What changed in this filing

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Item 1. Financial Statements

2022-05-10 compared with 2021-11-08 · 231 added, 336 removed, 1213 unchanged (32% of the section changed)

3 unchanged sentences

(In thousands, except share data;

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Cash and due from banks $ 49,705 $ 57,032

34 unchanged sentences

Preferred stock, no par value:

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

1,000,000 shares authorized, zero issued and outstanding at March 31, 2022 and December 31, 2021

Common stock, no par value:

50,000,000 shares authorized;

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

33,837,935 and 29,730,424 issued and outstanding at March 31, 2022 and December 31, 2021, respectively

706,672 532,244

Retained earnings 479,868 466,959

Accumulated other comprehensive income, net of tax 3,727 12,280

Accumulated other comprehensive (loss) income, net of tax ( 77,358 ) 981

Total shareholders’ equity 1,109,182 1,000,184

5 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

Interest and dividend income:

32 unchanged sentences

Dividends per share $ 0.25 $ 0.25

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In thousands;

Three months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

Net income $ 20,374 $ 33,649

Other comprehensive income (loss), net of tax:

Unrealized gains (losses) on available for sale securities arising during the period ( 4,440 ) 3,266 ( 7,924 ) 7,069

Other comprehensive loss, net of tax:

Unrealized losses on available for sale securities arising during the period ( 78,397 ) ( 8,690 )

Change in minimum pension liability 58 —

Change in joint beneficiary agreements — ( 629 )

Other comprehensive income (loss) ( 4,440 ) 4,957 ( 8,553 ) 10,798

Comprehensive income $ 22,982 $ 22,563 $ 80,880 $ 51,955

See accompanying notes to unaudited condensed consolidated financial statements.

TRICO BANCSHARES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands, except share and per share data;

Stock Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

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

Net income 17,606 17,606

Other comprehensive income 4,957 4,957

Stock options exercised 16,000 259 259

RSU vesting 383 383

PSU vesting 162 162

RSUs released 2,619 —

PSUs released — —

Repurchase of common stock ( 8,439 ) ( 151 ) ( 91 ) ( 242 )

Dividends paid ($ 0.22 per share)

( 6,549 ) ( 6,549 )

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 loss ( 78,339 ) ( 9,319 )

Stock options exercised 4,000 58 58

RSU vesting 485 485

PSU vesting 252 252

RSUs released 2,689 —

PSUs released 19,272 —

Repurchase of common stock ( 27,646 ) ( 494 ) ( 620 ) ( 1,114 )

Dividends paid ($ 0.25 per share)

( 7,429 ) ( 7,429 )

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

Comprehensive income (loss) $ ( 57,965 ) $ 24,330

See accompanying notes to unaudited condensed consolidated financial statements.

TRICO BANCSHARES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands, except share and per share data;

4 unchanged sentences

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

Cumulative change from adoption of ASU 2016-13 ( 12,983 ) ( 12,983 )

Balance at January 1, 2020 (as adjusted for change in accounting principle) 30,523,824 543,998 354,811 ( 5,222 ) 893,587

Net income 33,649 33,649

8 unchanged sentences

( 7,432 ) ( 7,432 )

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

Three months ended March 31, 2021 29,727,122 $ 531,367 $ 408,211 $ 2,961 $ 942,539

Balance at January 1, 2022 29,730,424 $ 532,244 $ 466,959 $ 981 $ 1,000,184

6 unchanged sentences

PSUs released —

Issuance of common stock 4,105,518 173,585 173,585

Repurchase of common stock ( 1,332 ) ( 24 ) ( 32 ) ( 56 )

1 unchanged sentence

( 7,433 ) ( 7,433 )

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

Three months ended March 31, 2022 33,837,935 $ 706,672 $ 479,868 $ ( 77,358 ) $ 1,109,182

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(In thousands;

For the nine months ended September 30,

For the three months ended March 31,

Operating activities:

3 unchanged sentences

Amortization of intangible assets 1,228 1,431

Provision for (reversal of) credit losses on loans ( 7,880 ) 37,738

Provision for (reversal of) credit losses 8,330 ( 6,060 )

Amortization of investment securities premium, net 5,618 1,186

5 unchanged sentences

Provision for losses on foreclosed assets — 9

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

Gain on sale of foreclosed assets — ( 51 )

Operating lease expense payments ( 1,292 ) ( 1,204 )

(Gain) loss on disposal of fixed assets ( 445 ) 37

Gain on disposal of fixed assets ( 1,078 ) —

Increase in cash value of life insurance ( 638 ) ( 673 )

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

Loss on marketable equity securities 137 53

Equity compensation vesting expense 812 537

7 unchanged sentences

Proceeds from maturities of securities held to maturity 12,894 23,850

Proceeds from sale of available for sale securities — 229

Purchases of securities available for sale ( 247,354 ) ( 372,917 )

4 unchanged sentences

Purchases of premises and equipment ( 631 ) ( 188 )

Net cash used by investing activities ( 752,929 ) ( 639,947 )

Cash acquired from VRB, net of cash consideration paid 426,883 —

Net cash from (used by) investing activities 121,914 ( 460,561 )

Financing activities:

3 unchanged sentences

Dividends paid ( 7,433 ) ( 7,432 )

Exercise of stock options 86 —

Net cash from financing activities 110,503 359,336

3 unchanged sentences

Supplemental disclosure of noncash activities:

Unrealized (loss) gain on securities available for sale $ ( 11,249 ) $ 10,036

Unrealized loss on securities available for sale $ ( 111,302 ) $ ( 12,337 )

Loans transferred to held-for-sale 12,044 —

Market value of shares tendered in-lieu of cash to pay for exercise of options and/or related taxes 55 2

11 unchanged sentences

The Bank is a California-chartered bank that is engaged in the general commercial banking business in 31 California counties.

