- Net income of $43.0 million for the year ended December 31,
2021, as compared to $35.4 million for the same period in 2020, an
increase of $7.6 million or 21%.
- Return on average assets was 1.29%, return on average equity
was 12.05%, and diluted earnings per share were $2.80 for the
twelve months ended 2021.
- Deposit growth of $157.0 million, or 6% during the year ended
2021.
- Hired several new commercial lenders with diverse experience in
the fourth quarter of 2021.
Sierra Bancorp (Nasdaq: BSRR), parent of Bank of the Sierra,
today announced its unaudited financial results for the three-and
twelve-month periods ended December 31, 2021. Sierra Bancorp
reported consolidated net income in the fourth quarter of 2021 of
$9.6 million, or $0.63 per diluted share, compared to net income of
$9.0 million, or $0.58 per diluted share, in the fourth quarter of
2020. The Company's fourth quarter 2021 return on average assets
and return on average equity was 1.10% and 10.47%, respectively, as
compared to 1.12% and 10.49%, respectively, for the same
comparative period in 2020.
For the year ended 2021, the Company recognized net income of
$43.0 million, or $2.80 per diluted share, as compared to $35.4
million, or $2.32 per diluted share, for the same period in 2020.
The Company’s financial performance metrics for the year ended 2021
include an annualized return on average assets and a return on
average equity of 1.29% and 12.05%, respectively, compared to 1.22%
and 10.80%, respectively, for the same period in 2020.
“We are proud of our efforts to help our customers and
communities through these challenging times. Our tireless work is
reflected in our fourth quarter results that complete a
record-breaking year for income,” stated Kevin McPhaill, President
and CEO. “Henry Ford said it best, ‘Coming together is a beginning;
keeping together is progress; working together is success.’ With
2021 now complete, we look forward to opportunities in 2022 and
beyond!" McPhaill concluded.
Financial Highlights
Quarterly Changes (comparisons to the fourth quarter of
2020)
- Net income for the fourth quarter of 2021 increased $0.6
million to $9.6 million, there was a $1.2 million negative
provision for loan and lease losses in the fourth quarter of 2021,
lower salary and benefit costs for $0.8 million partially offset by
an increase in litigation expense and related legal reserves.
Compared to 2020, there was a $2.2 million provision for loan and
lease losses; the $3.4 million decrease in provision being
attributable to the impact of continued improvements in the overall
economy, a reduction in historical loss rates, a decline in
specific reserves on impaired loans, net loan recoveries in 2021, a
change in the mix of loans, and lower outstanding balances of net
loans and leases; lower FTE was responsible for the decrease in
salaries and benefits.
- Net interest income for the fourth quarter of 2021 decreased by
$2.3 million mostly due to a 57 bps decline in the yield on earning
assets and a shift in mix due to higher levels of cash invested
overnight with the Federal Reserve Bank and increased lower
yielding investment balances.
- Noninterest income for the fourth quarter of 2021 increased
$1.1 million, or 18%, due to a $0.3 million increase in debit card
interchange income from increased usage, $0.4 million in life
insurance proceeds and $0.3 million from the sale of underlying
assets within an investment in a Small Business Investment Company.
Noninterest expense for the fourth quarter of 2021 increased by
$1.4 million due mostly to a $1.3 million increase in legal
expenses.
Year to-Date Changes (comparisons to the year ended
2020)
- Net income for 2021 increased by $7.6 million, or 21%. The most
significant line-item changes were a $12.2 million decrease in the
provision for loan and lease losses, and an increase of $4.2
million or 4% in net interest income, due mostly to higher average
loan balances and a continued favorable deposit mix with cost of
funds decreasing 10 bps. These items were partially offset by a
$7.6 million increase in noninterest expense in 2021 as compared to
the prior year due to higher salary & benefits expense, data
processing expenses, debit card processing costs, and professional
services expense.
- Noninterest income for 2021 increased by $1.9 million, or 7%,
due to greater interchange fee income, increases in BOLI income,
and increases in the fair market value of equity securities
partially offset by nonrecurring gains in 2020 from the sales of
investments, and the sale of assets within a low-income housing tax
credit fund in 2020 that did not reoccur in 2021.
Balance Sheet Changes (comparisons to December 31,
2020)
- Total assets increased by $150.3 million, or 5%, to $3.4
billion, during 2021.
- Cash and due from banks increased $186.1 million, to $257.5
million for the year due mostly to higher deposit balances coupled
with lower loan balances.
- Investment securities increased $429.3 million, or 79%, to
$973.3 million primarily due to bond purchases.
- During 2020, gross loans increased by $700.5 million, or 40%.
Following this tremendous loan growth in 2020, overall loan
balances declined $473.4 million, or 19%. For the two-year period
of 2020 and 2021, overall loan balances increased by $227.2
million, or 13%. The decline in loan balances during 2021 was due
mostly to lower utilization of mortgage warehouse lines resulting
in a $206.5 million decline in overall mortgage warehouse
outstanding balances due primarily to reduced refinancing activity.
Other significant declines included a $155.7 million decline in
real estate loans mostly due to lower commercial real estate and
construction loan balances, and a $99.3 million decrease in
commercial and industrial loans, which was predominately due to
Small Business Administration Paycheck Protection Program (“SBA
PPP”) loan forgiveness.
- Deposits totaled $2.8 billion at December 31, 2021,
representing a year-to-date increase of $157.0 million, or 6%. The
growth in deposits came primarily from core transaction and savings
accounts, while higher-cost time and wholesale brokered deposits
decreased by $159.0 million, or 31%.
- Short-term debt decreased to $106.9 million at December 31,
2021. While overnight repurchase agreements increased $67.8 million
to $106.9 million, FHLB borrowings and overnight fed funds
decreased to zero, from $143.0 million.
- Long-term debt increased to $49.1 million at December 31, 2021
from the issuance of $50 million in ten year 3.25% fixed to
floating subordinated notes in the third quarter of 2021.
Other financial highlights are reflected in the following
table.
