425

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 8-K

Current report

pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 26, 2018

TriCo Bancshares

(Exact name of registrant as specified in its charter)

California	0-10661	94-2792841
(State or other jurisdiction of incorporation or organization)	(Commission File No.)	(I.R.S. Employer Identification No.)

63 Constitution Drive, Chico, California	95973
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (530) 898-0300

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☒ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 2.02. Results of Operations and Financial Condition.

On April 26, 2018, TriCo Bancshares announced its financial results for the three month period ended March 31, 2018. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

Item 8.01. Other Events

The only information contained in this Form 8-K being filed for the purposes of Rule 425 the Securities Act is the information relating solely to the proposed merger between the Company and FNB Bancorp contained in the press release furnished herewith as Exhibit 99.1 and being filed under this Item 8.01.

Item 9.01: Financial Statements and Exhibits

(d) Exhibits

99.1 Press release dated April 26, 2018

* The information furnished under Item 2.02 and Item 9.01 of this Current Period on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of TriCo Bancshares under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TRICO BANCSHARES
Date: April 26, 2018	/s/ Thomas J. Reddish
	Thomas J. Reddish, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EX-99.1

Exhibit 99.1

PRESS RELEASE	Contact:	Richard P. Smith
For Immediate Release	President & CEO (530) 898-0300

TRICO BANCSHARES ANNOUNCES QUARTERLY RESULTS

CHICO, Calif. – (April 26, 2018) – TriCo Bancshares (NASDAQ: TCBK) (the “Company”), parent company of Tri Counties Bank, today announced net income of $13,910,000 for the quarter ended March 31, 2018, compared to $12,079,000 for the quarter ended March 31, 2017. Diluted earnings per share were $0.60 for the quarter ended March 31, 2018, compared to $0.52 for the quarter ended March 31, 2017. Net income before taxes was $19,350,000 and $19,431,000 for the quarters ended March 31, 2018 and 2017, respectively. Net income for the quarter ended March 31, 2018 includes the effect of a change in the Company’s Federal tax rate from 35% to 21% that resulted from the Tax Cuts and Jobs Act of 2017 that was effective on January 1, 2018.    During the quarter ended March 31, 2018, income tax expense was $2,020,000 lower than it would have been, and net income was $2,020,000 higher than it would have been, had the tax rate not changed. Also, affecting net income during the quarter ended March 31, 2018 was $476,000 of merger and acquisition expenses related to the proposed merger with FNB Bancorp (“FNBB”) previously announced on December 11, 2017 compared to no merger and acquisition expense recorded in the quarter ended March 31, 2017.

Performance highlights and other developments for the Company during the quarter ended March 31, 2018 included the following:

• Total loan balances averaged $3,028,178,000 during the three months ended March 31, 2018 representing a $269,634,000 (9.8%) increase compared to the quarter ended March 31, 2017.

• The average rate of interest paid on deposits, including the effect of noninterest-bearing deposits, remained low at 0.11%.

The following is a summary of the components of the Company’s consolidated net income, average common shares, and average diluted common shares outstanding for the periods indicated:

	Three months ended
	March 31,
(dollars and shares in thousands)	2018			2017			$ Change			% Change
Net Interest Income	$	44,986		$	41,993		$	2,993			7.1	%
Reversal of provision for loan losses		236			1,557			(1,321	)
Noninterest income		12,290			11,703			587			5.0	%
Noninterest expense		(38,162	)		(35,822	)		(2,340	)		6.5	%
Provision for income taxes		(5,440	)		(7,352	)		1,912			(26.0	%)
Net income	$	13,910		$	12,079		$	1,831			15.2	%
Average common shares		22,956			22,870			86			0.4	%
Average diluted common shares		23,283			23,232			51			0.2	%

The following is a summary of certain of the Company’s consolidated assets and deposits as of the dates indicated:

Ending balances	As of March 31,
($’s in thousands)	2018		2017		$ Change		% Change
Total assets	$	4,779,957	$	4,527,954	$	252,003		5.6	%
Total loans		3,069,733		2,761,192		308,541		11.2	%
Total investments		1,251,776		1,168,812		82,964		7.1	%
Total deposits	$	4,084,404	$	3,898,884	$	185,520		4.8	%
Qtrly avg balances	As of March 31,
($’s in thousands)	2018		2017		$ Change		% Change
Total assets	$	4,741,227	$	4,493,657	$	247,570		5.5	%
Total loans		3,028,178		2,758,544		269,634		9.8	%
Total investments		1,261,554		1,174,519		87,035		7.4	%
Total deposits	$	4,004,332	$	3,862,793	$	141,539		3.7	%

The Company’s primary source of revenue is net interest income, or the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Included in the Company’s net interest income is interest income from municipal bonds that is almost entirely exempt from Federal income tax. These municipal bonds are classified as investments – nontaxable, and the Company may present the interest income from these bonds on a fully tax equivalent (FTE) basis.

