July 24, 2023
Porterville, Calif. – (Business Wire) – 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, 2023. Sierra Bancorp reported consolidated net income of $9.9 million, or $0.67 per diluted share, for the second quarter of 2023, compared to $9.2 million, or $0.61 per diluted share, in the second quarter of 2022. On a linked-quarter (three months ended March 31, 2023) basis, the Company increased diluted earnings per share by $0.09, or 15%.
Highlights for the second quarter of 2023:
- Net Income of $9.9 million, up 13% versus the first quarter of 2023 (the prior linked quarter)
- Increased Return on Average Assets to 1.07% from 0.97% in the prior linked quarter
- Higher Return on Average Equity of 13.06% compared to 11.53% in the prior linked quarter
- Improved net interest income by $0.2 million as compared to the prior linked quarter
Solid Asset Quality
- Total Nonperforming Loans of $1.1 million, or 0.05% of total gross loans
- No foreclosed assets at June 30, 2023
- Net Charge-offs remained low at $0.2 million
- Stable Allowance for Credit Losses on loans of $23.0 million
Stable Deposits & Liquidity
- Overall primary and secondary liquidity sources increased slightly to $2.59 billion at June 30, 2023
- Total deposits declined by 1% during the quarter, but increased by $72.6 million, or 3% year-to-date
- Noninterest-bearing deposits increased by $24.8 million and represent 37% of total deposits
- Uninsured deposits declined from 30% to 27% of total deposit balances during the quarter
Strong Capital and Solid Asset Growth
- Record level of Total Assets at $3.76 billion, up 2% from prior linked quarter and 4% year-to-date
- Maintained a diversified investment portfolio designed for interest rate risk management and liquidity
- Total Loans grew by $60.4 million, or 3% during the quarter
- Repurchased 235,148 shares of stock during the quarter
- Tangible Book Value per share increased by 3% to $18.93 per share at June 30, 2023
- Strong regulatory Community Bank Leverage Ratio of 10.86% for our subsidiary Bank
- Tangible Common Equity Ratio of 7.5% on a consolidated basis and 9.3% for our subsidiary bank
Dividend declared of $0.23 per share, payable on August 14, 2023
“Success isn’t always about greatness. It’s about consistency. Consistent hard work leads to success.
Greatness will come.” – Dwayne Johnson
“Our community-centric approach to banking has benefitted the Bank and our customers for more than 45 years,” stated Kevin McPhaill, CEO and President. “We regularly evaluate our strategic plan based on market trends and always focus on maintaining strong fundamentals in our business. This approach helped us finish the second quarter strong with improved earnings including higher net interest income, good loan growth, stable deposit balances, higher capital, and continued strong asset quality. We are proud of our entire team working together to provide our customers with exceptional service that led to our solid performance during the second quarter. The strength and power of community-focused banking gives us great reasons to be excited about our opportunities for continued growth in the second half of 2023,” concluded Mr. McPhaill.
For the first six months of 2023, the Company recognized net income of $18.7 million, or $1.26 per diluted share, as compared to $16.6 million, or $1.10 per diluted share, for the same period in 2022. The Company’s improved financial performance metrics for the first half of 2023 include an annualized return on average equity of 12.30%, a return on average assets of 1.02%, and net interest margin of 3.43%, as compared to an annualized return on average equity of 10.10%, a return on average assets of 0.98%, and a net interest margin of 3.31% for the same period in 2022.
Quarterly Income Changes (comparisons to the second quarter of 2022)
- Net income increased by $0.7 million, or 8%, to $9.9 million due to higher net interest income and a decrease in provision for credit losses partially offset by lower noninterest income and higher expenses.
- The $1.7 million, or 7%, increase in net interest income is due to an $12.7 million increase in interest income partially offset by an $10.9 million increase in interest expense. There was an increase in investment securities which contributed $10.0 million to the favorable interest income variance. This increase in investments primarily consisted of floating rate collateralized loan obligations (CLOs), which contributed to $7.3 million, or 57.5%, of the interest income favorable variance, partially offset by an unfavorable increase in interest expense due to a shift of deposit balances into higher cost time certificates and an increase in borrowed funds.