FINANCIAL HIGHLIGHTS
(Dollars in Thousands, Except per Share
Data, Unaudited)
At or For the
At or For the
Three Months Ended
Twelve Months Ended
12/31/2021
9/30/2021
12/31/2020
12/31/2021
12/31/2020
Net income
$
9,621
$
10,605
$
8,979
$
43,012
$
35,444
Diluted earnings per share
$
0.63
$
0.69
$
0.58
$
2.80
$
2.32
Return on average assets
1.10
%
1.26
%
1.12
%
1.29
%
1.22
%
Return on average equity
10.47
%
11.62
%
10.49
%
12.05
%
10.80
%
Net interest margin (tax-equivalent)
3.31
%
3.46
%
3.91
%
3.56
%
3.95
%
Yield on average loans and leases
4.59
%
4.61
%
4.41
%
4.57
%
4.65
%
Cost of average total deposits
0.08
%
0.08
%
0.09
%
0.09
%
0.16
%
Efficiency ratio (tax-equivalent)¹
64.86
%
59.75
%
58.68
%
59.92
%
57.18
%
Total assets
$
3,371,014
$
3,442,739
$
3,220,742
$
3,371,014
$
3,220,742
Loans & leases net of deferred
fees
$
1,987,861
$
2,137,214
$
2,459,964
$
1,987,861
$
2,459,964
Noninterest demand deposits
$
1,084,544
$
1,111,411
$
943,664
$
1,084,544
$
943,664
Total deposits
$
2,781,572
$
2,820,646
$
2,624,606
$
2,781,572
$
2,624,606
Noninterest-bearing deposits over total
deposits
39.0
%
39.4
%
36.0
%
39.0
%
36.0
%
Shareholders' equity / total assets
10.8
%
10.6
%
10.7
%
10.8
%
10.7
%
Tangible Common equity ratio
9.9
%
9.8
%
9.8
%
9.9
%
9.8
%
Book value per share
$
23.74
$
23.70
$
22.35
$
23.74
$
22.35
Tangible book value per share
$
21.73
$
21.69
$
20.29
$
21.73
$
20.29
(1) Noninterest expense as a percentage of
the sum of net interest income and noninterest income excluding net
gains (losses) from securities.
INCOME STATEMENT HIGHLIGHTS
Net Interest Income
Net interest income was $26.6 million for the fourth quarter of
2021, a $2.3 million decrease, or 8%, over the fourth quarter of
2020, and increased $4.2 million, or 4%, to $109.0 million for the
year ended 2021 relative to the same period in 2020.
For the fourth quarter of 2021, growth in average
interest-earning assets totaled $267.2 million, or 9%, as compared
to the fourth quarter of 2020. The yield on these balances was 57
basis points lower for the same period due mostly to a shift in the
mix of earning assets to lower yielding investment securities, and
cash held overnight at the Federal Reserve Bank.
Net interest income for the comparative year-to-date periods
increased due to a $415.4 million, or 15%, growth in average
interest-earning assets. The yield on these average balances was 46
basis points lower for the same period but was partially offset by
a 10 basis point drop in interest paid on liabilities. The net
impact of this lower rate was a 39 basis point decrease in our net
interest margin for the year ending December 31, 2021 as compared
to the same period in 2020.
Loan income during the fourth quarter 2021 included $0.5 million
related to fee income, net of origination costs, recognized on SBA
PPP loans. Similarly, SBA PPP loan fees, net of origination costs
of $3.8 million were recognized for the year ended December 31,
2021. At December 31, 2021, approximately $1.1 million of unearned
fees, net of origination costs related to SBA PPP loans, remains on
the balance sheet.
At December 31, 2021, approximately 20% of the bank’s loan
portfolio is scheduled to mature or reprice within twelve months
with another 11% repricing within three years. In addition,
approximately $332 million of the securities portfolio consists of
floating rate bonds.
Interest expense was $1.3 million for the fourth quarter of
2021, an increase of $0.4 million, or 43%, relative to the fourth
quarter of 2020. For the year ended 2021, compared to the same
period in 2020, interest expense declined $1.4 million, or 25%, to
$4.1 million. The increase in interest expense for the quarterly
comparison is attributable to the issuance of subordinated notes,
as the interest expense on deposit accounts was mainly flat. For
the year ended 2021, compared to the year ended 2020, the average
balance of higher cost time deposits fell by $58.6 million or 12%,
while lower or no cost transaction and savings accounts increased
$430.0 million or 22%, contributing to the positive year to date
variance.
Our net interest margin was significantly impacted by the
additional overnight cash balances resulting from increased
liquidity from deposit growth in 2021 coupled with lower loan
balances. This additional liquidity was deployed in overnight
funding and lower yielding investment bonds. Average overnight cash
balances were $311.3 million during the fourth quarter 2021 and
$269.9 million for the year ended December 31, 2021. This overnight
funding earned an average rate of 15 and 14 basis points,
respectively, for the fourth quarter and year ended December 31,
2021. The average balance of investment accounts increased $315.6
million for the fourth quarter of 2021 as compared to the same
period in 2020 and $69.9 million for the year ended 2021 as
compared to the year ended 2020. The yield on investment balances
declined 65 bps for the fourth quarter of 2021 as compared to the
same period in 2020 and declined 67 bps for the year ended December
31, 2021 as compared to the same period in 2020.
Provision for Loan and Lease Losses
The Company recorded a net benefit related to loan and lease
loss provision of $1.2 million in the fourth quarter of 2021
relative to a provision of $2.2 million in the fourth quarter of
2020, and a year-to-date net benefit for loan and lease loss
provision of $3.7 million in 2021 as compared to $8.6 million loan
and lease loss provision expense for the same period in 2020. The
Company's $3.4 million, favorable decline in provision for loan and
lease losses in the fourth quarter of 2021 as compared to the
fourth quarter of 2020, and the $12.2 million favorable decrease,
for the year ending 2021 compared to the same period in 2020 is due
mostly to lower historical loan loss rates, a decline in
outstanding balances on loans, a change in the mix of loans, and
net year-to-date 2021 recoveries of previously charged-off loan
balances. During 2021, management adjusted its qualitative risk
factors under our current incurred loss model for improved economic
conditions, improvements in the severity and volume of past due
loans, and a reduction in the level of concentrations of credit in
non-owner occupied real estate loans.
