11. COMMITMENTS AND CONTINGENCIES	6 Months Ended
Jun. 30, 2014
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES	The Company is involved in legal actions arising from normal business activities. Management, based upon the advice of legal counsel, believes that the ultimate resolution of all pending legal actions will not have a material effect on the Company’s financial position or results of its operations or its cash flows. On January 24, 2014, a putative shareholder class action lawsuit titled John Solak v. North Valley Bancorp, et al. was filed against the Company in the Superior Court of the State of California, County of Shasta. TriCo Bancshares and all of the individuals serving as Directors of the Company were also named as defendants. The complaint alleges breach of fiduciary duty and aiding and abetting breach of fiduciary duty in connection with the Agreement and Plan of Merger and Reorganization signed between the Company and TriCo Bancshares on January 21, 2014. The Company and the Directors of the Company have not yet filed a response to the complaint. However, on July 31, 2014, following settlement discussions, the named defendants entered into a memorandum of understanding with the plaintiffs regarding the settlement of the lawsuit. In connection with the settlement contemplated by the memorandum of understanding, and in consideration for the full settlement and release of all claims under the lawsuit, TriCo Bancshares and North Valley agreed to make certain additional disclosures related to the proposed Merger, which were reported in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 1, 2014. The memorandum of understanding contemplates that the parties will negotiate in good faith and use their reasonable best efforts to enter into a stipulation of settlement, although there can be no assurance that the parties will ultimately enter into a stipulation of settlement. The Company, the Directors of the Company and TriCo Bancshares continue to believe that the lawsuit is without merit and they vigorously deny the allegations that the Company Directors breached their fiduciary duties. The resolution of this matter is not expected to have a material impact on the Company's business, financial condition or results of operations, though no assurance can be given in this regard, as no estimate of the potential loss, if any, can be made at this time. The Company was contingently liable under letters of credit issued on behalf of its customers in the amount of $3,858,000 and $4,557,000 at June 30, 2014 and December 31, 2013, respectively. At June 30, 2014, commercial and consumer lines of credit and real estate loans of approximately $38,255,000 and $36,139,000, respectively, were undisbursed. At December 31, 2013, commercial and consumer lines of credit and real estate loans of approximately $38,683,000 and $35,264,000, respectively, were undisbursed. Approximately 82% of these undisbursed loan commitments are associated with variable rate loans. Loan commitments are typically contingent upon the borrower meeting certain financial and other covenants and such commitments typically have fixed expiration dates and require payment of a fee. As many of these commitments are expected to expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. The Company evaluates each potential borrower and the necessary collateral on an individual basis. Collateral varies, but may include real property, bank deposits, debt securities, equity securities or business or personal assets. Standby letters of credit are conditional commitments written by the Company to guarantee the performance of a customer to a third party. These guarantees are issued primarily relating to inventory purchases by the Company’s commercial customers and such guarantees are typically short term. Credit risk is similar to that involved in extending loan commitments to customers and the Company, accordingly, uses evaluation and collateral requirements similar to those for loan commitments. Virtually all of such commitments are collateralized. The fair value of the liability related to these standby letters of credit, which represents the fees received for issuing the guarantees, was not significant at June 30, 2014 and 2013. The Company recognizes these fees as revenues over the term of the commitment or when the commitment is used. Loan commitments and standby letters of credit involve, to varying degrees, elements of credit and market risk in excess of the amounts recognized in the balance sheet and do not necessarily represent the actual amount subject to credit loss. At June 30, 2014 and December 31, 2013, the reserve for unfunded commitments totaled $146,000. In management’s opinion, a concentration exists in real estate-related loans which represent approximately 82% and 81% of the Company’s loan portfolio for periods ended June 30, 2014 and 2013. Although management believes such concentrations to have no more than the normal risk of collectibility, a continued substantial decline in the economy in general, or a continued decline in real estate values in the Company’s primary market areas in particular, could have an adverse impact on collectibility of these loans. However, personal and business income represents the primary source of repayment for a majority of these loans.

11. COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2014

The Company is involved in legal actions arising from normal business activities. Management, based upon the advice of legal counsel, believes that the ultimate resolution of all pending legal actions will not have a material effect on the Company’s financial position or results of its operations or its cash flows.

On January 24, 2014, a putative shareholder class action lawsuit titled John Solak v. North Valley Bancorp, et al. was filed against the Company in the Superior Court of the State of California, County of Shasta. TriCo Bancshares and all of the individuals serving as Directors of the Company were also named as defendants. The complaint alleges breach of fiduciary duty and aiding and abetting breach of fiduciary duty in connection with the Agreement and Plan of Merger and Reorganization signed between the Company and TriCo Bancshares on January 21, 2014. The Company and the Directors of the Company have not yet filed a response to the complaint. However, on July 31, 2014, following settlement discussions, the named defendants entered into a memorandum of understanding with the plaintiffs regarding the settlement of the lawsuit. In connection with the settlement contemplated by the memorandum of understanding, and in consideration for the full settlement and release of all claims under the lawsuit, TriCo Bancshares and North Valley agreed to make certain additional disclosures related to the proposed Merger, which were reported in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 1, 2014. The memorandum of understanding contemplates that the parties will negotiate in good faith and use their reasonable best efforts to enter into a stipulation of settlement, although there can be no assurance that the parties will ultimately enter into a stipulation of settlement. The Company, the Directors of the Company and TriCo Bancshares continue to believe that the lawsuit is without merit and they vigorously deny the allegations that the Company Directors breached their fiduciary duties. The resolution of this matter is not expected to have a material impact on the Company's business, financial condition or results of operations, though no assurance can be given in this regard, as no estimate of the potential loss, if any, can be made at this time.

The Company was contingently liable under letters of credit issued on behalf of its customers in the amount of $3,858,000 and $4,557,000 at June 30, 2014 and December 31, 2013, respectively. At June 30, 2014, commercial and consumer lines of credit and real estate loans of approximately $38,255,000 and $36,139,000, respectively, were undisbursed. At December 31, 2013, commercial and consumer lines of credit and real estate loans of approximately $38,683,000 and $35,264,000, respectively, were undisbursed. Approximately 82% of these undisbursed loan commitments are associated with variable rate loans.

Loan commitments are typically contingent upon the borrower meeting certain financial and other covenants and such commitments typically have fixed expiration dates and require payment of a fee. As many of these commitments are expected to expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. The Company evaluates each potential borrower and the necessary collateral on an individual basis. Collateral varies, but may include real property, bank deposits, debt securities, equity securities or business or personal assets.

Standby letters of credit are conditional commitments written by the Company to guarantee the performance of a customer to a third party. These guarantees are issued primarily relating to inventory purchases by the Company’s commercial customers and such guarantees are typically short term. Credit risk is similar to that involved in extending loan commitments to customers and the Company, accordingly, uses evaluation and collateral requirements similar to those for loan commitments. Virtually all of such commitments are collateralized. The fair value of the liability related to these standby letters of credit, which represents the fees received for issuing the guarantees, was not significant at June 30, 2014 and 2013. The Company recognizes these fees as revenues over the term of the commitment or when the commitment is used.

Loan commitments and standby letters of credit involve, to varying degrees, elements of credit and market risk in excess of the amounts recognized in the balance sheet and do not necessarily represent the actual amount subject to credit loss. At June 30, 2014 and December 31, 2013, the reserve for unfunded commitments totaled $146,000.

In management’s opinion, a concentration exists in real estate-related loans which represent approximately 82% and 81% of the Company’s loan portfolio for periods ended June 30, 2014 and 2013. Although management believes such concentrations to have no more than the normal risk of collectibility, a continued substantial decline in the economy in general, or a continued decline in real estate values in the Company’s primary market areas in particular, could have an adverse impact on collectibility of these loans. However, personal and business income represents the primary source of repayment for a majority of these loans.

- Definition

The entire disclosure for commitments and contingencies.

+ References+ Details