PORTERVILLE, Calif.,
July 21, 2014 /PRNewswire/
-- Sierra Bancorp (Nasdaq: BSRR), parent of Bank of the
Sierra, today announced its unaudited financial results for the
quarter and the six-month period ended June
30, 2014. Sierra Bancorp recognized net income of
$4.237 million for the second quarter
of 2014, an improvement of 12% relative to net income in the second
quarter of 2013. The increase is largely the result of higher
net interest income, a lower loan loss provision, and investment
gains realized in 2014. Those favorable variances were
partially offset by a drop in deposit service charge income and
higher costs resulting from our recent core software
conversion. The Company's return on average assets was 1.16%
in the second quarter of 2014, up from 1.09% in the second quarter
of 2013. Return on average equity also increased to 9.13% in
the second quarter of 2014 from 8.62% in the second quarter of
2013, and diluted earnings per share increased to $0.30 from $0.27. For the first six months of 2014 the
Company recognized net income of $8.036
million, which represents an increase of 31% relative to the
same period in 2013. In addition to the factors affecting the
quarterly results, the year-to-date comparison was impacted by a
relatively large net gain on the sale of foreclosed assets in
2014. The Company's financial performance metrics for the
first six months of 2014 include an annualized return on average
equity of 8.75%, a return on average assets of 1.12%, and diluted
earnings per share of $0.56.
Total assets were up $88 million,
or 6%, in the first six months of 2014, due to net growth of
$90 million in gross loan balances
and a $35 million increase in
investment securities, partially offset by a lower level of cash
and due from banks and other assets. Loan volume was
favorably impacted by the purchase of $33
million in residential mortgage loans in March, along with
substantial second quarter growth in agricultural real estate loans
and mortgage warehouse loans. Total nonperforming assets,
including nonperforming loans and foreclosed assets, were reduced
by $12 million, or 26%, during the
first half. Total deposits increased $72 million, or 6%, in the first half of 2014, as
a result of strong growth in core non-maturity deposits.
"We're pleased to report an increase in net income, strong loan
and deposit growth, and a substantial reduction in nonperforming
assets," commented James C. Holly,
Chief Executive Officer. "Continued improvement in our
financial results and the potential inherent in our
recently-announced acquisition of Santa Clara Valley Bank has
generated an increased level of energy and excitement within the
Bank, and we hope to sustain that enthusiasm going forward," added
Holly.
Financial Highlights
Net income increased by $438,000,
or 12%, for the second quarter of 2014 relative to the second
quarter of 2013, and was up $1.904
million, or 31%, for the first half of 2014 relative to the
first half of 2013. The increase in net income was due in
part to net interest income, which was up by $675,000, or 5%, for the comparative quarters and
by $1.048 million, or 4%, for the
comparative year-to-date periods. Net interest income
includes non-recurring income such as net interest recoveries on
non-accrual loans and prepayment penalties, which totaled
approximately $280,000 for the second
quarter of 2014 and $288,000 for the
first six months of 2014. Despite the favorable impact of
those items, our net interest margin reflects a slight decline for
the quarterly comparison due primarily to the highly competitive
environment for quality loans. Having a positive impact on
net interest income were increases in average interest-earning
assets totaling $82 million for the
quarterly comparison and $58 million
for the year-to-date comparison. Another significant factor
in the Company's results of operations in 2014 was the loan loss
provision, which was reduced by $250,000, or 56%, in the second quarter of 2014
relative to the second quarter of 2013, and was down $1.700 million, or 83%, for the comparative
six-month periods.
