BSRR Sierra Bancorp

PORTERVILLE, Calif., April 24 /PRNewswire-FirstCall/ -- Sierra Bancorp (NASDAQ:BSRR), parent of Bank of the Sierra, today announced its financial results for the quarter ended March 31, 2006. During the first quarter of 2006, gross loan and lease balances grew by $54 million, or 7%, surpassing the $45 million growth in loans and leases for the entire year in 2005. Net income for the first quarter of 2006 increased 36% to $4.5 million, or $0.43 per diluted share, compared to $3.3 million, or $0.31 per diluted share, in the same quarter a year ago. Sierra Bancorp generated a return on average equity of 22.5% in the first quarter of 2006 compared to 18.3% in the same quarter last year. "We're off to a spirited start in 2006," remarked James C. Holly, President and CEO. "Our Bank is really a reflection of the people who work here," Holly stated, "and we are fortunate to have retained highly dedicated, talented, and hard-working individuals on staff who have created the momentum to provide such a strong launch in our 29th year of operations." Financial Highlights The Company's improved quarterly operating results were primarily the result of growth in average earning assets and a higher net interest margin. Average interest-earning assets were $57 million higher in the first quarter of 2006 than in the first quarter of 2005, and the Company's net interest margin was 5.85% for the first quarter of 2006 versus 5.43% in the first quarter of 2005. The following factors contributed to the net interest margin increase: the Company's balance sheet is asset-sensitive, and net interest income tends to increase as short-term interest rates rise; the ratio of average interest-free demand deposit balances to average earning assets grew to 29% in the first quarter of 2006 from 27% in the first quarter of 2005; and non-performing loan balances declined to $914,000 at March 31, 2006 from $3.9 million at March 31, 2005. For the quarter, service charges on deposits increased by $218,000, or 17%, relative to the first quarter of 2005. Service charges show considerable improvement due primarily to the implementation of new charges for higher-risk accounts. Loan sale and servicing income was down 98% because of the prior-year sale of $21 million in mortgage loans at a $527,000 gain. Other non-interest income increased by $473,000, or 56%, due largely to the $330,000 write-down of our investment in Diversified Holdings, Inc. in the first quarter of 2005, but year-over-year increases in core operating income such as debit card interchange fees and leasing income also contributed. On the expense side, salaries and benefits were only 3% higher despite the addition of staff for our two newest branches. The main reason for the lower-than-expected increase is a $177,000, or 24%, increase in the deferral of salary costs that are associated with successful loan originations. The cost of benefits also fell by $127,000, due in large part to a reduction in workers compensation costs. As with salaries and benefits, occupancy expense increased by only 3%. Other non-interest expenses declined by $329,000, or 10%. One of the principal reasons for the drop is that marketing expenses were $273,000 lower in 2006 than in 2005, due to a $95,000 reduction in expenditures for a deposit program that is not being repeated in 2006 and timing differences in the payment of other promotional expenses. Another factor in the reduction in non-interest expenses is that OREO properties were written down by $200,000 in the first quarter of 2005, but only by $133,000 in the first quarter of 2006. The Company's single remaining OREO property at year-end 2005 was sold in March, and the balance at the end of the first quarter was zero. While it is possible that other properties may be foreclosed upon during the remainder of the year, further OREO write-downs