October 24, 2022
Porterville, Calif. – (Business Wire) – Sierra Bancorp (Nasdaq: BSRR), parent of Bank of the Sierra, today announced its unaudited financial results for the three-and nine-month periods ended September 30, 2022. Sierra Bancorp reported consolidated net income of $9.9 million, or $0.66 per diluted share, for the third quarter of 2022, compared to $10.6 million, or $0.69 per diluted share in the third quarter of 2021. On a linked-quarter basis, the Company increased net income by $0.7 million, or 8%.
For the first nine months of 2022, the Company recognized net income of $26.5 million, or $1.76 per diluted share, as compared to $33.4 million, or $2.17 per diluted share, for the same period in 2021. The year-over-year change is due primarily to a $4.4 million provision for credit losses in 2022 as compared to a net release of allowance in 2021. The Company’s financial performance metrics for the first nine months of 2022 include an annualized return on average assets and a return on average equity of 1.03% and 10.98%, respectively, compared to 1.36% and 12.60%, respectively, for the same period in 2021.
“If people like you, they’ll listen to you, but if they trust you, they’ll do business with you.” – Zig Ziglar
“Banking is a critical part of our economy, locally and globally,” stated Kevin McPhaill, President and CEO. “At Bank of the Sierra, we understand this importance and are committed to providing financial services and solutions to individuals, businesses and other organizations in our communities throughout the entire economic cycle. With the dedication and drive from our legacy market and new lending teams, we are seeing great traction in obtaining new lending relationships throughout our markets. We are also experiencing solid deposit growth – a hallmark of our bank’s success – while maintaining nearly 39% of our deposit base in non-interest bearing accounts. The bank remains focused on this important part of community banking as our treasury management services and team expand. Looking to the fourth quarter and beyond, we have worked to position the bank for additional growth opportunities – it is an exciting time indeed!” McPhaill concluded.
Quarterly Changes (comparisons to the third quarter of 2021)
- Net income decreased $0.7 million to $9.9 million. Net interest income was $2.2 million higher due to an increase in margin and growth in earning assets. This positive net interest income variance was offset by the net negative impact of the Company’s deferred compensation plan and related on-balance sheet funding through bank-owned life insurance of $0.6 million, as well as an unfavorable change in provision for credit losses on loans of $1.8 million.
- Net interest income increased $2.2 million. We had a 17 basis point increase in net interest margin coupled with a $120 million increase in average earning assets.
- Noninterest income decreased $0.9 million or 12% primarily due to a $1.1 million decrease in bank-owned life insurance as previously mentioned.
- The provision for credit losses on loans and leases was $1.2 million under the new current expected credit losses (“CECL”) methodology, as compared to a benefit of $0.6 million under the incurred loss model in the same quarter of 2021.
- All capital ratios remain well above the regulatory requirements for a well-capitalized institution. The Community Bank Leverage ratio was 11.54% for Bank of the Sierra. The Sierra Bancorp Tier I leverage ratio was 10.45%.
Linked Quarter Changes (comparisons to the three months ended June 30, 2022)
- Net income improved by $0.7 million, or 8%. Factors impacting this improvement include a $1.1 million decrease in noninterest expense, and a $3.4 million increase in net interest income after the provision for credit losses, offset by a $3.8 million decrease in noninterest income as further described below. The increase in net interest income was driven by higher average earning assets and a 40 basis point increase in the yield on earning assets, partially offset by a 27 basis point increase in the cost of interest-bearing liabilities.
- Noninterest income decreased by $3.8 million, or 37%, due primarily to the sale of other assets in the second quarter of 2022 with no like sales in the third quarter of 2022.
- The provision for credit losses on loans and leases decreased $1.3 million to $1.2 million due mostly to charge-offs in the second quarter as the overall quantitative and qualitative components of the allowance for credit losses remained relatively consistent with the prior quarter, although there were mostly offsetting adjustments within the qualitative components of the calculation.
- Noninterest expense decreased $1.1 million, or 5%, mostly in other operating expense, due to a $0.7 million increase in other expense due to a proactive approach taken in the second quarter of 2022, due to FDIC supervisory guidance addressing certain consumer compliance risks associated with the treatment of non-sufficient fund charges on representments.