TriCo Bancshares
11/06/2026 | Press release | Distributed by Public on 11/06/2026 16:14
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
Cautionary Statements Regarding Forward-Looking Information
The statements contained herein that are not historical facts are forward-looking statements based on current expectations and beliefs of the Company ("TriCo") concerning future developments and their potential effects on TriCo including, among others, statements regarding the expected timing, completion and effects of the proposed business combination transaction between First Hawaiian, Inc and its subsidiaries (including First Hawaiian Bank) ("FHI") and TriCo (the "Transaction"). Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of TriCo. TriCo cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: changes in general economic, political, or industry conditions, and in conditions impacting the banking industry specifically; uncertainty in U.S. fiscal, monetary and trade policy, including the interest rate policies of the Federal Reserve Board or the effects of any declines in housing and commercial real estate prices, high or increasing unemployment rates, continued or renewed inflation, the impact of proposed or imposed tariffs by the U.S. government or retaliatory tariffs proposed or imposed by U.S. trading partners that could have an adverse impact on customers or any recession or slowdown in economic growth particularly in the markets in which TriCo and FHI conduct business, including California, Hawaii, Guam and Saipan; volatility and disruptions in global capital and credit markets; the impact of bank failures or adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks; changes in interest rates that could significantly reduce net interest income and negatively affect asset yields and valuations and funding sources, including impacts on prepayment speeds; competitive pressures among financial institutions and nontraditional providers of financial services, including on product pricing and services; concentrations within TriCo's or FHI's loan portfolio (including commercial real estate loans) or other asset classes, and the parties' ability to attract and retain customer deposits, large loans to certain borrowers, access liquidity and capital, and manage deposit costs and funding sources; the success, impact, and timing of TriCo's and FHI's respective business strategies, including market acceptance of any new products or services and TriCo's and FHI's ability to successfully implement strategic, operational, technology and integration initiatives; the failure to properly use and protect customer and employee information and data; cybersecurity risks (such as TriCo's 2023 cyber security ransomware incident), including the occurrence of fraudulent activity or a material breach of, or disruption to, the security of FHI's, TriCo's or their vendors' systems; risks related to the development, implementation, use and management of artificial intelligence and other emerging technologies; the effects of failures or interruptions of information, communications or third-party service-provider systems; the nature, extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations; changes in laws or regulations; adverse weather conditions, natural disasters and other catastrophic events such as wildfires; the challenges of attracting, integrating and retaining key employees, especially while the Transaction is pending; the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement to which TriCo and FHI are parties; the outcome of any legal proceedings that have been or may in the future be instituted against TriCo or FHI, including litigation relating to the Transaction; delays in completing the Transaction; the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the Transaction); the failure to obtain stockholder or shareholder approvals, as applicable, or to satisfy any of the other conditions to the closing of the Transaction on a timely basis or at all; changes in TriCo's or FHI's share price before closing, including as a result of the financial performance of the other party prior to closing, or more generally due to broader stock market movements, and the performance of financial companies and peer group companies; the possibility that the anticipated benefits of the Transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where TriCo and FHI do business; certain restrictions during the pendency of the proposed Transaction that may impact the parties' ability to pursue certain business opportunities or strategic transactions; the possibility that the Transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; diversion of management's attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the Transaction; the ability to complete the Transaction and integration of TriCo and FHI promptly and successfully; the dilution caused by FHI's issuance of additional shares of its capital stock in connection with the Transaction; potential judgments, orders, settlements, penalties, fines and reputational damage resulting from pending or future litigation and regulatory investigations, proceedings and enforcement actions; each company's ability to manage the risks involved in the foregoing; and other factors that may affect the future results of TriCo and FHI. The foregoing factors should not be considered an exhaustive list and should be read together with the other cautionary statements set forth in TriCo's Annual Report on Form 10-K for the year ended December 31, 2025 and its latest Quarterly Report on Form 10-Q, which are on file with the Securities and Exchange Commission (the "SEC") and available on TriCo's website, in the "Investor Relations" section of TriCo's website, www.tcbk.com, under the "About" tab and the "Investor Relations" link and then under the heading "SEC Filings" and in other documents TriCo files with the SEC, and in FHI's Annual Report on Form 10-K for the year ended December 31, 2025 and its latest Quarterly Report on Form 10-Q, which are on file with the SEC and available on FHI's investor relations website, https://ir.fhb.com, under the heading "SEC Filings," and in other documents FHI files with the SEC. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Annualized, pro forma, projections and estimates are not forecasts and may not reflect actual results. Neither TriCo nor FHI undertakes any obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law.
General
As TriCo Bancshares (referred to in this report as "we", "our" or the "Company") has not commenced any business operations independent of Tri Counties Bank (the "Bank"), the following discussion pertains primarily to the Bank. Average balances, including such balances used in calculating certain financial ratios, are generally comprised of average daily balances for the Company. Within Management's Discussion and Analysis of Financial Condition and Results of Operations, interest income, net interest income, and net interest yield are generally presented on a FTE basis. The Company believes the use of these non-generally accepted accounting principles (non-GAAP) measures provides additional clarity in assessing its results, and the presentation of these measures on a FTE basis is a common practice within the banking industry. Interest income and net interest income are shown on a non-FTE basis in the Part I - Financial Information section of this Form 10-Q, and a reconciliation of the FTE and non-FTE presentations is provided below in the discussion of net interest income.
Recent Developments
On July 12, 2026, TriCo entered into an Agreement and Plan of Reorganization and Merger (the "merger agreement") with First Hawaiian, Inc., a Delaware corporation ("First Hawaiian") and Horizon Merger Sub, Inc., a California corporation and wholly owned subsidiary of First Hawaiian ("Merger Sub"). The merger agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into TriCo (the "merger"), with TriCo surviving the merger (the "Surviving Corporation"), and immediately following the merger, the Surviving Corporation will merge with and into First Hawaiian (the "second step merger," and together with the merger, the "mergers"), with First Hawaiian continuing as the surviving entity in the second step merger. Promptly following the second step merger, Tri Counties Bank will merge with and into First Hawaiian's wholly owned bank subsidiary, First Hawaiian Bank (the "bank merger"), with First Hawaiian Bank surviving the bank merger. The merger agreement was unanimously approved and adopted by the board of directors of each of TriCo, FHI and Merger Sub.
Subject to the terms and conditions of the merger agreement, at the effective time of the merger (the "effective time"), each share of TriCo common stock outstanding immediately prior to the effective time, other than shares owned, directly or indirectly, by TriCo, First Hawaiian or any of their respective subsidiaries, will be converted into the right to receive 2.095 shares of common stock, par value $0.01 per share, of First Hawaiian. Holders of TriCo's common stock will receive cash in lieu of fractional shares. Upon closing of the transaction, First Hawaiian and TriCo shareholders are expected to own approximately 65% and 35%, respectively, of the combined company.
The transaction is expected to close by the end of 2026, subject to the receipt of required regulatory approvals and the satisfaction of customary closing conditions. A summary of the terms of the merger agreement and other related agreements are summarized in, and the merger agreement has been filed as an exhibit to, the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on July 15, 2026.
Critical Accounting Policies and Estimates
The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of 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 credit 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.
Geographical Descriptions
For the purpose of describing the geographical location of the Company's operations, the Company has defined northern California as that area of California north of, and including, Stockton to the east and San Jose to the west; central California as that area of the state south of Stockton and San Jose, to and including, Bakersfield to the east and San Luis Obispo to the west; and southern California as that area of the state south of Bakersfield and San Luis Obispo.
