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SIERRA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
65
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Foreclosed Assets
Foreclosed assets include real estate and other property acquired in full or partial settlement of loan
obligations. Upon acquisition, any excess of the recorded investment in the loan balance over the appraised
fair market value, net of estimated selling costs, is charged against the allowance for loan and lease losses.
A valuation allowance for losses on foreclosed assets is maintained to provide for temporary declines in
value. The allowance is established through a provision for losses on foreclosed assets which is included in
other non-interest expense. Subsequent gains or losses on sales or write-downs resulting from permanent
impairments are recorded in other non-interest income or expense as incurred. Operating costs after
acquisition are expensed.
The Company had no foreclosed residential real estate properties recorded at December 31, 2015, as a result
of obtaining physical possession of the property. At December 31, 2015, the recorded investment of
consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds
are in process is $709,000.
Goodwill and Other Intangible Assets
The Company acquired Sierra National Bank in 2000. Goodwill resulting from business combinations prior
to January 1, 2009 represents the amount by which the purchase price exceeded the fair value of the net
assets.
The Company acquired Santa Clara Valley Bank in 2014. Goodwill resulting from business combinations
after January 1, 2009 is generally determined as the excess of the fair value of the consideration transferred,
plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired
and liabilities assumed as of the acquisition date.
Goodwill and intangible assets acquired in a purchase business combination and determined to have an
indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if
events and circumstances exist which indicate that an impairment test should be performed. The Company
selected December 31, 2015 as the date to perform the annual impairment test for 2015. Goodwill is the
only intangible asset with an indefinite life on our balance sheet. There was no impairment recognized for
the years ended December 31, 2015, 2014, and 2013.
Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated
residual values. The Company’s other intangible assets consist solely of core deposit intangible assets
arising from the acquisition of Santa Clara Valley Bank, which are being amortized on a straight line basis
over eight years.
Loan Commitments and Related Financial Instruments
Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and
commercial letters of credit, issued to meet customer financing needs. The face amount for these items
represents the exposure to loss, before considering customer collateral or ability to repay. Such financial
instruments are recorded when they are funded. Details regarding these commitments and financial
instruments are discussed in detail in Note 12 to our consolidated financial statements.