TCBK 10-K & 10-Q changes, risk factors and insider trading

The majority of our assets are loans, which are subject to creditscredit risks.

As a lender, we face a significant risk that we will sustain losses because borrowers, guarantors or related parties may fail to perform in accordance with the terms of the loans we make or acquire. Our earnings are significantly affected by our ability to properly originate, underwrite and service loans. Certain of our credit exposures are concentrated in industries that may be more susceptible to the long-term risks of climate change, natural disasters or global pandemics. To the extent that these risks may have a negative impact on the financial condition of borrowers, it could also have a material adverse effect on our business, financial condition and results of operations. We have underwriting and credit monitoring procedures and credit policies, including the establishment and review of the allowance for credit losses, 11 TriCo Bancshares 2024 10-K that we believe appropriately address this risk by assessing the likelihood of nonperformance, tracking loan performance and diversifying our respective loan portfolios. Such policies and procedures, however, may not prevent unexpected losses that could adversely affect our results of operations. We could sustain losses if we incorrectly assess the creditworthiness of our borrowers or fail to detect or respond to deterioration in asset quality in a timely manner or as a result of deteriorating economic conditions, for example.

Like other financial institutions, we maintain an allowance for credit losses to provide for loan defaults and non-performance. Our allowance for credit losses may not be adequate to cover actual loan losses, and future provisions for loan losses would reduce our earnings and could materially and adversely affect our business, financial condition and results of operations. Our allowance for credit losses is based on prior experience, as well as an evaluation of the known risks in the current portfolio, composition and growth of the loan portfolio and actual and forecast economic factors. Determining an appropriate level of allowance is an inherently difficult process and is based on numerous 11 TriCo Bancshares 2025 10-K assumptions. The actual amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, unemployment and a number of other economic conditions that may be beyond our control and these losses may exceed current estimates. Effective January 1, 2020, we implemented a new accounting standard, “Measurement of Credit Losses on Financial Instruments,” commonly referred to as the “Current Expected Credit Losses” standard, or “CECL.” CECL changed the allowance for credit losses methodology from an incurred loss concept to an expected loss concept, which is more dependent on future economic forecasts, assumptions and models than previous methodology, which could result in increases and add volatility to our allowance for credit losses and future provisions for loan losses. These forecasts, assumptions and models are inherently uncertain and are based upon our management’s reasonable judgment in light of information currently available.

A substantial portion of our loan portfolio consists of commercial real estate loans. As of December 31, 2024,2025, we had approximately $4.6 billion of commercial real estate loans outstanding, which represented approximately 67.6% of our total loan portfolio. Consequently, commercial real estate-related credit risks are a significant concern for us. Commercial real estate loans are generally viewed as having more risk of default than some other types of loans because repayment of the loans often depends on the successful operation of the property and the income stream of the borrowers. In addition, these loans often involve larger loan balances to single borrowers or groups of related borrowers compared with other types of loans. In recent years, commercial real estate markets have been particularly impacted by the economic disruption resulting from the COVID-19 pandemic, which has been a catalyst for the evolution of various remote work options which could impact the vacancy rates and the long-term vacancy performance of some types of office properties within our commercial real estate portfolio. Accordingly, the federal banking regulatory agencies have expressed concerns about weaknesses in the current commercial 12 TriCo Bancshares 2025 10-K real estate market. The adverse consequences from real estate-related credit risks tend to be cyclical and are often driven by national economic developments that are not controllable or entirely foreseeable by us or our borrowers.

In the course of our business, we may foreclose and take title to real estateestate. andAs a result, we could be subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean-up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law or contractual claims by third parties (including purchasers of a property) based on damages and costs resulting from environmental contamination emanating from the property. When applicable, we establish contingent liability reserves for this purpose based on future reasonable and estimable costs developed by qualified soil and chemical engineering consultants. If we become subject to significant environmental liabilities or if our contingency reserve estimates are incorrect, our business, financial condition and results of operations could be materially adversely affected.

Additionally, consumers can maintain funds that would have historically been held as bank deposits in brokerage accounts or mutual funds. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. InThe addition,growing experimentation with and adoption of advanced technologies—such as AI, quantum computing, distributed ledgers, tokenized deposits, blockchain, stablecoins, and other digital currencies, including the potential issuance, acceptance, and integration of central bank digital currencies—has the potential to fundamentally reshape the financial services landscape. Regulatory developments related to these emerging technologies, including the recent enactment of the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (“GENIUS Act”) and the potential passage of the Digital Asset Market Clarity Act of 2025 (“CLARITY Act”), further underscore this shift. This the emergence, adoption and evolution of new technologies that do not require intermediation, including distributed ledgers such as digital assets and blockchain, as well as advances in robotic process automation, could significantly affect the competition for financial services. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. Failure to keep pace with technological advancements could adversely affect our competitive position, diminish customer satisfaction, and reduce the accessibility and relevance of our products and services.

Adverse changes in economic or market conditions, including health relatedhealth-related events, may hurt our businesses.