The Company has five capital subsidiary business trusts (collectively, the “Capital Trusts”) that issued trust preferred securities, including two organized by the Company and three acquired with the acquisition of North Valley Bancorp.

The consolidated financial statements are prepared in accordance with accounting policies generally accepted in the United States of America and general practices in the banking industry.

2 unchanged sentences

All inter-company accounts and transactions have been eliminated in consolidation.

For financial reporting purposes, the Company’s investments in the Capital Trusts of $ 1,748,000 are accounted for under the equity method and, accordingly, are not consolidated and are included in other assets on the consolidated balance sheet.

The subordinated debentures issued and guaranteed by the Company and held by the Capital Trusts are reflected as debt on the Company’s consolidated balance sheet.

See the footnote 'Junior Subordinated Debt' for additional information on borrowings outstanding.

Use of Estimates in the Preparation of Financial Statements

20 unchanged sentences

Allowance for Credit Losses - Securities

The Company measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type, then further

disaggregated by sector and bond rating.

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 Company measures expected credit losses on HTM debt securities on a collective basis by major security type, then further disaggregated by sector and bond rating.

Accrued interest receivable on HTM debt securities totaled was considered insignificant at March 31, 2022 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.

3 unchanged sentences

As a result of this evaluation, management determined that the expected credit losses associated with these securities is not significant for financial reporting purposes and therefore, no allowance for credit losses has been recognized.

The Company evaluates available for sale debt securities in an unrealized loss position to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors.

The Company evaluates AFS debt securities in an unrealized loss position to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors.

Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes.

5 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 nine month periods ended September 30, 2021 and 2020, respectively.

No security credit losses were recognized during the three month periods ended March 31, 2022 and 2021, 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.

5 unchanged sentences

Allowance for Credit Losses - Loans

The allowance for credit losses (ACL) is a valuation account that is deducted from the loan's amortized cost basis to present the net amount expected to be collected on the loans.

The ACL is a valuation account that is deducted from the loan's amortized cost basis to present the net amount expected to be collected on the loans.

Loans are charged off against the allowance when management believes the recorded loan balance is confirmed as uncollectible.

12 unchanged sentences

A loan is considered to be collateral dependent when repayment is expected to be provided substantially through the operation or sale of the collateral.

The ACL on collateral dependent loans is measured using the fair value of the underlying collateral, adjusted for costs to

sell when applicable, less the amortized cost basis of the financial asset.

The ACL on collateral dependent loans is measured using the fair value of the underlying collateral, adjusted for costs to sell when applicable, less the amortized cost basis of the financial asset.

If the value of underlying collateral is determined to be less than the recorded amount of the loan, a charge-off will be taken.

Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, is considered to be a troubled debt restructuring (TDR).

Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, is considered to be a TDR.

The ACL on a TDR is measured using the same method as all other portfolio loans, except when the value of a concession cannot be measured using a method other than the discounted cash flow method.

When the value of a concession is measured using the discounted cash flow method, the ACL is determined by discounting the expected future cash flows at the original interest rate of the loan.

PCD assets are assets acquired at a discount that is due, in part, to credit quality deterioration since origination.

PCD assets are accounted for in accordance with ASC 326-20 and are initially recorded at fair value, by taking the sum of the present value of expected future cash flows and an allowance for credit losses, at acquisition.

The allowance for credit losses for PCD assets is recorded through a gross-up of reserves on the balance sheet, while the allowance for acquired non-PCD assets, such as loans, is recorded through the provision for credit losses on the income statement, consistent with originated loans.

Subsequent to acquisition, the allowance for credit losses for PCD loans will generally follow the same forward-looking estimation, provision, and charge-off process as non-PCD acquired and originated loans.

The Company has identified the following portfolio segments to evaluate and measure the allowance for credit loss:

44 unchanged sentences

Construction :

While secured by real estate, construction loans represent a greater level of risk than term real estate loans due to the nature of the additional risks associated with the not only the completion of construction within an estimated time period and budget, but also the need to either sell the building or reach a level of stabilized occupancy sufficient to generate the cash flows necessary to support debt service and operating costs.

service and operating costs.

The Company seeks to mitigate the additional risks associated with construction lending by requiring borrowers to comply with lower loan to value ratios and additional covenants as well as strong tertiary support of guarantors.

12 unchanged sentences

The reserve for unfunded commitments is maintained on the consolidated balance sheet in other liabilities.

Accounting Standards Adopted in 2021

On January 1, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

This ASU simplified the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The guidance also promoted consistent application and simplification of GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the Coronavirus Disease 2019 (COVID-19) pandemic.

The CARES Act provides optional temporary relief from troubled debt restructuring and impairment accounting requirements for loan modifications related to the COVID-19 pandemic made during the period from March 1, 2020 to the earlier of December 31, 2020 or 60 days after the national emergency concerning COVID-19 declared by the President terminates.

The applicable period for this relief was extended through 2021 by way of the Consolidated Appropriations Act.

Following the passage of the CARES Act legislation, the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus" was issued by federal bank regulators, which similarly offers temporary relief from troubled debt restructuring accounting for loan payment deferrals for certain customers whose businesses are experiencing economic hardship due to Coronavirus.

