PORTERVILLE, Calif., July 20 /PRNewswire-FirstCall/ -- Sierra
Bancorp (NASDAQ:BSRR), parent of Bank of the Sierra, today
announced its financial results for the quarter and the six months
ended June 30, 2009. Net income for the quarter was $2.6 million,
which is 43% lower than net income in the second quarter of 2008.
Diluted earnings per share also fell 43%, to $0.27 in the second
quarter of 2009 from $0.47 in the second quarter of 2008. A higher
level of earning assets boosted net interest income, while strong
growth in core deposits helped the Company's net interest margin
and enhanced service charges on deposits. Net interest income was
$384,000 higher, and non-interest income increased by $393,000.
However, these favorable variances were more than offset by a loan
loss provision that was up $1.3 million to cover credit charge-offs
and provide loan loss reserve reinforcement, a $3.1 million
increase in other non-interest expense due in part to higher FDIC
insurance premiums, and a substantial increase in non-performing
assets for the relative quarters that negatively impacted our net
interest margin and contributed to the increase in non-interest
expense. Sierra Bancorp generated a return on average equity of
9.4% and a return on average assets of 0.8% for the second quarter
of 2009. For the first half of 2009 net income was $5.3 million,
diluted earnings per share were $0.54, return on average equity was
9.7%, and return on average assets was 0.8%. Notable balance sheet
changes from December 31, 2008 to June 30, 2009 include the
following: Core deposit balances, defined as all deposits except
brokered deposits and time deposits of $100,000 or greater,
increased $29 million, or 4%, with most of the increase occurring
in the second quarter; wholesale-sourced brokered deposits declined
by $68 million, or 58%, while CDARS deposits increased by $27
million, or 24%, and other customer time deposits of $100,000 or
greater increased by $26 million, or 14%; and Federal Home Loan
Bank (FHLB) borrowings were reduced by over $50 million, or 56%.
During the first half of 2009 gross loan and lease balances dropped
$11 million, or 1%, due to relatively weak loan demand, heightened
selectivity on the part of the Company in a difficult credit
environment, loan charge-offs and transfers to OREO. "We're pleased
to have kept pace with internal net income projections, despite
outsized increases in FDIC costs and continued credit
deterioration," commented James C. Holly, President and CEO.
"Fortunately, the positive surprises offset the negative for the
quarter: core deposits increased at a robust rate, wholesale
funding was dramatically reduced, our net interest margin has been
trending up, and capital ratios continue to strengthen," he added.
Mr. Holly noted that another favorable development in the second
quarter of 2009 was shareholder approval of Sierra Bancorp's
ability to issue preferred stock, which gives the Company more
flexibility with regard to potential future opportunities. "This is
the most difficult economic environment we've encountered since the
Bank was founded more than 30 years ago, and it doesn't appear that
strong economic growth will resume anytime soon. We appreciate our
loyal customers and shareholders for their continued support, and
commend our employees for their dedication and hard work in
ensuring that Bank of the Sierra remains one of the top-performing
banks in the country," Mr. Holly concluded. Financial Highlights
Net interest income was higher in 2009 than in 2008, reflecting
increases of $384,000, or 3%, for the second quarter, and $242,000,
or 1%, for the first half. These increases were largely due to
growth in average interest-earning assets, which were $28 million
higher for the quarter and $54 million higher for the half,
although much of the growth during the past year has been in
investments which tend to be lower-yielding than loans. The
increase in net interest income for the half is lower than for the
quarter because our net interest margin was about the same for the
quarter, but was 17 basis points lower in the first half of 2009
relative to the first half of 2008. Our net interest margin was
positively impacted by an increase in average core deposit
balances, the easing of market pressures on deposit rates, and a
lower level of interest reversals, but has been negatively impacted
by an increase in average non-performing assets. Net interest
reversals on loans placed on non-accrual for the second quarter and
first half of 2009 were $92,000 and $357,000, respectively,
relative to $480,000 for both the second quarter and first half of
2008. Our current interest rate risk profile indicates that net
interest income is likely to decline over the next 12 months in
either rising or declining interest rate scenarios, all else being
equal. The Company's loan loss provision was significantly higher
in 2009, increasing by $1.3 million for the second quarter and by
$2.6 million for the first half relative to like periods in 2008.
