NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
Description of Business and Basis of Presentation
TriCo
Bancshares (the Company or we) is a California corporation organized to act as a bank holding company for Tri Counties Bank (the Bank). The Company and the Bank are headquartered in Chico, California. The Bank is
a California-chartered bank that is engaged in the general commercial banking business in 29 California counties. The Company has five capital subsidiary business trusts (collectively, the Capital Trusts) that issued trust preferred
securities, including two organized by the Company and three acquired with the acquisition of North Valley Bancorp.
The consolidated financial statements
are prepared in accordance with accounting policies generally accepted in the United States of America and general practices in the banking industry. All adjustments necessary for a fair presentation of these consolidated financial statements have
been included and are of a normal and recurring nature. The financial statements include the accounts of the Company. All inter-company accounts and transactions have been eliminated in consolidation. For financial reporting purposes, the
Companys investments in the Capital Trusts of $1,714,000 are accounted for under the equity method and, accordingly, are not consolidated and are included in other assets on the consolidated balance sheet. The subordinated debentures issued
and guaranteed by the Company and held by the Capital Trusts are reflected as debt on the Companys consolidated balance sheet.
Use of Estimates
in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in
the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited condensed consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Companys Annual Report on Form
10-K
for the year ended December 31, 2018 (the 2018 Annual Report). The Company
believes that the disclosures made are adequate to make the information not misleading.
Segment and Significant Group Concentration of Credit Risk
The Company grants agribusiness, commercial, consumer, and residential loans to customers located throughout northern and central California. The
Company has a diversified loan portfolio within the business segments located in this geographical area. The Company currently classifies all its operation into one business segment that it denotes as community banking.
Geographical Descriptions
For the purpose of describing
the geographical location of the Companys operations, the Company has defined northern California as that area of California north of, and including, Stockton to the east and San Jose to the west; central California as that area of the state
south of Stockton and San Jose, to and including, Bakersfield to the east and San Luis Obispo to the west; and southern California as that area of the state south of Bakersfield and San Luis Obispo.
Cash and Cash Equivalents
Net cash flows are reported
for loan and deposit transactions and other borrowings. For purposes of the consolidated statement of cash flows, cash, due from banks with original maturities less than 90 days, interest-earning deposits in other banks, and Federal funds sold are
considered to be cash equivalents.
Accounting Standards Adopted in 2019
The Financial Accounting Standards Board (FASB) issued ASU
No. 2016-02,
Leases (Topic 842)
.
ASU 2016-02,
which among other things, requires lessees to recognize most leases
on-balance
sheet, increasing reported assets and liabilities. Lessor accounting remains
substantially similar to current U.S. GAAP. The FASB has issued incremental guidance to Topic 842 standard through ASU
No. 2018-11,
2018-20,
and
2019-01.
The Company has elected to use the transition relief approach as provided in ASU
2018-11,
which permits the Company to use January 1, 2019 as both the
application date and the adoption date, rather than the modified retrospective approach which would have required an application date of January 1, 2017 and adoption date of January 1, 2019. The Company also elected certain relief options
offered within the new standard, which include the package of practical expedients, the option not to recognize a
right-of-use
asset (ROUA) and lease liability that
arise from short-term leases (i.e. leases with terms of 12 months or less), and the option of hindsight when determining lease term. Substantially all of the Companys lease agreements are considered operating
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