The Interagency Statement requires the modification event to be short-term and COVID-19 related, requiring the borrower be not more than 30 days past due as of the date the modification program was implemented, and allowing Management to apply judgement as when the modification program terminates.

The ability to suspend TDR accounting under either program does not apply to any adverse impact on the credit of a borrower that is not related to the COVID-19 pandemic.

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 2022-02, Financial Instruments — Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures .

This ASU addresses feedback received from adopters of CECL, specifically regarding accounting guidance for TDRs and disclosures of gross write-offs by year of loan origination.

Accounting guidance for TDRs by creditors will be eliminated under this amendment, while also enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty.

Amendments in this ASU are effective for the Company beginning after December 31, 2022, with early adoption permitted.

Management is evaluating the extent to which this will impact the consolidated financial statements.

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

5 unchanged sentences

As the Company has an insignificant number of instruments that are applicable to this ASU, management has determined that no impact to the valuations of these instruments are applicable for financial reporting purposes.

Note 2 - Business Combinations

On March 25, 2022, the Company completed its acquisition of Valley Republic Bancorp, including the merger of Valley Republic Bank into Tri Counties Bank, with Tri Counties Bank as the surviving entity, in accordance with the terms of the merger agreement dated as of July 27, 2021.

The cash and stock transaction was valued at approximately $ 174.0 million in aggregate, based on TriCo's closing stock price of $ 42.48 on March 25, 2022.

Under the terms of the merger agreement, the Company issued approximately 4.1 million shares, in addition to approximately $ 431,000 in cash paid out for settlement of stock option awards at VRB.

VRB was headquartered in Bakersfield, California, and had four branch locations in and around Bakersfield, which all now operate as branches for Tri Counties Bank, and a loan production office in Fresno, California.

The Company anticipates that Tri Counties Bank's previously existing Bakersfield branch and the VRB loan production office in Fresno will be consolidated, subject to regulatory approval, into the overlapping locations in the near future.

The acquisition of VRB has been accounted for as a business combination.

We recorded the fair values based on the valuations available as of reporting date.

In accordance with business combination accounting guidance, we will continue to evaluate these fair values for up to one year following the merger date of March 25, 2022.

While management believes the information available and presented below provide a reasonable basis for estimating fair value, we may obtain additional information and evidence during the measurement period that could result in changes to the estimated fair value amounts.

Valuations subject to change include, but are not limited to, loans and leases, deposits, deferred tax items, and certain other assets and liabilities.

The following table summarizes the consideration paid for VRB and the amounts of assets acquired and liabilities assumed that were recorded at the acquisition date (in thousands):

Valley Republic Bancorp

March 25, 2022

Fair value of consideration transferred:

Fair value of shares issued $ 173,585

Cash consideration 431

Total fair value of consideration transferred 174,016

Assets acquired:

Cash and cash equivalents 427,314

Securities available for sale 109,716

Loans and leases 771,353

Premises and equipment 4,658

Cash value of life insurance 13,609

Core deposit intangible 10,635

Other assets 26,244

Total assets acquired 1,363,529

Liabilities assumed:

Deposits ( 1,215,479 )

Subordinated debt ( 47,236 )

SERP liability ( 3,352 )

Other liabilities ( 10,516 )

Total liabilities assumed ( 1,276,583 )

Total net assets acquired 86,946

Goodwill recognized $ 87,070

Note 3 - Investment Securities

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

September 30, 2021

March 31, 2022

(in thousands) Amortized

27 unchanged sentences

Total debt securities held to maturity $ 199,759 $ 8,381 $ — $ — $ 208,140

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.

There were no sales of investment securities during the three months ended March 31, 2022 and 2021, respectively.

Investment securities with an aggregate carrying value of $ 475,674,000 and $ 423,892,000 at March 31, 2022 and December 31, 2021, 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 March 31, 2022 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 September 30, 2021, obligations of U.S.

At March 31, 2022, obligations of U.S.

government corporations and agencies with a cost basis totaling $ 1,404,095,000 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 September 30, 2021, the Company estimates the average remaining life of these mortgage-backed securities issued by U.S.

At March 31, 2022, the Company estimates the average remaining life of these mortgage-backed securities issued by U.S.

government corporations and agencies to be approximately 6.28 years.

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

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

As of March 31, 2022, 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:

September 30, 2021:

March 31, 2022:

Less than 12 months 12 months or more Total

7 unchanged sentences

Obligations of states and political subdivisions 106,944 ( 10,040 ) 9,045 ( 1,364 ) 115,989 ( 11,404 )

Corporate bonds 4,112 ( 65 ) — — 4,112 ( 65 )

Asset backed securities 212,168 ( 2,544 ) 107,603 ( 2,301 ) 319,771 ( 4,845 )

Total debt securities available for sale $ 1,708,871 $ ( 92,589 ) $ 337,547 $ ( 22,777 ) $ 2,046,418 $ ( 115,366 )

Debt Securities Held to Maturity

Obligations of U.S.

government agencies $ 147,078 $ ( 3,070 ) $ — $ — $ 147,078 $ ( 3,070 )

December 31, 2021:

7 unchanged sentences

government agencies $ 947,108 $ ( 9,737 ) $ 44,086 $ ( 1,293 ) $ 991,194 $ ( 11,030 )

Obligations of states and political subdivisions 56,153 ( 785 ) — — 56,153 ( 785 )

Asset backed securities 389,837 ( 4,118 ) 109,748 ( 872 ) 499,585 ( 4,990 )

8 unchanged sentences

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.