Loans acquired through purchase, or acquisition of other banks, are classified by the Company as Purchased Not Credit Impaired (PNCI), Purchased Credit Impaired – cash basis (PCI – cash basis), or Purchased Credit Impaired – other (PCI – other). Loans not acquired in an acquisition or otherwise “purchased” are classified as “originated”. Often, such purchased loans are purchased at a discount to face value, and part of this discount is accreted into (added to) interest income over the remaining life of the loan. A loan may also be purchased at a premium to face value, in which case, the premium is amortized into (subtracted from) interest income over the remaining life of the loan. Generally, as time goes on, the effects of loan discount accretion and loan premium amortization decrease as the purchased loans mature or pay off early. Upon the early pay off of a loan, any remaining (unaccreted) discount or (unamortized) premium is immediately taken into interest income; and as loan payoffs may vary significantly from quarter to quarter, so may the impact of discount accretion and premium amortization on interest income. Further details regarding interest income from loans, including fair value discount accretion, may be found under the heading “Supplemental Loan Interest Income Data” in the Consolidated Financial Data table at the end of this announcement.

Following is a summary of the components of net interest income for the periods indicated (dollars in thousands):

	Three months ended
	March 31,
(dollars and shares in thousands)	2018			2017			$ Change			% Change
Interest income	$	47,121		$	43,484		$	3,637			8.4	%
Interest expense		(2,135	)		(1,491	)		(644	)		43.2	%
FTE adjustment		312			625			(313	)		(50.1	%)
Net interest income (FTE)	$	45,298		$	42,618		$	2,680			6.3	%
Net interest margin (FTE)		4.14	%		4.13	%
Purchased loan discount accretion:
Amount (included in interest income)	$	632		$	1,541
Effect on average loan yield		0.08	%		0.22	%
Effect on net interest margin (FTE)		0.06	%		0.15	%
Interest income recovered via loan sales:
Amount (included in interest income)		—			—
Effect on average loan yield		0.00	%		0.00	%
Effect on net interest margin (FTE)		0.00	%		0.00	%

The following table shows the components of net interest income and net interest margin on a fully tax-equivalent (FTE) basis for the periods indicated:

ANALYSIS OF CHANGE IN NET INTEREST MARGIN ON EARNING ASSETS

(unaudited, dollars in thousands)

	Three Months Ended								Three Months Ended								Three Months Ended
	March 31, 2018								December 31, 2017								March 31, 2017
	Average		Income/			Yield/			Average		Income/			Yield/			Average		Income/			Yield/
	Balance		Expense			Rate			Balance		Expense			Rate			Balance		Expense			Rate
Assets
Earning assets
Loans	$	3,028,178	$	38,049			5.03	%	$	2,948,277	$	38,194			5.18	%	$	2,758,544	$	34,914			5.06	%
Investments - taxable		1,125,394		7,658			2.72	%		1,118,547		7,459			2.67	%		1,038,229		7,094			2.73	%
Investments - nontaxable		136,160		1,353			3.97	%		136,321		1,666			4.89	%		136,290		1,666			4.89	%
Cash at Federal Reserve and other banks		90,864		373			1.64	%		86,511		267			1.23	%		197,406		435			0.88	%
Total earning assets		4,380,596		47,433			4.33	%		4,289,656		47,586			4.44	%		4,130,469		44,109			4.27	%
Other assets, net		360,631								369,021								363,188
Total assets	$	4,741,227							$	4,658,677							$	4,493,657
Liabilities and shareholders’ equity
Interest-bearing
Demand deposits	$	994,206		211			0.08	%	$	964,827		210			0.09	%	$	907,104		127			0.06	%
Savings deposits		1,371,377		411			0.12	%		1,380,384		430			0.12	%		1,376,048		424			0.12	%
Time deposits		306,514		474			0.62	%		307,446		422			0.55	%		331,789		343			0.41	%
Other borrowings		107,781		342			1.27	%		61,769		141			0.91	%		17,483		2			0.05	%
Junior subordinated debt		56,882		697			4.90	%		56,837		665			4.68	%		56,690		595			4.20	%
Total interest-bearing liabilities		2,836,760		2,135			0.30	%		2,771,263		1,868			0.27	%		2,689,114		1,491			0.22	%
Noninterest-bearing deposits		1,332,235								1,308,765								1,247,852
Other liabilities		66,219								65,642								71,880
Shareholders’ equity		506,013								513,007								484,811
Total liabilities and shareholders’ equity	$	4,741,227							$	4,658,677							$	4,493,657
Net interest rate spread							4.03	%							4.17	%							4.05	%
Net interest income/net interest margin (FTE)				45,298			4.14	%				45,718			4.26	%				42,618			4.13	%
FTE adjustment				(312	)							(625	)							(625	)
Net interest income (not FTE)			$	44,986							$	45,093							$	41,993
Purchase loan discount accretion effect:
Amount (included in interest income)			$	632							$	1,489							$	1,541
Effect on avg loan yield				0.08	%							0.20	%							0.22	%
Effect on net interest margin				0.06	%							0.14	%							0.15	%
Loan sale effect:
Amount (included in interest income)				—								—								—
Effect on avg loan yield				0.00	%							0.00	%							0.00	%
Effect on net interest margin				0.00	%							0.00	%							0.00	%

