BSRR Sierra Bancorp

PORTERVILLE, Calif., April 23 /PRNewswire-FirstCall/ -- Sierra Bancorp (NASDAQ:BSRR), parent of Bank of the Sierra, today announced its financial results for the quarter ended March 31, 2007. Net income for the first quarter of 2007 increased 7% to $4.8 million, or $0.47 per diluted share, compared to $4.5 million, or $0.43 per diluted share, in the same quarter a year ago. About $0.01 of the increase in diluted earnings per share is attributable to lower average diluted shares for the quarter, with the remainder due to higher earnings. The Company's net interest margin in the first quarter of 2007 was about the same as in the fourth quarter of 2006, although it was 50 basis points lower than in the first quarter of 2006. Sierra Bancorp generated a return on average equity of 21.4% in the first quarter of 2007 compared to 22.5% in the same quarter last year. Loans increased by over $17 million, or 2%, in the first quarter of 2007, while total deposits increased by close to $34 million, or 4%, for the same time period due to growth in customer deposits. "Our strong first quarter performance was accentuated by the March opening of our 21st branch, in the city of Delano, which by all measures was a highly successful opening," remarked James C. Holly, President and CEO. "While we recognize the challenges of increasing core deposits and maintaining a strong net interest margin, we remain optimistic that we will ultimately be able to achieve record earnings once again this year, our 30th year of operations," Holly stated. Financial Highlights The Company's improved quarterly operating results were primarily due to higher net interest income resulting from growth in average earning assets. Average interest-earning assets were $129 million higher in the first quarter of 2007 than in the first quarter of 2006, but the contribution of higher earning assets to net interest income was somewhat diluted by compression in the Company's net interest margin. The following factors contributed to the net interest margin decline: the Company's balance sheet is asset-sensitive, and net interest income tends to decline as short-term interest rates flatten; the bulk of the growth in earning assets over the past year was funded by relatively expensive brokered certificates of deposit or borrowings from the Federal Home Loan Bank (FHLB); and the ratio of average interest-free demand deposit balances to average earning assets fell to 24% in the first quarter of 2007 from 29% in the first quarter of 2006. Our loan loss provision was $150,000 lower in the first quarter of 2007 than in the first quarter of 2006 due to a lower rate of growth in outstanding loan balances. The $867,000 in net charge-offs during the first quarter of 2007 consists primarily of a $370,000 commercial loan and several unsecured credit lines, which had a high level of specific reserves already allocated to them at the beginning of the quarter and thus did not have a significant impact on the loan loss provision. We tightened our credit criteria for unsecured lines last year, but because of lines approved before then a level of charge-offs higher than historically experienced for that loan type is still possible for the remainder of the year. For the quarter, service charges on deposits increased by $99,000, or 7%, relative to the first quarter of 2006. Service charges show improvement due primarily to returned item and overdraft fees generated by new consumer checking accounts. Other non-interest income increased by $293,000, or 27%, due largely to a higher level of income from bank-owned life insurance (BOLI), although year-over-year increases in debit and credit card interchange fees, leasing income, and dividends on FHLB stock also contributed. On the expense side, salaries and benefits increased by $473,000, or 11%, due in large part to the fact that lower loan volume led to a $211,000 drop in the deferral of salary costs associated with successful loan originations. Adding to the