S-4
Table of Contents

As filed with the Securities and Exchange Commission on March 21, 2018

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

TRICO BANCSHARES

(Exact name of Registrant as specified in its charter)

 

 

 

California
  6022
  94-2792841

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code No.)

 

(I.R.S. Employer

Identification No.)

63 Constitution Drive

Chico, California 95973

(530) 898-0300

(Address, including zip code and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Richard P. Smith

President and Chief Executive Officer

TriCo Bancshares

63 Constitution Drive

Chico, California 95973

(530) 898-0300

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

with a copy to:

 

David Gershon, Esq.

Sheppard Mullin Richter & Hampton LLP

Four Embarcadero Center, 17th Floor

San Francisco, CA 94111-4109
Telephone: (415) 434-9100

 

Joseph G. Mason, Esq.

Glenn T. Dodd, Esq.

Dodd Mason George LLP

1840 41st Avenue, Suite 102-175

Capitola, CA 95010

(408) 452-1478

 

 

Approximate date of commencement of proposed sale to the public:

As soon as practicable following the effectiveness of this Registration Statement, satisfaction or waiver of the other conditions to closing of the merger described herein, and consummation of the merger.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐


Table of Contents

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☐  (Do not check if a smaller reporting company)    Smaller reporting company  
     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 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

Calculation of Registration Fee

 

 

Title of Each Class of

Securities to be Registered

 

Amount

to be

Registered (1)

 

Proposed

Maximum

Offering Price

Per Share or Unit (2)

 

Proposed

Maximum

Aggregate

Offering Price (2)

 

Amount of

Registration Fee (3)

Common Stock, no par value per share

  7,744,194   N/A   $302,537,220   $37,665.88

 

 

(1) Represents the maximum number of shares of common stock of TriCo Bancshares, or TriCo, estimated to be issued pursuant to the Agreement and Plan of Merger and Reorganization dated as of December 11, 2017, by and between TriCo and FNB Bancorp, or FNBB, based on (a) 7,477,518 shares of FNBB common stock outstanding, (b) 424,721 shares of FNBB common stock issuable pursuant to stock options and (c) an exchange ratio of 0.98 shares of TriCo common stock for each share of FNBB common stock. Pursuant to Rule 416 under the Securities Act of 1933, this Registration Statement also covers additional securities that may be issued as a result of stock splits, stock dividends or similar transactions.
(2) Pursuant to Rule 457(f) under the Securities Act of 1933, and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is the product of (a) $38.285 (the average high and low prices reported for FNBB’s common stock on the NASDAQ Global Select Market on March 16, 2018) and (b) 7,902,239 (the maximum number of shares of FNBB common stock expected to be exchanged for the common shares being registered).
(3) Calculated by multiplying the proposed maximum aggregate offering price by .0001245.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold prior to the time the registration statement becomes effective. This document shall not constitute an offer to sell nor shall there be any sale of these securities in any jurisdiction in which such offer or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

PRELIMINARY—SUBJECT TO COMPLETION—DATED MARCH 21, 2018

 

 

 


Table of Contents

The information in this joint proxy statement/prospectus is not complete and may be changed. We may not offer or sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED MARCH 21, 2018

 

 

LOGO

63 Constitution Drive

Chico, California 95973

Dear TriCo Bancshares Shareholders:

On December 11, 2017, TriCo Bancshares, which we refer to as TriCo, entered into an agreement and plan of merger and reorganization, which we refer to as the merger agreement, to acquire FNB Bancorp, which we refer to as FNBB. If the required shareholder and regulatory approvals are obtained and all closing conditions are satisfied or waived, FNBB will merge with and into TriCo, with TriCo as the surviving corporation, which we refer to as the merger. Immediately after the merger, FNBB’s wholly-owned bank subsidiary, First National Bank of Northern California, will merge with and into Tri Counties Bank, the wholly-owned bank subsidiary of TriCo, with Tri Counties Bank as the surviving bank.

You are cordially invited to attend a special meeting of shareholders of TriCo to be held at [●], Pacific Time, on [●], 2018 at 890 Fortress Street, Chico, California 95973. At the special meeting, TriCo shareholders will be asked to consider and vote upon a proposal to approve the merger agreement, including the merger and the issuance of shares of TriCo common stock in connection with the merger, which we refer to as the merger proposal. FNBB will also hold a special meeting of shareholders to consider the proposed merger agreement and related matters. TriCo and FNBB cannot complete the proposed merger unless TriCo’s shareholders vote to approve the merger proposal. This letter is accompanied by the attached joint proxy statement/prospectus, which TriCo’s board of directors is providing to solicit your proxy to vote for the approval of the merger proposal.

If the merger is completed, each outstanding share of FNBB common stock will be canceled and converted into the right to receive 0.98 shares of TriCo common stock, which we refer to as the exchange ratio. Cash will be paid in lieu of any fractional shares.

As described in the attached joint proxy statement/prospectus, the exchange ratio is subject to potential adjustment. The exchange ratio could change depending on the weighted average closing price of TriCo common stock reported on the Nasdaq Global Select Market over the 20 trading days ending five business days prior to the completion of the merger, which we refer to as the TriCo average closing price.

 

    If the TriCo average closing price is $33.18 or more and $49.78 or less, the exchange ratio will remain unchanged at 0.98 shares of TriCo common stock.

 

    However, FNBB is entitled to terminate the merger agreement if the TriCo average closing price (i) is less than $33.18 per share and (ii) represents a percentage change, relative to an initial value of $41.48 per share of TriCo common stock, that is more than 20% below the percentage change in the KBW Nasdaq Regional Banking Index, measured by comparing the average closing value of that index over the 20 trading days ending five business days prior to the completion of the merger to an initial value of 109.24, unless TriCo agrees that the exchange ratio will increase as provided in the merger agreement.

 

    Conversely, TriCo is entitled to terminate the merger agreement if the TriCo average closing price (i) is greater than $49.78 per share and (ii) represents a percentage change, relative to an initial value of $41.48 per share of TriCo common stock, that is more than 20% above the percentage change in the KBW Nasdaq Regional Banking Index, measured by comparing the average closing value of that index over the 20 trading days ending five business days prior to the completion of the merger to an initial value of 109.24, unless FNBB agrees that the exchange ratio will decrease as provided in the merger agreement.

On [●], 2018, the actual closing price for TriCo common stock reported on the Nasdaq Global Select Market was $[●] per share. If the merger had been completed on that date, the TriCo average closing price would have been $[●] and the exchange ratio would have remained unchanged at 0.98 shares of TriCo common stock. The actual exchange ratio will not be known until the merger is completed.


Table of Contents

Based on the closing price of TriCo common stock as reported on the Nasdaq Global Select Market of $41.64 as of December 8, 2017, the trading day immediately preceding the public announcement of the merger, the implied merger consideration that an FNBB shareholder would be entitled to receive for each share of FNBB common stock owned would be $40.81 with an aggregate transaction value of approximately $315 million. Based on the closing price of TriCo common stock as reported on the Nasdaq Global Select Market of $[●] as of [●], 2018, the latest practicable date before the date of this joint proxy statement/prospectus, the implied merger consideration that an FNBB shareholder would be entitled to receive for each share of FNBB common stock owned would be $[●] with an aggregate transaction value of approximately $[● ] million. The value of the merger consideration will fluctuate based on the market price of TriCo common stock.

Consequently, the value of the merger consideration will not be known at the time you vote on the merger proposal. Based on the current number of shares of FNBB common stock outstanding, TriCo expects to issue approximately [●] shares of common stock in the aggregate upon completion of the merger and FNBB’s current shareholders would own approximately 24% of the combined company. TriCo’s common stock is listed on the Nasdaq Global Select Market under the symbol “TCBK.” FNBB’s common stock is listed on the Nasdaq Global Select Market under the symbol “FNBG.” You should obtain current market quotations for TriCo common stock and FNBB common stock before you vote on the merger proposal.

Based on our reasons for the merger described in the accompanying document, including the fairness opinion issued by our financial advisor, Stephens Inc., our board of directors believes that the merger is fair to and in the best interests of TriCo shareholders. Accordingly, the TriCo board of directors unanimously recommends that you vote “FOR” the merger proposal. The accompanying joint proxy statement/prospectus gives you detailed information about the special meeting, the merger and the issuance of shares of TriCo common stock in connection with the merger and related matters. In addition to being a proxy statement of TriCo for the solicitation of proxies from TriCo shareholders, this document is also the proxy statement for the solicitation of proxies from FNBB shareholders to vote to approve the merger agreement including the merger and is the prospectus of TriCo for the shares of its common stock that will be issued to FNBB shareholders in connection with the merger.

 

 

We advise you to read this entire document carefully, including the considerations discussed under “Risk Factors” beginning on page 29, and the appendices to the accompanying joint proxy statement/prospectus, which include the merger agreement.

Your vote is very important. The merger cannot be completed unless the holders of a majority of the outstanding shares vote in favor of approval of the merger proposal. Whether or not you plan to attend the special meeting, please take the time to vote by completing and mailing the enclosed proxy card or by following the instructions to vote via the Internet or by telephone indicated on the proxy card.

We appreciate your continuing loyalty and support and, should you choose to attend, we look forward to seeing you at the special meeting.

Sincerely,

Richard P. Smith

President and Chief Executive Officer

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the shares of TriCo common stock to be issued in the merger or determined if this joint proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

The securities to be issued in connection with the merger are not savings accounts, deposits or other obligations of any bank or savings association and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

This joint proxy statement/prospectus is dated [●], 2018 and is being first mailed to shareholders of TriCo and FNBB on or about [●], 2018.


Table of Contents

The information in this joint proxy statement/prospectus is not complete and may be changed. We may not offer or sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED MARCH 21, 2018

 

 

LOGO

975 El Camino Real

South San Francisco, California 94080

Dear FNB Bancorp Shareholders:

On December 11, 2017, TriCo Bancshares, which we refer to as TriCo, entered into an agreement and plan of merger and reorganization, which we refer to as the merger agreement, to acquire FNB Bancorp, which we refer to as FNBB. If the required shareholder and regulatory approvals are obtained and all closing conditions are satisfied or waived, FNBB will be merged with and into TriCo, with TriCo as the surviving corporation, which we refer to as the merger. Immediately after the merger, FNBB’s wholly-owned bank subsidiary, First National Bank of Northern California, will merge with and into Tri Counties Bank, the wholly-owned bank subsidiary of TriCo, with Tri Counties Bank as the surviving bank.

You are cordially invited to attend a special meeting of shareholders of FNBB to be held at [●], Pacific Time, on [●], 2018 at The Basque Cultural Center, 599 Railroad Avenue, South San Francisco, California 94080. At the special meeting, the FNBB shareholders will be asked to consider and vote upon a proposal to approve the merger agreement and the merger. You will also be asked to approve, on an advisory (non-binding) basis, the compensation that may be payable to FNBB’s named executive officers in connection with the merger, and to approve adjournments of the special meeting, if necessary, to permit further solicitation of proxies in favor of the foregoing proposals. TriCo will also hold a special meeting of shareholders to approve the merger agreement and the issuance of shares of TriCo common stock in connection with the merger. TriCo and FNBB cannot complete the proposed merger unless FNBB’s shareholders vote to approve the merger agreement and the merger. This letter is accompanied by the attached joint proxy statement/prospectus, which FNBB’s board of directors is providing to solicit your proxy to vote for the approval of the merger agreement and the merger.

If the merger is completed, each outstanding share of FNBB common stock will be cancelled and converted into the right to receive 0.98 shares of TriCo common stock, which we refer to as the exchange ratio. Cash will be paid in lieu of any fractional shares.

As described in the attached joint proxy statement/prospectus, the exchange ratio is subject to potential adjustment. The exchange ratio could change depending on the weighted average closing price of TriCo common stock reported on the Nasdaq Global Select Market over the 20 trading days ending five business days prior to the completion of the merger, which we refer to as the TriCo average closing price.

 

    If the TriCo average closing price is $33.18 or more and $49.78 or less, the exchange ratio will remain unchanged at 0.98 shares of TriCo common stock.

 

    However, FNBB is entitled to terminate the merger agreement if the TriCo average closing price of TriCo (i) is less than $33.18 per share and (ii) represents a percentage change, relative to an initial value of $41.48 per share of TriCo common stock, that is more than 20% below the percentage change in the KBW Nasdaq Regional Banking Index, measured by comparing the average closing value of that index over the 20 trading day ending five business days prior to the completion of the merger to an initial value of 109.24, unless TriCo agrees that the exchange ratio will increase as provided in the merger agreement.

 

    Conversely, TriCo is entitled to terminate the merger agreement if the TriCo average closing price (i) is greater than $49.78 per share and (ii) represents a percentage change, relative to an initial value of $41.48 per share of TriCo common stock, that is more than 20% above the percentage change in the KBW Nasdaq Regional Banking Index, measured by comparing the average closing value of that index over the 20 trading day ending five business days prior to the completion of the merger to an initial value of 109.24, unless FNBB agrees that the exchange ratio will decrease as provided in the merger agreement.


Table of Contents

On [●], 2018, the actual closing price for TriCo common stock reported on the Nasdaq Global Select Market was $[●] per share. If the merger had been completed on that date, the TriCo average closing price would have been $[●] and the exchange ratio would have remained unchanged at 0.98 shares of TriCo common stock. The actual exchange ratio will not be known until the merger is completed.

Based on the closing price of TriCo common stock as reported on the Nasdaq Global Select Market of $41.64 as of December 8, 2017, the trading day immediately preceding the public announcement of the merger, the implied merger consideration that an FNBB shareholder would be entitled to receive for each share of FNBB common stock owned would be $40.81 with an aggregate transaction value of approximately $315 million. Based on the closing price of TriCo common stock as reported on the Nasdaq Global Select Market of $[●] as of [●], 2018, the latest practicable date before the date of this joint proxy statement/prospectus, the implied merger consideration that an FNBB shareholder would be entitled to receive for each share of FNBB common stock owned would be $[●] with an aggregate transaction value of approximately $[●] million. The value of the merger consideration will fluctuate based on the market price of TriCo common stock. Based on the number of shares of TriCo common stock outstanding as of the date of this document, TriCo expects to issue approximately [●] shares of common stock in the aggregate upon completion of the merger. TriCo’s common stock is listed on the Nasdaq Global Select Market under the symbol “TCBK”. FNBB’s common stock is listed on the Nasdaq Global Select Market under the symbol “FNBG.” You should obtain current market quotations for TriCo common stock and FNBB common stock before you vote on the merger proposal.

Based on our reasons for the merger described in the accompanying document, including the fairness opinion issued by our financial advisor, The Courtney Group, LLC, the FNBB board of directors believes that the exchange ratio is fair to and in the best interests of FNBB shareholders.

Accordingly, FNBB’s board of directors unanimously recommends that you vote “FOR” the merger agreement and the merger, “FOR” the proposal to approve, on an advisory (non-binding) basis, the compensation that may be payable to FNBB’s named executive officers in connection with the merger, and “FOR” the proposal to approve adjournments of the special meeting, if necessary. The accompanying joint proxy statement/prospectus gives you detailed information about the special meeting, the merger and related matters. In addition to being a proxy statement of FNBB, this document is the proxy statement for the solicitation of proxies from TriCo shareholders to vote to approve the merger agreement and the transactions contemplated therein, including the merger, and the issuance of shares of TriCo common stock in connection with the merger and is the prospectus of TriCo for the shares of TriCo common stock that will be issued to the FNBB shareholders in connection with the merger.

 

 

We advise you to read this entire document carefully, including the considerations discussed under “Risk Factors” beginning on page 29, and the appendices to the accompanying joint proxy statement/prospectus, which include the merger agreement.

Your vote is very important. The merger cannot be completed unless the holders of a majority of the outstanding shares of FNBB common stock vote in favor of approval of the merger agreement and the transactions contemplated therein, including the merger, at the special meeting. Whether or not you plan to attend the special meeting, please take the time to vote by completing and mailing the enclosed proxy card or by following the instructions to vote via the Internet or by telephone indicated on the proxy card.

We appreciate your continuing loyalty and support and, should you choose to attend, we look forward to seeing you at the special meeting.

Sincerely,

Thomas C. McGraw

Chief Executive Officer


Table of Contents

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the shares of TriCo common stock to be issued in connection with the merger or determined if this joint proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

The securities to be issued in connection with the merger are not savings accounts, deposits or other obligations of any bank or savings association and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

This joint proxy statement/prospectus is dated [●], 2018 and is being first mailed to shareholders of FNBB and TriCo on or about [●], 2018.


Table of Contents

TRICO BANCSHARES

63 Constitution Drive

Chico, California 95973

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To be held on [], 2018

 

 

To the shareholders of TriCo Bancshares:

We will hold a special meeting of shareholders of TriCo Bancshares, or TriCo, at [●], Pacific Time, on [●], 2018 at 890 Fortress Street, Chico, California 95973, for the following purposes:

1. Approval of Merger Agreement. To consider and vote upon a proposal to approve the agreement and plan of merger and reorganization, dated as of December 11, 2017, by and between TriCo and FNB Bancorp, referred to in this notice as the merger agreement, pursuant to which (i) FNB Bancorp will merge with and into TriCo, with TriCo as the surviving corporation, which we refer to in this notice as the merger, and (ii) TriCo will issue shares of TriCo common stock in exchange for outstanding shares of FNB Bancorp common stock in accordance with the merger agreement, all of which we refer to as the merger proposal. A copy of the merger agreement is attached as Appendix A to the accompanying joint proxy statement/prospectus of which this notice is a part.

2. Adjournment. To consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the TriCo special meeting to approve the merger proposal.

No other business may be conducted at the special meeting.

We have fixed the close of business on [●], 2018 as the record date for the determination of shareholders entitled to notice of and to vote at the special meeting. Only holders of TriCo common stock of record at the close of business on that date will be entitled to notice of and to vote at the special meeting or any adjournment or postponement of the special meeting.

The TriCo board of directors has unanimously approved the merger agreement and the transactions contemplated therein and has determined that the merger is in the best interests of TriCo and its shareholders, and unanimously recommends that shareholders vote “FOR” approval of the merger proposal and “FOR” approval of the proposal to adjourn the TriCo special meeting to a later date or dates, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the merger proposal.

If you have any questions concerning the merger or the joint proxy statement/prospectus, please contact Richard P. Smith, TriCo’s President and Chief Executive Officer, at (530) 898-0300. If you would like additional copies of the joint proxy statement/prospectus or if you need help voting your shares of TriCo common stock, please contact Craig Compton, TriCo’s Corporate Secretary, at (530) 898-0300.

Your vote is very important. Whether or not you plan to attend the TriCo special meeting, please promptly complete, sign, date and return your proxy card in the enclosed envelope or vote via the Internet or by telephone pursuant to the instructions provided on the enclosed proxy card.

By Order of the Board of Directors

Craig S. Compton

Secretary

Chico, California

[●], 2018


Table of Contents

FNB Bancorp

975 El Camino Real

South San Francisco, California 94080

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To be held on [], 2018

 

 

To the shareholders of FNB Bancorp:

We will hold a special meeting of shareholders of FNB Bancorp, or FNBB, at [●] p.m., Pacific Time, on [●], 2018 at The Basque Cultural Center, 599 Railroad Avenue, South San Francisco, California 94080 for the following purposes:

1. Approval of the Merger Agreement. To consider and vote upon a proposal to approve an agreement and plan of merger and reorganization, dated as of December 11, 2017, by and between TriCo Bancshares, or TriCo, and FNBB, which we refer to in this notice as the merger agreement, pursuant to which FNBB will merge with and into TriCo with TriCo as the surviving corporation, which we refer to as the merger. A copy of the merger agreement is attached as Appendix A to the accompanying joint proxy statement/prospectus of which this notice is a part;

2. Advisory (Non-Binding) Vote on Certain Compensatory Arrangements. To consider and vote on a proposal to approve, on an advisory (non-binding) basis, the compensation that may be payable to FNBB’s named executive officers in connection with the merger, and the agreements and understandings pursuant to which such compensation may be paid or become payable, as described in the section entitled “The Merger—Interests of Certain FNBB Officers and Directors in the Merger—Merger-Related Compensatory Arrangements for FNBB’s Named Executive Officers” beginning on page [●]; and

3. Adjournment. To consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the merger agreement.

No other business may be conducted at the special meeting.

We have fixed the close of business on [●], 2018 as the record date for the determination of shareholders entitled to notice of and to vote at the FNBB special meeting. Only holders of FNBB common stock of record at the close of business on that date will be entitled to notice of and to vote at the FNBB special meeting or any adjournment or postponement of the special meeting.

The FNBB board of directors has unanimously approved the merger agreement and the transactions contemplated therein. Based on FNBB’s reasons for the merger described in the attached joint proxy statement/prospectus, the FNBB board of directors has determined that the merger is in the best interests of FNBB and its shareholders, and unanimously recommends that shareholders vote “FOR” approval of the merger proposal “FOR” the proposal to approve, on an advisory (non-binding) basis, the compensation that may be payable to FNBB’s named executive officers in connection with the merger, and “FOR” approval of the proposal to adjourn the FNBB special meeting to a later date or dates, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the FNBB special meeting to approve the merger proposal.

If you have any questions concerning the merger or the joint proxy statement/prospectus, if you would like additional copies of the joint proxy statement/prospectus or if need help voting your shares of FNBB common stock, please contact Thomas C. McGraw, FNBB’s Chief Executive Officer, at (650) 588-6800.


Table of Contents

Your vote is very important. Whether or not you plan to attend the special meeting, please promptly complete, sign, date and return your proxy card in the enclosed envelope or vote via the Internet or by telephone pursuant to the instructions provided on the enclosed proxy card.

By Order of the Board of Directors

Edward J. Watson

Secretary

South San Francisco, California

[●], 2018


Table of Contents

TABLE OF CONTENTS

 

WHERE YOU CAN FIND MORE INFORMATION

     1  

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS

     2  

SUMMARY

     8  

SELECTED HISTORICAL FINANCIAL DATA

     19  

Selected Consolidated Historical Financial Data of TriCo

     19  

Selected Consolidated Historical Financial Data of FNBB

     20  

UNAUDITED CONDENSED PRO FORMA COMBINED CONSOLIDATED FINANCIAL DATA

     22  

UNAUDITED COMPARATIVE PER SHARE DATA

     28  

RISK FACTORS

     29  

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

     36  

GENERAL INFORMATION

     38  

THE TRICO SPECIAL MEETING

     39  

Time, Date and Place

     39  

Matters to be Considered

     39  

Recommendation of TriCo’s Board of Directors

     39  

Shares Outstanding and Entitled to Vote; Record Date

     39  

How to Vote TriCo Shares

     39  

Revocation of Proxies

     40  

Quorum

     40  

Vote Required

     41  

Solicitation of Proxies

     41  

Attending the TriCo Special Meeting

     41  

Adjournments and Postponements

     42  

Questions and Additional Information

     42  

THE FNBB SPECIAL MEETING

     43  

Time, Date and Place

     43  

Matters to be Considered

     43  

Recommendation of the FNBB’s Board of Directors

     43  

Shares Outstanding and Entitled to Vote; Record Date

     44  

How to Vote FNBB Shares

     44  

Revocation of Proxies

     45  

Quorum

     45  

Vote Required

     45  

 

-i-


Table of Contents

Shares of FNBB Subject to Voting Agreements

     46  

Solicitation of Proxies

     46  

Attending the FNBB Special Meeting

     46  

Adjournments and Postponements

     47  

Questions and Additional Information

     47  

THE MERGER

     48  

Structure of the Merger

     48  

Background of the Merger

     48  

TriCo’s Reasons for the Merger and Recommendation of TriCo’s Board of Directors

     53  

FNBB’s Reasons for the Merger and Recommendation of FNBB’s Board of Directors

     54  

Opinion of TriCo’s Financial Advisor

     56  

Opinion of FNBB’s Financial Advisor

     62  

The Merger Consideration

     71  

FNBB Stock Options

     73  

Procedures for Exchanging FNBB Common Stock Certificates

     73  

Conditions to the Merger

     74  

Bank Regulatory Approvals

     76  

Business Pending the Merger

     77  

FNBB Board of Directors’ Covenant to Recommend the Merger Agreement

     80  

No Solicitation

     81  

Representations and Warranties of the Parties

     82  

Effective Time of the Merger

     83  

Amendment of the Merger Agreement

     83  

Termination of the Merger Agreement

     83  

Termination Fee

     84  

Certain Employee Matters

     85  

Interests of Certain FNBB Officers and Directors in the Merger

     86  

Material Federal Income Tax Consequences

     90  

Accounting Treatment of the Merger

     93  

Expenses of the Merger

     93  

Listing of the TriCo Common Stock

     93  

Resale of TriCo Common Stock

     93  

Shareholder Agreements

     94  

Dissenters’ Rights

     95  

 

-ii-


Table of Contents

MARKET FOR COMMON STOCK AND DIVIDENDS

     96  

TriCo Market Information and Dividends

     96  

FNBB Market Information and Dividends

    
96
 

INFORMATION ABOUT TRICO

     98  

General

     98  

Management and Additional Information

     98  

INFORMATION ABOUT FNBB

     99  

General

     99  

Business

     99  

Effect of Existing or Probable Governmental Regulations on the Business of FNBB and First National Bank

     102  

Properties

     112  

Legal Proceedings

     113  

Selected Financial Data

     113  

Supplementary Financial Information

     114  

Changes in and Disagreement with Accountants on Accounting and Financial Disclosure

     114  

FNBB’S QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     114  

FNBB MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     115  

CERTAIN BENEFICIAL OWNERSHIP OF FNBB COMMON STOCK

     132  

DESCRIPTION OF TRICO CAPITAL STOCK

     135  

Common Stock

     135  

Preferred Stock

     135  

COMPARISON OF THE RIGHTS OF SHAREHOLDERS

     137  

LEGAL MATTERS

     142  

EXPERTS

     142  

FUTURE SHAREHOLDER PROPOSALS

     143  

TriCo Annual Meeting

     143  

FNBB Annual Meeting

     143  

DOCUMENTS INCORPORATED BY REFERENCE

     144  

 

-iii-


Table of Contents

Appendix A—Agreement and Plan of Merger and Reorganization

  

Appendix B—Opinion of The Courtney Group

  

Appendix C—Opinion of Stephens Inc.

  

Appendix  D—FNB Bancorp’s Report of Independent Registered Public Accounting Firm and Audited Consolidated Financial Statements as of December 31, 2017 and 2016, and for the Three Years in the period ended December 31, 2017.

  

 

-iv-


Table of Contents

WHERE YOU CAN FIND MORE INFORMATION

Both TriCo Bancshares, which we refer to as TriCo, and FNB Bancorp, which we refer to as FNBB, file annual, quarterly and current reports, proxy statements and other business and financial information with the Securities and Exchange Commission, which we refer to as the SEC. You may read and copy any materials that either TriCo or FNBB files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. Please call the SEC at (800) SEC-0330 ((800) 732-0330) for further information on the public reference room. In addition, TriCo and FNBB file reports and other business and financial information with the SEC electronically, and the SEC maintains a website located at http://www.sec.gov containing this information. You can also obtain, free of charge, documents that TriCo files with the SEC at www.tcbk.com under the tab “About Us” and then under the heading “Investor Relations” or documents that FNBB files with the SEC at www.fnbnorcal.com under the link “Investor Relations.” The information provided on (or accessible through) the TriCo and FNBB websites is not part of this joint proxy statement/prospectus and is not incorporated herein by reference unless specifically stated. Copies of the documents that TriCo or FNBB, respectively, files with the SEC can also be obtained, free of charge, by directing a request to TriCo or FNBB at the following respective addresses and phone numbers:

 

TriCo Bancshares
63 Constitution Drive
Chico, California 95973
Attn: Shareholder Relations
(530) 898-0300
  FNB Bancorp
975 El Camino Real
South San Francisco, California 94080
Attn: Thomas C. McGraw
(650) 588-6800

TriCo has filed a registration statement on Form S-4 to register with the SEC the shares of TriCo common stock as specified therein. This joint proxy statement/prospectus is a part of that registration statement. As permitted by SEC rules, this document does not contain all of the information included in the registration statement or in the exhibits or schedules to the registration statement. You may read and copy the registration statement, including any amendments, schedules and exhibits, at the addresses set forth above. Statements contained in this document as to the contents of any contract or other documents referred to in this document are not necessarily complete. In each case, you should refer to the copy of the applicable contract or other document filed as an exhibit to the registration statement of which this joint proxy statement/prospectus is a part. This document incorporates important business and financial information about TriCo that is not included in or delivered with this document, including incorporating by reference documents that TriCo has previously filed with the SEC. See “Documents Incorporated by Reference.” These documents are available without charge to you upon written or oral request to TriCo’s principal executive offices listed above.

If any TriCo shareholder or FNBB shareholder would like to request documents, please do so by [], 2018, which is five business days prior to the date of the special meetings, in order to provide sufficient time receive them before the special meeting of TriCo shareholders, which we refer to as the TriCo special meeting, or the special meeting of FNBB shareholders, which we refer to as the FNBB special meeting, as the case may be. You will not be charged for any of these documents.

 

1


Table of Contents

QUESTIONS AND ANSWERS

ABOUT THE MERGER AND THE SPECIAL MEETINGS

The following are some questions that you may have regarding the merger and the special meetings, and brief answers to those questions. TriCo and FNBB advise you to read carefully the remainder of this joint proxy statement/prospectus because the information in this section does not provide all of the information that might be important to you with respect to the merger and the special meetings of TriCo and FNBB. Additional important information is also contained in the documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” on page [] and “Documents Incorporated by Reference” on page [].

Q: What am I being asked to vote on?

A: TriCo and FNBB have entered into an agreement and plan of merger and reorganization, which we refer to as the merger agreement, pursuant to which TriCo has agreed to acquire FNBB. If the required shareholder and regulatory approvals are obtained and the merger is subsequently completed, FNBB will be merged with and into TriCo with TriCo continuing as the surviving corporation. Immediately thereafter, FNBB’s wholly-owned bank subsidiary, First National Bank of Northern California, which we refer to as First National Bank, will merge with and into Tri Counties Bank, the wholly-owned bank subsidiary of TriCo, with Tri Counties Bank continuing as the surviving corporation.

If you are a TriCo shareholder, you are being asked to vote to approve the merger agreement and the other transactions contemplated therein, including the merger and the issuance of shares of TriCo common stock in connection with the merger, which we refer to as the TriCo merger proposal. If you are an FNBB shareholder, you are being asked to vote (1) to approve the merger agreement and the merger, which we refer to as the FNBB merger proposal, and (2) to approve on an advisory (non-binding) basis, the compensatory arrangements between FNBB and its named executive officers providing for compensation in connection with the merger and the agreements and understandings pursuant to which such compensation may be paid or become payable. As a result of the merger, FNBB will cease to exist and FNBB shareholders will have the right to receive in exchange for each of their shares of common stock of FNBB, or FNBB common stock, the merger consideration consisting of 0.98 shares of TriCo common stock, or the exchange ratio, as further described in “The Merger—The Merger Consideration” beginning on page [●].

Each of the TriCo and FNBB shareholders is also being asked to consider and vote upon a proposal to grant discretionary authority to adjourn the special meeting of their respective shareholders, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of either or both special meetings to approve the matters being presented at such special meetings.

In addition to receiving the necessary regulatory approvals, the merger cannot be completed unless the TriCo shareholders vote to approve the TriCo merger proposal and FNBB shareholders vote to approve the FNBB merger proposal. At each of the respective shareholders’ meetings, TriCo and FNBB shareholders will vote on the proposals necessary to complete the merger. Information about these shareholders’ meetings, the merger agreement and the merger and the other business to be considered by shareholders at each of the shareholders’ meetings is contained in this document.

This document constitutes both a joint proxy statement of TriCo and FNBB and a prospectus of TriCo. It is a joint proxy statement because each of the boards of directors of TriCo and FNBB is soliciting proxies using this document for their respective shareholder meetings. It is a prospectus because TriCo, in connection with the merger, is offering shares of TriCo common stock in exchange for outstanding shares of FNBB common stock in the merger.

 

2


Table of Contents

Q: What will FNBB Shareholders Receive in the Merger?

A: In the merger, each share of FNBB common stock owned by an FNBB shareholder will be converted into the right to receive 0.98 shares of TriCo common stock based on the exchange ratio.

Based on the closing price of TriCo common stock on December 11, 2017, the value of the per share merger consideration payable to holders of FNBB common stock was $40.51. Based on the closing price of TriCo common stock on [●], 2018, the last practicable date before the date of this joint proxy statement/prospectus, the value of the per share merger consideration payable to holders of FNBB common stock was $[●].

Q: Is the exchange ratio subject to change?

A: Yes. While the exchange ratio is generally fixed at 0.98 shares of TriCo common stock, the merger agreement includes a trading collar that could result in termination of the merger agreement or a change to the exchange ratio. In particular, TriCo can elect to terminate the merger agreement if both (i) the average share price of TriCo common stock for the 20-day period up to and including the fifth day prior to the closing date of the merger (the “TriCo average closing price”) is greater than $49.78, which equals 120% of the average share price of TriCo common stock for the 20 trading-day period up to and including December 8, 2017, which was $41.48, which we refer to as the “initial TriCo trading price”, and (ii) TriCo common stock outperforms the KBW Nasdaq Regional Banking Index by more than 20% since December 8, 2017, unless FNBB agrees to decrease the exchange ratio to cure the deficiency so that fewer shares of TriCo common stock will be issued to FNBB shareholders on a per share basis. Conversely, FNBB can terminate the merger agreement if both (i) the TriCo average closing price is less than $33.18, which equals 80% of the initial TriCo trading price, and (ii) TriCo common stock underperforms the KBW Nasdaq Regional Banking Index by more than 20%, unless TriCo agrees to increase the exchange ratio to cure the deficiency so that more shares of TriCo common stock will be issued to FNBB shareholders on a per share basis.

If the average closing share price of TriCo common stock is $33.18 or more and $49.78 or less, the exchange ratio will remain unchanged at 0.98 shares of TriCo common stock. For more information concerning the potential change to the exchange ratio, see “The Merger—The Merger Consideration—Potential Adjustment to Exchange Ratio” on page [●].

Q: How will the parties decide whether to adjust the exchange ratio or allow the merger agreement to terminate?

A: If TriCo elects to terminate the merger agreement because the TriCo average closing price is greater than $49.78 and TriCo common stock outperforms the KBW Nasdaq Regional Banking Index by more than 20%, FNBB can elect to prevent the termination by allowing the exchange ratio to adjust downward as provided in the merger agreement. FNBB’s board of directors would decide whether FNBB will make this election. Conversely, if FNBB elects to terminate the merger agreement because the TriCo average closing price is less than $33.18 and TriCo common stock underperforms the KBW Nasdaq Regional Banking Index by more than 20%, TriCo can elect to prevent the termination by allowing the exchange ratio to adjust upward as provided in the merger agreement. TriCo’s board of directors would decide whether TriCo will make this election. The boards of directors of TriCo and FNBB will evaluate various factors at the time of closing in determining whether to exercise any termination rights TriCo and FNBB may have and whether to prevent any termination by allowing the exchange ratio to adjust. Following the time of closing, TriCo will file a Current Report on Form 8-K with the SEC that will disclose the exchange ratio that will apply in the merger.

Q: Will FNBB shareholders be able to trade the TriCo common stock that they receive in the merger?

A: Yes. The TriCo common stock issued in the merger to FNBB shareholders will be listed on the Nasdaq Global Select Market under the symbol “TCBK.” Unless you are deemed an “affiliate” of TriCo, you may sell or transfer the shares of TriCo common stock you receive in the merger without restriction.

 

3


Table of Contents

Q: Why is my vote important?

A: The TriCo merger proposal must be approved by the holders of a majority of the outstanding shares of TriCo common stock and the FNBB merger proposal must be approved by the holders of a majority of the outstanding shares of FNBB common stock. We cannot complete the merger without these shareholder approvals. TriCo shareholders will vote on the applicable proposals necessary to complete the merger at the TriCo special meeting and the FNBB shareholders will vote on the applicable proposals necessary to complete the merger at FNBB special meeting. Information about the TriCo special meeting and the FNBB special meeting, the merger and the other business to be considered by shareholders at each of the special meetings is contained in this document.

If you are a TriCo or FNBB shareholder and you do not vote, it will have the same effect as a vote against the merger agreement. Holders of [●] shares of FNBB common stock, representing approximately 20% of the outstanding shares of FNBB common stock, have signed shareholder agreements with TriCo agreeing to vote in favor of the merger agreement.

Q: Why must the TriCo shareholders approve the merger agreement and the issuance of shares of TriCo common stock in connection with the merger?

A: TriCo shareholders are required to approve the merger agreement and the issuance of shares of the TriCo common stock, which is estimated to equate to approximately 24% of TriCo’s issued and outstanding shares of common stock. Because TriCo will likely issue in excess of 20% of its outstanding shares of common stock to the FNBB shareholders in connection with the merger, the California General Corporation Law, or the CGCL, requires that holders of a majority of the outstanding shares of TriCo common stock approve the merger agreement.