Financial Highlights
Performance highlights and other developments for the Company as of or for the three and nine months ended September 30, 2026, included the following:
•Net income was $38.0 million or $1.18 per diluted share as compared to $34.2 million or $1.06 per diluted share in the trailing quarter, and an increase of $3.8 million or 11.1% from the trailing quarter
•Net interest income (FTE) was $96.8 million, an increase of $2.9 million or 3.1% over the trailing quarter; net interest margin (FTE) was 4.16%, an increase of 5 basis points over 4.11% in the trailing quarter
•Loan balances increased $99.1 million or 5.4% (annualized) from the trailing quarter and increased $403.4 million or 5.8% from the same quarter of the prior year
•Deposit balances increased $74.6 million or 3.6% (annualized) from the trailing quarter and $109.0 million or 1.3% from the same quarter of the prior year
•Quarterly average non-interest bearing deposits grew by 3.2% year over year and represented 31.0% of total average deposits while non-interest bearing deposits as of quarter end represented 31.4% of total deposits
•Yield on average earning assets was 5.35%, an increase of 4 basis points over the 5.31% in the trailing quarter; yield on average loans was 5.87%, an increase of 2 basis points over the 5.85% in the trailing quarter
•The average cost of total deposits was 1.26%, a decrease of 1 basis point as compared to 1.27% in the trailing quarter, and a decrease of 13 basis points from 1.39% in the same quarter of the prior year
•For the quarter ended September 30, 2026, the Company's return on average assets was 1.50%, while the return on average equity was 11.08%; for the trailing quarter ended June 30, 2026, the Company's return on average assets was 1.37%, while the return on average equity was 10.15%
•The loan to deposit ratio was 87.76% as of September 30, 2026, as compared to 87.36% for the trailing quarter end
•The efficiency ratio was 56.96% for the quarter ended September 30, 2026, as compared to 56.25% for the trailing quarter, inclusive of $3.8 million in merger related expenses during the current quarter, versus $0.9 million in the trailing quarter
•The benefit from credit losses totaled $1.9 million during the quarter ended September 30, 2026, as compared to $2.7 million in provision recorded during the trailing quarter
•The allowance for credit losses (ACL) to total loans was 1.73% as of September 30, 2026, compared to 1.78% as of the trailing quarter end, and 1.78% as of September 30, 2025. Non-performing assets to total assets were 0.79% on September 30, 2026, as compared to 0.76% as of June 30, 2026, and 0.72% on September 30, 2025
TRICO BANCSHARES
Financial Summary
(In thousands, except per share amounts; unaudited)
|
Three months ended September 30, |
Nine months ended September 30, |
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| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net interest income | $ | 96,546 | $ | 89,555 | $ | 281,402 | $ | 258,616 | |||||||||||||||
| Benefit from (provision for) credit losses | 1,881 | (670) | (4,099) | (9,063) | |||||||||||||||||||
| Non-interest income | 20,166 | 18,007 | 55,444 | 51,170 | |||||||||||||||||||
| Non-interest expense | (66,483) | (60,424) | (188,460) | (181,140) | |||||||||||||||||||
| Provision for income taxes | (14,143) | (12,449) | (38,466) | (31,659) | |||||||||||||||||||
| Net income | $ | 37,967 | $ | 34,019 | $ | 105,821 | $ | 87,924 | |||||||||||||||
| Per Share Data: | |||||||||||||||||||||||
| Basic earnings per share | $ | 1.19 | $ | 1.04 | $ | 3.30 | $ | 2.68 | |||||||||||||||
| Diluted earnings per share | $ | 1.18 | $ | 1.04 | $ | 3.29 | $ | 2.67 | |||||||||||||||
| Dividends paid | $ | 0.36 | $ | 0.36 | $ | 1.08 | $ | 1.02 | |||||||||||||||
| Book value at period end | $ | 41.56 | $ | 40.12 | |||||||||||||||||||
| Weighted average common shares outstanding | 31,966 | 32,542 | 32,028 | 32,749 | |||||||||||||||||||
| Weighted average diluted common shares outstanding | 32,118 | 32,723 | 32,204 | 32,929 | |||||||||||||||||||
| Shares outstanding at period end | 31,967 | 32,507 | |||||||||||||||||||||
| At period end: | |||||||||||||||||||||||
| Loans | $ | 7,410,189 | $ | 7,006,824 | |||||||||||||||||||
| Total investment securities | $ | 1,633,267 | $ | 1,856,133 | |||||||||||||||||||
| Total assets | $ | 9,978,516 | $ | 9,878,836 | |||||||||||||||||||
| Total deposits | $ | 8,443,433 | $ | 8,334,461 | |||||||||||||||||||
| Other borrowings | $ | - | $ | 17,039 | |||||||||||||||||||
| Shareholders' equity | $ | 1,328,450 | $ | 1,304,305 | |||||||||||||||||||
| Financial Ratios: | |||||||||||||||||||||||
| During the period: | |||||||||||||||||||||||
| Return on average assets (annualized) | 1.50 | % | 1.36 | % | 1.42 | % | 1.20 | % | |||||||||||||||
| Return on average equity (annualized) | 11.08 | % | 10.47 | % | 10.44 | % | 9.24 | % | |||||||||||||||
|
Net interest margin(1) (annualized)
|
4.16 | % | 3.92 | % | 4.12 | % | 3.84 | % | |||||||||||||||
| Efficiency ratio | 56.96 | % | 56.18 | % | 55.95 | % | 58.47 | % | |||||||||||||||
| Average equity to average assets | 13.56 | % | 13.02 | % | 13.59 | % | 12.94 | % | |||||||||||||||
| At end of period: | |||||||||||||||||||||||
| Equity to assets | 13.31 | % | 13.20 | % | |||||||||||||||||||
| Total capital to risk-adjusted assets | 15.12 | % | 15.11 | % | |||||||||||||||||||
(1) Fully Taxable Equivalent (FTE)
Results of Operations
The following discussion and analysis is designed to provide a better understanding of the significant changes and trends related to the Company and the Bank's financial condition, operating results, asset and liability management, liquidity and capital resources and should be read in conjunction with the unaudited Condensed Consolidated Financial Statements of the Company and the Notes thereto located at Item 1 of this report.
Net Interest Income
The Company's primary source of revenue is net interest income, or the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Following is a summary of the components of FTE net interest income for the periods indicated.
| Three months ended | |||||||||||||||||||||||
| (in thousands) |
September 30, 2026 |
June 30, 2026 |
Change | % Change | |||||||||||||||||||
| Interest income | $ | 124,108 | $ | 120,986 | $ | 3,122 | 2.6 | % | |||||||||||||||
| Interest expense | (27,562) | (27,356) | (206) | 0.8 | % | ||||||||||||||||||
|
Fully tax-equivalent adjustment (FTE) (1)
|
259 | 259 | - | - | % | ||||||||||||||||||
| Net interest income (FTE) | $ | 96,805 | $ | 93,889 | $ | 2,916 | 3.1 | % | |||||||||||||||
| Net interest margin (FTE) | 4.16 | % | 4.11 | % | |||||||||||||||||||
| Acquired loans discount accretion, net: | |||||||||||||||||||||||
| Amount (included in interest income) | $ | 1,177 | $ | 990 | $ | 187 | 18.9 | % | |||||||||||||||
|
Net interest margin less effect of acquired loan discount accretion(1)
|
4.11 | % | 4.07 | % | 0.04 | % | |||||||||||||||||
| Three months ended September 30, | |||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | Change | % Change | |||||||||||||||||||
| Interest income | $ | 124,108 | $ | 119,987 | $ | 4,121 | 3.4 | % | |||||||||||||||
| Interest expense | (27,562) | (30,432) | 2,870 | (9.4) | % | ||||||||||||||||||
|
Fully tax-equivalent adjustment (FTE) (1)
|
259 | 262 | (3) | (1.1) | % | ||||||||||||||||||
| Net interest income (FTE) | $ | 96,805 | $ | 89,817 | $ | 6,988 | 7.8 | % | |||||||||||||||
| Net interest margin (FTE) | 4.16 | % | 3.92 | % | |||||||||||||||||||
| Acquired loans discount accretion, net: | |||||||||||||||||||||||
| Amount (included in interest income) | $ | 1,177 | $ | 996 | $ | 181 | 18.2 | % | |||||||||||||||
|
Net interest margin less effect of acquired loan discount accretion(1)
|
4.11 | % | 3.88 | % | 0.23 | % | |||||||||||||||||
| Nine months ended September 30, | |||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | Change | % Change | |||||||||||||||||||
| Interest income | $ | 362,921 | $ | 350,425 | $ | 12,496 | 3.6 | % | |||||||||||||||
| Interest expense | (81,519) | (91,809) | 10,290 | (11.2) | % | ||||||||||||||||||
|
Fully tax-equivalent adjustment (FTE) (1)
|
778 | 791 | (13) | (1.6) | % | ||||||||||||||||||
| Net interest income (FTE) | $ | 282,180 | $ | 259,407 | $ | 22,773 | 8.8 | % | |||||||||||||||
| Net interest margin (FTE) | 4.12 | % | 3.84 | % | |||||||||||||||||||
| Acquired loans discount accretion, net: | |||||||||||||||||||||||
| Amount (included in interest income) | $ | 3,553 | $ | 4,238 | $ | (685) | (16.2) | % | |||||||||||||||
|
Net interest margin less effect of acquired loan discount accretion(1)
|
4.06 | % | 3.78 | % | 0.28 | % | |||||||||||||||||
(1)Certain information included herein is presented on a FTE basis and/or to present additional financial details which may be desired by users of this financial information. The Company believes the use of this non-generally accepted accounting principles (non-GAAP) measure provides additional clarity in assessing its results, and the presentation of these measures is a common practice within the banking industry.
Loans may be acquired at a premium or discount to par value, in which case, the premium is amortized (subtracted from) or the discount is accreted (added to) interest income over the remaining life of the loan. 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 September 30, 2026, June 30, 2026 and September 30, 2025, the purchased loan discount accretion was $1.2 million, $1.0 million and $1.0 million, respectively.
Summary of Average Balances, Yields/Rates and Interest Differential
The following table presents, for the three month periods indicated, information regarding the Company's consolidated average assets, liabilities and shareholders' equity, the amounts of interest income from average interest-earning assets and resulting yields, and the amount of interest expense paid on interest-bearing liabilities. Average loan balances include nonperforming loans. Interest income includes proceeds from loans on nonaccrual loans only to the extent cash payments have been received and applied to interest income. Yields on securities and certain loans have been adjusted upward to reflect the effect of income thereon exempt from federal income taxation at the current statutory tax rate (dollars in thousands).
