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Business Combinations
6 Months Ended
Jun. 30, 2018
Business Combinations [Abstract]  
Business Combinations

Note 2 - Business Combinations

Merger with FNB Bancorp

On July 6, 2018, pursuant to a previously announced Agreement and Plan of Merger and Reorganization dated as of December 11, 2017 (the “Merger Agreement”) between the Company and FNB Bancorp (“FNB”), FNB merged with and into the Company with the Company continuing as the surviving corporation (the “Merger”). Immediately after the Merger, First National Bank of Northern California, the wholly owned bank subsidiary of FNB (“First National Bank”), merged with and into the Bank, with the Bank continuing as the surviving bank. The Merger and Bank Merger are collectively referred to as the “Transaction.”

As part of its business strategy, the Company evaluates opportunities to acquire bank holding companies, banks and other financial institutions, which is an important element of its strategic plan. The Transaction is consistent with the Company’s business strategy, which will (1) extend The Company’s geographic footprint into the San Francisco Peninsula, (2) create opportunities for the Company to provide additional products and services to First National Bank customers and other potential customers, and (3) strengthen the Company’s deposit base with a mature base of core deposits.

At the close of the transaction each share of FNBB common stock issued and outstanding immediately prior to the effective time of the Merger was canceled and converted into 0.98 shares of the Company’s common stock (the “Exchange Ratio”), with cash paid in lieu of fractional shares of the Company’s common stock. In addition, on July 6, 2018, each outstanding and unexercised option to acquire shares of FNBB common stock held by FNBB’s employees and directors was canceled and, in exchange, the holder of each option received a lump sum cash payment equal to the product of (1) the number of shares of FNBB common stock remaining under the option multiplied by (2) the Exchange Ratio multiplied by (3) the amount, if any, by which the Average Closing Share Price, as defined in the Merger Agreement, exceeded the exercise price of the option.

These exchanges resulted in the Company issuing 7,405,277 shares of common stock, paying $6,000 in lieu of fractional shares, and paying $6,690,000 in exchange for the outstanding FNBB options. Based on the closing price of the Company’s common stock of $38.41 on July 6, 2018, the consideration value issued to the shareholders of FNBB was $284.4 million in aggregate. The 7,405,277 shares of the Company’s shares issued to the shareholders of FNBB on July 6, 2018 represented 24.4% of the Company’s 30,409,430 shares outstanding immediately subsequent to the Transaction.

Immediately subsequent to the Transaction, the newly combined company, operating as TriCo Bancshares with its banking subsidiary, Tri Counties Bank, had total assets of approximately $6.1 billion. Immediately prior to the merger on July 6, 2018, FNBB had investment securities of approximately $344 million, loans of approximately $868 million, deposits of approximately $995 million, borrowings from the Federal Home Loan Bank of San Francisco (FHLB) of $165 million, and total assets of approximately $1.3 billion. These amounts are subject to change as the Company is in the process of determining the fair value of FNBB assets and liabilities acquired in accordance with generally accepted accounting principles. The Company anticipates recording goodwill and core deposit intangibles with this acquisition. During July 9 and 10, 2018, the Company sold approximately $292 million of the $344 million of investment securities obtained in the Transaction at no material gain or loss from their fair value on July 6, 2018. The proceeds from these security sales were used to pay off all of the Company’s $136 million of FHLB borrowings that existed at June 30, 2018 and all of FNBB’s $165 million of FHLB borrowings that existed at July 6, 2018 and matured in steps through August 6, 2018.

The Company will file an amended Form 8-K on or before September 23, 2018 that will include financial statements for FNBB and combined pro forma financial information for the Company and FNBB as if the merger was effective on June 30, 2018 for the balance sheet and January 1, 2017 for the statements of income. The pro forma financial information will reflect various adjustments required by applicable acquisition accounting rules.

While FNBB’s banking subsidiary, First National Bank of Northern California officially became part of Tri Counties Bank on July 6, 2018, the First National Bank branches continued to operate under the name “First National Bank” until the conversion of its operating systems to the operating systems of Tri Counties Bank on July 22, 2018 at which time First National Bank banking centers along with the client relationships and all accounts converted to Tri Counties Bank.