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SIERRA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
103
13.
SHAREHOLDERS’ EQUITY
(Continued)
The Company is using the Black-Scholes model to value stock options. In accordance with U.S. GAAP,
charges of $35,000, $181,000, and $268,000 are reflected in the Company’s income statements for the years
ended December 31, 2015, 2014, and 2013, respectively, as pre-tax compensation and directors’ expense
related to stock options. The related tax benefit of these options is $0, $33,000, and $2,000 for the years
ended December 31, 2015, 2014, and 2013, respectively.
Unamortized compensation expense associated with unvested stock options outstanding at December 31,
2015 was $77,000, which will be recognized over the next 4.3 years.
14.
REGULATORY MATTERS
The Company and the Bank are subject to certain regulatory capital requirements administered by the Board
of Governors of the Federal Reserve System and the FDIC. Capital adequacy guidelines and, additionally
for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and
certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgements by regulators. Failure to meet capital requirements
can initiate regulatory action. The final rules implementing Basel Committee on Banking Supervision’s
capital guidelines for U.S. banks (Basel III rules) became effective for the Company on January 1, 2015
with full compliance with all of the requirements being phased in over a multi-year schedule, and fully
phased in by January 1, 2019. The net unrealized gain on available for sale securities is not included in
computing regulatory capital. Capital amounts and ratios for December 31. 2014 are calculated using Basel
I rules. Management believes as of December 31, 2015, the Company and the Bank meet all capital
adequacy requirements to which they are subject. Prompt corrective action regulations provide five
classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized,
and critically undercapitalized, although these terms are not used to represent overall financial condition. If
adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized,
capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.
At year-end December 31, 2015 and 2014, 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.
Actual and required capital amounts (in thousands) and ratios are presented below at year end.
Leverage Ratio
Sierra Bancorp and subsidiary
$ 207,576
12.14% $199,853
12.99%
Minimum requirement for "Well-Capitalized" institutions 85,526
5.0% 76,926
5.0%
Minimum regulatory requirement
68,421
4.0% 61,541
4.0%
Bank of the Sierra
$ 205,055
12.00% $195,174
12.72%
Minimum requirement for "Well-Capitalized" institutions 85,276
5.0% 76,706
5.0%
Minimum regulatory requirement
68,221
4.0% 61,365
4.0%
2015
2014
Capital
Amount
Ratio
Capital
Amount
Ratio