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SIERRA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
105
14.
REGULATORY MATTERS
(Continued)
Dividend Restrictions
The Company’s ability to pay cash dividends is dependent on dividends paid to it by the Bank, and is also
limited by state corporation law. The California General Corporation Law allows a California corporation
to pay dividends if the Company’s retained earnings equal at least the amount of the proposed dividend. If
the Company does not have sufficient retained earnings available for the proposed dividend, it may still pay
a dividend to its shareholders if immediately after giving effect to the dividend the sum of the company’s
assets (exclusive of goodwill and deferred charges) would be at least equal to 125% of its liabilities (not
including deferred taxes, deferred income and other deferred liabilities) and the current assets of the
company would be at least equal to its current liabilities, or, if the average of its earnings before taxes on
income and before interest expense for the two preceding fiscal years was less than the average of its interest
expense for the two preceding fiscal years, at least equal to 125% of its current liabilities.
Dividends from the Bank to the Company are restricted under California law to the lesser of the Bank’s
retained earnings or the Bank’s net income for the latest three fiscal years, less dividends previously declared
during that period, or, with the approval of the Department of Business Oversight, to the greater of the
retained earnings of the Bank, the net income of the Bank for its last fiscal year, or the net income of the
Bank for its current fiscal year. As of December 31, 2015, the maximum amount available for dividend
distribution under this restriction was approximately $17,735,000.