At March 31, 2022, 199 debt securities representing obligations of U.S.

government agencies had unrealized losses with aggregate depreciation of 5.50 % 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 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.

At March 31, 2022, 79 debt securities representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of 8.95 % from the Company’s amortized cost basis.

Corporate bonds:

The unrealized losses on investments in corporate bonds were caused by increases in required yields by investors in these types of securities.

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

At March 31, 2022, 3 debt securities representing corporate bonds had unrealized losses with aggregate depreciation of 1.56 % 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 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.

At the time of purchase, each of these securities was rated AA or AAA and through March 31, 2022 has not experienced any deterioration in credit rating.

At March 31, 2022, 29 asset backed securities had unrealized losses with aggregate depreciation of 1.49 % 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:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

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

7 unchanged sentences

A summary of loan balances follows:

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

(in thousands) March 31, 2022 December 31, 2021

Commercial real estate:

18 unchanged sentences

Allowance for credit losses on loans $ ( 96,049 ) $ ( 85,376 )

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 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.

In March 2020 (Round 1) and subsequently in December 2020 (Round 2), the Small Business Administration ("SBA") Paycheck

Protection Program ("PPP") was created to help small businesses keep workers employed during the COVID-19 crisis.

Bank, through its online portal, facilitated the ability for borrowers to open a new deposit account and submit PPP applications during

the entirety of the Programs.

The SBA ended PPP and did not accept new borrowing applications, effective May 31, 2021.

PPP loan balances included in commercial and industrial loan totals above were $ 56,605,000 and $ 61,147,000 , net of approximately $ 1,190,000 and $ 2,164,000 in deferred fee income as of March 31, 2022 and December 31, 2021, respectively.

During the three months ended March 31, 2022, the Company recognized $ 974,000 in fees on PPP loans as compared with $ 3,482,000 and $ 4,978,000 for the three months ended December 31, 2021 and March 31, 2021, respectively.

Based on the payment guarantee provided by the SBA as well as the expected short-term duration of the PPP loans acquired from VRB, the fair value of these loans approximates the principal balance outstanding as of the merger date, and therefore, no purchase discount was recorded.

Note 5 – 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 September 30, 2021

(in thousands) Beginning

Balance Charge-offs Recoveries Provision (benefit) Ending

Commercial real estate:

CRE non-owner occupied $ 26,028 $ — $ 10 $ ( 817 ) $ 25,221

CRE owner occupied 10,463 ( 18 ) 793 ( 508 ) 10,730

Multifamily 13,196 — — ( 320 ) 12,876

Farmland 1,950 ( 126 ) — 78 1,902

Total commercial real estate loans 51,637 ( 144 ) 803 ( 1,567 ) 50,729

SFR 1-4 1st DT liens 10,629 ( 145 ) 1 133 10,618

SFR HELOCs and junior liens 10,701 — 63 ( 333 ) 10,431

Other 2,620 ( 181 ) 97 ( 94 ) 2,442

Total consumer loans 23,950 ( 326 ) 161 ( 294 ) 23,491

Commercial and industrial 4,511 ( 1,112 ) 355 ( 327 ) 3,427

Construction 4,951 — — 577 5,528

Agriculture production 1,007 — 2 110 1,119

Leases 6 — — 6 12

Allowance for credit losses on loans 86,062 ( 1,582 ) 1,321 ( 1,495 ) 84,306

Reserve for unfunded commitments 3,465 — — 60 3,525

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

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

Allowance for credit losses – Three months ended March 31, 2022

(in thousands) Beginning

Balance Charge-offs Recoveries Provision (benefit) Ending

Balance ACL on PCD Loans Charge-offs Recoveries Provision (benefit) Ending

Commercial real estate:

21 unchanged sentences

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.

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.

Purchased loans and leases that reflect a more-than-insignificant deterioration of credit from origination are considered PCD.

For PCD loans and leases, the initial estimate of expected credit losses is recognized in the ACL on the date of acquisition using the same methodology as other loans and leases held-for-investment.

The following table provides a summary of loans and leases purchased as part of the VRB acquisition with credit deterioration at acquisition:

As of March 25, 2022

(in thousands) Commercial Real Estate Consumer Commercial and Industrial Construction Agriculture Production Total

Par value $ 27,237 $ 3,877 $ 2,674 $ 25,645 $ 9,080 $ 68,513

ACL at acquisition ( 1,573 ) ( 144 ) ( 81 ) ( 201 ) ( 38 ) ( 2,037 )

Non-credit discount ( 2,305 ) ( 360 ) ( 47 ) ( 232 ) ( 12 ) ( 2,956 )

Purchase price $ 23,359 $ 3,373 $ 2,546 $ 25,212 $ 9,030 $ 63,520

Allowance for credit losses – Year ended December 31, 2021

(in thousands) Beginning

Balance Adoption of CECL Charge-offs Recoveries Provision

Balance Charge-offs Recoveries Provision

(benefit) Ending Balance

16 unchanged sentences

Total $ 95,247 $ ( 2,392 ) $ 3,086 $ ( 6,775 ) $ 89,166

On January 1, 2020, the Company adopted ASU 2016-03 Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which replaces the incurred loss methodology that is referred to as the current expected credit loss (CECL) methodology.