This increase can be explained in part by net charge-offs, which
increased by $219,000, or 9%, for the quarter and by $1.7 million,
or 36%, for the half, due mainly to acquisition and development
loans, mortgage loans, and equity lines that were either charged
off or written down to current fair values. The percentage increase
in net loan charge-offs was lower for the quarter, due to a
significant drop in unsecured commercial loan charge-offs in the
second quarter of 2009 relative to the second quarter of 2008. In
addition to reserve replenishment related to charge-offs, much of
the 2009 loan loss provision was used to enhance specific reserves
on impaired commercial loans, consumer loans, mortgage loans, and
equity lines. Our detailed analysis indicates that as of June 30,
2009, our $16.4 million allowance for loan and lease losses should
be sufficient to cover potential credit losses inherent in loan and
lease balances outstanding as of that date. However, no assurance
can be given that the Company will not experience substantial
future losses relative to the size of the allowance. Our allowance
for loan and lease losses was 1.75% of total loans at June 30,
2009, up from 1.59% at year-end 2008 and 1.35% at June 30, 2008.
Service charge income on deposits increased by $186,000 in the
second quarter of 2009 relative to the second quarter of 2008, and
by $347,000 for the year-to-date period, a 7% increase for both
comparative periods. Service charges show improvement due primarily
to returned item and overdraft fees generated by new consumer
checking accounts, and a fee increase that became effective
mid-2008. The $28,000 gain on investments in the second quarter of
2009 represents a gain on an investment security called prior to
maturity, and the year-to-date gain on investments in 2009 includes
a $66,000 recovery on a previously charged-off investment in a
title insurance holding company. Investment gains in 2008 consist
entirely of gains on called securities. Other non-interest income
increased by $182,000, or 17%, for the quarter, but declined by
$728,000, or 27%, for the half. Much of the drop in income for the
year-to-date period in 2009 is due to non-recurring income in the
first quarter of 2008. Factors contributing to the changes in other
non-interest income for the second quarter and first half include
the following: Income from bank-owned life insurance (BOLI)
increased $395,000 for the quarter and $341,000 for the half,
primarily because of 2009 gains on BOLI associated with deferred
compensation plans, relative to losses in 2008 (although associated
deferred compensation plan expense accruals were also higher, as
noted below); dividends on our $9 million investment in FHLB stock
have been suspended thus far in 2009, leading to a drop in income
on restricted stock totaling $214,000 for the quarter and $294,000
for the half; pass-through operating costs associated with our
investment in low-income housing tax credit funds, which are
accounted for as a reduction in income, were up only nominally for
the quarter but increased by $320,000 for the year-to-date period;
we recognized a one-time gain of $289,000 in the first quarter of
2008 resulting from the mandatory redemption of a portion of our
Visa shares, pursuant to Visa's initial public offering in March
2008; we realized a non-recurring $82,000 gain on the sale of
property adjacent to one of our branches in the first quarter of
2008; and we received a non-recurring $75,000 contingent final
payment in the first quarter of 2008 related to the outsourcing of
our merchant services function in late 2006. With regard to
non-interest expense, salaries and benefits increased $1.0 million,
or 23%, for the second quarter of 2009 and $1.6 million, or 18%,
for the first half of 2009, relative to like periods in 2008. The
increases are due in part to a drop in salaries deferred pursuant
to FAS 91, which were $345,000 lower for the quarter and $708,000
lower for the half due to a drop in loan origination activity.
