SIERRA BANCORP : ANNOUNCES QUARTERLY AND YEAR TO DATE EARNINGS - Form 8-K

Published: 2021-10-25 11:04:23 ET BSRR

SIERRA BANCORP ANNOUNCES QUARTERLY AND YEAR TO DATE EARNINGS

Company Release - 10/25/2021

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, 2021. Sierra Bancorp reported consolidated net income of $10.6 million, or $0.69 per diluted share, for the third quarter of 2021, compared to $10.4 million, or $0.67 per diluted share in the third quarter of 2020.

For the first nine months of 2021, the Company recognized net income of $33.4 million, or $2.17 per diluted share, as compared to $26.5 million, or $1.73 per diluted share, for the same period in 2020. The Company's financial performance metrics for the first nine months of 2021 include an annualized return on average assets and a return on average equity of 1.36% and 12.60%, respectively, compared to 1.26% and 10.90%, respectively, for the same period in 2020.

"The most effective way to do it, is to do it." Amelia Earhart

"We are proud of our robust earnings in the third quarter, which helped the Bank achieve its strongest net income for a nine-month period in its history," stated Kevin McPhaill, President and CEO. "Our continued efforts in both core deposit and diversified earning asset generation during 2021 have led to overall balance sheet growth. This success is a result of our banking team's determination and perseverance. We are excited and ready for opportunities in the fourth quarter and next year!", McPhaill concluded.

Financial Highlights

Quarterly Changes (comparisons to the third quarter of 2020)

Sierra Bancorp Financial Results

October 25, 2021

Page 2

Year to-Date Changes (comparisons to the first nine-months of 2020)

Balance Sheet Changes (comparisons to December 31, 2020)

Sierra Bancorp Financial Results

October 25, 2021

Page 3

Other financial highlights are reflected in the following table.

FINANCIAL HIGHLIGHTS

(Dollars in Thousands, Except Per Share Data, Unaudited)

As of or for the

three months ended

nine months ended

9/30/2021

6/30/2021

9/30/2020

9/30/2021

9/30/2020

Net income

10,605

11,708

10,356

33,391

26,465

Diluted earnings per share

0.69

0.76

0.68

2.17

1.73

Return on average assets

1.26%

1.42%

1.34%

1.36%

1.26%

Return on average equity

11.62%

13.29%

12.34%

12.60%

10.90%

Net interest margin (tax-equivalent)

3.46%

3.60%

3.98%

3.66%

3.97%

Yield on average loans and leases

4.61%

4.57%

4.56%

4.57%

4.75%

Cost of average total deposits

0.08%

0.09%

0.10%

0.09%

0.19%

Efficiency ratio (tax-equivalent) (1)

59.75%

58.79%

53.74%

58.29%

56.64%

Total assets

3,442,739

3,272,048

3,199,618

3,442,739

3,199,618

Loans & leases net of deferred fees

2,137,214

2,140,961

2,377,222

2,137,214

2,377,222

Noninterest demand deposits

1,111,411

1,073,833

975,750

1,111,411

975,750

Total deposits

2,820,646

2,775,914

2,591,713

2,820,646

2,591,713

Noninterest-bearing deposits over total deposits

39.4%

38.7%

37.6%

39.4%

37.6%

Shareholders equity / total assets

10.6%

10.9%

10.5%

10.6%

10.5%

Tangible common equity ratio (2)

9.8%

10.1%

9.6%

9.8%

9.6%

Book value per share

23.70

23.21

21.92

23.70

21.92

Tangible book value per share (2)

21.69

21.19

19.84

21.69

19.84

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income was $26.7 million, for the third quarter of 2021, a $1.4 million decrease, or 5% over the third quarter of 2020, and increased $6.4 million, or 8% to $82.5 million for the first nine months of 2021 relative to the same period in 2020.

For the third quarter of 2021, growth in average interest-earning assets totaled $267.0 million, or 9%, as compared to the third quarter of 2020. The yield on these balances was 54 basis points lower for the same period due mostly to a shift in the mix of earning assets to lower yielding investment securities, including cash held overnight at the Federal Reserve Bank. This decrease in yield was slightly offset by an 2 basis point drop in the cost of our interest-bearing liabilities for the same period.

Net interest income for the comparative year-to-date periods increased due to a $465.0 million, or 18% growth in average interest-earning assets. The yield on these average balances was 43 basis points lower for the same period, but was partially offset by a 17 basis point drop in interest paid on liabilities. The net impact of this lower rate was a 31 basis point decrease in our net interest margin for the nine-months ending September 30, 2021 as compared to the same period in 2020.