The Company elected to defer the adoption of the Current
Expected Credit Loss ("CECL") accounting method under Financial
Accounting Standards Board (FASB) Accounting Standards Update
2016-03 and related amendments, Financial Instruments – Credit
Losses (Topic 326) to January 1, 2022. The Company’s decision to
defer the adoption of CECL was done primarily to provide additional
time to better assess the impact of the COVID-19 pandemic on the
expected lifetime credit losses. At the time the decision was made,
there was a significant change in economic uncertainty on the
local, regional, and national levels as a result of local and state
stay-at-home orders, as well as relief measures provided at a
national, state, and local level. Further, the Company has taken
actions to serve our communities during the pandemic, including
permitting short-term payment deferrals to current customers, as
well as originating bridge loans and SBA PPP loans. Upon adoption
of CECL, the Company was required to make an adjustment to equity,
net of taxes, equal to the difference between the allowance for
credit losses calculated under the CECL method and the allowance
for loan and lease losses as calculated under the incurred loss
method as of December 31, 2021. Therefore, on January 1, 2022, the
Company recorded a $10.4 million increase in the allowance for
credit losses, which includes a $0.9 million reserve for unfunded
commitments as an adjustment to equity, net of deferred taxes.
Noninterest Income
Total noninterest income reflects increases of $1.1 million, or
18%, for the quarter ended December 31, 2021 as compared to the
same quarter in 2020, and $1.9 million, or 7%, for the year ended
December 31, 2021 as compared to the same period in 2020. The
quarterly and year-to-date comparisons were primarily impacted by
higher interchange income, life insurance proceeds and a gain on
the sale of underlying limited partnership assets, however, the
comparable year-to-date periods also included an increase of $0.4
million in the valuation gain of restricted equity investments
owned by the Company, a $0.4 million favorable fluctuation in
income on Bank-Owned Life Insurance (BOLI) associated with deferred
compensation plans, and a $0.6 million favorable change in
low-income housing tax credit fund expenses. The year-to-date
increases were offset by a $0.4 million gain on the sale of debt
securities from the restructuring of the portfolio in 2020 and a
$1.6 million nonrecurring gain on the wrap up of low-income housing
tax credit funds also in 2020.
Service charges on customer deposit account income increased
$0.2 million, or 5%, to $3.2 million in the fourth quarter of 2021
as compared to the fourth quarter of 2020. This increase is
primarily due to increases in analysis fee and overdraft income
during the comparable periods. This service charge income was $0.1
million higher, or 1%, for the year ending December 31, 2021, as
compared to the same period in 2020. The increase for the
year-to-date comparison is primarily a result of increases in ATM
fees and service charges on money service business accounts
partially offset by decreases in overdraft income.
Noninterest Expense
Total noninterest expense increased by $1.4 million, or 7%, in
the fourth quarter of 2021 relative to the fourth quarter of 2020,
and by $7.6 million, or 10%, for the year ended 2021 as compared to
the same period in 2020.
Salaries and Benefits were $0.8 million, or 7%, lower in the
fourth quarter of 2021 as compared to the fourth quarter of 2020
and $2.3 million, or 6%, higher for the year ended 2021 compared to
the same period in 2020. Overall full-time equivalent employees
were 480 at December 31, 2021 as compared to 501 at December 31,
2020. This decline accounted for the favorable quarterly variance
while a $2.3 million decline in salary expense deferrals related to
the decrease in loan originations were primarily responsible for
the negative year to date variance.
Occupancy expenses were $0.1 million lower for the fourth
quarter of 2021 as compared to the same quarter in 2020 and
unchanged for the year ended 2021 as compared to the same period in
2020. The primary reason for decrease in the quarterly comparison
was the closure of five branch facilities earlier in the year,
which included the early termination of two leases immediately.
Other noninterest expense increased $2.3 million, or 32% for the
fourth quarter 2021 as compared to the fourth quarter in 2020, and
increased $5.4 million, or 21% for the year ended 2021 as compared
to the same period in 2020. The variance for the fourth quarter of
2021 compared to the same period in 2020 was primarily driven by an
increase of $1.7 million in legal and accounting costs due mostly
to an increase in legal costs, related legal reserves, and
additional costs related to the outsourcing of certain audit
functions. Additionally, there were increases of $0.2 million in
data processing costs resulting from increases in core banking
system expenses, and $0.4 million in increase in debit card
processing costs due to higher debit card usage. These higher costs
were partially offset by a $0.2 million decrease in foreclosed
assets costs, due to the sale of all but two bank owned properties
and a $0.2 million decrease in ATM servicing costs. For the
year-over-year comparison the categories of increase were the same
as with the quarterly comparison, along with increases in FDIC
assessments for $0.4 million, a $0.3 million in data
communications, and a $0.4 million increase in director’s expense,
$0.2 million of which is linked to the changes in BOLI income,
partially offset by a $0.4 million decrease in ATM servicing costs.
All the Company’s ATM machines were either upgraded or replaced in
2021, resulting in lower servicing costs.
The Company's provision for income taxes was 24.2% of pre-tax
income in the fourth quarter of 2021 relative to 24.6% in the
fourth quarter of 2020, and 24.8% of pre-tax income for the year
ended December 31, 2021 relative to 23.8% for the same period in
2020. The increase in effective tax rate in the fourth quarter and
year to date 2021 is due to tax credits and tax-exempt income
representing a smaller percentage of total taxable income.
Balance Sheet Summary
Balance sheet changes for the year ended December 31, 2021
include an increase in total assets of $150.3 million, or 5%,
primarily a result of increases in cash and due from banks and
investments securities of $186.1 million and $429.3 million,
respectively, net of a $468.6 million decrease in net loan
balances.
The increase in investment securities of $429.3 million in 2021
consisted primarily of increases in municipal bonds of $76.5
million, corporate securities of $28.5 million, and AAA and AA
tranches of collateralized loan obligations of $332.2 million. The
purchases of AAA and AA tranches of collateralized loan obligations
(“CLOs”) in 2021 is primarily a balance sheet diversification
strategy as management continues to utilize available liquidity. In
addition to providing asset class diversification given the high
level of real estate backed earning assets on the balance sheet,
these floating rate CLOs are more asset sensitive which complements
the longer-term fixed-rate earning assets.