Our success depends, to a certain extent, upon local, national and global economic and political conditions, as well as governmental monetary policies. Conditions such as an economic recession, pandemics, rising unemployment, adverse immigration policies impacting the labor market (notably agriculture), inflation, changes in interest rates, declines in asset values and other factors beyond our control may adversely affect our asset quality, deposit levels and our net income. Adverse changes in the economy may also have a negative effect on the demand for new loans and the ability of our existing borrowers to make timely repayments of their loans, which could adversely impact our growth and earnings. Economic and market conditions may also be affected by political developments in the U.S. and other countries and global conflicts, such the conflicts in Ukraine and the Middle East. Uncertainty about the federal fiscal policymaking process, the fiscal outlook of the federal government, prolonged government shutdowns, and future tax rates is a concern for businesses, consumers and investors in the United States. While the effects of COVID have reduced, the pandemic and related efforts to contain it have disrupted global economic activity, adversely affected the functioning of financial markets, impacted interest rates, increased economic and market uncertainty, employment and labor markets and disrupted trade and supply chains. If these effectsconditions continue for a prolonged period or result in sustained economic stress or recession, many of the risk factors identified in our Form 10-K could be exacerbated and such effects could have a material adverse impact on us in a number of ways related to credit, collateral, customer demand, funding, operations, interest rate risk, and human capital, as described in this document.

After an extended period at a target rate of 0-0.25%, the Federal Reserve BoardFRB began aggressively increasing interest rates in March 2022 and continuing into 20232023. withIn increaseslate of2024, 25the basisFRB pointsbegan lowering rates as inflationary pressure started to ease, and in February,late March,2025, May,the FRB again lowered rates. However, the economic and Julyinflationary 2023. Most recently, the Federal Reserve Board decreased interest rates 50 basis points in September and 25 basis points in November and December 2024, respectively, resulting in a target rate range of 4.25% to 4.50% at December 31, 2024. Today, thereoutlook continues to beremain uncertaintyuncertain. regardingIf futurethe FRB were to reverse course and rapidly increase rates, the increase could result in further declines in the fair market values of long duration fixed rate investment securities, constrain our interest rates.rate spread and may adversely affect our business forecasts. Increases in interest rates can have negative impacts on our business, including reducing our customers’ desire to borrow money from us or adversely affecting their ability to repay their outstanding loans by increasing their debt obligations through the periodic reset of adjustable interest rate loans. If our borrowers’ ability to pay their loans is impaired by increasing interest payment obligations, our level of non-performing assets would increase, producing an adverse effect on operating results. Asset values, especially commercial real estate as collateral, securities or other fixed rate earning assets, can decline significantly with relatively minor changes in interest rates. Conversely, decreases in interest rates can affect the amount of interest we earn on our loans and investment securities, which could have a material adverse effect on our financial condition and results of operations. Elevated inflation and expectations for elevated future inflation can adversely impact economic growth, consumer and business confidence, and our financial condition and results. In addition, elevated inflation may cause unexpected changes in monetary policies and actions which may adversely affect confidence and the economy. Although we have implemented strategies that we believe reduce the potential effects of adverse changes in interest rates on our results of operations, these strategies may not always be successful. Any of these events could adversely affect our results of operations, financial condition and liquidity.

We are subject to extensive regulation, supervision and examination by the DFPI, FDIC, and the FRB as well as regulations and policies of the CFPB. See "Item 1. Business - Regulation and Supervision" of this report for information on the regulation and supervision which governs our activities. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for credit losses. Banking regulations or the actions of our banking regulators may limit our growth, earnings and the return to our shareholders by restricting certain of our activities, such as: the payment of dividends to our shareholders, possible mergers with or acquisitions of or by other institutions, desired investments, loans and interest rates on loans, interest rates paid on deposits, service charges on deposit account transactions, the possible expansion or reduction of branch offices, and the ability to provide new products or services.

Additionally, other regulatory requirements apply to depository institutions and holding companies with $10 billion or more in total consolidated assets, including a cap on interchange transaction fees for debit cards, as required by Federal Reserve Board regulations, which would significantly reduce our interchange revenue, and restrictions on proprietary trading and investment and sponsorship in hedge 16 TriCo Bancshares 2025 10-K funds and private equity funds known as the Volcker Rule. See also "Item 1 - Business - Regulation and Supervision - Interchange Fees" in this report. Further, deposit insurance assessment rates are calculated differently, and may be higher, for insured depository institutions with $10 billion or more in total consolidated assets.

The Bank worked with third-party forensic investigators to understand the nature and scope of the incident and to determine what and how much information was impacted. The Bank determined that its internal computer network had been infected with malware which prevented access to certain files on the network. Through its investigation, the Bank determined that an unauthorized actor illegally accessed and acquired data from certain systems, including the personal information of approximately 75,000 individuals, including certain current and former customers, individuals related to current and former customers, current and former employees and their dependents, and others. While the information impacted varied by individual, the types of information that were impacted included name, social security number, driver’s license number, state identification number, financial account information, medical information, health insurance information, date of birth, passport number, digital/electronic signature, tax information, tax identification number, access credentials, and mother’s maiden name. The Bank notified and will continue to notify impacted individuals consistent with state and federal requirements and the Bank is offeringoffered impacted individuals credit restoration services and 24 months of credit monitoring services at no cost. The Bank issued a press release regarding this event and posted notice of this event on its website.

We face three purported class action lawsuits numerous lawsuits related to the 2023 cyberattack, including three purported class action lawsuitscyberattack that have been filed in California Superior Court for the Counties of Contra Costa and Butte, seeking unspecified monetary damages, equitable relief, costs and attorneys’ fees. The lawsuits were consolidated (Donna Dryden v. Tri Counties Bank et. al., Superior Court of State of California - Butte County, 23-CV-03115) and allege breach of contract, negligence, violations of various privacy laws and a variety of other legal causes of action. WeFollowing mediation, the parties entered into a settlement agreement and on January 21, 2026, the court preliminarily approved the agreement. The Class is being notified by mail and we and hope to resolve this litigation quickly. The cost of the settlement is expected to be covered by insurance. However, we are currently unable to predict the potential outcome of any of this litigation or whether we may be subject to further private litigation. In addition, the Company has received inquiries from various government authorities related to the 2023 cyberattack, which could result in sanctions, fines or penalties. We are respondingresponded to these inquiries and cooperatingcooperated fully. However, we cannot predict the timing or outcome of any of these inquiries, or whether we may be subject to further governmental inquiries.