increase in salaries and benefits were regular annual salary increases, and the addition of employees for our newest branch in Delano. Occupancy expense fell by $111,000, or 7%, because of property tax refunds resulting from assessor audits and lower depreciation expense on furniture and equipment. Other non-interest expenses increased by $273,000, or 11%, due mainly to an increase of $251,000 in marketing expenses. Marketing expenses are in line with expectations, and have increased because of costs associated with our current deposit-oriented marketing initiatives. Also impacting non-interest expenses were the fact that OREO properties were written down by $133,000 in the first quarter of 2006 but no write-downs occurred in the first quarter of 2007, outsourced internal audit review costs were $81,000 higher, and directors' costs were $60,000 higher. Balance sheet changes during the first quarter of 2007 include a drop of $12 million, or 22%, in cash and due from banks, an increase of $17 million, or 2%, in gross loans and leases, and an increase of $34 million, or 4%, in total deposits. Total assets increased by only $1 million from December 31, 2006 to March 31, 2007. The lower balance of cash and due from banks is the result of a reduction in cash items in process of collection. Most of the loan growth for the quarter was centered in real estate loans and commercial loans, both of which grew by 3%. The growth in deposits was primarily due to customer deposits generated by our branch system, since the balance of wholesale-sourced brokered deposits did not change during the quarter. There was a shift, however, from non-interest bearing demand deposits into interest bearing demand (NOW) and money market accounts. Non-interest bearing demand deposits declined by $22 million, or 8%, while NOW/savings account balances increased by $7 million, or 6%, and money market accounts increased by $17 million, or 15%. Time deposits increased by $31 million, or 9%, due in part to a $12 million increase in public deposits but mainly because of additional commercial and consumer time deposits in our branches. Since deposit growth exceeded the increase in loans, and because cash and investment balances declined, we were able to reduce our reliance on FHLB borrowings and fed funds purchased by a combined $34 million, or 16%. 2006 Reclassifications To provide consistency with 2007 financial reporting there were minor reclassifications of income statement amounts originally reported in the first quarter of 2006, including but not necessarily limited to the following: Losses on partnership investments totaling $234,000 are now shown as a reduction of other non-interest income rather than as other non-interest expenses; and property insurance premiums totaling $29,000 were moved from other non-interest expenses to occupancy expense. About Sierra Bancorp Sierra Bancorp is the holding company for Bank of the Sierra (http://www.bankofthesierra.com/), which is in its 30th year of operations and is the largest independent bank headquartered in the South San Joaquin Valley. The Company has $1.2 billion in total assets and currently maintains 21 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 April 2007 edition, US Banker magazine ranked Sierra Bancorp as the 10th best performing publicly-traded mid-tier bank in the nation based on three-year average return on equity, placing us in the top 5% for banks in that category. 