Gross loan balances decreased $473.4 million during the year
ended December 31, 2021, primarily as a result of a $206.5 million
decline in mortgage warehouse line utilization, an $87.6 million
decline in SBA PPP loans due mostly to forgiveness of such loans,
and a net decrease of $155.7 million in real estate secured loans,
primarily from construction and other commercial real estate
loans.
During 2021, in an effort to reduce its concentration risk, the
Company strategically lowered its regulatory commercial real estate
concentration ratio from 378% at December 31, 2020 to 248% at
December 31, 2021. The ratio at December 31, 2021 would have been
265% if not for a $25.0 million capital infusion from the Company
to the Bank in the fourth quarter of 2021. During 2022, the Company
expects the ratio to increase.
The overall decline in real estate secured loans during 2021 was
partially offset by an increase of $149.6 million in 1-4 family
residential real estate loans due to the $208.0 million purchase of
mortgage loans during the second half of 2021. These loan purchases
were designed as a bridge to organic loan growth as the Bank’s core
loan pipeline continues to improve with the recent hiring of
strategic lending team lift-outs as detailed below:
- The Bank’s mortgage warehouse team program will be refreshed
and rebuilt under the direction and leadership of a new Mortgage
Warehouse Market President, Tim McAvenia, who was hired for this
role in the fourth quarter of 2021.
- The Real Estate Industries Group (REIG) hired two new
commercial real estate loan officers who are expected to continue
the Bank’s commitment to serving the commercial real estate
markets. John Penrith, VP & Commercial Loan Officer and Sean
Hart, VP & Senior Commercial Loan Officer were appointed to
complement the REIG. In addition, further lending teams are
currently being recruited along with additional underwriters to
support the REIG.
- Expansion of the agricultural lending and commercial &
industrial (C&I) lending capabilities of the Bank is a key
third element. In December 2021, Matt Dusi was hired as the new
Agricultural and Commercial Lending President. Matt is actively
recruiting additional lenders to expand the Agricultural and
C&I teams with key lender lift outs across our footprint. Like
the other groups, these relationship managers will be complemented
with a team of portfolio managers who will assist with underwriting
support, portfolio management, and identification of opportunities
for additional credit extensions. It is recognized that we cannot
rely upon relationship managers alone for loan growth. Instead, a
full team to support prudently underwritten loans is needed to
minimize risk.
Unused commitments, excluding mortgage warehouse and consumer
overdraft lines, were $242.3 million at December 31, 2021, compared
to $260.0 million at December 31, 2020. Total line utilization,
excluding mortgage warehouse and consumer overdraft lines, was 55%
at December 31, 2021 and 57% at December 31, 2020. Mortgage
warehouse utilization declined significantly to 33% at December 31,
2021, as compared to 71% at December 31, 2020.
The Company participated in the SBA PPP as authorized by the
CARES Act. We began accepting and funding loans under this program
in April 2020. There were 438 loans for $31.8 million outstanding
at December 31, 2021, compared to 1,274 loans for $117.2 million at
December 31, 2020. There were 723 new SBA PPP loans for $49.6
million made during the year ended December 31, 2021. During the
same period the SBA forgave $137.9 million of SBA PPP loans and
honored their guaranty for $0.7 million.
Deposit balances reflect growth of $157.0 million, or 6%, during
the year ended December 31, 2021. Core non-maturity deposits
increased by $316.0 million, or 15%, while customer time deposits
decreased by $119.1 million, or 29%. Wholesale brokered deposits
decreased by $40.0 million to $60.0 million. Overall
noninterest-bearing deposits as a percent of total deposits at
December 31, 2021, increased to 39.0%, as compared to 36.0% at
December 31, 2020.
Other interest-bearing liabilities of $106.9 million on December
31, 2021 consists exclusively of customer repurchase agreements.
Other interest-bearing liabilities at December 31, 2020 of $182.0
million consisted of $100.0 million of fed funds purchased, $39.1
million of customer repurchase agreements, $37.9 million of FHLB
overnight borrowings and $5.0 million of FHLB short term
borrowings.
Long term debt increased to $49.1 million for the year ended
December 31, 2021, from the issuance of $50 million in 3.25% fixed
– floating subordinated debt with a ten-year maturity in the third
quarter of 2021. The Company contributed $25 million of additional
capital to the Bank in the fourth quarter of 2021 and is utilizing
the remainder of the funds for general corporate purposes, which
includes repurchasing shares of common stock, among other
things.
Additionally, subordinated debentures totaled $35.3 million and
$35.1 million at December 31, 2021 and December 31, 2020,
respectively, in the form of long-term borrowings from trust
subsidiaries formed specifically to issue trust preferred
securities.
The Company continues to have substantial liquidity. At December
31, 2021, and December 31, 2020, the Company had the following
sources of primary and secondary liquidity ($ in thousands):
Primary and Secondary Liquidity
Sources
December
31, 2021
December
31, 2020
Cash and due from banks
$
257,528
$
71,417
Unpledged investment securities
806,132
311,983
Excess pledged securities
47,024
52,892
FHLB borrowing availability
787,519
535,404
Unsecured lines of credit
305,000
230,000
Funds available through fed discount
window
50,608
58,127
Totals
$
2,253,811
$
1,259,823
Total capital of $362.5 million at December 31, 2021 reflects an
increase of $18.6 million, or 5%, relative to year-end 2020. The
increase in equity during the year ended December 31, 2021 was due
to the addition of $43.0 million in net income, offset by a $7.2
million unfavorable swing in accumulated other comprehensive
income/loss, $13.2 million in dividends paid, and $5.2 million in
share repurchases. The remaining difference is related to stock
options exercised and restricted stock granted during the year.
Asset Quality
Total nonperforming assets, comprised of nonaccrual loans and
foreclosed assets, decreased by $4.0 million to $4.6 million for
the year ended December 31, 2021. The Company's ratio of
nonperforming loans to gross loans decreased to 0.23% at December
31, 2021 from 0.31% at December 31, 2020. All 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.
The Company's allowance for loan and lease losses was $14.3
million at December 31, 2021, as compared to a balance of $17.7
million at December 31, 2020. The allowance was 0.72% of total
loans at both December 31, 2021 and December 31, 2020.