Total non-interest income was about the same for the quarterly
comparison, but fell by $413,000, or
5%, for the year-to-date comparison. The largest component of
non-interest income, service charges on deposit accounts, declined
by about 8% for both the second quarter and the first half due in
large part to lower overdraft income. Bank-owned life
insurance (BOLI) income increased by $86,000, or 27%, for the second quarter but fell
by $136,000, or 17%, for the first
half of 2014 due primarily to fluctuations in income on BOLI
associated with deferred compensation plans. We realized
$183,000 in gains on the sale of
investments in the second quarter of 2014 and $287,000 in gains during the first half of 2014,
relative to no investment gains in the second quarter of 2013 and
only $6,000 in gains for the first
half of 2013. Other non-interest income was down $97,000, or 7%, for the comparative quarters and
declined $195,000, or 6%, for the
comparative six-month periods, as the result of higher pass-through
costs associated with our low-income housing tax credit investments
in the second quarter of 2014 and, for the year-to-date comparison,
a $100,000 non-recurring signing
incentive received in conjunction with our conversion of merchant
processing to a new vendor in the first quarter of 2013.
Total non-interest expense increased by $291,000, or 3%, for the comparative quarters,
but fell by $802,000, or 4%, for the
year-to-date comparison. The largest component of
non-interest expense, salaries and benefits, fell by $75,000, or 1%, for the quarterly comparison, but
was about the same for the comparative year-to-date results.
The greatest favorable impact on compensation expense came from a
higher level of deferred salaries directly related to successful
loan originations. For the quarter this was partially offset
by higher deferred compensation plan expense accruals related to
the aforementioned increase in BOLI income, while the first half of
the year was negatively impacted by a non-recurring increase in
overtime costs related to our core conversion. Occupancy
expense was lower in 2014 due to lower depreciation expense on
furniture and equipment, despite additional expenses resulting from
our rebranding project and our information technology network
upgrade. Other non-interest expenses increased by
$430,000, or 12%, in the second
quarter of 2014, but reflect a drop of $682,000, or 8%, for the first six months of the
year. The increase in the second quarter is centered in costs
associated with our core banking software conversion, and also
includes an increase in marketing costs due in part to our recent
rebranding effort. The reduction for the first six months was
driven by a drop of $1.178 million in
net costs associated with foreclosed assets, due primarily to a
non-recurring net gain of $842,000 on
the sale foreclosed assets in the first half of 2014 relative to a
net loss of $307,000 on the sale of
foreclosed assets in the first half of 2013. A drop in both
internal review costs and legal costs favorably impacted the
comparative results for the second quarter and the first six
months.
The Company's provision for income taxes was 26.4% of pre-tax
income in the second quarter of 2014, relative to 25.9% in the
second quarter of 2013. For the first six months, the
Company's book tax rate was 25.6% in 2014 relative to 20.0% in
2013. The higher tax provisioning in 2014 is primarily the
result of an increase in taxable income relative to the Company's
available tax credits. Taxable income excludes income
associated with bank-owned life insurance and municipal
investments. Tax credits arise from our investments in
low-income housing tax credit funds, as well as certain hiring tax
credits.
Balance sheet changes during the six months ended June 30, 2014 include an increase in total assets
of $88 million, or 6%, due to growth
in loans and investments net of reductions in foreclosed assets and
balances due from banks. Gross loans increased by
$90 million, or 11%, due to the
purchase of $33 million in
residential mortgage loans in the first quarter of 2014 and strong
growth in agricultural mortgage loans and mortgage warehouse loans
in the second quarter. Reclassifications made in the course
of our core conversion contributed to the increase in real estate
loans and the drop in commercial loans. Investment balances
were up $35 million, or 8%, due
primarily to the purchase of mortgage-backed securities as we
deployed excess liquidity. Cash and due from banks was down
$29 million, or 37%, due mainly to a
lower balance of excess interest-earning funds held in our Federal
Reserve Bank account.
Total nonperforming assets, including non-accrual loans and
foreclosed assets, reflect a reduction of $12 million, or 26%, during the first six months
of 2014, with much of the decrease coming in the second quarter
subsequent to the sale of about $6
million in nonperforming loans. The Company's ratio of
nonperforming assets to loans plus foreclosed assets was 3.76% at
June 30, 2014, compared to 5.62% at
December 31, 2013. All of the
Company's impaired assets are periodically reviewed, and are either
well-reserved based on current loss expectations or are carried at
the fair value of the underlying collateral, net of expected
disposition costs. In addition to nonperforming assets, the
Company had $13 million in loans
classified as restructured troubled debt (TDRs) that were included
with performing loans as of June 30,
2014, a reduction of about $2
million relative to TDRs at December
31, 2013.