Net interest income (FTE) during the three months ended March 31, 2018 increased $2,680,000 (6.3%) to $45,298,000 compared to $42,618,000 during the three months ended March 31, 2017. The increase in net interest income (FTE) was due primarily to increases in the average balance of loans and investments that were partially offset by an increase in other borrowings, a 3 basis point decrease in yield on loans, and an 8 basis point increase in the average rate paid on interest-bearing liabilities compared to the three months ended March 31, 2017.    The 3 basis point decrease in loan yields from 5.06% during the three months ended March 31, 2017 to 5.03% during the three months ended March 31, 2018 was due to a decrease in purchased loan discount accretion from $1,541,000 during the three months ended March 31, 2017 to $632,000 during the three months ended March 31, 2018. This decrease in purchased loan discount accretion reduced loan yields by 14 basis points, and net interest margin by 9 basis points, but was substantially offset by increases in new and renewed loan yields due to increases in market yields. The 8 basis point increase in the average rate paid on interest-bearing liabilities was primarily due to increases in market rates that increased the rates the Company pays on its overnight borrowings and junior subordinated debt.

Also affecting net interest margin during the three months ended March 31, 2018, was the decrease in the Federal tax rate from 35% to 21%. This decrease in the Federal tax rate caused the fully tax-equivalent (FTE) yield on the Company’s nontaxable investments to decrease from 4.89% during the three months ended March 31, 2017 to 3.97% during the three months ended March 31, 2018, and resulted in net interest income (FTE) being $312,000, or 2 basis points, less than it otherwise would have been.

The negative impact on net interest margin from these decreases in average loan and nontaxable investments yields was offset by the positive impact of an increase in average loan balances and a decrease in the average balance of lower yielding interest earning cash compared to the year-ago quarter.

The table below that sets forth a summary of the changes in interest income and interest expense from changes in average asset and liability balances (volume) and changes in average interest yields and rates for each category of interest earning asset and interest paying liability for the periods indicated:

	Three months ended March 31, 2018 compared with three months ended March 31, 2017
	Volume			Yield/ Rate			Total
Increase (decrease) in interest income:
Loans	$	3,411		$	(276	)	$	3,135
Investments - taxable		595			(31	)		564
Investments - nontaxable		(2	)		(311	)		(313	)
Federal funds sold		(234	)		172			(62	)
Total		3,770			(446	)		3,324
Increase (decrease) in interest expense:
Demand deposits (interest-bearing)		13			71			84
Savings deposits		(1	)		(12	)		(13	)
Time deposits		(26	)		157			131
Other borrowings		11			329			340
Junior subordinated debt		2			100			102
Total		(1	)		645			644
Increase (decrease) in net interest income	$	3,771		$	(1,091	)	$	2,680

The Company recorded a reversal of provision for loan losses of $236,000 during the three months ended March 31, 2018 compared to a reversal of provision for loan losses of $1,557,000 during the three months ended March 31, 2017. The $236,000 reversal of provision for loan losses during the three months ended March 31, 2018 was due primarily to a decrease in the balance of performing/unimpaired but substandard loans during the three months ended March 31, 2018. Nonperforming loans were $24,381,000, or 0.79% of loans outstanding as of March 31, 2018, compared to $24,394,000, or 0.81% of loans outstanding as of December 31, 2017, and $19,511,000, or 0.71% of loans outstanding as of March 31, 2017. Net loan charge-offs during the three months ended March 31, 2018 were $114,000.