The $3.5 million decrease in the allowance for loan and lease
losses during the year ended December 31, 2021, resulted from the
$3.7 million benefit associated with loan and lease loss provision
combined with net loan recoveries of previously charged off loan
balances for $0.2 million. For further information regarding the
Company's decision to defer the implementation of CECL under
Section 4014 of the CARES Act, as well as further detail on the
decrease loan and lease loss provision during the fourth quarter
and year ended 2021, please see the discussion above under
Provision for Loan and Lease Losses.
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
December 31, 2021, but no assurance can be given that the Company
will not experience substantial future losses relative to the size
of the loan and lease loss allowance.
The Company provided loan modification deferrals to customers
under Section 4013 of the CARES Act, which are not treated as
troubled debt restructured loans. As of December 31, 2021, we had
three remaining loans for one customer relationship totaling $10.4
million. All these loans are fully secured by real estate
collateral.
About Sierra Bancorp
Sierra Bancorp is the holding company for Bank of the Sierra
(www.bankofthesierra.com), which is in its 45th year of operations
and is the largest independent bank headquartered in the South San
Joaquin Valley. Bank of the Sierra is a community-centric regional
bank, which offers a broad range of retail and commercial banking
services through full-service branches located within the counties
of Tulare, Kern, Kings, Fresno, Ventura, San Luis Obispo and Santa
Barbara. The Bank also maintains an online branch and provides
specialized lending services through an agricultural credit center,
an SBA center and a dedicated loan production office in Roseville,
California. In 2021, Bank of the Sierra was recognized as one of
the strongest community banks in the country, with a 5‑star rating
from Bauer Financial.
Forward-Looking Statements
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 our
borrowers' actual payment performance as loan deferrals related to
the COVID-19 pandemic expire, changes to statutes, regulations, or
regulatory policies or practices as a result of, or in response to
COVID-19, including the potential adverse impact of loan
modifications and payment deferrals implemented consistent with
recent regulatory guidance, the health of the national and local
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 acquisitions
and branch expansion, changes in interest rates, loan portfolio
performance, 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.
STATEMENT OF CONDITION
(Dollars in Thousands, Unaudited)
ASSETS
12/31/2021
9/30/2021
6/30/2021
3/31/2021
12/31/2020
Cash and due from banks
$
257,528
$
422,350
$
373,902
$
346,211
$
71,417
Investment securities
973,314
732,312
607,474
552,931
543,974
Real estate loans
1-4 family residential construction
21,369
34,720
37,165
36,818
48,565
Other construction/land
25,299
25,512
27,682
50,433
71,980
1-4 family - closed-end
289,457
220,240
106,599
126,949
139,836
Equity lines
26,588
31,341
33,334
36,276
38,075
Multi-family residential
53,458
55,628
58,230
58,324
61,865
Commercial real estate - owner
occupied
334,446
345,116
359,021
359,777
343,199
Commercial real estate - non-owner
occupied
882,888
995,921
1,048,153
1,071,532
1,062,498
Farmland
106,706
124,446
125,783
126,157
129,905
Total real estate loans
1,740,211
1,832,924
1,795,967
1,866,266
1,895,923
Agricultural production loans
33,990
43,296
42,952
45,476
44,872
Commercial & industrial
109,791
132,292
150,632
183,762
209,048
Mortgage warehouse lines
101,184
126,486
150,351
187,940
307,679
Consumer loans
4,550
4,828
4,894
5,024
5,589
Gross loans & leases
1,989,726
2,139,826
2,144,796
2,288,468
2,463,111
Deferred loan & lease fees
(1,865
)
(2,612
)
(3,835
)
(3,717
)
(3,147
)
Allowance for loan & lease losses
(14,256
)
(15,617
)
(16,421
)
(18,319
)
(17,738
)
Net loans & leases
1,973,605
2,121,597
2,124,540
2,266,432
2,442,226
Bank premises & equipment
23,571
24,490
25,949
26,795
27,505
Other assets
142,996
141,990
140,183
133,668
135,620
Total assets
$
3,371,014
$
3,442,739
$
3,272,048
$
3,326,037
$
3,220,742
LIABILITIES & CAPITAL
Noninterest demand deposits
$
1,084,544
$
1,111,411
$
1,073,833
$
1,020,350
$
943,664
Interest-bearing transaction accounts
744,553
765,823
752,137
770,271
668,346
Savings deposits
450,785
451,248
435,076
415,230
368,420
Money market deposits
147,793
141,348
133,977
136,653
131,232
Customer time deposits