The Company's allowance for loan and lease losses was
$11.6 million as of June 30, 2014, down very slightly from the
balance at December 31, 2013.
Net loans charged off against the allowance totaled only
$392,000 in the first half of 2014
compared to $3.743 million in the
first half of 2013. Due to loan growth the overall allowance
declined as a percentage of total loans, to 1.30% at June 30, 2014 from 1.45% at December 31, 2013. Management's detailed
analysis indicates that the Company's allowance for loan and lease
losses should be sufficient to cover credit losses inherent in loan
and lease balances outstanding as of June
30, 2014, but no assurance can be given that the Company
will not experience substantial future losses relative to the size
of the allowance.
Deposits reflect growth of $72
million, or 6%, during the six months ended June 30, 2014. Core non-maturity deposits
were up $80 million, or 9%, although
some of the increase appears to be seasonal. There were also
significant changes in the composition of deposits, due in part to
the transition of approximately $40
million in non-interest bearing demand deposits into
interest-bearing transaction accounts during the course of our core
conversion. Growth in non-maturity deposits was partially
offset by the runoff of $6 million in
customer time deposits and a $2
million reduction in brokered deposits.
Total capital increased by $5.2
million, or 3%, to $187
million at June 30,
2014. The increase resulted primarily from an increase in
retained earnings, net of the impact of the Company's repurchase of
270,100 shares in the first half of 2014 (including 191,460 shares
repurchased during the second quarter). At June 30, 2014, we had 429,900 shares remaining
for repurchase out of the 700,000 shares authorized under the
current program. Risk-based capital ratios, while still
robust, dropped slightly during the first half due to an increase
in risk-adjusted assets. At June 30,
2014, our total risk-based capital ratio was 20.1%, our tier
1 risk-based capital ratio was 18.9%, and our tier 1 leverage ratio
was 13.9%.
About Sierra Bancorp
Sierra Bancorp is the holding company for Bank of the Sierra
(www.bankofthesierra.com), which is in its 37th year of
operations and is the largest independent bank headquartered in the
South San Joaquin Valley. The Company has over 400 employees
and conducts business through 25 branch offices, an online branch,
a real estate industries center, an agricultural credit center, and
an SBA center. As announced on July
17, 2014, the Company has entered into a definitive
agreement to acquire Santa Clara Valley Bank which has $128 million in assets and maintains branches in
Santa Paula, Santa Clarita, and Fillmore, California.
The statements contained in this release that are not
historical facts are forward-looking statements based on
management's current expectations and beliefs concerning future
developments and their potential effects on the Company.
Readers are cautioned not to unduly rely on forward looking
statements. Actual results may differ from those
projected. These forward-looking statements involve risks and
uncertainties including but not limited to the health of the
national and California economies,
the Company's ability to attract and retain skilled employees,
customers' service expectations, the Company's ability to
successfully deploy new technology, the success of branch
expansion, changes in interest rates, loan portfolio performance,
the Company's ability to secure buyers for foreclosed properties,
and other factors detailed in the Company's SEC filings, including
the "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections of the
Company's most recent Form 10-K and Form 10-Q.