The following table presents the key components of noninterest income for the periods indicated:

	Three months ended
	March 31,
(dollars in thousands)	2018		2017			$ Change			% Change
Service charges on deposit accounts	$	3,779	$	3,619		$	160			4.4	%
ATM fees and interchange		4,235		4,015			220			5.5	%
Other service fees		714		765			(51	)		(6.7	%)
Mortgage banking service fees		517		521			(4	)		(0.8	%)
Change in value of mortgage servicing rights		111		(13	)		124			(953.8	%)
Total service charges and fees		9,356		8,907			449			5.0	%
Gain on sale of loans		626		910			(284	)		(31.2	%)
Commission on nondeposit investment products		876		607			269			44.3	%
Increase in cash value of life insurance		608		685			(77	)		(11.2	%)
Change in indemnification asset		—		(221	)		221			(100.0	%)
Gain on sale of foreclosed assets		371		118			253			214.4	%
Other noninterest income		453		697			(244	)		(35.0	%)
Total other noninterest income		2,934		2,796			138			4.9	%
Total noninterest income	$	12,290	$	11,703		$	587			5.0	%

Noninterest income increased $587,000 (5.0%) to $12,290,000 during the three months ended March 31, 2018 compared to the three months ended March 31, 2017. The increase in noninterest income was due to the changes noted in the table above. The $269,000 increase in commissions on nondeposit investment products was due to continued focus in this area. The $253,000 increase in gain on sale of foreclosed assets was due to the sale of six foreclosed properties each of which had increases in property values since they were foreclosed. The $221,000 increase in change in indemnification asset was due to a $221,000 decrease in the indemnification asset during the first quarter of 2017, and no change during the first quarter of 2018 as the Company and the FDIC terminated their loss sharing agreements during the second quarter of 2017. The $220,000 increase in ATM fees and interchange revenue was due primarily to increased interchange revenue. The $160,000 increase in service charges on deposit accounts was due primarily to increased monthly service charges that were partially offset by a decrease in nonsufficient funds fees. The $284,000 decrease in gain on sale of loans was due primarily to decreased residential mortgage refinance activity compared to the year-ago quarter. The $244,000 decrease in other noninterest income was due primarily to a decrease in lease brokerage revenue.

The following table presents the key components of the Company’s noninterest expense for the periods indicated:

	Three months ended
	March 31,
(dollars in thousands)	2018		2017			$ Change			% Change
Base salaries, overtime and temporary help, net of deferred loan origination costs	$	13,962	$	13,390		$	572			4.3	%
Commissions and incentives		2,452		2,198			254			11.6	%
Employee benefits		5,238		5,305			(67	)		(1.3	%)
Total salaries and benefits expense		21,652		20,893			759			3.6	%
Occupancy		2,681		2,692			(11	)		(0.4	%)
Equipment		1,551		1,723			(172	)		(10.0	%)
Data processing and software		2,514		2,396			118			4.9	%
ATM and POS network charges		1,226		853			373			43.7	%
Telecommunications		701		643			58			9.0	%
Postage		358		404			(46	)		(11.4	%)
Courier service		267		254			13			5.1	%
Advertising		838		967			(129	)		(13.3	%)
Assessments		430		405			25			6.2	%
Operational losses		294		435			(141	)		(32.4	%)
Professional fees		773		766			7			0.8	%
Foreclosed assets expense		24		38			(14	)		(36.8	%)
Provision for (reversal of) foreclosed asset losses		90		(66	)		156			(236.4	%)
Change in reserve for unfunded commitments		700		15			685			4566.7	%
Intangible amortization		339		359			(20	)		(5.6	%)
Merger and acquisition expense		476		—			476
Other miscellaneous expense		3,248		3,045			203			6.7	%
Total other noninterest expense		16,510		14,929			1,581			10.6	%
Total noninterest expense	$	38,162	$	35,822		$	2,340			6.5	%
Average full time equivalent employees		1,002		1,015			(13	)		(1.3	%)
Merger & acquisition expense:
Professional fees	$	355		—
Miscellaneous other expense		121		—
Total merger & acquisition expense	$	476		—

Salary and benefit expenses increased $759,000 (3.6%) to $21,652,000 during the three months ended March 31, 2018 compared to $20,893,000 during the three months ended March 31, 2017. Base salaries, net of deferred loan origination costs increased $572,000 (4.3%) to 13,962,000.    The increase in base salaries was due to annual merit increases, and the addition of employees with base salaries above the average base salary that were partially offset by a 1.3% decrease in average full time equivalent employees to 1,002 from 1,015 in the year-ago quarter. Commissions and incentive compensation increased $254,000 (11.6%) to $2,452,000 during the three months ended March 31, 2018 compared to the year-ago quarter due primarily to increases in management, back-office and nondeposit investment product sales incentives that were partially offset by decreased commissions on loans and other sales incentives. Benefits & other compensation expense decreased $67,000 (1.3%) to $5,238,000 during the three months ended March 31, 2018 due primarily to decreases in group medical, workers compensation insurance, retirement (ESOP) expenses, that were partially offset by an increase in employer payroll tax expense.    