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 September 30, 2020

Allowance for credit losses – Three months ended March 31, 2021

(in thousands) Beginning

17 unchanged sentences

Total $ 95,247 $ ( 226 ) $ 560 $ ( 6,060 ) $ 89,521

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

(in thousands) Beginning

Balance Adoption of CECL Charge-offs Recoveries Provision Ending Balance

Commercial real estate:

CRE non-owner occupied $ 5,948 $ 6,701 $ — $ 223 $ 15,975 $ 28,847

CRE owner occupied 2,027 2,281 — 3 5,314 9,625

Multifamily 3,352 2,281 — — 4,399 10,032

Farmland 668 585 — — 537 1,790

Total commercial real estate loans 11,995 11,848 — 226 26,225 50,294

SFR 1-4 1st DT liens 2,306 2,675 ( 13 ) 414 3,555 8,937

SFR HELOCs and junior liens 6,183 4,638 ( 23 ) 265 613 11,676

Other 1,595 971 ( 471 ) 253 1,046 3,394

Total consumer loans 10,084 8,284 ( 507 ) 932 5,214 24,007

Commercial and industrial 4,867 ( 1,961 ) ( 688 ) 323 1,993 4,534

Construction 3,388 933 — — 3,319 7,640

Agriculture production 261 ( 179 ) — 22 989 1,093

Leases 21 ( 12 ) — — ( 2 ) 7

Allowance for credit losses on loans 30,616 18,913 ( 1,195 ) 1,503 37,738 87,575

Reserve for unfunded commitments 2,775 — — — 225 3,000

Total $ 33,391 $ 18,913 $ ( 1,195 ) $ 1,503 $ 37,963 $ 90,575

As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including, but not limited to, trends relating to (i) the level of criticized and classified loans, (ii) net charge-offs, (iii) non-performing loans, and (iv) delinquency within the portfolio.

The Company analyzes loans individually to classify the loans as to credit risk and grading.

This analysis is performed annually for all outstanding balances greater than $ 1,000,000 and non-homogeneous loans, such as commercial real estate loans, unless other indicators, such as delinquency, trigger more frequent evaluation.

This analysis is performed annually for all outstanding balances greater than $ 1,000,000 and non-homogeneous loans, such as commercial real

estate loans, unless other indicators, such as delinquency, trigger more frequent evaluation.

Loans below the $ 1,000,000 threshold and homogenous in nature are evaluated as needed for proper grading based on delinquency and borrower credit scores.

20 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 September 30, 2021

Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2022

(in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

13 unchanged sentences

Total CRE owner occupied risk ratings $ 49,344 $ 195,551 $ 134,670 $ 74,908 $ 55,828 $ 309,486 $ 31,647 $ — $ 851,434

Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2022

(in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Commercial real estate:

19 unchanged sentences

Total SFR 1st DT liens $ 43,212 $ 278,719 $ 147,268 $ 38,965 $ 38,376 $ 148,832 $ 11,886 $ 4,131 $ 711,389

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

Consumer loans:

12 unchanged sentences

Total other consumer loans $ 4,341 $ 17,317 $ 14,480 $ 15,490 $ 7,486 $ 3,087 $ 621 $ — $ 62,822

Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2022

(in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Commercial and industrial loans:

19 unchanged sentences

Total agriculture production loans $ 60 $ 4,443 $ 3,456 $ 1,787 $ 3,952 $ 1,625 $ 54,016 $ — $ 69,339

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

Lease risk ratings

33 unchanged sentences

Total multifamily loans $ 278,942 $ 100,752 $ 76,127 $ 109,374 $ 85,932 $ 147,137 $ 25,236 $ — $ 823,500

Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2020

(in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Commercial real estate:

12 unchanged sentences

Total SFR 1st DT liens $ 269,846 $ 159,860 $ 40,947 $ 35,251 $ 36,869 $ 119,753 $ — $ 4,434 $ 666,960

Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2021

(in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Consumer loans:

19 unchanged sentences

Total commercial and industrial loans $ 92,972 $ 20,350 $ 27,550 $ 11,639 $ 7,230 $ 7,268 $ 91,306 $ 1,040 $ 259,355

Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2020

(in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Construction loans:

12 unchanged sentences

Total agriculture production loans $ 2,068 $ 878 $ 1,393 $ 951 $ 940 $ 895 $ 43,686 $ — $ 50,811

Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2021

(in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

Lease risk ratings

11 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 September 30, 2021

Analysis of Past Due Loans - As of March 31, 2022

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

35 unchanged sentences

Non Accrual Loans

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

As of March 31, 2022 As of December 31, 2021

(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 $ 12,448 $ 13,766 $ 152 $ 25,704 $ 29,575 $ —

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.

Interest income on non accrual loans that would have been recognized during the three months ended March 31, 2022 and 2021, if all such loans had been current in accordance with their original terms, totaled $ 167,000 and $ 536,000 , respectively.

Interest income actually recognized on these originated loans during the three months ended March 31, 2022 and 2021 was $ 13,000 and $ 17,000 , respectively.

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

As of September 30, 2021

As of March 31, 2022

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

31 unchanged sentences

Total $ 2,591 $ 1,253 $ 1,545 $ 7,315 $ 4,458 $ 1,027 $ 5,253 $ 1,636 $ 5 $ 2,162 $ 117 $ 27,362

The CARES Act, in addition to providing financial assistance to both businesses and consumers, provides financial institutions the option to temporarily suspend certain requirements under GAAP related to troubled debt restructurings for a limited period of time to account for the effects of COVID-19.

The banking regulatory agencies have likewise issued guidance encouraging financial institutions to work prudently with borrowers who are, or may be, unable to meet their contractual payment obligations because of the effects of COVID-19.

That guidance, with concurrence of the Financial Accounting Standards Board and provisions of the CARES Act, allow modifications made on a good faith basis in response to COVID-19 to borrowers who were generally current with their payments prior to any relief, to not be treated as troubled debt restructurings.