Given the uncertainties about any further impacts of the incident, including the inherent uncertainties involved in litigation, contractual obligations, government investigations and regulatory enforcement decisions, we face the risk that outcomes from these risks could have a material adverse effect on our reputation, business and/or financial condition. In addition, litigation, government interventions, and negative media reports and any resulting damage to our reputation or loss of confidence in the security of our systems could adversely affect our business. It is possible that we could incur losses associated with these proceedings and inquiries, and the Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable. OngoingWhile we believe we have adequate insurance to cover most of the costs of the cyberattack, ongoing legal and other costs related to these proceedings and inquiries, as well as any potential future proceedings and inquiries, may be substantial, and losses associated with any adverse judgments, settlements, penalties or other resolutions of such proceedings and inquiries could be material to our business, reputation, financial condition and operating results.

The Company, our customers, our vendors, and other third parties have experienced security breaches and cyber attacks in the past, and it is inevitable that additional breaches and attacks will occur in the future. While such breaches and attacks have not materially impacted the Company to date, future security breaches and cyber attacks could result in serious and harmful consequences for us or our clients and customers. A principal reason that we cannot provide absolute security against cyber attacks is that we may not always be possible to anticipate, detect or recognize threats to the Company’s systems, or to implement effective preventive measures against all breaches because: the techniques used in cyber attacks evolve frequently and are increasingly sophisticated, and therefore may not be recognized until launched; cyber attacks can originate from a wide variety of sources, including our own employees, cyber-criminals, hacktivists, groups 18 TriCo Bancshares 2025 10-K linked to terrorist organizations or hostile countries, or third parties whose objective is to disrupt the operations of financial institutions more generally; we do not have control over the cybersecurity of the systems of the large number of clients, customers, counterparties and third-party service providers with which we do business; and it is possible that a third party, after establishing a foothold on an internal network without being detected, might obtain access to other networks and systems. The risk of a security breach due to a cyber attack could increase in the future due to factors such as: our ongoing expansion of mobile and digital banking and other internet-based products and applications, and the increased use of remote access to facilitate remote arrangements for employees, vendors and other third parties. In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by our employees. The techniques used in cyber attacks and breaches change rapidly and are increasingly sophisticated, including through the use of generative AI and deepfakes, and we expect additional risks in the future through the use of quantum computing, and we may not be able to anticipate cyber attacks or other data security breaches. Additionally, cyber attacks and breaches in some cases appear to be supported by foreign governments or other well-financed entities and often originate from less regulated and remote areas of the world. We have seen a higher volume and complexity of attacks during times of increased geopolitical tensions. A successful penetration or circumvention of the security of our systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including: significant disruption of our operations and those of our clients, customers and counterparties, including: losing access to operational systems; misappropriation of our confidential information or that of our clients, customers, counterparties, employees, regulators, or other individuals; disruption of or damage to our systems and those of our clients, customers and counterparties; the inability, or extended delays in the ability, to fully recover and restore data that has been stolen, manipulated or destroyed or the inability to prevent systems from processing fraudulent transactions; allegations or violations by the Company of applicable privacy and other laws; financial loss to us or to our clients, customers, counterparties, employees, or others; loss of confidence in our cybersecurity and business resiliency measures; dissatisfaction among our clients, customers or counterparties; significant exposure to litigation and regulatory fines, penalties or other sanctions; and harm to our reputation, all of which could have a material adverse effect on us. If personal, confidential or proprietary information of customers or others in the 19 TriCo Bancshares 2024 10-K Bank’s or such vendors’ or other third-parties’ possession were to be mishandled or misused, we could suffer significant regulatory consequences, reputational damage and financial loss, as discussed earlier regarding the Bank's 2023 cyberattack. The extent of a particular cyber attack and the steps that we may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation or determination, judicial or otherwise, can be completed. While such an investigation is ongoing, we may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit our ability to provide rapid, full and reliable information about the cyber attack to its clients, customers, counterparties and regulators, and the public. Furthermore, it may not be clear how best to contain and remediate the harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the costs and consequences of a cyber attack.

In 2024,2025, the Company reported net income of $114.9$121.6 million, ana $2.5$6.7 million or 2.1%5.8% decreaseincrease from the prior year. Earnings per share on a diluted basis for the year were $3.46,$3.70, downup 1.7%6.9% from the prior year. The current year net income reported was impacted by declinesan increase in net interest income primarily associated with elevateddecreased interest expense and partially offset by aan reductionincrease in provision for loan losses. In 2024,2025, total interest expense was reported at $135.2$119.7 million, an increasedecrease of $53.5$15.5 million or 65.5%11.4% from the prior year.

Net interest income on a fully tax equivalent (FTE) basis, a non-GAAP financial measure, was $332.5$351.9 million, aan decreaseincrease of $25.7$19.4 million, or 7.2%,5.8%, from 2023.2024. The decreaseincrease in FTE net interest income reflects the $64.9$75.8 million, or 0.7%,0.8%, decreaseincrease in average earning assets and aan 2518 basis point decreaseincrease in the FTE net interest margin to 3.71%.3.89%. Average earning asset declines included a $308.7$226.1 million or 12.6%10.5% decrease in average securities, partially offset by an $189.8$166.3 million, or 2.9%2.5% increase in average loans and leases. The decrease in average securities was driven by the redeployment of liquidity from prepaymentsprepayments, maturities and maturitiessales into the pay down of borrowings and loan growth during 2024.2025. The net interest margin contractionexpansion was driven by the higherdeclining rate environment and a liability sensitive balance sheet, resulting in ana increasedecrease in the higher cost of funds from both deposits and borrowings. This increasedecrease in interest expense was partially offsetsupported by improved average balances on loans, flat yields on loanearnings balancesassets 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$5.7 billion and $5.0$5.4 billion during 20242025 and 2023,2024, respectively, while average other borrowings totaled $294.3$35.6 million and $430.7$294.3 million, respectively, during the same periods.