Other noninterest expense increased $1,581,000 (10.6%) to $16,510,000 during the three months ended March 31, 20018 compared to the three months ended March 31, 2017.    The increase in other noninterest expense was due to the changes noted in the table above. The $685,000 increase in change in reserve for unfunded commitments was due to an increase in unfunded construction loan commitments. The $118,000 and $373,000 increases in data processing and software expense and ATM & POS network charges, respectively, were due primarily to system enhancements and capacity expansion. The $172,000 decrease in equipment expense was due to decreased equipment rental, repair and maintenance. During the three months ended March 31, 2018, the Company incurred $476,000 of merger related expense associated with the proposed merger with FNBB of which $343,000 is nondeductible for tax purposes.

The effective combined Federal and State income tax rate on income was 28.1% and 37.8% for the three months ended March 31, 2018 and 2017, respectively. This decrease in effective combined Federal and State income tax rate was due primarily to a decrease in the Federal tax rate from 35% to 21% effective January 1, 2018. The effective combined Federal and State income tax rate was greater than the Federal statutory tax rate due to State income tax expense of $2,207,000 and $2,134,000, for the three months ended March 31, 2018 and 2017, respectively, that were partially offset by the effects of tax-exempt income of $1,041,000 and $1,041,000, respectively, from investment securities, $608,000 and $792,000, respectively, from increase in cash value of life insurance, low-income housing tax credits of $190,000 and $121,000, respectively, $1,000 and $90,000, respectively, of equity compensation excess tax benefits, and $343,000 of nondeductible merger expense during the three months ended March 31, 2018. The low income housing tax credits and the equity compensation excess tax benefits represent direct reductions in tax expense.

The provisions for income taxes applicable to net income before taxes differ from amounts computed by applying the statutory Federal income tax rates to income before taxes. The effective tax rate and the statutory federal income tax rate are reconciled for the periods indicated as follows:

	Three months ended
	March 31,
	2018			2017
Federal statutory income tax rate		21.0	%		35.0	%
State income taxes, net of federal tax benefit		9.0			6.9
Tax-exempt interest on municipal obligations		(1.1	)		(1.9	)
Increase in cash value of insurance policies		(0.7	)		(1.4	)
Low income housing tax credits		(1.0	)		(0.6	)
Equity compensation		—			(0.5	)
Nondeductible merger expenses		0.4			—
Other		0.5			0.3
Effective Tax Rate		28.1	%		37.8	%

The Company’s financial statements are prepared in conformity with generally accepted accounting principles in the United States of America (GAAP). The Company uses certain non-GAAP measures to provide supplemental information regarding performance.    Net income and the effective tax rate for the three months ended March 31, 2018 include the effects of $476,000 of expenses related to the proposed merger with FNBB, of which $343,000 is non-deductible for taxes.    Net income for the three months ended March 31, 2017 includes no merger related expenses. The Company believes that presenting the effective tax rate, net income, return on average assets (ROAA), return on average equity (ROAE), and earnings per common share, excluding the impact of merger & acquisition expenses, provides additional clarity to the users of the financial statements regarding core financial performance. The following table presents a comparison of the effective tax rate, net income, ROAA, ROAE, and earnings per common share as reported, and as adjusted for the impact of merger & acquisition expenses, for the periods indicated.

	Three months ended
	March 31,
($’s in thousands except per share amounts)	2018			2017
Net income before tax	$	19,350		$	19,431
Effect of merger expense		476			—
Adjusted net income before tax	$	19,826		$	19,431
Income tax expense	$	5,440		$	7,352
Effect of merger expense		39			—
Adjusted income tax expense	$	5,479		$	7,352
Net income	$	13,910		$	12,079
Effect of merger expense		437			—
Adjusted net income	$	14,347		$	12,079
Effective tax rate		28.1	%		37.8	%
Adjusted effective tax rate		27.6	%		37.8	%
ROAA		1.17	%		1.08	%
Adjusted ROAA		1.21	%		1.08	%
ROAE		11.00	%		9.97	%
Adjusted ROAE		11.34	%		9.97	%
Earnings per common share:
Basic	$	0.61		$	0.53
Diluted	$	0.60		$	0.52
Adjusted earnings per common share:
Basic	$	0.62		$	0.53
Diluted	$	0.62		$	0.52
M&A expense	$	476			—
Non-deductible M&A expense	$	343			—
Average assets	$	4,741,227		$	4,493,657
Average equity	$	506,013		$	484,811
Weighted average shares		22,956,239			22,870,467
Weighted average diluted shares		23,283,127			23,231,778

Richard P. Smith, President and CEO of the Company commented, “Our Company enjoyed another strong quarter of performance as consistent loan demand continued to provide the catalyst for revenue growth. Total loans grew by 1.8% during the quarter, or 7.2% annualized, and increased 11.2% over the prior year. Additionally, deposit growth also increased during the quarter during a period that normally sees deposit outflows. This performance is reflective of improved economic activity in our Northern California markets and generally to a more robust US and California economy.”

