What changed in this filing

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Item 1. Financial Statements

2021-11-08 compared with 2021-08-06 · 142 added, 125 removed, 1407 unchanged (16% of the section changed)

3 unchanged sentences

(In thousands, except share data;

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Cash and due from banks $ 83,188 $ 77,253

34 unchanged sentences

Preferred stock, no par value:

1,000,000 shares authorized, zero issued and outstanding at June 30, 2021 and December 31, 2020

1,000,000 shares authorized, zero issued and outstanding at September 30, 2021 and December 31, 2020

Common stock, no par value:

50,000,000 shares authorized;

29,716,294 and 29,727,214 issued and outstanding at June 30, 2021 and December 31, 2020, respectively

29,714,609 and 29,727,214 issued and outstanding at September 30, 2021 and December 31, 2020, respectively

531,339 530,835

8 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

36 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

14 unchanged sentences

Income (Loss) Total

Balance at March 31, 2020 29,973,516 $ 534,623 $ 356,935 $ ( 25,132 ) $ 866,426

Balance at June 30, 2020 29,759,209 $ 530,422 $ 354,645 $ 619 $ 885,686

Net income 17,606 17,606

8 unchanged sentences

( 6,549 ) ( 6,549 )

Three months ended June 30, 2020 29,759,209 $ 530,422 $ 354,645 $ 619 $ 885,686

Balance at March 31, 2021 29,727,122 $ 531,367 $ 408,211 $ 2,961 $ 942,539

Three months ended September 30, 2020 29,769,389 $ 531,075 $ 365,611 $ 5,576 $ 902,262

Balance at June 30, 2021 29,716,294 $ 531,038 $ 427,575 $ 8,167 $ 966,780

Net income 27,422 27,422

Other comprehensive income 5,206 5,206

Other comprehensive loss ( 4,440 ) ( 4,440 )

Stock options exercised 4,000 58 58

6 unchanged sentences

( 7,429 ) ( 7,429 )

Three months ended June 30, 2021 29,716,294 $ 531,038 $ 427,575 $ 8,167 $ 966,780

Three months ended September 30, 2021 29,714,609 $ 531,339 $ 446,948 $ 3,727 $ 982,014

See accompanying notes to unaudited condensed consolidated financial statements.

TRICO BANCSHARES

18 unchanged sentences

( 19,758 ) ( 19,758 )

Six months ended June 30, 2020 29,759,209 $ 530,422 $ 354,645 $ 619 $ 885,686

Nine months ended September 30, 2020 29,769,389 $ 531,075 $ 365,611 $ 5,576 $ 902,262

Balance at January 1, 2021 29,727,214 $ 530,835 $ 381,999 $ 12,280 $ 925,114

9 unchanged sentences

( 22,291 ) ( 22,291 )

Six months ended June 30, 2021 29,716,294 $ 531,038 $ 427,575 $ 8,167 $ 966,780

Nine months ended September 30, 2021 29,714,609 $ 531,339 $ 446,948 $ 3,727 $ 982,014

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(In thousands;

For the six months ended June 30,

For the nine months ended September 30,

Operating activities:

11 unchanged sentences

Provision for losses on foreclosed assets — —

Gain on transfer of loans to foreclosed assets ( 20 ) —

(Gain) loss on transfer of loans to foreclosed assets ( 133 ) 128

Gain on sale of foreclosed assets ( 68 ) ( 57 )

2 unchanged sentences

Increase in cash value of life insurance ( 2,062 ) ( 2,203 )

Loss (gain) on marketable equity securities 45 ( 72 )

(Gain) loss on marketable equity securities 59 ( 72 )

Equity compensation vesting expense 1,900 1,476

7 unchanged sentences

Proceeds from maturities of securities held to maturity 66,880 64,054

Proceeds from sale of available for sale securities — 229

Purchases of securities available for sale ( 960,668 ) ( 298,018 )

45 unchanged sentences

Segment and Significant Group Concentration of Credit Risk

The Company grants agribusiness, commercial, consumer, and residential loans to customers located throughout northern and central California.

The Company grants agribusiness, commercial, consumer, and residential loans to customers located throughout California.

The Company has a diversified loan portfolio within the business segments located in this geographical area.

13 unchanged sentences

disaggregated by sector and bond rating.

Accrued interest receivable on held-to-maturity (HTM) debt securities totaled was considered insignificant at June 30, 2021 and is therefore excluded from the estimate of credit losses.

Accrued interest receivable on held-to-maturity (HTM) debt securities totaled was considered insignificant at September 30, 2021 and is therefore excluded from the estimate of credit losses.