293,897
290,816
295,891
411,388
412,944
Wholesale brokered deposits
60,000
60,000
85,000
100,000
100,000
Total deposits
2,781,572
2,820,646
2,775,914
2,853,892
2,624,606
Long-term debt
49,141
49,221
-
-
-
Junior subordinated debentures
35,302
35,258
35,213
35,169
35,124
Other interest-bearing liabilities
106,937
92,553
70,535
56,527
182,038
Total deposits & interest-bearing
liabilities
2,972,952
2,997,678
2,881,662
2,945,588
2,841,768
Other liabilities
35,568
80,554
32,657
32,468
35,078
Total capital
362,494
364,507
357,729
347,981
343,896
Total liabilities & capital
$
3,371,014
$
3,442,739
$
3,272,048
$
3,326,037
$
3,220,742
GOODWILL & INTANGIBLE
ASSETS
(balances in $000's, unaudited)
12/31/2021
9/30/2021
6/30/2021
3/31/2021
12/31/2020
Goodwill
$
27,357
$
27,357
$
27,357
$
27,357
$
27,357
Core deposit intangible
3,275
3,527
3,780
4,038
4,307
Total intangible assets
$
30,632
$
30,884
$
31,137
$
31,395
$
31,664
CREDIT QUALITY
(balances in $000's, unaudited)
12/31/2021
9/30/2021
6/30/2021
3/31/2021
12/31/2020
Non-accruing loans
$
4,522
$
6,788
$
7,276
$
8,599
$
7,598
Foreclosed assets
93
93
774
945
971
Total nonperforming assets
$
4,615
$
6,881
$
8,050
$
9,544
$
8,569
Performing TDR's (not included in
NPA's)
$
4,910
$
5,509
$
10,774
$
10,596
$
11,382
Net (recoveries) charge offs
$
(168
)
$
(329
)
$
(533
)
$
(331
)
$
735
Past due & still accruing (30-89)
$
2,013
$
380
$
3,197
$
2,991
$
1,656
Loans deferred under CARES act
$
10,411
$
10,411
$
10,411
$
22,437
$
29,500
Non-performing loans to gross loans
0.23
%
0.32
%
0.34
%
0.38
%
0.31
%
NPA's to loans plus foreclosed assets
0.23
%
0.32
%
0.38
%
0.42
%
0.35
%
Allowance for loan losses to loans
0.72
%
0.73
%
0.77
%
0.80
%
0.72
%
SELECT PERIOD-END STATISTICS
(unaudited)
12/31/2021
9/30/2021
6/30/2021
3/31/2021
12/31/2020
Shareholders’ equity / total assets
10.8
%
10.6
%
10.9
%
10.5
%
10.7
%
Gross loans / deposits
71.5
%
75.9
%
77.3
%
80.2
%
93.8
%
Non-interest bearing deposits / total
deposits
39.0
%
39.4
%
38.7
%
35.8
%
36.0
%
CONSOLIDATED INCOME STATEMENT
(Dollars in Thousands, Unaudited)
Qtr Ended:
Year Ended:
12/31/2021
9/30/2021
12/31/2020
12/31/2021
12/31/2020
Interest income
$
27,897
$
27,629
$
29,762
$
113,076
$
110,243
Interest expense
1,331
913
930
4,050
5,408
Net interest income
26,566
26,716
28,832
109,026
104,835
(Benefit) provision for loan & lease
losses
(1,200
)
(600
)
2,200
(3,650
)
8,550
Net interest income after provision
27,766
27,316
26,632
112,676
96,285
Service charges
3,169
3,186
3,013
11,846
11,765
BOLI income
203
1,048
415
2,648
2,412
Gain on investments
-
11
-
11
390
Other noninterest income
3,730
3,290
2,611
13,574
11,583
Total noninterest income
7,102
7,535
6,039
28,079
26,150
Salaries & benefits
10,237
10,618
11,042
42,431
40,178
Occupancy expense
2,366
2,359
2,452
9,837
9,842
Other noninterest expenses
9,572
7,898
7,263
31,288
25,892
Total noninterest expense
22,175
20,875
20,757
83,556
75,912
Income before taxes
12,693
13,976
11,914
57,199
46,523
Provision for income taxes
3,072
3,371
2,935
14,187
11,079
Net income
$
9,621
$
10,605
$
8,979
$
43,012
$
35,444
TAX DATA
Tax-exempt municipal income
$
1,761
$
1,578
$
1,475
$
6,218
$
5,707
Interest income - fully tax equivalent
$
28,365
$
28,048
$
30,154
$
114,729
$
111,760
PER SHARE DATA
(unaudited)
Qtr Ended:
Year Ended:
12/31/2021
9/30/2021
12/31/2020
12/31/2021
12/31/2020
Basic earnings per share
$
0.63
$
0.70
$
0.59
$
2.82
$
2.33
Diluted earnings per share
$
0.63
$
0.69
$
0.58
$
2.80
$
2.32
Common dividends
$
0.22
$
0.22
$
0.20
$
0.87
$
0.80
Weighted average shares outstanding
15,226,834
15,257,367
15,222,044
15,241,957
15,216,749
Weighted average diluted shares
15,297,414
15,343,543
15,456,984
15,353,445
15,280,325
Book value per basic share (EOP)
$
23.74
$
23.70
$
22.35
$
23.74
$
22.35
Tangible book value per share (EOP)
$
21.73
$
21.69
$
20.29
$
21.73
$
20.29
Common shares outstanding (EOP)
15,270,010
15,382,518
15,388,423
15,270,010
15,388,423
KEY FINANCIAL RATIOS
(unaudited)
Qtr Ended:
Year Ended:
12/31/2021
9/30/2021
12/31/2020
12/31/2021
12/31/2020
Return on average equity
10.47
%
11.62
%
10.49
%
12.05
%
10.80
%
Return on average assets
1.10
%
1.26
%
1.12
%
1.29
%
1.22
%
Net interest margin (tax-equivalent)
3.31
%
3.46
%
3.91
%
3.56
%
3.95
%
Efficiency ratio (tax-equivalent)¹
64.86
%
59.75
%
58.68
%
59.92
%
57.18
%
Net charge-offs (recoveries) to avg loans
(not annualized)
0.01
%
0.01
%
0.00
%
(0.01
)%
0.04
%
(1) Noninterest expense as a percentage of
the sum of net interest income and noninterest income excluding net
gains (losses) from securities.
NON-GAAP FINANCIAL MEASURES
(Unaudited)
12/31/2021
9/30/2021
12/31/2020
Total stockholders' equity
$
362,494
$
364,507
$
343,896
Less: goodwill and other intangible
assets
30,632
30,884
31,664
Tangible common equity
$
331,862
$
333,623
$
312,232
Total assets
$
3,371,014
$
3,442,739
$
3,220,742
Less: goodwill and other intangible
assets
30,632
30,884
31,664
Tangible assets
$
3,340,382
$
3,411,855
$
3,189,078
Common shares outstanding
15,270,010
15,382,518
15,388,423
Book value per common share
$
23.74
$
23.70
$
22.35
Tangible book value per common share
$
21.73
$
21.69
$
20.29
Equity ratio - GAAP (total stockholders'
equity / total assets)
10.75
%
10.59
%
10.68
%
Tangible common equity ratio (tangible
common equity / tangible assets)
9.93
%
9.78
%
9.79
%
NONINTEREST INCOME/EXPENSE
(Dollars in Thousands, Unaudited)
For three months
ended:
For twelve months
ended:
Noninterest income:
12/31/2021
9/30/2021
12/31/2020
12/31/2021
12/31/2020
Service charges on deposit accounts
$
3,169
$
3,186
$
3,013
$
11,846
$
11,765
Checkcard fees
2,165
2,192
1,840
8,485
7,023
Bank-owned life insurance
203
1,048
415
4,797
2,412
Other service charges and fees
992
708
871
2,648
4,084
Gain on sale of securities
—
11
—
11
390
Loss on tax credit investment
(133
)
—
(158
)
(524
)
(1,189
)
Other
706
390
58
816
1,665
Total noninterest income
$
7,102
$
7,535
$
6,039
$
28,079
$
26,150
As a % of average interest earning assets
(1)
0.87
%
0.96
%
0.81
%
0.90
%
0.97
%
Noninterest expense:
Salaries and employee benefits
$
10,237
$
10,618
$
11,042
$
42,431
$
40,178
Occupancy costs
Furniture & equipment
409
406
447
1,720
2,028
Premises
1,957
1,953
2,005
8,117
7,814
Advertising and marketing costs
539
370
539
1,521
1,889
Data processing costs
1,481
1,470
1,295
5,890
4,661
Deposit services costs
2,298
2,402
2,223
9,049
8,483
Loan services costs
Loan processing
158
109
228
501
880
Foreclosed assets
(6
)
(19
)
(170
)
72
253
Other operating costs
Telephone & data communications
431
534
456
2,013
1,775
Postage & mail
56
60
57
308
321
Other
906
470
558
2,176
1,647
Professional services costs
Legal & accounting
2,703
966
988
4,794
1,989
Other professional service
796
1,320
819
4,015
2,990
Stationery & supply costs
85
107
104
345
446
Sundry & tellers
125
109
166
604
558
Total noninterest expense
$
22,175
$
20,875
$
20,757
$
83,556
$
75,912
As a % of average interest earning assets
(1)
2.72
%
2.66
%
2.77
%
2.69
%
2.82
%
Efficiency ratio (2)(3)
64.86
%
59.75
%
58.68
%
59.92
%
57.18
%
(1)
Annualized.
(2)
Tax equivalent.
(3)
Noninterest expense as a percentage of the
sum of net interest income and noninterest income excluding net
gains (losses) from securities and bank owned life insurance
income.
AVERAGE BALANCES AND RATES
(Dollars in Thousands, Unaudited)
For the quarter ended
For the quarter ended
For the quarter ended
December 31, 2021
September 30, 2021
December 31, 2020
Average
Income/
Yield/
Average
Income/
Yield/
Average
Income/
Yield/
Balance (1)
Expense
Rate (2)
Balance (1)
Expense
Rate (2)
Balance (1)
Expense
Rate (2)
Assets
Investments:
Federal funds sold/interest-earning due
from's
$
311,386
$
120
0.15
%
$
379,597
$
146
0.15
%
$
4,071
$
2
0.20
%
Taxable
593,959
2,403
1.61
%
389,524
1,679
1.71
%
338,554
1,657
1.95
%
Non-taxable
285,811
1,679
2.95
%
259,996
1,578
3.05
%
225,583
1,461
3.26
%
Total investments
1,191,156
4,202
1.55
%
1,029,117
3,403
1.47
%
568,208
3,120
2.46
%
Loans and Leases: (3)
Real estate
1,794,285
20,864
4.61
%
1,775,611
20,805
4.65
%
1,866,418
21,629
4.61
%
Agricultural Production
38,191
361
3.75
%
43,243
410
3.76
%
45,143
418
3.68
%
Commercial
118,159
1,457
4.89
%
140,105
1,796
5.09
%
213,725
2,077
3.87
%
Consumer
4,720
237
19.92
%
4,862
205
16.73
%
5,873
239
16.19
%
Mortgage warehouse lines
90,736
747
3.27
%
118,036
982
3.30
%
270,401
2,250
3.31
%
Other
1,430
29
8.05
%
1,463
28
7.59
%
1,617
29
7.13
%
Total loans and leases
2,047,521
23,695
4.59
%
2,083,320
24,226
4.61
%
2,403,177
26,642
4.41
%
Total interest earning assets (4)
3,238,677
27,897
3.47
%
3,112,437
27,629
3.58
%
2,971,385
29,762
4.04
%
Other earning assets
21,425
15,713
20,092
Non-earning assets
206,344
212,116
202,996
Total assets
$
3,466,446
$
3,340,266
$
3,194,473
Liabilities and shareholders'
equity
Interest bearing deposits:
Demand deposits
$
131,810
$
80
0.24
%
$
148,175
$
86
0.23
%
$
123,717
$
69
0.22
%
NOW
615,245
112
0.07
%
605,620
115
0.08
%
536,127
93
0.07
%
Savings accounts
451,369
65
0.06
%
443,406
63
0.06
%
366,080
52
0.06
%
Money market
146,174
25
0.07
%
139,433
26
0.07
%
129,536
27
0.08
%
Time Deposits
291,516
241
0.33
%
293,379
248
0.31
%
416,069
310
0.30
%
Wholesale Brokered Deposits
60,000
49
0.32
%
72,283
53
0.29
%
53,750
28
0.21
%
Total interest bearing deposits
1,696,114
572
0.13
%
1,702,296
591
0.14
%
1,625,279
579
0.14
%
Borrowed funds:
Other Interest-Bearing Liabilities
98,326
86
0.35
%
79,132
41
0.21
%
175,025
98
—
Long-Term Debt
49,156
430
3.47
%
3,812
38
3.95
%
—
—
—
Subordinated Debentures
35,276
243
2.73
%
35,229
243
2.74
%
35,098
253
2.87
%
Total borrowed funds
147,482
516
1.65
%
118,173
322
1.08
%
210,123
351
0.66
%
Total interest bearing liabilities
1,878,872
1,331
0.28
%
1,820,469
913
0.20
%
1,835,402
930
0.20
%
Demand deposits - Noninterest bearing
1,120,323
1,104,506
979,593
Other liabilities
102,838
53,134
39,106
Shareholders' equity
364,413
362,157
340,372
Total liabilities and shareholders'
equity
$
3,466,446
$
3,340,266
$
3,194,473
Interest income/interest earning
assets
3.47
%
3.58
%
4.04
%
Interest expense/interest earning
assets
0.16
%
0.12
%
0.13
%
Net interest income and margin
(5)
$
26,566
3.31
%
$
26,716
3.46
%
$
28,832
3.91
%
(1)
Average balances are obtained from the
best available daily or monthly data and are net of deferred fees
and related direct costs.