Smith added, “Other key activities affecting performance in the quarter include the benefits of lower corporate taxes, increased revenues from service charges and fees on deposit accounts and ATM/interchange revenues. Most important we continue to proceed with the approval and integration of our previously announced acquisition of FNB Bank of Northern California.”

About TriCo Bancshares

Established in 1975, Tri Counties Bank is a wholly-owned subsidiary of TriCo Bancshares (NASDAQ: TCBK) headquartered in Chico, California, providing a unique brand of customer Service with Solutions available in traditional stand-alone and in-store bank branches in communities throughout Northern and Central California. Tri Counties Bank provides an extensive and competitive breadth of consumer, small business and commercial banking financial services, along with convenient around-the-clock ATM, online and mobile banking access. Brokerage services are provided by the Bank’s investment services through affiliation with Raymond James Financial Services, Inc. Visit www.TriCountiesBank.com to learn more.

Important Additional Information about the Merger

The Company has filed a registration statement on Form S-4 with the SEC (filed on March 21, 2018 and amended on April 18, 2018), which includes a joint proxy statement of the Company and FNBB and a prospectus of the Company, and each party will file other documents regarding the proposed transaction with the SEC. A definitive joint proxy statement/prospectus will also be sent to the Company and FNBB shareholders seeking required shareholder approvals.

Before making any voting or investment decision, investors and security holders of the Company and FNBB are urged to carefully read the entire registration statement and joint proxy statement/prospectus, when they become available, as well as any amendments or supplements to these documents, because they will contain important information about the proposed transaction.

The documents filed by the Company and FNBB with the SEC may be obtained free of charge at the SEC’s website at www.sec.gov. In addition, the documents filed by the Company may be obtained free of charge at the Company’s website at https://www.tcbk.com/investor-relations and the documents filed by FNBB may be obtained free of charge at FNBB’s website at https://www.fnbnorcal.com/investor-relations-overview. Alternatively, these documents, when available, can be obtained free of charge from the Company upon written request to TriCo Bancshares, Attention: Craig Compton, Secretary, 63 Constitution Drive, Chico, CA 95973 or by calling (800) 922-8742 or from FNBB upon written request to FNB Bancorp, 975 El Camino Real, South San Francisco, CA, 94080, Attention: Corporate Secretary, or by calling (650) 588-6800.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy securities nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. This communication is also not a solicitation of any vote in any jurisdiction pursuant to the proposed transactions or otherwise. No offer of securities or solicitation will be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. The communication is not a substitute for the joint proxy statement/prospectus that the Company and FNBB will file with the SEC.

Forward-Looking Statement

The statements contained herein that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. These risks and uncertainties include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the impact of changes in financial services policies, laws and regulations; technological changes; mergers and acquisitions, including costs or difficulties related to the integration of acquired companies; changes in the level of the Company’s nonperforming assets and charge-offs; any deterioration in values of California real estate, both residential and commercial; the effect of changes in accounting standards and practices; possible other-than-temporary impairment of securities held by the Company; changes in consumer spending, borrowing and savings habits; ability to attract deposits and other sources of liquidity; changes in the financial performance and/or condition of our borrowers; the impact of competition from financial and bank holding companies and other financial service providers; unanticipated regulatory or judicial proceedings; the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; and the Company’s ability to manage the risks involved in the foregoing. Additional factors that could cause results to differ materially from those described above can be found in our Annual Report on Form 10-K for the year ended December 31, 2017, which is on file with the Securities and Exchange Commission (the “SEC”) and available in the “Investor Relations” section of our website, https://www.tcbk.com/investor-relations and in other documents we file with the SEC. Annualized, pro forma, projections and estimates are not forecasts and may not reflect actual results.