The estimate of expected credit losses considers historical credit loss information that is adjusted for current condition and reasonable and supportable forecasts based on current and expected changes in credit ratings and default rates.

11 unchanged sentences

Losses are charged against the ACL when management believes the uncollectability of an available for sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

No security credit losses were recognized during the six month periods ended June 30, 2021 and 2020, respectively.

No security credit losses were recognized during the nine month periods ended September 30, 2021 and 2020, respectively.

Loans that management has the intent and ability to hold until maturity or payoff are reported at principle amount outstanding, net of deferred loan fees and costs.

99 unchanged sentences

Accounting Standards Pending Adoption

FASB issued ASU 2021-06, Presentation of Financial Statements (Topic 205), Financial Services—Depository and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946):

Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No.

33-10835, Update of Statistical

Disclosures for Bank and Savings and Loan Registrants.

This ASU updates certain GAAP annual and interim disclosure requirements to conform with SEC disclosure updates to Guide 3 "Statistical Disclosure by Bank Holding Companies.” Amendments in this ASU are effective for the Company's annual disclosures for fiscal years ending December 31, 2021.

The Company's existing annual disclosure report (10-K) largely complies with the impacted updates to Guide 3 requirements, and management expects the impact from adoption to be limited to:

certain deposit related disclosures, and reducing certain comparative disclosures from five years to three years, all within Management's Discussion and Analysis section of the 10-K.

FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform by providing optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging

relationships, and other transactions affected if certain criteria are met.

The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

4 unchanged sentences

The amortized cost, estimated fair values and allowance for credit losses of investments in debt securities are summarized in the following tables:

June 30, 2021

September 30, 2021

(in thousands) Amortized

27 unchanged sentences

Total debt securities held to maturity $ 284,563 $ 14,163 $ — $ — $ 298,726

There were no sales of investment securities during the three and six months ended June 30, 2021 and 2020, respectively.

Investment securities with an aggregate carrying value of $ 456,446,000 and $ 429,049,000 at June 30, 2021 and December 31, 2020, respectively, were pledged as collateral for specific borrowings, lines of credit or local agency deposits.

The amortized cost and estimated fair value of debt securities at June 30, 2021 by contractual maturity are shown below.

There were no sales of investment securities during the three and nine months ended September 30, 2021 and 2020, respectively.

Investment securities with an aggregate carrying value of $ 440,177,000 and $ 429,049,000 at September 30, 2021 and December 31, 2020, respectively, were pledged as collateral for specific borrowings, lines of credit or local agency deposits.

The amortized cost and estimated fair value of debt securities at September 30, 2021 by contractual maturity are shown below.

Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

At June 30, 2021, obligations of U.S.

At September 30, 2021, obligations of U.S.

government corporations and agencies with a cost basis totaling $ 1,196,924,000 consist almost entirely of residential real estate mortgage-backed securities whose contractual maturity, or principal repayment, will follow the repayment of the underlying mortgages.

1 unchanged sentence

government corporations and agencies is categorized based on final maturity date.

At June 30, 2021, the Company estimates the average remaining life of these mortgage-backed securities issued by U.S.

At September 30, 2021, the Company estimates the average remaining life of these mortgage-backed securities issued by U.S.

government corporations and agencies to be approximately 4.24 years.

Average remaining life is defined as the time span after which the principal balance has been reduced by half.

As of June 30, 2021, the contractual final maturity for available for sale and held to maturity investment securities is as follows:

As of September 30, 2021, the contractual final maturity for available for sale and held to maturity investment securities is as follows:

Debt Securities Available for Sale Held to Maturity

9 unchanged sentences

Gross unrealized losses on debt securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

June 30, 2021:

September 30, 2021:

Less than 12 months 12 months or more Total

26 unchanged sentences

Government Sponsored Entities (principally Fannie Mae and Freddie Mac).

It is expected that the securities would not be settled at a price less than the amortized cost of the investment.Because management believes the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, there is no impairment on these securities and there has been no allowance for credit losses recorded.

At June 30, 2021, 32 debt securities representing obligations of U.S.

It is expected that the securities would not be settled at a price less than the amortized cost of the investment.

Because management believes the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, there is no impairment on these securities and there has been no allowance for credit losses recorded.

At September 30, 2021, 40 debt securities representing obligations of U.S.

government agencies had unrealized losses with aggregate depreciation of 1.01 % from the Company’s amortized cost basis.

2 unchanged sentences

It is expected that the securities would not be settled at a price less than the amortized cost of the investment.

At June 30, 2021, six debt securities representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of 1.83 % from the Company’s amortized cost basis.