| Three months ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
|
Average Balance |
Interest Income/ Expense |
Rates Earned /Paid |
Average Balance |
Interest Income/ Expense |
Rates Earned /Paid |
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| Assets: | |||||||||||||||||||||||||||||||||||
| Loans | $ | 7,324,950 | $ | 108,371 | 5.87 | % | $ | 6,971,860 | $ | 101,004 | 5.75 | % | |||||||||||||||||||||||
| Investment securities - taxable | 1,588,747 | 13,174 | 3.29 | % | 1,737,273 | 15,321 | 3.50 | % | |||||||||||||||||||||||||||
|
Investment securities - nontaxable(1)
|
129,496 | 1,121 | 3.43 | % | 132,121 | 1,134 | 3.41 | % | |||||||||||||||||||||||||||
| Total investments | 1,718,243 | 14,295 | 3.30 | % | 1,869,394 | 16,455 | 3.49 | % | |||||||||||||||||||||||||||
| Cash at Federal Reserve and other banks | 180,729 | 1,701 | 3.73 | % | 249,646 | 2,790 | 4.43 | % | |||||||||||||||||||||||||||
| Total interest-earning assets | 9,223,922 | 124,367 | 5.35 | % | 9,090,900 | 120,249 | 5.25 | % | |||||||||||||||||||||||||||
| Other assets | 806,910 | 809,775 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 10,030,832 | $ | 9,900,675 | |||||||||||||||||||||||||||||||
| Liabilities and shareholders' equity: | |||||||||||||||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 1,930,435 | $ | 7,236 | 1.49 | % | $ | 1,850,733 | $ | 6,649 | 1.43 | % | |||||||||||||||||||||||
| Savings deposits | 2,784,139 | 10,704 | 1.53 | % | 2,855,750 | 12,965 | 1.80 | % | |||||||||||||||||||||||||||
| Time deposits | 1,131,017 | 8,926 | 3.13 | % | 1,107,646 | 9,587 | 3.43 | % | |||||||||||||||||||||||||||
| Total interest-bearing deposits | 5,845,591 | 26,866 | 1.82 | % | 5,814,129 | 29,201 | 1.99 | % | |||||||||||||||||||||||||||
| Other borrowings | 10,102 | 1 | 0.04 | % | 17,495 | 3 | 0.07 | % | |||||||||||||||||||||||||||
| Junior subordinated debt | 41,238 | 695 | 6.69 | % | 71,477 | 1,228 | 6.82 | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 5,896,931 | 27,562 | 1.85 | % | 5,903,101 | 30,432 | 2.05 | % | |||||||||||||||||||||||||||
| Noninterest-bearing deposits | 2,630,165 | 2,547,471 | |||||||||||||||||||||||||||||||||
| Other liabilities | 143,870 | 160,568 | |||||||||||||||||||||||||||||||||
| Shareholders' equity | 1,359,866 | 1,289,535 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 10,030,832 | $ | 9,900,675 | |||||||||||||||||||||||||||||||
|
Net interest spread(2)
|
3.50 | % | 3.20 | % | |||||||||||||||||||||||||||||||
|
Net interest income and interest margin(3)
|
$ | 96,805 | 4.16 | % | $ | 89,817 | 3.92 | % | |||||||||||||||||||||||||||
(1)Fully taxable equivalent (FTE). All yields and rates are calculated using specific day counts for the period and year as applicable.
(2)Net interest spread represents the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.
(3)Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance of interest-earning assets, then annualized based on the number of days in the given period.
Net interest income (FTE) during the three months ended September 30, 2026, increased $7.0 million or 7.8% to $96.8 million compared to $89.8 million during the three months ended September 30, 2025. Net interest margin totaled 4.16% for the three months ended September 30, 2026, an increase of 24 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 $5.1 million, coupled with a decline in yields paid on interest-bearing deposits improving net interest income by $2.3 million, with yields paid declining by 17 basis points between the quarter ended September 30, 2026, and the same quarter of the prior year. The accretion of discounts from acquired loans added 6 basis points to loan yields during the quarters ended September 30, 2026 and September 30, 2025, respectively. Finally, the average balance of noninterest-bearing deposits increased by $82.7 million from the three-month average as of September 30, 2026.
| Nine months ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
|
Average Balance |
Interest Income/ Expense |
Rates Earned /Paid |
Average Balance |
Interest Income/ Expense |
Rates Earned /Paid |
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| Assets | |||||||||||||||||||||||||||||||||||
| Loans | $ | 7,182,193 | $ | 313,315 | 5.83 | % | $ | 6,876,128 | $ | 295,077 | 5.74 | % | |||||||||||||||||||||||
| Investments-taxable | 1,679,567 | 42,142 | 3.35 | % | 1,812,965 | 45,994 | 3.39 | % | |||||||||||||||||||||||||||
|
Investments-nontaxable (1)
|
129,953 | 3,371 | 3.47 | % | 132,690 | 3,426 | 3.45 | % | |||||||||||||||||||||||||||
| Total investments | 1,809,520 | 45,513 | 3.36 | % | 1,945,655 | 49,420 | 3.40 | % | |||||||||||||||||||||||||||
| Cash at Federal Reserve and other banks | 175,033 | 4,871 | 3.72 | % | 200,364 | 6,719 | 4.48 | % | |||||||||||||||||||||||||||
| Total earning assets | 9,166,746 | 363,699 | 5.30 | % | 9,022,147 | 351,216 | 5.20 | % | |||||||||||||||||||||||||||
| Other assets, net | 803,976 | 807,433 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 9,970,722 | $ | 9,829,580 | |||||||||||||||||||||||||||||||
| Liabilities and shareholders' equity | |||||||||||||||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 1,899,435 | $ | 20,687 | 1.46 | % | $ | 1,828,709 | $ | 18,946 | 1.39 | % | |||||||||||||||||||||||
| Savings deposits | 2,784,223 | 31,500 | 1.51 | % | 2,795,620 | 37,409 | 1.79 | % | |||||||||||||||||||||||||||
| Time deposits | 1,135,886 | 27,267 | 3.21 | % | 1,110,123 | 29,749 | 3.58 | % | |||||||||||||||||||||||||||
| Total interest-bearing deposits | 5,819,544 | 79,454 | 1.83 | % | 5,734,452 | 86,104 | 2.01 | % | |||||||||||||||||||||||||||
| Other borrowings | 10,726 | 9 | 0.11 | % | 42,959 | 1,064 | 3.31 | % | |||||||||||||||||||||||||||
| Junior subordinated debt | 41,238 | 2,056 | 6.67 | % | 91,196 | 4,641 | 6.80 | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 5,871,508 | 81,519 | 1.86 | % | 5,868,607 | 91,809 | 2.09 | % | |||||||||||||||||||||||||||
| Noninterest-bearing deposits | 2,587,391 | 2,526,280 | |||||||||||||||||||||||||||||||||
| Other liabilities | 156,630 | 163,015 | |||||||||||||||||||||||||||||||||
| Shareholders' equity | 1,355,193 | 1,271,678 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 9,970,722 | $ | 9,829,580 | |||||||||||||||||||||||||||||||
|
Net interest rate spread (1) (2)
|
3.44 | % | 3.11 | % | |||||||||||||||||||||||||||||||
|
Net interest income and margin (1) (3)
|
$ | 282,180 | 4.12 | % | $ | 259,407 | 3.84 | % | |||||||||||||||||||||||||||
Summary of Changes in Interest Income and Expense due to Changes in Average Asset and Liability Balances and Yields Earned and Rates Paid
The following table sets forth, for the period identified, a summary of the changes in interest income and interest expense from changes in average asset and liability balances (volume) and changes in average interest rates for the periods indicated. Changes not solely attributable to volume or rates have been allocated in proportion to the respective volume and rate components.
The following commentary regarding net interest income, interest income and interest expense may be best understood while referencing the Summary of Average Balances, Yields/Rates and Interest Differential and the Summary of Changes in Interest Income and Expense due to Changes in Average Asset and Liability Balances and Yields Earned and Rates Paid shown above.
|
Three months ended September 30, 2026
compared with three months ended September 30, 2025
|
|||||||||||||||||
| (in thousands) | Volume | Rate | Total | ||||||||||||||
| Increase (decrease) in interest income: | |||||||||||||||||
| Loans | $ | 5,076 | $ | 2,291 | $ | 7,367 | |||||||||||
|
Investment securities
|
(1,322) | (838) | (2,160) | ||||||||||||||
| Cash at Federal Reserve and other banks | (763) | (326) | (1,089) | ||||||||||||||
| Total interest-earning assets | 2,991 | 1,127 | 4,118 | ||||||||||||||
| Increase (decrease) in interest expense: | |||||||||||||||||
| Interest-bearing demand deposits | 285 | 302 | 587 | ||||||||||||||
| Savings deposits | (322) | (1,939) | (2,261) | ||||||||||||||
| Time deposits | 200 | (861) | (661) | ||||||||||||||
| Total interest-bearing deposits | 163 | (2,498) | (2,335) | ||||||||||||||
| Other borrowings | (1) | (1) | (2) | ||||||||||||||
| Junior subordinated debt | (516) | (17) | (533) | ||||||||||||||
| Total interest-bearing liabilities | (354) | (2,516) | (2,870) | ||||||||||||||
| Increase in net interest income | $ | 3,345 | $ | 3,643 | $ | 6,988 | |||||||||||
Net interest income (FTE) during the three months ended September 30, 2026 increased $7.0 million to $96.8 million compared to $89.8 million during the three months ended September 30, 2025. As noted above, the increase in net interest income (FTE) was due largely to: higher average loan balances, lower rates paid for interest-bearing deposits, and lower average balances for borrowings, all of which have a beneficial impact on net interest income.
|
Nine months ended September 30, 2026
compared with nine months ended September 30, 2025
|
|||||||||||||||||
| (in thousands) | Volume | Rate | Total | ||||||||||||||
| Increase (decrease) in interest income: | |||||||||||||||||
| Loans | $ | 13,176 | $ | 5,062 | $ | 18,238 | |||||||||||
|
Investment securities
|
(3,463) | (444) | (3,907) | ||||||||||||||
| Cash at Federal Reserve and other banks | (851) | (997) | (1,848) | ||||||||||||||
| Total interest-earning assets | 8,862 | 3,621 | 12,483 | ||||||||||||||
| Increase (decrease) in interest expense: | |||||||||||||||||
| Interest-bearing demand deposits | 737 | 1,004 | 1,741 | ||||||||||||||
| Savings deposits | (153) | (5,756) | (5,909) | ||||||||||||||
| Time deposits | 692 | (3,174) | (2,482) | ||||||||||||||
| Other borrowings | (800) | (255) | (1,055) | ||||||||||||||
| Junior subordinated debt | (2,548) | (37) | (2,585) | ||||||||||||||
| Total interest-bearing liabilities | (2,072) | (8,218) | (10,290) | ||||||||||||||
| Increase in net interest income | $ | 10,934 | $ | 11,839 | $ | 22,773 | |||||||||||
Asset Quality and Credit Loss Provisioning
During the three months ended September 30, 2026, the Company recorded a reversal of credit losses of $1.9 million, as compared to a provision of $2.7 million during the trailing quarter, and $0.7 million during the third quarter of 2025.
