SIERRA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
101
13.
SHAREHOLDERS’ EQUITY
(Continued)
The Company is using the Black-Scholes model to value stock options. In accordance with U.S. GAAP,
charges of $181,000, $268,000 and $487,000 are reflected in the Company’s income statements for the
years ended December 31, 2014, 2013 and 2012, respectively, as pre-tax compensation and directors’
expense related to stock options. The related tax benefit of these options is $63,000, $110,000 and
$200,000 for the years ended December 31, 2014, 2013 and 2012, respectively.
Unamortized compensation expense associated with unvested stock options outstanding at December 31,
2014 was $99,000, which will be recognized over the next 2.9 years.
14.
REGULATORY MATTERS
The Company and the Bank are subject to certain regulatory requirements administered by the Board of
Governors of the Federal Reserve System and the FDIC. Failure to meet these minimum capital
requirements can initiate certain mandatory and possibly additional discretionary actions by regulators
that, if undertaken, could have a direct material effect on the Company’s consolidated financial
statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action,
the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets,
liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The
Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the
Bank to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets and of
Tier 1 capital to average assets. Each of these components is defined in the regulations. Management
believes that the Company and the Bank met all of their capital adequacy requirements as of
December 31, 2014 and 2013. In addition, as of December 31, 2014 and 2013, notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.
There are no conditions or events since that notification that management believes have changed the
Bank’s category. To be categorized as well capitalized, the Bank must maintain minimum total risk-
based, Tier 1 risk-based and leverage capital ratios as set forth below (dollars in thousands):
Leverage Ratio
Sierra Bancorp and subsidiary
$199,853
12.99% $198,216
14.37%
Minimum requirement for "Well-Capitalized" institutions 76,926
5.0% 68,969
5.0%
Minimum regulatory requirement
61,541
4.0% 55,175
4.0%
Bank of the Sierra
$195,174
12.72% $195,001
14.18%
Minimum requirement for "Well-Capitalized" institutions 76,706
5.0% 68,765
5.0%
Minimum regulatory requirement
61,365
4.0% 55,012
4.0%
2014
2013
Capital
Amount
Ratio
Capital
Amount
Ratio