To the extent that such modifications meet the criteria previously described, such modifications are not expected to be classified as troubled debt restructurings.

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

TDR information for the three months ended September 30, 2021

(dollars in thousands) Number Pre-mod

balance Post-mod

balance Financial

impact due to

provision Number that

defaulted during

the period Recorded

investment of

defaulted during

the period Financial impact

taken as charge-

offs or additional

Commercial real estate:

CRE non-owner occupied 3 $ 3,943 $ 3,938 $ — — $ — $ —

CRE owner occupied — — — — — — —

Multifamily — — — — — — —

Farmland 1 50 50 50 — — —

Total commercial real estate loans 4 3,993 3,988 50 — — —

SFR 1-4 1st DT liens — — — — — — —

SFR HELOCs and junior liens — — — — — — —

Other — — — — — — —

Total consumer loans — — — — — — —

Commercial and industrial 2 160 159 106 1 13 ( 5 )

Construction — — — — — — —

Agriculture production — — — — — — —

Leases — — — — — — —

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

TDR information for the three months ended September 30, 2020

(dollars in thousands) Number Pre-mod

balance Post-mod

balance Financial

impact due to

provision Number that

defaulted during

the period Recorded

investment of

defaulted during

the period Financial impact

taken as charge-

offs or additional

Commercial real estate:

CRE non-owner occupied 1 $ 319 $ 314 $ 314 1 $ 141 $ —

CRE owner occupied 5 2,422 2,341 67 2 1,401 —

Multifamily — — — — — — —

Farmland — — — — — — —

Total commercial real estate loans 6 2,741 2,655 381 3 1,542 —

SFR 1-4 1st DT liens — — — — — — —

SFR HELOCs and junior liens — — — — 1 143 —

Other — — — — — — —

Total consumer loans — — — — 1 143 —

Commercial and industrial — — — — — — —

Construction — — — — — — —

Agriculture production — — — — — — —

Leases — — — — — — —

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

TDR Information for the nine months ended September 30, 2021

TDR information for the three months ended March 31, 2022

(dollars in thousands) Number Pre-mod

25 unchanged sentences

Total 3 $ 1,228 $ 1,440 $ — — $ — $ —

TDR Information for the nine months ended September 30, 2020

TDR information for the three months ended March 31, 2021

(dollars in thousands) Number Pre-mod

35 unchanged sentences

If the asset is determined not to be collateral dependent, the impairment is measured on the net present value difference between the expected cash flows of the restructured loan and the cash flows which would have been received under the original terms.

The effect of this could result in a requirement for additional provision to the

The effect of this could result in a requirement for additional provision to the reserve.

The effect of these required provisions for the period are indicated above.

3 unchanged sentences

Note 6 - Leases

The Company records a right-of-use asset (“ROUA”) on the consolidated balance sheets for those leases that convey rights to control use of identified assets for a period of time in exchange for consideration.

The Company records a ROUA on the consolidated balance sheets for those leases that convey rights to control use of identified assets for a period of time in exchange for consideration.

The Company also records a lease liability on the consolidated balance sheets for the present value of future payment commitments.

13 unchanged sentences

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

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

Three months ended March 31,

(in thousands) 2022 2021

5 unchanged sentences

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

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

Three months ended March 31,

(in thousands) 2022 2021

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) 8.8 9.8

Weighted-average discount rate 2.90 % 3.03 %

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

At March 31, 2022, future expected operating lease payments are as follows:

(in thousands)

2 unchanged sentences

Discount for present value of expected cash flows ( 4,668 )

Lease liability at September 30, 2021 $ 27,290

Lease liability at March 31, 2022 $ 30,500

Note 7 - Deposits

A summary of the balances of deposits follows:

(in thousands) September 30,

(in thousands) March 31,

2022 December 31,

5 unchanged sentences

Total deposits $ 8,714,477 $ 7,367,159

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.

Certificate of deposit balances of $ 1,000,000 from the State of California were included in time certificates, over $250,000, at March 31, 2022 and December 31, 2021, 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 $ 1,110,000 and $ 985,000 were classified as consumer loans at September 30, 2021 and December 31, 2020, respectively.

Overdrawn deposit balances of $ 1,399,000 and $ 2,324,000 were classified as consumer loans at March 31, 2022 and December 31, 2021, respectively.

Note 8 - Subordinated Debentures

The following table summarizes the terms and recorded balances of each debenture as of the date indicated (dollars in thousands):

Coupon Rate (Variable) 3 mo.

LIBOR + As of March 31, 2022 December 31, 2021

Subordinated Debt Series Maturity

Value Current

Coupon Rate Recorded

Book Value Recorded

TriCo Cap Trust I 10/7/2033 $ 20,619 3.05 % 3.29 % $ 20,619 $ 20,619

TriCo Cap Trust II 7/23/2034 20,619 2.55 % 2.67 % 20,619 20,619

North Valley Trust II 4/24/2033 6,186 3.25 % 3.38 % 5,428 5,403

North Valley Trust III 7/23/2034 5,155 2.80 % 2.92 % 4,315 4,291

North Valley Trust IV 3/15/2036 10,310 1.33 % 1.53 % 7,211 7,147

VRB Subordinated - 6 %

3/29/2029 16,000 Fixed 6.00 % 17,774 —

VRB Subordinated - 5 %

8/27/2035 20,000 Fixed 5.00 % 25,018 —

$ 98,889 $ 100,984 $ 58,079

The VRB - 6 % Subordinated Debt issuance has a fixed rate of 6.0 % through March 29, 2024, then indexed to the three-month LIBOR plus 3.5 % through the maturity date.

