SIERRA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
107
19.
FAIR VALUE
(Continued)
The Company used the following methods and significant assumptions to estimate fair values for each
category of financial asset noted below:
Securities: The fair values of securities available for sale are determined by obtaining quoted
prices on nationally recognized securities exchanges or by matrix pricing, which is a
mathematical technique used widely in the industry to value debt securities by relying on
their relationship to other benchmark quoted securities.
Collateral-dependent impaired loans: A specific loss allowance is created for collateral
dependent impaired loans, representing the difference between the face value of the loan and
its current appraised value less estimated disposition costs.
Foreclosed assets: Repossessed real estate (OREO) and other assets are carried at the lower
of cost or fair value. Fair value is the appraised value less expected selling costs for OREO
and some other assets such as mobile homes, and for all other assets fair value is represented
by the estimated sales proceeds as determined using reasonably available sources.
Foreclosed assets for which appraisals can be feasibly obtained are periodically measured for
impairment using updated appraisals. Fair values for other foreclosed assets are adjusted as
necessary, subsequent to a periodic re-evaluation of expected cash flows and the timing of
resolution. If impairment is determined to exist, the book value of a foreclosed asset is
immediately written down to its estimated impaired value through the income statement,
thus the carrying amount is equal to the fair value and there is no valuation allowance.