In addition to factors previously disclosed in reports filed by the Company and FNBB with the SEC, risks and uncertainties for the Company, FNBB and the combined company include, but are not limited to: the possibility that any of the anticipated benefits of the proposed merger will not be realized or will not be realized within the expected time period; the risk that integration of FNBB’s operations with those of the Company will be materially delayed or will be more costly or difficult than expected; the inability to close the merger in a timely manner; the inability to complete the merger due to the failure of the Company’s or FNBB’s shareholders to adopt the merger agreement; diversion of management’s attention from ongoing business operations and opportunities; the failure to satisfy other conditions to completion of the merger, including receipt of required regulatory and other approvals; the failure of the proposed merger to close for any other reason; the challenges of integrating and retaining key employees; the effect of the announcement of the merger on the Company’s, FNBB’s or the combined company’s respective customer relationships and operating results; the possibility that the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; and general competitive, economic, political and market conditions and fluctuations. All forward-looking statements included in this filing are made as of the date hereof and are based on information available at the time of the filing. Except as required by law, neither the Company nor FNBB assumes any obligation to update any forward-looking statement.

Proxy Solicitation

The Company, FNBB, their directors, executive officers and certain other persons may be deemed to be participants in the solicitation of proxies from the Company’s and FNBB’s shareholders in favor of the approval of the merger. Information about the directors and executive officers of the Company and their ownership of the Company’s common stock is set forth in the proxy statement for the Company’s 2018 annual meeting of shareholders, as previously filed with the SEC on April 18, 2018. Information about the directors and executive officers of FNBB and their ownership of FNBB common stock is set forth in FNBB’s Amendment No. 1 on Form 10-K/A, as previously filed with the SEC on April 20, 2018. Shareholders may obtain additional information regarding the interests of such participants by reading the registration statement and the proxy statement/prospectus when they become available.

TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands, except share data)

	Three months ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2018			2017			2017			2017			2017
Statement of Income Data
Interest income	$	47,121		$	46,961		$	45,913		$	45,044		$	43,484
Interest expense		2,135			1,868			1,829			1,610			1,491
Net interest income		44,986			45,093			44,084			43,434			41,993
Provision (benefit from reversal of provision) for loan losses		(236	)		1,677			765			(796	)		(1,557	)
Noninterest income:
Service charges and fees		9,356			9,562			9,475			9,479			8,907
Other income		2,934			2,916			3,455			3,431			2,796
Total noninterest income		12,290			12,478			12,930			12,910			11,703
Noninterest expense:
Base salaries net of deferred loan origination costs		13,962			13,942			13,600			13,657			13,390
Incentive compensation expense		2,452			2,247			2,609			2,173			2,198
Employee benefits and other compensation expense		5,238			4,421			4,724			4,664			5,305
Total salaries and benefits expense		21,652			20,610			20,933			20,494			20,893
Other noninterest expense		16,510			17,466			16,289			15,410			14,929
Total noninterest expense		38,162			38,076			37,222			35,904			35,822
Income before taxes		19,350			17,818			19,027			21,236			19,431
Net income	$	13,910		$	2,989		$	11,897		$	13,589		$	12,079
Share Data
Basic earnings per share	$	0.61		$	0.13		$	0.52		$	0.59		$	0.53
Diluted earnings per share	$	0.60		$	0.13		$	0.51		$	0.58		$	0.52
Book value per common share	$	22.01		$	22.03		$	22.09		$	21.76		$	21.28
Tangible book value per common share	$	19.00		$	19.01		$	19.04		$	18.70		$	18.20
Shares outstanding		22,956,323			22,955,963			22,941,464			22,925,069			22,873,305
Weighted average shares		22,956,239			22,944,523			22,931,855			22,899,600			22,870,467
Weighted average diluted shares		23,283,127			23,289,545			23,244,235			23,240,112			23,231,778
Credit Quality
Nonperforming originated loans	$	16,080		$	15,463		$	11,689		$	10,581		$	13,234
Total nonperforming loans		24,381			24,394			21,955			17,429			19,511
Foreclosed assets, net of allowance		1,564			3,226			3,071			3,489			3,529
Loans charged-off		480			627			862			2,512			409
Loans recovered	$	366		$	526		$	701		$	434		$	480
Selected Financial Ratios
Return on average total assets		1.17	%		0.26	%		1.04	%		1.21	%		1.08	%
Return on average equity		11.00	%		2.33	%		9.38	%		10.93	%		9.97	%
Average yield on loans		5.03	%		5.18	%		5.18	%		5.23	%		5.06	%
Average yield on interest-earning assets		4.33	%		4.44	%		4.42	%		4.42	%		4.27	%
Average rate on interest-bearing liabilities		0.30	%		0.27	%		0.27	%		0.24	%		0.22	%
Net interest margin (fully tax-equivalent)		4.14	%		4.26	%		4.24	%		4.26	%		4.13	%
Supplemental Loan Interest Income Data:
Discount accretion PCI - cash basis loans	$	246		$	516		$	398		$	386		$	112
Discount accretion PCI - other loans		60			445			407			797			631
Discount accretion PNCI loans		326			528			559			987			798
All other loan interest income		37,417			36,705			35,904			34,248			33,373
Total loan interest income	$	38,049		$	38,194		$	37,268		$	36,418		$	34,914