| Three months ended | Nine months ended | ||||||||||||||||||||||||||||
| (dollars in thousands) |
September 30, 2026 |
June 30, 2026 |
September 30, 2025 |
September 30, 2026 |
September 30, 2025 |
||||||||||||||||||||||||
| (Reversal of) addition to allowance for credit losses on loans and leases | $ | (1,731) | $ | 2,585 | $ | 730 | $ | 3,824 | $ | 7,918 | |||||||||||||||||||
|
(Reversal of) addition to reserve for unfunded loan commitments
|
(150) | 70 | (60) | 275 | 1,145 | ||||||||||||||||||||||||
| Total (benefit from) provision for credit losses | $ | (1,881) | $ | 2,655 | $ | 670 | $ | 4,099 | $ | 9,063 | |||||||||||||||||||
The ACL was $128.2 million or 1.73% of total loans as of September 30, 2026. The reversal of credit losses on loans totaling $1.7 million was driven by a $1.3 million reduction in loss reserves associated with individually evaluated loans, with the balance of the reversal driven by improvements in risk ratings and general economic forecast data attributed to collectively evaluated loan pools, net of $0.3 million in net charge-offs.
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Balance, beginning of period | $ | 130,187 | $ | 124,455 | $ | 125,762 | $ | 125,366 | |||||||||||||||
| (Benefit from) provision for credit losses on loans and leases | (1,731) | 730 | 3,824 | 7,918 | |||||||||||||||||||
| Loans charged-off | (831) | (737) | (2,198) | (9,706) | |||||||||||||||||||
| Recoveries of previously charged-off loans | 530 | 123 | 767 | 993 | |||||||||||||||||||
| Balance, end of period | $ | 128,155 | $ | 124,571 | $ | 128,155 | $ | 124,571 | |||||||||||||||
The net charge-offs incurred during the quarter were spread amongst numerous borrowers and loan types.
The decrease in allowance for credit losses required on individually analyzed loans is largely attributed to the improvement in collateral values, including borrowers who have provided additional collateral, across several credits. Meanwhile, the reversal in collective reserves, despite an overall increase in net loan balances of approximately $99.1 million during the quarter, was primarily attributed to improved delinquency rates and risk grades across the commercial real estate portfolio. 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 remained supportive of general economic expansion, and a slight improvement from the period ended June 30, 2026, which is aligned with the Company's direct experiences with borrowers.
Management believes the provisioning for individually analyzed relationships is sufficient relative to expected future losses, if any. The Company continues to work closely with these largely cooperative borrowers and is diligently monitoring for any further changes in financial conditions. The net charge-offs incurred during the quarter were spread amongst numerous borrowers and loan types.
| (dollars in thousands) | As of September 30, 2026 | % of Loans Outstanding | As of June 30, 2026 | % of Loans Outstanding | As of September 30, 2025 | % of Loans Outstanding | ||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||||||
| Pass | $ | 7,186,815 | 97.0 | % | $ | 7,050,687 | 96.5 | % | $ | 6,785,679 | 96.8 | % | ||||||||||||||
| Special Mention | 92,729 | 1.3 | % | 119,600 | 1.6 | % | 89,352 | 1.3 | % | |||||||||||||||||
| Substandard | 130,645 | 1.7 | % | 140,803 | 1.9 | % | 131,793 | 1.9 | % | |||||||||||||||||
| Total | $ | 7,410,189 | 100.00 | % | $ | 7,311,090 | 100.00 | % | $ | 7,006,824 | 100.00 | % | ||||||||||||||
| Classified loans to total loans | 1.76 | % | 1.93 | % | 1.88 | % | ||||||||||||||||||||
| Loans past due 30+ days to total loans | 0.62 | % | 0.68 | % | 0.65 | % | ||||||||||||||||||||
| ACL to non-performing loans | 184.20 | % | 189.11 | % | 189.76 | % | ||||||||||||||||||||
The ratio of classified loans to total loans of 1.76% as of September 30, 2026, was a decrease of 17 basis points from June 30, 2026, and 12 basis points from the comparative quarter ended 2025. The change in classified loans outstanding as compared to the trailing quarter represented a decrease of approximately $10.2 million.
Loans past due 30 days or more decreased by $3.4 million during the quarter ended September 30, 2026, to $46.2 million, as compared to $49.6 million at June 30, 2026. The majority of loans identified as past due are well-secured by collateral, and approximately $27.5 million are less than 90 days delinquent.
Non-performing assets to total assets were 0.79% on September 30, 2026, as compared to 0.76% as of June 30, 2026, and 0.72% on September 30, 2025. Non-performing loans increased nominally during the quarter ended September 30, 2026, to $69.6 million as compared to $68.8 million at June 30, 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 $69.6 million loans designated as non-performing as of September 30, 2026, approximately $45.0 million are current or less than 30 days past due with respect to payments required under their existing loan agreements.
Management continues to proactively assess the repayment capacity of borrowers that will be subject to rate resets in the near term. To date this analysis as well as management's observations of loans that have experienced a rate reset, have resulted in an insignificant need to provide concessions to borrowers.
As of September 30, 2026, other real estate owned consisted of 14 properties with a carrying value of approximately $9.4 million, as compared to 14 properties with a carrying value of $6.8 million at June 30, 2026. Non-performing assets of $79.0 million at September 30, 2026, represented 0.79% of total assets, a change from $75.6 million or 0.76% and $71.1 million or 0.72% as of June 30, 2026 and September 30, 2025, respectively.
Non-interest Income
The following table summarizes the Company's non-interest income for the periods indicated (in thousands):
|
Three months ended September 30, |
|||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | $ Change | % Change | |||||||||||||||||||
| ATM and interchange fees | $ | 6,725 | $ | 6,493 | $ | 232 | 3.6 | % | |||||||||||||||
| Service charges on deposit accounts | 5,713 | 5,448 | 265 | 4.9 | % | ||||||||||||||||||
| Other service fees | 1,449 | 1,485 | (36) | (2.4) | % | ||||||||||||||||||
| Mortgage banking service fees | 420 | 430 | (10) | (2.3) | % | ||||||||||||||||||
| Change in value of mortgage servicing rights | (33) | (105) | 72 | 68.6 | % | ||||||||||||||||||
| Total service charges and fees | 14,274 | 13,751 | 523 | 3.8 | % | ||||||||||||||||||
| Increase in cash value of life insurance | 880 | 871 | 9 | 1.0 | % | ||||||||||||||||||
| Asset management and commission income | 2,054 | 1,932 | 122 | 6.3 | % | ||||||||||||||||||
| Gain on sale of loans | 394 | 327 | 67 | 20.5 | % | ||||||||||||||||||
| Lease brokerage income | 42 | 82 | (40) | (48.8) | % | ||||||||||||||||||
| Sale of customer checks | 299 | 311 | (12) | (3.9) | % | ||||||||||||||||||
| (Loss) gain on sale or exchange of investment securities | - | (2,124) | 2,124 | (100.0) | % | ||||||||||||||||||
| (Loss) gain on marketable equity securities | (100) | 26 | (126) | (484.6) | % | ||||||||||||||||||
| Other income | 2,323 | 2,831 | (508) | (17.9) | % | ||||||||||||||||||
| Total other non-interest income | 5,892 | 4,256 | 1,636 | 38.4 | % | ||||||||||||||||||
| Total non-interest income | $ | 20,166 | $ | 18,007 | $ | 2,159 | 12.0 | % | |||||||||||||||
Non-interest income increased $2.2 million or 12.0% to $20.2 million during the three months ended September 30, 2026, compared to $18.0 million during the comparative quarter ended September 30, 2025. Non-interest income line items saw modest yet broadly favorable movement during the quarter. During the comparative period ended September 30, 2025, the Company recorded a gain in other income of approximately $2.5 million tied to the early retirement of $59.9 million in subordinated debt, along with losses on investment securities sales of approximately $2.1 million - neither of which reocurred in the current period.