CONSOLIDATED
INCOME STATEMENT
|
3-Month Period
Ended:
|
|
6-Month Period
Ended:
|
(in $000's,
unaudited)
|
6/30/2014
|
6/30/2013
|
%
Change
|
|
6/30/2014
|
6/30/2013
|
%
Change
|
Interest
Income
|
$ 13,682
|
$ 13,090
|
4.5%
|
|
$ 26,634
|
$ 25,806
|
3.2%
|
Interest
Expense
|
732
|
815
|
-10.2%
|
|
1,469
|
1,689
|
-13.0%
|
Net Interest
Income
|
12,950
|
12,275
|
5.5%
|
|
25,165
|
24,117
|
4.3%
|
|
|
|
|
|
|
|
|
Provision for Loan
& Lease Losses
|
200
|
450
|
-55.6%
|
|
350
|
2,050
|
-82.9%
|
Net Int after
Provision
|
12,750
|
11,825
|
7.8%
|
|
24,815
|
22,067
|
12.5%
|
|
|
|
|
|
|
|
|
Service
Charges
|
2,039
|
2,215
|
-7.9%
|
|
3,925
|
4,288
|
-8.5%
|
BOLI
Income
|
403
|
317
|
27.1%
|
|
688
|
824
|
-16.5%
|
Gain (Loss) on
Investments
|
183
|
-
|
100.0%
|
|
287
|
6
|
4683.3%
|
Other Non-Interest
Income
|
1,393
|
1,490
|
-6.5%
|
|
2,825
|
3,020
|
-6.5%
|
Total Non-Interest
Income
|
4,018
|
4,022
|
-0.1%
|
|
7,725
|
8,138
|
-5.1%
|
|
|
|
|
|
|
|
|
Salaries &
Benefits
|
5,328
|
5,403
|
-1.4%
|
|
11,313
|
11,323
|
-0.1%
|
Occupancy
Expense
|
1,532
|
1,596
|
-4.0%
|
|
3,037
|
3,147
|
-3.5%
|
Other Non-Interest
Expenses
|
4,148
|
3,718
|
11.6%
|
|
7,386
|
8,068
|
-8.5%
|
Total Non-Interest
Expense
|
11,008
|
10,717
|
2.7%
|
|
21,736
|
22,538
|
-3.6%
|
|
|
|
|
|
|
|
|
Income Before
Taxes
|
5,760
|
5,130
|
12.3%
|
|
10,804
|
7,667
|
40.9%
|
Provision for Income
Taxes
|
1,523
|
1,331
|
14.4%
|
|
2,768
|
1,535
|
80.3%
|
Net
Income
|
$ 4,237
|
$ 3,799
|
11.5%
|
|
$ 8,036
|
$ 6,132
|
31.1%
|
|
|
|
|
|
|
|
|
Tax
Data
|
|
|
|
|
|
|
|
Tax-Exempt Muni
Income
|
$ 733
|
$ 672
|
9.1%
|
|
$ 1,474
|
$ 1,291
|
14.2%
|
Interest Income -
Fully Tax Equiv
|
$ 14,060
|
$ 13,436
|
4.6%
|
|
$ 27,393
|
$ 26,471
|
3.5%
|
|
|
|
|
|
|
|
|
Net Charge-Offs
(Recoveries)
|
$ 57
|
$ 1,469
|
-96.1%
|
|
$ 392
|
$ 3,743
|
-89.5%
|
|
|
|
|
|
|
|
|
PER SHARE
DATA
|
3-Month Period
Ended:
|
|
6-Month Period
Ended:
|
(unaudited)
|
6/30/2014
|
6/30/2013
|
%
Change
|
|
6/30/2014
|
6/30/2013
|
%
Change
|
Basic Earnings per
Share
|
$0.30
|
$0.27
|
11.1%
|
|
$0.57
|
$0.43
|
32.6%
|
Diluted Earnings per
Share
|
$0.30
|
$0.27
|
11.1%
|
|
$0.56
|
$0.43
|
30.2%
|
Common
Dividends
|
$0.08
|
$0.06
|
33.3%
|
|
$0.16
|
$0.12
|
33.3%
|
|
|
|
|
|
|
|
|
Wtd. Avg. Shares
Outstanding
|
14,086,939
|
14,128,146
|
|
|
14,157,103
|
14,120,865
|
|
Wtd. Avg. Diluted
Shares
|
14,212,532
|
14,227,335
|
|
|
14,291,359
|
14,211,910
|
|
|
|
|
|
|
|
|
|
Book Value per Basic
Share (EOP)
|
$13.34
|
$12.38
|
7.8%
|
|
$13.34
|
$12.38
|
7.8%
|
Tangible Book Value
per Share (EOP)
|
$12.95
|
$11.99
|
8.0%
|
|
$12.95
|
$11.99
|
8.0%
|
|
|
|
|
|
|
|
|
Common Shares
Outstanding (EOP)
|
14,009,139
|
14,144,439
|
|
|
14,009,139
|
14,144,439
|
|
|
|
|
|
|
|
|
|
KEY FINANCIAL
RATIOS
|
3-Month Period
Ended:
|
|
|
6-Month Period
Ended:
|
|
(unaudited)
|
6/30/2014
|
6/30/2013
|
|
|
6/30/2014
|
6/30/2013
|
|
Return on Average
Equity
|
9.13%
|
8.62%
|
|
|
8.75%
|
7.03%
|
|
Return on Average
Assets
|
1.16%
|
1.09%
|
|
|
1.12%
|
0.89%
|
|
Net Interest Margin
(Tax-Equiv.)
