NOTE

BRANCH

ACQUISITION

March 11, 2016,

we completed the purchase of

five

Bank of America branches in northern California. The acquired branches are located in Colusa, Willows, Orland, Corning, and Yreka. The Bank also acquired

three

offsite ATM locations in Williams, Orland and Corning. The Bank paid cash consideration of

$6.7

million and acquired

$155.2

million in assets, primarily cash and premises. The Bank assumed

$149.2

million in liabilities, primarily deposits.

The transaction provided a new source of low cost core deposits and allowed us to execute our plan to reconfigure our

balance sheet. On

March 14, 2016,

we utilized a portion of that new liquidity to reduce our reliance on wholesale funding sources repaying

$75.0

million of Federal Home Loan Bank of San Francisco hedged term debt and redeeming

$17.5

million of brokered time deposits.

The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on the acquisition date. The Bank engaged

third

party specialists to assist in valuing certain assets, including the real estate and the core deposit intangible that resulted from the acquisition.

The contribution of the acquired operations of the

five

former Bank of America offices was immaterial. Therefore, disclosure of supplemental pro forma financial information, especially prior period comparison

s is deemed neither practical nor meaningful. Additionally, the acquired operation was

not

considered a “significant business combination” as defined by the Securities and Exchange Commission.

Branch acquisition costs recorded during the year ended

December 31, 2016

and

2015

were $

580

thousand and

$347

thousand, respectively. The following table provides an assessment of the consideration transferred, assets purchased, and the liabilities assumed.

			Fair Value and
	As Recorded by		Other Merger
	Bank of		Related		As Recorded by
(Amounts in thousands)	America		Adjustments		the Company
Consideration paid:
Cash paid					$	6,656
Total consideration					$	6,656

Assets acquired:
Cash and cash equivalents	$	149,067	$	—	$	149,067

Premises and equipment, net		1,835		2,355		4,190

Other assets		201		—		201
Core deposit intangible		—		1,772		1,772
Total assets acquired	$	151,103	$	4,127	$	155,230

Liabilities assumed:
Deposits	$	149,047	$	—	$	149,047

Other liabilities		20		172		192
Total liabilities assumed	$	149,067	$	172	$	149,239
Net identifiable assets acquired over liabilities assumed	$	2,036	$	3,955	$	5,991
Goodwill					$	665