At September 30, 2021, 31 debt securities representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of 2.02 % from the Company’s amortized cost basis.

Asset backed securities:

The unrealized losses on investments in asset backed securities were caused by increases in required yields by investors for these types of securities.

At the time of purchase, each of these securities was rated AA or AAA and through June 30, 2021 has not experienced any deterioration in credit rating.

At June 30, 2021, 18 asset backed securities had unrealized losses with aggregate depreciation of 0.63 % from the Company’s amortized cost basis.

At the time of purchase, each of these securities was rated AA or AAA and through September 30, 2021 has not experienced any deterioration in credit rating.

At September 30, 2021, 26 asset backed securities had unrealized losses with aggregate depreciation of 0.62 % from the Company’s amortized cost basis.

The Company continues to monitor these securities for changes in credit rating or other indications of credit deterioration.

The Company monitors credit quality of debt securities held-to-maturity through the use of credit rating.

1 unchanged sentence

The following table summarizes the amortized cost of debt securities held-to-maturity at the dates indicated, aggregated by credit quality indicator:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

AAA/AA/A BBB/BB/B AAA/AA/A BBB/BB/B

7 unchanged sentences

A summary of loan balances follows:

(in thousands) June 30, 2021 December 31, 2020

(in thousands) September 30, 2021 December 31, 2020

Commercial real estate:

18 unchanged sentences

Allowance for credit losses on loans $ ( 84,306 ) $ ( 91,847 )

As of June 30, 2021, the total gross balance outstanding of PPP loans (included within commercial and industrial) was $ 248,582,000 as compared to total PPP originations of $ 640,410,000 .

As of September 30, 2021 and December 31, 2020, the total gross balance outstanding of PPP loans was $ 157,461,000 and $ 326,770,000 , respectively, as compared to total PPP originations of $ 640,410,000 .

In connection with the origination of these loans, the Company earned approximately $ 25,299,000 in loan fees, offset by deferred loan costs of approximately $ 1,245,000 , the net of which will be recognized over the earlier of loan maturity (between 24 - 60 months), repayment or receipt of forgiveness confirmation.

As of June 30, 2021 there was approximately $ 8,990,000 in net deferred fee income remaining to be recognized, as compared to $ 7,212,000 in remaining net deferred fee income as of December 31, 2020.

During the three and six months ended June 30, 2021, the Company recognized $ 2,344,000 and $ 7,304,000 , respectively in fees on PPP loans.

During the three and six months ended June 30, 2020, the Company recognized $ 2,356,000 , respectively, in fees on PPP loans.

As of September 30, 2021, there was approximately $ 6,013,000 in net deferred fee income remaining to be recognized.

During the three and nine months ended September 30, 2021, the Company recognized $ 2,984,000 and $ 10,306,000 , respectively in fees on PPP loans as compared with $ 2,603,000 and $ 4,959,000 for the three and nine months ended September 30, 2020, respectively.

Note 4 – Allowance for Credit Losses

For the periods indicated, the following tables summarize the activity in the allowance for credit losses on loans which is recorded as a contra asset, and the reserve for unfunded commitments which is recorded on the balance sheet within other liabilities:

Allowance for credit losses – Three months ended June 30, 2021

Allowance for credit losses – Three months ended September 30, 2021

(in thousands) Beginning

17 unchanged sentences

Total $ 89,527 $ ( 1,582 ) $ 1,321 $ ( 1,435 ) $ 87,831

Allowance for credit losses – Six months ended June 30, 2021

Allowance for credit losses – Nine months ended September 30, 2021

(in thousands) Beginning

22 unchanged sentences

The Company utilizes a forecast period of approximately eight quarters and obtains the forecast data from publicly available sources as of the balance sheet date.

This forecast data continues to evolve and included significant shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date.

Management noted that the majority of economic forecasts utilized

in the ACL calculation seem to have rebounded slightly in the current quarter, coinciding with the widespread availability of vaccines, continued easing of occupancy and social distancing restrictions, and continued government stimulus efforts.

Management believes that the allowance for credit losses at June 30, 2021 appropriately reflected expected credit losses inherent in the loan portfolio at that date.

This forecast data continues to evolve and included improving shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date.

However, management notes that the majority of economic forecasts

utilized in the ACL calculation have remained directionally consistent with preceding quarters, as general economic conditions continue to improve, albeit at a pace slower than expected due to unforeseen disruptions in the supply chain and increasing energy prices.

In addition, management notes that the level of governmental assistance provided through PPP as well as other programs during the last several quarters has been unprecedented.