The provision for credit losses decreasedincreased $17.4$5.4 million to $6.6$12.1 million, primarily due to mutedgrowth in loan volume during 20242025 and generallyincreased stable qualitative reserve levels,charge-offs, relative to the 20232024 period with muted loan growth and less volatility drivenwithin bycollateral CA unemployment trends and rising Corporate BBB bond yields.values. The allowance for credit losses (ACL) was $125.8 million, or 1.77% of total loans and leases, at December 31, 2025, compared to $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, 2023.2024.

Noninterest income was $64.4$68.3 million, up $3.0$3.9 million, or 4.9%,6.1%, from the prior year, while noninterest expenses of $241.0 million was up $6.9 million or 2.9%, from the prior year. While noninterest expense of $234.1 million remained generally consistent (up $0.9 million or 0.4%, from the prior year), a variety of both increases and decreases in individual expense items offset one another. The year over year changes in noninterest income reflected improved earnings on deposit accounts and other service fees, coupled with elevated earnings from asset management from continued growth in assets under management. The increase in noninterest expense meanwhile as compared to the trailing year is attributed primarily to a combination of routine merit increases, increased incentive compensation from elevated levels of both loan and deposit production, and targeted strategic hiring.

The tangible common equity to tangible assets ratio, a non-GAAP financial measure, was 9.72%10.71% at December 31, 2024,2025, up 9299 basis points from December 31, 2023,2024, primarily due to an increase in tangible common equity related primarily to the retention of 20242025 earnings.earnings and a reduction in accumulated other comprehensive loss.

Certain loans are not included in pools of loans that are collectively evaluated. The segregation of these loans is based on the results from analysis of individually identified credits that meet management’s criteria for individual evaluation. These loans are first reviewed individually to determine if such loans have a unique risk profile that would warrant individual evaluation. Loans where management has concluded that it is probable that the borrower will be unable to pay all amounts due under the original contractual terms are removed from the pools of loans collectively evaluated. They are then specifically reviewed and evaluated individually by management for loss potential by evaluating sources of repayment, including collateral as applicable, and a specified allowance for credit losses is established where necessary. By definition, any loan that management has placed on non-accrual is required to be individually evaluated, however, not all individually 33 TriCo Bancshares 2025 10-K evaluated loans need to be placed on non-accrual.

Because current economic conditions and forecasts can change and determining the likelihood of future events make it inherently difficult to predict the anticipated amount of estimated credit losses on loans, management's determination of the appropriateness of the ACL, could change significantly. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors and inputs are considered in estimating the allowance and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may move independently of one another, such that improvement in one or certain factors may offset deterioration in others. Thus, as a result of the significant size of the loan portfolio, the numerous assumptions in the model, and the high degree of potential change in such assumptions, there is a high degree of sensitivity to the reported amounts. The ACL is sensitive to changes in key assumptions, and changes in the economic forecasts, the forecast period, and other macroeconomic factors, such as those noted above, would all change the outcome of the quantitative components of the ACL. Those results would then need to be assessed from a qualitative perspective, potentially requiring further adjustments to the qualitative components to arrive at a reasonable and appropriate allowance for credit losses. Management believes that the ACL was adequate as of December 31, 2024.2025.

Balance sheet mix shift where liquidity from deposit growth and investment security principal repayments and sales were utilized to pay down borrowings assistedand in minimizing the compression inbenefit net interest income and net interest margin during the year ended 2024.2025. More specifically, deposit increases of $253.5$176.3 million and principalprincipal, repaymentsmaturities, repayment and sales on investment securities of $269.3$194.2 million, facilitated a $543.0$77.9 million reduction in higher cost balances of other borrowings.borrowings and an increase of $342.6 million in loans.

Net charge-offs for the year ended December 31, 20242025 totaled $2.6$9.9 million, as compared to net recoveriescharge-offs of $6.6$2.6 million for the year ended December 31, 2023.2024. Total nonperforming loans increased by 1925 basis points to 0.90% of total loans at December 31, 2025 from 0.65% of total loans at December 31, 2024 from 0.46% of total loans at December 31, 2023.2024. For further details of the chan1gechange in nonperforming loans during the period ended December 31, 20242025 see the Tables, and associated narratives, labeled “Changes in nonperforming assets during the year ended December 31, 20242025” and “Changes in nonperforming assets during the three months ended December 31, 20242025” under the heading “Asset Quality and Non-Performing Assets” below.

The provision for credit losses is based on management’s evaluation of inherent risks in the loan portfolio and a corresponding analysis of the allowance for credit losses. Additional discussion on loan quality, our procedures to measureidentify loanindividually impairment,evaluation loans and the related reserves, if any, and the allowance for credit losses is provided under the heading “Asset Quality and Non-Performing Assets” below.

Non-interest income increased $3.0 million or 4.90%4.9% to $64.4 million during the yeartwelve months ended December 31, 2024, as compared to $61.4 million during the yearcomparative twelve months ended December 31, 2023. ATM and interchange fees declined in the 2024 period byand resulted in a decrease of $1.1 million as compared to the twelve months ended December 31, 2023. Meanwhile, service charges on deposit accounts and other service fees increased by $1.9 million and $0.6 million, respectively, as compared to the equivalent period in 2023 following $0.9 million in waived or reversed fees as a courtesy to customers in the prior year. Elevated levels of assets under management and transaction activity within asset management operationsand the increases in value of Visa equity securities further contributed to the overall improvement in income during the year ended 2024.