Furthermore, as noted above, because of participant gains on
deferred compensation plans in 2009 relative to losses in 2008,
deferred compensation expense accruals increased $224,000 for the
second quarter and $181,000 for the first half of 2009 relative to
2008, although deferred compensation expense accruals are offset by
non-taxable gains on BOLI. Contributing to the increase in
compensation costs were normal annual salary adjustments, the
addition of staff for our two newest branches (opened in July and
November of 2008), and strategic staff additions to help address
credit issues and position the Company for future growth
opportunities. Occupancy expense also increased, rising by
$159,000, or 10%, for the second quarter and by $329,000, or 11%,
for the half, due primarily to costs associated with our newer
branches and annual rent increases. Other non-interest expenses
rose by $2.0 million, or 67%, for the second quarter and by $2.9
million, or 53%, in the first half of 2009 relative to 2008. The
largest increase in this category was in FDIC costs, which were up
$1.2 million for the quarter and $1.4 million for the half, due to
a $595,000 accrual in the second quarter of 2009 for an
industry-wide special assessment, and significantly higher regular
assessment rates. Other large changes in non-interest expenses for
the comparative 2009 and 2008 periods include the following:
Marketing expense declined by $186,000 for the quarter and by
$214,000 for the half; lending costs increased by $301,000 for the
quarter and $670,000 for the half, due to foreclosed asset
write-downs, an increase in foreclosed asset operating expenses,
higher legal costs associated with collections, and higher demand
and foreclosure costs; deposit-related costs were up $141,000 for
the quarter and $452,000 for the half, due in large part to a
non-recurring $104,000 EFT processing rebate received in the second
quarter of 2008 and one-time incentives totaling $242,000 received
in the first quarter of 2008; telecommunications costs increased
$144,000 for the half because of network upgrades in the first
quarter of 2009; operations-related losses, including debit card
losses, were $161,000 higher for the quarter and $112,000 higher
for the year-to-date period; and, 2009 gains versus 2008 losses on
directors deferred compensation plans resulted in an increase in
expense accruals for deferred directors' fees totaling $251,000 for
the quarter and $218,000 for the half. Significant balance sheet
changes during the first half of 2009 include a drop in total
assets due to lower loan, investment and cash balances, a sizeable
increase in customer deposits and a corresponding reduction in
wholesale-sourced funding, and a large increase in non-performing
assets. Total assets declined by $30 million, or 2%, during the
first half. The largest decrease came in investments, which were
down $13 million, or 5%, due to a $6 million reduction in fed funds
sold and a drop in our mortgage-backed securities portfolio
totaling $10 million, partially offset by purchases of municipal
securities with high underlying ratings. Gross loans and lease
balances were also down by $11 million. Commercial loans grew
almost $8 million, or 5%, due to increased balances outstanding on
mortgage warehouse lines of credit. Real estate loan balances, on
the other hand, dropped $16 million, or 2%, due to runoff,
charge-offs and write-downs of over $3 million, and transfers to
OREO totaling $6.3 million. Consumer loans also declined $2
million, and agricultural production loan balances were down about
$1 million due to seasonal fluctuations. Cash and due from banks
declined, as well, dropping by close to $9 million due to
fluctuations in cash items in process of collection. Total
non-performing assets increased $21 million, or 56%, during the
first six months of 2009, ending the half at $58 million.
Approximately $6 million of that increase came in the second
quarter of 2009. The increase for the half includes net increases
of approximately $9.2 million in non-performing
acquisition/development and land loans, $3.1 million in residential
construction loans, $1.1 million in mortgage loans, $1.1 million in
commercial real estate loans, $2.1 million in commercial and SBA
loans, and $3.8 million in other real estate owned. All impaired
assets at June 30, 2009 have either been written down to current
appraised values, less expected costs of disposition, or are
well-reserved based on loss expectations. Total deposits increased
$15 million, or 1%, during the first half, but excluding a $68
million drop in wholesale-sourced brokered deposits, customer
deposits were up by $83 million, or 9%. Much of the growth in
customer deposits was in time deposits, including a $27 million
increase in CDARS deposits and a $34 million increase in other
customer time deposits. Non-maturity deposits also experienced a
healthy increase, with combined NOW/savings balances up $19
million, or 12%, and money market deposits up $6 million, or 4%.