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 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. SIERRA BANCORP CONSOLIDATED INCOME STATEMENT 3-Month Period Ended: (in $000's, unaudited) 3/31/2007 3/31/2006 % Change Interest Income $21,745 $18,019 20.7% Interest Expense 7,769 4,540 71.1% Net Interest Income 13,976 13,479 3.7% Provision for Loan & Lease Losses 900 1,050 -14.3% Net Int after Provision 13,076 12,429 5.2% Service Charges 1,575 1,476 6.7% Loan Sale & Servicing Income 37 13 184.6% Other Non-Interest Income 1,373 1,080 27.1% Gain (Loss) on Investments 5 -- Total Non-Interest Income 2,990 2,569 16.4% Salaries & Benefits 4,664 4,191 11.3% Occupancy Expense 1,466 1,577 -7.0% Other Non-Interest Expenses 2,854 2,581 10.6% Total Non-Interest Expense 8,984 8,349 7.6% Income Before Taxes 7,082 6,649 6.5% Provision for Income Taxes 2,329 2,199 5.9% Net Income $4,753 $4,450 6.8% TAX DATA Tax-Exempt Muni Income $547 $475 15.2% Tax-Exempt BOLI Income $358 $185 93.5% Interest Income - Fully Tax Equiv $22,040 $18,275 20.6% NET CHARGE-OFFS $867 $83 944.6% PER SHARE DATA 3-Month Period Ended: (unaudited) 3/31/2007 3/31/2006 % Change Basic Earnings per Share $0.49 $0.46 6.5% Diluted Earnings per Share $0.47 $0.43 9.3% Common Dividends $0.15 $0.13 15.4% Wtd. Avg. Shares Outstanding 9,729,627 9,752,930 Wtd. Avg. Diluted Shares 10,149,351 10,271,219 Book Value per Basic Share (EOP) $9.49 $8.43 12.6% Tangible Book Value per Share (EOP) $8.92 $7.86 13.5% Common Shares Outstndg. (EOP) 9,758,779 9,769,880 KEY FINANCIAL RATIOS 3-Month Period Ended: (unaudited) 3/31/2007 3/31/2006 Return on Average Equity 21.37% 22.46% Return on Average Assets 1.60% 1.70% Net Interest Margin (Tax-Equiv.) 5.35% 5.85% Efficiency Ratio (Tax-Equiv.) 51.45% 50.84% Net C/O's to Avg Loans (not annualized) 0.10% 0.01% AVERAGE BALANCES 3-Month Period Ended: (in $000's, unaudited) 3/31/2007 3/31/2006 % Change Average Assets $1,203,998 $1,061,229 13.5% Average Interest-Earning Assets $1,082,418 $953,215 13.6% Average Gross Loans & Leases $891,208 $756,109 17.9% Average Deposits $868,396 $813,560 6.7% Average Equity $90,196 $80,347 12.3% STATEMENT OF CONDITION (in $000's, End of Period: unaudited) 3/31/2007 12/31/2006 3/31/2006 Annual Chg ASSETS Cash and Due from Banks $40,908 $52,725 $41,627 -1.7% Securities and Fed Funds Sold 192,815 196,562 197,495 -2.4% Agricultural 11,690 13,193 8,642 35.3% Commercial & Industrial 138,036 133,794 124,404 11.0% Real Estate 669,738 652,089 577,102 16.1% SBA Loans 22,678 25,946 26,463 -14.3% Consumer Loans 54,815 54,568 50,268 9.0% Consumer Credit Card Balances 8,189 8,418 8,162 0.3% Gross Loans & Leases 905,146 888,008 795,041 13.8% Deferred Loan & Lease Fees (3,662) (3,618) (2,933) 24.9% Loans & Leases Net of Deferred Fees 901,484 884,390 792,108 13.8% Allowance for Loan & Lease Losses (11,612) (11,579) (10,297) 12.8% Net Loans & Leases 889,872 872,811 781,811 13.8% Bank Premises & Equipment 18,187 17,978 18,128 0.3% Other Assets 74,062 74,998 63,169 17.2% Total Assets $1,215,844 $1,215,074 $1,102,230 10.3% LIABILITIES & CAPITAL Demand Deposits $258,913 $281,024 $280,866 -7.8% NOW / Savings Deposits 134,685 127,521 148,124 -9.1% Money Market Deposits 132,642 115,266 112,008 18.4% Time Certificates of Deposit 375,882 344,634 267,167 40.7% Total Deposits 902,122 868,445 808,165 11.6% Junior Subordinated Debentures 30,928 30,928 30,928 0.0% Other Interest-Bearing Liabilities 175,404 209,403 167,228 4.9% Total Deposits & Int.-Bearing Liab. 1,108,454 1,108,776 1,006,321 10.1% Other Liabilities 14,790 15,927 13,555 9.1% Total Capital 92,600 90,371 82,354 12.4% Total Liabilities & Capital $1,215,844 $1,215,074 $1,102,230 10.3% CREDIT QUALITY DATA (in $000's, End of Period: unaudited) 3/31/2007 12/31/2006 3/31/2006 Annual Chg Non-Accruing Loans $649 $689 $914 -29.0% Over 90 Days PD and Still Accruing -- -- -- 0.0% Foreclosed Assets 76 -- -- 100.0% Total Non-Performing Assets $725 $689 $914 -20.7% Non-Perf Loans to Total Loans 0.07% 0.08% 0.11% Non-Perf Assets to Total Assets 0.06% 0.06% 0.08% Allowance for Ln Losses to Loans 1.28% 1.30% 1.30% OTHER PERIOD-END STATISTICS End of Period: (unaudited) 3/31/2007 12/31/2006 3/31/2006 Shareholders Equity/ Total Assets 7.6% 7.4% 7.5% Loans/Deposits 100.3% 102.3% 98.4% Non-Int. Bearing Dep./ Total Dep. 28.7% 32.4% 34.8% DATASOURCE: Sierra Bancorp CONTACT: Ken Taylor, EVP/CFO, +1-559-782-4900, or Hope Attenhofer, SVP/Marketing Director, +1-888-454-BANK, both of Sierra Bancorp Web site: http://www.bankofthesierra.com/

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