|
4.00%
|
4.04%
|
|
|
4.00%
|
4.00%
|
|
Efficiency Ratio
(Tax-Equiv.)
|
64.06%
|
64.89%
|
|
|
66.96%
|
66.75%
|
|
Net C/O's to Avg
Loans (not annualized)
|
0.01%
|
0.18%
|
|
|
0.05%
|
0.46%
|
|
|
|
|
|
|
|
|
|
AVERAGE
BALANCES
|
3-Month Period
Ended:
|
|
6-Month Period
Ended:
|
(in $000's,
unaudited)
|
6/30/2014
|
6/30/2013
|
%
Change
|
|
6/30/2014
|
6/30/2013
|
%
Change
|
Average
Assets
|
$ 1,470,697
|
$ 1,398,890
|
5.1%
|
|
$ 1,443,689
|
$ 1,395,766
|
3.4%
|
Average
Interest-Earning Assets
|
$ 1,335,188
|
$ 1,252,907
|
6.6%
|
|
$ 1,306,503
|
$ 1,248,183
|
4.7%
|
Avg Loans &
Leases (net of def fees)
|
$ 858,572
|
$ 823,832
|
4.2%
|
|
$ 821,420
|
$ 816,273
|
0.6%
|
Average
Deposits
|
$ 1,228,929
|
$ 1,157,984
|
6.1%
|
|
$ 1,202,639
|
$ 1,159,194
|
3.7%
|
Average
Equity
|
$ 186,118
|
$ 176,769
|
5.3%
|
|
$ 185,258
|
$ 175,820
|
5.4%
|
STATEMENT OF
CONDITION
|
End of
Period:
|
|
(in $000's,
unaudited)
|
6/30/2014
|
12/31/2013
|
6/30/2013
|
Annual
Chg
|
ASSETS
|
|
|
|
|
Cash and Due from
Banks
|
$ 48,824
|
$ 78,006
|
$ 66,982
|
-27.1%
|
Securities and Fed
Funds Sold
|
459,744
|
425,044
|
393,576
|
16.8%
|
Loans Held for
Sale
|
-
|
105
|
523
|
-100.0%
|
|
|
|
|
|
Real Estate
Loans
|
638,796
|
577,839
|
554,781
|
15.1%
|
Agricultural
Production Loans
|
26,142
|
25,180
|
22,404
|
16.7%
|
Comm'l &
Industrial Loans & Leases
|
101,348
|
103,262
|
103,192
|
-1.8%
|
Mortgage Warehouse
Lines
|
106,157
|
73,425
|
104,204
|
1.9%
|
Consumer
Loans
|
20,598
|
23,536
|
25,613
|
-19.6%
|
Gross Loans &
Leases
|
893,041
|
803,242
|
810,194
|
10.2%
|
Deferred Loan
Fees
|
1,393
|
1,522
|
1,237
|
12.6%
|
Loans & Leases Net
of Deferred Fees
|
894,434
|
804,764
|
811,431
|
10.2%
|
Allowance for Loan
& Lease Losses
|
(11,634)
|
(11,677)
|
(12,180)
|
-4.5%
|
Net Loans &
Leases
|
882,800
|
793,087
|
799,251
|
10.5%
|
|
|
|
|
|
Bank Premises &
Equipment
|
20,794
|
20,393
|
20,932
|
-0.7%
|
Other
Assets
|
85,877
