Note 13 – Recent Developments

On May 13, 2016, the Company acquired certain loans and deposits from Citizens Business Bank concurrent with the closure of that bank’s Porterville branch. At the time of acquisition there were a total of $10 million in deposits and $1 million in loans, which we consolidated into our Porterville Main office.

In January 2016 the Company entered into a definitive agreement to acquire Coast Bancorp, the holding company for Coast National Bank. The transaction closed on July 8, 2016, subsequent to the receipt of requisite regulatory and shareholder approvals, and immediately following that acquisition, Coast National Bank was merged with and into Bank of the Sierra. Coast National Bank was a community bank with branch offices in San Luis Obispo, Paso Robles, and Arroyo Grande, and a loan production office in Atascadero, California. Shortly after transaction closing, the Atascadero location was converted into a full-service branch office. The transaction also involved Sierra Bancorp’s acquisition of 100% of the voting equity of Coast Bancorp Statutory Trust II and Sierra Bancorp’s assumption of $7 million in associated junior subordinated debentures. The aggregate consideration tendered by the Company in its acquisition of Coast Bancorp consisted of 599,242 shares of Sierra Bancorp common stock and $3.3 million in cash, and one-time acquisition costs are expected to add roughly $3.2 million to the Company’s pre-tax non-interest expense in 2016. At the merger date the Coast acquisition contributed approximately $95 million to the Company’s outstanding loan balances, $31 million to investments, and $129 million to total deposits. In accordance with GAAP, assets and liabilities will be reflected on the Company’s books at their estimated fair values and there was no carryover of the allowance for loan losses that had previously been recorded by Coast. The Company will also record a deferred income tax asset, goodwill, and a core deposit intangible in conjunction with the acquisition, although those amounts have not yet been definitively determined. Goodwill represents the excess of consideration transferred over the fair values of the identifiable net assets acquired. The core deposit intangible will be amortized on a straight line basis over eight years, commencing at the date of acquisition. Goodwill and core deposit intangibles are not deductible for income tax purposes.