April 24, 2023
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, 2023. Sierra Bancorp reported consolidated net income of $8.8 million, or $0.58 per diluted share, for the first quarter of 2023 compared to $7.4 million, or $0.49 per diluted share, in the first quarter of 2022. The favorable variance in net income came largely from a $3.4 million increase in net interest income. The Company’s return on average assets and return on average equity were 0.97% and 11.53%, respectively, in the first quarter of 2023 as compared to 0.88% and 8.64%, respectively, in the first quarter of 2022.
Highlights for the first quarter of 2023:
- Net Income of $8.75 million, up 23% versus the fourth quarter of 2022 (the prior linked quarter).
- Improved Return on Average Assets to 0.97% from 0.79% in the prior linked quarter.
- Increased Return on Average Equity to 11.53% from 9.62% in the prior linked quarter.
- Continue to strategically invest in and develop lending teams to support future diversified loan growth.
Asset Quality Improvement
- Sold the assets related to a single dairy relationship which significantly improved overall asset quality.
- Total Nonperforming Assets declined $18.6 million to $0.9 million, or 0.05% of total gross loans.
- Continued trend of a low level of past due loans.
- Charge-offs declined significantly to $0.2 million as asset quality improved.
- Provision for loan loss of $0.3 million, a reduction of $6.2 million from the prior linked quarter.
Deposit & Liquidity Growth
- Total deposits increased by $102.8 million, or 16% annualized, during the first quarter of 2023.
- Customer deposits remained level during March 2023.
- Noninterest-bearing deposits of $1.04 billion at March 31, 2023 represent 35% of total deposits.
- Uninsured deposits are approximately 30% of total deposit balances.
- Launched an enhanced on-line deposit account opening service as part of our overall digital strategy.
Asset Growth & Strong Capital
- Record level of Total Assets at $3.69 billion, up 2.4% during the quarter.
- Maintained a diversified investment portfolio designed for interest rate risk management and liquidity.
- Increased Tangible Book Value per share by 2% to $18.44 per share at March 31, 2023.
- Strong regulatory Community Bank Leverage Ratio of 10.7% for our subsidiary bank.
- Tangible Common Equity Ratio of 7.6% on a consolidated basis and 9.2% for our subsidiary bank.
- Repurchased 146,418 shares of stock during the quarter.
“Success is where preparation and opportunity meet.” Bobby Unser
“The first quarter of 2023 has certainly been a challenging and volatile quarter for banks. Risk management, especially around the balance sheet, has come to the forefront especially as it applies to deposits, interest rate risk management, capital, and liquidity,” stated Kevin McPhaill, CEO and President. “Risk management has always been a key element of our strategy as demonstrated by several risk mitigation strategies employed over the past several years, including diversification of our investment portfolio to manage interest rate risk, reductions in loan concentrations, and adding a Chief Risk Officer to our executive management team. Bank of the Sierra – a community bank with its roots anchored in the Central Valley of California – focuses on providing banking services to over 122,000 traditional retail and commercial customer deposit accounts within our communities. While this year has certainly started with its challenges for many banks, we believe there will be opportunities for continued growth. We remain committed to serving our customers by making sure it is business as usual within our branches which we believe benefits our communities, our employees, and our shareholders,” McPhaill concluded.
Quarterly Changes (comparisons to the first quarter of 2022)
- The $3.4 million, or 14%, increase in net interest income is due mostly to an $11.3 million increase in interest income partially offset by an $8.0 million increase in interest expense. There was an increase in investment securities which contributed $9.6 million to the favorable interest income variance. This increase in investments primarily consisted of floating rate collateralized loan obligations (CLOs), which contributed to $6.9 million or 61.0% 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.
- 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 March 31, 2023, from 1.54% at the same period in 2022. Nonperforming assets declined from $30.5 million at March 31, 2022, to $0.9 million at March 31, 2023, a decline of 97%. Further, past due loans declined from $2.8 million at March 31, 2022, to $1.2 million at March 31, 2023, a decline of 56%.
- The provision for credit losses at $0.3 million declined by $0.2 million, or 49%, as a result of lower net loan charge-offs recognized in the first quarter of 2023.
- Liquidity continues to be substantial with the primary liquidity ratio at 32.4% and $2.5 billion in overall available liquidity at March 31, 2023. Further, overall deposits continued to increase with an additional 3.6% added in the first quarter of 2023.
- All capital ratios were above the regulatory requirements for a well-capitalized institution. The Community Bank Leverage ratio was 10.13% consolidated and 10.74% for our subsidiary, Bank of the Sierra.
- Sierra Bancorp repurchased 146,418 shares totaling $2.7 million in the first quarter of 2023.
- Our Board of Directors declared a cash dividend of $0.23 per share on April 20, 2023. This is the 97th consecutive quarterly dividend paid by Sierra Bancorp. The cash dividend is payable on May 15, 2023, to shareholders of record at the close of business on May 1, 2023.
Linked Quarter Changes (comparisons to the three months ended December 31, 2022)
- Net income increased by $1.6 million, or 23%, driven mostly by a $6.2 million decline in the provision for credit losses. The elevated provision for credit losses in the three months ended December 31, 2022, was a result of several loans to one dairy relationship that were foreclosed upon and subsequently sold in the first quarter of 2023.
Balance Sheet Quarterly Changes (comparisons to December 31, 2022)
- Total assets increased $85.4 million, or 2% to $3.7 billion, during the first three months of 2023, due mostly to an increase in deposits and borrowed funds as a result of the purchase of investment securities consisting mostly of short-duration U.S. agency securities and variable rate CLOs.
- Deposits increased by $102.8 million, or 4%. The growth in deposits came primarily from customer time and brokered deposits. The brokered deposits were added early in the first quarter of 2023 due to both lower rates on such deposits and as part our overall interest rate risk strategy to increase the duration of liabilities. All brokered deposit orders were placed prior to March 10, 2023. Gross loan balances declined by $19.0 million, due mostly to the foreclosure of $18.1 million of loans related to one dairy relationship in January 2023. Further commercial real estate secured loans increased $8.7 million, and mortgage warehouse lines increased by $3.0 million.