Because TriCo is listed on the Nasdaq Global Select Market, TriCo is subject to the Nasdaq’s listing rules. Nasdaq’s listing rules similarly require the shareholders of TriCo to approve the issuance of shares of TriCo common stock in connection with the merger because TriCo will likely issue in excess of 20% of its outstanding shares of common stock to the FNBB shareholders in connection with the merger. By voting to approve the TriCo merger proposal, TriCo shareholders will be voting to approve the merger agreement and the transactions contemplated in the merger agreement, including the merger and the issuance of shares in connection with the merger for purposes of the Nasdaq’s listing rules.

Q: What do each of the TriCo and the FNBB boards of directors recommend?

A: The TriCo board of directors unanimously recommends that TriCo shareholders vote “FOR” approval of the TriCo merger proposal and “FOR” approval of the proposal to adjourn TriCo’s special meeting, if necessary, to solicit additional proxies in favor of the merger proposal.

The FNBB board of directors unanimously recommends that FNBB shareholders vote “FOR” approval of the FNBB merger proposal, “FOR” the proposal to approve, on an advisory (non-binding) basis, the compensation that may be payable to FNBB’s named executive officers in connection with the merger, and “FOR” approval of the proposal to adjourn the special meeting, if necessary, to solicit additional proxies in favor of approval of the FNBB merger proposal.

Q: Will I have dissenters’ rights in connection with the merger?

A: No. Neither the holders of TriCo common stock nor the holders of FNBB common stock will have the right to dissent from the merger and assert dissenters’ or appraisal rights.

Under the CGCL, shareholders are generally entitled to dissent from a merger or consolidation and obtain payment of the fair value of their shares when a merger or consolidation into another company occurs. However,

 

4


Table of Contents

the CGCL provides that appraisal rights are not available for shares that are listed on a national securities exchange where the merger consideration is stock of a publicly traded corporation. FNBB’s common stock is traded on a national security exchange and the merger consideration, comprised of TriCo’s common stock, is also traded on a national securities exchange. As such, neither FNBB’s shareholders nor TriCo’s shareholders are entitled to appraisal rights in connection with the merger.

Q: Are there any risks I should consider in deciding whether to vote for the matters required to be voted on by the respective shareholders of TriCo and FNBB?

A: Yes. Set forth under the heading of “Risk Factors,” beginning on page [●], are a number of risk factors that each of the shareholders of TriCo and FNBB should consider carefully.

Q: When do TriCo and FNBB expect to complete the merger?

A: The parties expect to complete the merger during the second quarter of 2018. However, we are unable to assure you whether or when the merger will occur. Prior to the consummation of the merger, FNBB shareholders must approve the FNBB merger proposal at the FNBB special meeting, TriCo shareholders must approve the TriCo merger proposal at the TriCo special meeting all required bank regulatory approvals must be obtained and other conditions to the consummation of the merger must be satisfied.

Q: What happens if the merger is not consummated?

A: If the merger proposal is not approved by the TriCo and FNBB shareholders or if the merger is not completed for any other reason, the merger will not occur and the FNBB shareholders will not receive any consideration for their shares under the terms of the merger agreement. Instead, FNBB and TriCo would remain independent public companies and the common stock of FNBB would continue to be outstanding and traded on the Nasdaq Global Select Market. Under specified circumstances, FNBB may be required to pay a fee to TriCo in the event the merger agreement is terminated as described under the caption “The Merger—Termination Fees” beginning on page [●].

Q: When and where is the TriCo special meeting?

A: The TriCo special meeting will be held at [●], Pacific Time, on [●], [●], 2018 at 890 Fortress Street, Chico, California 95973.

Q: Who is entitled to vote at the TriCo special meeting?

A: The holders of record of TriCo common stock at the close of business on [●], 2018, which is the date TriCo’s board of directors has fixed as the record date for the TriCo special meeting, are entitled to vote at the TriCo special meeting.

Q: When and where is the FNBB special meeting?

A: The FNBB special meeting will be held at [●], Pacific Time, on [●], [●], 2018 at The Basque Cultural Center, 599 Railroad Avenue, South San Francisco, CA 94080.

Q: Who is entitled to vote at the FNBB special meeting?

A: The holders of record of FNBB common stock at the close of business on [●], 2018, which is the date FNBB’s board of directors has fixed as the record date for the FNBB special meeting, are entitled to vote at the FNBB special meeting.

 

5


Table of Contents

Q: What do I need to do now?

A: After you have carefully read this joint proxy statement/prospectus, indicate on your proxy card how you want your shares of FNBB common stock or TriCo common stock, as the case may be, to be voted. Then sign, date and mail your proxy card in the enclosed postage-paid return envelope as soon as possible or follow the instructions to vote via the Internet or by telephone indicated on the proxy card.

Q: If my shares are held in street name by my bank, broker, or other nominee will my bank, broker or other nominee automatically vote my shares for me?

A: No. Your bank, broker or other nominee will not be able to vote shares held by it in street name on your behalf without instructions from you. You should instruct your bank, broker or other nominee to vote your shares by following the directions your bank, broker or other nominee provides to you.

Q: What happens if I abstain from voting or fail to instruct my bank, broker or other nominee?

A: If you are a holder of TriCo common stock or FNBB common stock and you abstain from voting or fail to instruct your bank, broker or other nominee to vote your shares and the bank, broker or other nominee submits an unvoted proxy, referred to as a broker non-vote, then the abstention or broker non-vote will be counted towards a quorum at the TriCo special meeting or FNBB special meeting, but it will have the same effect as a vote against approval of the merger agreement and, if you are an FNBB shareholder, against approval of the advisory (non-binding) proposal regarding the compensation that may be payable to FNBB’s named executive officers in connection with the merger.

Abstentions and broker non-votes of shares of TriCo or FNBB common stock will not have any effect on the proposal of the TriCo or FNBB board of directors to adjourn the special meeting if the number of affirmative votes cast for the adjournment is a majority of the votes cast and such affirmative votes constitute a majority of the quorum required to transact business at the special meeting. However, if the number of affirmative votes cast for the adjournment proposal is a majority of the votes cast, but such votes do not constitute a majority of the quorum required to transact business at the special meeting, then abstentions and broker non-votes will have the same effect as a vote against the proposal of the TriCo or FNBB board of directors to adjourn the TriCo or FNBB special meeting.

Q: Can I attend the special meeting and vote my shares in person?

A: Yes. While not required, all TriCo shareholders are invited to attend the TriCo special meeting. Likewise, all FNBB shareholders are invited to attend the FNBB special meeting. Shareholders of record can vote in person at their respective special meeting. If your shares are held in street name, then you are not the shareholder of record and you must bring a legal proxy from your broker, bank or other nominee confirming that you are the beneficial owner of the shares in order to vote in person at the applicable special meeting.

Q: Can I change my vote?

A: Yes. Regardless of the method used to cast a vote, you may change your vote at any time before your proxy is voted at the TriCo special meeting or the FNBB special meeting. You may do so in one of the following ways:

 

  if you are an FNBB shareholder, by delivering to FNBB, which must be received by FNBB prior to the FNBB special meeting, a written notice of revocation addressed to Edward J. Watson, Secretary, FNB Bancorp, 975 El Camino Real, South San Francisco, California 94080;

 

  if you are a TriCo shareholder, by delivering to TriCo, which must be received by TriCo prior to the TriCo special meeting, a written notice of revocation addressed to Craig Compton, Corporate Secretary, TriCo Bancshares, 63 Constitution Drive, Chico, California 95973;

 

6


Table of Contents
  by logging onto the Internet website specified on your proxy card in the same manner you would to submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case, if you are eligible to do so and following the instructions on the proxy card;

 

  completing, signing and returning a new proxy card with a later date before the date of the applicable special meeting, which will automatically revoke any earlier proxy; or

 

  attending the TriCo special meeting or the FNBB special meeting, as the case may be, and voting in person, which will automatically revoke any earlier proxy. However, simply attending the TriCo special meeting or the FNBB special meeting, as the case may be, without voting will not revoke an earlier proxy voted by you.

If you have instructed a bank, broker or other nominee to vote your shares of either FNBB or TriCo common stock, you must follow directions received from the bank, broker or other nominee to change your vote. If you fail to comply with the instructions of the bank, broker or other nominee, your vote will not be changed because the bank, broker or other nominee is the record holder of such shares.

Q: Will FNBB be required to submit the merger agreement to its shareholders even if the FNBB board of directors has withdrawn, modified or qualified its recommendation?

A: Yes. Unless the merger agreement is terminated before the FNBB special meeting, FNBB is required to submit the merger agreement to its shareholders even if the FNBB board of directors has withdrawn, modified or qualified its recommendation, consistent with the terms of the merger agreement.

Q: What is the procedure for sending in FNBB stock certificates?

A: Promptly following the closing of the merger, FNBB shareholders will receive a transmittal letter instructing FNBB shareholders to surrender their FNBB common stock certificates or shares of FNBB common stock that are held in book-entry form, in exchange for the merger consideration. FNBB shareholders should follow the instructions in the transmittal letter for how to deliver their FNBB common stock certificates or book-entry shares of FNBB common stock in exchange for the merger consideration. You should NOT send your FNBB common stock certificates with your proxy card now. Instead, follow the instructions in the transmittal letter and use the separate envelope specifically provided with the transmittal letter for returning the FNBB stock certificates.

Q: Who should I call with questions?

A: If you are a holder of FNBB common stock and you have any questions concerning the merger or this joint proxy statement/prospectus or if you would like additional copies of this joint proxy statement please contact Thomas C. McGraw, FNBB’s Chief Executive Officer, at (650) 588-6800.

If you are a holder of TriCo common stock and you have any questions concerning the merger or this joint proxy statement/prospectus, please contact Richard P. Smith, TriCo’s President and Chief Executive Officer, at (530) 898-0300. If you would like additional copies of the joint proxy statement/prospectus, please contact Craig Compton, Corporate Secretary, at (530) 898-0300.

 

7


Table of Contents

SUMMARY

This summary highlights selected information from this joint proxy statement/prospectus and may not contain all of the information that is important to the shareholders of TriCo and the shareholders of FNBB. To more fully understand the merger and for a more complete description of the legal terms of the merger, you should read carefully this entire joint proxy statement/prospectus, including the merger agreement and the other documents included with this joint proxy statement/prospectus. See “Where You Can Find More Information” on page [] and “Documents Incorporated by Reference” on page []. Page references are included in this summary to direct the reader to a more complete description of the topics.

Throughout this joint proxy statement/prospectus, “TriCo” refers to TriCo Bancshares and “FNBB” refers to FNB Bancorp. Also, throughout this joint proxy statement/prospectus, the Agreement and Plan of Merger and Reorganization, dated as of December 11, 2017, by and between TriCo and FNBB, is referred to as the “merger agreement.” The merger of FNBB with and into TriCo is referred to as the “merger” and the TriCo common stock to be issued to FNBB shareholders in consideration for their FNBB common stock, as well as any cash issued in lieu of fractional shares, is referred to as the “merger consideration.”

Parties to the Proposed Merger (Pages [] and [])

TriCo Bancshares. TriCo is a California-based bank holding company for its wholly-owned subsidiary Tri Counties Bank, a California-chartered commercial bank. TriCo’s principal asset is all of the capital stock of Tri Counties Bank. Tri Counties Bank provides a unique brand of customer service with solutions through 57 traditional stand-alone branches, nine in-store branches and two loan production offices in communities throughout Northern and Central California. The deposits of the bank are insured by the FDIC up to applicable limits. Tri Counties Bank conducts a commercial banking business including accepting demand, money market, savings and time deposits and making commercial, real estate, and consumer loans. It also offers installment note collection, issues cashier’s checks, sells travelers checks and provides safe deposit boxes and other customary banking services. Most of Tri Counties Bank’s customers are retail customers and small to medium-sized businesses. In addition, the bank provides some specialized services to its customers. These services include courier deposit services to key locations or customers throughout its service area, SBA loans, factoring and asset-based loans and Internet banking.

As of December 31, 2017, TriCo had, on a consolidated basis, total assets of $4.8 billion, total shareholders’ equity of $505.8 million and total deposits of $4.0 billion. At December 31, 2017, TriCo had gross loans of $2.9 billion.

TriCo’s principal executive offices are located at 63 Constitution Drive, Chico, California 95973 and its telephone number is (530) 898-0300.

FNB Bancorp. Headquartered in South San Francisco, California, FNBB is the bank holding company for its wholly-owned subsidiary, First National Bank of Northern California, which we refer to as First National Bank, a national banking association headquartered in Daly City, California. First National Bank is a community-oriented financial services firm which provides banking products and services to small and medium sized businesses and consumers through 12 retail branches located on the San Francisco Peninsula.

As of December 31, 2017, FNBB, on a consolidated basis, had total assets of $1.3 billion, gross loans of $840 million, total shareholders’ equity of $119.3 million and total deposits of $1.1 billion.

FNBB’s principal executive offices are located at 975 El Camino Real, South San Francisco, California 94080 and its telephone number is (650) 588-6800.



 

8


Table of Contents

The Merger (Page [])

The merger agreement is attached to this joint proxy statement/prospectus as Appendix A, and is incorporated by reference. Please read the entire merger agreement. It is the legal document that governs the merger. Pursuant to the terms and conditions set forth in the merger agreement, TriCo has agreed to acquire FNBB in a transaction in which FNBB will merge with and into TriCo, with TriCo as the surviving corporation. Immediately following the consummation of the merger, First National Bank will merge with and into Tri Counties Bank, with Tri Counties Bank as the surviving corporation. The parties expect to complete the mergers during the second quarter of 2018.

TriCo’s Reasons for the Merger and Factors Considered by TriCo’s Board of Directors (Page [])

As part of its business strategy, TriCo evaluates opportunities to acquire bank holding companies, banks and other financial institutions, which is an important element of its strategic plan. The proposed acquisition of FNBB is consistent with this strategy. The proposed acquisition of FNBB will (i) extend TriCo’s geographic footprint into the San Francisco Peninsula, (ii) create opportunities for Tri Counties Bank to provide additional products and services to FNBB customers and other potential customers, and (iii) strengthen Tri Counties Bank’s deposit base with a mature base of core deposits.

Based on TriCo’s reasons for the merger described in this joint proxy statement/prospectus, including the fairness opinion of Stephens Inc., an independent investment banking firm, the TriCo board of directors believes that the merger is fair to and in the best interests of TriCo’s shareholders and the TriCo board of directors unanimously recommends that TriCo shareholders vote “FOR” approval of the TriCo merger proposal. For a discussion of the circumstances surrounding the merger and the factors considered by TriCo’s board of directors in approving the merger agreement, see “The Merger—TriCo’s Reasons for the Merger” beginning on page [●].

FNBB’s Reasons for the Merger and Factors Considered by FNBB’s Board of Directors (Page [])

Based on FNBB’s reasons for the merger described in this joint proxy statement/prospectus, including the fairness opinion of The Courtney Group, LLC, which we refer to as Courtney, an independent investment banking firm, the FNBB board of directors believes that the merger is fair to FNBB shareholders and in their best interests, and unanimously recommends that FNBB shareholders vote “FOR” approval of the merger agreement and the merger. For a discussion of the circumstances surrounding the merger and the factors considered by FNBB’s board of directors in approving the merger agreement, see “The Merger—FNBB’s Reasons for the Merger” beginning on page [●].

Opinion of TriCo’s Financial Advisor (Page [])

Stephens Inc. delivered its written opinion to TriCo’s board of directors that, as of December 11, 2017, and based upon and subject to assumptions made, procedures followed, matters considered and limitations and qualification on the review undertaken set forth in its opinion, the merger consideration to be paid by TriCo to FNBB shareholders in the merger pursuant to the merger agreement was fair, from a financial point of view, to TriCo.

The full text of the written opinion of Stephens Inc., dated December 11, 2017, which sets forth assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken is attached as Appendix C to this joint proxy statement/prospectus. TriCo’s shareholders should read the opinion in its entirety. Stephens Inc. provided its opinion for the information and assistance of TriCo’s board of directors in connection with its consideration of the transaction. The opinion of Stephens Inc. has not been updated prior to the date of this joint proxy statement/prospectus and does not reflect any changes in circumstances since



 

9


Table of Contents

December 11, 2017. The Stephens Inc. opinion does not address the underlying business decision to proceed with the merger and is not a recommendation as to how any holder of TriCo common stock should vote on matters to be considered at the TriCo special meeting.

Opinion of FNBB’s Financial Advisor (Page [])

In connection with the merger, Courtney, delivered its opinion to FNBB’s board of directors to the effect that, as of December 11, 2017, and based upon and subject to the assumptions made, procedures followed, matters considered and limitations and qualification on the review undertaken by Courtney in providing its opinion, the exchange ratio was fair, from a financial point of view, to the holders of FNBB common stock.

The full text of the written opinion of Courtney, dated December 11, 2017, which sets forth the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Courtney is attached as Appendix B to this joint proxy statement/prospectus. FNBB’s shareholders should read the opinion in its entirety. The opinion of Courtney has not been updated prior to the date of this joint proxy statement/prospectus and does not reflect any change in circumstance or assumptions after December 11, 2017. Courtney provided its opinion for the information and assistance of FNBB’s board of directors in connection with its consideration of the transaction. Courtney’s opinion is not a recommendation as to how any holder of FNBB common stock should vote on matters to be considered at the FNBB special meeting.

FNBB Shareholders Will Receive Shares of TriCo Common Stock for Each Share of FNBB Common Stock Exchanged in the Merger (Page [])

At the effective time of the merger, each outstanding share of FNBB common stock will, by virtue of the merger and without any action on the part of an FNBB shareholder, be converted into the right to receive 0.98 shares of TriCo common stock, which is referred to as the exchange ratio. The exchange ratio is subject to potential adjustment as set forth in the merger agreement and described elsewhere in this joint proxy statement/prospectus. Cash will be paid in lieu of any fractional share.

Aggregate Merger Consideration.

The total consideration to be paid by TriCo to the FNBB shareholders in connection with the merger is referred to in this joint proxy statement/prospectus as the aggregate merger consideration. The term aggregate merger consideration does not include the consideration, if any, payable to holders of options to purchase shares of FNBB common stock, which we refer to as FNBB options.

Upon completion of the merger and based on a $         closing price of TriCo’s common stock of $[●] on [●], 2018, the last practical date before the date of this joint proxy statement prospectus on approximately $[●] million of aggregate merger consideration consisting of approximately [●] shares of TriCo common stock will be payable to the FNBB shareholders. The foregoing sentence does not include the payment of cash to holders of FNBB options upon the closing of the merger and assumes that (i) there are [●] shares of FNBB common stock outstanding at the closing, (ii) the FNBB shareholders will receive an aggregate of [●] shares of TriCo common stock after applying the exchange ratio of 0.98, and (iii) no FNBB options are exercised prior to the closing of the merger that would result in such shares of FNBB stock being converted into the right to receive the merger consideration in the merger.

Fractional Shares.

No fractional shares of TriCo common stock will be issued, and in lieu thereof, each holder of FNBB common stock who would otherwise be entitled to a fractional share will receive an amount in cash, without interest, determined by multiplying such fractional interest by the average closing price per share of TriCo common stock, as reported on the NASDAQ Global Select Market, for the 20 trading days ending on and including the fifth trading day prior to the closing date of the merger, rounded to the nearest whole cent.



 

10


Table of Contents

Potential Adjustment to Exchange Ratio.

While the exchange ratio is generally fixed at 0.98 shares of TriCo common stock, the merger agreement includes a trading collar that could result in termination of the merger agreement or a change to the exchange ratio if the TriCo average closing price is less than $33.18 or greater than $49.78.

TriCo can elect to terminate the merger agreement if both (i) the TriCo average closing price is greater than $49.78, which equals 120% of the average share price of TriCo common stock for the 20 trading-day period up to and including December 8, 2017, which was $41.48, or the “initial TriCo trading price”, and (ii) TriCo common stock outperforms the KBW Nasdaq Regional Banking Index by more than 20%, unless FNBB agrees that the exchange ratio will be reduced in accordance with the terms of the merger agreement and fewer shares of TriCo common stock will be issued to FNBB shareholders on a per share basis. Conversely, FNBB can terminate the merger agreement if both (i) the TriCo average closing price is less than $33.18, which is equivalent to 80% of the initial TriCo trading price, and (ii) TriCo common stock underperforms the KBW Nasdaq Regional Banking Index by more than 20%, unless TriCo agrees that the exchange ratio will be increased in accordance with the terms of the merger agreement and more shares of TriCo common stock will be issued to FNBB shareholders on a per share basis.

Treatment of Outstanding FNBB Options (Page [])

The board of directors of FNBB will approve the acceleration of the vesting of FNBB options prior to the closing of the merger.

Each outstanding and unexercised FNBB option will be canceled in exchange for a cash payment equal to the number of shares of FNBB common stock that are subject to such FNBB option immediately prior to the closing of the merger multiplied by the amount, if positive, by which the product of the exchange ratio multiplied by the average closing share price exceeds the per share exercise price under such FNBB option.

Transmittal Materials (Page [])

After Computershare, which will be the exchange agent in the merger, has received and processed the transmittal materials following the closing of the merger, FNBB shareholders will be sent the TriCo common stock and any cash in lieu of fractional shares to which they are entitled. If an FNBB shareholder holds shares in street name, he or she will receive information from his or her bank, broker or other nominee advising such FNBB shareholder of the process for receiving the TriCo common stock and any cash in lieu of fractional shares to which he or she is entitled.

Each FNBB shareholder will need to surrender his or her FNBB common stock certificates or follow instructions for the transfer of shares of FNBB common stock held in book-entry form, to receive the appropriate merger consideration. FNBB shareholders should not send any certificates now. Each FNBB shareholder will receive detailed instructions on how to exchange his or her share certificates or book-entry shares along with transmittal materials promptly following the closing of the merger.

Per Share Market Price and Dividend Information (Page [])

Shares of TriCo common stock currently trade on the NASDAQ Global Select Market under the symbol “TCBK.” Shares of FNBB common stock currently trade on the NASDAQ Global Select Market under the symbol “FNBG.”

The following table sets forth the closing sale prices of (i) TriCo common stock as reported on the NASDAQ Global Select Market, and (ii) FNBB common stock as reported on the NASDAQ Global Select Market, in each



 

11


Table of Contents

case on December 8, 2017, the last trading-day before TriCo announced the merger, and on [●], 2018, the last practicable trading-day before the distribution of this joint proxy statement/prospectus. To help illustrate the market value of the per share merger consideration to be received by FNBB’s shareholders, the following table also presents the equivalent market value per share of FNBB common stock as of December 11, 2017 and [●], 2018, which were determined by multiplying the closing price for the TriCo common stock on those dates by the exchange ratio of 0.98 of a share of TriCo common stock for each share of FNBB common stock. See “The Merger—The Merger Consideration” beginning on page [●] for additional information about the merger consideration to be received by holders of FNBB common stock.

 

     TriCo
Common Stock
     FNBB
Common Stock
     Equivalent
Market
Value Per Share of
FNBB
 

At December 11, 2017

   $ 41.64      $ 35.34      $ 40.81  

At [●], 2018

        

The market price of TriCo common stock and FNBB common stock will fluctuate prior to the date of each of TriCo’s and FNBB’s special meeting and the date such FNBB shareholder receives the merger consideration. TriCo and FNBB shareholders should obtain a current price quotation for the shares of TriCo common stock to update the implied value for a share of FNBB common stock before voting on the merger proposals.

Each of TriCo and FNBB has been paying a regular quarterly dividend on its common stock. Pursuant to the merger agreement, FNBB may continue to pay its regular quarterly cash dividend equal to the rate paid during the fiscal quarter immediately preceding the date of the merger agreement through the closing of the merger, with record and payment dates consistent with past practice. See “The Merger—Business Pending the Merger” beginning on page [●].

Material Federal Income Tax Consequences of the Merger (Page [])

The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, and it is a condition to completion of the merger that TriCo and FNBB receive a legal opinion to that effect. If the merger is completed, the merger consideration that will be paid to the holders of FNBB common stock will consist of shares of TriCo common stock (and cash for any fractional shares).

Assuming the merger qualifies as a reorganization, subject to the limitations and more detailed discussion set forth in “The Merger—Material Federal Income Tax Consequences” of this joint proxy statement/prospectus, an FNBB shareholder that is a U.S. holder generally will not recognize gain or loss on such exchange, other than with respect to cash received in lieu of fractional shares of TriCo common stock.

Tax matters are complicated, and the tax consequences of the merger to a particular FNBB shareholder will depend in part on such shareholder’s individual circumstances. Accordingly, each FNBB shareholder is urged to consult his or her own tax advisor for a full understanding of the tax consequences of the merger to such shareholder, including the applicability and effect of federal, state, local and foreign income and other tax laws.



 

12


Table of Contents

Date, Time and Location of the TriCo Special Meeting (Page [])

The TriCo special meeting will be held at [●], Pacific Time, on [●], [●], 2018 at 890 Fortress Street, Chico, California 95973. At the TriCo special meeting, TriCo shareholders will be asked to:

 

  approve the merger agreement and the transactions contemplated therein, including the merger and the issuance of TriCo common stock in connection with the merger; and

 

  approve a proposal to adjourn the TriCo special meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the TriCo special meeting to approve the TriCo merger proposal.

Date, Time and Location of the FNBB Special Meeting (Page [])

The FNBB special meeting will be held at [●], Pacific Time, on [●], 2018 at The Basque Cultural Center, 599 Railroad Avenue, California 94080. At the FNBB special meeting, FNBB shareholders will be asked to:

 

  approve the merger agreement and the transactions contemplated therein, including the merger;

 

  approve, on an advisory (non-binding) basis, the compensation that may be payable to the named executive officers of FNBB in connection with the merger; and

 

  approve a proposal to adjourn the FNBB special meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the FNBB special meeting to approve the FNBB merger proposal.

Record Date and Voting Rights for the TriCo Special Meeting (Page [])

Each TriCo shareholder is entitled to vote at the TriCo special meeting if he or she owned shares of TriCo common stock as of the close of business on [●], 2018, the record date for the TriCo special meeting. Each TriCo shareholder will have one vote at the TriCo special meeting for each share of TriCo common stock that he or she owned on that date.

TriCo shareholders of record may vote by mail, by telephone or by the Internet or by attending the TriCo special meeting and voting in person. Each proxy returned to TriCo by a holder of TriCo common stock, which is not revoked, will be voted in accordance with the instructions indicated thereon. If no instructions are indicated on a signed TriCo proxy that is returned, such proxy will be voted “FOR” approval of the TriCo merger proposal, and “FOR” the proposal to adjourn the TriCo special meeting if necessary to permit further solicitation of proxies on the TriCo merger proposal. TriCo shareholders who hold their shares in street name must follow the instructions of their bank, broker or other nominee to have their shares voted at the TriCo special meeting.

Record Date and Voting Rights for the FNBB Special Meeting (Page [])

Each FNBB shareholder is entitled to vote at the FNBB special meeting if he or she owned shares of FNBB common stock as of the close of business on [●], 2018, the record date for the FNBB special meeting. Each FNBB shareholder will have one vote at the special meeting for each share of FNBB common stock that he or she owned on that date.

FNBB shareholders of record may vote by mail, by telephone or by the Internet or by attending the FNBB special meeting and voting in person. Each proxy returned to FNBB by a holder of FNBB common stock, which is not revoked, will be voted in accordance with the instructions indicated thereon. If no instructions are indicated on a signed FNBB proxy that is returned, such proxy will be voted “FOR” approval of the merger agreement, “FOR”



 

13


Table of Contents

the proposal to approve, on an advisory (non-binding) basis, the compensation that may be payable to FNBB’s named executive officers in connection with the merger, and “FOR” the proposal to adjourn the FNBB special meeting if necessary to permit further solicitation of proxies on the proposal to approve the FNBB merger proposal. FNBB shareholders who hold their shares in street name must follow the instructions of their bank, broker or other nominee to have their shares voted at the FNBB special meeting.

Approval of the TriCo Merger Proposal Requires the Affirmative Vote of the Holders of a Majority of the Issued and Outstanding Shares of TriCo Common Stock (Page [])

The affirmative vote of the holders of a majority of issued and outstanding shares of TriCo common stock is necessary to approve the TriCo merger proposal on behalf of TriCo. At the close of business on the record date, there were [●] shares of TriCo common stock outstanding held by approximately [●] holders of record. Each holder of record of TriCo common stock on the record date is entitled to one vote for each share held on all matters to be voted upon at the TriCo special meeting. If a TriCo shareholder does not vote, it will have the same impact on the proposal to approve as a vote against the merger proposal.

Approval of the FNBB Merger Proposal Requires the Affirmative Vote of Holders of a Majority of the Issued and Outstanding Shares of FNBB Common Stock (Page [])

The affirmative vote of the holders of a majority of the issued and outstanding shares of FNBB common stock is necessary to approve the FNBB merger proposal on behalf of FNBB. At the close of business on the record date, there were [●] shares of FNBB common stock outstanding and entitled to vote, held by [●] holders of record. Each holder of record of FNBB common stock on the record date is entitled to one vote for each share held on all matters to be voted upon at the special meeting. If an FNBB shareholder does not vote, it will have the same effect as a vote against the merger agreement.

Holders of [●] shares of FNBB common stock, representing approximately 20% of the outstanding shares of FNBB common stock, have signed shareholder agreements with TriCo agreeing to vote their shares of FNBB common stock in favor of the merger agreement.

Management of TriCo Owns Shares which may be Voted at the TriCo Special Meeting (Page [])

As of the record date, the executive officers and directors of TriCo, as a group, held shares of TriCo common stock, or approximately [●]% of the outstanding TriCo common stock. While the executive officers and directors of TriCo have not entered into voting agreements agreeing to vote their shares of TriCo common stock in a particular manner, it is anticipated that the executive officers and directors of TriCo will vote consistent with the recommendation of the TriCo board of directors, which is to vote “FOR” the TriCo merger proposal.

Management of FNBB Owns Shares which may be Voted at the FNBB Special Meeting (Page []) (Page [])

As of the record date, the executive officers and directors of FNBB, as a group, held [●] shares of FNBB common stock, or approximately 20% of the outstanding FNBB common stock, and all of such directors and substantially all of such executive officers have each entered into shareholder agreements with TriCo and FNBB pursuant to which they have agreed, among other things, in their capacity as shareholders of FNBB, to vote their shares of FNBB common stock in favor of the merger agreement. The form of shareholder agreement is attached as Annex A to the merger agreement, which is attached as Appendix A to this joint proxy statement/prospectus.

FNBB is Prohibited from Soliciting Other Offers (Page [])

FNBB has agreed that, so long as the merger agreement had not been terminated, it will not solicit, initiate, encourage or, subject to some limited exceptions, engage in discussions with any third party other than TriCo



 

14


Table of Contents

regarding extraordinary transactions such as a merger, business combination or sale of a material amount of its assets or capital stock.

TriCo and FNBB Must Meet Several Conditions to Complete the Merger (Page [])

Completion of the merger depends on meeting a number of conditions, including the following:

 

  shareholders of TriCo must approve the TriCo merger proposal;

 

  shareholders of FNBB must approve the merger agreement and the merger;

 

  TriCo and FNBB must receive all required regulatory approvals for the merger, and any waiting periods required by law must have passed and no such approval may contain any condition (other than conditions or requirements related to remedial actions) that TriCo’s board of directors reasonably determines in good faith would materially reduce the economic benefits of the merger to such a degree that, had such condition been known, TriCo, in its reasonable discretion, would not have entered into the merger agreement;

 

  there must be no law, injunction or order enacted or issued preventing completion of the merger;

 

  the TriCo common stock to be issued in the merger must have been approved for trading on the NASDAQ Global Select Market;

 

  the representations and warranties of each of TriCo and FNBB in the merger agreement must be true and correct, subject to the materiality standards provided in the merger agreement;

 

  TriCo and FNBB must have complied in all material respects with their respective obligations in the merger agreement;

 

  TriCo and FNBB must have received a written opinion that the merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code;

 

  TriCo must have received an opinion from VP Tax, Inc., or another nationally recognized accounting firm reasonably acceptable to TriCo, that no agreement, contract or arrangement to which any employee of FNBB is a party will result in the payment of any amount that would not be deductible by reason of Section 280G of the Code, as determined without regard to Section 280G(b)(4) of the Code; and

 

  as of the closing date, FNBB’s tangible common equity (as defined and subject to certain specified adjustments set forth in the merger agreement) must not be less than $119 million; and

 

  all required regulatory approvals for the merger of First National Bank with and into Tri Counties Bank must be received, any waiting periods required by law must have passed and there must be no law, injunction or order enacted or issued preventing completion of the merger of First National Bank and Tri Counties Bank.

Unless prohibited by law, either TriCo or FNBB could elect to waive a condition that has not been satisfied and complete the merger. The parties cannot be certain whether or when any of the conditions to the merger will be satisfied, or waived where permissible, or whether or when the merger will be completed.

TriCo and FNBB Have Filed Applications Seeking Regulatory Approvals Required to Complete the Merger (Page [])

To complete the merger, the parties need the prior approval from the Board of Governors of the Federal Reserve System, which we refer to as the Federal Reserve, the Federal Deposit Insurance Corporation, which we refer to as the FDIC, and the California Department of Business Oversight, which we refer to as the CDBO, or confirmation that no application is required. The U.S. Department of Justice is also able to provide input into the



 

15


Table of Contents

approval process of federal banking agencies and will have between 15 and 30 days following any approval of a federal banking agency to challenge the approval on antitrust grounds. First National Bank is also required to notify its primary federal regulator, which is the Office of the Comptroller of the Currency, which we refer to as the OCC, of its intention to merge with Tri Counties Bank. TriCo and FNBB have filed all necessary applications and notices with the Federal Reserve, the FDIC, the CDBO and the OCC. TriCo and FNBB cannot predict whether the required regulatory approvals will be obtained or whether any such approvals will have conditions which would be detrimental to TriCo following completion of the merger.

TriCo and FNBB May Terminate the Merger Agreement (Page [])

TriCo and FNBB can mutually agree at any time to terminate the merger agreement before completing the merger, even if shareholders of TriCo and/or FNBB have already voted to approve it.

TriCo or FNBB can also terminate the merger agreement:

 

  if the other party breaches any of its representations, warranties, covenants or agreements under the merger agreement that (i) cannot be or has not been cured within 30 days of the giving of written notice to the breaching party or parties and (ii) would entitle the non-breaching party or parties not to consummate the merger;

 

  if the merger is not consummated by September 30, 2018, except to the extent that the failure to consummate the merger by that date is due to (i) the terminating party’s failure to perform or observe its covenants and agreements in the merger agreement, or (ii) the failure of any of the FNBB shareholders (if FNBB is the party seeking to terminate) to perform or observe their respective covenants under the relevant shareholder agreement; or

 

  if any required governmental approval of the merger has been denied by final non-appealable action or an application for approval of the merger has been permanently withdrawn at the request of a governmental authority, provided that no party has the right to terminate the merger agreement if the denial is due to the terminating party’s failure to perform or observe its covenants in the merger agreement.

In addition, TriCo may terminate the merger agreement if the shareholders of FNBB do not approve the FNBB merger proposal and TriCo may terminate the merger agreement at any time prior to the TriCo special meeting if the board of directors of FNBB withdraws or modifies its recommendation to the FNBB shareholders that the merger agreement be approved in any way which is adverse to TriCo, or breaches its covenants requiring the calling and holding of the FNBB special meeting to consider the merger agreement and prohibiting the solicitation of other offers. TriCo also may terminate the merger agreement if a third party commences a tender offer or exchange offer for 10% or more of the outstanding FNBB common stock and the board of directors of FNBB recommends that FNBB shareholders tender their shares in the offer or otherwise fails to recommend that they reject the offer within a specified period.

FNBB may terminate the merger agreement if the shareholders of TriCo do not approve the TriCo merger proposal in connection with the merger and FNBB may terminate the merger agreement if FNBB’s board of directors has effected a permissible change in recommendation to its shareholders with respect to the merger agreement, provided that FNBB is not then in breach of any representation, warranty, covenant or agreement contained in the merger agreement and, provided further, that any such termination shall not be effective until FNBB has paid TriCo the termination fee required by the merger agreement.

TriCo may terminate the merger agreement if the TriCo closing average price is greater than $49.78 and TriCo common stock outperforms the KBW Nasdaq Regional Banking Index by more than 20%, but FNBB can elect to prevent the termination by allowing the exchange ratio to adjust downward as provided in the merger agreement.



 

16


Table of Contents

Conversely, FNBB may terminate the merger agreement because the TriCo average closing price is less than $33.18 and TriCo common stock underperforms the KBW Nasdaq Regional Banking Index by more than 20%, but TriCo can elect to prevent the termination by allowing the exchange ratio to adjust upward as provided in the merger agreement. See “The Merger—Merger Consideration—Potential Adjustment to Exchange Ratio on page [●]

Termination Fee (Page [])

FNBB must pay TriCo a termination fee of $12.0 million if the merger agreement is terminated under specified circumstances.

TriCo and FNBB May Amend the Merger Agreement (Page [])

The parties may amend or supplement the merger agreement by written agreement at any time before the merger actually takes place; provided, however, no amendment or supplement that by law requires further approval by the shareholders of TriCo or FNBB may be made after the special meeting, of TriCo or FNBB, as the case may be, without first obtaining such additional shareholder approval.