The effective tax rate on income was 26.8%, 25.9%, 27.0%, and 27.9%27.0% in 2025, 2024, 2023, and 2022,2023, respectively. The effective tax rate was greater than the Federal statutory rates of 21% due to the combinationaddition of state tax expenses of 7.9%.6.6%. The impact of Federal and state tax expenses were partially offset by Federal tax-exempt interest income of $5.6$5.0 million, $5.5$4.4 million, and $3.1$5.6 million, respectively, Federal and State tax-exempt income of $3.1$4.6 million, $3.2$3.3 million, and $3.5$3.1 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$3.5 million, $0.2$3.0 million, and $0.6$1.9 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 2025, 2024, 2023, and 2022.2023.

Nonperforming assets increased by $12.3 million or 35.5% to $46.9 million at December 31, 2024 from $34.6 million at December 31, 2023. The increase in nonperforming assets during 2024 was primarily the result of additions$27.6 million of nonperformingadditions loansto totalingnon-performing $27.6loans, million,which was partially offset by net paydowns, sales or upgrades of nonperforming loans to performing status totaling $11.5 million,million and net charge-offs of $3.7 million.

Nonperforming assets increased during the fourth quarter of 2024 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.

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, 2024,2025, the Company's HTM investment portfolio had a carrying value of approximately $111.9$90.5 million and was comprised of $109.2$89.0 million in obligations backed by U.S. government agencies and $2.7$1.6 million in obligations of states and political subdivisions. As the 97.6%98.3% 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, as of and during the yearyears ended December 31, 20242025, as2024, and 2023, no allowance for credit losses related to HTM securities was recorded.

The estimated credit losses associated with these unfunded lending commitments is calculated using the same models and methodologies notedfor aboveloans andbut incorporatealso incorporates utilization assumptions at the estimated time of default.default based on a historical utilization rate for each segment. While the provision for credit losses associated with unfunded commitments is included in "provision for (benefit from) credit losses" on the consolidated statement of income, the reserve for unfunded commitments is maintained on the consolidated balance sheet in other liabilities.

See Note 13 to the consolidated financial statements at Part II, Item 8 of this report for information about the Company’s other borrowings and long-term debt.borrowings.

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those that materially affect the financial statements and are related to the adequacy of the allowance for loancredit losses, investments, mortgage servicing rights, fair value measurements, retirement plans and intangible assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. A detailed discussion related to the Company’s accounting policies including those related to estimates on the allowance for credit losses related to loans and investment securities, and impairment of intangible assets, can be found in Note 1 of the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2025.

Performance highlights and other developments for the Company as of or for the three and six months ended MarchJune 31,30, 2026, included the following:

•Net income was $33.7$34.2 million or $1.04$1.06 per diluted share as compared to $33.6$33.7 million or $1.03$1.04 per diluted share in the trailing quarter, and an increase of $7.3$6.6 million or 27.8%24.1% from the firstsecond quarter of 2025

•Net interest income (FTE) was $91.5$93.9 million, aan decreaseincrease of $1.0$2.4 million or 1.1%2.6% over the trailing quarter; net interest margin (FTE) was 4.07%,4.11%, an increase of 54 basis points over 4.02%4.07% in the trailing quarter

•Loan balances decreasedincreased $42.9$242.9 million or 2.4%13.7% (annualized) from the trailing quarter and increased $247.4$352.1 million or 3.6%5.1% from the same quarter of the prior year

•Deposit balances increaseddecreased $139.7$34.8 million or 6.8%1.7% (annualized) from the trailing quarter and increased $198.3$7.0 million or 2.4%0.1% from the same quarter of the prior yearyear. One-way sell deposit balances totaled $68.8 million at quarter end, as compared to zero for both the trailing quarter and same quarter of the prior period

•Yield on average earning assets was 5.26%,5.31%, an increase of 35 basis points over the 5.23%5.26% in the trailing quarter; yield on average loans was 5.78%,5.85%, an increase of 17 basis pointpoints over the 5.77%5.78% in the trailing quarter

•The average cost of total deposits was 1.26%,1.27%, aan decreaseincrease of 31 basis pointspoint as compared to 1.29%1.26% in the trailing quarter, and a decrease of 1710 basis points from 1.43%1.37% in the same quarter of the prior year

•Diluted earnings per share were $1.04$1.06 for the firstsecond quarter of 2026, compared to $1.03$1.04 for the trailing quarter and $0.80$0.84 during the firstsecond quarter of 2025

•The loan to deposit ratio was 84.11%87.36% as of MarchJune 31,30, 2026, as compared to 86.05%84.11% for the trailing quarter end

•The efficiency ratio was 54.55%56.25% for the quarter ended MarchJune 31,30, 2026, as compared to 54.68%54.55% for the trailing quarter, inclusive of $0.9 million in merger related expenses during the current quarter, versus none in the trailing quarter

•The provision for credit losses was $3.3$2.7 million during the quarter ended MarchJune 31,30, 2026, as compared to $3.0$3.3 million during the trailing quarter

•The allowance for credit losses (ACL) to total loans was 1.81%1.78% as of MarchJune 31,30, 2026, compared to 1.77%1.81% as of the trailing quarter end, and 1.88%1.79% as of MarchJune 31,30, 2025. Non-performing assets to total assets were 0.77%0.76% on MarchJune 31,30, 2026, as compared to 0.72%0.77% as of December 31, 2025, and 0.59% on March 31, 2026, and 0.68% on June 30, 2025

Loans may be acquired at a premium or discount to par value, in which case, the premium is amortized (subtracted from) or the discount is accreted (added to) interest income over the remaining life of the loan. The dollar impact of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining unaccreted discount or unamortized premium is immediately taken into interest income; and as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. Despite the elevated rate environment, the prepayment rate of portfolio loans, inclusive of those acquired at a premium or discount, remains generally consistent. During the quarters ended June 30, 2026, March 31, 2026, December 31, 20252026 and MarchJune 31,30, 2025, the purchased loan discount accretion was $1.4$1.0 million, $0.9$1.4 million and $2.0$1.2 million, respectively.