TRICO BANCSHARES - CONSOLIDATED FINANCIAL DATA

(Unaudited. Dollars in thousands)

	Three months ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2018			2017			2017			2017			2017
Balance Sheet Data
Cash and due from banks	$	182,979		$	205,428		$	188,034		$	167,649		$	323,706
Securities, marketable equity		2,890			2,938			2,957			2,955			3,033
Securities, available for sale		735,895			727,945			675,279			669,614			568,686
Securities, held to maturity		496,035			514,844			536,567			559,518			580,137
Restricted equity securities		16,956			16,956			16,956			16,956			16,956
Loans held for sale		2,149			4,616			2,733			2,537			1,176
Loans:
Commercial loans		216,015			220,500			227,479			225,743			212,685
Consumer loans		348,789			365,113			361,320			360,782			357,593
Real estate mortgage loans		2,359,379			2,291,995			2,194,874			2,106,567			2,066,372
Real estate construction loans		145,550			137,557			147,940			133,301			124,542
Total loans, gross		3,069,733			3,015,165			2,931,613			2,826,393			2,761,192
Allowance for loan losses		(29,973	)		(30,323	)		(28,747	)		(28,143	)		(31,017	)
Foreclosed assets		1,564			3,226			3,071			3,489			3,529
Premises and equipment		58,558			57,742			54,995			51,558			49,508
Cash value of life insurance		98,391			97,783			97,142			96,410			95,783
Goodwill		64,311			64,311			64,311			64,311			64,311
Other intangible assets		4,835			5,174			5,513			5,852			6,204
Mortgage servicing rights		6,953			6,687			6,419			6,596			6,860
Accrued interest receivable		12,407			13,772			12,656			11,605			11,236
Other assets		56,274			55,051			86,936			62,635			66,654
Total assets	$	4,779,957		$	4,761,315		$	4,656,435		$	4,519,935		$	4,527,954
Deposits:
Noninterest-bearing demand deposits	$	1,359,996		$	1,368,218		$	1,283,949		$	1,261,355		$	1,254,431
Interest-bearing demand deposits		1,022,299			971,459			965,480			956,690			947,006
Savings deposits		1,395,481			1,364,518			1,367,597			1,346,016			1,370,015
Time certificates		306,628			304,936			310,430			314,361			327,432
Total deposits		4,084,404			4,009,131			3,927,456			3,878,422			3,898,884
Accrued interest payable		958			930			867			781			770
Reserve for unfunded commitments		3,864			3,164			2,989			2,599			2,734
Other liabilities		63,529			63,258			62,850			59,868			66,938
Other borrowings		65,041			122,166			98,730			22,560			15,197
Junior subordinated debt		56,905			56,858			56,810			56,761			56,713
Total liabilities	$	4,274,701		$	4,255,507		$	4,149,702		$	4,020,991		$	4,041,236
Total shareholders’ equity	$	505,256		$	505,808		$	506,733		$	498,944		$	486,718
Accumulated other comprehensive gain (loss)	$	(17,205	)	$	(5,228	)	$	(4,612	)	$	(4,501	)	$	(7,402	)
Average loans	$	3,028,178		$	2,948,277		$	2,878,944		$	2,783,686		$	2,758,544
Average interest-earning assets	$	4,380,596		$	4,289,656		$	4,214,488		$	4,135,021		$	4,130,469
Average total assets	$	4,741,227		$	4,658,677		$	4,572,424		$	4,492,389		$	4,493,657
Average deposits	$	4,004,332		$	3,961,422		$	3,878,183		$	3,851,519		$	3,862,793
Average total equity	$	506,013		$	513,007		$	507,389		$	497,225		$	484,811
Total risk based capital ratio		13.9	%		14.1	%		14.4	%		14.8	%		15.0	%
Tier 1 capital ratio		13.0	%		13.2	%		13.6	%		13.9	%		14.0	%
Tier 1 common equity ratio		11.6	%		11.7	%		12.1	%		12.3	%		12.4	%
Tier 1 leverage ratio		10.8	%		10.8	%		11.0	%		11.0	%		10.8	%
Tangible capital ratio		9.3	%		9.3	%		9.5	%		9.6	%		9.3	%

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