FNBB’s Directors and Officers Have Some Interests in the Merger that are in Addition to or Different than the Interests of FNBB Shareholders (Page [])

FNBB directors and officers have interests in the merger as individuals that are in addition to, or different from, their interests as shareholders of FNBB, which are:

 

  FNBB’s directors and officers will receive, upon consummation of the merger, cash payments in exchange for the cancellation of their FNBB options and, in addition, the vesting of their FNBB stock options will be accelerated;

 

  the agreement of TriCo to honor indemnification obligations of FNBB for a period of six years, as well as to purchase liability insurance for FNBB’s directors and officers for six years following the merger, subject to the terms of the merger agreement;

 

  cash payments to certain officers of FNBB in the aggregate amount of approximately $2.25 million, on a pre-tax basis, pursuant to the terms of their respective employment-related severance payment or retention agreements with FNBB;

 

  the appointment of two directors of FNBB, who are not yet identified, to serve on the boards of directors of TriCo and Tri Counties Bank effective upon completion of the merger; and

 

  James Black, President and a director of FNBB and First National Bank, Anthony Clifford, Executive Vice President and Chief Operating Officer and a director of FNBB and First National Bank and Randy Brugioni, Senior Vice President and Chief Lending Officer of First National Bank, have entered into employment agreements with TriCo and Tri Counties Bank, each of which will be effective as of the closing of the merger, and which provide compensation for continued employment with TriCo and Tri Counties Bank following the merger.

The board of directors of TriCo and FNBB were aware of the foregoing interests and considered them, among other matters, in approving the merger agreement and the merger.

Accounting Treatment of the Merger (Page [])

The merger will be accounted for under the acquisition method of accounting under U.S. generally accepted accounting principles, or GAAP. In accordance with current accounting guidance, the mergers will be accounted for using the acquisition method. The result of this method is that the assets and liabilities of TriCo will be



 

17


Table of Contents

carried forward at their recorded amounts, TriCo’s historical operating results will be unchanged for the prior periods being reported on and the assets and liabilities of FNBB will be adjusted to fair value at the date of the merger. In addition, all identified intangibles will be recorded at their fair values and included as part of the net assets acquired. To the extent that the purchase price, consisting of cash plus the number of TriCo common shares to be issued to former FNBB shareholders at fair value, exceeds the fair value of the net assets acquired, including identifiable intangible assets, from FNBB at the date of the mergers, that amount will be reported as goodwill. In accordance with current accounting guidance, goodwill will not be amortized but, in general, will be evaluated for impairment annually. Identified intangibles will be amortized over their estimated lives. Further, the acquisition method of accounting results in the operating results of FNBB being included in the operating results of TriCo beginning from the date of completion of the merger.

Shareholders of TriCo and FNBB Have Different Rights (Page [])

The rights of shareholders of TriCo differ from the rights of shareholders of FNBB. Following the closing of the merger, shareholders of FNBB will receive shares of TriCo common stock in exchange for their shares of FNBB common stock and become shareholders of TriCo, and their rights as shareholders of TriCo will be governed by TriCo’s articles of incorporation and bylaws rather than those of FNBB.



 

18


Table of Contents

SELECTED HISTORICAL FINANCIAL DATA

The following tables present selected consolidated historical financial data of TriCo and selected consolidated historical financial data of FNBB.

Selected Consolidated Historical Financial Data of TriCo

Set forth below are selected historical financial data derived from TriCo’s audited consolidated financial statements as of and for the years ended December 31, 2017, 2016, 2015, 2014, and 2013. You should read the information set forth below, together with TriCo’s consolidated financial statements and related notes included in TriCo’s Annual Report on Form 10-K for the year ended December 31, 2017, and the sections of such report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” TriCo’s Annual Report on Form 10-K for the year ended December 31, 2017 was filed with the SEC on March 1, 2018 and is incorporated by reference into this joint proxy statement/prospectus.

 

    At or for the year ended December 31,  

(in thousands, except per share data and ratios)

  2017     2016     2015     2014     2013  

Interest income

  $ 181,402     $ 173,708     $ 161,414     $ 121,115     $ 106,560  

Interest expense

    6,798       5,721       5,416       4,681       4,696  

Net interest income

    174,604       167,987       155,998       116,434       101,864  

(Benefit from) provision for loan losses

    89       (5,970     (2,210     (4,045     (715

Noninterest income

    50,021       44,563       45,347       34,516       36,829  

Noninterest expense

    147,024       145,997       130,841       110,379       93,604  

Income before income taxes

    77,512       72,523       72,714       44,616       45,804  

Provision for income taxes

    36,958       27,712       28,896       18,508       18,405  

Net income

  $ 40,554     $ 44,811     $ 43,818     $ 26,108     $ 27,399  

Earnings per share:

         

Basic

  $ 1.77     $ 1.96     $ 1.93     $ 1.47     $ 1.71  

Diluted

  $ 1.74     $ 1.94     $ 1.91     $ 1.46     $ 1.69  

Per share:

         

Dividends paid

  $ 0.66     $ 0.60     $ 0.52     $ 0.44     $ 0.42  

Book value per common share

  $ 22.03     $ 20.87     $ 19.85     $ 18.41     $ 15.61  

Tangible book per common share

  $ 19.01     $ 17.77     $ 16.81     $ 15.31     $ 14.59  

Average common shares outstanding

    22,912       22,814       22,750       17,716       16,045  

Average diluted common shares outstanding

    23,250       23,087       22,998       17,923       16,197  

Shares outstanding

    22,956       22,868       22,775       22,715       16,077  

Loans, net of allowance

  $ 2,984,842     $ 2,727,090     $ 2,486,926     $ 2,245,939     $ 1,633,762  

Total assets

    4,761,315       4,517,968       4,220,722       3,916,458       2,744,066  

Total deposits

    4,009,131       3,895,560       3,631,266       3,380,423       2,410,483  

Other borrowings

    122,166       17,493       12,328       9,276       6,335  

Junior subordinated debt

    56,858       56,667       56,470       56,272       41,238  

Shareholders’ equity

    505,808       477,347       452,116       418,172       250,946  

Financial Ratios:

         

Return on average assets

    0.89     1.02     1.11     0.87     1.04

Return on average equity

    8.10     9.46     10.04     8.67     11.34

Net interest margin (1)

    4.22     4.23     4.32     4.17     4.18

Net loan (recoveries) charge-offs to average loans

    0.08     (0.09 )%      (0.07 )%      (0.13 )%      0.23

Efficiency ratio (2)

    6.47     67.9     64.7     72.9     67.3

Average equity to average assets

    10.99     10.84     11.01     10.00     9.21

Dividend payout ratio

    37.3     30.6     27.2     30.1     24.9

At December 31:

         

Equity to assets

    10.62     10.57     10.71     10.68     9.15


 

19


Table of Contents
    At or for the year ended December 31,  

(in thousands, except per share data and ratios)

  2017     2016     2015     2014     2013  

TriCo Capital Ratios (3):

         

Tier 1 Leverage Ratio

    10.80     10.62     10.79     10.80     10.17

Common Equity Tier 1 to Risk Weighted Assets

    11.72     12.17     12.27     N/A       N/A  

Tier 1 Capital to Risk Weighted Assets

    13.18     13.74     13.86     14.38     13.51

Total Capital to Risk Weighted Assets

    14.07     14.77     15.09     15.63     14.77

 

(1) Fully taxable equivalent. Net interest margin is reported on a equivalent yield basis at a 35% rate.
(2) Represents a noninterest expense divided by the sum of fully taxable equivalent net interest income and noninterest income.
(3) TriCo adopted the U.S. Basel III capital framework effective January 1, 2015. All ratios subsequent to the effective date reflect its adoption, while ratios for the prior periods reflect the previous capital rules under Basel I.

Selected Consolidated Historical Financial Data of FNBB

Set forth below is certain consolidated financial data of FNBB derived from FNBB’s audited consolidated financial statements as of and for the years ended December 31, 2017, 2016, 2015, 2014 and 2013. You should read the information set forth below, together with FNBB’s consolidated financial statements and related notes included in FNBB’s Audited Consolidated Financial Statements as of and for the Years Ended December 31, 2017 and 2016 included in Appendix D to this document.

 

Dollar amounts in thousands, except

per share amounts and ratios

  At or for the years ended December 31,  
  2017     2016     2015     2014     2013  

Selected Balance Sheet Data

         

Securities available-for-sale, at fair value

  $ 355,857     $ 360,105     $ 329,207     $ 264,881     $ 263,988  

Other equity securities

    7,567       7,206       6,748       5,769       5,300  

Loans, net

    829,766       782,485       722,747       583,715       552,343  

Allowance for loan losses

    10,171       10,167       9,970       9,700       9,879  

Total assets

    1,265,238       1,219,394       1,124,349       917,164       891,930  

Average assets

    1,257,848       1,163,454       1,010,435       901,533       903,825  

Total deposits

    1,050,295       1,019,506       983,189       792,194       773,615  

Total borrowings

    78,750       75,350       21,950       14,550       15,000  

Total liabilities

    1,145,958       1,109,080       1,020,187       820,076       797,681  

Total stockholder’s equity

    119,280       110,314       104,162       97,088       94,249  

Average stockholder’s equity

    120,858       109,854       100,621       90,938       93,166  

Operating Data

         

Interest income

    50,218       45,513       39,282       36,859       37,389  

Interest expense

    3,871       3,069       2,597       2,093       2,395  

Net interest income

    46,347       42,444       36,685       34,766       34,994  

Provision for (recovery of) loan losses

    (360     150       (305     (1,020     1,385  

Net interest income after provision for (recovery of) loan losses

    46,707       42,294       36,990       35,786       33,609  

Service charges

    2,264       2,461       2,501       2,548       2,630  

Net gain on sale of investment securities

    210       438       339       138       324  

Earnings on bank owned life insurance

    390       402       364       359       366  

Other Income

    996       1,294       1,292       3,544       863  

Noninterest expense

    30,549       30,692       29,925       27,868       29,028  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before provision for income taxes

    20,018       16,197       11,561       14,507       8,764  

Provision for income taxes

    9,307       5,696       3,364       5,098       1,325  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

    10,711       10,501       8,197       9,409       7,439  

Dividends and discount accretion on preferred stock

    —         —         —         170       567  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings available to common stockholders

  $ 10,711     $ 10,501     $ 8,197     $ 9,239     $ 6,872  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


 

20


Table of Contents

Dollar amounts in thousands, except

per share amounts and ratios

  At or for the years ended December 31,  
  2017     2016     2015     2014     2013  

PER SHARE DATA—see note (1)

         

Net earnings per share:

         

Basic

  $ 1.46     $ 1.45     $ 1.15     $ 1.32     $ 1.01  

Diluted

  $ 1.41     $ 1.42     $ 1.12     $ 1.28     $ 0.98  

Cash dividends per share

  $ 0.49     $ 0.40     $ 0.33     $ 0.27     $ 0.07  

Weighted average shares outstanding:

         

Basic

    7,361,000       7,233,000       7,113,000       6,999,000       6,834,000  

Diluted

    7,607,000       7,417,000       7,314,000       7,221,000       6,987,000  

Shares outstanding at period end

    7,442,279       7,280,122       7,159,500       7,044,000       6,907,500  

Book value per common share outstanding

  $ 16.03     $ 15.15     $ 14.55     $ 13.78     $ 13.64  

SELECTED PERFORMANCE DATA

         

Return on average assets (2)

    0.85     1.02     0.81     1.02     0.76

Return on average equity (2)

    8.86     10.88     8.15     10.16     7.38

Net interest margin

    3.97     3.95     4.06     4.21     4.31

Efficiency ratio

    60.85     65.25     72.67     71.77     72.85

Average total stockholders’ equity as a percentage of average total assets

    9.29     9.44     9.96     10.09     10.31

Common dividend payout ratio

    33.92     27.52     29.85     19.27     21.13

SELECTED ASSET QUALITY RATIOS

         

Net loan (recoveries) charge-offs/total loans

    (0.04 )%      (0.01 )%      (0.08 )%      (0.14 )%      0.11

Allowance for loan losses/Total Loans

    1.21     1.28     1.36     1.63     1.76

CAPITAL RATIOS (3)

         

Total Regulatory Capital Ratio

    12.61     12.42     12.76     14.60     14.30

Tier 1 Capital Ratio

    11.57     11.32     11.54     13.34     13.05

Leverage Ratio

    9.09     9.02     8.64     10.30     9.81

Common Equity Tier 1 Capital Ratio

    11.57     11.32     11.54     N/A       N/A  

 

(1) On March 31, 2017, FNBB’s board of directors declared a 3 for 2 stock split with a record date of May 26, 2017. Share and per share date has been adjusted for all stock dividends and stock splits.
(2) Calculated using net earnings available to common shareholders.
(3) Ratios are for FNBB and are substantially similar to First National Bank’s regulatory capital ratios.


 

21


Table of Contents

UNAUDITED CONDENSED PRO FORMA COMBINED

CONSOLIDATED FINANCIAL DATA

The following Unaudited Condensed Pro Forma Combined Consolidated Balance Sheet as of December 31, 2017 combines the historical Consolidated Balance Sheet of TriCo and the historical Consolidated Balance Sheet of FNBB as of such date (i) on an actual historical basis and (ii) assuming the completion of the merger at such date, using the acquisition method of accounting and giving effect to the related pro forma adjustments described in the accompanying Notes to the Unaudited Condensed Pro Forma Combined Financial Statements.

The following Unaudited Condensed Pro Forma Combined Consolidated Statements of Operations for the year ended December 31, 2017 combines the historical Consolidated Statements of Income of TriCo and the historical Consolidated Statements of Earnings of FNBB for such year giving effect to the merger as if the merger had become effective at the beginning of such year, using the acquisition method of accounting and giving effect to the pro forma adjustments described in the accompanying Notes to the Unaudited Condensed Pro Forma Combined Consolidated Financial Statements.

Although pro forma financial information is not a measurement of performance calculated in accordance with GAAP, TriCo and FNBB believe that pro forma financial information is important because it gives effect to the merger and the transactions referenced above. The manner in which TriCo and FNBB calculate pro forma financial information may differ from similarly titled measures reported by other companies.

The unaudited condensed pro forma combined consolidated financial information included in this joint proxy statement/prospectus are presented for informational purposes only. This information includes various estimates and may not necessarily be indicative of the financial condition or results of operations that would have occurred if the merger or the other transactions referenced above had been completed on the dates or at the beginning of the periods indicated or which may be obtained in the future. The unaudited pro forma combined financial information has been derived from and should be read in conjunction with the respective period’s historical consolidated financial statements and the related notes of TriCo and FNBB. The historical consolidated financial statements of TriCo and FNBB are filed with the SEC and, in the case of TriCo, incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information.” and “Documents Incorporated by Reference.” In addition, FNBB’s consolidated financial statements and related notes included in Audited Consolidated Financial Statements as of December 31, 2017 and 2016, and for each of the three years in the period ended December 31, 2017 included in Appendix D to this document.

The pro forma information, while we believe to be helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the opportunities to earn additional revenue and does not include certain assumptions as to cost savings and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had the companies been combined during the periods presented.



 

22


Table of Contents

The unaudited condensed pro forma combined consolidated shareholders’ equity and net income are qualified by the statements set forth under this caption and should not be considered indicative of the market value of TriCo’s or FNBB’s common stock or the actual or future results of operations of TriCo, FNBB or the combined company for any period. Actual results may be materially different than the pro forma information presented.

Selected Unaudited Condensed Pro Forma Combined Consolidated Balance Sheet

(Dollars in thousands)

 

     As of December 31, 2017     Estimated
Purchase
Accounting Entries
    Pro Forma
Combined
TriCo
 
     Historical
TriCo
    Historical
FNBB
     

Assets:

        

Noninterest-bearing cash

   $ 105,968     $ 14,086     $ (9,999 )(a),(d)    $ 110,055  

Interest-bearing cash

     99,460       4,397       —         103,857  
  

 

 

   

 

 

     

 

 

 

Cash and due from banks

     205,428       18,483       (9,999     213,912  
  

 

 

   

 

 

   

 

 

   

 

 

 

Securities held to maturity

     514,844       —           514,844  

Securities available for sale

     730,883       355,857         1,086,740  

Loans held for sale

     4,616       —           4,616  

Loans, gross

     3,015,165       839,937       (29,734 )(b)      3,825,368  

Loan loss reserve

     (30,323     (10,171     10,171  (b)      (30,323

Premises and equipment, net

     57,742       9,322       16,595  (c)      83,659  

OREO

     3,226       3,300         6,526  

Goodwill

     64,311       4,580       155,250  (d)      224,141  

Mortgage servicing rights

     6,687       —           6,687  

Core deposit & other intangible

     5,174       344       17,900  (e)      23,418  

FHLB & other equity securities

     16,956       7,567         24,523  

Bank owned life insurance

     97,783       16,637         114,420  

Accrued interest

     13,772       5,317         19,089  

Investment in subsidiary

     —         —           —    

Other assets

     55,051       14,065       (2,771 )(f)      66,345  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 4,761,315     $ 1,265,238     $ 157,412     $ 6,183,965  
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

        

Deposits

        

Noninterest-bearing non-CD

   $ 1,368,218     $ 313,435       $ 1,681,653  

Interest-bearing non-CD

     2,335,977       598,776         2,934,753  

CDs

     304,936       138,084       563  (g)      443,583  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     4,009,131       1,050,295       563       5,059,989  

Other borrowings

     122,166       78,750       —   (h)      200,916  

Junior sub debt

     56,858       —           56,858  

Reserve for unfunded commitments

     3,164       177         3,341  

Accrued expenses & other liabilities

     64,188       16,736         80,924  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     4,255,507       1,145,958       563       5,402,028  

Shareholders’ equity:

        

Common stock (TriCo)

     255,836         276,129  (d)      531,965  

Common Stock (FNBB)

       85,565       (85,565 )(i)      —    

Retained earnings

     255,200       34,654       (34,654 )(i)      255,200  

Accumulated other comprehensive income

     (5,228     (939     939  (i)      (5,228
  

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     505,808       119,280       156,849       781,937  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 4,761,315     $ 1,265,238     $ 157,412     $ 6,183,965  
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying Notes are an integral part of the Unaudited Condensed Pro Forma Combined Consolidated Financial Information.



 

23


Table of Contents

Unaudited Condensed Pro Forma Combined Consolidated Statements of Operations

     (Dollars in thousands except share amounts)  
     Year Ended December 31, 2017     Esitimated
Purchase
Accounting
Entries
    Pro Forma
Combined
TriCo
 
     Historical
TriCo
    Historical
FNBB
     

Statement of Income

        

Equity in income of subsidiary:

        

Interest income

   $ 181,402     $ 50,218     $ 2,795  (b)    $ 234,415  

Interest expense

     (6,798     (3,871     (375 )(g)      (11,044
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

   $ 174,604     $ 46,347     $ 2,420     $ 223,371  

(Provision) benefit for loan losses

     (89     360         271  
  

 

 

   

 

 

     

 

 

 

Noninterest income

     49,060       3,650         52,710  

Realized gains on AFS securities

     961       210         1,171  

Noninterest expense:

        

Salaries and benefits

     (82,930     (19,366       (102,296

Other noninterest expense

     (64,094     (11,183     (3,110 )(c),(e)      (78,387
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

   $ (147,024   $ (30,549   $ (3,110   $ (180,683
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income before income taxes

   $ 77,512     $ 20,018     $ (690   $ 96,840  

Income tax (expense) benefit

     (36,958     (9,307     290       (45,975
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 40,554     $ 10,711     $ (400   $ 50,865  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares:

        
     22,912       7,361       (68 )(j)      30,205  
     23,250       7,607       (314 )(j)      30,543  

Earnings per common share:

        
   $ 1.77     $ 1.46       $ 1.68  
   $ 1.74     $ 1.41       $ 1.67  

The accompanying Notes are an integral part of the Unaudited Condensed Pro Forma Combined Consolidated Financial Information.



 

24


Table of Contents

Notes to Unaudited Condensed Pro Forma Combined Consolidated Financial Statements

Note 1—Basis of Presentation

The Unaudited Condensed Pro Forma Combined Consolidated Balance Sheet and explanatory notes as of December 31, 2017 combine the historical Consolidated Balance Sheet of TriCo and the historical Consolidated Balance Sheet of FNBB as of such date (i) on an actual historical basis and (ii) assuming the completion of the merger at such date, using the acquisition method of accounting and giving effect to the related pro forma adjustments described in the accompanying Notes to the Unaudited Condensed Pro Forma Combined Consolidated Financial Statements.

The Unaudited Condensed Pro Forma Combined Consolidated Statements of Operations and explanatory notes for the year ended December 31, 2017 combine the historical Consolidated Statements of Income of TriCo and the historical Consolidated Statements of Earnings of FNBB for such respective periods giving effect to the merger as if the merger had become effective at the beginning of such year, using the acquisition method of accounting and giving effect to the pro forma adjustments described in the accompanying Notes to the Unaudited Condensed Pro Forma Combined Consolidated Financial Statements.

Under the acquisition method of accounting, the assets and liabilities of FNBB will be recorded at the respective fair values on the merger date, including adjustments for credit quality, and no allowance for credit losses is carried over to TriCo’s balance sheet. The fair value on the merger date represents management’s best estimates based on available information and facts and circumstances in existence on the merger date. Although the purchase price is indicative of the actual purchase price, the pro forma adjustments reflected in the unaudited pro forma condensed combined financial information is subject to change and may vary from the actual purchase price allocation that will be recorded when the accounting for the merger is completed. Adjustments may include, but not be limited to, changes in (i) FNBB’s balance sheet through the effective time of the merger; (ii) total merger related expenses if consummation and/or implementation costs vary from currently estimated amounts; and (iii) the underlying values of assets and liabilities if market conditions differ from current assumptions. The accounting policies of both TriCo and FNBB are in the process of being reviewed in detail. Upon completion of such review, conforming adjustments or financial statement reclassification may be determined. In addition, certain anticipated nonrecurring costs associated with the merger such as professional fees, legal fees and conversion-related expenditures are not reflected in the pro forma statements of operations.

While the recording of the acquired loans at their fair value will impact the prospective determination of the provision for credit losses and the allowance for credit losses, for purposes of the Unaudited Condensed Pro Forma Combined Consolidated Statements of Operations for the year ended December 31, 2017, TriCo assumed no adjustments to the historical amounts of FNBB’s provisions for credit losses. If such adjustments were estimated, there could be an increase or a reduction to the historical amounts of FNBB’s provisions for credit losses presented. In addition, the fair value of the loan portfolio is not necessarily reflective of the allowance for loan losses calculated under the probable incurred loss model, as the fair value also takes into account an interest and liquidity component.

Note 2—Accounting Policies and Financial Statement Classifications

TriCo is reviewing the accounting policies of FNBB in detail. Upon completion of such review, conforming adjustments or financial statement reclassifications may be determined.

Note 3—Merger and Acquisition Integration Costs

In connection with the merger, the plan to integrate TriCo’s and FNBB’s operations is still being developed. The specific details of this plan will continue to be refined over the next several months, and will include assessing



 

25


Table of Contents

personnel, benefit plans, premises, equipment, and service contracts to determine where they may take advantage of redundancies. Certain decisions arising from these assessments may involve involuntary termination of employees, vacating leased premises, changing information systems, canceling contracts with certain service providers, and selling or otherwise disposing of certain property, furniture and equipment. TriCo also expects to incur merger-related costs including professional fees, legal fees, system conversion costs and costs related to communications with customers and others. To the extent there are costs associated with these actions, the costs will be recorded based on the nature of the cost and in the period incurred.

Note 4—Estimated Annual Cost Savings

TriCo expects to realize cost savings following the merger. These cost savings are not reflected in the pro forma financial information and there can be no assurance they will be achieved in the amount or manner currently contemplated.

Note 5—Pro Forma Adjustments

The following pro forma adjustments have been reflected in the unaudited pro forma combined condensed consolidated financial information. All adjustments are based on current assumptions and valuations, which are subject to change. The pro forma data in this column presents the unaudited financial data for TriCo on a pro forma combined basis reflecting the consummation of the merger with FNBB, as if the merger had taken place as of the date indicated, or at the beginning of the period indicated, after giving effect to the pro forma adjustments described in the other footnotes to this table.

 

(a) Cash paid to cash out FNBB option holders. This is calculated based on the exchange ratio of 0.98 shares of TriCo common stock terms and as if the merger occurred on December 31, 2017, and is based on FNBB options outstanding as of December 31, 2017. Tax benefit (shown in Other Assets) is reduced by 50% for estimated Code section 162(m) limitations.

 

(b) FNBB loan fair value purchase discount estimated to be 3.54% (1.21% credit related ($10,171,000), and 2.33% interest rate related ($19,563,000)). Interest rate component of loan purchase discount expected to accrete into interest income over seven years using effective interest method. FNBB’s allowance for loan losses is eliminated according to purchase accounting rules.

 

(c) FNBB fixed assets (buildings) fair value purchase adjustment. Increased book basis to be depreciated on straight line basis over 30 years. The fair value purchase adjustment is based on TriCo’s internal appraisal estimates.

 

(d) Purchase goodwill is the sum of TriCo common stock issued to FNBB shareholders (7,442,276 x 0.9800 x $37.86 = $276,129,000), less all the other purchase accounting adjustments shown in the Pro Forma Consolidated Balance Sheet. ($37.86 is the price per share of TriCo common stock on December 31, 2017.) The change in Goodwill can be summarized as follows (dollars in thousands, except per share data):

 

TriCo shares issued to FNBB shareholders

     7,293,433  

TriCo issue price per share

   $ 37.86  

Value of TriCo shares paid to FNBB shareholders

     276,129  

Value in-the-money from options

     9,999  
  

 

 

 

Total pro forma merger consideration paid

   $ 286,128  
  

 

 

 


 

26


Table of Contents

Carrying value of FNBB net assets at December 31, 2017

   $ 119,280  

Fair value adjustments to net assets at December 31, 2017:

  

Loans

   $ (29,734

Allowance for loan losses

     10,171  

Premises and equipment

     16,595  

Core deposit intangible

     17,900  

Deferred tax effect of fair value adjustments and tax benefits of option exercise

     (2,771

Other borrowings

     —    

Deposits

     (563
  

 

 

 

Total fair value adjustments

   $ 11,598  
  

 

 

 

Fair value of net assets acquired on December 31, 2017

   $ 130,878  

Excess of fair value of net assets acquired over consideration paid

   $ 155,250  

 

(e) Core deposit intangible adjustment represents estimated fair value of acquired identifiable intangible core deposit asset, calculated as approximately 2.00% of FNBB’s core deposits, less FNBB’s existing core deposit intangible, resulting in a net adjustment. The acquired core deposit intangible is expected to be amortized over seven years using a straight line method. This core deposit intangible estimate is based on data from recent acquisitions and is calculated as follows:

 

FNBB core deposits

   $ 912,211  

Core deposit intangible as percent of core deposits (estimate)

     2.00
  

 

 

 

FNBB core deposit intangible

   $ 18,244  

Less: Existing FNBB core deposit intangible

     (344
  

 

 

 

FNBB core deposit intangible FV adjustment

   $ 17,900  
  

 

 

 

 

(f) Purchase adjustment to other assets/deferred taxes is comprised of adjustment to deferred taxes related to fair value purchase adjustments, and tax benefit from option exercise as follows:

 

Fair value adjustments to net assets:

  

Loans

   $ 8,790  

Allowance for loan losses

   $ (3,007

Premises and equipment

   $ (4,906

Core deposit intangible

   $ (5,292

Other borrowings

   $ —    

Deposits

   $ 166  

Tax benefit of option exercise

     1,478  
  

 

 

 

Deferred tax effect of fair value adjustments and tax benefit of option exercise

   $ (2,771
  

 

 

 

 

(g) Purchase adjustment to (time) deposits is based on FNBB’s December 31, 2017 fair value disclosure. This fair value adjustment is amortized over an estimated life of FNBB’s time deposits of 18 months using the straight-line method.

 

(h) There was no differences identified between the carrying value and fair value of other borrowings in the footnotes of FNBB’s December 31, 2017 financial statements.

 

(i) Purchase adjustment to equity represents addition of fair value of TriCo common stock issued to FNBB shareholders (see note (d)) less the effect of elimination of FNBB’s equity accounts.

 

(j) Adjustment reflects the elimination of FNBB’s weighted average shares outstanding offset by the issuance of shares of TriCo common stock.


 

27


Table of Contents

UNAUDITED COMPARATIVE PER SHARE DATA

The following table sets forth certain historical, pro forma and pro forma equivalent per share financial information for the TriCo common stock and the FNBB common stock. The pro forma and pro forma equivalent per share information for the year ended December 31, 2017 gives effect to the merger as if the transaction had been effective on the last date of the year, in the case of book value data, and as if the transaction had been effective on the first day of the year, in the case of the income and dividend data. The pro forma information in the below table assumes that the merger is accounted for under the acquisition method of accounting. The information in the following table is based on, and should be read together with, the historical consolidated financial information that TriCo and FNBB have presented in their prior filings with the SEC and which are incorporated into this joint proxy statement/prospectus or attached hereto, as the case may be. See “Where You Can Find More Information” on page [] and “Documents Incorporated by Reference” on page [●].

 

     At or For the
Year Ended
December 31,
2017
 

Net Income Per Common Share (1):

  

Historical TriCo

  

Basic

   $ 1.77  

Diluted

     1.74  

Historical FNBB (2)

  

Basic

     1.46  

Diluted

     1.41  

Trico Pro Forma Combined (1)

  

Basic

     1.68  

Diluted

     1.67  

Dividends Declared Per Common Share:

  

Historical TriCo

   $ 0.66  

Historical FNBB

     0.6  

FNBB Pro Forma Equivalent Per Share (3)

     0.65  

Book Value Per Common Share (at period end):

  

Historical TriCo

   $ 22.03  

Historical FNBB

     16.03  

TriCo Pro Forma Combined

     25.85  

FNBB Pro Form Equivalent Per Share (3)

     25.33  

 

(1) Pro forma shares are calculated by adding together the historical shares reported by TriCo and historical shares reported by FNBB, adjusted for the estimated purchase accounting adjustments to be recorded in connection with the FNBB acquisition to equate to an estimated 7,293,433 of TriCo shares to be issued in connection with the FNBB acquisition based on the terms of the merger agreement.
(2) Adjusted for stock splits and stock dividends.
(3) The equivalent pro forma per share data combined for FNBB is computed by multiplying the pro forma combined amounts by the exchange ratio of 0.98.


 

28


Table of Contents

RISK FACTORS

In addition to the other information included and incorporated by reference (or attached) into this joint proxy statement/prospectus, including the matters addressed in the section entitled “Cautionary Statement Concerning Forward-Looking Statements” beginning on page [], you should be aware of and carefully consider the following risks and uncertainties that are applicable to the merger agreement, the merger, TriCo and FNBB before deciding whether to vote for the approval of the TriCo merger proposal or the FNBB merger proposal and the approval of the adjournment of the TriCo or FNBB special meeting, if necessary, to solicit additional proxies in favor of the merger proposals to approve the merger proposals. You should also consider the risks relating to the businesses of TriCo and ownership of TriCo common stock contained in Part I, Item 1A of TriCo’s Annual Report on Form 10-K for the year ended December 31, 2017 that has been filed with the SEC, as well as any subsequent documents filed by TriCo with the SEC, which are incorporated into this joint proxy statement/prospectus by reference. See “Where You Can Find More Information” on page [] and “Documents Incorporated by Reference” on page [].

Risks Relating to the Merger

Because the market price of TriCo common stock fluctuates, FNBB shareholders will not know of the value of the merger consideration they will receive in the merger at the time they vote.

Upon the effective time of the merger, each share of FNBB common stock will be cancelled and converted into the right to receive the merger consideration, consisting of shares of TriCo common stock pursuant to the terms of the merger agreement. The value of the merger consideration to be received by FNBB shareholders will be based on an exchange ratio, which is fixed at 0.98 shares of TriCo common stock for each share of FNBB common stock but subject to potential adjustment, as described in the following paragraph. Because the price of TriCo common stock could fluctuate during the period of time between the FNBB special meeting and the time the FNBB shareholders actually receive their shares of TriCo common stock as merger consideration, the FNBB shareholders will be subject to the risk of a decline in the price of TriCo common stock during this period. FNBB does not have the right to terminate the merger agreement or to resolicit the vote of its shareholders solely because of changes in the market prices of TriCo’s common stock (although the parties will have certain rights to terminate the merger agreement or adjust the exchange ratio for changes in the market prices of TriCo’s common stock as described elsewhere in this joint proxy statement/prospectus). Stock price changes may result from a variety of factors, including general market and economic conditions, changes in the values and perceptions of financial services stocks generally and TriCo in particular, changes in TriCo’s business, operations and prospects and regulatory considerations. Many of these factors are beyond TriCo’s control. For example, from December 8, 2017, the last trading day prior to the date that TriCo and FNBB announced their entry into the merger agreement, and [●], 2018, the actual closing price of TriCo common stock reported on Nasdaq ranged from $[●] to $[●] implying a value per share of FNBB common stock of $[●] to $[●], based on the exchange ratio of 0.98 shares of TriCo common stock. Accordingly, at the time of the FNBB special meeting, the FNBB shareholders will not know or be able to calculate the exact value of the shares of TriCo common stock they will receive upon completion of the merger.

Further, while the exchange ratio is generally fixed at 0.98 shares of TriCo common stock, the merger agreement includes a trading collar that could result in the termination of the merger agreement or a change in the exchange ratio. TriCo can elect to terminate the merger agreement if both (i) the TriCo average closing price is greater than $49.78, which equals 120% of the average share price of TriCo common stock for the 20 trading-day period up to and including December 8, 2017, which was $41.48, which we refer to as the “initial TriCo trading price”, and (ii) TriCo common stock outperforms the KBW Nasdaq Regional Banking Index by more than 20%, unless FNBB agrees that the exchange ratio will be reduced in accordance with the merger agreement and fewer shares of TriCo common stock will be issued to FNBB shareholders on a per share basis. Conversely, FNBB can terminate the merger agreement if both (i) the TriCo average closing price is less than $33.18, which is equivalent to 80% of the initial TriCo trading price, and (ii) TriCo common stock underperforms the KBW Nasdaq Regional Banking Index by more than 20%, unless TriCo agrees that the exchange ratio will be increased

 

29


Table of Contents

in accordance with the merger agreement and more shares of TriCo common stock will be issued to FNBB shareholders on a per share basis.

Directors and officers of FNBB have interests in the merger that are in addition to or different than the interests of FNBB shareholders.

FNBB directors and officers have interests in the merger as individuals that are in addition to, or different from, their interests as shareholders of FNBB, which are:

 

  FNBB’s directors and officers will receive, upon consummation of the merger, cash in exchange for the termination of their FNBB options and the vesting of the FNBB options will accelerate;

 

  the agreement of TriCo to honor indemnification obligations of FNBB for a period of six years, as well as to purchase liability insurance for FNBB’s directors and officers for six years following the merger, subject to the terms of the merger agreement;

 

  cash payments to certain officers of FNBB in the aggregate amount of approximately $2.25 million, on a pre-tax basis, pursuant to the terms of their respective employment-related agreements with FNBB;

 

  the appointment of two directors of FNBB, who are not yet identified, to serve on the boards of directors of TriCo and Tri Counties Bank effective upon completion of the merger; and

 

  James Black, President and a director of FNBB and First National Bank, Anthony Clifford, Executive Vice President and Chief Operating Officer and a director of FNBB and First National Bank and Randy Brugioni, Senior Vice President and Chief Lending Officer of First National Bank, have entered into employment agreements with TriCo and Tri Counties Bank, each of which will be effective as of the closing of the merger, and which provide compensation for continued employment with TriCo and Tri Counties Bank following the merger.

These arrangements may create potential conflicts of interest. These interests of FNBB’s directors and officers may cause some of these persons to view the proposed transaction differently than how other FNBB shareholders view it. The FNBB and TriCo boards of directors were aware of these interests and considered them, among other things, in their approval of the merger agreement and the transactions contemplated by the merger agreement. FNBB shareholders should consider these interests in conjunction with the recommendation of the FNBB board of directors with respect to approval of the merger. See “The Merger—Interests of Certain FNBB Officers and Directors in the Merger” beginning on page [●].

The termination fee and the restrictions on solicitation contained in the merger agreement may discourage other companies from trying to acquire FNBB.

Until the completion of the merger, with some limited exceptions, FNBB is prohibited from soliciting, initiating, encouraging or participating in any discussion of or otherwise considering any inquiries or proposals that may lead to an acquisition proposal, such as a merger or other business combination transaction, with any person other than TriCo. In addition, FNBB has agreed to pay a termination fee to TriCo in specified circumstances. See “The Merger—Termination Fee” beginning on page [●]. These provisions could discourage other companies from trying to acquire FNBB even though those other companies might be willing to offer greater value to FNBB shareholders than TriCo has offered in the merger. The payment of the termination fee could also have a material adverse effect on FNBB’s financial condition.

TriCo may fail to realize the anticipated benefits of the merger.

The success of the merger will depend on, among other things, TriCo’s ability to realize the anticipated revenue enhancements and efficiencies and to combine the businesses of TriCo and FNBB and compete effectively in a new market in a manner that does not materially disrupt the existing customer relationships of FNBB or result in

 

30


Table of Contents

decreased revenues resulting from any loss of customers and that permits growth opportunities to occur. If TriCo is not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected.