Net interest income (FTE) during the three months ended MarchJune 31,30, 2026, increased $8.7$7.1 million or 10.5%8.2% to $91.5$93.9 million compared to $82.8$86.8 million during the three months ended MarchJune 31,30, 2025. Net interest margin totaled 4.07%4.11% for the three months ended MarchJune 31,30, 2026, an increase of 3423 basis points from the same quarter in 2025. The primary drivers behind the change in net interest margin is related to an increase in average loan balances, improving interest income by $3.8$4.3 million, coupled with a decline in yields paid on interest-bearing deposits improving net interest income by $2.9$1.3 million, with yields paid declining by 2414 basis points between the quarter ended MarchJune 31,30, 2026, and the same quarter of the prior year. The accretion of discounts from acquired loans added 86 basis points and 128 basis points to loan yields during the quarters ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively. Finally, the average balance of noninterest-bearing deposits increased by $37.1$63.0 million from the three-month average as of MarchJune 31,30, 2026.

Net interest income (FTE) during the three months ended MarchJune 31,30, 2026 increased $8.7$7.1 million to $91.5$93.9 million compared to $82.8$86.8 million during the three months ended MarchJune 31,30, 2025. As noted above, the increase in net interest income (FTE) was due largely to: higher average loan balances andbalances, lower rates paid for interest-bearing deposits, bothand lower average balances for borrowings, all of which have a beneficial impact on net interest income.

During the three months ended MarchJune 31,30, 2026, the Company recorded a provision for credit losses of $3.3$2.7 million, as compared to $3.0$3.3 million during the trailing quarter, and $3.7$4.7 million during the firstsecond quarter of 2025.

The allowance for credit losses (ACL) was $127.9$130.2 million or 1.81%1.78% of total loans as of MarchJune 31,30, 2026. The provision for credit losses on loans of $3.3$2.6 million recorded allocated approximately $2.9$2.3 million toward individuallycollectively evaluated loans and $0.4$0.3 million to replenish quarterly net charge-offs.

The $2.2 million increase in allowance for credit losses was primarily attributed to net change in reserves on collective loan poolsgrowth was minimal as ofduring the quarter ended March 31, 2026. On a gross basis, the Company did benefit from declining required general reserves for consumer loans,quarter, which wastotaled offset$242.9 by increases in required general reserves for commercial real estate lending.million. Additionally, Management notes that economic indicators through the end of the current quarter, as well as actual and forecasted trends including, but not limited to, unemployment, gross domestic product, and corporate borrowing rates continued to evidence stability and were supportive of general economic expansion, and generallywere consistent withwith, if not slightly improved from the trailing period ended DecemberMarch 31, 2025,2026, which is aligned with the Company's direct experiences with borrowers. Management's proactive portfolio management policies and ongoing dialogue with borrowers suggestssuggest caution continues to be warranted.warranted, with emphasis on the consumer portfolio. Actions by the Federal Reserve to further cut rates during 2026 or stimulative policies by the Federal government may help further improveimpact this outlook overall, but the uncertainty associated with the extent and timing of these potential reductions has inhibited a material change to monetary policy assumptions. Furthermore, political policy risks both domestic and international remain unresolved, which could quickly lead to further negative effects on domestic economic outcomes. The lingering uncertainties related to the extent and duration of escalation within the Middle East, and potential domestic economic impact from volatility in oil prices and the impact on inflation risks, continue to present challenges in correlating potential improvement of credit risks within the Company's loan portfolio. Therefore, 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.

The ratio of classified loans to total loans of 2.00%1.93% as of June 30, 2026, was a decrease of 7 basis points from March 31, 2026, wasand an increase of 221 basis points from December 31, 2025, and 6 basis pointspoint from the comparative quarter ended 2025. The change in classified loans outstanding as compared to the trailing quarter represented ana increasedecrease of approximately $14.6$0.5 million.

Loans past due 30 days or more increased by $11.0$0.7 million during the quarter ended MarchJune 31,30, 2026, to $48.9$49.6 million, as compared to $37.9$48.9 million at DecemberMarch 31, 2025.2026. The majority of loans identified as past due are well-secured by collateral, and approximately $22.9$27.5 million are less than 90 days delinquent.

Non-performing loans increaseddecreased by $5.2$0.6 million during the quarter ended MarchJune 31,30, 20262026, to $69.5$68.8 million as compared to $64.2$69.5 million at DecemberMarch 31, 2025.2026. The credit and collateral profiles of non-performing loans remain generally consistent with the trailing quarter. As noted previously, management continues to proactively work with these borrowers to identify actionable and appropriate resolution strategies which are customary for the industries. Management anticipates that these proactive strategies, specifically within agricultural real estate secured and agricultural commercial loans, will further benefit from the continued improvement in agricultural commodity prices, stable water supply, and growing crop demand. Of the $69.5$68.8 million loans designated as non-performing as of MarchJune 31,30, 2026, approximately $38.2$43.9 million are current or less than 30 days past due with respect to payments required under their existing loan agreements.