Non-interest bearing demand deposits, however, while trending up in
recent months, still reflect a year-to-date decline of $3 million,
or 1%. We let $50 million in FHLB borrowings roll off due to the
aggregate deposit influx and the drop in total assets. About Sierra
Bancorp Sierra Bancorp is the holding company for Bank of the
Sierra (http://www.bankofthesierra.com/), which is in its 32nd year
of operations and is the largest independent bank headquartered in
the South San Joaquin Valley. The Company has $1.3 billion in total
assets with 23 branch offices, an agricultural credit center, an
SBA center, an online "virtual" branch, and over 400 employees. 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. CONSOLIDATED INCOME STATEMENT 3-Month Period
Ended: 6-Month Period Ended: (in $000's, % % unaudited) 6/30/2009
6/30/2008 Change 6/30/2009 6/30/2008 Change Interest Income $17,869
$19,453 -8.1% $35,570 $39,932 -10.9% Interest Expense 3,269 5,237
-37.6% 7,169 11,773 -39.1% ----- ----- ----- ------ Net Interest
Income 14,600 14,216 2.7% 28,401 28,159 0.9% Provision for Loan
& Lease Losses 3,902 2,650 47.2% 7,503 4,920 52.5% ----- -----
----- ----- Net Int after Provision 10,698 11,566 -7.5% 20,898
23,239 -10.1% Service Charges 2,923 2,737 6.8% 5,552 5,205 6.7%
Loan Sale & Servicing Income 13 3 333.3% 30 19 57.9% Other
Non-Interest Income 1,274 1,092 16.7% 2,002 2,730 -26.7% Gain
(Loss) on Investments 28 13 115.4% 94 58 62.1% -- -- -- -- Total
Non-Interest Income 4,238 3,845 10.2% 7,678 8,012 -4.2% Salaries
& Benefits 5,430 4,409 23.2% 10,490 8,906 17.8% Occupancy
Expense 1,701 1,542 10.3% 3,356 3,027 10.9% Other Non-Interest
Expenses 4,856 2,902 67.3% 8,354 5,462 52.9% ----- ----- -----
----- Total Non-Interest Expense 11,987 8,853 35.4% 22,200 17,395
27.6% Income Before Taxes 2,949 6,558 -55.0% 6,376 13,856 -54.0%
Provision for Income Taxes 356 1,994 -82.1% 1,087 4,333 -74.9% ---
----- ----- ----- Net Income $2,593 $4,564 -43.2% $5,289 $9,523
-44.5% ====== ====== ====== ====== Tax Data Tax-Exempt Muni Income
$621 $600 3.5% $1,209 $1,178 2.6% Tax-Exempt BOLI Income $474 $79
500.0% $580 $239 142.7% Interest Income - Fully Tax Equiv $18,203
$19,776 -8.0% $36,221 $40,566 -10.7% Net Charge-Offs (Recoveries)
$2,725 $2,506 8.7% $6,239 $4,574 36.4% --------------- ------
------ --- ------ ------ ---- PER SHARE DATA 3-Month Period Ended:
6-Month Period Ended: (unaudited) 6/30/2009 6/30/2008 % Change
6/30/2009 6/30/2008 % Change Basic Earnings per Share $0.27 $0.48
-43.8% $0.55 $1.00 -45.0% Diluted Earnings per Share $0.27 $0.47
-42.6% $0.54 $0.97 -44.3% Common Dividends $0.10 $0.17 -41.2% $0.20
$0.34 -41.2% Wtd. Avg. Shares Outstanding 9,678,953 9,577,515
9,677,408 9,567,838 Wtd. Avg. Diluted Shares 9,761,218 9,766,734
9,757,013 9,783,702 Book Value per Basic Share (EOP) $11.41 $10.62
7.4% $11.41 $10.62 7.4% Tangible Book Value per Share (EOP) $10.83
$10.04 7.9% $10.83 $10.04 7.9% Common Shares Outstanding (EOP)
9,679,141 9,597,391 9,679,141 9,597,391 ------------- ---------
--------- --------- --------- KEY FINANCIAL RATIOS 3-Month Period
Ended: 6-Month Period Ended: (unaudited) 6/30/2009 6/30/2008
6/30/2009 6/30/2008 Return on Average Equity 9.38% 17.78% 9.70%
18.79% Return on Average Assets 0.79% 1.43% 0.81% 1.52% Net
Interest Margin (Tax-Equiv.) 5.01% 5.00% 4.90% 5.07% Efficiency
Ratio (Tax-Equiv.) 61.70% 48.00% 59.93% 47.58% Net C/O's to Avg
Loans (not annualized) 0.29% 0.27% 0.66% 0.50%