TriCo and FNBB have operated and, until the completion of the merger, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect TriCo’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the merger. Integration efforts between the two companies could also divert management attention and resources. These integration matters could have an adverse effect on each of TriCo and FNBB during the transition period and on the combined company following completion of the merger.

The market price of TriCo common stock after the merger may be affected by factors different from those currently affecting the shares of FNBB or TriCo.

Upon completion of the merger, holders of FNBB common stock will become holders of TriCo common stock. TriCo’s business differs from that of FNBB, and, accordingly, the financial condition and results of operations of the combined company and the market price of TriCo common stock after the completion of the merger may be affected by factors different from those currently affecting the financial condition and results of operations of FNBB or TriCo on a standalone basis.

The fairness opinion received by TriCo’s board of directors from its financial advisor, Stephens Inc., and the fairness opinion received by FNBB’s board of directors from FNBB’s financial advisor, Courtney, will not be updated to reflect any changes since the date of such opinions.

Changes in the operations and prospects of TriCo or FNBB, general market and economic conditions and other factors that may be beyond the control of TriCo and FNBB may alter the value of TriCo or FNBB or the market price for shares of TriCo common stock or FNBB common stock by the time the merger is completed. Neither the fairness opinion delivered by Stephens Inc. to TriCo’s board of directors nor the fairness opinion delivered by Courtney to FNBB’s board of directors speaks as of any date other than the date of such opinions, which was December 11, 2017. The merger agreement does not require that either Stephens, Inc.’s or Courtney’s fairness opinion be updated as a condition to the completion of the merger, and neither TriCo nor FNBB intends to request that the respective fairness opinions be updated. Stephens Inc.’s fairness opinion is attached as Appendix C to this joint proxy statement/prospectus and Courtney’s fairness opinion is attached as Appendix B to this joint proxy statement/prospectus. For a description of Stephens Inc.’s opinion, see “The Merger—Opinion of TriCo’s Financial Advisor” beginning on page [●]. For a description of Courtney’s opinion, see “The Merger—Opinion of FNBB’s Financial Advisor” beginning on page [●]. For a description of the other factors considered by TriCo’s board of directors in determining to approve the merger, see “The Merger—TriCo’s Reasons for the Merger” beginning on page [●]. For a description of the other factors considered by FNBB’s board of directors in determining to approve the merger, see “The Merger—FNBB’s Reasons for the Merger” beginning on page [●].

The merger is subject to the receipt of approvals or waivers from regulatory authorities that may impose conditions that could have an adverse effect on TriCo.

Before the merger can be completed, various approvals or waivers must be obtained, including those from bank regulatory authorities. Regulatory approval or waivers are not guaranteed and even if granted, the bank regulatory or other authorities may impose conditions on the completion of the merger or require changes to the terms of the merger. Although TriCo and FNBB do not currently expect that any such conditions or changes will be imposed, there can be no assurance that they will not be, and such conditions or changes could have the effect of delaying completion of the merger, imposing additional costs on, or limiting the revenues of TriCo following the merger or causing the merger transaction between TriCo and FNBB to terminate. See “The Merger—Bank Regulatory Approvals” beginning on page [●] and “The Merger—Conditions to the Merger” beginning on page [●].

 

31


Table of Contents

The merger cannot be completed unless the TriCo shareholders approve the TriCo merger proposal and the FNBB shareholders approve the FNBB merger proposal.

In order for the merger to be completed, the TriCo shareholders must approve the TriCo merger proposal and the FNBB shareholders must approve the FNBB merger proposal. The approval of TriCo’s shareholders is required under applicable provisions of the CGCL and Nasdaq rules in order for TriCo to be authorized to issue the shares of TriCo common stock to FNBB shareholders as the merger consideration. Approval of the TriCo merger proposal requires approval of shareholders representing at least a majority of the total outstanding shares of TriCo common stock. The approval of the FNBB merger proposal by the FNBB shareholders also requires the affirmative vote of the holders of a majority of the outstanding shares of FNBB common stock. If either or both of these required votes is not obtained from the shareholders of each of the respective companies, the merger may not be consummated.

The merger is subject to certain closing conditions that, if not satisfied or waived, will result in the merger not being completed, which may cause the prices of TriCo common stock and FNBB common stock to decline.

Consummation of the merger is subject to customary conditions to closing in addition to the receipt of the required regulatory approvals and approval of the TriCo and FNBB shareholders of the merger agreement. If any condition to the merger is not satisfied or waived, to the extent permitted by law, the merger will not be completed. In addition, TriCo and FNBB may terminate the merger agreement under certain circumstances even if the merger agreement is approved by TriCo and/or FNBB shareholders, including if the merger has not been completed on or before September 30, 2018. If the merger is not completed, the respective trading prices of TriCo common stock and FNBB common stock on the Nasdaq Global Select Market may decline to the extent that the current prices reflect a market assumption that the merger will be completed. In addition, neither company would realize any of the expected benefits of having completed the merger if the merger does not close. Finally, TriCo and FNBB will each incur significant costs and diversion of management attention whether or not the merger is successfully consummated, any of which may have an adverse effect on the financial condition and results of operations of TriCo and FNBB, as applicable. For more information on closing conditions to the merger agreement, see “The Merger—Conditions to the Merger” beginning on page [●].

The unaudited condensed pro forma combined financial data included in this joint proxy statement/prospectus are presented for illustrative purposes only and may not be an indication of the combined company’s financial condition or results of operations following the merger.

The unaudited condensed pro forma combined financial data contained in this joint proxy statement/prospectus are presented for illustrative purposes only, are based on various adjustments, assumptions and preliminary estimates and may not be an indication of the combined company’s financial condition or results of operations following the merger for several reasons. The actual financial condition and results of operations of the combined company following the merger may not be consistent with, or evident from, these unaudited pro forma condensed combined financial data. In addition, the assumptions used in preparing the unaudited pro forma condensed combined financial data may not prove to be accurate, and other factors may affect the combined company’s financial condition or results of operations following the merger. Any potential decline in the combined company’s financial condition or results of operations may cause significant variations in the stock price of the combined company.

The shares of TriCo common stock to be received by FNBB shareholders as a result of the merger will have different rights than shares of FNBB common stock.

Upon completion of the merger, FNBB shareholders will become TriCo shareholders and their rights as shareholders will be governed by the TriCo articles and bylaws. The rights associated with FNBB common stock are different from the rights associated with TriCo common stock. See “Comparison of the Rights of Shareholders” beginning on page [●].

 

32


Table of Contents

If FNBB shareholders approve the merger proposal and the merger successfully closes, FNBB shareholders will no longer have the right to benefit from any hypothetical future increase in the value of FNBB which may have resulted if FNBB continued as an independent company.

If the merger closes as contemplated, FNBB will cease to operate as an independent company. Consequently, FNBB shareholders will relinquish the right to benefit from any increase in value that may have hypothetically accrued to FNBB had it continued as an independent company and not completed the merger with TriCo. FNBB, as an independent company, may have increased in value at a more rapid pace (or decreased in value at a less rapid pace) compared to the actual value of the combined company. Following consummation of the merger, any change in the value of the shares currently held by FNBB shareholders will be based on the success or failure of the combined company and not the separate results of FNBB.

Risks Related to TriCo’s Business

TriCo is, and will continue to be, subject to the risks described in TriCo’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as may be amended and as updated by subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all of which are or will be filed with the SEC and are incorporated by reference into this joint proxy statement/prospectus. See “Documents Incorporated by Reference” and “Where You Can Find More Information” included elsewhere in this joint proxy statement/prospectus.

Risks Related to FNBB’s Business

FNBB’s allowance for loan losses may not be adequate to cover actual losses.

Like other financial institutions, FNBB maintains an allowance for loan losses to provide for loan defaults and non-performance. FNBB’s allowance for loan losses may not be adequate to cover actual loan losses, and any future provisions for loan losses would reduce FNBB’s earnings could materially and adversely affect FNBB’s business, financial condition, results of operations and cash flows. The allowance for loan losses reflects FNBB’s estimate of the probable losses in its loan portfolio at the relevant balance sheet date. The allowance for loan losses is based on prior experience, as well as an evaluation of the known risks in the current portfolio, composition and growth of the loan portfolio and economic factors. Determining an appropriate level of loan loss allowance is an inherently difficult process and is based on numerous assumptions. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, that may be beyond FNBB’s control and these losses may exceed current estimates. Federal and state regulatory agencies, as an integral part of their examination process, review FNBB’s loans and allowance for loan losses. Therefore, we cannot assure you that FNBB will not increase its allowance for loan losses further or that the allowance will be adequate to absorb loan losses FNBB actually incurs. Either of these occurrences could have a material adverse effect on FNBB’s business, financial condition and results of operations and those of the combined company following the merger.

Substantially all of the loans in FNBB’s portfolio are secured by real estate and a downturn in its real estate markets could hurt FNBB’s business.

A large portion of FNBB’s loan portfolio is dependent on the performance of its real estate portfolio. At December 31, 2017, real estate (including construction loans) served as the principal source of collateral with respect to approximately 92% of FNBB’s loan portfolio. Within FNBB’s real estate secured loan portfolio, commercial real estate loans represented 59%, 1 to 4 single family residential loans represented 22%, multi-family residential loans represented 14% and construction loans represented 5% of the total as of December 31, 2017.

A substantial decline in the economy in general or a decline in real estate values in FNBB’s primary operating market areas could have an adverse effect on the demand for new loans, the ability of borrowers to repay outstanding loans, and the value of real estate and other collateral securing loans. Real estate values could decline due to reduced construction lending, tighter underwriting requirements, or reduced borrower ability to make

 

33


Table of Contents

payments. Real estate loans may pose collection problems, resulting in increased collection expenses, and delays in the ultimate collection of these loans. In addition, acts of nature, including fires, earthquakes and floods, which may cause uninsured damage and other loss of value to real estate that secures these loans, may also negatively impact FNBB’s financial condition and those of the combined company following the merger.

FNBB makes commercial business loans, which could have a higher degree of loss than other types of loans.

As of December 31, 2017, approximately 7% of FNBB’s loan portfolio consisted of commercial business loans, which could have a higher degree of risk than other types of loans. Commercial lending is dependent on borrowers making payments on their loans and lines of credit in accordance with the terms of their notes. Worsening economic conditions could make it difficult for many commercial borrowers to make their required loan payments. This credit risk is increased when there is a concentration of principal in a limited number of loans and borrowers, the mobility of collateral, and the increased difficulty of evaluating and monitoring these types of loans. The availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself and the general economic environment. If the cash flow from business operations is reduced, the borrower’s ability to repay the loan may be impaired.

In addition, unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial business loans typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. If FNBB is required to repossess equipment or pursue collection efforts under personal guarantees, there could be a substantial decrease in value of collateral, if any, increased legal costs, and an increased risk of loss on the amount outstanding.

FNBB is exposed to the risk of environmental liablities with respect to properties to which it owns or takes title.

In the ordinary course of its business, FNBB may foreclose and take title to real estate and could become subject to environmental related liabilities with respect to these properties. FNBB may be held liable to a government entity or third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination or may be required to investigate or clean-up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigations or remediation activities could be substantial. In addition, as the owner or former owner of a contaminated site, FNBB could become subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. If FNBB becomes subject to significant environmental liabilities, its business prospects, financial condition, liquidity, results of operations and stock price, and those of the combined company following the merger, could be materially and adversely affected. One property that was acquired through foreclosure and subsequently sold is subject to contractual performance obligations related to toxic soil and water quality remediation. See “Nonperforming Assets” in FNBB’s Management’s Discussion and Analysis of Financial Condition and Results of Operations at page [●] and “FNBB is a Party to Contracts with Performance Obligations that Could be Substantial,” immediately below.

FNBB is a Party to Contracts with Performance Obligations that Could be Substantial.

FNBB utilizes purchase and sale contracts when entering into the purchase or sale of certain assets. Such a contract may contain performance obligations that are imbedded in the terms and conditions of the contract. These performance obligations may require FNBB to perform a service or services where the ultimate cost and the length of time required to perform the service or services cannot be predicted with certainty. When these circumstances exist, FNBB is required to review all the facts and circumstances related to its performance obligations and use sound business judgement in the quantification of the cost of these performance obligations. On July 12, 2011, FNBB foreclosed on a commercial real estate property that was known to have soil and ground water contamination. Since acquiring title to the property, the property has been held as other real estate owned

 

34


Table of Contents

and FNBB has conducted remediation efforts, with the guidance of an environmental consultant and others, while seeking a final remediation plan acceptable to the San Francisco Bay Regional Water Quality Control Board, which we refer to as the Water Board. FNBB sold the property to an unrelated third party effective February 22, 2018. The sale transaction was completed using a purchase and sale contract that included continuing performance obligations. Under the terms of the contract, the buyer of the property obtained title to the property, including the legal right to lease revenue being generated by the property, and FNBB agreed to perform certain remediation activities and to continue work with the Water Board toward the objective of obtaining a mutually acceptable final remediation plan for the property. FNBB remains responsible for additional remediation costs should further remediation becomes necessary and could be liable to governmental entities or third parties for future investigation and clean-up costs or other expenses, which could be substantial. FNBB has established a contingent liability reserve based on future expected cost estimates provided to FNBB by its soil engineering and consulting company consultant. If the actual liabilities, costs and expenses related to these obligations are determined to be substantially in excess of the reserve established by FNBB, these excess costs could potentially have a material adverse effect on the business prospects, financial condition, liquidity, results of operations and stock price of FNBB and the combined company following the merger. For addition information, please see notes 7 and 23 to FNBB’s 2017 Consolidated Financial Statements included in Appendix D to this joint proxy statement/prospectus.

If FNBB fails to maintain an effective system of internal and disclosure controls, FNBB may not be able to accurately report its financial results or prevent fraud. As a result, current and potential shareholders could lose confidence in the financial reporting, which would harm FNBB’s business.

Management regularly reviews and updates FNBB’s internal control over financial reporting, disclosure controls and procedures, and corporate governance policies and procedures. FNBB maintains controls and procedures to mitigate risks such as processing system failures or errors and customer or employee fraud, and FNBB maintains insurance coverage for certain of these risks. Any system of controls and procedures, however well designed and operated, is based in part on certain assumptions and provides only reasonable, not absolute, certainty that the objectives of the system will be met. Events could occur which are not prevented or detected by FNBB’s internal controls, are not insured against, or are in excess of its insurance limits. Any failure or circumvention of FNBB’s controls and procedures, or failure to comply with regulations related to controls and procedures, could have an adverse effect on the business of FNBB and the combined company.

FNBB faces risks of systems failure and security risks, including “hacking” and “identity theft.”

FNBB is subject to certain operations risks, including, but not limited to, data processing system or cybersecurity failures and customer or employee fraud. FNBB maintains a system of internal controls to mitigate against such occurrences and maintains insurance coverage for such risks, but should such an event occur that is not prevented or detected by FNBB’s internal controls, uninsured or in excess of applicable insurance limits, it could have a significant adverse impact on FNBB’s business, financial condition or results of operations. Additionally, FNBB is dependent on network and computer systems. If these systems or their back-up systems were to fail or were breached, FNBB could be adversely affected. FNBB cannot be certain that the continued implementation of safeguards will eliminate the risk of vulnerability to technological difficulties or failures or ensure the absence of a breach of information or security, including as a result of a cybersecurity breach. If information security is compromised or other technology difficulties or failures occur at FNBB or with one of its vendors, information may be lost or misappropriated, services and operations may be interrupted and FNBB and the combined company could be exposed to claims from customers.

 

35


Table of Contents

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus contains or incorporates by reference a number of forward-looking statements regarding the financial condition, results of operations, earnings outlook and business prospects of TriCo, Tri Counties Bank and FNBB and the potential combined company and may include statements for the periods following the completion of the merger. Shareholders of either TriCo or FNBB can find many of these statements by looking for words such as “expects,” “projects,” “anticipates,” “believes,” “intends,” “estimates,” “strategy,” “plan,” “potential,” “possible” and other similar expressions. Statements about the expected timing, completion and effects of the merger and all other statements in this joint proxy statement/prospectus or in the documents incorporated by reference in this joint proxy statement/prospectus other than historical facts constitute forward-looking statements. Forward-looking statements involve certain risks and uncertainties that are subject to change based on factors which are, in many instances, beyond TriCo’s or FNBB’s control. The ability of either TriCo or FNBB to predict results or actual effects of its plans and strategies, or those of the combined company, is inherently uncertain. Accordingly, actual results may differ materially from those expressed in, or implied by, the forward-looking statements. Some of the factors that may cause actual results or earnings to differ materially from those contemplated by the forward-looking statements include, but are not limited to, those discussed under “Risk Factors” and those discussed in the filings of TriCo that are incorporated into this joint proxy statement/prospectus by reference, as well as the following:

 

  estimated revenue enhancements, costs savings and financial benefits from the merger may not be fully realized within the expected time frames or at all;

 

  deposit attrition, customer loss, employee loss or revenue loss following the merger may occur or be greater than expected;

 

  required regulatory, shareholder or other approvals may not be obtained or other closing conditions may not be satisfied in a timely manner or at all;

 

  reputational risks and the reaction of the companies’ customers to the merger;

 

  diversion of management time on merger-related issues and fees and expenses that TriCo and FNBB will incur whether or not the merger successfully closes;

 

  competitive pressure among depository and other financial institutions may increase significantly;

 

  costs or difficulties related to the integration of the businesses of TriCo and FNBB may be greater than expected;

 

  changes in the interest rate environment may affect interest margins and the valuation of various assets and liabilities;

 

  the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve;

 

  general economic or business conditions, either nationally or in the states or regions in which TriCo and FNBB do business, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality or a reduced demand for credit;

 

  legislation or changes in regulatory requirements may adversely affect the businesses in which TriCo and FNBB are engaged;

 

  adverse changes may occur in the securities markets; and

 

  competitors of TriCo may have greater financial resources and develop products and technology that enable those competitors to compete more successfully than TriCo.

Because these forward-looking statements are subject to assumptions and uncertainties, TriCo’s and FNBB’s actual results may differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are predicated on the beliefs and assumptions of the management of each of TriCo

 

36


Table of Contents

and FNBB based on information known to them as of the date of this joint proxy statement/prospectus. FNBB and TriCo shareholders are cautioned not to place undue reliance on these statements, which speak only as of the date of this joint proxy statement/prospectus or the date of any document incorporated by reference or related to in this joint proxy statement/prospectus.

All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this joint proxy statement/prospectus and attributable to TriCo or FNBB or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. TriCo and FNBB undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this joint proxy statement/prospectus or to reflect the occurrence of unanticipated events, unless obligated to do so under the federal securities laws.

 

37


Table of Contents

GENERAL INFORMATION

This document constitutes a proxy statement for, and is being furnished to all record holders of, TriCo in connection with the solicitation of proxies by the board of directors of TriCo to be used at a special meeting of shareholders of TriCo to be held on [●], 2018 and any adjournment or postponement of the TriCo special meeting. The purposes of the TriCo special meeting are to consider and vote upon a proposal to approve the merger agreement and the transactions contemplated therein, including the merger and the issuance of shares of TriCo common stock in connection with the merger, and a proposal to adjourn the TriCo special meeting to the extent necessary to solicit additional votes on the TriCo merger proposal in connection with the merger.

This document also constitutes a proxy statement for, and is being furnished to all record holders of, FNBB in connection with the solicitation of proxies by the board of directors of FNBB to be used at a special meeting of shareholders of FNBB to be held on [●], 2018 and any adjournment or postponement of the FNBB special meeting. The purposes of the FNBB special meeting are to consider and vote upon a proposal to approve the FNBB merger proposal, to approve, on an advisory (non-binding) basis, the compensation that may be payable to FNBB’s named executive officers in connection with the merger, and a proposal to adjourn the FNBB special meeting to the extent necessary to solicit additional votes on the merger agreement.

This document also constitutes a prospectus of TriCo relating to the TriCo common stock to be issued upon completion of the merger to holders of FNBB common stock as the merger consideration. See “The Merger—The Merger Consideration” beginning on page [●]. Based on [●] shares of FNBB common stock outstanding on [●], 2018 and the exchange ratio of 0.98, approximately [●] shares of TriCo common stock will be issuable to shareholders of FNBB upon completion of the merger, which does not include shares of TriCo common stock issuable to holders of FNBB options that may be exercised prior to the merger and which assumes no change in the exchange ratio.

TriCo has supplied all of the information contained or incorporated by reference herein relating to TriCo and Tri Counties Bank, and FNBB has supplied all of the information contained herein relating to FNBB and First National Bank.

 

38


Table of Contents

THE TRICO SPECIAL MEETING

Time, Date and Place

A special meeting of shareholders of TriCo will be held at [●], Pacific Time, on [●], [●], 2018 at 890 Fortress Street, Chico, California 95973.

Matters to be Considered

The purposes of the TriCo special meeting are to:

 

  consider and vote upon a proposal to approve the merger agreement and the transactions contemplated in the merger agreement, including the merger and the issuance of shares of TriCo common stock to the shareholders of FNBB in connection with the merger; and

 

  consider and vote upon a proposal to adjourn the TriCo special meeting to a later date or dates, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the TriCo special meeting to approve the TriCo merger proposal.

No other business may be conducted at the TriCo special meeting. A copy of the merger agreement is included in this joint proxy statement/prospectus as Appendix A, and TriCo shareholders are encouraged to read it carefully in its entirety.

Recommendation of TriCo’s Board of Directors

The TriCo board of directors (i) has unanimously determined that each of the merger agreement and the transactions contemplated by the merger agreement, including the merger and the issuance of shares of TriCo common stock, are fair and reasonable, advisable and in the best interests of TriCo and its shareholders; (ii) has unanimously approved the merger agreement, the merger and the transactions contemplated thereby and (iii) unanimously recommends that the TriCo shareholders approve the TriCo merger proposal. The TriCo board of directors unanimously recommends that TriCo shareholders vote “FOR” the TriCo merger proposal. See “The Merger—TriCo’s Reasons for the Merger” beginning on page [●].

The TriCo board of directors also unanimously recommends that TriCo shareholders vote FOR the proposal to adjourn the TriCo special meeting, if necessary, to permit further solicitation of proxies on the TriCo merger proposal.

Shares Outstanding and Entitled to Vote; Record Date

The close of business on [*], 2018 has been fixed by TriCo as the record date for the determination of TriCo shareholders entitled to notice of and to vote at the TriCo special meeting and any adjournment or postponement of the TriCo special meeting. At the close of business on the record date, there were [●] shares of TriCo common stock outstanding and entitled to vote, held by approximately [●] holders of record. Each share of TriCo common stock entitles the holder to one vote at the TriCo special meeting on all matters properly presented at the special meeting.

How to Vote TriCo Shares

Shareholders of Record.

TriCo shareholders of record may vote by mail, telephone, via the Internet or by attending the TriCo special meeting and voting in person. If a TriCo shareholder chooses to vote by mail, he or she should simply mark the enclosed proxy card, date and sign it, and return it in the postage-paid envelope provided. Internet and telephone voting is available until 11:59 p.m., Eastern Time, on [●], [●], 2018.

 

39


Table of Contents

Shares Held in “Street Name.”

If a TriCo shareholder’s shares of TriCo common stock are held through a bank, broker or other nominee, such TriCo shareholder is considered the beneficial owner of such shares held in “street name.” In such case, this joint proxy statement/prospectus has been forwarded by such TriCo shareholder’s bank, broker or other nominee, who is considered, with respect to such shares, the shareholder of record. As the beneficial owner, a TriCo shareholder has the right to direct such bank, broker or other nominee how to vote the shares by following the voting instructions that such bank, broker or other nominee has sent, or will send, to the TriCo shareholder. Without specific instructions from the TriCo shareholder, the bank, broker or other nominee is not empowered to vote a TriCo shareholder’s shares on non-routine matters such as the proposal to approve the TriCo merger proposal or the proposal of the TriCo board of directors to adjourn the TriCo special meeting, if necessary. Not voting these shares will have the same effect as a vote against the TriCo merger proposal but will have no effect on the proposal of the TriCo board of directors to adjourn the special meeting, if necessary. When the vote is tabulated for the proposals, broker non-votes, if any, will only be counted for purposes of determining whether a quorum is present. Accordingly, we advise each TriCo shareholder to promptly give instructions to his or her bank, broker or other nominee to vote FOR approval of the TriCo merger proposal and FOR the proposal to adjourn the TriCo special meeting, if necessary, by using the voting instruction card provided to such TriCo shareholder by his or her bank, broker or other nominee. Alternatively, if a TriCo shareholder is a beneficial owner and wishes to vote in person at the TriCo special meeting, the TriCo shareholder must provide a proxy executed in such TriCo shareholder’s favor by the bank, broker or other nominee.

Revocation of Proxies

A TriCo shareholder can revoke a proxy at any time before his or her shares are voted. If the TriCo shareholder is a shareholder of record, the TriCo shareholder can revoke a proxy by:

 

  delivering to TriCo, which must be received by TriCo prior to the TriCo special meeting, a written notice of revocation addressed to: Secretary, TriCo Bancshares, 63 Constitution Drive, Chico, California 95973;

 

  completing, signing and returning a new proxy card with a later date before the date of the TriCo special meeting, which will automatically revoke any earlier dated proxy;

 

  calling the toll-free number listed on the TriCo proxy card or by accessing the Internet site listed on the TriCo proxy card to change his or her vote by 11:59 p.m., Eastern Time, on [●], [●], 2018, in which case the later submitted proxy via telephone or Internet, as the case may be, will be recorded and the earlier dated proxy will be revoked; or

 

  attending the TriCo special meeting and voting in person, which will automatically revoke any earlier proxy. However, simply attending the TriCo special meeting without voting will not revoke a TriCo proxy.

If a TriCo shareholder has instructed a bank, broker or other nominee to vote such TriCo shareholder’s shares of TriCo common stock, the TriCo shareholder must follow directions received from the bank, broker or other nominee to change his or her vote.

Each proxy returned to TriCo (and not revoked) by a holder of TriCo common stock will be voted in accordance with the instructions indicated thereon. If no instructions are indicated on a signed proxy that is returned, such proxy will be voted “FOR” approval of the TriCo merger proposal and “FOR” the proposal to adjourn the TriCo special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the TriCo special meeting to approve the TriCo merger proposal.

Quorum

A quorum, consisting of the holders of a majority of the shares entitled to vote at the TriCo special meeting, must be present in person or by proxy before any action may be taken at the TriCo special meeting. Once a share of

 

40


Table of Contents

TriCo common stock is represented at the TriCo special meeting, it will be counted for the purpose of determining a quorum not only at the TriCo special meeting but also at any adjournment or postponement of the TriCo special meeting. In the event that a quorum is not present at the TriCo special meeting, it is expected that the TriCo special meeting will be adjourned or postponed.

Abstentions and broker non-votes will not be counted for purposes of determining the number of votes cast on a proposal but will be treated as present for quorum purposes. “Broker non-votes” are shares held by banks, brokers or nominees as to which voting instructions have not been received from the beneficial owners or the persons entitled to vote those shares and the bank, broker or nominee does not have discretionary voting power under the applicable New York Stock Exchange rules. Under these rules, the proposals to approve the TriCo merger proposal and to adjourn the TriCo special meeting, if necessary, are not items on which brokerage firms may vote in their discretion on behalf of their clients if such clients have not furnished voting instructions.

Vote Required

The affirmative vote of holders of the majority of the outstanding shares of TriCo common stock is needed to approve the TriCo merger proposal. The affirmative vote of holders of the majority of the shares for which votes are cast at the TriCo special meeting is needed to approve the proposal to adjourn the TriCo special meeting, if necessary.

Because the merger agreement must be approved by holders representing a majority of the outstanding shares of TriCo common stock, abstentions and broker non-votes will have the same effect as a vote against the merger, as will the failure to vote TriCo shares. Abstentions and broker non-votes will not be counted as votes cast and, therefore, will not affect the adjournment proposal. Further, the failure to vote, either by proxy or in person, will not have an effect on the adjournment proposal.

Unless instructions to the contrary are specified in a proxy properly voted and returned through available channels, the proxies will be voted “FOR” approval of the merger agreement and “FOR” the proposal to adjourn the TriCo special meeting, if necessary, to permit further solicitation of proxies on the proposal to approve the TriCo merger proposal.

Solicitation of Proxies

TriCo will pay the costs of soliciting its shareholders’ proxies, as well as all other costs incurred by it in connection with the solicitation of proxies from its shareholders on behalf of its board of directors. In addition to solicitation by mail, directors, officers and employees of TriCo may solicit proxies from shareholders of TriCo in person or by telephone, facsimile or other electronic methods without compensation other than reimbursement for their actual expenses TriCo may retain an outside proxy solicitation firm to assist in the solicitation of proxies, but at this time does not plan to do so.

Arrangements also will be made with custodians, nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of stock held of record by such persons, and TriCo will reimburse such custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses in connection therewith.

Attending the TriCo Special Meeting

While not required, all holders of TriCo common stock, including shareholders of record and shareholders who hold their shares in street name through banks, brokers or other nominees, are invited to attend the TriCo special meeting. TriCo shareholders of record can vote in person at the TriCo special meeting. If a TriCo shareholder is not a shareholder of record and would like to vote in person at the TriCo special meeting, such TriCo shareholder must produce a proxy executed in his or her favor by the record holder of such TriCo shareholder’s shares. In addition, each TriCo shareholder must bring a form of personal photo identification with him or her in order to be

 

41


Table of Contents

admitted at the TriCo special meeting. TriCo reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the TriCo special meeting is prohibited without TriCo’s written consent.

Adjournments and Postponements

Although it is not currently expected, the TriCo special meeting may be adjourned or postponed, including for the purpose of soliciting additional proxies, if there are insufficient votes at the time of the TriCo special meeting to approve the TriCo merger proposal or if a quorum is not present at the TriCo special meeting. Other than an announcement to be made at the TriCo special meeting of the time, date and place of an adjourned meeting, an adjournment generally may be made without notice. Any adjournment or postponement of the TriCo special meeting for the purpose of soliciting additional proxies will allow the shareholders who have already sent in their proxies to revoke them at any time prior to their use at the TriCo special meeting as adjourned or postponed.

Questions and Additional Information

If a TriCo shareholder has questions about the merger, please contact Richard P. Smith, TriCo’s President and Chief Executive Officer, at (530) 898-0300. If a TriCo shareholder has questions about the process for voting or requires additional copies of this document or a replacement proxy card, please call Craig Compton, TriCo’s Corporate Secretary, at (530) 898-0300.

 

42


Table of Contents

THE FNBB SPECIAL MEETING

Time, Date and Place

A special meeting of shareholders of FNBB will be held at [●], Pacific Time, on [●], 2018 at The Basque Cultural Center, 599 Railroad Avenue, South San Francisco, California 94080.

Matters to be Considered

The purposes of the FNBB special meeting are to:

 

  consider and vote upon a proposal to approve the merger agreement and the transactions contemplated by the merger agreement, including the merger;

 

  consider and vote upon, on an advisory (non-binding) basis, the compensation that may be payable to FNBB’s named executive officers in connection with the merger; and

 

  consider and vote upon a proposal to adjourn the FNBB special meeting to a later date or dates, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the FNBB special meeting to approve the FNBB merger proposal.

No other business may be conducted at the FNBB special meeting. A copy of the merger agreement is included in this joint proxy statement/prospectus as Appendix A, and FNBB shareholders are encouraged to read it carefully in its entirety.

Recommendation of FNBB’s Board of Directors

The FNBB board of directors (i) has unanimously determined that each of the merger agreement and the transactions contemplated by the merger agreement are fair and reasonable, advisable and in the best interests of FNBB and its shareholders; (ii) has unanimously approved the merger agreement, the merger and the transactions contemplated thereby, including the merger and (iii) unanimously recommends that the FNBB shareholders approve the FNBB merger proposal. The FNBB board of directors unanimously recommends that FNBB shareholders vote “FOR” approval of the merger agreement. See “The Merger—FNBB’s Reasons for the Merger” beginning on page [●].

In accordance with Section 14A of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, FNBB is providing its shareholders with the opportunity to cast an advisory (non-binding) vote on the compensation that may be payable to its named executive officers in connection with the merger, the value of which is set forth in the table included in the section of this joint proxy statement/prospectus entitled “The Merger—Interests of Certain FNBB Officers and Directors in the Merger—Summary of Payments to Certain Executive Officers” beginning on page [●]. As required by Section 14A of the Exchange Act, FNBB is asking its shareholders to vote on the adoption of the following resolution:

“RESOLVED, that the compensation that may be paid or become payable to FNBB’s named executive officers in connection with the merger, as disclosed in the table in the section of the joint proxy statement/prospectus entitled “The Merger—Interests of Certain FNBB Officers and Directors in the Merger—Merger-Related Compensatory Arrangements for FNBB’s Named Executive Officers,” including the associated narrative discussion, are hereby approved.”

The advisory (non-binding) vote on executive compensation payable in connection with the merger is a vote separate and apart from the vote to approve the FNBB merger proposal. Accordingly, an FNBB shareholder may vote to approve the executive compensation and vote not to approve the FNBB merger proposal and vice versa. Because the vote is advisory in nature only, it will not be binding on either FNBB or TriCo. Furthermore, because FNBB is contractually obligated to pay the compensation, the compensation will be payable, subject only to the conditions applicable thereto, if the merger is approved, regardless of the outcome of the advisory vote.

 

43


Table of Contents

The FNBB board of directors unanimously recommends a vote “FOR” the advisory (non-binding) proposal on the compensation that may be payable to FNBB’s named executive officers in connection with the merger, and the agreements and understandings pursuant to which such compensation may be paid or become payable.

The FNBB board of directors also unanimously recommends that FNBB shareholders vote FOR” the proposal to adjourn the FNBB special meeting, if necessary, to permit further solicitation of proxies on the proposal to approve the FNBB merger proposal.

Shares Outstanding and Entitled to Vote; Record Date

The close of business on [●], 2018 has been fixed by FNBB as the record date for the determination of FNBB shareholders entitled to notice of and to vote at the FNBB special meeting and any adjournment or postponement of the FNBB special meeting. At the close of business on the record date, there were [●] shares of FNBB common stock outstanding and entitled to vote, held by approximately [●] holders of record. Each share of FNBB common stock entitles the holder to one vote at the FNBB special meeting on all matters properly presented at the FNBB special meeting.

As of the close of business on the record date for the FNBB special meeting, neither TriCo nor any of its directors beneficially owned any shares of FNBB common stock.

How to Vote FNBB Shares

Shareholders of Record.

Shareholders of record may vote by mail, telephone, via the Internet or by attending the FNBB special meeting and voting in person. If an FNBB shareholder chooses to vote by mail, he or she should simply mark the enclosed proxy card, date and sign it, and return it in the postage-paid envelope provided. Internet and telephone voting is available until 11:59 p.m., Eastern Time, on [●], [●], 2018.

Shares Held in “Street Name.”

If an FNBB shareholder’s shares of FNBB common stock are held through a bank, broker or other nominee, such FNBB shareholder is considered the beneficial owner of such shares held in “street name.” In such case, this joint proxy statement/prospectus has been forwarded by such FNBB shareholder’s bank, broker or other nominee, who is considered, with respect to such shares, the shareholder of record. As the beneficial owner, an FNBB shareholder has the right to direct such bank, broker or other nominee how to vote the shares by following the voting instructions that they have sent, or will send, to the FNBB shareholder. Without specific instructions from the FNBB shareholder, the bank, broker or other nominee is not empowered to vote an FNBB shareholder’s shares on non-routine matters such as the proposal to approve the FNBB merger proposal, the proposal to approve, on an advisory (non-binding) basis, the compensation that may be payable to FNBB’s named executive officers in connection with the merger, or the proposal of the FNBB board of directors to adjourn the FNBB special meeting, if necessary. Not voting these shares will have the effect of voting against the approval of the merger agreement and against approval of the advisory (non-binding) proposal regarding the compensation that may be payable to FNBB’s named executive officers in connection with the merger, but will not have any effect on the proposal of the FNBB board of directors to adjourn the special meeting, if necessary. When the vote is tabulated for the proposals, broker non-votes, if any, will only be counted for purposes of determining whether a quorum is present. Accordingly, we advise each FNBB shareholder to promptly give instructions to his or her bank, broker or other nominee to vote “FOR” approval of the merger agreement, “FOR” the proposal to approve, on an advisory (non-binding) basis, the compensation that may be payable to FNBB’s named executive officers in connection with the merger, and “FOR” the proposal to adjourn the FNBB special meeting, if necessary, by using the voting instruction card provided to such FNBB shareholder by his or her bank, broker or other nominee. Alternatively, if an FNBB shareholder is a beneficial owner and wishes to vote in person at the FNBB special meeting, the FNBB shareholder must provide a proxy executed in such FNBB shareholder’s favor by the bank, broker or other nominee.