As a result, management continues to believe that certain credit weakness are likely present in the overall economy and that it is appropriate to maintain a reserve level that incorporates such risk factors.

Allowance for credit losses – Year ended December 31, 2020

22 unchanged sentences

The Company recognized an increase in the ACL for loans totaling $ 18,913,000 , including a reclassification of $ 481,000 from discounts on acquired loans to the allowance for credit losses, as a cumulative effect adjustment from change in accounting policies, with a corresponding decrease in retained earnings, net of $ 5,449,000 in taxes of $ 12,983,000 .

Allowance for credit losses – Three months ended June 30, 2020

Allowance for credit losses – Three months ended September 30, 2020

(in thousands) Beginning

17 unchanged sentences

Total $ 82,739 $ ( 194 ) $ 381 $ 7,649 $ 90,575

Allowance for credit losses – Six months ended June 30, 2020

Allowance for credit losses – Nine months ended September 30, 2020

(in thousands) Beginning

42 unchanged sentences

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows for the period indicated:

Term Loans Amortized Cost Basis by Origination Year – As of June 30, 2021

Term Loans Amortized Cost Basis by Origination Year – As of September 30, 2021

(in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

34 unchanged sentences

Total SFR 1st DT liens $ 225,634 $ 170,331 $ 51,147 $ 37,638 $ 39,214 $ 133,771 $ — $ 4,608 $ 662,343

Term Loans Amortized Cost Basis by Origination Year – As of June 30, 2021

Term Loans Amortized Cost Basis by Origination Year – As of September 30, 2021

(in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

34 unchanged sentences

Total agriculture production loans $ 2,037 $ 945 $ 1,598 $ 1,216 $ 1,091 $ 982 $ 36,541 $ — $ 44,410

Term Loans Amortized Cost Basis by Origination Year – As of June 30, 2021

Term Loans Amortized Cost Basis by Origination Year – As of September 30, 2021

(in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

100 unchanged sentences

The following table shows the ending balance of current and past due originated loans by loan category as of the date indicated:

Analysis of Past Due Loans - As of June 30, 2021

Analysis of Past Due Loans - As of September 30, 2021

(in thousands) 30-59 days 60-89 days > 90 days Total Past

35 unchanged sentences

Non Accrual Loans

As of June 30, 2021 As of December 31, 2020

As of September 30, 2021 As of December 31, 2020

(in thousands) Non accrual with no allowance for credit losses Total non accrual Past due 90 days or more and still accruing Non accrual with no allowance for credit losses Total non accrual Past due 90 days or more and still accruing

16 unchanged sentences

Total, net $ 26,138 $ 28,015 $ — $ 21,703 $ 26,053 $ —

Interest income on non accrual loans that would have been recognized during the three months ended June 30, 2021 and 2020, if all such loans had been current in accordance with their original terms, totaled $ 524,000 and $ 428,000 , respectively.

Interest income actually recognized on these originated loans during the three months ended June 30, 2021 and 2020 was $ 159,000 and $ 39,000 , respectively.

Interest income on non accrual loans that would have been recognized during the six months ended June 30, 2021 and 2020, if all such loans had been current in accordance with their original terms, totaled $ 1,060,000 and $ 859,000 , respectively.

Interest income actually recognized on these originated loans during the six months ended June 30, 2021 and 2020 was $ 176,000 and $ 86,000 , respectively.

Interest income on non accrual loans that would have been recognized during the three months ended September 30, 2021 and 2020, if all such loans had been current in accordance with their original terms, totaled $ 412,000 and $ 303,000 , respectively.

Interest income actually recognized on these originated loans during the three months ended September 30, 2021 and 2020 was $ 117,000 and $ 187,000 , respectively.

Interest income on non accrual loans that would have been recognized during the nine months ended September 30, 2021 and 2020, if all such loans had been current in accordance with their original terms, totaled $ 1,472,000 and $ 1,162,000 , respectively.

Interest income actually recognized on these originated loans during the nine months ended September 30, 2021 and 2020 was $ 293,000 and $ 321,000 , respectively.