--------------------------- ---- ---- ---- ---- AVERAGE BALANCES
(in $000's, 3-Month Period Ended: 6-Month Period Ended: unaudited)
6/30/2009 6/30/2008 % Change 6/30/2009 6/30/2008 % Change Average
Assets $1,315,071 $1,287,286 2.2% $1,313,754 $1,260,042 4.3%
Average Interest- Earning Assets $1,196,613 $1,168,640 2.4%
$1,195,261 $1,141,162 4.7% Average Gross Loans & Leases
$940,800 $927,034 1.5% $940,369 $921,509 2.0% Average Deposits
$1,101,512 $934,714 17.8% $1,091,756 $900,566 21.2% Average Equity
$110,929 $103,246 7.4% $109,974 $101,945 7.9% ------- --------
-------- --- -------- -------- --- STATEMENT OF CONDITION End of
Period: (in $000's, unaudited) 6/30/2009 12/31/2008 6/30/2008
Annual Chg ASSETS Cash and Due from Banks $37,160 $46,010 $52,737
-29.5% Securities and Fed Funds Sold 236,385 248,913 241,155 -2.0%
Agricultural 12,759 13,542 10,953 16.5% Commercial & Industrial
150,480 142,674 144,745 4.0% Real Estate 690,666 706,342 700,850
-1.5% SBA Loans 19,413 19,463 21,276 -8.8% Consumer Loans 62,233
64,619 54,223 14.8% ------ ------ ------ Gross Loans & Leases
935,551 946,640 932,047 0.4% Deferred Loan Fees (721) (1,365)
(2,269) -68.2% ---- ------ ------ Loans & Leases Net of
Deferred Fees 934,830 945,275 929,778 0.5% Allowance for Loan &
Lease Losses (16,358) (15,094) (12,622) 29.6% ------- -------
------- Net Loans & Leases 918,472 930,181 917,156 0.1% Bank
Premises & Equipment 19,097 19,280 18,809 1.5% Other Assets
84,702 81,908 78,446 8.0% ------ ------ ------ Total Assets
$1,295,816 $1,326,292 $1,308,303 -1.0% ========== ==========
========== LIABILITIES & CAPITAL Demand Deposits $228,914
$232,168 $230,157 -0.5% NOW / Savings Deposits 175,176 156,322
154,148 13.6% Money Market Deposits 153,188 146,896 150,699 1.7%
Time Certificates of Deposit 519,341 526,112 428,311 21.3% -------
------- ------- Total Deposits 1,076,619 1,061,498 963,315 11.8%
Junior Subordinated Debentures 30,928 30,928 30,928 0.0% Other
Interest-Bearing Liabilities 65,597 113,919 196,214 -66.6% ------
------- ------- Total Deposits & Int.-Bearing Liab. 1,173,144
1,206,345 1,190,457 -1.5% Other Liabilities 12,274 13,147 15,955
-23.1% Total Capital 110,398 106,800 101,891 8.3% ------- -------
------- Total Liabilities & Capital $1,295,816 $1,326,292
$1,308,303 -1.0% ----------------------- ========== ==========
========== ---- CREDIT QUALITY DATA End of Period: (in $000's,
unaudited) 6/30/2009 12/31/2008 6/30/2008 Annual Chg Non-Accruing
Loans $46,914 $29,786 $12,407 278.1% Over 90 Days PD and Still
Accruing - 71 - 0.0% Foreclosed Assets 10,907 7,127 1,820 499.3%
------ ----- ----- Total Non-Performing Assets $57,821 $36,984
$14,227 306.4% ======= ======= ======= Non-Perf Loans to Total
Loans 5.01% 3.15% 1.33% Non-Perf Assets to Total Assets 4.46% 2.79%
1.09% Allowance for Ln Losses to Loans 1.75% 1.59% 1.35%
-------------------------- ---- ---- ---- OTHER PERIOD-END
STATISTICS End of Period: (unaudited) 6/30/2009 12/31/2008
6/30/2008 Shareholders Equity / Total Assets 8.5% 8.1% 7.8% Loans /
Deposits 86.9% 89.2% 96.8% Non-Int. Bearing Dep. / Total Dep. 21.3%
21.9% 23.9% ---------------------------------- ---- ---- ----
DATASOURCE: Sierra Bancorp CONTACT: Ken Taylor, EVP/CFO, or Kevin
McPhaill, EVP/Chief Banking Officer, +1-559-782-4900,
1-888-454-BANK, both of Sierra Bancorp Web Site:
http://www.bankofthesierra.com/
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