 

44


Table of Contents

Revocation of Proxies

An FNBB shareholder can revoke a proxy at any time before his or her shares are voted. If the FNBB shareholder is a shareholder of record, the FNBB shareholder can revoke a proxy by:

 

  delivering to FNBB, which must be received by FNBB prior to the FNBB special meeting, a written notice of revocation addressed to Edward J. Watson, Secretary, FNB Bancorp, 975 El Camino Real, South San Francisco, California 94080;

 

  completing, signing and returning a new proxy card with a later date before the date of the FNBB special meeting, which will automatically revoke any earlier dated proxy;

 

  calling the toll-free number listed on the FNBB proxy card or by accessing the Internet site listed on the FNBB proxy card to change his or her vote by 11:59 p.m., Eastern Time, on [●], 2018, in which case the later submitted proxy via telephone or Internet, as the case may be, will be recorded and the earlier dated proxy revoked; or

 

  attending the FNBB special meeting and voting in person, which will automatically revoke any earlier dated proxy. However, simply attending the FNBB special meeting without voting will not revoke an FNBB proxy.

If an FNBB shareholder has instructed a bank, broker or other nominee to vote such FNBB shareholder’s shares of FNBB common stock, the FNBB shareholder must follow directions received from the bank, broker or other nominee to change his or her vote.

Each proxy returned to FNBB (and not revoked) by a holder of FNBB common stock will be voted in accordance with the instructions indicated thereon. If no instructions are indicated on a signed proxy that is returned, such proxy will be voted “FOR” approval of the merger agreement, FOR the proposal to approve, on an advisory (non-binding) basis, the compensation that may be payable to FNBB’s named executive officers in connection with the merger, and “FOR” the proposal to adjourn the FNBB special meeting, if necessary, to permit further solicitation of proxies on the proposals.

Quorum

A quorum, consisting of the holders of a majority of the shares entitled to vote at the FNBB special meeting, must be present in person or by proxy before any action may be taken at the FNBB special meeting. Once a share of FNBB common stock is represented at the FNBB special meeting, it will be counted for the purpose of determining a quorum not only at the FNBB special meeting but also at any adjournment or postponement of the FNBB special meeting. In the event that a quorum is not present at the FNBB special meeting, it is expected that the FNBB special meeting will be adjourned or postponed.

Abstentions and broker non-votes will not be counted for purposes of determining the number of votes cast on a proposal but will be treated as present for quorum purposes. “Broker non-votes” are shares held by banks, brokers or nominees as to which voting instructions have not been received from the beneficial owners or the persons entitled to vote those shares and the bank, broker or nominee does not have discretionary voting power under the applicable New York Stock Exchange rules. Under these rules, the proposals to approve the FNBB merger proposal, approve, on an advisory (non-binding) basis, the compensation that may be payable to FNBB’s named executive officers in connection with the merger, and to adjourn the special meeting are not items on which brokerage firms may vote in their discretion on behalf of their clients if such clients have not furnished voting instructions.

Vote Required

The affirmative vote of the holders of a majority of the outstanding shares of FNBB common stock is necessary to approve the FNBB merger proposal. The proposal to approve, on an advisory (non-binding) basis, the

 

45


Table of Contents

compensation that may be payable to FNBB’s named executive officers in connection with the merger, and to adjourn the special meeting, if necessary, to permit further solicitation of proxies, must be approved by the affirmative vote of a majority of the shares of FNBB common stock represented and entitled to vote at the FNBB special meeting.

Because the proposal to approve the FNBB merger proposal is required to be approved by the holders of a majority of the outstanding shares of FNBB common stock, abstentions and broker non-votes, as well as the failure of an FNBB shareholder to vote by proxy or in person at the FNBB special meeting, will have the same effect as a vote against the proposal to approve the FNBB merger proposal.

Because the affirmative vote of a majority of shares of FNBB common stock represented and entitled to vote at the FNBB special meeting (which shares voting affirmatively must constitute a majority of the required quorum) is needed to approve the advisory (non-binding) proposal regarding the compensation that may be payable to FNBB’s named executive officers in connection with the merger, and the adjournment proposal, abstentions and broker non-votes will not have any effect on these proposals. However, if the number of affirmative votes cast for these proposals is a majority of the votes cast, but such votes do not constitute a majority of the quorum required to transact business at the special meeting, then abstentions and broker non-votes will have the same effect as a vote against the proposal of the FNBB board of directors to adjourn the FNBB special meeting.

Shares of FNBB Subject to Voting Agreements

Directors and executive officers of FNBB, who collectively own and have the power to vote approximately 20% of the outstanding shares of FNBB common stock, have entered into shareholder agreements with TriCo pursuant to which they have agreed, among other things, to vote all of their shares in favor of the merger agreement. See “The Merger—Shareholder Agreements” on page [●].

Solicitation of Proxies

FNBB will pay for the costs of mailing this joint proxy statement/prospectus to its shareholders, as well as all other costs incurred by it in connection with the solicitation of proxies from its shareholders on behalf of its board of directors. In addition to solicitation by mail, the directors, officers and employees of FNBB may solicit proxies from shareholders of FNBB in person or by telephone, facsimile or other electronic methods without compensation other than reimbursement for their actual expenses. FNBB may retain an outside proxy solicitation firm to assist in the solicitation of proxies, but at this time does not have plans to do so.

Arrangements also will be made with custodians, nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of stock held of record by such persons, and FNBB will reimburse such custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses in connection therewith.

Attending the FNBB Special Meeting

While not required, all holders of FNBB common stock, including shareholders of record and shareholders who hold their shares in street name through banks, brokers or other nominees, are invited to attend the FNBB special meeting. Shareholders of record can vote in person at the FNBB special meeting. If an FNBB shareholder is not a shareholder of record and would like to vote in person at the FNBB special meeting, such FNBB shareholder must produce a proxy executed in his or her favor by the record holder of such FNBB shareholder’s shares. In addition, each FNBB shareholder must bring a form of personal photo identification with him or her in order to be admitted at the FNBB special meeting. FNBB reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the FNBB special meeting is prohibited without FNBB’s written consent.

 

46


Table of Contents

Adjournments and Postponements

Although it is not currently expected, the FNBB special meeting may be adjourned or postponed, including for the purpose of soliciting additional proxies, if there are insufficient votes at the time of the FNBB special meeting to approve the proposal to approve the FNBB merger proposal or if a quorum is not present at the FNBB special meeting. Other than an announcement to be made at the FNBB special meeting of the time, date and place of an adjourned meeting, an adjournment generally may be made without notice. Any adjournment or postponement of the FNBB special meeting for the purpose of soliciting additional proxies will allow the shareholders who have already sent in their proxies to revoke them at any time prior to their use at the FNBB special meeting as adjourned or postponed.

Questions and Additional Information

If an FNBB shareholder has questions about the merger or the process for voting or if additional copies of this document or a replacement proxy card are needed, please contact Thomas C. McGraw, FNBB’s Chief Executive Officer at (650) 588-6800.

 

47


Table of Contents

THE MERGER

The following information describes the material aspects of the merger agreement and the merger. This description does not purport to be complete and is qualified in its entirety by reference to the appendices to this joint proxy statement/prospectus, including the merger agreement which is attached as Appendix A and incorporated by reference into this joint proxy statement/prospectus. Shareholders of both TriCo and FNBB should carefully read the appendices and the documents incorporated herein in their entirety.

Structure of the Merger

Pursuant to the terms and conditions set forth in the merger agreement, TriCo has agreed to acquire FNBB in a transaction in which FNBB will merge with and into TriCo, with TriCo as the surviving corporation, which is referred to as the merger. Immediately following the consummation of the merger, First National Bank will merge with and into Tri Counties Bank, with Tri Counties Bank as the surviving institution, which is referred to as the bank merger. Following consummation of the bank merger, Tri Counties Bank intends to continue to operate all of the branches acquired from First National Bank.

Following the consummation of the merger, TriCo’s articles of incorporation and bylaws as in effect immediately prior to the merger will continue as the governing corporate documents of TriCo. The directors and executive officers of TriCo immediately prior to the merger will continue as the directors and executive officers of TriCo after the merger, in each case, until their respective successors are duly elected or appointed and qualified. In addition, pursuant to the terms of the merger agreement, FNBB and TriCo will select two current directors of FNB Bancorp to become additional directors of TriCo and Tri Counties Bank upon the effectiveness of the merger.

Background of the Merger

In the normal course of its business, FNBB has from time to time received unsolicited oral inquiries from various sources regarding possible interest in a business combination transaction. The general policy of the board of directors has been to not respond to these unsolicited inquiries. At the same time, in the context of its annual budgeting and planning process, the board of directors has periodically discussed and evaluated strategic alternatives and whether they would be in the best interests of shareholders. Recent discussions have included the possibility of making additional acquisitions (such as FNBB’s acquisitions of Oceanic Bank in 2012 and America California Bank in 2015) and whether to remain independent or to consider a combination with some other financial institution. Discussion of these topics has typically involved a review of current and projected market conditions, the results of operations of FNBB and First National Bank, certain peer group performance comparisons, reported merger and acquisition activity, and selected industry information and analysis provided to the board of directors by its financial advisors. These discussions also examined the importance of operational scale and financial resources in the current banking environment, taking notice of the possibility that a business combination with a larger financial institution, having more resources, higher lending limits, a more geographically diversified customer base and product offerings, and with more liquidity in its common stock, could produce a stronger financial institution and increase value for FNBB’s shareholders. Without making any change in the board’s general position to remain independent, FNBB’s board of directors instructed FNBB’s chief executive officer to keep the board informed regarding the receipt of any unsolicited inquiries from representatives of other financial institutions expressing interest in a possible business combination with FNBB.

During 2016 and 2017, the chief executive officer of FNBB and First National Bank, Thomas C. McGraw, was approached informally by seven financial institutions including TriCo expressing preliminary interest in discussing a business combination transaction with FNBB. These verbal inquiries were reported to the board of directors, without any follow-up action being authorized or taken.

At an executive session of FNBB’s board of directors on April 28, 2017, without making any change in the board’s general position to remain independent while seeking to increase shareholder value, members of

 

48


Table of Contents

executive management were instructed to review the potential for future earnings growth under various scenarios and to report back to the FNBB board of directors. FNBB’s executive management presented its preliminary report to the board of directors on May 26, 2017. Thereafter, on June 14, 2017, the board of directors determined to interview at least three investment banking firms, each with the requisite expertise and experience to advise the board on strategic planning matters. FNBB’s board of directors also established a committee composed entirely of non-employee (independent) directors Lisa Angelot, Tom Atwood and Ed Watson, with the authority to conduct interviews and make recommendations for consideration by the entire board of directors. Following the completion of these interviews, the committee recommended and the board of directors approved the selection of Courtney, a private equity and investment banking firm based in Newport Beach, California.

At a meeting held on July 28, 2017, FNBB’s board of directors discussed further the subject of strategic planning alternatives in the current banking environment with its executive management. Information on west coast bank merger and acquisition activity and the potential strengths and weaknesses of various financial institutions that recently or in the past had completed business combination transactions was examined. Based on the information and data reviewed at the meeting, the board of directors determined that it would be in the best interests of the shareholders of FNBB to investigate, on a confidential and preliminary basis, with the assistance of Courtney, their strategic alternatives and the viability of a potential combination with certain of those financial institutions.

Following the meeting of FNBB’s board of directors on July 28, 2017, FNBB contacted C. Matthew Allen, Managing Principal of Courtney, regarding his preparation of a draft engagement letter for financial advisory services. From time to time in the past, Mr. Allen had consulted with FNBB’s board of directors and executive management regarding strategic planning alternatives, securities portfolio management and other corporate matters. In the past, Mr. Allen also had provided financial advisory services to FNBB and First National Bank in connection with multiple merger and acquisition transactions. The FNBB board of directors considered the various terms of the draft engagement letter proposed by Courtney and, with the assistance of FNBB legal counsel, negotiated changes and then provided direction to the Chief Executive Officer, Thomas C. McGraw, authorizing him to finalize and sign the engagement letter. FNBB signed the engagement letter on August 4, 2017, pursuant to which Courtney agreed to provide the board of directors with (i) financial analysis with respect to current market conditions affecting financial institutions and the valuation of financial institutions, and (ii) financial analysis with respect to the consideration of various strategic alternatives, including remaining independent and a possible business combination.

On August 16, 2017, the FNBB board of directors convened a special meeting with Courtney to discuss strategic alternatives and a general timetable for conducting exploratory inquiries. After further discussion, the board of directors identified seventeen financial institutions, including TriCo and other institutions that had previously expressed interest (verbally) in a potential transaction with FNBB, to be contacted for the purpose of confirming their interest in proceeding with an exchange of financial information under the terms of a confidentiality agreement. Courtney was authorized to contact each of those institutions on behalf of FNBB and First National Bank, utilizing a form of confidentiality and nondisclosure agreement approved by FNBB’s legal counsel for that purpose. Courtney was instructed to request any institution with preliminary interest to respond by September 8, 2017, so that Courtney could report to the board of directors regarding the results of the contacts made with the designated institutions. Courtney attended a regular meeting of FNBB’s board of directors held on August 25, 2017 and reported on the status of its contacts with various financial institutions.

During the period from August 16, 2017 through September 8, 2017, seven of the financial institutions declined interest, ten financial institutions executed a confidentiality agreement with FNBB and were provided with access to selected FNBB financial and other information posted in a confidential data room created for the purpose, and four financial institutions, including TriCo, submitted non-binding expressions of preliminary interest. All four of those institutions had executed a confidentiality agreement with FNBB and were provided with access to the same data room information.

At a special meeting of the FNBB’s board of directors held on September 13, 2017, Courtney reported on and the FNBB board of directors reviewed and discussed the four non-binding expression of interest letters. The non-

 

49


Table of Contents

binding expression of interest letters included proposed preliminary consideration, subject in each case to the results of due diligence reviews, with implied values ranging from $32.50 to $36.00. TriCo’s proposed preliminary merger consideration consisted of TriCo shares of common stock for each share of FNBB common stock, with an implied value in the range of $34.50 to $36.00 per share of FNBB common stock and its non-binding expression of interest letter stated that TriCo would consider the addition of FNBB directors to TriCo’s board of directors as part of its diligence process. After extensive discussion regarding the proposed terms and merits of the four letters, FNBB’s board of directors instructed Courtney to suspend all further contact with the two companies having the lowest proposed consideration. The FNBB board of directors also instructed Courtney to arrange in-depth due diligence meetings in South San Francisco between FNBB directors and management and the representatives of TriCo and the other remaining company, which we refer to as Company A. Because both TriCo and Company A had requested exclusivity in further discussions, the board of directors determined that additional information regarding their proposed transaction structures would be appropriate. In addition, the Company A expression of interest letter indicated that if FNBB received an offer from an interested party other than Company A and such offer included a higher price than proposed by Company A, then Company A would be prepared to increase its proposed consideration to be one percent higher than the other party’s offer.

During the weeks of September 18 and 25, 2017, both TriCo and Company A conducted on-site due diligence in South San Francisco and met with representatives of FNBB. On September 29, 2017, Courtney reported to the board of directors on the outcome of those meetings. During the on-site due diligence review by Company A, the FNBB board of directors and management met with directors and management of Company A to discuss their business plans and other matters relevant to a proposed business combination. Thereafter, on October 5, 2017, six members of the FNBB board of directors (including the Chief Executive Officer, Thomas C. McGraw) traveled to Chico, California and met with four members of the TriCo board of directors (including TriCo’s Chief Executive Officer, Richard P. Smith) for the same general purposes as in the case of the meeting with directors and management of Company A.

On October 12, 2017, the FNBB board of directors held a special meeting to review and discuss two outstanding non-binding expression of interest letters received from TriCo and Company A. TriCo had submitted an updated non-binding expression of interest letter on October 10, 2017, proposing revised preliminary consideration consisting of shares of TriCo common stock for each share of FNBB common stock, having an implied value of $41.50 per share of FNBB common stock based on the market price of TriCo common stock on October 10, 2017. TriCo also proposed that two of FNBB’s directors, who were not determined, join TriCo’s board of directors at the time of the merger. Company A had also submitted an updated expression of interest letter on October 10, 2017, proposing preliminary consideration consisting of shares of Company A common stock for each share of FNBB common stock, having an implied value of $38.00 per share of FNBB common stock based on the market price of Company A common stock on October 9, 2017. The updated non-binding expression of interest letter submitted by Company A did not, however, repeat its previous indication of a willingness to increase its proposed consideration to be one percent higher than a competing offer. Courtney attended the special meeting and provided the board of directors with an analysis of the potential deal structure represented by each updated non-binding expression of interest letter. After extensive discussion, the board of directors decided that it would be in the best interests of FNBB and its shareholders to give priority to a further review of the TriCo non-binding expression of interest letter, following which TriCo provided a further updated expression of interest letter dated October 12, 2017, proposing revised preliminary consideration consisting of shares of TriCo common stock at an exchange ratio of 1.000 share of TriCo common stock for each share of FNBB common stock, having an implied value of $41.85 for each share of FNBB common stock based on the market price of TriCo common stock on October 10, 2017. TriCo’s October 12, 2017 letter included a 30-day exclusivity period during which TriCo would continue its due diligence review with the right to extend the review period for an additional 30 days, provided that TriCo continued to conduct due diligence and negotiate the proposed terms of a definitive agreement in good faith. The FNBB board of directors authorized Courtney and executive management to contact TriCo and facilitate a continuation of TriCo’s due diligence investigation of FNBB. At the same time, the board of directors authorized and directed Courtney to notify Company A of its decision to suspend negotiations with Company A. On October 13, 2017, FNBB signed and returned TriCo’s updated non-binding expression of

 

50


Table of Contents

interest letter for the continuation of negotiations with TriCo, including a more in-depth due diligence investigation of TriCo during the 30-day exclusivity period.

On October 18, 2017, FNBB entered into a confidentiality and non-disclosure agreement to facilitate further due diligence on TriCo. During the following week, TriCo established a confidential data room for FNBB’s online due diligence review purposes, and on October 24, 2017, TriCo sent FNBB a first draft of a proposed definitive agreement, with draft exhibits including as Exhibit A, a form of shareholder agreement to be signed by all directors and executive officers of FNBB. Among other matters, this first draft of the proposed definitive merger agreement included a preliminary proposed exchange ratio of 1.000 share of TriCo common stock for each share of FNBB common stock, subject to ongoing due diligence reviews. On October 26, 2017, the FNBB Chief Executive Officer and members of the FNBB board of directors met with Courtney and legal counsel to FNBB to identify the principal questions and issues raised by TriCo’s first draft of the proposed definitive merger agreement. The first draft and related documents were then discussed with all members of the FNBB board of directors at a meeting held on October 26, 2017. Also on October 26, 2017, FNBB issued a press release, announcing its operating results and earnings for the third quarter of 2017.

During the week of October 30, 2017, independent directors Lisa Angelot and Thomas G. Atwood, along with executive management represented by the chief executive officer, the president, the chief financial officer, the chief credit officer, and other senior credit administration and lending personnel, and accompanied by representatives of Courtney and FNBB legal counsel, performed a due diligence visitation review at the TriCo headquarters in Chico, supplementing their review of the confidential internal information TriCo posted to the TriCo data room for FNBB review.

At a special meeting on November 6, 2017, the FNBB board of directors discussed the additional TriCo information gathered by the onsite due diligence team in Chico the prior week. FNBB’s board of directors instructed FNBB’s legal counsel to prepare a response draft to TriCo’s first draft of a proposed definitive merger agreement incorporating the changes, questions and comments of the directors and executive management and to provide such draft to legal counsel for TriCo. On November 8, 2017, FNBB’s legal counsel transmitted a response draft of the proposed definitive merger agreement to TriCo’s legal counsel. By letter dated November 10, 2017, TriCo acknowledged receipt of the response draft and notified FNBB of its election to extend the exclusivity period for an additional 30 days, until December 12, 2017, as permitted under TriCo’s non-binding expression of interest letter with FNBB.

On November 15, 2017, TriCo’s legal counsel transmitted a revised draft of its proposed definitive merger agreement to FNBB’s legal counsel. Members of FNBB’s board of directors discussed this revised draft with Courtney and FNBB’s legal counsel on November 16, 2017, and the open issues were discussed at a meeting of FNBB’s board of directors held on November 17, 2017, to address the status of negotiations with TriCo and the results of the ongoing due diligence. After a review of possible alternative provisions, FNBB’s board of directors directed its legal counsel and Courtney, in coordination with its executive management, to attempt to negotiate revisions to the draft definitive merger agreement, subject to further review by the board of directors. On November 21, 2017, FNBB’s legal counsel transmitted a further revised draft of the proposed definitive merger agreement to TriCo’s legal counsel along with a first draft of the FNBB Disclosure Schedule contemplated by the draft definitive merger agreement. On November 22, 2017, TriCo’s legal counsel forwarded a sample form of employment agreement to FNBB’s legal counsel in anticipation of the possibility that Tri Counties Bank might decide to discuss post-closing employment positions with certain executive officers of FNBB and First National Bank. On November 26, 2017 and on December 1, 2017, TriCo legal counsel responded with further revised drafts of the proposed definitive merger agreement, including a draft of TriCo’s Disclosure Schedule. On December 4, 2017, FNBB legal counsel prepared and transmitted a more comprehensive draft of FNBB’s Disclosure Schedule to TriCo’s legal counsel. Meanwhile, during the last week of November and the first week of December, representatives of Tri Counties Bank engaged in discussions with FNBB executive officers Jim Black, Tony Clifford and Randy Brugioni concerning their potential interest in accepting post-closing employment positions with Tri Counties Bank, including the salary, benefits and other terms and conditions of

 

51


Table of Contents

such employment. The independent members of FNBB’s board of directors felt that such a possibility would be conducive to a successful business combination and in the best interest of FNBB shareholders and instructed Courtney to keep the board of directors informed regarding the status of such discussions.

On December 6, 2017, the FNBB board of directors held a special meeting to discuss the latest developments regarding negotiations with TriCo representatives, involving FNBB executive management, legal counsel and Courtney, and to review the changes made to the draft of the proposed definitive agreement since the last meeting of FNBB’s board of directors, including changes reflected in a revised draft distributed by legal counsel for TriCo on December 1, 2017, and further revised drafts distributed after such date. The FNBB board of directors also reviewed and discussed the proposed exhibits to the draft definitive merger agreement and the regulatory approvals required in connection with the proposed business combination. FNBB’s board of directors and executive management also discussed the impact of the proposed business combination on the shareholders, customers and employees of FNBB. FNBB’s board of directors determined that certain remaining issues required further attention and instructed Courtney and FNBB legal counsel and executive management to continue negotiations with TriCo. As a result of these negotiations, TriCo’s legal counsel prepared and distributed a further revised draft of the proposed definitive merger agreement. This draft included a proposed final exchange ratio of 0.980 of a share of TriCo common stock for each one share of FNBB common stock having an implied value of $40.81 for each share of FNBB common stock based on the market price of TriCo common stock on December 8, 2017, reflecting primarily the results of adjustments for anticipated expense savings, the mark to market on FNBB real estate, and employee retention arrangements following further due diligence by TriCo.

On December 11, 2017, the board of directors of FNBB and First National Bank met in a joint special meeting with its executive management, legal counsel and Courtney to review the proposed final form of the proposed definitive merger agreement and exhibits thereto. After extensive review and discussion of the proposed final form of the definitive merger agreement and exhibits, followed by an updated review of the financial results and projections of FNBB and its available strategic alternatives and an evaluation of various factors relevant to consummation of the proposed business combination, and based upon the advice of legal counsel and the opinion of Courtney that the merger consideration was fair from a financial point of view to the holders of FNBB common stock, the directors of FNBB and First National Bank voted unanimously to approve the merger agreement and the transactions contemplated therein including the merger and to authorize its execution and delivery to TriCo, along with a final version of the FNBB Disclosure Schedule. It was understood that TriCo’s board of directors would be holding a special meeting on the same day in order to authorize and approve the execution and delivery of the merger agreement with FNBB. It was also understood that Tri Counties Bank would at the same time execute employment agreements with Jim Black, Tony Clifford and Randy Brugioni, to become effective upon the merger of First National Bank with and into Tri Counties Bank.

On December 11, 2017, TriCo’s board of directors held a special board meeting for purposes of considering the definitive merger agreement. At that meeting, TriCo’s board of directors discussed and considered the terms and conditions of the transaction and the definitive merger agreement. TriCo’s management and legal counsel, Sheppard, Mullin, Richter and Hampton LLP, which we refer to as Sheppard Mullin, reviewed the material terms of the merger agreement with TriCo’s board of directors. Sheppard Mullin also advised TriCo’s board of directors regarding its duties in connection with the transaction. Stephens Inc. reviewed the financial aspects of the proposed transaction and rendered an opinion to the TriCo board of directors to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Stephens, Inc. as set forth in such opinion, the aggregate merger consideration to be paid by TriCo to the FNBB shareholders in the merger pursuant to the merger agreement was fair, from a financial point of view, to the holders of TriCo common stock. After deliberation, TriCo’s board of directors voted unanimously to approve the merger agreement and the transactions contemplated by the definitive merger agreement, and authorized TriCo management to execute the merger agreement.

After telephonic confirmations and the exchange of signature pages and final documents between representatives of TriCo and FNBB, in accordance with the resolutions adopted by the TriCo and FNBB boards of directors,

 

52


Table of Contents

TriCo and FNBB entered into the merger agreement dated as of December 11, 2017. At the same time, members of FNBB’s board of directors and certain of FNBB’s executive officers entered into the shareholders agreement with TriCo.

On December 11, 2017, after the closing of trading on the Nasdaq Stock Market, TriCo and FNBB issued a joint press release announcing the execution of the merger agreement and both parties filed a current report on Form 8-K summarizing the terms of the merger agreement.

TriCo’s Reasons for the Merger and Recommendation of TriCo’s Board of Directors

As part of TriCo’s business strategy, it evaluates opportunities to acquire bank holding companies, banks and other financial institutions. The acquisition of FNBB and First National Bank is consistent with this strategy. In reaching its conclusion to approve the merger and to recommend to its shareholders to approve the TriCo merger proposal, TriCo’s board of directors consulted with its financial advisor, Stephens Inc. with respect to the financial aspects of the proposed acquisition and with its legal counsel, Sheppard Mullin, as to its legal duties and the terms of the merger agreement and related agreements. TriCo entered into the merger agreement with FNBB because, among other things, TriCo believes that the acquisition of FNBB and First National Bank will:

 

  extend TriCo’s geographic footprint into the San Francisco Peninsula;

 

  be immediately accretive to TriCo’s earnings per share in fiscal year 2018, excluding non-recurring deal related expenses, and result in an anticipated earnings per share accretion of approximately 8.0% in fiscal year 2019;

 

  improve and strengthen Tri Counties Bank’s existing deposit base by acquiring an attractive deposit franchise, which was comprised of approximately 29% non-interest bearing demand deposits at December 31, 2017;

 

  enable TriCo to redeploy excess liquidity into higher yielding assets;

 

  enable TriCo to offer its broader range of products and services to First National Bank customers;

 

  result in a broader market presence providing greater opportunities for future in-market acquisitions; and

 

  allow TriCo to deploy a portion of its capital into what its board of directors believes is a compelling investment.

The TriCo board of directors also considered the potential adverse consequences of the proposed merger, including:

 

  the possible disruption to TriCo’s or FNBB’s business that may result from the announcement of the merger;

 

  the risk that the cost savings, operational synergies and other expected benefits resulting from the merger might not be fully realized or not realized at all;

 

  the possibility that the merger may not be completed or may be unduly delayed because conditions to closing may not be satisfied, including:

 

    the condition that TriCo’s shareholders approve the TriCo merger proposal,

 

    the condition that FNBB’s shareholders approve the FNBB merger proposal, and

 

    other conditions which are outside of TriCo’s control;

 

  the risk that the merger might not be completed and the effect of the resulting public announcement of termination of the merger agreement on:

 

    the market price of TriCo’s common stock,

 

53


Table of Contents
    TriCo’s relationships with its customers and employees;

 

    TriCo’s operating results, particularly in light of the costs incurred in connection with the merger, which will be incurred whether or not the merger is successfully completed; and

 

  the potential risk of diverting management focus and resources from operational matters and other strategic opportunities while working to implement the merger.

Based on the reasons stated above, TriCo’s board of directors believes that the merger is in the best interest of TriCo and its shareholders and unanimously recommends that the TriCo shareholders vote “FOR” approval of the TriCo merger proposal.

FNBB’s Reasons for the Merger and Recommendation of FNBB’s Board of Directors

After carefully considering all of its options, and cognizant of its fiduciary duty to shareholders, the current competitive and regulatory environment, and a number of other factors discussed in this joint proxy statement/prospectus, FNBB’s board of directors unanimously recommended approval of the merger agreement, determining that the merger, on the terms provided in the merger agreement, is FNBB’s best option to realize reasonable value for its shareholders in today’s challenging and uncertain banking market.

In reaching its conclusion to approve the merger and recommend adoption of the merger agreement to the FNBB shareholders, FNBB’s board of directors consulted with its financial advisor, Courtney, with respect to the financial aspects of the proposed sale, and consulted with its legal counsel, Dodd Mason George LLP, as to its legal duties and the terms of the merger agreement and related agreements. All material factors considered by the FNBB board of directors have been disclosed in this joint proxy statement/prospectus.

In approving the merger with TriCo, FNBB’s board of directors considered and discussed a variety of factors, both positive and negative. FNBB’s Board of Directors did not assign any relative or specific weight to any of the factors described below and individual members of FNBB’s board of directors may have given different weights to different factors as they were discussed. In addition, the factors described below are not listed in any particular order nor intended to be exhaustive of the factors considered. The primary factors that favor the merger include, but are not limited to, the following:

 

    Future Prospects. Based on its understanding of the business, operations, financial condition, earnings, management and future prospects of FNBB, and in consultation with its financial advisor, FNBB’s board of directors believes that a business combination with TriCo would enable FNBB shareholders to participate in a combined company that would have enhanced future prospects compared to those that FNBB is likely to achieve on a stand-alone basis. FNBB’s board of directors believes that a larger company will provide additional products and services to better grow and retain FNBB’s customers, that the combined, more diversified, customer base will improve and diversify future revenue sources, and that future earnings prospects will be stronger on a combined basis.

 

    Results of Due Diligence. FNBB’s board of directors’ understanding of the business, operations, financial condition, earnings, management and future prospects of TriCo, taking into account FNBB’s due diligence investigation of TriCo, including, but not limited to, debt service and other existing financial obligations, the financial obligations to be incurred in connection with the proposed transaction and other likely financial obligations of TriCo and the possible effect of such obligations.

 

    Competition. The current and prospective economic and competitive environment facing the financial services industry generally, including the continued consolidation in the industry and the increased importance of operational scale and financial resources in maintaining efficiency and remaining competitive over the long term.

 

    Complementary Business. The complementary nature of the respective markets, customers and asset/liability mix of First National Bank and Tri Counties Bank combined with an opportunity for First National Bank customers to access enhanced products or services and a significant increase in lending limits.

 

54


Table of Contents
    Financial Presentations. The reports of FNBB’s management and the financial presentation by Courtney to FNBB’s board of directors concerning the operations, financial condition and prospects of TriCo and the expected financial impact of the merger on the combined company, including pro forma assets, earnings, deposits and other financial metrics.

 

    Share Value. The value to be received by holders of FNBB common stock pursuant to the merger agreement in relation to the historical trading prices of FNBB common stock, as compared to other similar transactions of a comparable nature in the view of the FNBB’s board of directors’ financial advisor, as well as the possibility of a more active trading market for TriCo common stock (which is the merger consideration that will be payable to FNBB shareholders).

 

    Cash Dividends. TriCo has paid cash dividends on its common stock in every quarter since 1993. Although there is no assurance that cash dividends will be paid in the future, the stated intention of TriCo’s board of directors is to continue the payment of cash dividends on a quarterly basis. Receiving TriCo stock as consideration in the merger, FNBB shareholders would benefit from the anticipated future cash dividends that TriCo may pay to its shareholders.

 

    Fairness Opinion. The opinion delivered to FNBB’s board of directors by Courtney that, as of the date of the opinion and based upon and subject to the considerations in its opinion, the merger consideration was fair, from a financial point of view, to holders of FNBB common stock.

 

    Terms of the Merger. The review by FNBB’s board of directors with its legal and financial advisor of the structure of the merger and the financial and other terms of the merger agreement, including the exchange ratio, TriCo’s agreement to appoint two members of FNBB’s board of directors to the board of directors of each of TriCo and Tri Counties Bank, and FNBB’s right to accept a superior offer in certain circumstances, so long as FNBB pays a termination fee to TriCo.

 

    Approvals. The likelihood of receiving regulatory approvals in a timely fashion without unacceptable conditions and the likelihood that the merger would be completed.

 

    Corporate Values. The belief of FNBB’s board of directors that the two companies share a common vision of the importance of customer service and that management and employees of FNBB and TriCo possess complementary skills and expertise.

 

    Non-Financial Considerations. The potential social and economic effects of the merger on FNBB’s customers and employees.

 

    Indemnification and Employee Benefits. The agreements of TriCo to provide indemnification for FNBB’s directors and executive officers and to honor certain existing employee benefits.

 

    Reorganization. The expectation that the merger will constitute a tax-free “reorganization” under Section 368(a) of the Code to FNBB shareholders with respect to the TriCo common stock received by them.

In the course of its deliberations regarding the merger, FNBB’s board of directors also considered the following factors and risks, which FNBB’s board of directors determined did not outweigh the expected benefits to FNBB and its shareholders:

 

    Integration Issues. The challenges of combining the businesses, assets and employees of FNBB and TriCo which could affect the post-merger success of the combined companies and the ability to achieve anticipated cost savings and other potential synergies.

 

    Fixed Exchange Ratio. The fixed exchange ratio component of the merger consideration, which is subject to potential adjustment by a trading collar mechanism.

 

    Non-Cash Merger Consideration. The merger consideration payable to FNBB shareholders consists of shares of TriCo common stock, which FNBB shareholders may not be able to immediately liquidate for fair market value due to market limitations or conditions, and the merger consideration will not be in the form of cash.

 

55


Table of Contents
    Insider Interests. The interests of FNBB executive officers and directors with respect to the merger apart from their interests as holders of FNBB common stock, and the risk that these interests might influence their decision with respect to the merger, as described below in “The Merger—Interests of Certain Persons in the Merger.”

 

    Competing Transactions. The risk that the terms of the merger agreement, including provisions relating to the payment of a termination fee under specified circumstances, although required by TriCo as a condition to its willingness to enter into a merger agreement, could have the effect of discouraging other parties that might be interested in a transaction with FNBB that might be more favorable to FNBB shareholders from proposing such a transaction.

 

    Operational Restrictions. The restrictions contained in the merger agreement on the operation of FNBB’s business during the period between the signing of the merger agreement and completion of the merger which may delay or prevent FNBB from pursuing business opportunities that could arise before completion of the merger.

 

    Risk of Termination. The possibility that the merger might not be completed and the impact of a public announcement of the termination of the merger agreement on, among other things, the market price of FNBB common stock and FNBB operating results, particularly in light of the costs incurred in connection with the transaction.

Based on the reasons stated, FNBB’s board of directors believes that the merger agreement and the merger are in the best interest of FNBB and the FNBB shareholders and unanimously recommends that the FNBB shareholders vote “FOR” approval of the merger agreement and the merger.

Opinion of TriCo’s Financial Advisor

On November 2, 2017, TriCo engaged Stephens Inc. to act as financial adviser to TriCo in connection with the acquisition of FNBB. As part of the engagement, Stephens Inc. was asked to assess the fairness to TriCo, from a financial point of view, of the merger consideration to be paid by TriCo in the acquisition. Stephens Inc. is a nationally recognized investment banking firm with offices throughout the United States and has substantial experience in similar mergers. As part of its investment banking business, Stephens Inc. is continually engaged in the valuation of banking businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. As specialists in the securities of banking companies, Stephens Inc. has experience in, and knowledge of, the valuation of banking enterprises.

As part of its engagement, at the request of TriCo, representatives of Stephens Inc. attended meetings of the TriCo’s board of directors in which the board of directors evaluated the proposed merger, including, among others, a meeting of the board of directors held on December 11, 2017. At this meeting, the board of directors requested and received reports, discussion and commentary from its advisors, management and members regarding the proposed merger. As TriCo’s financial advisor at that meeting, Stephens Inc. reviewed the financial aspects of the proposed merger and rendered its opinion that, as of such date and based upon and subject to the factors and assumptions referenced in its opinion, the consideration to be paid in the merger was fair, from a financial point of view, to TriCo. The TriCo’s board of directors, after considering advice, reports, discussion and commentary from its advisors, management and members, approved the merger agreement at this meeting.

The full text of Stephens Inc.’s written opinion, dated December 11, 2017, is attached as Appendix C to this document and incorporated herein by reference. TriCo’s shareholders are urged to read the opinion in its entirety for a description of the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Stephens Inc.. The description of the opinion set forth herein is qualified in its entirety by reference to the full text of such opinion.

Stephens Inc.’s opinion speaks only as of its date, and Stephens Inc. has undertaken no obligation to update or revise its opinion. The opinion was directed to TriCo’s board of directors and addresses only the

 

56


Table of Contents

fairness to TriCo, from a financial point of view, of the consideration to be paid in the merger by TriCo. It does not address the underlying business decision to proceed with the merger. The opinion does not constitute a recommendation to any shareholder of TriCo as to how the shareholder should vote or act with respect to the merger or any related matter. TriCo and FNBB determined the merger consideration through a negotiation process.

