Sierra Bancorp Reports First Quarter 2024 Results

April 22, 2024

Porterville, Calif. – (Business Wire) – Sierra Bancorp (Nasdaq: BSRR), parent of Bank of the Sierra, today announced its unaudited financial results for the quarter ended March 31, 2024. Sierra Bancorp reported consolidated net income of $9.3 million, or $0.64 per diluted share, for the first quarter of 2024 compared to $8.8 million, or $0.58 per diluted share, in the first quarter of 2023. The favorable variance in net income came largely from a $0.6 million increase in net interest income due mostly to a $0.7 million decline in other borrowing costs as a result of the strategic balance sheet restructuring during the quarter. The Company’s return on average assets and return on average equity was 1.06% and 11.09%, respectively, in the first quarter of 2024 as compared to 0.97% and 11.53%, respectively, in the first quarter of 2023.

Highlights for the first quarter of 2024:

• Improved Earnings
• Net Income of $9.3 million, up 48% versus the fourth quarter of 2023 (the prior linked quarter).
• Improved Return on Average Assets to 1.06% from 0.67% in the prior linked quarter.
• Increased Return on Average Equity to 11.09% from 8.03% in the prior linked quarter.
• Improved Net Interest Margin to 3.62% from 3.31% in the prior linked quarter.
• Solid Asset Quality
• Total Nonperforming Assets at 0.66% of total gross loans.
• Provision for loan loss of $0.1 million, a reduction of $3.5 million from the prior linked quarter.
• Regulatory Commercial Real Estate concentration ratio of 248%, and a 13% decline in total commercial real estate the past three years.
• Loan and Deposit Growth
• Loan growth of $66.8 million, or 13% annualized, during the first quarter of 2024.
• Total deposits increased by $85.8 million, or 12% annualized, during the first quarter of 2024.
• Noninterest-bearing deposits of $969.0 million at March 31, 2024, represent 34% of total deposits.
• Uninsured deposits are approximately 28% of total deposit balances.
• Strong Capital and Liquidity
• Increased Tangible Book Value (non-GAAP) per share by 3% to $21.61 per share during the quarter.
• Strong regulatory Community Bank Leverage Ratio of 11.6% for our subsidiary bank.
• Tangible Common Equity Ratio (non-GAAP) of 9.0% on a consolidated basis and 10.6% for our subsidiary bank.
• Repurchased 178,937 shares of stock during the quarter.
• Dividend declared of $0.23 per share, payable on May 13, 2024.
• Overall primary and secondary liquidity sources of $2.5 billion at March 31, 2024.
• Completion of Balance Sheet Restructuring to Improve Future Earnings
• Completed initial sale of $196.7 million in investments in early January 2024.
• Bonds sold had a weighted average yield of 2.61%.
• Proceeds from bond sale were used to pay down short-term borrowings.
• Sold an additional $53.9 million in bonds in late March 2024.
• Bonds sold had a weighted average yield of 3.02%.
• Proceeds from bond sale will be used to fund anticipated loan growth.

“Each fresh peak ascended teaches something.” – Sir Martin Conway

“Our first quarter results demonstrate our strength and commitment to banking fundamentals coupled with strategic repositioning, especially in this challenging rate environment that continues to affect the banking industry,” stated Kevin McPhaill, CEO and President. “Following the completion of our balance sheet restructuring last quarter, our return on assets and net interest margin both showed strong improvement this quarter. In addition, both our capital and liquidity positions strengthened. We also grew outstanding loans by 3.2% during the quarter while maintaining strong total and low-cost deposits. This is a direct result of the efforts of our banking team! Our bankers continue to understand the importance of relationship-based community banking and we are grateful for our loyal customers and communities. We are excited for the opportunities ahead in 2024 and beyond!” McPhaill concluded.

Quarterly Changes (comparisons to the first quarter of 2023)

• Net income for the first quarter of 2024 increased $0.6 million, or 7%, to $9.3 million due primarily to an increase in net interest income of $0.6 million. Additionally, the favorable change in the credit loss expense on loans and improvements in noninterest income, was mostly offset by higher noninterest expenses.
• The $0.6 million increase in net interest income for the quarter was driven by a 15 basis point increase in the net interest margin due to higher yields on investments and lower costs of borrowings, partially offset by higher deposit costs.
• Noninterest income for the first quarter of 2024 as compared to the same period in 2023 increased $2.0 million or 31%. There was a favorable variance of $1.0 million in bank owned life insurance (BOLI), a gain on the sale/leaseback of two bank owned branch buildings for $3.8 million, increases in service charges and fees on deposit accounts for $0.3 million or 6%, offset by a loss on the sale of bonds from a balance sheet restructure for $3.0 million.

Linked Quarter Changes (comparisons to the three months ended December 31, 2023)

• Net income increased by $3.0 million, or 48%, driven mostly by a $3.4 million decline in the provision for credit losses. The higher provision for credit losses in the three months ended December 31, 2023, was due to a $2.3 million charge-off related to commercial real estate.
• Net interest income increased by $0.8 million, or 3%, during the quarter due mostly to higher yields on investments and lower costs of borrowing due to the strategic balance sheet restructuring, as well as growth in mortgage warehouse loan income. These favorable variances were partially offset by higher deposit costs.
• Other expenses were $0.4 million higher in the quarter due mostly to higher deferred directors fee expense of $0.8 million (which was offset by higher BOLI income).

Balance Sheet Quarterly Changes (comparisons to December 31, 2023)

• Total assets decreased $176.7 million, or 5% to $3.6 billion, during the first three months of 2024, due mostly to a strategic sale of lower yielding investment securities, with funds received used to paydown higher cost borrowings.
• Gross loans increased $66.8 million due to a $87.6 million increase in mortgage warehouse line utilization.
• Deposits increased by $85.8 million, or 3%. The growth in deposits came from brokered deposits, as overall customer deposits decreased $50.9 million.