|
Nine months ended September 30, |
|||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | $ Change | % Change | |||||||||||||||||||
| ATM and interchange fees | $ | 19,765 | $ | 19,189 | $ | 576 | 3.0 | % | |||||||||||||||
| Service charges on deposit accounts | 16,375 | 15,551 | 824 | 5.3 | % | ||||||||||||||||||
| Other service fees | 4,465 | 4,329 | 136 | 3.1 | % | ||||||||||||||||||
| Mortgage banking service fees | 1,266 | 1,307 | (41) | (3.1) | % | ||||||||||||||||||
| Change in value of mortgage servicing rights | (439) | (297) | (142) | (47.8) | % | ||||||||||||||||||
| Total service charges and fees | 41,432 | 40,079 | 1,353 | 3.4 | % | ||||||||||||||||||
| Increase in cash value of life insurance | 2,571 | 2,533 | 38 | 1.5 | % | ||||||||||||||||||
| Asset management and commission income | 5,864 | 5,055 | 809 | 16.0 | % | ||||||||||||||||||
| Gain on sale of loans | 1,276 | 1,174 | 102 | 8.7 | % | ||||||||||||||||||
| Lease brokerage income | 187 | 198 | (11) | (5.6) | % | ||||||||||||||||||
| Sale of customer checks | 982 | 974 | 8 | 0.8 | % | ||||||||||||||||||
| (Loss) gain on sale or exchange of investment securities | 17 | (3,266) | 3,283 | 100.5 | % | ||||||||||||||||||
| (Loss) gain on marketable equity securities | (128) | 73 | (201) | (275.3) | % | ||||||||||||||||||
| Other | 3,243 | 4,350 | (1,107) | (25.4) | % | ||||||||||||||||||
| Total other non-interest income | 14,012 | 11,091 | 2,921 | 26.3 | % | ||||||||||||||||||
| Total non-interest income | $ | 55,444 | $ | 51,170 | $ | 4,274 | 8.4 | % | |||||||||||||||
Non-interest income increased $4.3 million or 8.4% to $55.4 million during the nine months ended September 30, 2026, compared to $51.2 million during the comparative period ended September 30, 2025. Service charges and customer fees in the 2026 period drove an increase of $1.4 million. Further, elevated activity and volume of assets under management resulted in an increase of $0.8 million or 16.0% in related income. The remaining notable fluctuations are attributable to the previously noted non-recurring items associated with the retirement of subordinated debt and the sale of investment securities.
Non-interest Expense
The following table summarizes the Company's non-interest expense for the periods indicated:
|
Three months ended September 30, |
|||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | $ Change | % Change | |||||||||||||||||||
| Base salaries, net of deferred loan origination costs | $ | 25,660 | $ | 25,340 | $ | 320 | 1.3 | % | |||||||||||||||
| Incentive compensation | 6,510 | 5,351 | 1,159 | 21.7 | % | ||||||||||||||||||
| Benefits and other compensation costs | 6,638 | 7,038 | (400) | (5.7) | % | ||||||||||||||||||
| Total salaries and benefits expense | 38,808 | 37,729 | 1,079 | 2.9 | % | ||||||||||||||||||
| Occupancy | 4,704 | 4,388 | 316 | 7.2 | % | ||||||||||||||||||
| Data processing and software | 5,570 | 4,838 | 732 | 15.1 | % | ||||||||||||||||||
| Equipment | 1,471 | 1,269 | 202 | 15.9 | % | ||||||||||||||||||
| Intangible amortization | 362 | 482 | (120) | (24.9) | % | ||||||||||||||||||
| Advertising | 878 | 647 | 231 | 35.7 | % | ||||||||||||||||||
| ATM and POS network charges | 2,076 | 1,911 | 165 | 8.6 | % | ||||||||||||||||||
| Professional fees | 1,414 | 1,842 | (428) | (23.2) | % | ||||||||||||||||||
| Telecommunications | 440 | 503 | (63) | (12.5) | % | ||||||||||||||||||
| Regulatory assessments and insurance | 1,311 | 1,282 | 29 | 2.3 | % | ||||||||||||||||||
| Merger and acquisition expense | 3,870 | - | 3,870 | n/m | |||||||||||||||||||
| Postage | 370 | 353 | 17 | 4.8 | % | ||||||||||||||||||
| Operational losses | 662 | 544 | 118 | 21.7 | % | ||||||||||||||||||
| Courier service | 628 | 577 | 51 | 8.8 | % | ||||||||||||||||||
| (Gain) loss on sale or acquisition of foreclosed assets | (72) | - | (72) | n/m | |||||||||||||||||||
| (Gain) loss on disposal of fixed assets | 66 | 21 | 45 | 214.3 | % | ||||||||||||||||||
| Other miscellaneous expense | 3,925 | 4,038 | (113) | (2.8) | % | ||||||||||||||||||
| Total other non-interest expense | 27,675 | 22,695 | 4,980 | 21.9 | % | ||||||||||||||||||
| Total non-interest expense | $ | 66,483 | $ | 60,424 | $ | 6,059 | 10.0 | % | |||||||||||||||
| Average full time equivalent staff | 1,106 | 1,154 | (48) | (4.2) | % | ||||||||||||||||||
Total non-interest expense increased $6.1 million or 10.0% to $66.5 million during the three months ended September 30, 2026, as compared to $60.4 million for the quarter ended September 30, 2025. Total salaries and benefits expense increased by $1.1 million or 2.9% on a net basis, led by elevated incentive compensation attributed to both individual production and overall Company performance. Increases in data processing and software expense along with increases in equipment expense were largely attributable to expanded digital and scaling capabilities.
|
Nine months ended September 30, |
|||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | $ Change | % Change | |||||||||||||||||||
| Base salaries, net of deferred loan origination costs | $ | 75,379 | $ | 76,498 | $ | (1,119) | (1.5) | % | |||||||||||||||
| Incentive compensation | 17,766 | 14,612 | 3,154 | 21.6 | % | ||||||||||||||||||
| Benefits and other compensation costs | 20,780 | 21,760 | (980) | (4.5) | % | ||||||||||||||||||
| Total salaries and benefits expense | 113,925 | 112,870 | 1,055 | 0.9 | % | ||||||||||||||||||
| Occupancy | 13,523 | 12,665 | 858 | 6.8 | % | ||||||||||||||||||
| Data processing and software | 16,296 | 14,855 | 1,441 | 9.7 | % | ||||||||||||||||||
| Equipment | 4,126 | 3,742 | 384 | 10.3 | % | ||||||||||||||||||
| Intangible amortization | 1,222 | 1,479 | (257) | (17.4) | % | ||||||||||||||||||
| Advertising | 2,442 | 2,659 | (217) | (8.2) | % | ||||||||||||||||||
| ATM and POS network charges | 5,795 | 5,605 | 190 | 3.4 | % | ||||||||||||||||||
| Professional fees | 4,644 | 5,027 | (383) | (7.6) | % | ||||||||||||||||||
| Telecommunications | 1,359 | 1,504 | (145) | (9.6) | % | ||||||||||||||||||
| Regulatory assessments and insurance | 3,916 | 3,862 | 54 | 1.4 | % | ||||||||||||||||||
| Merger and acquisition expense | 4,720 | - | 4,720 | n/m | |||||||||||||||||||
| Postage | 1,123 | 1,058 | 65 | 6.1 | % | ||||||||||||||||||
| Operational losses | 1,449 | 1,238 | 211 | 17.0 | % | ||||||||||||||||||
| Courier service | 1,724 | 1,609 | 115 | 7.1 | % | ||||||||||||||||||
| (Gain) loss on sale or acquisition of foreclosed assets | (72) | (3) | (69) | 2,300.0 | % | ||||||||||||||||||
| (Gain) loss on disposal of fixed assets | 51 | 111 | (60) | (54.1) | % | ||||||||||||||||||
| Other miscellaneous expense | 12,217 | 12,859 | (642) | (5.0) | % | ||||||||||||||||||
| Total other non-interest expense | 74,535 | 68,270 | 6,265 | 9.2 | % | ||||||||||||||||||
| Total non-interest expense | $ | 188,460 | $ | 181,140 | $ | 7,320 | 4.0 | % | |||||||||||||||
| Average full time equivalent staff | 1,111 | 1,173 | (62) | (5.3) | % | ||||||||||||||||||
Non-interest expense increased $7.3 million or 4.0% to $188.5 million during the nine months ended September 30, 2026, as compared to $181.1 million for the trailing nine months ended September 30, 2025. As noted above, increases in incentive compensation were attributed to both individual production and overall Company performance. Increases in data processing and software expense along with increases in equipment expense were largely attributable to expanded digital and scaling capabilities. Excluding those items and the $4.7 million in merger expenses, changes in other non-interest expense line items were mixed during the nine months period ended September 30, 2026, but essentially flat and due to timing differences.
Income Taxes
The Company's effective tax rate was 27.1% for the quarter ended September 30, 2026, as compared to 26.2% for the quarter ended June 30, 2026, and 26.8% for the quarter ended September 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.
Financial Condition
For financial reporting purposes, the Company does not separately track the changes in assets and liabilities based on branch location or regional geography. The following is a comparison of the quarterly change in certain assets and liabilities:
| Ending balances |
September 30, 2026 |
June 30, 2026 |
Annualized % Change |
||||||||||||||||||||
| (dollars in thousands) | $ Change | ||||||||||||||||||||||
| Total assets | $ | 9,978,516 | $ | 9,930,763 | $ | 47,753 | 1.9 | % | |||||||||||||||
| Total loans | 7,410,189 | 7,311,090 | 99,099 | 5.4 | |||||||||||||||||||
| Total investments | 1,633,267 | 1,796,373 | (163,106) | (36.3) | |||||||||||||||||||
| Total deposits | 8,443,433 | 8,368,830 | 74,603 | 3.6 | |||||||||||||||||||
| Total other borrowings | - | 10,519 | (10,519) | (100.0) | |||||||||||||||||||
Loans outstanding increased by $99.1 million or 5.4% on an annualized basis during the quarter ended September 30, 2026. During the quarter, gross loan originations/draws totaled approximately $496.0 million while gross payoffs/repayments of loans totaled $410.8 million, which compares to gross originations/draws and gross payoffs/repayments during the trailing quarter ended of $632.9 million and $412.8 million, respectively. Origination and repayment volumes returned to levels consistent with recent periods, following an outlier quarter of elevated originations.
