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SIERRA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
99
12.
COMMITMENTS AND CONTINGENCIES
Letter of Credit
The Company holds two letters of credit with the Federal Home Loan Bank of San Francisco totaling
$97,086,000. A $90,000,000 letter of credit is pledged to secure public deposits at December 31, 2015 and
a $7,086,000 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. There were no reserve balances maintained at the Federal Reserve
Bank at December 31, 2015 and 2014, 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.