The following tables present the amortized cost basis of collateral dependent loans by class of loans as of the following periods:

As of June 30, 2021

As of September 30, 2021

(in thousands) Retail Office Warehouse Other Multifamily Farmland SFR -1st Deed SFR -2nd Deed Automobile/Truck A/R and Inventory Equipment Total

36 unchanged sentences

The following tables show certain information regarding TDRs that occurred during the periods indicated:

TDR information for the three months ended June 30, 2021

TDR information for the three months ended September 30, 2021

(dollars in thousands) Number Pre-mod

25 unchanged sentences

Total 6 $ 4,153 $ 4,147 $ 156 1 $ 13 $ ( 5 )

TDR information for the three months ended June 30, 2020

TDR information for the three months ended September 30, 2020

(dollars in thousands) Number Pre-mod

25 unchanged sentences

Total 6 $ 2,741 $ 2,655 $ 381 $ 4 $ 1,685 $ —

TDR Information for the six months ended June 30, 2021

TDR Information for the nine months ended September 30, 2021

(dollars in thousands) Number Pre-mod

25 unchanged sentences

Total 14 $ 8,232 $ 8,217 $ 2,521 5 $ 1,107 $ ( 5 )

TDR Information for the six months ended June 30, 2020

TDR Information for the nine months ended September 30, 2020

(dollars in thousands) Number Pre-mod

57 unchanged sentences

The following table presents the components of lease expense for the periods ended:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(in thousands) 2021 2020 2021 2020

5 unchanged sentences

The following table presents supplemental cash flow information related to leases for the periods ended:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(in thousands) 2021 2020 2021 2020

3 unchanged sentences

The following table presents the weighted average operating lease term and discount rate as of the period ended:

September 30,

Weighted-average remaining lease term (years) 9.3 10.0

Weighted-average discount rate 2.92 % 3.10 %

At June 30, 2021, future expected operating lease payments are as follows:

At September 30, 2021, future expected operating lease payments are as follows:

(in thousands)

2 unchanged sentences

Discount for present value of expected cash flows ( 4,615 )

Lease liability at June 30, 2021 $ 26,707

Lease liability at September 30, 2021 $ 27,290

Note 6 - Deposits

A summary of the balances of deposits follows:

(in thousands) June 30,

(in thousands) September 30,

2021 December 31,

5 unchanged sentences

Total deposits $ 7,236,822 $ 6,505,934

Certificate of deposit balances of $ 10,000,000 from the State of California were included in time certificates, over $250,000, at June 30, 2021 and December 31, 2020, respectively.

Certificate of deposit balances of $ 10,000,000 from the State of California were included in time certificates, over $250,000, at September 30, 2021 and December 31, 2020, respectively.

The Company participates in a deposit program offered by the State of California whereby the State may make deposits at the Company’s request subject to collateral and credit worthiness constraints.

The negotiated rates on these State deposits are generally more favorable than other wholesale funding sources available to the Company.

Overdrawn deposit balances of $ 916,000 and $ 985,000 were classified as consumer loans at June 30, 2021 and December 31, 2020, respectively.

Overdrawn deposit balances of $ 1,110,000 and $ 985,000 were classified as consumer loans at September 30, 2021 and December 31, 2020, respectively.

Note 7 - Commitments and Contingencies

The following table presents a summary of the Bank’s commitments and contingent liabilities:

(in thousands) June 30,

(in thousands) September 30,

2021 December 31,

9 unchanged sentences

Dividends Paid

The Bank paid to the Company cash dividends in the aggregate amounts of $ 8,367,000 and $ 12,694,000 during the three months ended June 30, 2021 and 2020, respectively, and $ 16,139,000 and $ 39,448,000 during the six months ended June 30, 2021 and 2020,

respectively.

The Bank is regulated by the Federal Deposit Insurance Corporation (FDIC) and the State Department of Financial Protection and Innovation (DFPI).

The Bank paid to the Company cash dividends in the aggregate amounts of $ 7,058,000 and $ 6,913,000 during the three months ended September 30, 2021 and 2020, respectively, and $ 23,197,000 and $ 46,361,000 during the nine months ended September 30, 2021 and 2020, respectively.

The Bank is regulated by the Federal Deposit Insurance Corporation (FDIC) and the State Department of Financial

Protection and Innovation (DFPI).

Absent approval from the Commissioner of the DFPI, California banking laws generally limit the Bank’s ability to pay dividends to the lesser of (1) retained earnings or (2) net income for the last three fiscal years, less cash distributions paid during such period.

2 unchanged sentences

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 program is subject to change.

The 2021 Repurchase Plan has no expiration date (in accordance with applicable laws and regulations) and during the three and six month periods June 30, 2021, the Company repurchased 45,354 shares with a market value of $ 2,101,000 , respectively.

The 2021 Repurchase Plan has no expiration date (in accordance with applicable laws and regulations) and during the three and nine month periods September 30, 2021, the Company repurchased 17,963 and 63,317 shares with a market value of $ 730,000 and $ 2,831,000 , respectively.

In connection with approval of the 2021 Repurchase Plan, the Company’s previous repurchase program adopted on November 12, 2019 (the 2019 Repurchase Plan) was terminated.

