Note 20 – Stock Options and Other Equity-Based Incentive Instruments

In March 2009, the Company’s Board of Directors adopted the TriCo Bancshares 2009 Equity Incentive Plan (2009 Plan) covering officers, employees, directors of, and consultants to, the Company. The 2009 Plan was approved by the Company’s shareholders in May 2009. The 2009 Plan allows for the granting of the following types of “stock awards” (Awards): incentive stock options, nonstatutory stock options, performance awards, restricted stock, restricted stock unit (RSU) awards and stock appreciation rights. RSUs that vest based solely on the grantee remaining in the service of the Company for a certain amount of time, are referred to as “service condition vesting RSUs”. RSUs that vest based on the grantee remaining in the service of the Company for a certain amount of time and a market condition such as the total return of the Company’s common stock versus the total return of an index of bank stocks, are referred to as “market plus service condition vesting RSUs”. In May 2013, the Company’s shareholders approved an amendment to the 2009 Plan increasing the maximum aggregate number of shares of TriCo’s common stock which may be issued pursuant to or subject to Awards from 650,000 to 1,650,000. The number of shares available for issuance under the 2009 Plan is reduced by: (i) one share for each share of common stock issued pursuant to a stock option or a Stock Appreciation Right and (ii) two shares for each share of common stock issued pursuant to a Performance Award, a Restricted Stock Award or a Restricted Stock Unit Award. When Awards made under the 2009 Plan expire or are forfeited or cancelled, the underlying shares will become available for future Awards under the 2009 Plan. To the extent that a share of common stock pursuant to an Award that counted as two shares against the number of shares again becomes available for issuance under the 2009 Plan, the number of shares of common stock available for issuance under the 2009 Plan shall increase by two shares. Shares awarded and delivered under the 2009 Plan may be authorized but unissued, or reacquired shares. As of December 31, 2016, 481,900 options for the purchase of common shares, and 115,876 restricted stock units were outstanding, and 637,262 shares remain available for issuance, under the 2009 Plan.

In May 2001, the Company adopted the TriCo Bancshares 2001 Stock Option Plan (2001 Plan) covering officers, employees, directors of, and consultants to, the Company. Under the 2001 Plan, the option exercise price cannot be less than the fair market value of the Common Stock at the date of grant except in the case of substitute options. Options for the 2001 Plan expire on the tenth anniversary of the grant date. Vesting schedules under the 2001 Plan are determined individually for each grant. As of December 31, 2016, 110,350 options for the purchase of common shares were outstanding under the 2001 Plan. As of May 2009, as a result of the shareholder approval of the 2009 Plan, no new options may be granted under the 2001 Plan.

Stock option activity is summarized in the following table for the dates indicated:


						Weighted
						Average
	Number			Option Price		Exercise
	of Shares			per Share		Price
Outstanding at December 31, 2015		948,350		$	12.63 to $25.91	$	17.94
Options granted		—			— to —		—
Options exercised		(336,900	)	$	14.54 to $25.91	$	19.31
Options forfeited		(19,200	)	$	14.76 to $23.21	$	19.14
Outstanding at December 31, 2016		592,250		$	12.63 to $23.21	$	17.12

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 December 31, 2016:


	Currently		Currently Not		Total
	Exercisable		Exercisable		Outstanding
Number of options		520,650		71,600		592,250
Weighted average exercise price	$	16.91	$	18.64	$	17.12
Intrinsic value (in thousands)	$	8,991	$	1,112	$	10,103
Weighted average remaining contractual term (yrs.)		4.1		6.3		4.3

The 71,600 options that are currently not exercisable as of December 31, 2016 are expected to vest, on a weighted-average basis, over the next 1.3 years, and the Company is expected to recognize $368,000 of pre-tax compensation costs related to these options as they vest. The Company did not modify any option grants during 2016 or 2015.

The following table shows the total intrinsic value of options exercised, the total fair value of options vested, total compensation costs for options recognized in income, and total tax benefit recognized in income related to compensation costs for options during the periods indicated:


	Years Ended December 31,
	2016		2015		2014
Intrinsic value of options exercised	$	3,483,000	$	969,000	$	1,209,000
Fair value of options that vested	$	580,000	$	734,000	$	965,000
Total compensation costs for options recognized in income	$	580,000	$	734,000	$	965,000
Total tax benefit recognized in income related to compensation costs for options	$	244,000	$	380,000	$	378,000
Weighted average fair value of grants (per option)		n/a		n/a	$	8.17

The fair value of the Company’s stock option grants is estimated on the measurement date, which, for the Company, is the date of grant. The fair value of stock options is estimated using the Black-Scholes option-pricing model. The Company estimated expected market price volatility and expected term of the options based on historical data and other factors. The weighted-average assumptions used to determine the fair value of options granted are detailed in the table below:


	Year Ended December 31,
	2016		2015		2014
Assumptions used to value option grants:
Average expected terms (years)		n/a		n/a		6.3
Volatility		n/a		n/a		42.1	%
Annual rate of dividends		n/a		n/a		1.90	%
Discount rate		n/a		n/a		1.69	%

Restricted stock unit (RSU) activity is summarized in the following table for the dates indicated:


	Service Condition Vesting RSUs					Market Plus Service Condition Vesting RSUs
	Number of RSUs			Weighted Average Fair Value on Date of Grant		Number of RSUs			Weighted Average Fair Value on Date of Grant
Outstanding at December 31, 2015		46,286					32,097
RSUs granted		47,020		$	28.01		19,402		$	24.41
RSUs added through dividend credits		1,292					—
RSUs released		(20,529	)				—
RSUs forfeited/expired		(5,619	)				(4,073	)
Outstanding at December 31, 2016		68,450					47,426

The 68,450 of service condition vesting RSUs outstanding as of December 31, 2016 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 68,450 of service condition vesting RSUs that are currently outstanding as of December 31, 2016 are expected to vest, and be released, on a weighted-average basis, over the next 1.4 years. The Company is expected to recognize $1,296,000 of pre-tax compensation costs related to these service condition vesting RSUs between December 31, 2016 and their vesting dates. During the 2016 and 2015, the Company did not modify any service condition vesting RSUs.

The 47,426 of market plus service condition vesting RSUs outstanding as of December 31, 2016 are expected to vest, and be released, on a weighted-average basis, over the next 1.5 years. The Company is expected to recognize $564,000 of pre-tax compensation costs related to these RSUs between December 31, 2016 and their vesting dates. As of December 31, 2016, 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 71,139 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 2016 or 2015.

The following table shows the compensation costs for RSUs recognized in income for the periods indicated:


	Year Ended December 31,
	2016		2015		2014
Total compensation costs for RSUs recognized in income:
Service condition vesting RSUs	$	616,000	$	458,000	$	126,000
Market plus service condition vesting RSUs	$	271,000	$	179,000	$	42,000