|
93,614
|
97,160
|
-11.6%
|
Total
Assets
|
$ 1,498,039
|
$ 1,410,249
|
$ 1,378,424
|
8.7%
|
|
|
|
|
|
LIABILITIES &
CAPITAL
|
|
|
|
|
Non-Interest Demand
Deposits
|
$ 351,757
|
$ 365,997
|
$ 357,540
|
-1.6%
|
Int-Bearing
Transaction Accounts
|
366,924
|
282,721
|
277,913
|
32.0%
|
Savings
Deposits
|
154,415
|
144,162
|
131,187
|
17.7%
|
Money Market
Deposits
|
72,541
|
73,132
|
66,497
|
9.1%
|
Customer Time
Deposits
|
292,490
|
298,167
|
311,879
|
-6.2%
|
Wholesale Brokered
Deposits
|
8,000
|
10,000
|
10,000
|
-20.0%
|
Total
Deposits
|
1,246,127
|
1,174,179
|
1,155,016
|
7.9%
|
|
|
|
|
|
Junior Subordinated
Debentures
|
30,928
|
30,928
|
30,928
|
0.0%
|
Other
Interest-Bearing Liabilities
|
13,844
|
5,974
|
1,963
|
605.2%
|
Total Deposits &
Int.-Bearing Liab.
|
1,290,899
|
1,211,081
|
1,187,907
|
8.7%
|
|
|
|
|
|
Other
Liabilities
|
20,218
|
17,494
|
15,346
|
31.7%
|
Total
Capital
|
186,922
|
181,674
|
175,171
|
6.7%
|
Total Liabilities
& Capital
|
$ 1,498,039
|
$ 1,410,249
|
$ 1,378,424
|
8.7%
|
|
|
|
|
|
CREDIT QUALITY
DATA
|
End of
Period:
|
|
(in $000's,
unaudited)
|
6/30/2014
|
12/31/2013
|
6/30/2013
|
Annual
Chg
|
Non-Accruing
Loans
|
$ 29,236
|
$ 37,414
|
$ 42,309
|
-30.9%
|
Foreclosed
Assets
|
4,498
|
8,185
|
10,834
|
-58.5%
|
Total Nonperforming
Assets
|
$ 33,734
|
$ 45,599
|
$ 53,143
|
-36.5%
|
|
|
|
|
|
Performing TDR's (not
incl. in NPA's)
|
$ 13,203
|
$ 15,239
|
$ 17,657
|
-25.2%
|
|
|
|
|
|
Non-Perf Loans to
Gross Loans
|
3.27%
|
4.66%
|
5.22%
|
|
NPA's to Loans plus
Foreclosed Assets
|
3.76%
|
5.62%
|
6.47%
|
|
Allowance for Ln
Losses to Loans
|
1.30%
|
1.45%
|
1.50%
|
|
|
|
|
|
|
OTHER PERIOD-END
STATISTICS
|
End of
Period:
|
|
(unaudited)
|
6/30/2014
|
12/31/2013
|
6/30/2013
|
|
Shareholders Equity /
Total Assets
|
12.5%
|
12.9%
|
12.7%
|
|
Loans /
Deposits
|
71.7%
|
68.4%
|
70.1%
|
|
Non-Int. Bearing Dep.
/ Total Dep.
|
28.2%
|
31.2%
|
31.0%
|
|
SOURCE Sierra Bancorp