In rendering its opinion, Stephens Inc., among other things:

 

  (i) analyzed certain publicly available financial statements and reports regarding TriCo and FNBB;

 

  (ii) analyzed certain audited financial statements and management reports regarding TriCo and FNBB;

 

  (iii) analyzed certain internal financial statements and other financial and operating data concerning TriCo and FNBB prepared by management of TriCo and FNBB, respectively;

 

  (iv) analyzed, on a pro forma basis, the effect of the merger on the balance sheet, capitalization ratios, earnings and book value both in the aggregate and, where applicable, on a per share basis of TriCo;

 

  (v) reviewed the reported prices and trading activity for the common stock of TriCo;

 

  (vi) compared the financial performance of TriCo and FNBB with that of certain other publicly-traded companies and their securities that Stephens Inc. deemed relevant to its analysis of the merger;

 

  (vii) reviewed the financial terms, to the extent publicly available, of certain merger or acquisition mergers that Stephens Inc. Inc. deemed relevant to its analysis of the merger;

 

  (viii) reviewed the most recent draft of the merger agreement and related documents provided by TriCo;

 

  (ix) discussed with management of TriCo and FNBB the operations of and future business prospects for TriCo and FNBB and the anticipated financial consequences of the merger to TriCo and FNBB;

 

  (x) assisted in TriCo’s deliberations regarding the material terms of the merger and its negotiations with FNBB; and

 

  (xi) performed such other analyses and provided such other services as Stephens Inc. Inc. deemed appropriate.

Stephens Inc.’s opinion was necessarily based upon conditions as they existed and could be evaluated on the date of the opinion and the information made available to Stephens Inc. through the date of the opinion. In conducting its review and arriving at its opinion, Stephens Inc. relied upon the accuracy and completeness of all of the financial and other information provided to it or otherwise publicly available. Stephens Inc. did not independently verify the accuracy or completeness of any such information or assume any responsibility for such verification or accuracy. Stephens Inc. relied upon management of TriCo and FNBB as to the reasonableness and achievability of the financial and operating forecasts and projections (and the assumptions and basis therefore) provided to Stephens Inc. Stephens Inc. assumed that such forecasts and projections reflected the best currently available estimates and judgments of such managements and that such forecasts and projections will be realized in the amounts and in the time periods currently estimated by such managements. Stephens Inc. is not an expert in the independent verification of the adequacy of allowances for loan and lease losses and assumed, with TriCo’s consent, that the aggregate allowance for loan and lease losses for TriCo and FNBB was adequate to cover such losses. Stephens Inc. did not make or obtain any evaluation or appraisal of the assets or liabilities of TriCo, FNBB or their respective affiliates, nor did it examine any individual credit files. Stephens Inc. was not asked to and did not undertake any independent verification of any such information, and Stephens Inc. did not assume any responsibility or liability for the accuracy and completeness thereof.

In conducting its analyses, Stephens Inc. used publicly published research consensus estimates as well as projections of expected future financial performance of TriCo and FNBB reflecting the judgment of the senior management teams of TriCo and FNBB, respectively, regarding expected future performance of their respective

 

57


Table of Contents

businesses. Neither TriCo nor FNBB publicly discloses internal management projections of the type provided to Stephens Inc. in connection with its review of the merger. As a result, such projections were not prepared with a view towards public disclosure. The projections were based on numerous variables and assumptions, which are inherently uncertain, including factors related to general economic and competitive conditions. Accordingly, actual results could vary significantly from those set forth in the projections.

For purposes of rendering its opinion, Stephens Inc. assumed that, in all respects material to its analyses:

 

  (i) the merger will be completed substantially in accordance with the terms set forth in the merger agreement, without material waiver or modification;

 

  (ii) the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger agreement are true and correct;

 

  (iii) each party to the merger agreement and all related documents will perform all of the covenants and agreements required to be performed by such party under such documents;

 

  (iv) all conditions to the completion of the merger will be satisfied without any waivers;

 

  (v) there has been no material change in the assets, liabilities, financial condition, results of operations, business or prospects of TriCo or FNBB since either the date of the last financial statements made available to Stephens Inc. and the date of the merger agreement, and that no legal, political, economic, regulatory or other development has occurred that will adversely impact TriCo or FNBB;

 

  (vi) all required governmental, regulatory, shareholder and third party approvals have been or will be received in a timely manner and without any conditions or requirements that would have a material adverse effect on the contemplated benefits of the merger to TriCo; and

 

  (vii) the merger will be accounted for as a purchase merger under generally accepted accounting principles.

Stephens Inc.’s opinion is limited to whether the consideration to be paid in the merger by TriCo is fair from a financial point of view to TriCo. Stephens Inc. was not asked to, and it did not, offer any opinion as to the terms of the merger agreement or the form of the merger or any aspect of the merger, other than the fairness, from a financial point of view, of the consideration to be paid by TriCo in the merger. The opinion did not address, and Stephens Inc. expressed no view or opinion with respect to, the relative merits or effect of the merger as compared to any other strategic alternatives or business strategies or combinations that may be or may have been available to or contemplated by TriCo or its board of directors. Moreover, Stephens Inc. did not express an opinion as to the fairness of the amount or nature of any compensation payable to or to be received by any officers, directors or employees of any of the parties to the merger relative to the aggregate consideration. Additionally, the opinion was not an expression of an opinion as to the price at which shares of TriCo common stock would trade at the time of issuance to shareholders of FNBB under the merger agreement or the prices at which TriCo’s or FNBB’s common stock may trade at any time.

In performing its analyses, Stephens Inc. made numerous assumptions with respect to general business, economic, market, industry and financial conditions and other matters, which were beyond the control of Stephens Inc., TriCo and FNBB. Any estimates contained in the analyses performed by Stephens Inc. were not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities did not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. In addition, the Stephens Inc. opinion was one factor among many factors taken into consideration by the TriCo’s board of directors in making its determination to approve the merger agreement and the merger. Consequently, the analyses described below should not be viewed as determinative of the decision of the TriCo’s board of directors with respect to the fairness of the consideration.

The following is a summary of the material analyses performed by Stephens Inc. and presented by it to the TriCo’s board of directors on December 11, 2017, in connection with its fairness opinion. The summary is not a

 

58


Table of Contents

complete description of the analyses underlying the Stephens Inc. opinion or the presentation made by Stephens Inc. to the TriCo’s board of directors, but summarizes the material analyses performed and presented in connection with such opinion. The preparation of a fairness opinion is a complex analytic process involving various determinations as to the appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Stephens Inc. did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of the analyses and factors considered. The financial analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the financial analyses. Accordingly, Stephens Inc.’s analyses and the summary of its analyses must be considered as a whole, and selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion.

Summary of Proposal.

Under the terms of the merger agreement, at the effective time of the merger, each outstanding share of FNBB’s common stock will be converted into the right to receive a fixed exchange ratio of 0.9800 shares of TriCo common stock subject to certain possible adjustments (as described in the merger agreement and elsewhere in this joint proxy statement/prospectus), and the options of FNBB will be cancelled in exchange for approximately $13.2 million in cash (based on TriCo’s share price on December 8, 2017).

Implied Valuation.

Using publicly available information, Stephens Inc. compared certain performance metrics of FNBB to selected groups of financial institutions deemed relevant by Stephens Inc. Merger multiples for the merger were derived from an aggregate merger value of $40.81 per share, or $315.3 million (as of December 8, 2017).

FNBB’s peer group consisted of the following selected publicly traded (NASDAQ, NYSE, or NYSE MKT) bank holding companies headquartered in the Western United States with total assets between $1.0 billion and $3.0 billion (excluding merger targets and ethnic focused banks):

Heritage Commerce Corp

Bank of Marin Bancorp

Sierra Bancorp

People’s Utah Bancorp

Central Valley Community Bancorp

Bank of Commerce Holdings

Pacific Mercantile Bancorp

First Financial Northwest, Inc.

To perform this analysis, Stephens Inc. used financial information as of and for the twelve months ended September 30, 2017. Market price information was as of December 8, 2017. Stephens Inc.’s analysis showed the following concerning FNBB peer group’s 25th percentile, median, and 75th percentile performance metrics:

 

FNBB Peer Multiples

    

FNBB Implied Valuation ($ per share)

 
     Price/     

Price/

 
     TBV (x)     LTM EPS (x)           TBV ($)      LTM EPS ($)  

75th Percentile

     1.97       20.9      75th Percentile      33.71        37.91  

Median

     1.78       19.4      Median      30.46        35.19  

25th Percentile

     1.65       17.7      25th Percentile      28.23        32.10  

TriCo / FNBB

     2.38 (1)      22.5(2)  

 

59


Table of Contents
(1) FNBB’s common equity adjusted for fair market value markup of bank owned real estate of $18 million pre-tax.
(2) FNBB LTM net income adjusted to remove $1.8 million pre-tax non-recurring accelerated accrual for Salary Continuation Agreements and updated with the estimated ongoing future expense of $0.35 million pre-tax per year.

In contrast to the companies in the publicly traded peer group analyzed on a standalone basis by Stephens Inc., the acquisition of FNBB will provide TriCo with the opportunity to realize cost savings. Stephens Inc. assessed the value of the discounted cash flow associated with the cost savings estimated by TriCo management at approximately 28% of FNBB’s noninterest expense through 2023. The analysis assumed discount rates ranging from 10.0% to 11.0% and terminal multiples ranging from 15.0 times to 17.0 times estimated cost savings in 2023. This resulted in a range of values of FNBB cost savings from $91 million to $104 million. The discounted cash flow present value analysis is a widely used valuation methodology that relies on numerous assumptions, including asset and earnings growth rates, terminal values and discount rates. The analysis did not purport to be effective to determine the actual current or expected future values of FNBB.

No company used as a comparison in the above analysis is identical to FNBB, TriCo or the proposed merger. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies.

Comparable Merger Analysis.

Stephens Inc. reviewed publicly available information related to recent bank acquisition mergers involving targets headquartered on the West Coast of the United States announced since the 2016 United States Presidential Election on November 8, 2017 with an aggregate announced deal value between $100 million and $1.0 billion. The mergers included in this group were:

 

Buyer

   Seller

Pacific Premier Bancorp

   Plaza Bancorp

Heritage Financial Corp.

   Puget Sound Bancorp Inc.

PacWest Bancorp

   CU Bancorp

Columbia Banking System Inc.

   Pacific Continental Corp.

Pacific Premier Bancorp

   Heritage Oaks Bancorp

First Interstate BancSystem

   Cascade Bancorp

Merger multiples for the merger were derived from an aggregate merger value of $40.81 per share, or $315.3 million (as of December 8, 2017). Using the comparable mergers, Stephens Inc. derived and compared, among other things, the implied deal value paid for the acquired company to:

 

    Tangible book value of the acquired company based on the most recent publicly available financial statements prior to announcement, adjusted for a fair market value markup of bank owned real estate of $18 million pre-tax (8 of FNBB’s 12 branches are owned as well as its operations center);

 

    the last twelve months net income of the acquired company based on the most recent publicly available financial statements prior to announcement, adjusted to remove $1.8 million pre-tax non-recurring accelerated accrual for Salary Continuation Agreements and updated with the estimated ongoing future expense of $0.35 million pre-tax per year;

 

    the premium paid on tangible common equity divided by the core deposits (core deposits defined as total deposits less time deposits greater than $100,000) of the acquired company based on the most recent publicly available financial statements prior to announcement.

 

60


Table of Contents

As illustrated in the following table, Stephens Inc. compared the proposed merger ratios to the 25th percentile, median and 75th percentile merger ratios of the selected comparable mergers:

 

FNBB Comparable Merger Multiples

    

FNBB Implied Valuation ($ per share)

 
     Price/           Price/  
     TBV
(x)
    LTM
EPS (x)
    Core
Deposit
Premium
(%)
          TBV
($)
     LTM
EPS ($)
     Core
Deposit
Premium
($)
 

75th Percentile

     2.62       29.2       16.1      75th Percentile      44.83        52.96        38.64  

Median

     2.24       26.2       15.2      Median      38.33        47.52        37.44  

25th Percentile

     2.14       25.3       13.2      25th Percentile      36.62        45.89        34.76  

TriCo / FNBB

     2.38 (1)      22.5 (2)      18.8              

 

(1) FNBB’s common equity adjusted for fair market value markup of bank owned real estate of $18 million pre-tax.
(2) FNBB LTM net income adjusted to remove $1.8 million pre-tax non-recurring accelerated accrual for Salary Continuation Agreements and updated with the estimated ongoing future expense of $0.35 million pre-tax per year.

No company or merger used as a comparison in the above analysis is identical to FNBB, TriCo or the proposed merger. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies.

Discounted Cash Flow Analysis.

Stephens Inc. performed a discounted cash flow analysis to estimate a range of present values of after-tax cash flows that FNBB could contribute to TriCo through 2023, standalone as well as including estimated cost savings of 28% of FNBB’s projected noninterest expense. In performing this analysis, Stephens Inc. relied on analyst projections to derive TriCo’s projected after-tax cash flows for fiscal years 2018-2019 (7.5% earnings growth thereafter). Stephens Inc. used FNBB management projections for 2018 and then TriCo projections (based on 10% balance sheet growth, 5% non-interest expense growth, and a flat rate environment) for 2019-2021 (12.5% earnings growth thereafter). Additionally, the analysis assumes FNBB pays the maximum dividend available while maintaining an 8.0% tangible common equity to tangible asset ratio. Any earnings in excess of what would need to be retained represented dividendable cash flows for FNBB.

A valuation was derived by discounting the projected free cash flows for FNBB based on the estimates for the period June 30, 2018 through December 31, 2022 and a terminal value at December 31, 2022 based on the next twelve months earnings ending December 31, 2023 and utilizing a range of discount rates approximating TriCo cost of capital.

The analysis assumed discount rates ranging from 10.0% to 11.0% and terminal multiples ranging from 15.0 times to 17.0 times fiscal year 2022 NTM forecasted earnings. On a standalone basis, this analysis resulted in a range of values of FNBB from $302.3 million to $350.8 million. Including estimated cost savings of 28% of FNBB’s projected noninterest expense, this analysis resulted in a range of values of FNBB from $393.6 million to $454.5 million. The discounted cash flow present value analysis is a widely used valuation methodology that relies on numerous assumptions, including asset and earnings growth rates, terminal values and discount rates. The analysis did not purport to be effective to determine the actual current or expected future values of FNBB.

Financial Impact Analysis.

Stephens Inc. performed pro forma merger analyses that combined projected income statement and balance sheet information of TriCo and FNBB. Analytic assumptions obtained from management of TriCo regarding the

 

61


Table of Contents

accounting treatment, acquisition adjustments and cost savings were used to calculate the financial impact that the merger could be expected to have on certain projected financial results of TriCo. In the course of this analysis, Stephens Inc. used TriCo consensus analyst earnings estimates for 2017-2019 and 7.5% earnings growth thereafter. For FNBB earnings, management projections were used for 2018 and 2019-2021 projections were based on 10% balance sheet growth, 5% non-interest expense growth, and flat rate environment (12.5% earnings growth thereafter). This analysis indicated that the merger is expected to be approximately 2% accretive to TriCo’s estimated earnings per share in 2018, excluding estimated one-time TriCo merger costs, and approximately 8% accretive to TriCo’s estimated earnings per share in 2019. The analysis also indicated that following the merger the pro forma entity would maintain well capitalized capital ratios. For all of the above analyses, the actual results achieved by TriCo following the merger will likely vary from the projected results, and the variations may be material.

Relationships.

In the ordinary course of its business as a broker-dealer, Stephens Inc. may, from time to time, purchase securities from, and sell securities to TriCo, FNBB or their respective affiliates. Stephens Inc. may also from time to time have a long or short position in, and buy or sell, debt or equity securities of TriCo or its affiliates for its own account and for the accounts of its customers.

Stephens Inc. has acted exclusively for the TriCo’s board of directors in rendering its opinion in connection with the merger and will receive a fee from TriCo for its services. Stephens Inc. has consented to the inclusion of its opinion in the registration statement of which this joint proxy statement/prospectus is a part. Stephens Inc. was due a fee of $100,000 upon rendering its fairness opinion to the TriCo’s board of directors, regardless of the conclusions set forth in the opinion and a separate fee of $300,000 upon the signing of the merger agreement. Upon the successful closing of the merger, Stephens Inc. is also entitled to a fee of $1,500,000 for its financial advisory services to TriCo and its board of directors. In addition, TriCo has agreed to reimburse Stephens Inc. for reasonable and customary out-of-pocket expenses and to indemnify Stephens Inc. against certain liabilities, including liabilities under the federal securities laws. Stephens Inc. has not provided other investment banking and financial advisory services to TriCo or FNBB in the past two years.

Opinion of FNBB’s Financial Advisor

By letter dated August 4, 2017, FNBB retained Courtney to act as its exclusive financial advisor in connection with a possible business combination with another financial institution. Courtney is a nationally recognized investment banking and private equity firm with a specialty in financial institutions transactions. In the ordinary course of its investment banking business, Courtney is engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

Courtney acted as exclusive financial advisor to FNBB in connection with the proposed transaction and participated in certain of the negotiations leading to the execution of a definitive merger agreement on December 11, 2017. At the December 11, 2017 meeting at which FNBB’s board of directors considered and approved the merger agreement, Courtney delivered to the FNBB board its opinion that, as of such date, the merger consideration was fair to the holders of FNBB common stock from a financial point of view.

The full text of Courtney’s opinion is attached as Appendix B to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Courtney in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. FNBB’s shareholders are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

Courtney’s opinion speaks only as of the date of the opinion. The opinion was directed to the FNBB board and is directed only to the fairness of the merger consideration to the holders of FNBB common stock from

 

62


Table of Contents

a financial point of view. It does not address the underlying business decision of FNBB to engage in the merger or any other aspect of the merger and is not a recommendation to any FNBB shareholder as to how such shareholder should vote at FNBB’s special meeting with respect to the merger or any other matter.

In connection with rendering its December 11, 2017 opinion, Courtney reviewed and considered, among other things:

 

  (1) the merger agreement and ancillary documents;

 

  (2) certain publicly available business and financial information relating to FNBB and TriCo that Courtney deemed to be relevant;

 

  (3) certain internal information, primarily financial in nature, including financial projections and other financial and operating data relating to the strategic implications and operational benefits anticipated to result from the merger, furnished to Courtney by FNBB and TriCo;

 

  (4) certain publicly available and other information concerning the reported prices and trading history of, and the trading market for, the common stock of FNBB and TriCo;

 

  (5) certain publicly available information with respect to other companies that Courtney believed to be comparable in certain respects to FNBB and TriCo;

 

  (6) the financial terms, to the extent publicly available, of selected recent business combinations of companies in the banking industry which we deemed to be comparable, in whole or in part, to the merger;

 

  (7) made inquiries regarding and discussed the merger and the merger agreement and other matters related thereto with the FNBB and FNBB’s legal counsel;

 

  (8) such other information, financial studies, analyses and investigations and financial, economic and market criteria as Courtney considered relevant.

Courtney also discussed with certain members of senior management of FNBB the business, financial condition, results of operations and prospects of FNBB, including certain operating, liquidity, regulatory and other financial matters.

In performing its review, Courtney relied upon the accuracy and completeness of all of the financial and other information that was available to it from public sources, that was provided to it by FNBB or its respective representatives or that was otherwise reviewed by Courtney and Courtney assumed such accuracy and completeness for purposes of rendering its opinion. Courtney further relied on the assurances of the management of FNBB that it is not aware of any facts or circumstances that would make any of such information inaccurate or misleading. Courtney was not asked to and did not undertake an independent verification of any of such information and it does not assume any responsibility or liability for the accuracy or completeness thereof. Courtney did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of FNBB, or the collectability of any such assets, nor was it furnished with any such evaluations or appraisals. Courtney did not make an independent evaluation of the adequacy of the allowance for loan losses of FNBB nor did Courtney review any individual credit files relating to FNBB.

With respect to the internal projections and estimates for FNBB used by Courtney in its analyses, FNBB’s management confirmed to Courtney that they reflected the best currently available estimates and judgments of management of the future financial performance of FNBB and Courtney assumed that such performance would be achieved. Courtney expressed no opinion as to such financial projections and estimates or the assumptions on which they are based. Courtney has also assumed that there had been no material change in FNBB’s assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements were made available. Courtney assumed in all respects material to its analysis that all of the

 

63


Table of Contents

representations and warranties contained in the merger agreement are true and correct, that each party to the merger agreement will perform all of the covenants required to be performed by such party under the merger agreement, and that the conditions precedent in the merger agreement are not waived. Courtney relied upon the advice FNBB has received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the merger and the other transactions contemplated by the merger agreement. Courtney did not provide any legal, accounting or tax advice relating to the merger agreement and the other transactions contemplated by the merger agreement.

Courtney’s opinion was necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, the date of its opinion. Events occurring after the date of the opinion could materially affect the opinion. Courtney has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date of its opinion. Courtney’s opinion was approved by Courtney’s fairness opinion committee.

Courtney’s opinion is limited to whether the consideration to be received by FNBB in the merger is fair from a financial point of view to FNBB. The opinion did not address, and Courtney expressed no view or opinion with respect to, the relative merits or effect of the merger as compared to any other strategic alternatives or business strategies that may have been available to FNBB or its board of directors. Courtney did not express an opinion as to the fairness of the amount or nature of any compensation payable to or to be received by any officers, directors or employees of any of the parties to the merger relative to the merger consideration. Courtney’s opinion was not an expression of an opinion as to the price at which shares of TriCo common stock would trade at the time of issuance to shareholders of FNBB under the merger agreement or the prices at which Trico or FNBB common stock may trade at any time.

In rendering its December 11, 2017 opinion, Courtney performed a variety of financial analyses. The following is a summary of the material analyses performed by Courtney, but is not a complete description of all the analyses underlying Courtney’s opinion.

The summary of financial analyses includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses.

The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to partial analysis or summary description. Courtney believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, would create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Courtney’s comparative analyses described below is identical to FNBB or TriCo and no transaction is identical to the proposed merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of FNBB or TriCo and the companies to which they are being compared.

Summary of Proposal. Subject to the provisions of the merger agreement, each share of FNBB common stock issued and outstanding immediately prior to the effective time of the Merger shall be converted into the right to receive 0.9800 shares of TriCo common stock. The exchange ratio is fixed and subject to a trading collar. Options to purchase FNBB common stock will be cashed out for the positive difference between the deal value per share and the exercise price of the option.

Courtney reviewed the financial terms of the proposed transaction, and as fully described in the merger agreement in a transaction in which all of the outstanding shares of FNBB common stock and all outstanding

 

64


Table of Contents

options are exchanged for total consideration of approximately $315.3 million or $40.81 per fully-diluted share as of December 11, 2017.

For purposes of its opinion, Courtney assumed 7,403,276 shares of FNBB common stock are outstanding and 512,819 options to purchase FNBB common stock are outstanding, with each option exercisable at a weighted average exercise price of $15.05 per share. The following table calculates the transaction ratios based on the above assumptions.

Transaction Ratios.

Based upon financial information for FNBB for the twelve months ended September 30, 2017, Courtney calculated the following transaction ratios:

 

Transaction Value to Tangible Book Value

     271.3

Transaction Value to Trailing Twelve Months Earnings

     24.6x  

Transaction Value to 2017 Expected Earnings

     24.4x  

Tangible Book Premium to Core Deposits

     21.0

Premium over Market Price One Month Prior to Transaction Announce

     27.5

Comparable Publicly Traded Company Analysis—FNBB.

Courtney used publicly available information to compare selected financial and market trading information for FNBB and a group of financial institutions selected by Courtney. In this regard, Courtney noted that although such companies were considered similar, none of the companies has the same management, makeup, size or combination of business as FNBB, as the case may be. The FNBB peer group consisted of the following publicly traded commercial banks and/or bank holding companies headquartered in California with total assets between $750 million and $2.5 billion: American Business Bank, Avidbank Holdings, Bank of Commerce Holdings, California BanCorp, Central Valley Community Bancorp, Community West Bancshares, First Choice Bank, First Northern Community Bancorp, Malaga Financial Corporation, Oak Valley Bancorp, Pacific Mercantile Bancorp, Presidio Bank, Provident Financial Holdings, River City Bank and United Security Bancshares.

The analysis compared publicly available financial information for FNBB and the high, low, average, and median financial and market trading data for the FNBB peer group using financial data as of and for the twelve months ended September 30, 2017 and market trading data as of the close of market on December 8, 2017. The table below sets forth the data for FNBB and FNBB’s peer group as of and for the dates provided above.

FNB BANCORP COMPARABLE COMPANY ANALYSIS—OPERATING METRICS

 

Company Name

 

Ticker

  State   Total
Assets
($000)
    ROAE
(%)
    ROAA
(%)
    Tg Equity
Ratio
(%)
    NIM
(%)
    Efficiency
Ratio
(%)
    NPAs/
Assets
(%)
    Reserves/
NPAs
(%)
 

FNB Bancorp

  FNBG   CA     1,274,614       11.20       1.03       9.16       3.94       60.70       1.12       71.69  
  LOGO   Average     1,135,315       9.03       0.90       9.74       3.78       63.65       0.60       217.45  

Comparable Companies

    Median     1,030,000       9.06       0.91       9.31       3.79       63.00       0.56       143.19  
    High     2,004,267       11.52       1.25       11.52       4.42       85.87       2.12       700.58  
    Low     763,807       2.59       0.28       8.41       2.86       32.09       —         51.12  

 

65


Table of Contents

FNB BANCORP COMPARABLE COMPANY ANALYSIS—TRADING METRICS

 

            Current     Average
Weekly
Volume
(%)
    Percent Stock Price Change  

Company Name

  Ticker   State   Market
Cap
($MMs)
    Price/
TBV
(%)
    Price/
TEPS
(x)
    Dividend
Yield
(%)
      One
Day
(%)
    One
Week
(%)
    One
Month
(%)
    Three
Months
(%)
    One
Year
(%)
 

FNB Bancorp

  FNBG   CA     261.63       225.08       20.91       1.47       0.48       0.74       (3.63     8.60       10.85       60.64  

 

Comparable Companies

 

  LOGO   Average       154.32       19.44       1.30       0.60       (0.66     (0.40     3.69       7.04       27.68  
    Median       156.55       16.91       1.13       0.35       —         0.00       1.60       7.18       27.14  
    High       190.49       45.98       3.35       1.70       1.87       10.10       18.48       18.48       51.88  
    Low       80.27       12.81       —         0.03       (5.97     (7.25     (2.28     (2.17     (6.91

Comparable Publicly Traded Company Analysis—TriCo.

Courtney used publicly available information to compare selected financial and market trading information for TriCo and a group of financial institutions selected by Courtney. In this regard, Courtney Group noted that although such companies were considered similar, none of the companies has the same management, makeup, size or combination of business as TriCo, as the case may be. The TriCo peer group consisted of the following publicly traded commercial banks and/or bank holding companies headquartered in California with total assets between $2 billion and $10 billion: 1867 Western Financial Corp., Bank of Marin Bancorp, Community Bank, CVB Financial Corp., Exchange Bank, Farmers & Merchants Bancorp, Farmers & Merchants Bank of Long Beach, First Foundation, Grandpoint Capital, Heritage Commerce Corp., Mechanics Bank, Opus Bank, Pacific Premier Bancorp, Sierra Bancorp and Westamerica Bancorporation.

The analysis compared publicly available financial information for TriCo and the high, low, average, and median financial and market trading data for the TriCo peer group using financial data as of and for the twelve months ended September 30, 2017 and market trading data as of the close of market on December 8, 2017. The table below sets forth the data for TriCo and TriCo’s peer group as of and for the dates provided above.

TRICO BANCSHARES COMPARABLE COMPANY ANALYSIS—OPERATING METRICS

 

Company Name

  Ticker   State   Total
Assets
($000)
    ROAE
(%)
    ROAA
(%)
    Tg Equity
Ratio
(%)
    NIM
(%)
    Efficiency
Ratio
(%)
    NPAs/
Assets
(%)
    Reserves/
NPAs
(%)
 

TriCo Bancshares

  TCBK   CA     4,656,435       10.18       1.11       9.53       4.23       64.41       0.79       78.11  
  LOGO   Average     4,473,679       8.97       1.00       10.11       3.71       57.56       0.44       286.16  

Comparable Companies

 

    Median     3,740,712       8.94       1.05       9.50       3.80       58.89       0.26       162.62  
    High     8,304,012       12.93       1.38       14.13       4.42       67.09       1.24       766.55  
    Low     2,077,993       2.80       0.36       8.02       2.96       42.30       0.03       45.05  

TRICO BANCSHARES COMPARABLE COMPANY ANALYSIS—TRADING METRICS

 

            Current     Average
Weekly
Volume
(%)
    Percent Stock Price Change  

Company Name

  Ticker   State   Market
Cap
($MMs)
    Price/
TBV
(%)
    Price/
TEPS
(x)
    Dividend
Yield
(%)
      One
Day
(%)
    One
Week
(%)
    One
Month
(%)
    Three
Months
(%)
    One
Year
(%)
 

TriCo Bancshares

  TCBK   CA     955.28       218.65       19.37       1.63       1.29       (0.43     (1.14     3.33       22.18       24.04  
  LOGO   Average       195.11       20.64       1.20       1.14       (0.52     (1.84     4.29       11.45       18.23  

Comparable Companies

 

    Median       179.87       20.45       1.18       1.04       —         (2.04     4.14       14.99       11.97  
    High       331.47       39.85       2.66       4.17       0.64       0.23       12.42       27.83       61.04  
    Low       107.08       9.92       —         —         (1.67     (4.73     (3.25     (4.52     (7.33

 

66


Table of Contents

Market Trading Analysis—FNBB

Courtney reviewed the historical public market trading history of FNBB common stock and reviewed its relative stock price performance against the S&P Bank Index, NASDAQ Bank Index and KBW Nasdaq Regional Banking Index over the preceding 1-year and 3-year periods.

FNB Bancorp Historical Trading Information

 

Most Recent Trading Price (12/8/17)

  $ 35.34  

52-Week Average Closing Price

  $ 28.14  

52-Week High Price

  $ 36.67  

52-Week Low Price

  $ 21.67  

52-Week Average Weekly Volume (Shares 000s)

    49.0  

30-Day Trailing Average Closing Price

  $ 34.95  

60-Day Trailing Average Closing Price

  $ 34.60  

90-Day Trailing Average Closing Price

  $ 32.90  

180-Day Trailing Average Closing Price

  $ 30.18  

52-Week Average Weekly Volume ($000s)

  $ 1,732.4  
 

 

FNB Bancorp Comparative Price Performance

 

One Year Trading History:   12/7/16     12/8/17  

FNB Bancorp

    100.0     160.6

S&P Bank Index

    100.0     117.6

KBW Nasdaq Regional Banking Index

    100.0     114.7

Nasdaq Bank Index

    100.0     103.6
Three-Year Trading History:   12/8/14     12/8/17  

FNB Bancorp

    100.0     198.1

S&P Bank Index

    100.0     142.8

KBW Nasdaq Regional Banking Index

    100.0     143.1

Nasdaq Bank Index

    100.0     151.7
 

 

Market Trading Analysis—TriCo.

Courtney reviewed the historical public market trading history of TriCo common stock and reviewed its relative stock price performance against the S&P Bank Index, NASDAQ Bank Index and KBW Nasdaq Regional Banking Index over the preceding 1-year and 3-year periods.

TriCo Bancshares Historical Trading Information

 

Most Recent Trading Price (12/8/17)

  $ 41.64  

52-Week Average Closing Price

  $ 36.65  

52-Week High Price

  $ 43.42  

52-Week Low Price

  $ 32.84  

52-Week Average Weekly Volume (Shares 000s)

    308.6  

30-Day Trailing Average Closing Price

  $ 41.37  

60-Day Trailing Average Closing Price

  $ 40.71  

90-Day Trailing Average Closing Price

  $ 39.10  

180-Day Trailing Average Closing Price

  $ 37.22  

52-Week Average Weekly Volume ($000s)

  $ 12,851.5  
 

 

TriCo Bancshares Comparative Price Performance

 

One Year Trading History:    12/7/16     12/8/17  

TriCo Bancshares

     100.0     121.9

S&P Bank Index

     100.0     117.6

KBW Nasdaq Regional Banking Index

     100.0     114.7

Nasdaq Bank Index

     100.0     103.6
Three-Year Trading History:    12/8/14     12/8/17  

TriCo Bancshares

     100.0     162.1

S&P Bank Index

     100.0     142.8

KBW Nasdaq Regional Banking Index

     100.0     143.1

Nasdaq Bank Index

     100.0     151.7
 

 

Present Value Analysis—FNBB.

Courtney performed an analysis of the present value of FNBB shares under different market pricing scenarios. The analysis assumes that FNBB performs in accordance with Courtney’s financial projections for FNBB, and the estimates used were a combination of projections provided by management and independently developed by Courtney.

 

67


Table of Contents

In performing the Present Value analyses, Courtney applied an estimated price-to-earnings multiple ranging from 12.0x to 24.0x to FNBB’s projected 2020 earnings per share and an estimated price-to-book multiple ranging from 125% to 275% to FNBB’s projected 2020 tangible book value per share, resulting in an implied projected valuation. The projected stock prices were discounted to the present using discount rates of 10.0% to 15.0%. These analyses indicate that the present value of the FNBB’s future stock price based on a price-to-earnings multiple averaged $28.65 per share and ranged from $17.83 to $40.86 per share, and based on a price-to-tangible book multiple averaged $29.09 per share and ranged from $16.97 to $42.78 per share.

 

     2020 Earnings per Share Multiples  

Discount Rate

   12.0x      14.0x      16.0x      18.0x      20.0x      22.0x      24.0x  
10%    $ 20.43      $ 23.84      $ 27.24      $ 30.65      $ 34.05      $ 37.46      $ 40.86  
11%    $ 19.87      $ 23.18      $ 26.50      $ 29.81      $ 33.12      $ 36.43      $ 39.74  
12%    $ 19.33      $ 22.56      $ 25.78      $ 29.00      $ 32.22      $ 35.45      $ 38.67  
13%    $ 18.81      $ 21.95      $ 25.09      $ 28.22      $ 31.36      $ 34.49      $ 37.63  
14%    $ 18.31      $ 21.37      $ 24.42      $ 27.47      $ 30.52      $ 33.57      $ 36.63  
15%    $ 17.83      $ 20.80      $ 23.77      $ 26.75      $ 29.72      $ 32.69      $ 35.66  

 

     2020 TBV per Share Multiples  

Discount Rate

   125%      150%      175%      200%      225%      250%      275%  
10%    $ 19.45      $ 23.34      $ 27.23      $ 31.12      $ 35.01      $ 38.90      $ 42.78  
11%    $ 18.92      $ 22.70      $ 26.48      $ 30.27      $ 34.05      $ 37.83      $ 41.61  
12%    $ 18.40      $ 22.08      $ 25.76      $ 29.45      $ 33.13      $ 36.81      $ 40.49  
13%    $ 17.91      $ 21.49      $ 25.07      $ 28.65      $ 32.24      $ 35.82      $ 39.40  
14%    $ 17.43      $ 20.92      $ 24.41      $ 27.89      $ 31.38      $ 34.86      $ 38.35  
15%    $ 16.97      $ 20.37      $ 23.76      $ 27.16      $ 30.55      $ 33.94      $ 37.34  

Courtney also considered how these ranges may be affected by changes in the underlying assumptions, specifically earnings fluctuations. Courtney assumed a range of plus-30% to minus-30% for 2015 earnings to gauge the sensitivity of the analysis to earnings fluctuations, and discounted the resultant prices to the present using a discount rate of 12.5%.

 

     2020 Earnings per Share Multiples  

Budget Variance

   12.0x      14.0x      16.0x      18.0x      20.0x      22.0x      24.0x  
-30%    $ 13.35      $ 15.58      $ 17.80      $ 20.03      $ 22.25      $ 24.48      $ 26.70  
-20%    $ 15.26      $ 17.80      $ 20.34      $ 22.89      $ 25.43      $ 27.97      $ 30.51  
-10%    $ 17.16      $ 20.03      $ 22.89      $ 25.75      $ 28.61      $ 31.47      $ 34.33  
   0%    $ 19.07      $ 22.25      $ 25.43      $ 28.61      $ 31.79      $ 34.97      $ 38.14  
 10%    $ 20.98      $ 24.48      $ 27.97      $ 31.47      $ 34.97      $ 38.46      $ 41.96  
 20%    $ 22.89      $ 26.70      $ 30.51      $ 34.33      $ 38.14      $ 41.96      $ 45.77  
 30%    $ 24.79      $ 28.93      $ 33.06      $ 37.19      $ 41.32      $ 45.45      $ 49.59  

During the meeting of FNBB’s board of directors on December 11, 2017, Courtney noted that present value analyses are a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

Present Value Analysis—TriCo.

Courtney performed an analysis of the present value of shares of TriCo common stock under different market pricing scenarios. The analysis assumes that TriCo performs in accordance with Courtney’s financial projections for TriCo, and the estimates used were a combination of projections provided by management and independently developed by Courtney.