(2)
Yields and net interest margin have been
computed on a tax equivalent basis utilizing a 21% effective tax
rate.
(3)
Loans are gross of the allowance for
possible loan losses. Loan fees have been included in the
calculation of interest income. Net loan fees and loan acquisition
FMV amortization were $0.8 million and $1.0 million for the
quarters ended December 31, 2021 and 2020, respectively, and $1.0
million for the quarter ended September 30, 2021.
(4)
Non-accrual loans have been included in
total loans for purposes of computing total earning assets.
(5)
Net interest margin represents net
interest income as a percentage of average interest-earning
assets.
AVERAGE BALANCES
AND RATES
(Dollars in Thousands, Unaudited)
Year Ended December
31,
2021
2020
2019
Average
Income/
Yield/
Average
Income/
Yield/
Average
Income/
Yield/
Assets
Balance(1)
Expense
Rate(2)
Balance(1)
Expense
Rate(2)
Balance(1)
Expense
Rate(2)
Investments:
Federal funds sold/due from banks
$
269,919
$
370
0.14
%
$
25,228
$
156
0.62
%
$
16,346
$
376
2.30
%
Taxable
406,790
7,239
1.78
%
379,024
8,199
2.16
%
423,453
10,139
2.39
%
Non-taxable
258,472
6,218
3.05
%
216,387
5,707
3.34
%
160,787
4,534
3.57
%
Total investments
935,181
13,827
1.66
%
620,639
14,062
2.51
%
600,586
15,049
2.71
%
Loans and
Leases: (3)
Real estate
1,818,362
84,074
4.62
%
1,610,686
79,175
4.92
%
1,440,465
79,777
5.54
%
Agricultural
42,866
1,598
3.73
%
47,299
1,887
3.99
%
50,042
2,973
5.94
%
Commercial
153,880
7,828
5.09
%
179,924
6,738
3.74
%
117,679
5,918
5.03
%
Consumer
4,993
831
16.64
%
6,584
1,069
16.24
%
8,497
1,340
15.77
%
Mortgage warehouse
147,996
4,807
3.25
%
221,319
7,135
3.22
%
134,171
5,695
4.24
%
Other
1,485
111
7.47
%
2,878
177
6.15
%
2,894
195
6.74
%
Total loans and leases
2,169,582
99,249
4.57
%
2,068,690
96,181
4.65
%
1,753,748
95,898
5.47
%
Total interest earning assets (4)
3,104,763
113,076
3.70
%
2,689,329
110,243
4.16
%
2,354,334
110,947
4.76
%
Other earning assets
15,043
13,103
12,421
Non-earning assets
208,678
207,590
202,810
Total assets
$
3,328,484
$
2,910,022
$
2,569,565
Liabilities and shareholders'
equity
Interest bearing
deposits:
Demand deposits
$
143,171
$
331
0.23
%
$
121,867
$
278
0.23
%
$
106,849
$
316
0.30
%
NOW
597,992
444
0.07
%
497,984
388
0.08
%
444,619
524
0.12
%
Savings accounts
427,803
240
0.06
%
336,620
221
0.07
%
289,727
308
0.11
%
Money market
140,365
111
0.08
%
124,755
128
0.10
%
124,625
181
0.15
%
Certificates of deposit<$100,000
70,692
190
0.27
%
77,119
326
0.42
%
88,792
1,035
1.17
%
Certificates of deposit>$100,000
262,512
849
0.32
%
359,687
2,361
0.66
%
396,465
7,896
1.99
%
Brokered deposits
81,041
225
0.28
%
36,071
246
0.68
%
48,392
1,120
2.31
%
Total interest bearing deposits
1,723,576
2,390
0.14
%
1,554,103
3,948
0.25
%
1,499,469
11,380
0.76
%
Borrowed
funds:
Federal funds purchased
1,561
1
0.06
%
1,918
4
0.21
%
313
1
0.32
%
Repurchase agreements
70,443
210
0.30
%
34,614
137
0.40
%
22,090
88
0.40
%
Short term borrowings
3,625
2
0.06
%
54,244
102
0.19
%
13,229
273
2.06
%
Long term debt
13,351
468
3.51
%
—
—
—
—
—
—
TRUPS
35,208
979
2.78
%
35,031
1,217
3.47
%
34,853
1,836
5.27
%
Total borrowed funds
124,188
1,660
1.34
%
125,807
1,460
1.16
%
70,485
2,198
3.12
%
Total interest bearing liabilities
1,847,764
4,050
0.22
%
1,679,910
5,408
0.32
%
1,569,954
13,578
0.86
%
Noninterest bearing demand deposits
1,064,119
862,274
664,061
Other liabilities
59,723
39,510
41,563
Shareholders' equity
356,878
328,328
293,987
Total liabilities and shareholders'
equity
$
3,328,484
$
2,910,022
$
2,569,565
Interest income/interest earning
assets
3.70
%
4.15
%
4.76
%
Interest expense/interest earning
assets
0.14
%
0.20
%
0.58
%
Net interest income and
margin(5)
$
109,026
3.56
%
$
104,835
3.95
%
$
97,369
4.19
%
(1)
Average balances are obtained from the
best available daily or monthly data and are net of deferred fees
and related direct costs.
(2)
Yields and net interest margin have been
computed on a tax equivalent basis.
(3)
Loans are gross of the allowance for
possible loan losses. Net loan fees have been included in the
calculation of interest income. Net loan fees and loan acquisition
FMV amortization were $4.2 million, $1.9 million, and $(0.4)
million for the years ended December 31, 2021, 2020, and 2019
respectively.
(4)
Non-accrual loans are slotted by loan type
and have been included in total loans for purposes of total
interest earning assets.
(5)
Net interest margin represents net
interest income as a percentage of average interest-earning assets
(tax-equivalent).
Category: Financial Source: Sierra Bancorp
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220124005121/en/
Kevin McPhaill, President/CEO (559) 782‑4900 or (888) 454‑BANK
www.sierrabancorp.com
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