Sierra Bancorp Reports Improved Financial Results for Third Quarter and First Nine Months of 2024

October 21, 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 nine-month periods ended September 30, 2024. Sierra Bancorp reported consolidated net income of $10.6 million, or $0.74 per diluted share, for the third quarter of 2024, an increase of $0.3 million, or 3%, as compared to the second quarter of 2024. In addition, the Company reported consolidated net income of $30.2 million for the first nine months of 2024, an increase of $1.6 million, or 6%, as compared to the same period in 2023. Diluted earnings per share for the nine-month period ended September 30, 2024, increased to $2.09, or 8%, from $1.93 diluted earnings per share for the same period in 2023.

Highlights for the third quarter of 2024:

Improved Earnings and Consistently Strong Earnings Metrics

Diluted Earnings Per Share increased 4%, or $0.03, from the prior linked quarter.
Improved net interest income by $0.6 million, or 2%, as compared to the prior linked quarter.
Maintained strong net interest margin of 3.66%, as compared to 3.69% in the prior linked quarter.
Return on Average Assets of 1.14%, which is unchanged from the prior linked quarter.
Return on Average Equity of 11.95%, which is unchanged from the prior linked quarter.

Solid Asset Quality

Total nonperforming loans to total gross loans ratio of 0.45%, with total classified loans down $6.4 million, year-to-date, to $29.1 million.
No foreclosed assets at September 30, 2024.
Net charge-offs to total loans during the quarter of 0.01%.
Regulatory Commercial Real Estate Concentration Ratio declined to 236.43%, from 241.05%, during the quarter.

Growth of Loans and Deposits

Loan growth of $86.1 million, or 15% annualized, during the quarter, to $2.3 billion.
Total deposits increased by $19.7 million, or 3% annualized, during the quarter, to $3.0 billion.
Noninterest-bearing deposits of $1.0 billion at September 30, 2024, represent 34% of total deposits.

Solid Capital and Liquidity

Increased Tangible Book Value (non-GAAP) per share by 3%, during the quarter, to $22.93 per share.
Repurchased 48,904 shares of common stock during the quarter.
Declared dividend of $0.24 per share, payable on November 12, 2024, our 103rd consecutive quarterly dividend.
Strong regulatory Community Bank Leverage Ratio increased to 11.70%, at September 30, 2024, for our subsidiary Bank.
Consolidated Tangible Common Equity Ratio (non-GAAP) increased to 9.01%, at September 30, 2024.
Overall primary and secondary liquidity sources of $2.4 billion, at September 30, 2024.

“If opportunity doesn’t knock, make a door.” Milton Berle

“We are happy to share our third quarter results, which demonstrate our entire team’s commitment to providing fantastic service to our customers and communities.” stated Kevin McPhaill, CEO and President. “While the current interest rate environment still presents the banking industry with unique challenges, our teams continue to improve profitability and grow loans and deposits. They are consistently finding opportunities to both bring new customers on board and strengthen our existing relationships. I speak for our entire team of dedicated bankers when I say we are proud of our results, we remain committed to excellent service, and we are incredibly excited about our future!” concluded Mr. McPhaill.

For the first nine months of 2024, the Company increased net income to $30.2 million, or $2.09 per diluted share, as compared to $28.6 million, or $1.93 per diluted share, for the same period in 2023. The year-over-year improvement is due primarily to higher net interest income of $5.1 million, despite a $1.8 million increase in the provision for credit losses in 2024. Increases of $1.7 million in noninterest income, were mostly offset by a $1.5 million increase in noninterest expense. The Company’s financial performance metrics for the first nine months of 2024 include an annualized return on average assets and a return on average equity of 1.11% and 11.67%, respectively, compared to 1.03% and 12.41%, respectively, for the same period in 2023.

Financial Highlights

Quarterly Changes (comparisons to the third quarter of 2023)

Net income increased 7%, or $0.7 million, to $10.6 million due to higher net interest income, partially offset by an increase in the provision for credit losses.
The $2.7 million increase in net interest income was driven by a 27 basis point increase in net interest margin. This is primarily a result of a balance sheet restructuring, including a bond sale, in the first quarter of 2024, along with higher loan yields.
Noninterest income was mostly flat for the quarter, with increases in service charge income offset by decreases in other noninterest income, primarily from life insurance proceeds received in 2023 that did not reoccur in 2024.
Noninterest expense was $0.2 million higher in the third quarter over the same quarter last year. While salary and benefit costs decreased due to a strategic internal reorganization in the fourth quarter of 2023, this was offset by an increase in occupancy costs, due to the sale/leaseback of certain branches in the fourth quarter of 2023.

Linked Quarter Income Changes (comparisons to the three months ended June 30, 2024)

Net income improved by $0.3 million, or 3%, driven mostly by a $0.6 million increase in net interest income, offset by a $0.5 million increase in the provision for credit losses.
Net interest income increased by $0.6 million, due to an increase in average earning assets, partially offset by an increase in interest-bearing liabilities, at a higher cost of funds.

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

Net income increased $1.6 million, or 6%. This was primarily driven by an increase of $5.1 million or 6% in net interest income, due mostly to an overall increase in interest rates on earning assets. While we experienced higher yields and balances on loans, this was complemented by a decrease in borrowed funds and a decrease in the rate paid on the remaining balance of borrowed funds. Partially offsetting these positive variances was an increase in the provision for credit losses, and an increase in occupancy expenses from the sale/leaseback of branch buildings in late 2023.
The provision for credit losses was $2.4 million, an increase of $2.2 million, primarily due to an increase in net charge-offs in the second quarter of 2024, due to a foreclosure of a single property.
Noninterest income increased by $1.7 million, or 7%. Service charges on deposit accounts were $1.0 million higher, due mostly to higher interchange income, an increase in analysis fees, and other transaction-based fees, combined with a net $0.6 million gain, from the balance sheet restructuring earlier in the year.
Noninterest expense increased $1.5 million, or 2%, due mostly to increases in rent expense from the sale/ leaseback of branch buildings at the end of 2023.

Statement of Condition Changes (comparisons to December 31, 2023)

Total assets decreased by $33.6 million, or 1%, to $3.7 billion, during the first nine months of the year due primarily to the strategic restructuring of our lower-yielding bond portfolio in the first quarter of 2024, partially offset by increases in loan balances.
Gross loans increased $230.6 million, due to a $219.8 million increase in mortgage warehouse line utilization, a $10.6 million increase in commercial real estate loans, a $13.3 million increase in farmland loans, and a $12.0 million increase in commercial loans. This favorable growth was partially offset by a $23.9 million decrease in residential real estate loans, and smaller declines in construction and consumer loans.
Deposits totaled $3.0 billion at September 30, 2024, representing a year-to-date increase of $200.9 million, or 7%. The growth in deposits came mostly from a $175.0 million increase in brokered deposits to fund mortgage warehouse lines, and a $40.6 million increase in transaction accounts offset by smaller declines in customer non-transaction accounts.
Other interest-bearing liabilities decreased $262.1 million, from a decrease in overnight borrowings facilitated by the strategic balance sheet restructuring in the first quarter of 2024, and a decrease in FHLB advances, as we utilized brokered deposits not only to fund mortgage lines, but to pay down more costly FHLB lines of credit.

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