ACQUISITIONS

Effective October 1, 2016, the Company acquired Sierra Vista Bank, headquartered in Folsom, California, wherein Sierra Vista Bank, with one branch in Folsom, one branch in Fair Oaks, and one branch in Cameron Park, merged with and into the Bank. Sierra Vista Bank’s assets as of October 1, 2016 totaled approximately $155.154 million. The acquired assets and liabilities were recorded at fair value at the date of acquisition. Under the terms of the merger agreement, the Company issued an aggregate of approximately 1.059 million shares of its common stock and cash totaling approximately $9.469 million to the former shareholders of Sierra Vista Bank.

In accordance with GAAP guidance for business combinations, the Company recorded $10.314 million of goodwill and $508,000 of other intangible assets on the acquisition date. The other intangible assets are primarily related to core deposits and are being amortized using a straight-line method over a period of ten years with no significant residual value. For tax purposes, purchase accounting adjustments including goodwill are all non-taxable and/or non-deductible. The fair values of assets acquired and liabilities assumed are subject to adjustment during the first twelve months after the acquisition date if additional information becomes available to indicate a more accurate or appropriate value for an asset or liability. During the nine-month period ended September 30, 2017, the Company determined that a measurement adjustment was appropriate which resulted in an $80,000 increase to goodwill.

The acquisition was consistent with the Company’s strategy to build a regional presence in Central California. The acquisition offers the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded region. Goodwill arising from the acquisition consisted largely of synergies and the cost savings resulting from the combined operations.

Pro Forma Results of Operations

The following table presents pro forma results of operations information for the periods presented as if the acquisition had occurred on January 1, 2016 after giving effect to certain adjustments. The unaudited pro forma results of operations for the nine months ended September 30, 2016 include the historical accounts of the Company and Sierra Vista Bank and pro forma adjustments as may be required, including the amortization of intangibles with definite lives and the amortization or accretion of any premiums or discounts arising from fair value adjustments for assets acquired and liabilities assumed. The pro forma information is intended for informational purposes only and is not necessarily indicative of the Company’s future operating results or operating results that would have occurred had the acquisition been completed at the beginning of 2016. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, expense efficiencies or asset dispositions. (In thousands, except per-share amounts):



Pro Forma Results of Operations	For the Nine Months Ended September 30,
(In thousands, except per share amounts)	2016
Net interest income	$	37,741
(Reversal of) Provision for credit losses	(5,750		)
Non-interest income	7,692
Non-interest expense	36,449
Income before provision for income taxes	14,734
Provision for income taxes	4,326
Net income	$	10,408
Basic earnings per common share	$	0.95
Diluted earnings per common share	$	0.94

On October 1, 2017, the Company completed the acquisition of Folsom Lake Bank (“Folsom”) for an aggregate transaction value of $28.5 million. Folsom was merged into the Bank, and the Company issued 1,276,888 shares of common stock to the former shareholders of Folsom. The Company also assumed the outstanding Folsom stock options. Folsom operated three full-service branches in Folsom, Rancho Cordova, and Roseville, California. Folsom’s assets (unaudited) as of September 30, 2017 totaled approximately $197.3 million. The acquired assets and liabilities will be recorded at fair value at the date of acquisition and will be reflected in the Company’s December 31, 2017 financial statements. The Company also expects to record goodwill and a core deposit intangible related to this transaction, but those amounts are not yet known as the initial fair value accounting is incomplete. The goodwill will not be deductible for tax purposes.