- Noninterest income decreased $2.4 million primarily from nonrecurring gains on the sale of other assets in the second quarter of 2022.
- Asset quality improved as demonstrated by a significant decline in non-performing assets to gross loans plus foreclosed assets. This ratio fell to 0.05% at June 30, 2023, from 1.47% at the same period in 2022. Nonperforming assets declined substantially from $29.7 million at June 30, 2022, to $1.1 million at June 30, 2023, a decline of 96%.
- Provision for credit losses declined by $2.5 million. The provision for credit losses for loans and leases was favorably impacted by an improvement in the qualitative reserve rate component as well as continued lower charge-offs.
- Liquidity continues to be substantial with the primary liquidity ratio at 32.2% and $2.6 billion in overall available liquidity at June 30, 2023. Further, overall deposits continued to increase with an additional 2.6% added in the first half of 2023.
- All capital ratios were above the regulatory requirements for a well-capitalized institution. The Community Bank Leverage ratio was 10.03% consolidated and 10.86% for the Bank.
- Sierra Bancorp repurchased 235,148 shares totaling $3.8 million in the second quarter of 2023.
- Our Board of Directors declared a cash dividend of $0.23 per share on July 20, 2023. This is the 98th consecutive quarterly dividend paid by Sierra Bancorp. The cash dividend is payable on August 14, 2023, to shareholders of record at the close of business on July 31, 2023.
Linked Quarter Income Changes (comparisons to the three months ended March 31, 2023)
- Net income improved by $1.2 million, or 13%, driven mostly by a $1.4 million increase in noninterest income, augmented by favorable changes in the provision for credit losses. Noninterest income increased by $1.4 million due to increased service charges on deposit accounts for $0.3 million, a gain on the sale of investments taking advantage of temporary favorable movements in the yield curve for $0.4 million, and a positive variance on BOLI income for $0.5 million tied to our nonqualified deferred compensation plan.
- There was a benefit for credit losses of $0.1 million which is down $0.3 million over the linked quarter due mostly to lower charge-offs in the second quarter and an improvement in the quantitative reserve rate component of the allowance for credit losses.
Year to-Date Income Changes (comparisons to the first six-months of 2022)
- Net income increased by $2.1 million, or 12%, due mostly to a $2.7 million decrease in the provision for credit losses, as well as higher net interest income on a change in mix of average earning assets, partially offset by lower noninterest income and higher noninterest expense.
- The provision for credit losses was $0.2 million, a decrease of $2.7 million, due to lower net charge-offs.
- Net interest income increased by $5.1 million, or 10%, due mostly to the change in mix of interest earning assets with both average loan and investment balances increasing. Partially offsetting the benefit from increased earning asset balances, the cost of interest-bearing liabilities was higher due to increases in index rates on certain floating rate liabilities.
- Noninterest income decreased $1.9 million, or 12%, for the same reasons as noted above in the quarterly comparison, combined with a $1.0 million gain on the sale of investment securities in 2022, partially offset by a $2.0 million positive variance in BOLI income tied to our nonqualified deferred compensation plan.
Balance Sheet Changes (comparisons to December 31, 2022)
- Total assets increased $153.9 million, or 4.3%, to $3.8 billion primarily due to increases in investment securities, mortgage warehouse and commercial and industrial loans. Deposits increased by $72.6 million, or 3%. The growth in deposits came primarily from higher-cost time deposits and brokered deposits. Noninterest bearing or low-cost transaction and savings accounts decreased $135.2 million.
- Gross loans increased $41.5 million, or 2%, due mostly to a $45.2 million increase in mortgage warehouse loans and a $18.6 million increase in commercial and industrial loans. These increases were offset by a $25.4 million decrease in real estate loans. Organic loan production for the first half of 2023 was $89.6 million, a 37% decrease, as compared to $142.1 million for the comparative period in 2022. The current interest rate environment is slowing loan demand and creating competitive pressures on new credits.
- Investment securities increased $84.2 million, or 7%, mostly in variable rate collateralized loan obligations.