 

68


Table of Contents

In performing the Present Value analyses, Courtney applied an estimated price-to-earnings multiple ranging from 12.0x to 24.0x to TriCo’s projected 2020 earnings per share and an estimated price-to-book multiple ranging from 125% to 275% to TriCo’s projected 2020 tangible book value per share, resulting in an implied projected valuation. The projected stock prices were discounted to the present using discount rates of 10.0% to 15.0%. These analyses indicate that the present value of the TriCo’s future stock price based on a price-to-earnings multiple averaged $30.90 per share and ranged from $19.23 to $44.07 per share, and based on a price-to-book multiple averaged $34.34 per share and ranged from $20.04 to $50.51 per share.

 

     2020 Earnings per Share Multiples  

Discount Rate

   12.0x      14.0x      16.0x      18.0x      20.0x      22.0x      24.0x  
10%    $ 22.03      $ 25.71      $ 29.38      $ 33.05      $ 36.72      $ 40.39      $ 44.07  
11%    $ 21.43      $ 25.00      $ 28.57      $ 32.15      $ 35.72      $ 39.29      $ 42.86  
12%    $ 20.85      $ 24.33      $ 27.80      $ 31.28      $ 34.75      $ 38.23      $ 41.70  
13%    $ 20.29      $ 23.67      $ 27.05      $ 30.44      $ 33.82      $ 37.20      $ 40.58  
14%    $ 19.75      $ 23.04      $ 26.33      $ 29.62      $ 32.92      $ 36.21      $ 39.50  
15%    $ 19.23      $ 22.43      $ 25.64      $ 28.84      $ 32.05      $ 35.25      $ 38.46  

 

     2020 TBV per Share Multiples  

Discount Rate

   125%      150%      175%      200%      225%      250%      275%  
10%    $ 22.96      $ 27.55      $ 32.14      $ 36.73      $ 41.33      $ 45.92      $ 50.51  
11%    $ 22.33      $ 26.80      $ 31.26      $ 35.73      $ 40.20      $ 44.66      $ 49.13  
12%    $ 21.73      $ 26.07      $ 30.42      $ 34.76      $ 39.11      $ 43.45      $ 47.80  
13%    $ 21.14      $ 25.37      $ 29.60      $ 33.83      $ 38.06      $ 42.28      $ 46.51  
14%    $ 20.58      $ 24.70      $ 28.81      $ 32.93      $ 37.04      $ 41.16      $ 45.27  
15%    $ 20.04      $ 24.04      $ 28.05      $ 32.06      $ 36.07      $ 40.07      $ 44.08  

Courtney also considered how these ranges may be affected by changes in the underlying assumptions, specifically earnings fluctuations. Courtney assumed a range of plus-30% to minus-30% for 2015 earnings to gauge the sensitivity of the analysis to earnings fluctuations, and discounted the resultant prices to the present using a discount rate of 12.5%.

 

     2020 Earnings per Share Multiples  

Budget Variance

   12.0x      14.0x      16.0x      18.0x      20.0x      22.0x      24.0x  

-30%

   $ 14.40      $ 16.80      $ 19.20      $ 21.60      $ 24.00      $ 26.40      $ 28.79  

-20%

   $ 16.45      $ 19.20      $ 21.94      $ 24.68      $ 27.42      $ 30.17      $ 32.91  

-10%

   $ 18.51      $ 21.60      $ 24.68      $ 27.77      $ 30.85      $ 33.94      $ 37.02  

   0%

   $ 20.57      $ 24.00      $ 27.42      $ 30.85      $ 34.28      $ 37.71      $ 41.14  

 10%

   $ 22.62      $ 26.40      $ 30.17      $ 33.94      $ 37.71      $ 41.48      $ 45.25  

 20%

   $ 24.68      $ 28.79      $ 32.91      $ 37.02      $ 41.14      $ 45.25      $ 49.36  

 30%

   $ 26.74      $ 31.19      $ 35.65      $ 40.11      $ 44.56      $ 49.02      $ 53.48  

During the meeting of FNBB’s board of directors on December 11, 2017, Courtney noted that present value analyses are a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

 

69


Table of Contents

Comparable Transaction Analysis

Courtney reviewed certain publicly available information regarding nine selected merger and acquisition transactions from January 1, 2016 to December 8, 2017 involving commercial banks and bank holding companies headquartered in the West Region of the United States and includes banking sector transactions for which transaction pricing was available and in which the target bank had between $500 million and $10 billion in assets. The nine selected transactions are listed in the following table.

 

Buyer

  

Seller

Glacier Bancorp, Inc.    Inter-Mountain Bancorp, Inc.
Pacific Premier Bancorp, Inc.    Plaza Bancorp
Heritage Financial Corporation    Puget Sound Bancorp, Inc.
PacWest Bancorp    CU Bancorp
Columbia Banking System, Inc.    Pacific Continental Corporation
Pacific Premier Bancorp, Inc.    Heritage Oaks Bancorp
First Interstate BancSystem, Inc.    Cascade Bancorp
Mechanics Bank    California Republic Bancorp
Midland Financial Co.    1st Century Bancshares, Inc.

For each transaction, Courtney analyzed data illustrating, among other things, the multiple of purchase price to LTM earnings, the multiple of purchase price to tangible book value, and the ratio of the premium (i.e., purchase price in excess of tangible book value) to core deposits. The table below sets forth the transaction metrics for the peer transaction group.

 

Comparable Transaction Group Analysis

 
     Transaction Metrics  
     Price to
Tangible Book Value
(%)
     Price to
LTM Earnings
(x)
     Premium to
Core Deps
(%)
 

West Region Comparable Bank Transactions Average

     226.8        28.0        13.94  

West Region Comparable Bank Transactions Median

     215.1        26.9        12.51  

West Region Comparable Bank Transactions High

     316.9        43.2        21.40  

West Region Comparable Bank Transactions Low

     178.4        17.0        9.27  

Trico Banchares / FNB Bancorp

     271.3        24.6        20.97  

Pro Forma Accretion and Capitalization.

Courtney analyzed certain potential pro-forma effects of the proposed merger, based upon (1) per share transaction value equal to an exchange ratio of 0.9800, or approximately $40.81 per share as of December 11, 2017, (2) the projected 2017 through 2021 earnings for FNBB and TriCo, (3) charges, transaction costs, and purchase accounting adjustments determined by Courtney and the senior managements of FNBB and TriCo, and (4) expense savings of approximately 28% of FNBB’s non-interest expense base, which becomes fully phased in for 2019 and thereafter.

The analyses indicated that for the year ending December 31, 2018, the merger (excluding transaction expenses) would be accretive to TriCo’s projected earnings per share and would be moderately dilutive to TriCo’s tangible book value per share. The analyses also indicated that for the year ending December 31, 2018, the merger would maintain TriCo’s regulatory capital ratios significantly in excess of the regulatory guidelines for “well capitalized” status. The actual results achieved by the combined company, however, may vary from projected results and the variations may be material.

Miscellaneous.

FNBB has agreed to pay Courtney a transaction fee in connection with the merger equal to 1% of the primary transaction value, all of which is contingent, and payable, upon closing of the merger. As of December 11, 2017,

 

70


Table of Contents

the transaction fee would equal approximately $3,020,000. FNBB has also agreed to reimburse certain of Courtney’s reasonable out-of-pocket expenses incurred in connection with its engagement and to indemnify Courtney and its affiliates and their respective partners, directors, officers, employees, agents, and controlling persons against certain expenses and liabilities, including liabilities under the securities laws.

Courtney has not previously provided investment banking services to FNBB nor has it received any compensation from FNBB in the past. Mr. Allen, a principal of Courtney, has provided certain investment banking services to FNBB and the investment banking firms with which he was employed at the time of such transactions and received compensation for such services, including in connection with FNBB’s acquisition of America California Bank in 2015, the acquisition of Oceanic Bank in 2012, and the acquisition of Sequoia National Bank in 2004. In the ordinary course of its respective broker and dealer businesses, Courtney may purchase securities from, and sell securities to, FNBB and their affiliates. Courtney may also actively trade the debt and/or equity securities of FNBB or its affiliates for their own accounts and for the accounts of their customers and, accordingly, may at any time hold a long or short position in such securities.

The Merger Consideration

General.

At the effective time of the merger, each share of FNBB common stock outstanding immediately before the effective time of the merger, will, by virtue of the merger and without any action on the part of an FNBB shareholder, be converted into the right to receive whole shares of common stock of TriCo. Cash will be paid in lieu of fractional shares of TriCo common stock. Since the federal income tax consequences will be dependent on the form of consideration received, you are urged to read carefully the information set forth below under “—Material Federal Income Tax Consequences” beginning on page [●].

Merger Consideration.

Upon consummation of the merger, each share of FNBB common stock issued and outstanding immediately prior to the effective time of the merger will be canceled and converted into the right to receive 0.98 shares of TriCo common stock, which is referred to as the exchange ratio. The exchange ratio is subject to potential adjustment. See “Potential Adjustment to Exchange Ratio on page [●]. Upon completion of the merger, and based on [●] shares of FNBB common stock outstanding as of the date of this joint proxy statement/prospectus and assuming the TriCo average closing price is $33.18 or more and $49.78 or less, FNBB shareholders are expected to receive an aggregate of [●] shares of TriCo common stock, which does not include shares of TriCo common stock issuable to holders of FNBB options that will accelerate in their vesting and be canceled in exchange for cash payments in connection with the closing of the merger. Following the completion of the merger, and based on [●] shares of TriCo common stock outstanding as of [●], 2018, the former FNBB shareholders will own approximately 24% of the outstanding shares of TriCo common stock and the current shareholders of TriCo will own the remaining approximately 76% of the outstanding shares of TriCo common stock.

Aggregate Merger Consideration.

The total consideration to be paid by TriCo to the FNBB shareholders in connection with the merger is referred to in this joint proxy statement/prospectus as the aggregate merger consideration. The term aggregate merger consideration does not include the consideration, if any, payable to holders of FNBB options.

Upon completion of the merger and based on a $[●] closing price of TriCo’s common stock on [●], 2018, approximately $[●] million of aggregate merger consideration will be payable to the FNBB shareholders. The foregoing sentence does not include the payment of cash to the holders of FNBB options or the value of shares of TriCo common stock that will be issued on account of FNBB options that are exercised between [●], 2018 and the date of the merger and assumes (i) there are [●] shares of FNBB common stock outstanding at the closing and

 

71


Table of Contents

(ii) FNBB shareholders will receive an aggregate of [●] shares of TriCo common stock after applying the exchange ratio of 0.98 without any adjustment on account of the trading collar.

Potential Adjustment to Exchange Ratio.

The merger agreement includes a trading collar that could result in termination of the merger agreement or a change to the exchange ratio.

If the TriCo average closing price is $33.18 or more and $49.78 or less, the exchange ratio will remain unchanged at 0.98 shares of TriCo common stock.

However, TriCo can elect to terminate the merger agreement if both (i) the TriCo average closing price is greater than $49.78, which equals 120% of the average share price of TriCo common stock for the 20 trading-day period up to and including December 8, 2017, which was $41.48, which we refer to as the “initial TriCo trading price,” and (ii) TriCo common stock outperforms the KBW Nasdaq Regional Banking Index by more than 20%. Under the merger agreement, the performance of the KBW Nasdaq Regional Banking Index is determined by dividing the average closing value of the KBW Nasdaq Regional Banking Index for the 20 trading-day period ending on the fifth business day prior to the closing date of the merger by 109.24, which was closing value of the KBW Nasdaq Regional Banking Index on last trading day prior to the date of the merger agreement. We refer to this ratio as the index ratio. If TriCo elects to terminate the merger agreement under these circumstances, the merger agreement allows FNBB to prevent TriCo from terminating the merger agreement for this reason by allowing the exchange ratio to decrease to the lesser of (a) the quotient (rounded to the nearest one-thousandth) of $49.78 divided by the TriCo average closing price and (b) the quotient (rounded to the nearest one-thousandth) of $49.78 divided by the TriCo average closing price multiplied by the index ratio. In such a case, fewer shares of TriCo common stock would be issued to FNBB shareholders.

The following table illustrates how the exchange ratio would adjust for a range of TriCo average closing prices greater than $49.78, assuming that TriCo common stock outperformed the index ratio by more than 20%.

 

Assumed TriCo average

closing price 

   Exchange ratio (1)    Aggregate number of
shares of TriCo
common stock to be
issued in the merger
   Aggregate value
of the shares of
TriCo common
stock to be issued
in the merger
(in thousands)
   Value of merger
consideration per
share of FNBB
common stock (2)
$59.73    0.833    6,169,892    $368,535    $49.78
$57.24    0.870    6,438,149    $368,535    $49.78
$54.75    0.909    6,730,792    $368,535    $49.78
$52.26    0.952    7,051,306    $368,535    $49.78

 

(1) The adjusted exchange ratio assumes that the index ratio is 1.0. The actual index ratio will depend on the average closing value of the KBW Nasdaq Regional Banking Index for the 20 trading-day period ending on the fifth business day prior to the closing date of the merger.
(2) The value of the merger consideration per share of FNBB common stock is determined by multiplying the assumed average closing share price of TriCo common stock by the adjusted exchange ratio.

Conversely, FNBB can terminate the merger agreement if both (i) the TriCo average closing price is less than $33.18, which is equivalent to 80% of the initial TriCo trading price, and (ii) TriCo common stock underperforms the KBW Nasdaq Regional Banking Index by more than 20%. If FNBB elects to terminate the merger agreement under these circumstances, the merger agreement allows TriCo to prevent FNBB from terminating the merger agreement for this reason by allowing the exchange ratio to increase to the lesser of (a) the quotient (rounded to the nearest one-thousandth) of $33.18 divided by the TriCo average closing price and (b) the quotient (rounded to the nearest one-thousandth) of $33.18 divided by the TriCo average closing price multiplied by the index ratio. In such a case, more shares of TriCo common stock would be issued to FNBB shareholders.

 

72


Table of Contents

The following table illustrates how the exchange ratio would adjust for a range of TriCo average closing prices less than $33.18, assuming that TriCo common stock underperforms the index ratio by more than 20%.

 

Assumed TriCo average

closing price

   Exchange ratio (1)    Aggregate number of
shares of TriCo
common stock to be
issued in the merger
   Aggregate value
of the shares of
TriCo common
stock to be issued
in the merger
(in thousands)
   Value of merger
consideration per

share of FNBB
common stock (2)
$31.52    1.053    7,791,983    $245,641    $33.18
$28.37    1.169    8,657,759    $245,641    $33.18
$24.12    1.376    10,185,598    $245,641    $33.18
$19.29    1.720    12,731,998    $245,641    $33.18

 

(1) The adjusted exchange ratio assumes that the index ratio is 1.0. The actual index ratio will depend on the average closing value of the KBW Nasdaq Regional Banking Index for the 20 trading-day period ending on the fifth business day prior to the closing date of the merger.
(2) The value of the merger consideration per share of FNBB common stock is determined by multiplying the assumed average closing share price of TriCo common stock by the adjusted exchange ratio.

Fractional Shares.

No fractional shares of TriCo common stock will be issued, and in lieu thereof, each holder of FNBB common stock who would otherwise be entitled to a fractional share will receive an amount in cash, without interest, determined by multiplying such fractional interest by the average share closing price of TriCo common stock, rounded to the nearest whole cent. No such holder shall be entitled to dividends, voting rights or any other rights in respect of any fractional share of TriCo common stock.

FNBB Stock Options

The board of directors of FNBB will approve the acceleration of the vesting of FNBB stock options held by directors, officers and employees of FNBB or its subsidiaries.

Each outstanding and unexercised FNBB option will be canceled in exchange for a cash payment equal to the number of shares of FNBB common stock that are subject to such FNBB option immediately prior to the closing of the merger multiplied by the amount, if positive, by which the product of the exchange ratio multiplied by the TriCo average closing price exceeds the per share exercise price under such FNBB option.

Procedures for Exchanging FNBB Common Stock Certificates

Promptly following the closing of the merger, Computershare, who will serve as the exchange agent for the merger, will mail to each holder of record of FNBB common stock a notice and form of transmittal letter advising such holder of the effectiveness of the merger and the procedure for surrendering to the exchange agent certificates representing shares or book-entry shares of FNBB common stock in exchange for the merger consideration allocated to them. Upon surrender of a stock certificate or book-entry shares of FNBB common stock for exchange and cancellation to the exchange agent, together with a duly executed transmittal letter, the holder of such certificate or book-entry shares will be entitled to receive the merger consideration allocated to him or her and the certificate or book-entry shares for FNBB common stock so surrendered will be canceled. No interest will be paid or accrued on any cash paid in lieu of fractional shares of TriCo common stock.

FNBB shareholders who surrender their stock certificates or book-entry shares and complete the transmittal materials, or who have taken other steps to surrender the evidence of their in FNBB common stock in accordance with the instructions accompanying the transmittal letter, will, upon the exchange agent’s acceptance of such

 

73


Table of Contents

stock certificates or book-entry shares and transmittal materials or other evidence, be entitled to evidence of issuance in book entry form, or upon written request of such holder, a certificate or certificates representing, the number of whole shares of TriCo common stock in to which the aggregate number of shares of FNBB common stock surrendered have been converted pursuant to the merger agreement.

Any FNBB shareholder who receives shares of TriCo common stock in the merger will receive dividends on TriCo common stock or other distributions declared after the completion of the merger only if he or she has surrendered his or her FNBB stock certificates or book-entry share. Only then will the FNBB shareholder be entitled to receive all previously withheld dividends and distributions, which may have been declared on TriCo common stock following the closing of the merger without interest.

After completion of the merger, no transfers of FNBB common stock issued and outstanding immediately prior to the completion of the merger will be allowed. FNBB stock certificates or book-entry shares that are presented for transfer after the completion of the merger will be canceled and exchanged for the appropriate merger consideration.

TriCo will only issue a TriCo stock certificate in a name other than the name in which a surrendered FNBB stock certificate is registered if an FNBB shareholder presents the exchange agent with all documents required to show and effect the unrecorded transfer of ownership of the shares of FNBB common stock formerly represented by such FNBB stock certificate, and that the FNBB shareholder has paid any applicable stock transfer fees and taxes.

If an FNBB shareholder has lost his or her FNBB stock certificate, or the FNBB stock certificate has been lost, stolen or destroyed, the FNBB shareholder may be required to deliver an affidavit and a lost certificate bond as a condition to receiving any merger consideration to which he or she may be entitled.

Conditions to the Merger

Completion of the merger is subject to the satisfaction of certain conditions set forth in the merger agreement, or the waiver of such conditions by the party entitled to do so, at or before the closing date of the merger. Each of the parties’ obligation to consummate the merger under the merger agreement is subject to the following conditions:

 

  the holders of a majority of the outstanding shares of TriCo common stock must approve the TriCo merger proposal;

 

  the holders of a majority of the outstanding shares of FNBB common stock must approve the FNBB merger proposal;

 

  all regulatory approvals required to consummate the merger by any governmental authority must have been obtained and must remain in full force and effect, all statutory waiting periods in respect thereof must have expired, and no required approval may contain any condition, restriction or requirement (other than a condition or requirement related to remedial actions) which TriCo’s board of directors reasonably determines in good faith would, individually or in the aggregate, materially reduce the economic benefits of the merger to such a degree that TriCo, in its reasonable discretion, would not have entered into the merger agreement had such conditions, restrictions or requirements been known at the date of the merger agreement;

 

  no statute, rule, regulation, judgment, decree, injunction or other order shall have been enacted, issued, promulgated, enforced or entered which prohibits the consummation of the merger;

 

  the registration statement of TriCo, of which this document is a part, must have become effective under the Securities Act of 1933, as amended, or the Securities Act, and no stop order suspending the effectiveness of such registration statement shall have been issued and no proceedings for that purpose shall have been initiated by the SEC and not withdrawn;

 

74


Table of Contents
  the shares of TriCo common stock to be issued in connection with the merger must have been approved for listing on the NASDAQ Global Select Market (or on any securities exchange on which the TriCo common stock may then be listed); and

 

  each of TriCo and FNBB must have received an opinion of Sheppard Mullin to the effect that the merger will constitute a reorganization within the meaning of Section 368(a) of the Code.

In addition to the foregoing conditions, the obligation of TriCo to consummate the merger under the merger agreement is subject to the following conditions, which may be waived by TriCo:

 

  the representations and warranties of FNBB in the merger agreement must be true and correct as of the date of the merger agreement and as of the effective time of the merger, except as to any representation or warranty which specifically relates to an earlier date and other than, in most cases, those failures to be true and correct that have not had or are reasonably likely not to have a material adverse effect (as defined below) on FNBB, and TriCo shall have received a certificate signed by the chief executive officer and chief financial officer of FNBB to that effect;

 

  FNBB must have performed in all material respects all obligations required to be performed by it at or prior to consummation of the merger, and TriCo shall have received a certificate signed by the chief executive officer and chief financial officer of FNBB to that effect;

 

  as of the closing date, FNBB’s tangible common equity (as defined and subject to certain specified adjustments set forth in the merger agreement) must not be less than $119 million;

 

  all regulatory approvals required to consummate the bank merger by any governmental authority must have been obtained and must remain in full force and effect, all statutory waiting periods in respect thereof must have expired; no statute, rule, regulation, judgment, decree, injunction or other order shall have been enacted, issued, promulgated, enforced or entered which prohibits the consummation of the bank merger;

 

  TriCo must have received an opinion from VP Tax, Inc., or another nationally recognized accounting firm reasonably acceptable to TriCo, that no agreement, contract or arrangement to which any employee of FNBB is a party will result in the payment of any amount that would not be deductible by reason of Section 280G of the Code, as determined without regard to Section 280G(b)(4) of the Code; and

 

  TriCo must have received such certificates of FNBB’s officers or others and such other documents to evidence fulfillment of the conditions to its obligations as TriCo may reasonably request.

In addition to the other conditions set forth above, the obligation of FNBB to consummate the merger under the merger agreement is subject to the following conditions, which may be waived by FNBB:

 

  the representations and warranties of TriCo in the merger agreement must be true and correct as of the date of the merger agreement and as of the effective time of the merger, except as to any representation or warranty which specifically relates to an earlier date and other than those failures to be true and correct that have not had or are reasonably likely not to have a material adverse effect (as defined below) on TriCo, and FNBB shall have received a certificate signed by the chief executive officer and chief financial officer of TriCo to that effect;

 

  TriCo must have performed in all material respects all obligations required to be performed by it at or prior to consummation of the merger, and FNBB shall have received a certificate signed by the chief executive officer and chief financial officer of TriCo to that effect; and

 

  FNBB must have received such certificates of TriCo’s officers or others and such other documents to evidence fulfillment of the conditions to its obligations as FNBB may reasonably request.

Under the terms of the merger agreement, a material adverse effect on either TriCo or FNBB is defined to mean any effect that (i) is material and adverse to the financial condition, results of operations or business of TriCo and its subsidiaries taken as a whole or FNBB and its subsidiaries taken as a whole, as the case may be, or (ii) would

 

75


Table of Contents

materially impair the ability of TriCo and its subsidiaries taken as a whole or FNBB and its subsidiaries taken as a whole, as the case may be, to perform their respective obligations under the merger agreement or otherwise materially impede the consummation of the merger. However, under the terms of the merger agreement, none of the following would be deemed to constitute a material adverse effect under subclause (i) above:

 

  changes after December 11, 2017 in laws or regulations of general applicability to banks and their holding companies generally or interpretations of them by governmental authorities;

 

  changes after December 11, 2017 in GAAP or regulatory accounting requirements applicable to banks or their holding companies generally;

 

  any outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism;

 

  changes resulting from conditions affecting the banking and financial services industry or changes in global, national or regional political conditions or market conditions (including changes in prevailing interest rates or exchange rates) affecting banks and their holding companies generally;

 

  the public announcement or pendency of the merger, including the impact of the merger on relationships with customers or employees or the incurrence by FNBB and its subsidiaries of merger related expenses;

 

  any modifications or changes to valuation policies and practices in connection with the merger or restructuring charges taken in connection with the merger, in each case in accordance with GAAP;

 

  the failure to meet earnings projections or internal financial forecasts, but not including the underlying causes unless otherwise excluded, or changes in the trading price or volume of TriCo’s or FNBB’s common stock, but not including the underlying causes unless otherwise excluded; and

 

  with respect to FNBB, the effects of any action or omission taken with the prior consent of TriCo or as otherwise contemplated by the merger agreement,

provided that the effect of the changes described in the first, second, third and fourth bullet points above will not be excluded as a material adverse effect to the extent of a materially disproportionate impact, if any, that they have on TriCo and its subsidiaries as a whole on the one hand, or FNBB and its subsidiaries on the other hand, as measured relative to similarly situated companies in the banking industry.

Bank Regulatory Approvals

The merger cannot be completed unless the parties receive prior approvals from the FDIC, CDBO and the Federal Reserve.

California Department of Business Oversight—Division of Financial Institutions; FDIC

In order to consummate the merger, the prior approval of the CDBO for the bank merger is be required under the California Financial Code, or “CFC,” and the prior approval of the FDIC is be required for the bank merger under the Bank Merger Act. In reviewing the bank merger, the CDBO and the FDIC take competitive considerations into account, as well as capital adequacy, quality of management and earnings prospects. The FDIC also considers the record of performance of Tri Counties Bank in meeting the credit needs of the communities that it serves and Tri Counties Bank’s regulatory rating under the Community Reinvestment Act, or CRA. Tri Counties Bank and First National Bank both received a composite “satisfactory” performance rating in their most recent CRA evaluations. In considering the merger, the CFC also requires the CDBO to consider whether the proposed transaction will be fair, just, and equitable to the bank being acquired and the surviving depository institution. In connection with the filing of the application, the FDIC will provide an opportunity for public comment on the application and is authorized to hold a public meeting or other proceeding if it determines such meeting or proceeding would be appropriate.

Any transaction approved by the FDIC under the Bank Merger Act may not be completed until 30 days after the FDIC’s approval, during which time the U.S. Department of Justice may challenge such transaction on antitrust grounds. With the approval of the FDIC and the U.S. Department of Justice, the waiting period may be reduced

 

76


Table of Contents

to 15 days. While TriCo and FNBB do not know of any reason that the U. S. Department of Justice would challenge regulatory approval by the FDIC and believe that the likelihood of such action is remote, there can be no assurance that the U.S. Department of Justice will not initiate such a proceeding, or if such a proceeding is initiated, the result of any such challenge.

Board of Governors of the Federal Reserve System.

TriCo is a bank holding company under the Bank Holding Company Act of 1956, as amended, which we refer to as the BHC Act. The Federal Reserve is TriCo’s primary federal banking regulator. TriCo has filed an application with the Federal Reserve under Section 3 of the BHC Act for the transactions contemplated by the merger agreement. In considering the approval of a transaction such as the merger, the BHC Act requires the Federal Reserve to review, with respect to the bank holding companies and the banks concerned: (1) the competitive impact of the transaction, (2) the financial condition and future prospects, including capital positions and managerial resources, (3) the convenience and needs of the communities to be served and the record of the insured depository institution subsidiaries of the bank holding companies under the CRA, (4) the effectiveness of the companies and the depository institutions concerned in combating money laundering activities, and (5) the extent to which the proposal would result in greater or more concentrated risks to the stability of the United States banking or financial system. In connection the filing of the application, the Federal Reserve will provide an opportunity for public comment on the application and is authorized to hold a public meeting or other proceeding if it determines such meeting or other proceeding would be appropriate.

Other Regulatory Approvals.

In connection with its anticipated merger into Tri Counties Bank, First National Bank is required to provide a notice to its primary federal regulator, the OCC. First National Bank has provided that notice to the OCC.

Neither TriCo nor FNBB is aware of any other regulatory approvals that would be required for completion of the merger except as described above. Should any other approvals be required, it is presently contemplated that such approvals would be sought. There can be no assurance, however, that any other approvals, if required, will be obtained.

Status of Applications.

TriCo has filed all required applications and notices with the FDIC, CDBO, the Federal Reserve and the OCC. The CDBO has approved TriCo’s application. The applications filed with the FDIC and Federal Reserve are pending. There can be no assurance that all requisite approvals will be obtained, that such approvals will be received on a timely basis or that such approvals will not impose conditions, restrictions or requirements (other than conditions or requirements related to remedial actions) which, individually or in the aggregate, would so materially reduce the economic benefits of the transactions contemplated by the merger agreement to TriCo that had such condition, restriction or requirement been known or could reasonably have been known, TriCo, in its reasonable, good faith judgment, would not have entered into the merger agreement. If any such condition or requirement is imposed, TriCo, in its reasonable discretion, may elect not to consummate the merger. See “—Conditions to the Merger” beginning on page [●]. The approval of any application or notice merely implies satisfaction of regulatory criteria for approval, and does not include review of the merger from the standpoint of the adequacy of the merger consideration to be received by, or fairness to, FNBB shareholders. Regulatory approval does not constitute an endorsement or recommendation of the proposed merger.

Business Pending the Merger

The merger agreement contains certain covenants of the parties regarding the conduct of their respective businesses pending consummation of the merger. These covenants, which are contained in Article IV of the merger agreement included as Appendix A to this joint proxy statement/prospectus, are briefly described below.

 

77


Table of Contents

Pending consummation of the merger, FNBB may not, and will cause each of its subsidiaries not to, among other things, take the following actions without the prior written consent of TriCo, except as expressly contemplated or permitted by the merger agreement:

 

  conduct its business other than in the ordinary and usual course consistent with past practice or fail to use commercially reasonable best efforts to preserve its business organization, keep available the present services of its employees (except in the case of terminations of employees for cause) and preserve for itself and TriCo the goodwill of the customers of FNBB, its subsidiaries and others with whom business relations exist;

 

  except for the issuances of shares of FNBB common stock pursuant to previously issued FNBB options, issue, sell or otherwise permit to become outstanding, or authorize the creation of, any additional shares of capital stock or rights to acquire stock, or permit any additional shares of stock to become subject to grants of employee or director stock options or other rights;

 

  except for FNBB regular quarterly cash dividends equal to $0.13 per share, with record and payment dates consistent with past practice, make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares on its capital stock, or directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire any shares of its capital stock;

 

  enter into or amend or renew any employment, consulting, severance, change in control, bonus, salary continuation or similar agreement or arrangement with any director or senior officer of FNBB or its subsidiaries, grant any salary or wage increase or increase any employee benefit, except for changes that are required by applicable law or as previously disclosed to TriCo, provided that the FNBB’s board of directors may, after conferring with TriCo, establish a discretionary bonus and retention pool providing for bonus and retention payments of up to $2,543,000;

 

  hire any person as an employee of FNBB or any of its subsidiaries or promote any employee except (i) to satisfy contractual obligations existing as of the date of the merger agreement and previously disclosed to TriCo, and (ii) persons hired to fill a vacancy existing as of the date of the merger agreement and previously disclosed to TriCo or (iii) vacancies arising after the date of the merger agreement, provided that the person’s employment is terminable at the will of FNBB or a subsidiary of FNBB, the person has the a salary or wage and target cash bonus opportunity not greater than that of the employee who previously held such position or and the person is not subject to or eligible for any severance or similar benefits or payments that would become payable as a result of the merger or its consummation;

 

  enter into, establish, adopt, amend, or terminate or make any contributions to (except (i) as may be required by applicable law or (ii) as required under the terms of a contract, plan, arrangement or agreement existing as of the date of the merger agreement and previously disclosed to TriCo) any employee benefit plan with respect to any current or former director, officer, or employee of FNBB or any of its subsidiaries, or take any action to accelerate the vesting or exercisability of stock options, restricted stock or other compensation or benefits payable thereunder, except that FNBB may accelerate the vesting and exercisability of FNBB options with respect to employees, directors and other service providers not being retained by TriCo or its subsidiaries;

 

  sell, transfer, mortgage, encumber or otherwise dispose of or discontinue any of its material assets, deposits, business or properties, except for sales, transfers and dispositions in the ordinary course of business, consistent with past practices and not material to FNBB and its subsidiaries taken as a whole;

 

  acquire (other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary and usual course of business consistent with past practice), including without limitation, by merger or consolidation or by investment in a partnership or joint venture, all or any portion of the assets, business, securities, deposits or properties of any other entity;

 

  make any capital expenditures, other than capital expenditures in the ordinary course of business consistent with past practice not exceeding $50,000 individually or $100,000 in the aggregate;

 

78


Table of Contents
  amend the FNBB articles of incorporation or bylaws or the articles of incorporation or bylaws of any subsidiary of FNBB;

 

  implement or adopt any change in its accounting principles, practices or methods other than as may be required by changes in laws or regulations or GAAP;

 

  except as otherwise permitted under the merger agreement, enter into, cancel, fail to renew, terminate, amend, or modify any material contract or amend or modify in any material respect any of its existing material contracts;

 

  enter into any settlement or similar agreement with respect to any claims if the settlement, agreement, or action involves payment by FNBB or any of its subsidiaries of an amount that exceeds $50,000 and/or would impose any material restriction on the business of FNBB or any of its subsidiaries or create precedent for claims that reasonably are likely to be material to FNBB or any of its subsidiaries;

 

  enter into any new material line of business; introduce any material new products or services; change its material banking and operating policies, except as required by applicable law, regulation or policy, or the manner in which its investment securities or loan portfolio is classified or reported; or invest in any mortgage-backed or mortgage-related security that would be risk-weighted over 100%; or file any application or enter into any contract with respect to the opening, relocation or closing of, or open, relocate or close, any branch, office, service center or other facility;

 

  introduce any material marketing campaigns or any material sales compensation or incentive programs or arrangements (except if the material terms have been fully disclosed in writing to TriCo prior to the date of the merger agreement);

 

  except as previously disclosed to TriCo, enter into any derivatives contract;

 

  incur any indebtedness for borrowed money (other than certain short-term borrowings) or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other person, other than with respect to the collection of checks and other negotiable instruments in the ordinary course of business consistent with past practice;

 

  except as previously disclosed to TriCo, acquire (other than by way of foreclosures or acquisitions in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary course of business consistent with past practice) any debt security or equity investment or dispose of any debt security or equity investment;

 

  (i) make, renew or modify any loan, loan commitment, letter of credit or other extension of credit, which are collectively referred to as the loans, other than loans made in the ordinary course of business consistent with past practice that are not in excess of $1.0 million (with any loan in excess of $1.0 million subject to TriCo’s review and consent); (ii) take any action that would result in any discretionary release of collateral or guarantees, or otherwise restructure the respective amounts of any loan in clause (i) above; (iii) enter into any loan securitization or create any special purpose funding entity; or (iv) enter into any loan participation agreement or arrangement, except for loan participations entered into in the ordinary course of business consistent with past practice where the total exposure does not exceed $1.0 million;

 

  make any investment or commitment to invest in real estate or in any real estate development project (other than by way of foreclosure or acquisitions in a bona fide fiduciary capacity or in satisfaction of a debt previously contracted in good faith, in each case in the ordinary course of business consistent with past practice);

 

  except as previously disclosed to TriCo, make or change any tax election, settle or compromise any tax liability of FNBB or any of its subsidiaries, agree to an extension or waiver of the statute of limitations with respect to the assessment or determination of an amount of taxes of FNBB or any of its subsidiaries, enter into any closing agreement with respect to any amount of taxes or surrender any right to claim a tax refund, adopt or change any method of accounting with respect to taxes or any of its subsidiaries or file any amended tax return;

 

79


Table of Contents
  take any action that would cause the merger agreement or the merger to be subject to the provisions of any state antitakeover law or state law that purports to limit or restrict business combinations or the ability to acquire or vote shares, or to exempt or make not subject to the provisions of any state antitakeover law or state law that purports to limit or restrict business combinations or the ability to acquire or vote shares, any person (other than TriCo or its subsidiaries) or any action taken thereby, if that person or action would otherwise have been subject to the restrictive provisions of that law;

 

  make or propose to make any loan to or enter into any transaction with FNBB or any of its subsidiaries or any of their respective officers, directors or affiliates, except that First National Bank may renew Regulation O compliant loans and originate new Regulation O compliant loans that are not objected to by TriCo;

 

  take any action that would or is reasonably likely to result in (i) the merger not qualifying as a “reorganization” within the meaning of Section 368(a) of the Code, (ii) any of the representations and warranties of FNBB set forth in the merger agreement being or becoming untrue in any material respect at or prior to the effective time of the merger, (iii) any of the conditions to the merger set forth in the merger agreement not being satisfied, (iv) a material violation of any provision of the merger agreement, except as may be required by applicable law and regulation, (v) a material delay in the ability of TriCo or FNBB to perform any of their obligations under the merger agreement on a timely basis, or (vi) a material delay in the ability of TriCo to obtain any required regulatory approvals; or

 

  enter into any contract with respect to, or otherwise agree or commit to do, any of the foregoing.

The merger agreement also provides that pending consummation of the merger, TriCo may not, and will cause each of its subsidiaries not to, take the following actions without the prior written consent of FNBB:

 

  conduct its business other than in the ordinary and usual course consistent with past practice or fail to use commercially reasonable best efforts to preserve its business organization and preserve for itself and FNBB the goodwill of the customers of TriCo and its subsidiaries and others with whom business relations exist;

 

  take any action that is intended or is reasonably likely to result in (i) the merger not qualifying as a “reorganization” within the meaning of Section 368(a) of the Code, (ii) any of the representations and warranties of TriCo set forth in the merger agreement being or becoming untrue in any material respect at or prior to the effective time of the merger, (iii) any of the conditions to the merger set forth in the merger agreement not being satisfied, (iv) a material violation of any provision of the merger agreement, except as may be required by applicable law and regulation, (v) a material delay in the ability of TriCo or FNBB to perform any of their obligations under the merger agreement on a timely basis, or (vi) a material delay in the ability of TriCo to obtain any required regulatory approvals; or enter into any contract with respect to, or otherwise agree or commit to do, any of the foregoing.