The VRB - 5 % Subordinated Debt issuance is fixed at 5.0 % through August 27, 2025, then indexed to the three-month LIBOR plus 4.9 % through the maturity date.

Note 9 - Commitments and Contingencies

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

(in thousands) September 30,

(in thousands) March 31,

2022 December 31,

9 unchanged sentences

Dividends Paid

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).

The Bank paid to the Company cash dividends in the aggregate amounts of $ 7,782,000 and $ 7,772,000 during the three months ended March 31, 2022 and 2021, respectively.

The Bank is regulated by the FDIC and the 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.

Stock Repurchase Plan

On February 25, 2021 the Board of Directors approved the authorization to repurchase up to 2,000,000 shares of the Company's common stock (the 2021 Repurchase Plan), which approximated 6.7 % of the shares outstanding as of the approval date.

The 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 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.

On February 25, 2021 the Board of Directors authorized the repurchase of up to 2,000,000 shares of the Company's common stock (the 2021 Repurchase Plan), which approximated 6.7 % of the shares outstanding as of the approval date.

The 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 2021 Repurchase Plan is subject to change.

The 2021 Repurchase Plan has no expiration date (in accordance with applicable laws and regulations) and no share repurchases were made by the Company during either of the three month periods ending March 31, 2022 and March 31, 2021.

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 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.

Under the 2019 Repurchase Plan, the Company repurchased 223 shares during the three months ended March 31, 2021.

Stock Repurchased Under Equity Compensation Plans

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 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.

During the three months ended March 31, 2022 and 2021, employees tendered zero shares, respectively, of the Company’s common stock in connection with option exercises.

Employees also tendered zero and 70 shares in connection with the tax withholding requirements of other share based awards during the three months ended March 31, 2022 and 2021, respectively.

In total, shares of the Company's common stock tendered had market values of $ 55,145 and $ 2,500 during the quarters ended March 31, 2022 and 2021, 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 nine months ended September 30, 2021 is summarized in the following table:

Stock option activity during the three months ended March 31, 2022 is summarized in the following table:

of Shares Weighted

4 unchanged sentences

Options forfeited — —

Outstanding at September 30, 2021 122,825 $ 17.80

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 September 30, 2021:

Outstanding at March 31, 2022 75,500 $ 19.40

Exercisable Currently Not

3 unchanged sentences

Intrinsic value (in thousands) $ 1,558 $ — $ 1,558

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

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:

Weighted average remaining contractual term (yrs.) 1.1 0 years 1.1

As of March 31, 2022 all options outstanding are fully vested and are expected to be exercised prior to expiration.

The Company did not modify any option grants during 2021 or the three months ended March 31, 2022.

Activity related to restricted stock unit awards during the three months ended March 31, 2022 is summarized in the following table:

Vesting RSUs Market Plus

4 unchanged sentences

RSUs forfeited/expired — —

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.

Outstanding at March 31, 2022 125,844 99,763

The 125,844 of service condition vesting RSUs outstanding as of March 31, 2022 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 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.

The 125,844 of service condition vesting RSUs outstanding as of March 31, 2022 are expected to vest, and be released, on a weighted-average basis, over the next 2.0 years.

The Company expects to recognize $ 3,269,785 of pre-tax compensation costs related to these service condition vesting RSUs between March 31, 2022 and their vesting dates.

The Company did not modify any service condition vesting RSUs during 2021 or during the three months ended March 31, 2022.

The 99,763 of market plus service condition vesting RSUs outstanding as of March 31, 2022 are expected to vest, and be released, on a weighted-average basis, over the next 1.8 years.

The Company expects to recognize $ 1,352,856 of pre-tax compensation costs related to these RSUs between March 31, 2022 and their vesting dates.

As of March 31, 2022, 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 2021 or during the three months ended March 31, 2022.

Note 12 - Non-interest Income and Expense

1 unchanged sentence

Three months ended

September 30, Nine months ended

September 30,

(in thousands) 2022 2021

11 unchanged sentences

Gain on sale of investment securities — —

Gain (loss) on marketable equity securities ( 14 ) — ( 59 ) 72

Loss on marketable equity securities ( 137 ) ( 53 )

Other 504 704

3 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

(in thousands) 2022 2021

14 unchanged sentences

Postage 228 198

Operational losses 244 154 665 559

Operational (gain) losses ( 183 ) 209

Courier service 414 294

Gain on sale or acquisition of foreclosed assets — ( 51 )

(Gain) loss on disposal of fixed assets ( 19 ) 22 ( 445 ) 37

Gain on disposal of fixed assets ( 1,078 ) —

Other miscellaneous expense 2,485 2,349

6 unchanged sentences

Earnings per share have been computed based on the following:

Three months ended September 30,

(in thousands) 2021 2020

Net income $ 27,422 $ 17,606

Average number of common shares outstanding 29,714 29,764

Effect of dilutive stock options and restricted stock 137 80

Average number of common shares outstanding used to calculate diluted earnings per share 29,851 29,844

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

Nine months ended September 30,

Three months ended March 31,

(in thousands) 2022 2021

8 unchanged sentences

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

Three months ended March 31,

(in thousands) 2022 2021

9 unchanged sentences

Amortization of actuarial losses 2 63

Total amounts reclassified out of accumulated other comprehensive income 49 464 147 1,393

Total amounts reclassified out of accumulated other comprehensive (loss) income ( 5 ) 49

Change in unfunded status of the supplemental retirement plans after reclassifications 58 —

6 unchanged sentences

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

(in thousands) September 30,

(in thousands) March 31,

2022 December 31,

6 unchanged sentences

Joint beneficiary agreement liability ( 433 ) ( 433 )

Tax effect — —

Joint beneficiary agreement liability, net of tax ( 433 ) ( 433 )

Accumulated other comprehensive income $ 3,727 $ 12,280

Accumulated other comprehensive (loss) income $ ( 77,358 ) $ 981

Note 15 - Fair Value Measurement

5 unchanged sentences

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:

21 unchanged sentences

When the fair value of the collateral is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the loan as nonrecurring Level 2.