As of MarchJune 31,30, 2026, other real estate owned consisted of 14 properties with a carrying value of approximately $7.0$6.8 million, as compared to 1214 properties with a carrying value of $6.2 million at December 31, 2025. Non-performing assets of $76.4$7.0 million at March 31, 2026. Non-performing assets of $75.6 million at June 30, 2026, represented 0.77%0.76% of total assets, a change from $70.5$76.4 million or 0.72%0.77% and $57.5$67.5 million or 0.59%0.68% as of December 31, 2025 and March 31, 2026 and June 30, 2025, respectively.

Non-interest income increased $1.0$2.1 million or 6.0%6.4% to $17.0$35.3 million during the threesix months ended MarchJune 31,30, 2026, compared to $16.1$33.2 million during the comparative quarterperiod ended MarchJune 31,30, 2025. GrowthAs noted above, service charges and customer fees in deposit related transactional activities contributed to the elevated service fees, which increased by a combined $0.5 million as compared to the equivalent2026 period indrove 2025.an increase of $0.8 million. Further, elevated activity and volume of assets under management droveresulted in an increase of $0.6$0.7 million or 37.7%22.0% in assetrelated managementincome. and commissionOther income for the period ended March 31, 2026, as compared to the same period in 2025. Other income during the threesix months ended MarchJune 31,30, 2026 decreasedand by2025 $1.3included million,excess reflectinginsurance therelated absenceproceeds of excess$560,000 cashand flows$1,207,000, from death benefit proceeds totaling $1.2 million in the comparative quarter. In addition, gains on investment security sales totaling $17.0 thousand were recorded during the current quarter as compared to losses on sales of $1.1 million during the same quarter of the prior year.respectively.

Total non-interest expense decreasedincreased $0.5$1.8 million or 0.9%2.9% to $59.1$62.9 million during the three months ended MarchJune 31,30, 2026, as compared to $59.6$61.1 million for the quarter ended MarchJune 31,30, 2025. Total salaries and benefits expense decreasedincreased by $0.7 million or 1.9%1.8% on a net basis, largelyled by incentive compensation attributed to the reductionsloan and deposit production activity in FTE.the Changesquarter as well as the Company's overall financial performance. Merger and acquisitions costs during the quarter totaled $0.9 million and were related to the proposed merger with First Hawaiian, Inc. announced on July 13, 2026. The remaining changes in other non-interest expense line items were mixed during the quarter ended MarchJune 31,30, 2026, but essentially flat and due to timing differences rather than unique changes in operations, resulting in a net increase of $0.2 million, led by an increase in occupancy expense of $0.4 million following the Company's expansion in the Bay Area.operations.

The Company’s effective tax rate was 26.2% for the quarter ended June 30, 2026, as compared to 26.6% for the quarter ended March 31, 2026, asand compared to 27.8%27.2% for the quarter ended DecemberJune 31, 2025, and 26.3% for the quarter ended March 31,30, 2025. 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.

Loans outstanding decreasedincreased by $42.9$242.9 million or 2.4%13.7% on an annualized basis during the quarter ended MarchJune 31,30, 2026. During the quarter, gross loan originations/draws totaled approximately $388.7$632.9 million while gross payoffs/repayments of loans totaled $442.2$412.8 million, which compares to gross originations/draws and gross payoffs/repayments during the trailing quarter ended of $502.8$388.7 million and $418.1$442.2 million, respectively. Origination volume contracted from the trailing quarter but expanded by comparison with the same quarter of prior years. However, the level of payoff and paydown was elevated during the quarter by comparisonrelative to bothhistorical thenorms, trailingwhile andrepayments priorwere yearin quarters.line with recent periods. Domestically, the macro-economic outlook remains optimistic for borrowers following the passage of tax and spending legislation that is expected to promote continued economic expansion through the remainder of 2026. The activity within loan payoffs/repayments remains generally consistent with recent quarters and spread amongst numerous borrowers, regions and loan types.

Investment security balances increaseddecreased $28.7$74.8 million or 6.2%16.0% on an annualized basis during the quarter as a result of purchases of $90.7 million, partially offset by net prepayments/maturities of $55.2$113.1 million and net decreases in the market value of securities of $6.6$3.6 million, partially offset by purchases totaling $42.1 million. Investment security purchases were comprised of fixed rate agency mortgage-backed securities.securities and collateralized loan obligations. While management intends to primarily utilize cash flows from the investment security portfolio and organic deposit growth to support loan growth, excess liquidity will be utilized for purchases of investment securities to support net interest income growth and net interest margin expansion.

Deposit balances increaseddecreased by $139.7$34.8 million or 6.8%1.7% annualized during the period.period, inclusive of $68.8 million in one-way sell activity at June 30, 2026, as a short-term method to reduce the Company's overall balance sheet size. There were no deposits sold as of March 31, 2026, compared to $72.9 million as ofin the trailing quarter end.or the same quarter of the prior year.

The following table presents the available for sale debt securities portfolio by major type as of MarchJune 31,30, 2026 and December 31, 2025:

Investment securities held to maturity decreased $4.8$9.8 million to $85.7$80.8 million as of MarchJune 31,30, 2026, as compared to December 31, 2025. This decrease is attributable to calls and principal repayments of $47.4$9.7 million, and amortization of net purchase premiums of $0.1 million.