The merger agreement contains certain covenants of the parties regarding their respective obligations pending consummation of the merger. These covenants, which are contained in Article VI of the merger agreement included as Appendix A, include covenants regarding, among others, the obligations of the parties to prepare and file the registration statement of TriCo of which this joint proxy statement/prospectus is a part; FNBB’s agreement to share certain information with TriCo; FNBB’s agreement to cooperate with TriCo to effect the discharge of FNBB’s borrowings from the Federal Home Loan Bank of San Francisco prior to the effective time of the merger; the provision of notices to FNBB’s customers prior to the merger; FNBB’s commitment to use commercially reasonable efforts to sell certain real property acquired upon foreclosure of a loan; and other covenants discussed elsewhere in this joint proxy statement/prospectus.

FNBB Board of Directors’ Covenant to Recommend the Merger Agreement

Pursuant to the merger agreement, the FNBB board of directors is required to recommend that FNBB shareholders approve the FNBB merger proposal at all times prior to and during the FNBB special meeting at which the merger agreement is to be considered by them. The FNBB board of directors may not withdraw, modify or qualify in any manner adverse to TriCo such recommendation or take any other action or make any other public statement in connection with the FNBB special meeting inconsistent with such recommendation,

 

80


Table of Contents

except as described below. Regardless of whether the FNBB board of directors changes its recommendation, the merger agreement must be submitted to the FNBB shareholders at the FNBB special meeting for the purpose of approving the merger agreement and any other matters required to be approved by FNBB’s shareholders for consummation of the transaction. FNBB may not submit to the vote of its shareholders any acquisition proposal other than the merger.

The FNBB board of directors is permitted to change its recommendation if FNBB has complied with the merger agreement and the FNBB board of directors, based on the advice of its outside counsel and financial advisor, has determined in good faith that failure to do so would result in a violation of the board of directors’ fiduciary duties under applicable law. If the FNBB board of directors intends to change its recommendation following an acquisition proposal, as described in “—No Solicitation” below, it must have first concluded in good faith, after giving effect to all of the adjustments to the terms and conditions of the merger agreement that may be offered by TriCo, that another acquisition proposal constitutes a superior proposal, as defined in “—No Solicitation” below. FNBB also must notify TriCo at least five business days in advance of its intention to change its recommendation in response to the superior proposal, including the identity of the party making the acquisition proposal, and furnish to TriCo all of the material terms and conditions of such superior proposal. Prior to changing its recommendation, FNBB must, and must cause its financial and legal advisors to, during the period following its delivery of the required notice, negotiate in good faith with TriCo for a period of up to five business days to the extent TriCo desires to negotiate to make adjustments in the terms and conditions of the merger agreement so that the other acquisition proposal ceases to constitute a superior proposal.

Pursuant to the merger agreement, the TriCo board of directors is required to recommend that TriCo shareholders approve the of TriCo merger proposal the shareholders of FNBB in connection with the merger and any other matters required to be approved by TriCo shareholders for consummation of the merger at all times prior to and during the TriCo special meeting.

No Solicitation

The merger agreement provides that FNBB will, and will direct and use its reasonable best efforts to cause its affiliates, directors, officers, employees, agents and representatives to, immediately cease any discussions or negotiations with any other parties that have been ongoing with respect to the possibility or consideration of any acquisition proposal and will use its reasonable best efforts to enforce any confidentiality or similar agreement relating to any acquisition proposal. For purposes of the merger agreement, “acquisition proposal” is defined to mean any inquiry, proposal or offer, filing of any regulatory application or notice, whether in draft or final form, or disclosure of an intention to do any of the foregoing from any person relating to any (i) direct or indirect acquisition or purchase of a business that constitutes 10% or more of the total revenues, net income, assets, or deposits of FNBB and its subsidiaries taken as a whole; (ii) direct or indirect acquisition or purchase of any class of equity securities representing 10% or more of the voting power of FNBB or First National Bank; (iii) tender offer or exchange offer that if consummated would result in any person beneficially owning 10% or more of any class of equity securities of FNBB or First National Bank; or (iv) merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving FNBB or First National Bank, other than the transactions contemplated by the merger agreement.

From the date of the merger agreement through the effective time of the merger, FNBB will not, and will use reasonable efforts to cause its directors, officers or employees or any other representative retained by it not to, directly or indirectly through another person (i) solicit, initiate, or encourage, including by way of furnishing information or assistance, or take any other action designed to facilitate or that is likely to result in, any inquiries or the making of any proposal or offer that constitutes, or is reasonably likely to lead to, any acquisition proposal, (ii) provide any confidential information or data to any person relating to any acquisition proposal, (iii) participate in any discussions or negotiations regarding any acquisition proposal, (iv) waive, terminate, modify, or fail to enforce any provision of any contractual “standstill” or similar obligations of any person other than TriCo or its affiliates, (v) approve or recommend, propose to approve or recommend, or execute or enter into, any letter of intent, agreement in principle, merger agreement, asset purchase agreement or share exchange

 

81


Table of Contents

agreement, option agreement or similar agreement related to any acquisition proposal or propose to take any of these actions, or (vi) make or authorize any statement, recommendation, or solicitation in support of any acquisition proposal.

However, prior to the date of the FNBB special meeting, if the FNBB board of directors determines in good faith, after consulting with its outside legal and financial advisors, that the failure to do so would breach, or would reasonably be expected to result in a breach of, its fiduciary duties under applicable law, FNBB may, in response to a bona fide, written acquisition proposal not solicited in violation of the merger agreement that the FNBB board of directors determines in good faith constitutes a superior proposal, subject to providing two business days prior written notice of its decision to take such action to TriCo and identifying the person making the proposal and all the material terms and conditions of the proposal and compliance with the merger agreement:

 

  furnish information with respect to itself and its subsidiaries to any person making the superior proposal pursuant to a customary confidentiality agreement, as determined by FNBB after consultation with its outside counsel, on terms no more favorable to the person than the terms contained in the confidentiality agreement between FNBB and TriCo are to TriCo; and

 

  participate in discussions or negotiations regarding the superior proposal.

For purposes of the merger agreement, “superior proposal” is defined to mean any bona fide written proposal made by a third party to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction, for consideration consisting of cash and/or securities, more than 50% of the combined voting power of the shares of FNBB common stock then outstanding or all or substantially all of FNBB’s consolidated assets, that the FNBB board of directors determines in good faith, after taking into account all legal, financial, regulatory, and other aspects of the proposal and the person making the proposal, including any break-up fees, expense reimbursement provisions, and conditions to consummation, and after taking into account the advice of FNBB’s financial advisor, which will be a recognized investment banking firm, and outside counsel, (1) is more favorable from a financial point of view to its shareholders than the merger, (2) is reasonably likely to be consummated on the terms set forth, and (3) for which financing, to the extent required, is then committed or which, in the good faith judgment of the FNBB board of directors, is reasonably likely to be obtained by the third party.

In addition to these obligations, FNBB will promptly, within 24 hours, advise TriCo orally and in writing of its receipt of any acquisition proposal, and keep TriCo informed, on a current basis, of the continuing status of the inquiry, including the material terms and conditions of the inquiry and any material changes to the inquiry, and will contemporaneously provide to TriCo all materials provided to or made available to any third party that were not previously provided to TriCo.

FNBB has agreed that any violations of the restrictions set forth in the merger agreement by any representative of FNBB or its subsidiaries will be deemed a breach of the merger agreement by FNBB.

TriCo and FNBB have agreed that irreparable damage would occur in the event FNBB, its subsidiaries or any of their respective representatives violated any of the restrictions described above regarding discussions and negotiations with other parties with respect to the possibility or consideration of any acquisition proposal. As such, under the merger agreement, TriCo is entitled to injunctive relief to prevent breaches of these restrictions and to enforce specifically the terms of these restrictions.

Representations and Warranties of the Parties

Pursuant to the merger agreement, TriCo and FNBB made certain customary representations and warranties relating to their respective companies, subsidiaries, businesses and matters related to the merger. For detailed information concerning these representations and warranties, reference is made to Article V of the merger agreement included as Appendix A to this joint proxy statement/prospectus. Such representations and warranties generally must remain accurate through the completion of the merger, unless the fact or facts that caused a

 

82


Table of Contents

breach of a representation and warranty has not had or is not reasonably likely to have a material adverse effect on the party making the representation and warranty. See “—Conditions to the Merger” beginning on page [●].

The merger agreement contains representations and warranties that TriCo and FNBB made to and solely for the benefit of each other. These representations and warranties are subject to materiality standards which may differ from what may be viewed as material by investors and shareholders, and, in certain cases, were used for the purpose of allocating risk among the parties rather than establishing matters as facts. The assertions embodied in those representations and warranties also are qualified by information in confidential disclosure schedules that the parties have exchanged in connection with signing the merger agreement. Although neither TriCo nor FNBB believes that the disclosure schedules contain information that the federal securities laws require to be publicly disclosed, the disclosure schedules do contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the merger agreement.

Accordingly, neither shareholders of either FNBB or TriCo should rely on the representations and warranties as characterizations of the actual state of facts, since they were only made as of the date of the merger agreement and are modified in important part by the underlying disclosure schedules. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement, which subsequent information may or may not be fully reflected in TriCo’s or FNBB’s public disclosures.

Effective Time of the Merger

Pursuant to the terms and conditions set forth in the merger agreement, TriCo has agreed to acquire FNBB in a transaction in which FNBB will merge with and into TriCo, with TriCo as the surviving corporation. The merger will become effective upon the acceptance of a certificate of merger to be filed with the Secretary of State of the State of California in accordance with the provisions of applicable California law.

Amendment of the Merger Agreement

To the extent permitted under applicable law, the merger agreement may be amended or supplemented at any time by written agreement of the parties whether before or after the approval of the shareholders of FNBB, except that after shareholders of FNBB have approved the principal terms of the merger agreement, except as described in the next sentence, no amendment or supplement that by law requires further approval by the shareholders of FNBB may be made without first obtaining such approval. The merger agreement provides that, by approving the principal terms of the merger agreement, FNBB shareholders will be deemed to have approved any amendment to the September 30, 2018 termination date described below.

Termination of the Merger Agreement

The merger agreement may be terminated:

 

  by the mutual written consent of TriCo and FNBB;

 

  if the terminating party is not in material breach of any representation, warranty, covenant, or agreement contained in the merger agreement, by TriCo or FNBB, in the event of a breach by the other party of any representation, warranty, covenant, or agreement contained in the merger agreement that (i) cannot be or has not been cured within thirty (30) days of the giving of written notice to the breaching party or parties and (ii) would entitle the non-breaching party not to consummate the merger;

 

  by TriCo or FNBB, in the event that the merger is not consummated by September 30, 2018, except to the extent that the failure to consummate the merger by September 30, 2018 is due to (i) the failure of the party seeking to terminate to perform or observe its covenants and agreements set forth in the merger agreement, or (ii) the failure of any of the FNBB shareholders (if FNBB is the party seeking to terminate) to perform or observe their respective covenants under their respective shareholder agreements with TriCo;

 

 

by TriCo or FNBB, in the event the approval of any governmental authority required for consummation of the merger and the other transactions contemplated by the merger agreement have been denied by final non-appealable action of the governmental authority, or any governmental authority shall have issued a

 

83


Table of Contents
 

final, non-appealable injunction prohibiting the consummations of the merger, or an application for approval has been permanently withdrawn at the request of a governmental authority, provided that no party has the right to terminate the merger agreement if the denial is due to the failure of the party seeking to terminate the merger agreement to perform or observe its covenants;

 

  by TriCo, if approval of the FNBB merger proposal by FNBB shareholders has not been obtained by reason of the failure to obtain the required vote at the FNBB special meeting or at any adjournment or postponement thereof;

 

  by FNBB, if the approval of the TriCo merger proposal has not been obtained by reason of the failure to obtain the required vote at the TriCo special meeting or at any adjournment or postponement thereof;

 

  by TriCo, if FNBB materially breaches the covenants described under “—No Solicitation” on page [●], in any respect adverse to TriCo, the FNBB board of directors fails to recommend that the shareholders of FNBB approve the FNBB merger proposal or withdraws, modifies or qualifies its recommendation in a manner that is adverse to TriCo, or FNBB breaches its covenants requiring the calling and holding of a meeting of shareholders in accordance with the merger agreement;

 

  by TriCo if a third party commences a tender offer or exchange offer for 15% or more of the outstanding FNBB common stock and the board of directors of FNBB recommends that FNBB shareholders tender their shares in the offer or otherwise fails to recommend that they reject the offer within a specified period; or

 

  by FNBB, if the FNBB board of directors changes its recommendation of the merger to its shareholders and (i) FNBB is not in breach of any representation, warranty, covenant or agreement contained in the merger agreement and (ii)  FNBB has paid the termination fee referenced below under “—Termination Fee” to TriCo.

Termination Fee

The merger agreement provides that FNBB must pay TriCo a $12.0 million termination fee under the circumstances and in the manner described below:

 

  if the merger agreement is terminated by TriCo for any of the reasons described in the seventh or eighth bullet points or by FNBB for the reason described in the ninth bullet point under “—Termination of the Merger Agreement” above, FNBB must pay the termination fee to TriCo on the second business day following the termination of the merger agreement; or

 

 

if the merger agreement is terminated by (A) TriCo pursuant to the second bullet point under “—Termination of the Merger Agreement” above, (B) either TriCo or FNBB pursuant to the third bullet point under “—Termination of the Merger Agreement” above and at the time of the termination no vote of the FNBB shareholders contemplated by the merger agreement at the FNBB special meeting shall have occurred, or (C) TriCo pursuant to the fifth bullet point under “—Termination of the Merger Agreement” above, and in the case of any termination referenced in clause (A), (B) or (C), an “acquisition proposal” (as defined under “—No Solicitation” above) shall have been publicly announced and communicated or made known to the executive officers of FNBB or the board of directors of FNBB (or any person shall have publicly announced, communicated or made known an intention, whether or not conditional, to make an acquisition proposal, or reiterated a previously expressed plan or intention to make an acquisition proposal) at any time after the date of the merger agreement and prior to the time that shareholders of FNBB vote on the merger agreement (in the case of clause (C)) or the date of termination of the merger agreement (in the case of clause (A) or (B)) and (1) within twelve months after the termination, FNBB or an FNBB subsidiary enters into an agreement with respect to a “control transaction,” then FNBB shall pay to TriCo an amount equal to $12.0 million on the date of execution of such agreement and upon consummation of any such “control transaction” at any time thereafter, FNBB shall pay to TriCo the remainder of the termination fee on the date of such consummation and (2) if a control transaction is consummated otherwise than pursuant to an agreement with FNBB within twelve months after such termination, then FNBB shall pay to TriCo the

 

84


Table of Contents
 

termination fee (less any amount previously paid by FNBB pursuant to clause (1) above) on the date of such consummation of such control transaction. A “control transaction” is defined as (i) the acquisition by any person whether by purchase, merger, consolidation, sale, transfer, or otherwise, in one transaction or any series of transactions, of a majority of the voting power of the outstanding securities of FNBB or First National Bank or a majority of the assets of FNBB or First National Bank, (ii) any issuance of securities resulting in the ownership by any person of more than 50% of the voting power of FNBB or by any person other than FNBB or its subsidiaries of more than 50% of the voting power of First National Bank, or (iii) any merger, consolidation, or other business combination transaction involving FNBB or any of its subsidiaries as a result of which the shareholders of FNBB cease to own, in the aggregate, at least 50% of the total voting power of the entity surviving or resulting from such transaction.

Any termination fee that becomes payable pursuant to the merger agreement shall be paid by wire transfer of immediately available funds to an account designated by TriCo.

If FNBB fails to timely pay the termination fee to TriCo, FNBB will be obligated to pay the costs and expenses (including reasonable legal fees and expenses) incurred by TriCo to collect such payment, provided TriCo prevails on the merits, together with interest.

Certain Employee Matters

The merger agreement contains certain agreements of the parties with respect to various employee matters, which are described below.

As soon as administratively practicable after the effective time of the merger, TriCo will take all reasonable action so that employees of FNBB and its subsidiaries will be entitled to participate in the TriCo and Tri Counties Bank employee benefit plans of general applicability to the same extent as similarly-situated employees of TriCo and its subsidiaries, provided that coverage shall be continued under the corresponding benefit plans of FNBB and its subsidiaries until such employees are permitted to participate in the TriCo benefit plans. TriCo and Tri Counties Bank, however, shall not be under any obligation to make any grants to any former employee of FNBB and its subsidiaries under any discretionary equity compensation plan of TriCo. For purposes of determining eligibility to participate in, the vesting of benefits and for all other purposes, other than for accrual of pension benefits under, the TriCo employee benefit plans, TriCo will recognize years of service with FNBB and its subsidiaries, to the same extent as such service was credited for such purpose by FNBB and its subsidiaries, except where such recognition would result in duplication of benefits. Nothing contained in the merger agreement shall limit the ability of TriCo to amend or terminate any TriCo or FNBB benefit plan in accordance with their terms at any time.

At the time the employees of FNBB and its subsidiaries become eligible to participate in a medical, dental, health, life or disability plan of TriCo and its subsidiaries, TriCo will cause each such plan to:

 

  waive any preexisting condition limitations to the extent such conditions are covered under the applicable medical, health or dental plans of TriCo;

 

  provide full credit under such medical, health or dental plans for any deductibles, co-payment and out-of-pocket expenses incurred by the employees and their beneficiaries during the portion of the calendar year prior to such participation; and

 

  waive any waiting period limitation or evidence of insurability requirement which would otherwise be applicable to such employee on or after the effective time of the merger to the extent such employee had satisfied any similar limitation or requirement under a corresponding FNBB plan prior to the effective time of the merger.

At and following the effective time of the merger, TriCo shall honor and shall continue to be obligated to perform, in accordance with their terms, all benefit obligations to, and contractual rights of, current and former employees of FNBB and its subsidiaries and current and former directors of FNBB and its subsidiaries existing as of the effective date of the merger, as well as all bonus, deferred compensation, supplemental retirement plan, salary continuation, severance, termination, change in control or other existing plans and policies of FNBB and its subsidiaries that were disclosed to TriCo.

 

85


Table of Contents

TriCo has agreed that those employees of FNBB and its subsidiaries (i) who are not offered employment by TriCo following the effective date of the merger, who are not a party to an employment agreement or otherwise entitled to an existing severance package, change in control benefit or payments under any salary continuation plan, and who sign and deliver (and do not revoke) a termination and release agreement or (ii) who are terminated by TriCo without cause prior to the first anniversary of the effective date of the merger and deliver (and do not revoke) a termination and release agreement, will be entitled to receive a single lump sum payment of severance in an amount and in accordance with the terms of a severance policy agreed to by the parties.

Pursuant to the merger agreement, FNBB is required, prior to the closing of the merger, to have made all discretionary employee contributions to the First National Bank retirement plan, to provide for full vesting of all non-elective contributions under such retirement plan for all participants, and to take all actions necessary to terminate such retirement plan effective no later than the business day preceding the closing date of the merger.

Interests of Certain FNBB Officers and Directors in the Merger

When FNBB shareholders are considering the recommendation of FNBB’s board of directors with respect to approving the merger agreement, FNBB shareholders should be aware that FNBB directors and officers have interests in the merger as individuals that are in addition to, or different from, their interests as shareholders of FNBB. The FNBB board of directors was aware of these factors and considered them, among other matters, in approving the merger agreement and the merger. These interests are described below.

Stock Ownership.

The directors and executive officers of FNBB, as a group, beneficially owned and had the power to vote as of [●], 2018, a total of [●] shares of FNBB common stock, representing approximately 20% of the outstanding shares of FNBB common stock as of that date. Substantially all of these shares are expected to be voted in favor of the merger agreement pursuant to the shareholder agreements entered into by each of the directors and substantially all of the executive officers of FNBB who own shares of FNBB common stock. See “—Shareholder Agreements” beginning on page [●]. Each of these persons will receive the same merger consideration for their shares of FNBB common stock as the other FNBB shareholders.

FNBB Options.

Under the terms of the merger agreement, the board of directors of FNBB will approve acceleration of the vesting of FNBB options, held by directors, officers and employees of FNBB or First National Bank immediately prior to the merger.

Each outstanding and unexercised FNBB option will be canceled in exchange for a cash payment equal to the number of shares of FNBB common stock subject to such FNBB option immediately prior to the closing of the merger multiplied by the amount, if positive, by which the product of the exchange ratio multiplied by the TriCo average closing price exceeds the per share exercise price under such FNBB option.

 

86


Table of Contents

The following tables disclose the number of FNBB shares included in stock option contracts held by each of FNBB’s executive officers and directors, and their vesting status, as of December 11, 2017, including the number of unvested options that will accelerate and vest in connection with the consummation of the merger and the value of the cash payment each executive officer or director will receive as the result of the cancellation of such options, assuming the value of a share of TriCo common stock is $41.64, which was the closing price of TriCo common stock on December 8, 2017, the last trading day prior to the announcement of the merger.

 

Executive Officer Table  

Named Executive Officers

   Number of
Shares
Subject to
Vested
Options (#)
     Cash-out
Payment
For
Vested
Options ($)
     Number of
Shares
Subject to
Unvested
Options (#)
     Cash-out
Payment
For
Unvested
Options ($)
     Total
Consideration
for Unvested
Equity
Awards ($)
     Total
Consideration
for Outstanding
Equity
Awards ($)
 

Thomas C. McGraw

     59,973      $ 1,691,438        —        $ —        $ —        $ —    

Jim D. Black

     7,195        158,500        21,287        482,328        —          —    

Anthony J. Clifford

     —          —          21,287        482,328        —          —    

David A. Curtis

     —          —          15,741        356,722        —          —    

Randy R. Brugioni

     13,174        339,888        14,716        335,377        —          —    

 

Non-Employee Director Table  

Non-Employee Directors

   Number of
Shares
Subject to
Vested
Options (#)
     Cash-out
Payment
For
Vested
Options ($)
     Number of
Shares
Subject to
Unvested
Options (#)
     Cash-out
Payment
For
Unvested
Options ($)
     Total
Consideration
for Unvested
Equity
Awards ($)
     Total
Consideration
for Outstanding
Equity
Awards ($)
 

Lisa Angelot

     15,760      $ 442,805        —        $ —        $ —        $ —    

Thomas G. Atwood

     9,806        230,035        —          —          —          —    

Ronald R. Barels

     8,576        192,862        —          —          —          —    

Merrie Turner Lightner

     5,435        114,137        —          —          —          —    

Michael Pacelli

     13,642        363,938        —          —          —          —    

Edward J. Watson

     15,754        442,658        —          —          —          —    

Appointment of FNBB Directors to the Boards of Directors of TriCo and Tri Counties Bank.

In the merger agreement, TriCo agreed to take all necessary action following completion of the merger to appoint two directors of FNBB to serve on the boards of directors of TriCo and Tri Counties Bank until the first annual meeting of shareholders of TriCo following the merger. Subject to the fiduciary duties of TriCo’s board of directors, TriCo agreed to cause such directors to be included among the nominees for which the TriCo board of directors will solicit proxies at such annual meeting. As of the date of their joint proxy statement/prospectus, the identity of the two FNBB directors who will join the boards of directors of TriCo and Tri Counties Bank is not known.

Other FNB Employment-Related Agreements and Benefits.

There are no employment contracts between FNBB or First National Bank and the named executive officers identified in the Executive Officer Table above for FNBB options. The named executive officers participate in certain benefit arrangements, agreements and plans described below.

FNBB Savings Plan. Neither FNBB nor First National Bank has a formal cash bonus plan. The FNBB board of directors decides annually whether to keep the plan a “safe harbor” plan and whether to make a profit sharing contribution to the FNBB Savings Plan (formerly named the “First National Bank Profit Sharing and 401(k) Plan”) and the amount of that contribution. The FNBB named executive officers are participants in the FNBB Savings Plan. Each participant in the FNBB Savings Plan who meets IRS qualifying criteria receives a share of the annual “safe harbor” contribution based on the amount of his or her qualifying compensation. Any profit sharing contributions vest according to a schedule of years of service. Eligible employees are allowed to make

 

87


Table of Contents

voluntary contributions and such contributions are funded by the individual employees. FNBB has agreed to terminate the plan in compliance with its terms and requirements of applicable law, effective prior to consummation of the merger.

Executive Supplemental Compensation Agreements. First National Bank has entered into supplemental compensation agreements with each of the FNBB named executive officers which provide for annual retirement benefits to be paid to each officer or his designated beneficiary over a period of twenty years in such amounts as specified in the individual agreements. The benefits are accrued at net present value and were fully vested as of December 31, 2017. Monthly payments begin the seventh month after the named executive officer’s separation from service. In order to help fund the payment of such benefits, First National Bank maintains bank-owned life insurance contracts on the FNBB named executive officers and has entered into split dollar life insurance agreements with each of the named executive officers. The payment obligations under these agreements will become TriCo obligations, effective upon consummation of the merger. At December 31, 2017, the net present value of the benefits accrued for the named executive officers under the supplemental compensation agreements were as follows: Thomas C. McGraw, $593,472; Jim D. Black, $1,455,193; Anthony J. Clifford, $1,670,029; David A. Curtis, $2,017,804; and Randy R. Brugioni, $1,483,679.

Management Continuity Agreements. First National Bank has entered into management continuity agreements with two of the named executive officers, Jim D. Black and Anthony J. Clifford (and one other officer who is not an executive officer). Each agreement provides for the payment of a lump sum severance benefit of two times the executive’s base annual salary upon termination of employment after a change in control of First National Bank. Payment under the agreements is conditioned on a change in control only. Any termination of employment for any reason prior to a change in control would result in automatic termination of a management continuity agreement and the loss of any benefit thereunder. First National Bank’s payment obligations under the management continuity agreement will become obligations of Tri Counties Bank as a result of the merger. See “Merger-Related Compensatory Arrangements for FNBB’s Named Executive Officers” with respect to amounts payable under these agreements.

Deferred Compensation Plan. First National Bank has established a nonqualified deferred compensation plan and participation is open to all officers, including the FNBB named executive officers. Messrs. Black, Clifford, Curtis and Brugioni currently participate in the plan. The funds contributed to the plan are those of the individual participant and represent income earned and/or bonuses awarded as an employee of First National Bank. There are no vesting requirements. Contributions of deferred compensation specified by the participants are forwarded by First National Bank to the deferred compensation trust which are then invested by the trustee in accordance with the instructions of the participants based on investment options offered by the plan’s investment manager. No funds of FNBB or First National Bank are contributed to the plan. Each participant may elect whether he or she will receive distribution of his or her account, in whole or in part, based upon the passage of a specified period of time of at least five years or upon termination of employment.

 

88


Table of Contents

Merger-Related Compensatory Arrangements for FNBB’s Named Executive Officers

The following table sets forth the estimated amounts of compensation and benefits that each named executive officer of FNBB could receive that are based on or otherwise relate to the merger. These amounts have been calculated assuming that the merger is consummated on March 9, 2018. Please see the section entitled “The Merger—Interests of FNBB Directors and Executive Officers in the Merger” beginning on page [●] for further information about the applicable compensation and benefits. These estimated amounts are based on multiple assumptions that may or may not actually occur, including assumptions described in this joint proxy statement/prospectus. Some of these assumptions are based on information not currently available and, as a result, the actual amounts, if any, to be received by a named executive officer may differ from the amounts set forth below.

Golden Parachute Compensation

 

Named Executive Officer

   Cash
($) (1)
     Equity
($) (2)
     Total
($) (3)
 

Thomas C. McGraw

   $ —        $ 1,642,656      $ 1,642,656  

Jim D. Black

     671,724        358,440        1,030,164  

Anthony J. Clifford

     642,646        417,813        1,060,459  

David A. Curtis

     418,252        266,045        684,297  

Randy R. Brugioni

     513,319        245,533        758,852  

 

(1) Cash. Cash amounts reflect change in control amounts payable pursuant to the named executive officer’s management continuity agreement. For Mr. Curtis, reflects a retention bonus in the amount of $418,252 and, for Mr. Brugioni, reflects a retention bonus in the amount of $513,319, which payments are conditioned upon their continued employment as Chief Financial Officer and Chief Credit Officer, respectively, for FNBB and First National Bank until the closing date, and their execution of a release.
(2) Equity. Represents the value of the aggregate consideration to be paid in respect of vested an unvested in-the-money FNBB options upon consummation of the merger, assuming the average closing share price for TriCo common stock is $40.81 as described in greater detail above in the section entitled “The Merger—Interests of FNBB Directors and Executive Officers in the Merger—FNBB Options” beginning on page [●] and as quantified in the “Cash-Out Payment For Vested Options” and “Cash-Out Payment For Unvested Options” columns of the Executive Officer Table on page [].
(3) Total. Represents for each named executive officer, the amounts which are payable as a single trigger (i.e., conditioned solely on the occurrence of a change in control). None are double trigger (i.e., payments requiring the occurrence of an additional event in addition to a change in control).

The “Cash” amounts to be paid to the named executive officers described in the “Golden Parachute Compensation” table and footnotes above will be paid in lump sums by FNBB immediately prior to the effective time of the merger.

The “Equity” amounts to be paid to the named executive officers described in the “Golden Parachute Compensation” table and footnotes above will be paid in lump sum by FNBB immediately prior to the effective time of the merger conditioned upon the cancellation of option agreements held by the named executive officers.

TriCo Employment Agreements with Certain Officers of FNBB.

TriCo and Tri Counties Bank have entered into employment agreements with Jim Black, Anthony Clifford, and Randy Brugioni, presently the President, the Chief Operating Officer and the Chief Credit Officer of FNBB, respectively, which will become effective upon consummation of the merger. Pursuant to the terms of their employment agreements, Mr. Black will be employed by Tri Counties Bank as Commercial Lending President—San Francisco Region, Mr. Clifford as Regional President—San Francisco Region, and Mr. Brugioni as Senior Vice President—Senior Credit Administrator. Mr. Black’s and Mr. Clifford’s employment agreements have a one year term and Mr. Brugioni’s employment agreement has a two year term.

 

89


Table of Contents

Pursuant to their respective employment agreements, Messrs. Black, Clifford and Brugioni will receive an annual base salary of $300,000, $300,000 and $250,000, respectively. In addition, they are eligible for bonuses and entitled to participate in any benefit plans or programs available to similarly situated employees of Tri Counties Bank generally. Each of Messrs. Black’s, Clifford’s and Brugioni’s employment agreements includes provisions related to payments to them in certain circumstances related to termination of employment, treatment of confidential information and restrictions against soliciting employees, vendors and customers of TriCo and Tri Counties Bank.

Indemnification.

FNBB’s directors, officers and employees are entitled to continuing indemnification against certain liabilities by virtue of provisions contained in the FNBB articles of incorporation, as amended, and bylaws, as amended, and the merger agreement. FNBB’s articles of incorporation, as amended, are referred to as the FNBB articles of incorporation, and FNBB’s bylaws, as amended, are referred to as the FNBB bylaws. In the merger agreement, TriCo agreed for a period of six years from the closing of the merger, to indemnify and hold harmless each present and former director, officer and employee of FNBB or a subsidiary of FNBB, as applicable, determined as of the effective time of the merger, against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the effective time of the merger, whether asserted or claimed prior to, at or after the effective time of the merger, arising in whole or in part out of or pertaining to the fact that he or she was a director, officer, employee, fiduciary or agent of FNBB or its subsidiaries or is or was serving at the request of FNBB or its subsidiaries as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust or other enterprise including, without limitation, matters related to the negotiation, execution and performance of the merger agreement or the consummation of any of the transactions contemplated by the merger agreement, to the fullest extent to which such indemnified parties would be entitled under the FNBB articles of incorporation and FNBB bylaws, or any agreement, arrangement or understanding previously disclosed by FNBB to TriCo pursuant to the merger agreement, in each case as in effect on the date of the merger agreement.

In the merger agreement, TriCo has agreed to maintain FNBB’s existing directors’ and officers’ liability insurance policy for FNBB’s directors and officers or a substitute policy which shall provide such directors and officers with coverage following the effective time of the merger for an additional six years, provided that if the cost of such insurance exceeds 200% of the annual premiums paid by FNBB for its existing directors’ and officers’ liability insurance, which is referred to as the maximum insurance amount, TriCo will obtain the most advantageous coverage as is available for the maximum insurance amount.

Other than as set forth above, no director or officer of FNBB has any direct or indirect material interest in the merger, except insofar as ownership of FNBB common stock might be deemed such an interest.

Material Federal Income Tax Consequences

The following is a general description of the anticipated material U.S. federal income tax consequences of the merger. This discussion is based upon the Code, Treasury regulations, judicial authorities and published positions of the Internal Revenue Service, or IRS, all as currently in effect and all of which are subject to change. Accordingly, the U.S. federal income tax consequences of the merger to the holders of FNBB common stock could differ from those described below.

Except as specifically stated herein, this discussion is limited to U.S. holders (as defined below) that hold shares of FNBB common stock as a capital asset within the meaning of Section 1221 of the Code for U.S. federal income tax purposes. This discussion does not address the tax consequences applicable to FNBB shareholders that are not U.S. holders, nor does it address all of the tax consequences that may be relevant to particular U.S.

 

90


Table of Contents

holders that are subject to special treatment under U.S. federal income tax laws, including, without limitation, financial institutions, insurance companies, partnerships and other pass-through entities, tax-exempt organizations, regulated investment companies, real estate investment trusts, dealers in securities or currencies, U.S. persons whose functional currency is not the U.S. dollar, traders in securities that elect to use a mark-to-market method of accounting, persons that hold FNBB common stock as part of a straddle, hedge, constructive sale or conversion transaction, and U.S. holders that acquired their shares of FNBB common stock through the exercise of an employee stock option or otherwise as compensation.

If a partnership or other entity taxed as a partnership holds FNBB common stock, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partnerships holding FNBB common stock and partners in such partnerships should consult with their tax advisors about the tax consequences of the merger to them.

This discussion does not address the tax consequences of the merger under state, local or foreign tax laws. This discussion also does not address the tax consequences of any transaction other than the merger.

For purposes of this section, the term “U.S. holder” means a beneficial owner of FNBB common stock that is for U.S. federal income tax purposes (i) an individual who is a citizen or resident of the United States, (ii) a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state or a political subdivision thereof, (iii) an estate that is subject to U.S. federal income tax on its income regardless of its source, or (iv) a trust, the substantial decisions of which are controlled by one or more U.S. persons and which is subject to the primary supervision of a U.S. court, or that has validly elected under applicable Treasury regulations to be treated as a U.S. person for U.S. federal income tax purposes.

Tax Consequences of the Merger.

The merger has been structured to qualify as a “reorganization” under Section 368(a) of the Code for U.S. federal income tax purposes. As a condition to the completion of the merger, Sheppard Mullin is required to deliver an opinion, dated the closing date of the merger, to the effect that the merger will be treated as a “reorganization” for U.S. federal income tax purposes within the meaning of Section 368(a) of the Code. The opinion will assume that the merger will be completed according to the terms of the merger agreement and that the parties will report the merger in a manner consistent with the opinion. The opinion will rely on the facts as stated in the merger agreement, the Registration Statement on Form S-4 filed by TriCo in connection with the merger (of which this joint proxy statement/prospectus is a part) and certain other documents. In rendering the opinion, counsel will rely on the representations of TriCo and FNBB, to be delivered at the time of closing (and counsel will assume that any representation that is qualified by belief, knowledge or materiality is true, correct and complete without such qualification). If any assumption or representation is or becomes inaccurate, the U.S. federal income tax consequences of the merger could be adversely affected. The opinion will be based on statutory, regulatory and judicial authority existing as of the date of the opinion.

An opinion of counsel represents such counsel’s best legal judgment but is not binding on the IRS or on any court. Neither TriCo nor FNBB intends to request any ruling from the IRS as to the U.S. federal income tax consequences of the merger. Consequently, no assurance can be given that the IRS will not assert, or that a court will not sustain, a position contrary to any of the tax consequences set forth below or any of the tax consequences described in the opinion.

Based on representations to be contained in representation letters of officers of TriCo and FNBB, all of which must continue to be true and accurate in all material respects as of the effective time of the merger, and subject to the other matters set forth above, it is the opinion of Sheppard, Mullin, Richter & Hampton LLP that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. Based upon the foregoing, the following discussion represents the opinion of Sheppard, Mullin, Richter & Hampton LLP with respect to the material U.S. federal income tax consequences of the merger.

 

91


Table of Contents

Tax Consequences of the Merger for U.S. Holders of FNBB Common Stock.

Except as described below under “—Cash in Lieu of Fractional Shares of TriCo Common Stock,” a U.S. holder that exchanges all of its shares of FNBB common stock for shares of TriCo common stock pursuant to the merger will not recognize gain or loss in connection with such exchange.

A U.S. holder’s aggregate tax basis in