Investment security balances decreased $163.1 million or 36.3% on an annualized basis during the quarter as a result of prepayments / maturities of $131.8 million and net decreases in the market value of securities of $60.5 million, partially offset by purchases totaling $29.2 million. Investment security purchases were comprised of fixed rate agency mortgage-backed securities. 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 increased by $74.6 million or 3.6% annualized during the period, inclusive of $68.8 million in one-way sell activity outstanding at June 30, 2026, which was returned to the Company's balance sheet during the current quarter. There were no deposits sold as of September 30, 2026 or the same quarter of the prior year.
The following is a comparison of the year over year change in certain assets and liabilities:
| Ending balances | As of September 30, | % Change | |||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | $ Change | ||||||||||||||||||||
| Total assets | $ | 9,978,516 | $ | 9,878,836 | $ | 99,680 | 1.0 | % | |||||||||||||||
| Total loans | 7,410,189 | 7,006,824 | 403,365 | 5.8 | |||||||||||||||||||
| Total investments | 1,633,267 | 1,856,133 | (222,866) | (12.0) | |||||||||||||||||||
| Total deposits | 8,443,433 | 8,334,461 | 108,972 | 1.3 | |||||||||||||||||||
| Total other borrowings | - | 17,039 | (17,039) | (100.0) | |||||||||||||||||||
Investment Securities
The following table presents the available for sale debt securities portfolio by major type as of September 30, 2026 and December 31, 2025:
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| (in thousands) | Fair Value | % | Fair Value | % | |||||||||||||||||||
|
Debt securities available for sale:
|
|||||||||||||||||||||||
| Obligations of U.S. government agencies | $ | 1,049,163 | 68.2 | % | $ | 1,064,028 | 61.4 | % | |||||||||||||||
| Obligations of states and political subdivisions | 201,770 | 13.1 | % | 220,686 | 12.7 | % | |||||||||||||||||
| Corporate bonds | 989 | 0.1 | % | 4,958 | 0.3 | % | |||||||||||||||||
| Asset backed securities | 160,972 | 10.5 | % | 269,520 | 15.6 | % | |||||||||||||||||
| Non-agency mortgage backed | 124,343 | 8.1 | % | 172,739 | 10.0 | % | |||||||||||||||||
| Total debt securities available for sale | $ | 1,537,237 | 100.0 | % | $ | 1,731,931 | 100.0 | % | |||||||||||||||
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| (in thousands) |
Amortized Cost |
% |
Amortized Cost |
% | |||||||||||||||||||
|
Debt securities held to maturity:
|
|||||||||||||||||||||||
| Obligations of U.S. government and agencies | $ | 74,652 | 97.9 | % | $ | 88,980 | 98.3 | % | |||||||||||||||
| Obligations of states and political subdivisions | 1,564 | 2.1 | % | 1,564 | 1.7 | % | |||||||||||||||||
| Total debt securities held to maturity | $ | 76,216 | 100.0 | % | $ | 90,544 | 100.0 | % | |||||||||||||||
Investment securities held to maturity decreased $14.3 million to $76.2 million as of September 30, 2026, as compared to December 31, 2025. This decrease is attributable to calls and principal repayments of $14.1 million, and amortization of net purchase premiums of $0.2 million.
Loans
The Company focuses its primary lending activities in six principal areas: commercial real estate loans, consumer loans, commercial and industrial loans, construction loans, agriculture production loans and leases. The interest rates charged for the loans made by the Company vary with the degree of risk, the size and duration of the loans, the borrower's relationship with the Company and prevailing money market rates indicative of the Company's cost of funds.
The majority of the Company's loans are direct loans made to individuals, and local or regional businesses which service a variety of industries. The Company relies substantially on local promotional activity and personal contacts by bank officers, directors and employees to compete with other financial institutions. The Company makes loans to borrowers whose applications include a sound purpose, a viable repayment source and a plan of repayment established at inception and generally backed by a secondary source of repayment.
The following table shows the Company's loan balances, net of deferred loan costs and discounts, as of the dates indicated:
| (in thousands) | September 30, 2026 | December 31, 2025 | |||||||||||||||||||||
| Commercial real estate | $ | 5,010,800 | 67.6 | % | $ | 4,853,762 | 68.3 | % | |||||||||||||||
| Consumer | 1,307,120 | 17.6 | % | 1,314,610 | 18.5 | % | |||||||||||||||||
| Commercial and industrial | 595,205 | 8.0 | % | 464,428 | 6.5 | % | |||||||||||||||||
| Construction | 336,299 | 4.5 | % | 301,045 | 4.2 | % | |||||||||||||||||
| Agriculture production | 157,343 | 2.1 | % | 172,494 | 2.5 | % | |||||||||||||||||
| Leases | 3,422 | 0.2 | % | 4,748 | - | % | |||||||||||||||||
| Total loans | $ | 7,410,189 | 100.0 | % | $ | 7,111,087 | 100.0 | % | |||||||||||||||
Nonperforming Assets
The following tables set forth the amount of the Company's NPAs as of the dates indicated. "Performing nonaccrual loans" are loans that may be current for both principal and interest payments, or are less than 90 days past due, but for which payment in full of both principal and interest is not expected, and are not well secured and in the process of collection:
| (in thousands) |
September 30, 2026 |
December 31, 2025 |
|||||||||
| Performing nonaccrual loans | $ | 48,782 | $ | 40,762 | |||||||
| Nonperforming nonaccrual loans | 20,125 | 23,374 | |||||||||
| Total nonaccrual loans | 68,907 | 64,136 | |||||||||
| Loans 90 days past due and still accruing | 666 | 83 | |||||||||
| Total nonperforming loans | 69,573 | 64,219 | |||||||||
| Foreclosed assets | 9,386 | 6,245 | |||||||||
| Total nonperforming assets | $ | 78,959 | $ | 70,464 | |||||||
| Nonperforming assets to total assets | 0.79 | % | 0.72 | % | |||||||
| Nonperforming loans to total loans | 0.94 | % | 0.90 | % | |||||||
| Allowance for credit losses to nonperforming loans | 184 | % | 196 | % | |||||||
Changes in nonperforming assets during the three months ended September 30, 2026
| (in thousands) | Balance at June 30, 2026 |
New NPA / Valuation Adjustments |
Pay-downs /Sales /Upgrades |
Charge-offs/ (1)
Write-downs
|
Transfers to Foreclosed Assets |
Balance at September 30, 2026 | |||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||
| CRE non-owner occupied | $ | 8,180 | - | 536 | - | (2,713) | $ | 6,003 | |||||||||||||||||||||||||||
| CRE owner occupied | 18,094 | 978 | (392) | - | - | 18,680 | |||||||||||||||||||||||||||||
| Multifamily | 926 | 431 | (519) | - | - | 838 | |||||||||||||||||||||||||||||
| Farmland | 25,261 | - | (423) | - | - | 24,838 | |||||||||||||||||||||||||||||
| Total commercial real estate loans | 52,461 | 1,409 | (798) | - | (2,713) | 50,359 | |||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||
| SFR 1-4 1st DT liens | 6,370 | 1,786 | (444) | - | - | 7,712 | |||||||||||||||||||||||||||||
| SFR HELOCs and junior liens | 4,316 | 1,194 | (396) | - | (169) | 4,945 | |||||||||||||||||||||||||||||
| Other | 540 | 432 | (104) | (49) | - | 819 | |||||||||||||||||||||||||||||
| Total consumer loans | 11,226 | 3,412 | (944) | (49) | (169) | 13,476 | |||||||||||||||||||||||||||||
| Commercial and industrial | 4,648 | 1,447 | (166) | (673) | - | 5,256 | |||||||||||||||||||||||||||||
| Construction | 106 | - | (8) | - | - | 98 | |||||||||||||||||||||||||||||
| Agriculture production | 159 | - | (32) | - | - | 127 | |||||||||||||||||||||||||||||
| Leases | 242 | 15 | - | - | - | 257 | |||||||||||||||||||||||||||||
| Total nonperforming loans | 68,842 | 6,283 | (1,948) | (722) | (2,882) | 69,573 | |||||||||||||||||||||||||||||
| Foreclosed assets | 6,778 | - | (274) | - | 2,882 | 9,386 | |||||||||||||||||||||||||||||
| Total nonperforming assets | $ | 75,620 | 6,283 | (2,222) | (722) | - | $ | 78,959 | |||||||||||||||||||||||||||
(1) The table above does not include deposit overdraft charge-offs.
Nonperforming assets increased during the three months ended September 30, 2026 by $3.3 million or 4.4% to $79.0 million compared to $75.6 million at June 30, 2026. The increase in nonperforming assets during the third quarter of 2026 was primarily the result of nonperforming loan additions totaling $6.3 million, offset by pay-downs and upgrades, which totaled $1.9 million during the quarter, as well as $0.7 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 September 30, 2026.
