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SIERRA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
97
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):
2015
2014
2013
Income taxexpense at Federal
statutory rate
9,498
$
7,501
$
5,597
$
Increase (decrease) resulting from:
State franchise taxexpense, net of
Federal tax effect
1,671
1,116
414
Taxexempt income
(1,034)
(1,018)
(920)
Affordable housing taxcredits
(770)
(1,006)
(1,257)
Other
(294)
(402)
(741)
9,071
$
6,191
$
3,093
$
Effective tax rate
33.4%
28.9%
18.8%
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, 2012, 2013 and 2014 are open to audit by the federal authorities
and our California state tax returns for the years ended December 31, 2011, 2012, 2013 and 2014 are open
to audit by the state authorities.
The Company has net operating loss carry forwards of approximately $3,800,000 for federal income and
approximately $4,400,000 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, 2015, 2014, and 2013, 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, 2015, all $30,000,000 of
the Company’s trust preferred securities qualified as Tier 1 capital.