Changes in nonperforming assets during the three months ended MarchJune 31,30, 2026

Nonperforming assets increaseddecreased during the three months ended MarchJune 31,30, 2026 by $6.0$0.8 million or 8.5%1.1% to $75.6 million compared to $76.4 million compared to $70.5 million at DecemberMarch 31, 2025.2026. The increasedecrease in nonperforming assets during the firstsecond quarter of 2026 was primarily the result of nonperforming loan additions totaling $15.2$3.3 million, partially offset by pay-downs and upgrades, which totaled $8.4$3.6 million during the quarter, as well as $0.8$0.3 million in charge-offs. Management is actively engaged in the collection and recovery efforts for all nonperforming assets and believes that the loan loss reserves associated with these loans is sufficient as of MarchJune 31,30, 2026.

For additional information regarding the allowance for loancredit losses, including changes in specific, formula, and environmental factors allowance categories, see “Asset Quality and Loan Loss Provisioning” at “Results of Operations”, above. For additional information on the current ACL methodology, see "Allowance for Credit Losses - Loans" within footnote 1 of the Company's 10-Q/10-K. Based on the current conditions of the loan portfolio, management believes that the $127.9$130.2 million allowance for credit losses at MarchJune 31,30, 2026 is adequate to absorb expected losses inherent in the Bank’s loan portfolio. No assurance can be given, however, that adverse economic conditions or other circumstances will not result in increased losses in the portfolio.

The following table details the components and summarize the activity in foreclosed assets, net of allowances for losses, for the threesix months ended MarchJune 31,30, 2026:

During the threesix months ended MarchJune 31,30, 2026, the Company’s deposits increased by $139.7$104.9 million to $8.4 billion at quarter end. There were no brokered deposits included in the deposit balances as of MarchJune 31,30, 2026 and December 31, 2025. Estimated uninsured deposits totaled $2.7$2.9 billion and $2.9 billion as of MarchJune 31,30, 2026 and December 31, 2025, respectively.

During the three months ended June 30, 2026, the Company repurchased zero shares. During the six months ended June 30, 2026, the Company repurchased 447,211 shares with a market value totaling $21.6 million under the 2025 Program. There were no shares repurchased in 2025 under the 2025 Program, however, during the three and six months ended June 30, 2025 the Company purchased 379,978 and 469,632 shares with market values of $15.2 million and $18.9 million under the 2021 Share Repurchase Program. As of June 30, 2026, approximately 1,553,000 shares remain authorized for repurchase Total shareholders' equity decreasedincreased by $4.0$19.6 million during the quarter ended MarchJune 31,30, 2026, as net income of $33.7$34.2 million was partially offset by a $4.6$2.5 million increase in accumulated other comprehensive losses,losses and $11.5 million in cash dividends on common stock and $21.6 million in share repurchase activity.stock. As a result, the Company’s book value increased to $41.49$42.03 per share at MarchJune 31,30, 2026, compared to $41.07$41.49 at DecemberMarch 31, 2025.2026. 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 $31.82$32.40 per share at MarchJune 31,30, 2026, as compared to $31.52$31.82 at DecemberMarch 31, 2025.2026.

The following is a comparison of various capital ratios for the current period with the trailingmost quarterrecent fiscal year-end and applicable minimum regulatory requirements.

As of MarchJune 31,30, 2026, we had an effective shelf registration statement on file with the Securities and Exchange Commission that allows us to issue various types of debt securities, as well as common stock, preferred stock, warrants, depository shares representing fractional interest in shares of preferred stock, purchase contracts and units from time to time in one or more offerings. Each issuance under the shelf registration statement will require the filing of a prospectus supplement identifying the amount and terms of the securities to be issued. The registration statement does not limit the amount of securities that may be issued thereunder. Our ability to issue securities is subject to market conditions and other factors including, in the case of our debt securities, our credit ratings and compliance with current and prospective covenants in credit agreements.

At MarchJune 31,30, 2026, the Company's primary sources of liquidity represented 51%47% of total deposits and 156%139% 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 $82.0$76.7 million, including approximately $3.8$4.1 million in net unrealized losses.

The Company’s profitability during the first threesix months of 2026 generated cash flows from operations of $33.7$58.8 million compared to $24.5$53.8 million during the first threesix months of 2025. Net cash from investing activities was $5.1$167.1 million for the threesix months ended MarchJune 31,30, 2026, compared to net cash from investing activities of $33.9$59.4 million during the threesix months ending 2025. Financing activities provided $105.5$56.5 million during the threesix months ended MarchJune 31,30, 2026, compared to using $104.9$174.9 million during the threesix months ended MarchJune 31,30, 2025.

The types of contractual obligations of the Company and Bank, include but are not limited to term subordinated debt, operating leases, deferred compensation and supplemental retirement plans as well as off-balance sheet commitments such as unfunded loans and letters of credit, are consistent with those as of December 31, 2025. However, as borrowings have been repaid, the borrowing capacity at correspondent banks has increased. In addition, as the balance of investment securities has declined, so has the balance of unpledged securities. In total, and as illustrated above, the balance of total primary liquidity has increased during the first threesix months of 2026.

The Company is dependent upon the payment of cash dividends by the Bank to service its commitments, which have historically included dividends to shareholders, scheduled debt service payments, and general operations. Shareholder dividends are expected to continue subject to the Board’s discretion and management's continuing evaluation of capital levels, earnings, asset quality and other factors. The Company expects that the cash dividends paid by the Bank to the Company will be sufficient to cover the Company's cash flow needs. However, the Company and its ability to generate liquidity through either the issuance of stock or debt, also serves as a potential source of strength for the Bank. Dividends paid by the Company to holders of its common stock used $11.5$23.0 million of cash during the threesix months ended MarchJune 31,30, 2026. The Company’s liquidity is dependent on dividends received from the Bank. Dividends from the Bank are subject to certain regulatory restrictions.