Changes in nonperforming assets during the nine months ended September 30, 2026
| (in thousands) | Balance at December 31, 2025 |
New NPA / Valuation Adjustments |
Pay-downs /Sales /Upgrades |
Charge-offs/ (1)
Write-downs
|
Transfers to Foreclosed Assets |
Balance at September 30, 2026 | |||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||
| CRE non-owner occupied | $ | 7,089 | 1,728 | (101) | - | (2,713) | $ | 6,003 | |||||||||||||||||||||||||||
| CRE owner occupied | 7,733 | 11,855 | (908) | - | - | 18,680 | |||||||||||||||||||||||||||||
| Multifamily | 435 | 937 | (534) | - | - | 838 | |||||||||||||||||||||||||||||
| Farmland | 31,615 | - | (6,777) | - | - | 24,838 | |||||||||||||||||||||||||||||
| Total commercial real estate loans | 46,872 | 14,520 | (8,320) | - | (2,713) | 50,359 | |||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||
| SFR 1-4 1st DT liens | 6,246 | 3,122 | (1,436) | - | (220) | 7,712 | |||||||||||||||||||||||||||||
| SFR HELOCs and junior liens | 5,474 | 2,737 | (3,022) | (75) | (169) | 4,945 | |||||||||||||||||||||||||||||
| Other | 459 | 779 | (146) | (273) | - | 819 | |||||||||||||||||||||||||||||
| Total consumer loans | 12,179 | 6,638 | (4,604) | (348) | (389) | 13,476 | |||||||||||||||||||||||||||||
| Commercial and industrial | 4,013 | 3,281 | (597) | (1,441) | - | 5,256 | |||||||||||||||||||||||||||||
| Construction | 650 | 42 | (23) | (70) | (501) | 98 | |||||||||||||||||||||||||||||
| Agriculture production | 505 | 40 | (418) | - | - | 127 | |||||||||||||||||||||||||||||
| Leases | - | 257 | - | - | - | 257 | |||||||||||||||||||||||||||||
| Total nonperforming loans | 64,219 | 24,778 | (13,962) | (1,859) | (3,603) | 69,573 | |||||||||||||||||||||||||||||
| Foreclosed assets | 6,245 | (188) | (274) | - | 3,603 | 9,386 | |||||||||||||||||||||||||||||
| Total nonperforming assets | $ | 70,464 | 24,590 | (14,236) | (1,859) | - | $ | 78,959 | |||||||||||||||||||||||||||
The Components of the Allowance for Credit Losses for Loans
The following table sets forth the allowance for credit losses for loans as of the dates indicated:
| (in thousands) |
September 30, 2026 |
December 31, 2025 |
September 30, 2025 |
||||||||||||||
| Allowance for credit losses: | |||||||||||||||||
| Allowance for collectively evaluated loans | $ | 123,969 | $ | 122,556 | $ | 121,268 | |||||||||||
| Allowance for individually evaluated loans | 4,186 | 3,206 | 3,303 | ||||||||||||||
| Total allowance for credit losses | $ | 128,155 | $ | 125,762 | $ | 124,571 | |||||||||||
| Allowance for credit losses for loans / total loans | 1.73 | % | 1.77 | % | 1.78 | % | |||||||||||
For additional information regarding the allowance for credit 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 $128.2 million allowance for credit losses at September 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 summarizes the allocation of the allowance for credit losses between loan types and by percentage of the total allowance for credit losses on loans as of the dates indicated:
| (in thousands) | September 30, 2026 | December 31, 2025 | September 30, 2025 | ||||||||||||||||||||||||||||||||
| Commercial real estate | $ | 76,078 | 59.4 | % | $ | 75,532 | 60.1 | % | $ | 75,017 | 60.2 | % | |||||||||||||||||||||||
| Consumer | 25,669 | 20.0 | % | 26,283 | 20.9 | % | 25,748 | 20.7 | % | ||||||||||||||||||||||||||
| Commercial and industrial | 13,183 | 10.3 | % | 11,430 | 9.1 | % | 9,090 | 7.3 | % | ||||||||||||||||||||||||||
| Construction | 9,149 | 7.1 | % | 8,231 | 6.5 | % | 10,792 | 8.7 | % | ||||||||||||||||||||||||||
| Agriculture production | 4,061 | 3.2 | % | 4,265 | 3.4 | % | 3,901 | 3.1 | % | ||||||||||||||||||||||||||
| Leases | 15 | 0.0 | % | 21 | 0.0 | % | 23 | 0.0 | % | ||||||||||||||||||||||||||
| Total allowance for credit losses | $ | 128,155 | 100.0 | % | $ | 125,762 | 100.0 | % | $ | 124,571 | 100.0 | % | |||||||||||||||||||||||
The following table summarizes the allocation of the allowance for credit losses as a percentage of the total loans for each loan category as of the dates indicated:
| (in thousands) | September 30, 2026 | December 31, 2025 | September 30, 2025 | ||||||||||||||
| Commercial real estate | 1.52 | % | 1.56 | % | 1.57 | % | |||||||||||
| Consumer | 1.96 | % | 2.00 | % | 1.99 | % | |||||||||||
| Commercial and industrial | 2.21 | % | 2.46 | % | 2.01 | % | |||||||||||
| Construction | 2.72 | % | 2.73 | % | 3.61 | % | |||||||||||
| Agriculture production | 2.58 | % | 2.47 | % | 2.40 | % | |||||||||||
| Leases | 0.44 | % | 0.44 | % | 0.44 | % | |||||||||||
| Total loans | 1.73 | % | 1.77 | % | 1.78 | % | |||||||||||
The following table summarizes the activity in the allowance for credit losses for the periods indicated:
|
Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||
| Balance at beginning of period | $ | 130,187 | $ | 124,455 | $ | 125,762 | $ | 125,366 | |||||||||||||||
| Provision for credit losses | (1,731) | 730 | 3,824 | 7,918 | |||||||||||||||||||
| Loans charged-off: | |||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| CRE non-owner occupied | - | - | - | - | |||||||||||||||||||
| CRE owner occupied | - | - | - | - | |||||||||||||||||||
| Multifamily | - | - | - | - | |||||||||||||||||||
| Farmland | - | - | - | - | |||||||||||||||||||
| Consumer: | |||||||||||||||||||||||
| SFR 1-4 1st DT liens | - | - | - | - | |||||||||||||||||||
| SFR HELOCs and junior liens | - | - | (75) | - | |||||||||||||||||||
| Other | (157) | (142) | (611) | (459) | |||||||||||||||||||
| Commercial and industrial | (674) | (595) | (1,442) | (9,236) | |||||||||||||||||||
| Construction | - | - | (70) | - | |||||||||||||||||||
| Agriculture production | - | - | - | (11) | |||||||||||||||||||
| Leases | - | - | - | - | |||||||||||||||||||
| Total loans charged-off | (831) | (737) | (2,198) | (9,706) | |||||||||||||||||||
|
Recoveries of previously charged-off loans:
|
|||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| CRE non-owner occupied | - | - | 1 | - | |||||||||||||||||||
| CRE owner occupied | 1 | - | 2 | 1 | |||||||||||||||||||
| Multifamily | - | - | - | - | |||||||||||||||||||
| Farmland | - | - | - | - | |||||||||||||||||||
| Consumer: | |||||||||||||||||||||||
| SFR 1-4 1st DT liens | - | - | - | - | |||||||||||||||||||
| SFR HELOCs and junior liens | 2 | 4 | 51 | 20 | |||||||||||||||||||
| Other | 32 | 30 | 133 | 103 | |||||||||||||||||||
| Commercial and industrial | 127 | 89 | 201 | 255 | |||||||||||||||||||
| Construction | - | - | - | - | |||||||||||||||||||
| Agriculture production | 368 | - | 379 | 614 | |||||||||||||||||||
| Leases | - | - | - | - | |||||||||||||||||||
| Total recoveries of previously charged-off loans | 530 | 123 | 767 | 993 | |||||||||||||||||||
| Net charge-offs | (301) | (614) | (1,431) | (8,713) | |||||||||||||||||||
| Balance at end of period | $ | 128,155 | $ | 124,571 | $ | 128,155 | $ | 124,571 | |||||||||||||||
| Average total loans | $ | 7,324,950 | $ | 6,971,860 | $ | 7,182,193 | $ | 6,876,128 | |||||||||||||||
| Ratios (annualized): | |||||||||||||||||||||||
| Net (charge-offs) recoveries during period to average loans outstanding during period | (0.01) | % | (0.01) | % | (0.03) | % | (0.17) | % | |||||||||||||||
| Provision for credit losses to average loans outstanding during period | (0.03) | % | 0.01 | % | 0.07 | % | 0.15 | % | |||||||||||||||
Foreclosed Assets, Net of Allowance for Losses
The following table details the components and summarize the activity in foreclosed assets, net of allowances for losses, for the nine months ended September 30, 2026:
| (in thousands) |
Balance at December 31, 2025 |
Sales |
Valuation Adjustments |
Transfers from Loans |
Balance at September 30, 2026 | ||||||||||||||||||||||||
| Land & construction | $ | 3,592 | $ | - | $ | (104) | $ | 501 | $ | 3,989 | |||||||||||||||||||
| Residential real estate | 1,754 | (224) | (84) | 389 | 1,835 | ||||||||||||||||||||||||
| Commercial real estate | 899 | (50) | - | 2,713 | 3,562 | ||||||||||||||||||||||||
| Total foreclosed assets | $ | 6,245 | $ | (274) | $ | (188) | $ | 3,603 | $ | 9,386 | |||||||||||||||||||
Deposits
During the nine months ended September 30, 2026, the Company's deposits increased by $179.5 million to $8.4 billion at quarter end. There were no brokered deposits included in the deposit balances as of September 30, 2026 and December 31, 2025. Estimated uninsured deposits totaled $2.9 billion and $2.9 billion as of September 30, 2026 and December 31, 2025, respectively.
Off-Balance Sheet Arrangements
See Note 9 to the condensed consolidated financial statements at Item 1 of Part I of this report for information about the Company's commitments and contingencies including off-balance-sheet arrangements.
Capital Resources
The current and projected capital position of the Company and the impact of capital plans and long-term strategies are reviewed regularly by Management.