Under the 2019 Repurchase Plan, during the three months ended March 31, 2021, the Company repurchased 223 shares with a market value of approximately $ 8,000 .

Under the 2019 Repurchase Plan, during the nine months ended September 30, 2021, the Company repurchased 223 shares with a market value of approximately $ 8,000 .

The Company repurchased 858,717 shares during 2020.

1 unchanged sentence

The Company's shareholder-approved equity compensation plans permit employees to tender recently vested shares in lieu of cash for the payment of exercise price, if applicable, and the tax withholding on such shares.

During the three months ended June 30, 2021 and 2020, employees tendered zero shares, respectively, of the Company’s common stock in connection with option exercises.

During the six months ended June 30, 2021 and 2020, employees tendered zero and 4,668 shares, respectively, of the Company’s common stock in connection with option exercises.

Employees also tendered 9,660 and 11,306 shares in connection with the tax withholding requirements of other share based awards during the three months ended June 30, 2021 and 2020, respectively, and 9,730 and 11,439 during the six months ended June 30, 2021 and 2020, respectively.

In total, shares of the Company's common stock tendered had market values of $ 450,000 and $ 346,000 during the quarters ended June 30, 2021 and 2020, respectively, and $ 452,000 and $ 494,000 during the year to date periods June 30, 2021 and 2020, respectively.

During the three months ended September 30, 2021 and 2020, employees tendered zero and 7,820 shares, respectively, of the Company’s common stock in connection with option exercises.

During the nine months ended September 30, 2021 and 2020, employees tendered zero and 12,488 shares, respectively, of the Company’s common stock in connection with option exercises.

Employees also tendered 9,683 and 619 shares in connection with the tax withholding requirements of other share based awards during the three months ended September 30, 2021 and 2020, respectively, and 19,413 and 12,058 during the nine months ended September 30, 2021 and 2020, respectively.

In total, shares of the Company's common stock tendered had market values of $ 384,000 and $ 242,000 during the quarters ended September 30, 2021 and 2020, respectively, and $ 836,000 and $ 588,000 during the year to date periods September 30, 2021 and 2020, respectively.

The tendered shares were retired.

6 unchanged sentences

While no new awards can be granted under the 2009 Plan, existing grants continue to be governed by the terms, conditions and procedures set forth in any applicable award agreement.

Stock option activity during the six months ended June 30, 2021 is summarized in the following table:

Stock option activity during the nine months ended September 30, 2021 is summarized in the following table:

of Shares Weighted

4 unchanged sentences

Options forfeited — —

Outstanding at June 30, 2021 126,825 $ 17.74

The following table shows the number, weighted-average exercise price, intrinsic value, and weighted average remaining contractual life of options exercisable, options not yet exercisable and total options outstanding as of June 30, 2021:

Outstanding at September 30, 2021 122,825 $ 17.80

Exercisable Currently Not

4 unchanged sentences

Weighted average remaining contractual term (yrs.) 1.3 0.0 1.5

As of June 30, 2021 all options outstanding are fully vested and are expected to be exercised prior to expiration.

The Company did not modify any option grants during 2020 or the six months ended June 30, 2021.

Activity related to restricted stock unit awards during the six months ended June 30, 2021 is summarized in the following table:

As of September 30, 2021 all options outstanding are fully vested and are expected to be exercised prior to expiration.

The Company did not modify any option grants during 2020 or the nine months ended September 30, 2021.

Activity related to restricted stock unit awards during the nine months ended September 30, 2021 is summarized in the following table:

Vesting RSUs Market Plus

4 unchanged sentences

RSUs forfeited/expired ( 190 ) ( 126 )

Outstanding at June 30, 2021 105,102 113,019

The 105,102 of service condition vesting RSUs outstanding as of June 30, 2021 include a feature whereby each RSU outstanding is credited with a dividend amount equal to any common stock cash dividend declared and paid, and the credited amount is divided by the closing price of the Company’s stock on the dividend payable date to arrive at an additional amount of RSUs outstanding under the original grant.

Outstanding at September 30, 2021 102,934 99,763

The 102,934 of service condition vesting RSUs outstanding as of September 30, 2021 include a feature whereby each RSU outstanding is credited with a dividend amount equal to any common stock cash dividend declared and paid, and the credited amount is divided by the closing price of the Company’s stock on the dividend payable date to arrive at an additional amount of RSUs outstanding under the original grant.

The dividend credits follow the same vesting requirements as the RSU awards and are not considered participating securities.

The 105,102 of service condition vesting RSUs outstanding as of June 30, 2021 are expected to vest, and be released, on a weighted-average basis, over the next 2.7 years.

