Sierra Bancorp Reports Improved Financial Results For Second Quarter And First Six Months Of 2024

July 22, 2024

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, 2024. Sierra Bancorp reported consolidated net income of $10.3 million, or $0.71 per diluted share, for the second quarter of 2024, compared to $9.9 million, or $0.67 per diluted share, in the second quarter of 2023. On a linked-quarter (three months ended March 31, 2024) basis, the Company reported an increase of $0.9 million, or 10%, in net income.

Highlights for the second quarter of 2024:

Improved Earnings

Diluted Earnings per Share increased 11%, or $0.07, from the prior linked quarter.
Increased Return on Average Assets to 1.14%, from 1.06%, in the prior linked quarter.
Higher Return on Average Equity of 11.95%, compared to 11.09%, in the prior linked quarter.
Improved net interest income by $1.5 million, or 5%, as compared to the prior linked quarter.
Net interest margin grew by 7 basis points from the prior linked quarter to 3.69%.

Strong Asset Quality

Total Nonperforming Loans to total gross loans declined 56% to 0.29% at June 30, 2024.
No foreclosed assets at June 30, 2024.
Regulatory Commercial Real Estate concentration ratio of 241%, and a 10% decline in total commercial real estate loan balances the past three years.
No non-owner occupied commercial real estate loans are on nonaccrual status as of June 30, 2024.
Delinquencies remained low at 0.14% of total loans.

Asset and Deposit Growth

Total assets increased $128.1 million, or 14% annualized, during the quarter, to $3.7 billion.
Loan growth of $77.7 million, or 14% annualized, during the quarter, to $2.2 billion.
Total deposits increased by $95.4 million, or 13% annualized, during the quarter, to $2.9 billion.
Noninterest-bearing deposits of $986.9 million at June 30, 2024, represent 34% of total deposits.

Solid Capital and Liquidity

Increased Tangible Book Value (non-GAAP) per share by 3%, to $22.24 per share during the quarter.
Repurchased 178,168 shares of stock during the quarter.
Raised dividend by $0.01 for the quarter to $0.24 per share, payable on August 15, 2024.
Strong regulatory Community Bank Leverage Ratio of 11.6%, at June 30, 2024, for our subsidiary Bank.
Tangible Common Equity Ratio (non-GAAP) of 8.8%, at June 30, 2024, on a consolidated basis.
Overall primary and secondary liquidity sources of $2.5 billion at June 30, 2024.

“In any team sport, the best teams have consistency and chemistry.” – Roger Staubach

“We are excited to share our strong second quarter results! The solid improvements achieved in the past two quarters demonstrate our balanced commitment to both our communities and shareholders as we complement growth with a focus on balance sheet strategy in a challenging interest rate environment,” stated Kevin McPhaill, CEO and President. “Our expanding and diversified banking teams continue to strengthen existing customer relationships while also bringing new relationships to the Bank. We are proud of our results for the first half of 2024 and believe that building this foundation will enable us to continue providing both exemplary service to our customers and strong and consistent returns for our shareholders,” concluded Mr. McPhaill.

For the first six months of 2024, the Company recognized net income of $19.6 million, or $1.35 per diluted share, as compared to $18.7 million, or $1.26 per diluted share, for the same period in 2023, a 5% increase. The Company’s improved financial performance metrics for the first half of 2024 include a return on average assets of 1.10%, and net interest margin of 3.66%, as compared to a return on average assets of 1.02%, and a net interest margin of 3.43% for the same period in 2023.

Quarterly Income Changes (comparisons to the second quarter of 2023)

Net income increased by $0.3 million, or 3%, to $10.3 million due to higher net interest income and lower noninterest expenses partially offset by an increase in the provision for credit losses, and lower noninterest income.
The $1.9 million, or 7%, increase in net interest income was driven by a 30 basis points increase in net interest margin. A $180.9 million decrease in other borrowed funds due to the bond sale and restructuring in early 2024 along with higher loan yields were the primary drivers of the net interest margin increase.
Noninterest income decreased $0.4 million, primarily from nonrecurring gains on the sale of investments in the second quarter of 2023.
Noninterest expense improved due to a strategic internal reorganization in the fourth quarter of 2023 which optimized our team structure, and better aligned our resources and processes.

Linked Quarter Income Changes (comparisons to the three months ended March 31, 2024)

Net income improved by $0.9 million, or 10%, driven mostly by a $1.5 million increase in net interest income partially offset by a $0.8 million increase in the provision for credit losses. Net nonrecurring gains in the first quarter of 2024 were more than offset by lower noninterest expenses in the second quarter of 2024.
Net interest income increased by $1.5 million, due to higher average earnings assets coupled with a 7 basis points increase in net interest margin for the same reasons listed in the quarterly comparison above.
Noninterest income was down $1.0 million, due mostly to the first quarter of 2024 including a gain on the sale/ leaseback of two bank-owned branch buildings partially offset by the loss on the sale of bonds from a balance sheet restructure.
Noninterest expense was down $1.8 million, mostly from salary expense decreases from the strategic reduction in force in 2023. These operational efficiencies were partially offset by higher occupancy costs resulting from the sale/leaseback of owned branch locations in the previous two quarters. Lower directors deferred compensation expense discussed in further detail below, mitigated some of the higher occupancy costs.

Year-to-Date Income Changes (comparisons to the first six-months of 2023)

Net income increased by $0.9 million, or 5%, due mostly to higher net interest income primarily resulting from a decrease in higher cost borrowed funds partially offset by an increase in the provision for credit losses, and an increase in occupancy expenses from the sale/leaseback in late 2023.
The provision for credit losses on loans was $1.0 million, an increase of $0.7 million, due to higher net charge-offs.
Net interest income increased by $2.4 million, or 4%, due mostly to an increase in interest income and a decrease in higher cost borrowed funds.
Noninterest income increased $1.6 million, or 11%, primarily from an increase in service charges on deposit accounts, and a $0.9 million positive variance in BOLI income tied to our nonqualified deferred compensation plan.

Balance Sheet Changes (comparisons to December 31, 2023)

Total assets decreased 1%, or $48.6 million, due primarily to the strategic restructuring of our lower-yielding bond portfolio in the first quarter of 2024, mostly offset by increases in loan balances.
Gross loans increased $144.5 million, or 7%, due to a $158.1 million increase in mortgage warehouse loans, and a $13.5 million increase in farmland loans, partially offset by smaller declines in other categories. Specifically, there was a $27.0 million decrease in non-agricultural real estate loans, a $0.4 million increase in other commercial loans, and a $0.5 million reduction in consumer loans. In addition to strong favorable growth in mortgage warehouse, new credit extended, including new fundings on non-mortgage warehouse lines of credit, was $75.3 million year to date in 2024 vs $89.6 million year to date in 2023.
Deposits increased by $181.2 million, or 7%. The growth in deposits came primarily from brokered deposits, as overall customer deposits decreased $30.4 million. Brokered deposits added in 2024 were one year or less and are used to fund increases in mortgage warehouse balances in 2024.
Other interest-bearing liabilities decreased $239.6 million mostly from a decrease in overnight borrowings facilitated by the strategic balance sheet restructuring in the first quarter of 2024.

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