The Company's Board of Directors has approved the authorization to repurchase up to 2.0 million shares of the Company's common stock (the 2025 Repurchase Plan or the 2025 Program). The Company's 2025 Share Repurchase Program replaces and supersedes the 2021 Share Repurchase Program which has been terminated as of December 31, 2025. The actual timing of any share repurchases will be determined by the Company's management and therefore the total value of the shares to be purchased under the 2025 Program is subject to change. The 2025 Program has no expiration date but the Board may suspend or discontinue the program at any time.
During the three months ended September 30, 2026, the Company repurchased zero shares. During the nine months ended September 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 nine months ended September 30, 2025 the Company purchased 52,106 and 521,738 shares with market values of $2.3 million and $21.3 million under the 2021 Share Repurchase Program. As of September 30, 2026, approximately 1,553,000 shares remain authorized for repurchase
Total shareholders' equity decreased by $15.1 million during the quarter ended September 30, 2026, as net income of $38.0 million was offset by a $42.6 million increase in accumulated other comprehensive losses and $11.5 million in cash dividends paid on common stock. As a result, the Company's book value decreased to $41.56 per share at September 30, 2026, compared to $42.03 at June 30, 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 $31.93 per share at September 30, 2026, as compared to $32.40 at June 30, 2026.
The following is a comparison of various capital ratios for the current period with the most recent fiscal year-end and applicable minimum regulatory requirements.
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Ratio |
Minimum Regulatory Requirement |
Ratio |
Minimum Regulatory Requirement |
||||||||||||||||||||
| Total risk based capital | 15.1 | % | 10.5 | % | 15.1 | % | 10.5 | % | |||||||||||||||
| Tier I capital | 13.9 | % | 8.5 | % | 13.8 | % | 8.5 | % | |||||||||||||||
| Common equity Tier 1 capital | 13.4 | % | 7.0 | % | 13.3 | % | 7.0 | % | |||||||||||||||
| Leverage | 12.2 | % | 4.0 | % | 11.8 | % | 4.0 | % | |||||||||||||||
See Note 10 and Note 16 to the condensed consolidated financial statements at Item 1 of Part I of this report for additional information about the Company's capital resources.
As of September 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.
Liquidity
The Company's primary sources of liquidity include the following for the periods indicated:
| (dollars in thousands) | September 30, 2026 | December 31, 2025 | |||||||||
| Borrowing capacity at correspondent banks and FRB | $ | 2,990,897 | $ | 2,905,789 | |||||||
| Less: borrowings outstanding | - | - | |||||||||
|
Unpledged available-for-sale investment securities
|
863,173 | 963,625 | |||||||||
|
Cash held or in transit with FRB
|
129,868 | 98,067 | |||||||||
| Total primary liquidity | $ | 3,983,938 | $ | 3,967,481 | |||||||
At September 30, 2026, the Company's primary sources of liquidity represented 47% of total deposits and 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 $70.8 million, including approximately $5.5 million in net unrealized losses.
The Company's profitability during the first nine months of 2026 generated cash flows from operations of $100.0 million compared to $98.8 million during the first nine months of 2025. Net cash from investing activities was $170.4 million for the nine months ended September 30, 2026, compared to net cash from investing activities of $3.6 million during the nine months ending 2025. Financing activities provided $109.1 million during the nine months ended September 30, 2026, compared to using $58.7 million during the nine months ended September 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 nine 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 $34.6 million of cash during the nine months ended September 30, 2026. The Company's liquidity is dependent on dividends received from the Bank. Dividends from the Bank are subject to certain regulatory restrictions.
TRICO BANCSHARES-NON-GAAP FINANCIAL MEASURES
(Unaudited. Dollars in thousands)
In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this filing contains certain non-GAAP financial measures. Management has presented these non-GAAP financial measures in this filing because it believes that they provide useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results, and facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, comparable earnings information using GAAP financial measures is also presented. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled measures as calculated by other companies. For a reconciliation of these non-GAAP financial measures, see the tables below:
| Three months ended | Nine months ended | ||||||||||||||||||||||
| (dollars in thousands) |
September 30, 2026 |
September 30, 2025 |
September 30, 2026 |
September 30, 2025 |
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| Net interest margin | |||||||||||||||||||||||
| Acquired loans discount accretion, net: | |||||||||||||||||||||||
| Amount (included in interest income) | $1,177 | $996 | $3,553 | $4,238 | |||||||||||||||||||
| Effect on average loan yield | 0.06 | % | 0.06 | % | 0.06 | % | 0.08 | % | |||||||||||||||
| Effect on net interest margin (FTE) | 0.05 | % | 0.04 | % | 0.05 | % | 0.06 | % | |||||||||||||||
| Net interest margin (FTE) | 4.16 | % | 3.92 | % | 4.12 | % | 3.84 | % | |||||||||||||||
| Net interest margin less effect of acquired loan discount accretion (Non-GAAP) | 4.11 | % | 3.88 | % | 4.06 | % | 3.78 | % | |||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||||||||||
| (dollars in thousands) |
September 30, 2026 |
September 30, 2025 |
September 30, 2026 |
September 30, 2025 |
|||||||||||||||||||
| Pre-tax pre-provision return on average assets or equity | |||||||||||||||||||||||
| Net income (GAAP) | $37,967 | $34,019 | $105,821 | $87,924 | |||||||||||||||||||
| Exclude provision for income taxes | 14,143 | 12,449 | 38,466 | 31,659 | |||||||||||||||||||
| Exclude provision for credit losses | (1,881) | 670 | 4,099 | 9,063 | |||||||||||||||||||
| Net income before income tax and provision expense (Non-GAAP) | $50,229 | $47,138 | $148,386 | $128,646 | |||||||||||||||||||
| Average assets (GAAP) | $10,030,832 | $9,900,675 | $9,970,722 | $9,829,580 | |||||||||||||||||||
| Average equity (GAAP) | $1,359,866 | $1,289,535 | $1,355,193 | $1,271,678 | |||||||||||||||||||
| Return on average assets (GAAP) (annualized) | 1.50 | % | 1.36 | % | 1.42 | % | 1.20 | % | |||||||||||||||
| Pre-tax pre-provision return on average assets (Non-GAAP) (annualized) | 1.99 | % | 1.89 | % | 1.99 | % | 1.75 | % | |||||||||||||||
| Return on average equity (GAAP) (annualized) | 11.08 | % | 10.47 | % | 10.44 | % | 9.24 | % | |||||||||||||||
| Pre-tax pre-provision return on average equity (Non-GAAP) (annualized) | 14.65 | % | 14.50 | % | 14.64 | % | 13.53 | % | |||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||||||||||
| (dollars in thousands) |
September 30, 2026 |
September 30, 2025 |
September 30, 2026 |
September 30, 2025 |
|||||||||||||||||||
| Return on tangible common equity | |||||||||||||||||||||||
| Average total shareholders' equity | $1,359,866 | $1,289,535 | $1,355,193 | $1,271,678 | |||||||||||||||||||
| Exclude average goodwill | 304,442 | 304,442 | 304,442 | 304,442 | |||||||||||||||||||
| Exclude average other intangibles | 3,470 | 5,259 | 3,890 | 5,741 | |||||||||||||||||||
| Average tangible common equity (Non-GAAP) | $1,051,954 | $979,834 | $1,046,861 | $961,495 | |||||||||||||||||||
| Net income (GAAP) | $37,967 | $34,019 | $105,821 | $87,924 | |||||||||||||||||||
| Exclude amortization of intangible assets, net of tax effect | 255 | 339 | 860 | 1,041 | |||||||||||||||||||
| Tangible net income available to common shareholders (Non-GAAP) | $38,222 | $34,358 | $106,681 | $88,965 | |||||||||||||||||||
| Return on average equity (GAAP) (annualized) | 11.08 | % | 10.47 | % | 10.44 | % | 9.24 | % | |||||||||||||||
| Return on average tangible common equity (Non-GAAP) | 14.42 | % | 13.91 | % | 13.62 | % | 12.37 | % | |||||||||||||||
| As of | |||||||||||
| (dollars in thousands) |
September 30, 2026 |
December 31, 2025 |
|||||||||
| Tangible shareholders' equity to tangible assets | |||||||||||
| Shareholders' equity (GAAP) | $1,328,450 | $1,328,001 | |||||||||
| Exclude goodwill and other intangible assets, net | 307,690 | 308,913 | |||||||||
| Tangible shareholders' equity (Non-GAAP) | $1,020,760 | $1,019,088 | |||||||||
| Total assets (GAAP) | $9,978,516 | $9,822,063 | |||||||||
| Exclude goodwill and other intangible assets, net | 307,690 | 308,913 | |||||||||
| Total tangible assets (Non-GAAP) | $9,670,826 | $9,513,150 | |||||||||
| Shareholders' equity to total assets (GAAP) | 13.31 | % | 13.52 | % | |||||||
| Tangible shareholders' equity to tangible assets (Non-GAAP) | 10.56 | % | 10.71 | % | |||||||
| As of | |||||||||||
| (dollars in thousands) |
September 30, 2026 |
December 31, 2025 |
|||||||||
| Tangible common shareholders' equity per share | |||||||||||
| Tangible shareholders' equity (Non-GAAP) | $1,020,760 | $1,019,088 | |||||||||
| Common shares outstanding at end of period | 31,966,630 | 32,334,974 | |||||||||
| Common shareholders' equity (book value) per share (GAAP) | $41.56 | $41.07 | |||||||||
| Tangible common shareholders' equity (tangible book value) per share (Non-GAAP) | $31.93 | $31.52 | |||||||||
TriCo Bancshares published this content on November 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 06, 2026 at 22:14 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]