The Company expects to recognize $ 3,894,000 of pre-tax compensation costs related to these service condition vesting RSUs between June 30, 2021 and their vesting dates.

The Company did not modify any service condition vesting RSUs during 2020 or during the six months ended June 30, 2021.

The 113,019 of market plus service condition vesting RSUs outstanding as of June 30, 2021 are expected to vest, and be released, on a weighted-average basis, over the next 2.4 years.

The Company expects to recognize $ 2,106,000 of pre-tax compensation costs related to these RSUs between June 30, 2021 and their vesting dates.

As of June 30, 2021, the number of market plus service condition vesting RSUs outstanding that will actually vest, and be released, may be reduced to zero or increased to 169,529 depending on the total return of the Company’s common stock versus the total return of an index of bank stocks from the grant date to the vesting date.

The Company did not modify any market plus service condition vesting RSUs during 2020 or during the six months ended June 30, 2021.

The 102,934 of service condition vesting RSUs outstanding as of September 30, 2021 are expected to vest, and be released, on a weighted-average basis, over the next 1.6 years.

The Company expects to recognize $ 3,406,000 of pre-tax compensation costs related to these service condition vesting RSUs between September 30, 2021 and their vesting dates.

The Company did not modify any service condition vesting RSUs during 2020 or during the nine months ended September 30, 2021.

The 99,763 of market plus service condition vesting RSUs outstanding as of September 30, 2021 are expected to vest, and be released, on a weighted-average basis, over the next 1.8 years.

The Company expects to recognize $ 1,852,000 of pre-tax compensation costs related to these RSUs between September 30, 2021 and their vesting dates.

As of September 30, 2021, the number of market plus service condition vesting RSUs outstanding that will actually vest, and be released, may be reduced to zero or increased to 149,645 depending on the total return of the Company’s common stock versus the total return of an index of bank stocks from the grant date to the vesting date.

The Company did not modify any market plus service condition vesting RSUs during 2020 or during the nine months ended September 30, 2021.

Note 10 - Non-interest Income and Expense

1 unchanged sentence

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

(in thousands) 2021 2020 2021 2020

17 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

(in thousands) 2021 2020 2021 2020

12 unchanged sentences

Regulatory assessments and insurance 673 538 1,903 993

Merger and acquisition expense 651 — 651 —

Postage 156 118 478 691

11 unchanged sentences

Earnings per share have been computed based on the following:

Three months ended June 30,

Three months ended September 30,

(in thousands) 2021 2020

4 unchanged sentences

Options excluded from diluted earnings per share because of their antidilutive effect — —

Six months ended June 30,

Nine months ended September 30,

(in thousands) 2021 2020

7 unchanged sentences

Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet identified as accumulated other comprehensive income (AOCI), such items, along with net income, are components of other comprehensive income (loss) (OCI).

The components of other comprehensive income and related tax effects are as follows:

Three months ended June 30, Six months ended June 30,

The components of other comprehensive income (loss) and related tax effects are as follows:

Three months ended September 30, Nine months ended

September 30, 2021

(in thousands) 2021 2020 2021 2020

18 unchanged sentences

The components of accumulated other comprehensive income, included in shareholders’ equity, are as follows:

(in thousands) June 30,

(in thousands) September 30,

2021 December 31,

12 unchanged sentences

In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, income approach, and/or the cost approach.

Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale

or use of an asset and the risk of nonperformance.

Marketable equity securities, debt securities available-for-sale, loans held for sale, and mortgage servicing rights are recorded at fair value on a recurring basis.

1 unchanged sentence

These nonrecurring fair value adjustments typically involve application impairment write-downs of individual assets.

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observable nature of the assumptions used to determine fair value.

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded

and the observable nature of the assumptions used to determine fair value.

These levels are:

33 unchanged sentences

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis (in thousands):

Fair value at June 30, 2021 Total Level 1 Level 2 Level 3

Fair value at September 30, 2021 Total Level 1 Level 2 Level 3

Marketable equity securities $ 2,965 $ 2,965

20 unchanged sentences

Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally corresponds with the Company’s quarterly valuation process.

There were no transfers between any levels during the six months ended June 30, 2021, or the year ended December 31, 2020.

There were no transfers between any levels during the nine months ended September 30, 2021, or the year ended December 31, 2020.

The following table provides a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the time periods indicated.

