Sierra Bancorp Announces Record Quarterly Earnings
October 19, 2020
Porterville, CA – October 16, 2020 — Sierra Bancorp (Nasdaq: BSRR), parent of Bank of the Sierra, today announced third quarter of 2020 net income of $10.4 million, or $0.67 per diluted share, compared to net income of $9.0 million, or $0.58 per diluted share, in the third quarter of 2019. The Company’s return on average assets decreased slightly to 1.34% in the third quarter of 2020, as compared to 1.36% in the third quarter of 2019, however return on average equity increased to 12.34% from 11.78%, for the same comparative periods. The increase in net income is driven primarily by higher net interest income on higher loan balances and higher noninterest income, partially offset by a higher provision for loan and lease losses and noninterest expense.
For the first nine months of 2020, the Company recognized net income of $26.5 million, or $1.72 per diluted share, as compared to $26.7 million, or $1.73 per diluted share, for the same period in 2019.
“Our potential is one thing. What we do with it is quite another.”
– Dr. Angela Duckworth
“As we continue to navigate these challenging times, we are very proud to serve our communities as demonstrated by our continued strong loan growth,” stated Kevin McPhaill, President and CEO. “This robust loan growth coupled with a continued focus on efficiency resulted in record high earnings. During these unique times, our foundation as a community bank drives our bankers to find new ways to continue to meet our customers’ needs. The coming months will bring further challenges, but we are determined to use them as opportunities to help our communities, customers, and employees succeed.” McPhaill concluded.
Quarterly Changes (comparisons to the third quarter of 2019)
- The $3.7 million increase in net interest income is due to a $1.1 million increase in interest income due mostly to higher loan volumes partially offset by lower rates and lower interest expense, as well as a $2.6 million decrease in interest expense due to an increase in noninterest bearing deposits and lower rates on the remaining deposits.
- The provision for loan & lease losses was $1.0 million higher due to the increase in core loan volume and relative uncertainty in the economy.
- The $1.2 million favorable increase in noninterest income is due to a $0.8 million gain from the disposal of a low-income housing tax credit fund investment, and a $0.7 million increase in bank-owned life insurance (BOLI) income. These increases were partially offset by a $0.3 million decline in customer service charges.
- Noninterest expense increased by $2.2 million, due mostly to a $1.1 million increase in salaries, a $0.4 million increase in foreclosed asset expenses, and a $0.5 million increase in director’s deferred compensation.
Year to-Date Changes (comparisons to the first nine-months of 2019)
- Net income was relatively flat with a $0.2 million net decline, or less than 1%. The most significant line item changes were a $4.3 million increase in the provision for loan and lease losses, partially offset by a $3.5 million increase in net interest income due to higher loan balances and a favorable deposit mix.
- Noninterest income increased by $2.5 million, or 14%, due in part to the third quarter changes described above in the quarterly comparison, but also because of a second quarter $0.7 million gain from the disposal of a tax credit fund investment and a second quarter $0.4 million gain from the sale of debt securities.
- Noninterest expense increased $2.6 million, or 5% due mostly to the increases previously discussed in noninterest expense for the quarterly comparison.
Balance Sheet Changes (comparisons to December 31, 2019)
- Total assets increased by $605.8 million, or 23%, to $3.2 billion, during the first nine months of the year.
- Year-to-date 2020 loan growth of $611.8 million, or 35%, was highlighted by a $437.8 million increase in non-agricultural real estate loans, as well as a $98.4 million increase in mortgage warehouse lines, and $123.6 million of Paycheck Protection Program (PPP) loans.
- Deposits increased by $423.3 million, or 20% during 2020. The growth in deposits came primarily from noninterest bearing or low-cost transaction and savings accounts, while higher-cost time deposits decreased.
Other interest bearing liabilities increased $149.1 million as we utilized overnight FHLB borrowings to partially fund loan growth in 2020, including PPP loans and increased utilization of mortgage warehouse lines.