during 2006 are not anticipated. Major balance sheet changes during the first quarter of 2006 include a $54 million, or 7%, increase in gross loans and leases, an $8 million, or 1%, drop in total deposits, and an increase of $53 million, or 47%, in other borrowed money. Most of the loan growth for the quarter was centered in commercial loans, SBA loans, and real estate loans, which grew by 12%, 9%, and 7% respectively. Within real estate loans, the strongest growth for the quarter was in loans secured by residential properties (most of which are actually commercial loans with residential real estate taken as collateral), which increased by $26 million, or 20%. Commenting further on balance sheet growth, Holly stated, "while most of the loan growth in the first quarter was generated by more-established branches, our Reedley branch has over $5 million in gross loans after its first full quarter of operation, and our newly-opened office in the Bakersfield Riverlakes area also appears poised to do well." The new branch in Bakersfield brings the total number of branches operated by the Company to twenty, and Holly explained that the Company's branch expansion strategy, which allows for two to three new branches a year, should provide a strong foundation for continued steady growth in the future. Time certificates of deposit fell by $18 million during the quarter, and non-interest demand deposits were down by about $2 million. On the other hand, NOW, savings, and money market account deposits increased by a combined $12 million. It is anticipated that recently-added deposit products targeted at commercial customers will help reverse the decline in deposits and provide for more balanced growth between loans and deposits in the future. "The decline in deposits in the first quarter of 2006 is similar to cycles the Company has experienced in the past, and borrowings from the Federal Home Loan Bank were used to make up for the deposit decrease and to fund loan growth," observed Ken Taylor, Chief Financial Officer. Taylor noted further, "the Company has ample liquidity resources in the form of brokered CD's, Federal Home Loan Bank borrowing lines, and correspondent bank lines of credit to fund any anticipated loan growth, although if core deposit growth doesn't materialize as anticipated our net interest margin could be negatively impacted by increased reliance on these more costly wholesale sources of funding." About Sierra Bancorp Sierra Bancorp is the holding company for Bank of the Sierra (http://www.bankofthesierra.com/), which is in its 29th year of operations and is the largest independent bank headquartered in the South San Joaquin Valley. The Company has $1.1 billion in total assets and currently maintains twenty branch offices, an agricultural credit center, and an SBA center. In June 2005, Sierra Bancorp was added to the Russell 2000 index based on relative growth in market capitalization. In its July 2005 edition, US Banker magazine ranked Sierra Bancorp as the nation's 8th best performing publicly-traded community bank based on three-year average return on equity. 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 de ploy new technology and gain efficiencies there from, 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. CONSOLIDATED INCOME STATEMENT 3-Month Period Ended: (in $000's, unaudited) 3/31/2006 3/31/2005 % Change Interest Income $18,019 $14,659 22.9% Interest Expense 4,540 2,831 60.4% Net Interest Income 13,479 11,828 14.0% Provision for Loan & Lease Losses 1,050 1,000 5.0% Net Int after Provision 12,429 10,828 14.8% Service Charges 1,476 1,258 17.3% Loan Sale & Servicing Income 13 560 -97.7% Other Non-Interest Income 1,314 841 56.2% Gain (Loss) on Investments - - 0.0% Total Non-Interest Income 2,803 2,659 5.4% Salaries & Benefits 4,191 4,066 3.1% Occupancy Expense 1,548 1,497 3.4% Other