Had there been any transfer into or out of Level 3 during the time periods indicated, the amount included in the “Transfers into (out of) Level 3” column would represent the beginning balance of an item in the period (interim quarter) during which it was transferred (in thousands):

Three months ended June 30, Beginning

Three months ended September 30, Beginning

Balance Transfers

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Mortgage servicing rights $ 4,250 — $ 236 $ 434 $ 4,920

Six months ended June 30, Beginning

Nine months ended September 30, Beginning

Balance Transfers

7 unchanged sentences

Conversely, a decrease in the mortgage prepayment speed and discount rate will result in a positive fair value adjustment (and increase in the fair value measurement).

The following table presents quantitative information about recurring Level 3 fair value measurements at June 30, 2021 and December 31, 2020:

As of June 30, 2021:

The following table presents quantitative information about recurring Level 3 fair value measurements at September 30, 2021 and December 31, 2020:

As of September 30, 2021:

(in thousands) Valuation

7 unchanged sentences

The tables below present the recorded investment in assets and liabilities measured at fair value on a nonrecurring basis, as of the dates indicated (in thousands):

June 30, 2021 Total Level 1 Level 2 Level 3 Total Gains (Losses)

September 30, 2021 Total Level 1 Level 2 Level 3 Total Gains (Losses)

Individually evaluated loans $ 2,942 — — $ 2,942 $ ( 840 )

5 unchanged sentences

Total assets measured at fair value $ 2,403 — — $ 2,403 $ ( 1,334 )

June 30, 2020 Total Level 1 Level 2 Level 3 Total Losses

September 30, 2020 Total Level 1 Level 2 Level 3 Total Losses

Individually evaluated loans $ 1,024 — — $ 1,024 $ ( 309 )

17 unchanged sentences

Under certain circumstances, management discounts are applied based on specific characteristics of an individual property.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at June 30, 2021:

June 30, 2021 Fair Value

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at September 30, 2021:

September 30, 2021 Fair Value

(in thousands) Valuation

25 unchanged sentences

Further, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on the fair value estimates and have not been considered in any of these estimates.

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

(in thousands) Carrying

28 unchanged sentences

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets.

The following tables present actual and required capital ratios as of June 30, 2021 and December 31, 2020 for the Company and the Bank under applicable Basel III Capital Rules.

The minimum capital amounts presented include the minimum required capital levels as of June 30, 2021 and December 31, 2020 based on the then phased-in provisions of the Basel III Capital Rules.

The following tables present actual and required capital ratios as of September 30, 2021 and December 31, 2020 for the Company and the Bank under applicable Basel III Capital Rules.

The minimum capital amounts presented include the minimum required capital levels as of September 30, 2021 and December 31, 2020 based on the then phased-in provisions of the Basel III Capital Rules.

Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

1 unchanged sentence

Considered Well

As of June 30, 2021:

As of September 30, 2021:

Amount Ratio Amount Ratio Amount Ratio

29 unchanged sentences

Tri Counties Bank $ 714,811 9.76 % $ 292,949 4.00 % $ 366,186 5.00 %

As of June 30, 2021 and December 31, 2020, capital levels at the Company and the Bank exceed all capital adequacy requirements under the Basel III Capital Rules.

Also, at June 30, 2021 and December 31, 2020, the Bank’s capital levels exceeded the minimum amounts necessary to be considered well capitalized under the current regulatory framework for prompt corrective action.

As of September 30, 2021 and December 31, 2020, capital levels at the Company and the Bank exceed all capital adequacy requirements under the Basel III Capital Rules.

Also, at September 30, 2021 and December 31, 2020, the Bank’s capital levels exceeded the minimum amounts necessary to be considered well capitalized under the current regulatory framework for prompt corrective action.

The Basel III Capital Rules require for all banking organizations to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers.

The capital conservation buffer is exclusively composed of common equity tier 1 capital, and it applies to each of the risk-based capital ratios but not the leverage ratio.

At June 30, 2021, the Company and the Bank are in compliance with the capital conservation buffer requirement.

Note 15 - Subsequent Events

At September 30, 2021, the Company and the Bank are in compliance with the capital conservation buffer requirement.

Note 15 - Pending Merger

On July 27, 2021, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Valley Republic Bancorp, a California corporation (“Valley”), providing for the merger of Valley with and into the Company, with the Company as the surviving corporation.

1 unchanged sentence

The Merger Agreement was adopted and unanimously approved by the Board of Directors of each of the Company and Valley.

As of June 30, 2021, Valley had a total asset size of approximately $ 1.36 billion.

The transaction, subject to customary regulatory approvals, is expected to close during the fourth quarter of 2021.

As of September 30, 2021, Valley had a total asset size of approximately $ 1.41 billion.

The transaction, subject to customary regulatory approvals as well as approval by a majority of the Valley Shareholders, is expected to close in the coming months.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements