Sierra Bancorp (Nasdaq: BSRR), parent of Bank of the Sierra,
today announced its unaudited financial results for the three-and
six-month periods ended June 30, 2022. Sierra Bancorp reported
consolidated net income of $9.2 million, or $0.61 per diluted
share, for the second quarter of 2022, compared to $11.7 million,
or $0.76 per diluted share, in the second quarter of 2021. On a
linked-quarter basis, the Company increased net income by $1.8
million, or 24%.
For the first six months of 2022, the Company recognized net
income of $16.6 million as compared to $22.8 million for the same
period in 2021. The Company's financial performance metrics for the
first half of 2022 include an annualized return on average equity
of 10.10%, a return on average assets of 0.98%, and diluted
earnings per share of $1.10.
“In this uncertain time of volatile interest rates and higher
inflation, the strength of our loyal customer base provides us with
a foundation of core deposits that position us to prudently
increase loan production. I believe that these fundamentals remain
a critical part of our success,” stated Kevin McPhaill, President
and CEO. “It is through our entire banking team’s efforts that we
continue to post solid financial results, and this last quarter is
no exception with a 24% increase in net income on a linked quarter
basis. Thanks to our strong capital position, recently expanded
lending teams, and our low-cost core deposit base, we are excited
about our prospects in the second half of 2022!” McPhaill
concluded.
Financial Highlights
Quarterly Changes (comparisons to the second quarter of
2021)
- Net interest income decreased $0.6 million, or 2%, due
primarily to a $0.4 million increase in interest expense from the
issuance of subordinated debt during the third quarter of 2021 and
higher cost of funds on interest-bearing liabilities due to the
recent increases in the prime interest rate.
- Noninterest income increased $3.8 million, primarily due to a
$3.2 million gain on sale of other assets, $0.4 million in life
insurance proceeds, a $0.2 million recovery on an acquired loan,
and a $1.0 million recovery of prior year legal expenses, partially
offset by a $1.4 million negative variance in corporate owned life
insurance with income linked to the Company’s nonqualified deferred
compensation plan.
- The provision for credit losses on loans and leases was $2.5
million under the new current expected credit losses (“CECL”)
methodology, as compared to a $2.1 million benefit under the
incurred loss model in the same quarter of 2021, for a net increase
of $4.6 million. This is driven primarily from the replacement of
allowance due to $2.3 million in net loan charge offs during the
second quarter of 2022.
- All capital ratios remain well above the regulatory
requirements for a well-capitalized institution. The Community Bank
Leverage ratio was 11.72% for Bank of the Sierra. The Sierra
Bancorp leverage ratio was 10.45%.
- Our Board of Directors declared a cash dividend of $0.23 per
share on July 21, 2022. This is the 94th consecutive quarterly
dividend paid by Sierra Bancorp. The cash dividend is payable on
August 15, 2022 to shareholders of record at the close of business
on August 1, 2022.
Linked Quarter Changes (comparisons to the three months ended
March 31, 2022)
- Net income improved by $1.8 million, or 24%, driven mostly by a
$1.8 million increase in net interest income, and higher
noninterest income, offset by unfavorable changes in the provision
for credit losses and noninterest expense. The increase in net
interest income was driven by higher average earning assets and a
22 basis point increase in the yield on earning assets, partially
offset by a 5 basis point increase in the cost of interest-bearing
liabilities.
- Noninterest income increased by $4.4 million, or 72%, for same
reasons as outlined in the quarterly comparison above.
- The provision for credit losses on loans and leases increased
$1.9 million to $2.5 million due mostly to charge-offs in the
second quarter as the quantitative and qualitative components of
the allowance for credit losses remained consistent with the prior
quarter.
- Noninterest expense increased $1.9 million, or 10%, mostly in
other operating expense, due to a $0.7 million increase in other
expense due to a proactive approach to a regulatory change in the
treatment of non-sufficient fund charges on representments, a $0.4
million increase in recruitment costs for our new lending teams,
and a $0.3 million increase in postage and supplies due to mailing
of new account agreements to customers.
Year to-Date Changes (comparisons to the first six-months of
2021)
- Net income decreased by $6.2 million due mostly to a $5.0
million increase in the provision for credit losses, as well as
lower net interest income on a change in mix of average earning
assets, partially offset by higher noninterest income.
- The provision for credit losses on loans and leases was $3.1
million, an increase of $5.0 million, due to a change from the
incurred loss method to the current expected credit loss method,
coupled with higher charge-offs in 2022 on two loan
relationships.
- Net interest income decreased by $4.4 million, or 8%, due
mostly to the change in mix of interest earning assets with average
loan balances increasing and investments increasing. In addition,
the cost of interest-bearing liabilities was higher due to
increases in index rates on certain floating rate liabilities.
- Noninterest income increased $3.1 million, or 23%, for the same
reasons as noted above in the quarterly comparison, combined with a
$1.0 million gain on the sale of investment securities, and a $2.6
million negative variance in BOLI income tied to our nonqualified
deferred compensation plan.
Balance Sheet Changes (comparisons to December 31,
2021)
- Total assets were relatively unchanged at $3.4 billion with
increases in loans and investments partially offset by lower cash
balances.
- Deposits increased by $69.4 million, or 2%. The growth in
deposits came primarily from noninterest-bearing or low-cost
transaction and savings accounts, while higher-cost time deposits
increased $5.9 million.
- Gross loans increased $32.9 million due predominantly to the
purchase of $173.1 million in high quality jumbo single family
mortgage loan pool purchases. These mortgage loan pool purchases
were offset by $201.8 million in loan maturities, charge-offs and
payoffs. Organic loan production for the first half of 2022 was
$142.1 million, a 61% increase, as compared to $88.3 million for
the comparative period in 2021, as the new lending teams hired
earlier in the year have been gaining traction in our market.
- Investment securities increased $52.3 million, or 5%. On April
1, 2022, the Company transferred $162.1 million of
“available-for-sale” investment securities to “held-to-maturity”.
The securities were transferred at fair market value on the date of
transfer. The transfer was initiated to partially insulate other
comprehensive income and equity from changes in interest rates.
This transfer had no impact on net income, and future price changes
on these securities due to changes in interest rates will not
affect capital.
Other financial highlights are reflected in the following
table.
FINANCIAL HIGHLIGHTS
(Dollars in Thousands, Except Per Share
Data, Unaudited)
As of or for the
As of or for the
three months ended
six months ended
6/30/2022
3/31/2022
6/30/2021
6/30/2022
6/30/2021
Net income
$
9,204
$
7,407
$
11,708
$
16,611
$
22,786
Diluted earnings per share
$
0.61
$
0.49
$
0.76
$
1.10
$
1.48
Return on average assets
1.07
%
0.88
%
1.42
%
0.98
%
1.41
%
Return on average equity
11.68
%
8.64
%
13.29
%
10.10
%
13.11
%
Net interest margin (tax-equivalent)
3.40
%
3.21
%
3.60
%
3.31
%
3.76
%
Yield on average loans and leases
4.31
%
4.32
%
4.57
%
4.31
%
4.55
%
Cost of average total deposits
0.11
%
0.08
%
0.09
%
0.10
%
0.09
%
Efficiency ratio (tax-equivalent) (1)
59.19
%
67.08
%
58.79
%
62.70
%
57.57
%
Total assets
$
3,396,635
$
3,418,854
$
3,272,048
$
3,396,635
$
3,272,048
Loans & leases net of deferred
fees
$
2,021,581
$
1,982,131
$
2,140,961
$
2,021,581
$
2,140,961
Noninterest demand deposits
$
1,120,413
$
1,104,691
$
1,073,833
$
1,120,413
$
1,073,833
Total deposits
$
2,850,999
$
2,864,943
$
2,775,914
$
2,850,999
$
2,775,914
Noninterest-bearing deposits over total
deposits
39.3
%
38.6
%
38.7
%
39.3
%
38.7
%
Shareholders’ equity / total assets
8.8
%
9.5
%
10.9
%
8.8
%
10.9
%
Tangible common equity ratio (2)
8.0
%
8.7
%
10.1
%
8.0
%
10.1
%
Book value per share
$
19.82
$
21.59
$
23.21
$
19.82
$
23.21
Tangible book value per share (2)
$
17.82
$
19.58
$
21.19
$
17.82
$
21.19
(1)
Noninterest expense as a percentage of the sum of net interest
income and noninterest income excluding net gains (losses) from
securities
(2)
See reconciliation of non-GAAP financial measures to the
corresponding GAAP measurement in "Non-GAAP Financial Measures"
later in this document
INCOME STATEMENT HIGHLIGHTS
Net Interest Income
Net interest income was $26.6 million, for the second quarter of
2022, a $0.6 million decrease, or 2% under the second quarter of
2021, and decreased $4.4 million, or 8% to $51.3 million for the
first six months of 2022 relative to the same period in 2021.
For the second quarter of 2022, growth in average
interest-earning assets totaled $117.5 million, or 4%, as compared
to the second quarter of 2021. The yield on these balances was 11
basis points lower for the same period. Average loan balances
decreased $173.0 million with a 26 basis point decrease in yield,
while average investment balances increased $290.6 million with a
79 basis point increase in yield, mostly due to a $388.9 million
increase in average collateralized loan obligation balances which
have variable rates. There was a 13 basis point increase in the
cost of our interest-bearing liabilities for the same period.
Net interest income for the comparative year-to-date periods
decreased due to the change in mix on interest earning assets,
compounded by an increase in interest rates paid on
interest-bearing liabilities. There was a $293.5 million, or 13%
decline in average loan and lease balances yielding 24 basis points
less for the same period, while average investment balances
increased $451.0 million yielding 28 basis points higher for the
same period. Average interest-bearing liabilities increased $86.8
million, of which $49.2 million is attributed to the issuance of
subordinated debt in the third quarter of 2021, with an 11 basis
point overall increase in yield. The net impact of the mix and rate
change was a 45 basis point decrease in our net interest margin for
the six-months ending June 30, 2022 as compared to the same period
in 2021.
Interest expense was $1.6 million for the second quarter of
2022, an increase of $0.7 million, or 80%, relative to the second
quarter of 2021. For the first six months of 2022, compared to the
first six months of 2021, interest expense increased $1.1 million,
or 63%, to $2.9 million. The increase in interest expense is
attributable to the issuance of subordinated debt combined with an
increase in interest rates paid on certain deposits. Some of the
increase in interest expense was mitigated by a favorable shift in
deposit mix as the average balance on higher cost time deposits
declined by $73.8 million or 17% in the second quarter of 2022 as
compared to the second quarter of 2021, and by $116.1 million or
25% for the six months ending 2022 as compared to the same period
in 2021, while lower or no cost average transaction and savings
accounts increased $153.5 million or 6% for the second quarter of
2022 compared to the same period in 2021 and increased by $205.2
million or 9% over the comparable year to date periods.
Our net interest margin was 3.40% for the second quarter of
2022, as compared to 3.21% for the linked quarter and 3.60% for the
second quarter of 2021.
Provision for Credit Losses
The Company recorded a provision for credit losses on loans and
leases of $2.5 million in the second quarter of 2022 relative to a
benefit of $2.1 million in the second quarter of 2021, and a
year-to-date provision for credit losses on loans and leases of
$3.1 million in 2022 as compared to a benefit of $1.9 million for
the same period in 2021. The Company's $4.6 million, increase in
the provision for credit losses on loans and leases in the second
quarter of 2022 as compared to the second quarter of 2021, and the
$5.0 million year to date increase in the provision for credit
losses on loans and leases, compared to the same period in 2021 was
primarily due to the impact of $4.1 million in net charge-offs in
the first six months of 2022. The increase in net charge-offs in
the second quarter of 2022 was primarily related to a single office
building loan relationship that was sold at a discount due to an
increased risk of default that would have likely led to a prolonged
collection period. For the first six months, the increase in net
charge-offs also included a single dairy loan relationship that
defaulted in late March 2022.
Noninterest Income
Total noninterest income increased by $3.8 million, or 58%, for
the quarter ended June 30, 2022 as compared to the same quarter in
2021 and increased $3.1 million, or 23% for the comparable
year-to-date periods. The quarterly comparison includes $3.2
million in non-recurring gains resulting from the sale of Visa B
stock of $2.6 million and a small business investment company fund
investment of $0.6 million, as well as $0.4 million in life
insurance proceeds, a $1.0 million recovery of prior year legal
expenses, and a $0.2 million gain from a recovery on an acquired
loan. In addition, the year-to-date comparison reflects a $1.0
million gain on the sale of investment securities. These favorable
adjustments to the quarter and year-to-date comparisons were
partially offset by unfavorable declines of $1.4 million and $2.6
million respectively, in the value of separate account
corporate-owned life insurance assets tied to non-qualified
deferred compensation plans. Investments in the separate account
variable life insurance policies are invested in a similar
proportionate mix of asset classes that our deferred compensation
participants have elected, with the exception of participant
elections in a fixed income account. Such election by plan
participants in the fixed income account is ignored which creates
greater volatility of the corporate owned life insurance asset
value as compared to the related liability balance for deferred
compensation.
Service charges on customer deposit account income increased by
$0.5 million, or 18%, to $3.2 million in the second quarter of 2022
as compared to the second quarter of 2021. This service charge
income was $0.8 million higher, or 14% in the first six months of
2022, as compared to the same period in 2021. These increases in
the quarterly and year-to-date comparisons are primarily a result
of increased analysis fees and overdraft income. Overdraft fees and
returned check charges increased $0.2 million to $1.4 million for
the second quarter of 2022 and increased $0.4 million to $2.7
million for the first six months of 2022.
Noninterest Expense
Total noninterest expense increased by $1.9 million, or 9%, in
the second quarter of 2022 relative to the second quarter of 2021,
and by $1.8 million, or 4%, in the first six months of 2022 as
compared to the first six months of 2021.
Salaries and Benefits were $1.3 million, or 13%, higher in the
second quarter of 2022 as compared to the second quarter of 2021
and $2.0 million, or 9% higher for the first six months of 2022
compared to the same period in 2021. The reason for this increase
is primarily due to increased salary expense due to the strategic
hiring of lending and management staff for both the quarterly and
year-to-date comparisons.
Occupancy expenses were $0.2 million lower for the second
quarter of 2022 as compared to the same quarter in 2021 and $0.4
million lower for the first half of 2022 as compared to the first
half of 2021. The primary reason for this decrease was from a
decrease in premises depreciation due to the sale of a branch
building which was closed in the third quarter of 2021.
Other noninterest expense increased $0.8 million, or 11% for the
second quarter 2022 as compared to the second quarter in 2021, and
increased $0.2 million, or 2% for the first half of 2022 as
compared to the same period in 2021. The variance for the second
quarter of 2022 compared to the same period in 2021 was driven by a
$0.7 million accrual for restitution payments to customers charged
nonsufficient fund fees in the past five years for representments.
This accrual was established after the FDIC published its position
in how such representments are characterized for regulatory
purposes. The Company also incurred higher costs of $0.3 million
associated with postage and mailing of new account agreements to
customers. Beginning in the third quarter of 2022, the Company will
no longer charge customers for returned item fees, commonly
referred to as nonsufficient fund fees. In addition, the Company
increased overdraft privilege for both commercial and consumer
customers but will limit the number of daily overdraft fees to four
per day (previously five per day) and will no longer charge a fee
for continuous overdrafts (previously a $35 charge after the 10th
consecutive day an account is in an overdraft position). These
changes to our nonsufficient fund fees, overdraft fees and
overdraft privilege program are not expected to have a material
impact on deposit fee income.
In addition, there was a $0.4 million increase in recruitment
costs associated with new lending teams and management staff. For
the quarterly and year-to-date comparisons, decreases in deferred
compensation expense for directors, which is linked to the changes
in life insurance income, partially offset the increases.
The Company's provision for income taxes was 26.3% of pre-tax
income in the second quarter of 2022 relative to 25.3% in the
second quarter of 2021, and 26.6% of pre-tax income for the first
half of 2022 relative to 25.4% for the same period in 2021. The
increase in effective tax rate for both the quarterly and
year-to-date comparisons is due to the volatility in the Corporate
Owned Life Insurance asset value associated with our non-qualified
deferred compensation plans. In the second quarter and first half
of 2022, the investments associated with the non-qualified deferred
compensation plans declined in value, resulting in a non-deductible
expense as compared to an increase in value generating non-taxable
income for the second quarter, and first half of 2021.
Balance Sheet Summary
Balance sheet changes during the first half of 2022 include an
increase in total assets of $25.6 million, or 1%, primarily a
result of a $32.9 million increase gross loan balances, a $52.3
million increase in investment securities, a $14.6 million increase
in other equity investments, including Low Income Housing Tax
Credit Funds, SBA loan funds and limited partnerships, a $28.3
million increase in deferred tax assets, and a $18.9 million
increase in cash and due from banks. These changes were partially
offset by a $114.6 million decrease in short term investments,
primarily overnight investments.
The increase in gross loan balances as compared to December 31,
2021 was primarily a result of an increase in 1-4 family
residential real estate loans, mostly from the purchase of $173.1
million in high quality jumbo mortgage loans and a $12.8 million
organic increase in multi-family residential loans.
Counterbalancing these positive variances were loan paydowns and
maturities resulting in net declines in many categories even with
higher loan production. In particular, there was a $20.4 million
net decrease in construction loans, a $9.9 million net decline in
commercial real estate loans, a $37.0 million net reduction in
commercial and industrial loans, a $43.0 million unfavorable change
in mortgage warehouse line utilization, and a $10.2 net decline in
agricultural loans. Further, SBA PPP loan forgiveness resulted in a
$23.6 million decline in loan balances, included in the commercial
and industrial variance noted above.
As indicated in the loan roll forward below, new credit extended
for the second quarter of 2022, increased $97.0 million over the
linked quarter to $119.6 million and increased $97.9 million over
the same period in 2021. This organic loan growth is attributable
to the new agricultural and commercial real estate lending teams
added earlier this year. Contributing to our organic growth, loans
purchased totaled $173.1 million, however we had $201.8 million in
loan paydowns and maturities, along with a $43.0 million decrease
in mortgage warehouse line utilization and a $37.4 million decrease
in line of credit utilization.
LOAN ROLLFORWARD
(Dollars in Thousands, Unaudited)
For the three months
ended:
For the six months
ended:
June 30, 2022
March 31, 2022
June 30, 2021
June 30, 2022
June 30, 2021
Gross loans beginning balance
$
1,983,331
$
1,989,726
$
2,288,468
$
1,989,726
$
2,463,111
New credit extended
119,553
22,543
21,698
142,096
88,294
Loan purchases
46,364
126,718
—
173,082
—
Changes in line of credit utilization
(17,837
)
(19,553
)
(17,071
)
(37,390
)
(39,657
)
Change in mortgage warehouse
956
(44,005
)
(37,588
)
(43,049
)
(157,327
)
Pay-downs, maturities, charge-offs and
amortization(1)
(109,705
)
(92,098
)
(110,711
)
(201,803
)
(209,625
)
Gross loans ending balance
2,022,662
1,983,331
2,144,796
2,022,662
2,144,796
Deferred costs and (fees), net
(1,081
)
(1,200
)
(3,835
)
(1,081
)
(3,835
)
Loans, net of deferred costs and
(fees)
$
2,021,581
$
1,982,131
$
2,140,961
$
2,021,581
$
2,140,961
(1)
Includes $1.6 million from the sale of a
performing loan during the second quarter of 2022.
Unused commitments, excluding mortgage warehouse and overdraft
lines, were $199.4 million at June 30, 2022, compared to $242.3
million at December 31, 2021. Total line utilization, excluding
mortgage warehouse and consumer overdraft lines, was 61.2% at June
30, 2022 and 61.0% at December 31, 2021. Mortgage warehouse
utilization declined significantly to 12% at June 30, 2022, as
compared to 28% at December 31, 2021. It should be noted that
approximately $278.0 million of the mortgage warehouse lines were
moved to repurchase agreement lines that provide stronger credit
protection to the Company, as well as more favorable regulatory
capital treatment as these repurchase lines are not considered
off-balance sheet commitments.
PPP loans continue to decline as borrowers receive forgiveness
on these loans. There were 107 loans for $8.2 million outstanding
at June 30, 2022, compared to 440 loans for $31.8 million at
December 31, 2021.
Deposit balances reflect growth of $69.4 million, or 2%, during
the first six months of 2022. Core non-maturity deposits increased
by $63.5 million, or 3%, while customer time deposits increased by
$5.9 million, or 2%. Wholesale brokered deposits were unchanged at
$60.0 million. Overall noninterest-bearing deposits as a percent of
total deposits at June 30, 2022, increased to 39.3%, as compared to
39.0% at December 31, 2021. Other interest-bearing liabilities of
$202.6 million on June 30, 2022 consisted of $118.0 million in
customer repurchase agreements, $35.4 million in trust preferred
securities and $49.2 million in subordinated debentures.
The Company continues to have substantial liquidity. At June 30,
2022, and December 31, 2021, the Company had the following sources
of primary and secondary liquidity (Dollars in Thousands):
Primary and secondary liquidity
sources
June 30, 2022
December 31, 2021
Cash and cash equivalents
$
161,875
$
257,528
Unpledged investment securities
839,833
806,132
Excess pledged securities
38,245
47,024
FHLB borrowing availability
830,615
787,519
Unsecured lines of credit
305,000
305,000
Funds available through fed discount
window
32,762
50,608
Totals
$
2,208,330
$
2,253,811
Total capital of $299.0 million at June 30, 2022 reflects a
decrease of $63.4 million, or 18%, relative to year-end 2021. The
decrease in equity during the first half of 2022 was due to the
addition of $16.6 million in net income, offset by a $61.6 million
unfavorable swing in accumulated other comprehensive income/loss
due principally to changes in investment securities’ fair value, a
one-time adjustment from the implementation of CECL on January 1,
2022 for $7.3 million, $4.9 million in share repurchases and net of
$7.0 million in dividends paid. The remaining difference is related
to stock options exercised and restricted stock compensation
recognized during the quarter.
The Company’s strong liquidity position enabled the transfer of
$162.1 million of “available-for-sale” investment securities to
“held-to-maturity” classification effective April 1, 2022. The
transfer was initiated to reduce the effect of future rate
increases on the available-for-sale portfolio, mark-to-market
adjustments, comprehensive income and equity.
Asset Quality
Total nonperforming assets, comprised of nonaccrual loans and
foreclosed assets, increased by $25.1 million to $29.7 million for
the first half of 2022. The Company's ratio of nonperforming loans
to gross loans increased to 1.47% at June 30, 2022 from 0.23% at
December 31, 2021. The increase resulted from an increase in
non-accrual loan balances, primarily as a result of a downgrade in
the first quarter of 2022 of one loan relationship in the dairy
industry consisting of four separate loans. All the Company's
nonperforming assets are individually evaluated for credit loss
quarterly and management believes the established allowance for
credit loss on such loans is appropriate.
The Company's allowance for credit losses on loans and leases
was $22.8 million at June 30, 2022, as compared to $14.3 million at
December 31, 2021. The $8.5 million increase in the allowance for
credit losses on loans and leases during the first half of 2022 is
due to a $9.5 million one-time adjustment from the implementation
of CECL on January 1, 2022, a $3.1 million provision for credit
losses on loans and leases, and net loan charge-offs of $4.1
million. In the second quarter of 2022, net loan charge-offs were
$2.3 million, including $1.6 million from the sale of a performing
loan during the quarter. Such loan was an office building that had
previously had interest deferred under the Coronavirus Aid, Relief,
and Economic Security (CARES) Act. Included in the charge-off was
$0.7 million of deferred interest that was not contractually due at
the time of sale. Given the potential of a prolonged work-out
process with the customer, management determined that the best
long-term course of action would be sell this loan rather than
waiting for it to become noncurrent and begin a foreclosure
process.
The allowance was 1.13% of gross loans at June 30, 2022, and
0.72% of gross loans at December 31, 2021. Management's detailed
analysis indicates that the Company's allowance for credit losses
on loans and leases should be sufficient to cover credit losses for
the life of the loans and leases outstanding as of June 30, 2022,
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.
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
in Templeton, California, an SBA center, and a dedicated loan
production office in Roseville, California. In 2022, Bank of the
Sierra was recognized as one of the strongest and top-performing
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 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
6/30/2022
3/31/2022
12/31/2021
9/30/2021
6/30/2021
Cash and due from banks
$
161,875
$
253,534
$
257,528
$
422,350
$
373,902
Investment securities
Available-for-sale, at fair value
864,178
1,025,032
973,314
732,312
607,474
Held-to-maturity, at amortized cost, net
of allowance for credit losses
161,399
-
-
-
-
Real estate loans
1-4 family residential construction
5,542
8,800
21,369
34,720
37,165
Other construction/land
20,816
24,633
25,299
25,512
27,682
1-4 family - closed-end
429,109
398,871
289,457
220,240
106,599
Equity lines
25,260
23,389
26,588
31,341
33,334
Multi-family residential
66,367
59,711
53,458
55,628
58,230
Commercial real estate - owner
occupied
312,060
331,764
334,446
345,116
359,021
Commercial real estate - non-owner
occupied
898,159
857,051
882,888
995,921
1,048,153
Farmland
101,675
98,865
106,706
124,446
125,783
Total real estate loans
1,858,988
1,803,084
1,740,211
1,832,924
1,795,967
Agricultural production loans
28,660
31,663
33,990
43,296
42,952
Commercial and industrial
72,616
87,173
109,791
132,292
150,632
Mortgage warehouse lines
58,134
57,178
101,184
126,486
150,351
Consumer loans
4,264
4,233
4,550
4,828
4,894
Gross loans and leases
2,022,662
1,983,331
1,989,726
2,139,826
2,144,796
Deferred loan and lease fees
(1,081
)
(1,200
)
(1,865
)
(2,612
)
(3,835
)
Allowance for credit losses on loans and
leases
(22,802
)
(22,530
)
(14,256
)
(15,617
)
(16,421
)
Net loans and leases
1,998,779
1,959,601
1,973,605
2,121,597
2,124,540
Bank premises and equipment
22,937
23,239
23,571
24,490
25,949
Other assets
187,467
157,448
142,996
141,990
140,183
Total assets
$
3,396,635
$
3,418,854
$
3,371,014
$
3,442,739
$
3,272,048
LIABILITIES AND CAPITAL
Noninterest demand deposits
$
1,120,413
$
1,104,691
$
1,084,544
$
1,111,411
$
1,073,833
Interest-bearing transaction accounts
736,034
776,457
744,553
765,823
752,137
Savings deposits
482,140
480,178
450,785
451,248
435,076
Money market deposits
152,596
149,918
147,793
141,348
133,977
Customer time deposits
299,816
293,699
293,897
290,816
295,891
Wholesale brokered deposits
60,000
60,000
60,000
60,000
85,000
Total deposits
2,850,999
2,864,943
2,781,572
2,820,646
2,775,914
Long-term debt
49,173
49,151
49,141
49,221
-
Subordinated debentures
35,392
35,347
35,302
35,258
35,213
Other interest-bearing liabilities
118,014
107,760
106,937
92,553
70,535
Total deposits and interest-bearing
liabilities
3,053,578
3,057,201
2,972,952
2,997,678
2,881,662
Allowance for credit losses on unfunded
loan commitments
893
1,040
203
203
193
Other liabilities
43,117
34,922
35,365
80,351
32,464
Total capital
299,047
325,691
362,494
364,507
357,729
Total liabilities and capital
$
3,396,635
$
3,418,854
$
3,371,014
$
3,442,739
$
3,272,048
GOODWILL AND INTANGIBLE ASSETS
(Dollars in Thousands, Unaudited)
6/30/2022
3/31/2022
12/31/2021
9/30/2021
6/30/2021
Goodwill
$
27,357
$
27,357
$
27,357
$
27,357
$
27,357
Core deposit intangible
2,769
3,022
3,275
3,527
3,780
Total intangible assets
$
30,126
$
30,379
$
30,632
$
30,884
$
31,137
CREDIT QUALITY
(Dollars in Thousands, Unaudited)
6/30/2022
3/31/2022
12/31/2021
9/30/2021
6/30/2021
Non-accruing loans
$
29,745
$
30,446
$
4,522
$
6,788
$
7,276
Foreclosed assets
2
93
93
93
774
Total nonperforming assets
$
29,747
$
30,539
$
4,615
$
6,881
$
8,050
Performing TDR's (not included in
NPA's)
$
4,714
$
4,568
$
4,910
$
5,509
$
10,774
Net (recoveries) / charge offs
$
4,056
$
1,778
$
(168
)
$
(329
)
$
(533
)
Past due & still accruing (30-89)
$
1,037
$
2,809
$
2,013
$
380
$
3,197
Non-performing loans to gross loans
1.47
%
1.54
%
0.23
%
0.32
%
0.34
%
NPA's to loans plus foreclosed assets
1.47
%
1.54
%
0.23
%
0.32
%
0.38
%
Allowance for credit losses on loans and
leases to loans
1.13
%
1.14
%
0.72
%
0.73
%
0.77
%
SELECT PERIOD-END STATISTICS
(Unaudited)
6/30/2022
3/31/2022
12/31/2021
9/30/2021
6/30/2021
Shareholders' equity / total assets
8.8
%
9.5
%
10.8
%
10.6
%
10.9
%
Gross loans / deposits
70.9
%
69.2
%
71.5
%
75.9
%
77.3
%
Noninterest-bearing deposits / total
deposits
39.3
%
38.6
%
39.0
%
39.4
%
38.7
%
CONSOLIDATED INCOME STATEMENT
(Dollars in Thousands, Unaudited)
For the three months
ended:
For the six months
ended:
6/30/2022
3/31/2022
6/30/2021
6/30/2022
6/30/2021
Interest income
$
28,206
$
26,081
$
28,092
$
54,287
$
57,550
Interest expense
1,621
1,325
903
2,945
1,806
Net interest income
26,585
24,756
27,189
51,342
55,744
Provision / (benefit) for credit losses on
loans and leases
2,548
600
(2,100
)
3,148
(1,850
)
Benefit for credit losses on unfunded loan
commitments
(147
)
(94
)
-
(241
)
-
Provision for credit losses on
held-to-maturity securities
18
-
-
18
-
Net interest income after provision
24,166
24,250
29,289
48,417
57,594
Service charges
3,204
3,040
2,725
6,245
5,491
BOLI (expense) income
(582
)
(645
)
814
(1,228
)
1,397
Gain on sale of investments
-
1,032
-
1,032
-
Other noninterest income
7,817
2,636
3,073
10,453
6,554
Total noninterest income
10,439
6,063
6,612
16,502
13,442
Salaries and benefits
11,745
11,805
10,425
23,550
21,576
Occupancy expense
2,406
2,294
2,626
4,699
5,112
Other noninterest expenses
7,962
6,074
7,184
14,037
13,818
Total noninterest expense
22,113
20,173
20,235
42,286
40,506
Income before taxes
12,492
10,140
15,666
22,633
30,530
Provision for income taxes
3,288
2,733
3,958
6,022
7,744
Net income
$
9,204
$
7,407
$
11,708
$
16,611
$
22,786
TAX DATA
Tax-exempt muni income
$
1,854
$
1,726
$
1,517
$
3,581
$
2,967
Interest income - fully tax equivalent
$
28,699
$
26,540
$
28,495
$
55,239
$
58,339
PER SHARE DATA
(Unaudited)
For the three months
ended:
For the six months
ended:
6/30/2022
3/31/2022
6/30/2021
6/30/2022
6/30/2021
Basic earnings per share
$
0.62
$
0.49
$
0.77
$
1.11
$
1.49
Diluted earnings per share
$
0.61
$
0.49
$
0.76
$
1.10
$
1.48
Common dividends
$
0.23
$
0.23
$
0.21
$
0.46
$
0.42
Weighted average shares outstanding
14,931,701
15,021,138
15,243,698
14,976,774
15,242,451
Weighted average diluted shares
15,004,017
15,120,990
15,375,825
15,063,804
15,365,966
Book value per basic share (EOP)
$
19.82
$
21.59
$
23.21
$
19.82
$
23.21
Tangible book value per share (EOP)
$
17.82
$
19.58
$
21.19
$
17.82
$
21.19
Common shares outstanding (EOP)
15,090,792
15,086,032
15,410,763
15,090,792
15,410,763
KEY FINANCIAL RATIOS
(Unaudited)
For the three months
ended:
For the six months
ended:
6/30/2022
3/31/2022
6/30/2021
6/30/2022
6/30/2021
Return on average equity
11.68
%
8.64
%
13.29
%
10.10
%
13.11
%
Return on average assets
1.07
%
0.88
%
1.42
%
0.98
%
1.41
%
Net interest margin (tax-equivalent)
3.40
%
3.21
%
3.60
%
3.31
%
3.76
%
Efficiency ratio (tax-equivalent)(1)
59.19
%
67.08
%
58.79
%
62.70
%
57.57
%
Net charge offs (recoveries) to avg loans
(not annualized)
0.11
%
0.09
%
(0.01
)%
0.20
%
(0.02
)%
(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)
6/30/2022
3/31/2022
6/30/2021
Total stockholders' equity
$
299,047
$
325,691
$
357,729
Less: goodwill and other intangible
assets
30,126
30,379
31,137
Tangible common equity
$
268,921
$
295,312
$
326,592
Total assets
$
3,396,635
$
3,418,854
$
3,272,048
Less: goodwill and other intangible
assets
30,126
30,379
31,137
Tangible assets
$
3,366,509
$
3,388,475
$
3,240,911
Common shares outstanding
15,090,792
15,086,032
15,410,763
Book value per common share
$
19.82
$
21.59
$
23.21
Tangible book value per common share
$
17.82
$
19.58
$
21.19
Equity ratio - GAAP (total stockholders'
equity / total assets
8.80
%
9.53
%
10.93
%
Tangible common equity ratio (tangible
common equity / tangible assets)
7.99
%
8.72
%
10.08
%
NONINTEREST INCOME/EXPENSE
(Dollars in Thousands, Unaudited)
For the three months
ended:
For the six months
ended:
Noninterest income:
6/30/2022
3/31/2022
6/30/2021
6/30/2022
6/30/2021
Service charges on deposit accounts
$
3,204
$
3,040
$
2,725
$
6,245
$
5,491
Debit card fees
2,161
2,056
2,235
4,218
—
Bank-owned life insurance
(582
)
(645
)
814
(1,228
)
1,397
Other service charges and fees
732
696
993
1,462
5,611
Gain on sale of securities
—
1,032
—
1,032
—
Loss on tax credit investment
(113
)
(113
)
(114
)
—
—
Other
5,037
(3
)
(41
)
4,773
943
Total noninterest income
$
10,439
$
6,063
$
6,612
$
16,502
$
13,442
As a % of average interest earning assets
(1)
1.31
%
0.77
%
0.86
%
1.04
%
0.89
%
Noninterest expense:
Salaries and employee benefits
$
11,745
$
11,805
$
10,425
$
23,550
$
21,576
Occupancy costs
Furniture & equipment
511
454
453
964
905
Premises
1,895
1,840
2,173
3,735
4,207
Advertising and marketing costs
449
406
292
855
612
Data processing costs
1,525
1,485
1,513
3,010
2,939
Deposit services costs
2,417
2,245
2,282
4,662
4,350
Loan services costs
Loan processing
186
111
65
297
234
Foreclosed assets
92
(5
)
(10
)
87
98
Other operating costs
Telephone & data communications
377
444
668
821
1,048
Postage & mail
223
56
109
279
193
Other
1,447
419
337
1,868
799
Professional services costs
Legal & accounting services
673
546
682
1,219
1,125
Other professional service
259
143
1,004
402
1,899
Stationery & supply costs
116
85
73
201
151
Sundry & tellers
198
139
169
336
370
Total noninterest expense
$
22,113
$
20,173
$
20,235
$
42,286
$
40,506
As a % of average interest earning assets
(1)
2.78
%
2.57
%
2.64
%
2.67
%
2.68
%
Efficiency ratio (2)(3)
59.19
%
67.08
%
58.79
%
62.70
%
57.58
%
(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
June 30, 2022
March 31, 2022
June 30, 2021
Average Balance(1)
Income/ Expense
Yield/ Rate(2)
Average Balance(1)
Income/ Expense
Yield/ Rate(2)
Average Balance(1)
Income/ Expense
Yield/ Rate(2)
Assets
Investments:
Federal funds sold/interest-earning due
from's
$
146,287
$
270
0.74
%
$
194,846
$
93
0.19
%
$
308,453
$
85
0.11
%
Taxable
752,693
4,477
2.39
%
744,599
3,490
1.90
%
340,690
1,573
1.85
%
Non-taxable
284,198
1,854
3.31
%
294,409
1,726
3.01
%
243,461
1,517
3.16
%
Total investments
1,183,178
6,601
2.40
%
1,233,854
5,309
1.90
%
892,604
3,175
1.61
%
Loans and leases: (3)
Real estate
1,844,367
19,659
4.28
%
1,753,394
18,326
4.24
%
1,825,600
21,015
4.62
%
Agricultural production
30,466
232
3.05
%
33,986
302
3.60
%
43,959
408
3.72
%
Commercial
80,533
980
4.88
%
97,127
1,398
5.84
%
166,554
2,124
5.12
%
Consumer
4,264
207
19.47
%
4,448
206
18.78
%
4,978
193
15.55
%
Mortgage warehouse lines
49,884
493
3.96
%
61,255
510
3.38
%
142,348
1,151
3.24
%
Other
2,354
34
5.79
%
1,485
30
8.19
%
1,460
26
7.14
%
Total loans and leases
2,011,868
21,605
4.31
%
1,951,695
20,772
4.32
%
2,184,899
24,917
4.57
%
Total interest earning assets (4)
3,195,046
$
28,206
3.60
%
3,185,549
$
26,081
3.38
%
3,077,503
$
28,092
3.71
%
Other earning assets