Non-Interest Expenses 2,844 3,173 -10.4% Total Non-Interest Expense 8,583 8,736 -1.8% Income Before Taxes 6,649 4,751 39.9% Provision for Income Taxes 2,199 1,490 47.6% Net Income $4,450 $3,261 36.5% TAX DATA Tax-Exempt Muni Income $475 $334 42.2% Tax-Exempt BOLI Income $185 $253 -26.9% Interest Income - Fully Tax Equiv $18,275 $14,831 23.2% NET CHARGE-OFFS $83 $191 -56.5% PER SHARE DATA 3-Month Period Ended: (unaudited) 3/31/2006 3/31/2005 % Change Basic Earnings per Share $0.46 $0.34 35.3% Diluted Earnings per Share $0.43 $0.31 38.7% Common Dividends $0.13 $0.11 18.2% Wtd. Avg. Shares Outstanding 9,752,996 9,723,454 Wtd. Avg. Diluted Shares 10,271,246 10,386,027 Book Value per Basic Share (EOP) $8.43 $7.49 12.6% Tangible Book Value per Share (EOP) $7.86 $6.92 13.6% Common Shares Outstndg. (EOP) 9,769,880 9,775,923 KEY FINANCIAL RATIOS 3-Month Period Ended: (unaudited) 3/31/2006 3/31/2005 Return on Average Equity 22.46% 18.32% Return on Average Assets 1.70% 1.32% Net Interest Margin (Tax-Equiv.) 5.85% 5.43% Efficiency Ratio (Tax-Equiv.) 51.53% 57.78% Net C/O's to Avg Loans (not annualized) 0.01% 0.03% AVERAGE BALANCES 3-Month Period Ended: (in $000's, unaudited) 3/31/2006 3/31/2005 % Change Average Assets $1,061,229 $998,893 6.2% Average Interest-Earning Assets $953,215 $896,070 6.4% Average Gross Loans & Leases $756,109 $692,782 9.1% Average Deposits $813,560 $755,044 7.8% Average Equity $80,347 $72,176 11.3% STATEMENT OF CONDITION End of Period: (in $000's, unaudited) 3/31/2006 12/31/2005 3/31/2005 Annual Chg ASSETS Cash and Due from Banks $41,627 $50,147 $35,022 18.9% Securities and Fed Funds Sold 197,495 193,676 218,403 -9.6% Agricultural 8,642 9,898 12,519 -31.0% Commercial & Industrial 124,404 110,683 103,085 20.7% Real Estate 577,102 537,182 488,745 18.1% SBA Loans 26,463 24,190 21,659 22.2% Consumer Loans 50,268 51,006 48,868 2.9% Consumer Credit Card Balances 8,162 8,401 8,335 -2.1% Gross Loans & Leases 795,041 741,360 683,211 16.4% Deferred Loan & Lease Fees (2,933) (2,250) (1,223) 139.8% Loans & Leases Net of Deferred Fees 792,108 739,110 681,988 16.1% Allowance for Loan & Lease Losses (10,297) (9,330) (9,651) 6.7% Net Loans & Leases 781,811 729,780 672,337 16.3% Bank Premises & Equipment 18,128 18,055 17,353 4.5% Other Assets 63,169 61,028 59,576 6.0% Total Assets $1,102,230 $1,052,686 $1,002,691 9.9% LIABILITIES & CAPITAL Demand Deposits $280,866 $282,451 $241,603 16.3% NOW / Savings Deposits 148,124 140,989 140,400 5.5% Money Market Deposits 112,008 107,045 115,578 -3.1% Time Certificates of Deposit 267,167 285,186 271,512 -1.6% Total Deposits 808,165 815,671 769,093 5.1% Junior Subordinated Debentures 30,928 30,928 30,928 0.0% Other Interest-Bearing Liabilities 167,228 113,861 118,720 40.9% Total Deposits & Int.- Bearing Liab. 1,006,321 960,460 918,741 9.5% Other Liabilities 13,555 13,463 10,758 26.0% Total Capital 82,354 78,763 73,192 12.5% Total Liabilities & Capital $1,102,230 $1,052,686 $1,002,691 9.9% CREDIT QUALITY DATA End of Period: (in $000's, unaudited) 3/31/2006 12/31/2005 3/31/2005 Annual Chg Non-Accruing Loans $914 $309 $1,631 -44.0% Over 90 Days PD and Still Accruing - - - 0.0% Other Real Estate Owned - 533 2,234 -100.0% Total Non-Performing Assets $914 $842 $3,865 -76.4% Non-Perf Loans to Total Loans 0.11% 0.04% 0.24% Non-Perf Assets to Total Assets 0.08% 0.08% 0.39% Allowance for Ln Losses to Loans 1.30% 1.26% 1.41% OTHER PERIOD-END STATISTICS End of Period: (unaudited) 3/31/2006 12/31/2005 3/31/2005 Shareholders Equity / Total Assets 7.5% 7.5% 7.3% Loans / Deposits 98.4% 90.9% 88.8% Non-Int. Bearing Dep. / Total Dep. 34.8% 34.6% 31.4% DATASOURCE: Sierra Bancorp CONTACT: Ken Taylor, EVP/CFO, or Hope Attenhofer, SVP/Marketing Director, both of Sierra Bancorp, +1-559-782-4900 or 888-454-BANK Web site: http://www.bankofthesierra.com/

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