SIERRA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
97
12.
COMMITMENTS AND CONTINGENCIES
Letter of Credit
The Company holds two letters of credit with the Federal Home Loan Bank of San Francisco totaling
$87,600,000. A $80,000,000 letter of credit is pledged to secure public deposits at December 31, 2014
and an $7,600,000 standby letter of credit was obtained on behalf of one of our customers to guarantee
financial performance. Should the standby letter of credit be drawn upon, the customer would reimburse
the Company from an existing line of credit.
Federal Reserve Requirements
Banks are required to maintain reserves with the Federal Reserve Bank equal to a specified percentage of
their reservable deposits less vault cash. The reserve balances maintained at the Federal Reserve Bank at
December 31, 2014 and 2013 were $0 and $41,761,000, respectively.
Financial Instruments with Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of
business. These financial instruments consist of commitments to extend credit and standby letters of
credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of
the amount recognized in the consolidated balance sheet.
The Company’s exposure to credit loss in the event of nonperformance by the other party for
commitments to extend credit and letters of credit is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments and letters of credit as it
does for loans included on the balance sheet.
