"Set to frame size"

Something's amiss, clearly. Either with your footage and maybe the way PPro handles it.

I typically don't spend too much time searching for anwers to non-critical issues in my life. I just fix things and move on. Saves a lot of headaches too, IMHO 😉

So here's what's happening.  The thin black bars on the sides are embedded in your image.  As far as Premiere understands it they are part of the image.

When you place that into a timeline with a different raster shape, Premier adjusts the whole image, including the thin black lines to fit the timeline raster.  In this case it needs to add space to the top and bottom in order to include the whole image.  It's behaving as expected.  If you want to enlarge the image to exclude the lines at the side you must do that manually.

What sequence setting are you using while creating the sequence? Depending on the clip dimension and sequence setting there might be a chance to remain the black size. might be your clip dimension are small and your sequence dimensions are large.

When dragging the clip to sequence select the " change the sequence setting" option.

let us know its works.

Thanks,

Suraj.