When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value, or the appraised value contains a significant unobservable assumption, such as deviations from comparable sales, and there is no observable market price, the Company records the loan as nonrecurring Level 3.

When an appraised value is not available or management determines the fair value of the collateral is further

impaired below the appraised value, or the appraised value contains a significant unobservable assumption, such as deviations from comparable sales, and there is no observable market price, the Company records the loan as nonrecurring Level 3.

Foreclosed assets - Foreclosed assets include assets acquired through, or in lieu of, loan foreclosure.

9 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 September 30, 2021 Total Level 1 Level 2 Level 3

Fair value at March 31, 2022 Total Level 1 Level 2 Level 3

Marketable equity securities $ 2,801 $ 2,801

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 nine months ended September 30, 2021, or the year ended December 31, 2020.

There were no transfers between any levels during the three months ended March 31, 2022, or the year ended December 31, 2021.

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 September 30, Beginning

Balance Transfers

into (out of)

Level 3 Change

in Earnings Issuances Ending

Mortgage servicing rights $ 5,603 — $ ( 233 ) $ 366 $ 5,736

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

Nine months ended September 30, Beginning

Three months ended March 31, Beginning

Balance Transfers

4 unchanged sentences

Mortgage servicing rights $ 5,092 — $ 12 $ 503 $ 5,607

Three months ended March 31,

The key unobservable inputs used in determining the fair value of mortgage servicing rights are mortgage prepayment speeds and the discount rate used to discount cash projected cash flows.

1 unchanged sentence

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 September 30, 2021 and December 31, 2020:

As of September 30, 2021:

The following table presents quantitative information about recurring Level 3 fair value measurements at March 31, 2022 and December 31, 2021:

As of March 31, 2022:

(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):

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

March 31, 2022 Total Level 1 Level 2 Level 3 Total Losses

Individually evaluated loans $ 684 — — $ 684 $ ( 615 )

1 unchanged sentence

Total assets measured at fair value $ 997 $ — $ — $ 997 $ ( 909 )

December 31, 2020 Total Level 1 Level 2 Level 3 Total Gains (Losses)

December 31, 2021 Total Level 1 Level 2 Level 3 Total Losses

Individually evaluated loans $ 3,683 — — $ 3,683 $ ( 1,105 )

1 unchanged sentence

Total assets measured at fair value $ 3,683 — — $ 3,683 $ ( 1,105 )

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

March 31, 2021 Total Level 1 Level 2 Level 3 Total Losses

Individually evaluated loans $ 4,557 — — $ 4,557 $ ( 2,710 )

Foreclosed assets 214 — — 214 ( 31 )

Total assets measured at fair value $ 4,771 — — $ 4,771 $ ( 2,741 )

The individually evaluated loan amounts above represent collateral dependent loans that have been adjusted to fair value.

11 unchanged sentences

The loss represents impairments on real estate owned for fair value adjustments based on the fair value of the real estate.

The Company’s property appraisals are primarily based on the sales comparison approach and income approach methodologies, which consider recent sales of comparable properties, including their income generating characteristics, and then make adjustments to reflect the general assumptions that a market participant would make when analyzing the property for purchase.

general assumptions that a market participant would make when analyzing the property for purchase.

These adjustments may increase or decrease an appraised value and can vary significantly depending on the location, physical characteristics and income producing potential of each property.

2 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 September 30, 2021:

September 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 March 31, 2022:

March 31, 2022 Fair Value

(in thousands) Valuation

17 unchanged sentences

Capitalization rate Not meaningful

Foreclosed assets (Residential real estate) $ 979 Sales comparison

approach Adjustment for differences between

comparable sales Not meaningful

Fair values for financial instruments are management’s estimates of the values at which the instruments could be exchanged in a transaction between willing parties.

3 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.

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(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 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.

The following tables present actual and required capital ratios as of March 31, 2022 and December 31, 2021 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 March 31, 2022 and December 31, 2021 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 September 30, 2021:

As of March 31, 2022:

Amount Ratio Amount Ratio Amount Ratio

29 unchanged sentences

Tri Counties Bank $ 811,713 9.77 % $ 332,196 4.00 % $ 415,245 5.00 %

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.

As of March 31, 2022 and December 31, 2021, capital levels at the Company and the Bank exceed all capital adequacy requirements under the Basel III Capital Rules.

Also, at March 31, 2022 and December 31, 2021, 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 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.

The Merger Agreement contemplates that immediately after the Merger, Valley Republic Bank, a California state-chartered bank and wholly-owned subsidiary of Valley, will merge with and into Tri Counties Bank, a California state-chartered bank and wholly-owned subsidiary of the Company, with Tri Counties Bank as the surviving bank (the “Bank Merger”).

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

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.

At March 31, 2022, the Company and the Bank are in compliance with the capital conservation buffer requirement.

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