15,628
15,679
15,438
Non-earning assets
239,803
210,724
209,218
Total assets
$
3,450,477
$
3,411,952
$
3,302,159
Liabilities and shareholders'
equity
Interest-bearing deposits:
Demand deposits
$
221,322
$
120
0.22
%
$
202,962
$
106
0.21
%
$
161,871
$
91
0.23
%
NOW
542,915
82
0.06
%
546,280
82
0.06
%
601,339
116
0.08
%
Savings accounts
480,654
70
0.06
%
467,700
67
0.06
%
424,512
59
0.06
%
Money market
155,574
23
0.06
%
151,339
23
0.06
%
139,336
30
0.09
%
Time deposits
295,850
441
0.60
%
293,684
234
0.32
%
337,270
262
0.30
%
Wholesale brokered deposits
60,000
48
0.32
%
60,000
48
0.32
%
92,418
61
0.26
%
Total interest-bearing deposits
1,756,315
784
0.18
%
1,721,965
560
0.13
%
1,756,746
619
0.14
%
Borrowed funds:
Other interest-bearing liabilities
112,586
77
0.27
%
105,238
82
0.31
%
61,186
39
0.26
%
Long-term debt
49,160
430
3.51
%
49,143
428
3.53
%
—
—
0.00
%
Subordinated debentures
35,365
330
3.74
%
35,320
255
2.93
%
35,185
245
2.79
%
Total borrowed funds
197,111
837
1.70
%
189,701
765
1.64
%
96,371
284
1.18
%
Total interest-bearing liabilities
1,953,426
1,621
0.33
%
1,911,666
1,325
0.28
%
1,853,117
903
0.20
%
Demand deposits - noninterest-bearing
1,132,601
1,093,709
1,052,494
Other liabilities
48,458
59,026
43,095
Shareholders' equity
315,992
347,551
353,453
Total liabilities and shareholders'
equity
$
3,450,477
$
3,411,952
$
3,302,159
Interest income/interest earning
assets
3.60
%
3.38
%
3.71
%
Interest expense/interest earning
assets
0.20
%
0.17
%
0.11
%
Net interest income and margin
(5)
$
26,585
3.40
%
$
24,756
3.21
%
$
27,189
3.60
%
(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 $0.4 million and $1.0 million for the
quarters ended June 30, 2022 and 2021, respectively, and $0.4
million for the quarter ended March 31, 2022.
(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)
For the six months
ended
For the six months
ended
June 30, 2022
June 30, 2021
Average Balance (1)
Income/ Expense
Yield/ Rate (2)
Average Balance (1)
Income/ Expense
Yield/ Rate (2)
Assets
Investments:
Interest-earning due from banks
$
170,432
$
363
0.43
%
$
193,120
$
104
0.11
%
Taxable
756,061
7,966
2.12
%
329,029
3,150
1.93
%
Non-taxable
281,882
3,581
3.24
%
235,204
2,967
3.22
%
Total investments
1,208,375
11,910
2.15
%
757,353
6,221
1.87
%
Loans and leases:(3)
Real estate
$
1,799,132
$
37,984
4.26
%
$
1,852,330
$
42,407
4.62
%
Agricultural
32,216
534
3.34
%
45,050
827
3.70
%
Commercial
88,784
2,378
5.40
%
179,036
4,575
5.15
%
Consumer
4,355
413
19.12
%
5,199
389
15.09
%
Mortgage warehouse lines
55,538
1,003
3.64
%
192,329
3,078
3.23
%
Other
1,922
65
6.82
%
1,523
53
7.02
%
Total loans and leases
1,981,947
42,377
4.31
%
2,275,467
51,329
4.55
%
Total interest earning assets (4)
3,190,322
54,287
3.49
%
3,032,820
57,550
3.88
%
Other earning assets
15,654
14,363
Non-earning assets
225,345
205,187
Total assets
$
3,431,321
$
3,252,370
Liabilities and shareholders'
equity
Interest-bearing deposits:
Demand deposits
$
212,193
$
226
0.21
%
$
146,403
$
164
0.23
%
NOW
544,589
164
0.06
%
585,344
217
0.07
%
Savings accounts
474,213
137
0.06
%
407,894
112
0.06
%
Money market
153,469
46
0.06
%
137,887
60
0.09
%
Time deposits
294,773
675
0.46
%
374,636
551
0.30
%
Brokered deposits
60,000
96
0.32
%
96,188
123
0.26
%
Total interest-bearing deposits
1,739,237
1,344
0.16
%
1,748,352
1,227
0.14
%
Borrowed funds:
Other interest-bearing liabilities
108,932
159
0.29
%
62,312
86
0.28
%
Long-term debt
49,152
857
3.52
%
—
—
—
Subordinated debentures
35,342
585
3.34
%
35,164
493
2.83
%
Total borrowed funds
193,426
1,601
1.67
%
97,476
579
1.20
%
Total interest-bearing liabilities
1,932,663
2,945
0.31
%
1,845,828
1,806
0.20
%
Demand deposits – noninterest-bearing
1,113,262
1,015,023
Other liabilities
53,712
41,156
Shareholders' equity
331,684
350,363
Total liabilities and shareholders'
equity
$
3,431,321
$
3,252,370
Interest income/interest earning
assets
3.49
%
3.88
%
Interest expense/interest earning
assets
0.18
%
0.12
%
Net interest income and
margin(5)
$
51,342
3.31
%
$
55,744
3.76
%
(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 $2.4 million for the six
months ended June 30, 2022 and 2021, respectively.
(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.
Category: Financial Source: Sierra Bancorp
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220725005109/en/
Kevin McPhaill, President/CEO (559) 782‑4900 or (888) 454‑BANK
www.sierrabancorp.com
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