SIERRA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
95
10.
INCOME TAXES
(Continued)
The expense for income taxes differs from amounts computed by applying the statutory Federal income
tax rates to income before income taxes. The significant items comprising these differences consisted of
the following (dollars in thousands):
2014
2013
2012
Income tax expense at Federal
statutory rate
7,501
$
5,597
$
2,666
$
Increase (decrease) resulting from:
State franchise taxexpense, net of
Federal tax effect
1,116
414
-
Taxexempt income
(1,018)
(920)
(1,388)
Affordable housing taxcredits
(1,006)
(1,257)
(1,639)
Other
(402)
(741)
17
6,191
$
3,093
$
(344)
$
Effective tax rate
28.9%
18.8%
(4.4%)
Year Ended December 31,
The Company is subject to federal income tax and income tax of the state of California. Our federal
income tax returns for the years ended December 31, 2011, 2012 and 2013 are open to audit by the federal
authorities and our California state tax returns for the years ended December 31, 2010, 2011, 2012 and
2013 are open to audit by the state authorities.
The Company has net operating loss carry forwards of approximately $1.2 million for federal income and
approximately $500 thousand for California franchise tax purposes. Net operating loss carry forwards, to
the extent not used will begin to expire in 2029. Net operating loss carry forwards available from
acquisitions are substantially limited by Section 382 of the Internal Revenue Code and benefits not
expected to be realized due to the limitation have been excluded from the deferred tax asset and net
operating loss carry forward amounts noted above.
There were no recorded interest or penalties related to uncertain tax positions as part of income tax for the
years ended December 31, 2014, 2013, and 2012, respectively. We do not expect the total amount of
unrecognized tax benefits to significantly increase or decrease within the next twelve months.
11.
SUBORDINATED DEBENTURES
Sierra Statutory Trust II (“Trust II”) and Sierra Capital Trust III (“Trust III”), (collectively, the “Trusts”)
were formed by the Company for the sole purpose of issuing trust preferred securities fully and
unconditionally guaranteed by the Company. For financial reporting purposes, the Trusts are not
consolidated and the Floating Rate Junior Subordinated Deferrable Interest Debentures (the “Subordinated
Debentures”) held by the Trusts and issued and guaranteed by the Company are reflected in the
Company’s consolidated balance sheet in accordance with provisions of ASC Topic 810. Under
applicable regulatory guidance, the amount of trust preferred securities that is eligible as Tier 1 capital is
limited to twenty-five percent of the Company’s Tier 1 capital on a pro forma basis. At December 31,
2014, all $30,000,000 of the Company’s trust preferred securities qualified as Tier 1 capital.