Loan income during the third quarter 2021 included $0.8 million related to fee income, net of origination costs, recognized on SBA PPP loans. Similarly, SBA PPP loan fees, net of origination costs of $3.3 million were recognized

Sierra Bancorp Financial Results

October 25, 2021

Page 4

for the nine months ended September 30, 2021. At September 30, 2021, approximately $1.6 million of unearned fees, net of origination costs related to SBA PPP loans remains on the balance sheet.

Interest expense was $0.9 million for the third quarter of 2021, a decline of $0.1 million, or 6%, relative to the third quarter of 2020. For the first nine months of 2021, compared to the first nine months of 2020, interest expense declined $1.8 million, or 39%, to $2.7 million. The significant decline in interest expense is attributable to a favorable shift in deposit mix as the average balance of higher cost time deposits declined by $134.8 million or 31% in the third quarter of 2021 as compared to the third quarter of 2020, and fell by $38.5 million or 9% for the first nine months of 2021 as compared to the same period in 2020, while lower or no cost transaction and savings accounts increased $198.2 million or 17% for the third quarter of 2021 compared to the same period in 2020 and increased by $241.1 million or 23%, for the first nine months of 2021 over the same nine months in 2020.

Our net interest margin was significantly impacted by the additional overnight cash balances resulting from increased liquidity from deposit growth in 2021 coupled with lower loan balances. This additional liquidity was mostly deployed in overnight funding resulting in $380.0 million in average overnight cash during the third quarter 2021 and $256.0 million in average balances for the year-to-date period ending September 30, 2021. This overnight funding earned an average rate of 15 and 13 basis points, respectively, for the third quarter and nine-months ending September 30, 2021.

In addition, investment yields have continued to decline given the overall rate environment in 2021. The overall impact of a lower net interest margin was more than offset by higher earning assets in 2021 as compared to 2020 for the year-to-date comparisons. However, for the third quarter of 2021 as compared to the same quarter in 2020, the $267.0 million increase in average interest earning balances did not fully offset the impact of the 54 bps decline in yield.

Provision for Loan and Lease Losses

The Company recorded a net benefit related to loan and lease loss provision of $0.6 million in the third quarter of 2021 relative to a provision of $2.4 million in the third quarter of 2020, and a year-to-date net benefit for loan and lease loss provision of $2.5 million in 2021 as compared to $6.4 million loan and lease loss provision expense for the same period in 2020. The Company's $3.0 million, or 126%, favorable decline in provision for loan and lease losses in the third quarter of 2021 as compared to the third quarter of 2020, and the $8.8 million favorable decrease, or 139% in the first nine months of 2021 compared to the same period in 2020 is due mostly to lower historical loan loss rates, a decline in outstanding balances on loans, a change in the mix of loans, and net year-to-date 2021 recoveries of previously charged-off loan balances. During 2021, management adjusted its qualitative risk factors under our current incurred loss model for improved economic conditions, improvements in the severity and volume of past due loans, and a reduction in the level of concentrations of credit in non-owner occupied real estate loans.

The Company was subject to the adoption in the first quarter of 2020 of the Current Expected Credit Loss ("CECL") accounting method under Financial Accounting Standards Board (FASB) Accounting Standards Update 2016-03 and related amendments, Financial Instruments - Credit Losses (Topic 326). Prior to the close of the first quarter of 2020, the Company elected under Section 4014 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to defer the implementation of CECL until the earlier of when the national emergency related to the outbreak of COVID-19 ends or December 31, 2020. Later in 2020, the Consolidated Appropriations Act, 2021 extended the deferral of implementation of CECL to the earlier of the first day of the fiscal year, beginning after the national emergency terminates or January 1, 2022. The Company's decision to defer the adoption of CECL was done primarily to provide additional time to better assess the impact of the COVID-19 pandemic on the expected lifetime credit losses. At the time the decision was made, there was a significant change in economic uncertainty on the local, regional, and national levels as a result of local and state stay-at-home orders, as well as relief measures provided at a national, state, and local level. Further, the Company has taken actions to serve our communities during the pandemic, including permitting short-term payment deferrals to current customers, as well as originating bridge loans and SBA PPP loans. Upon the adoption of CECL on January 1, 2022, the Company is expected to record the anticipated increase in the allowance for credit losses as an adjustment to equity, net of deferred taxes.

Sierra Bancorp Financial Results

October 25, 2021

Page 5

Noninterest Income

Total noninterest income reflects increases of $0.4 million, or 6%, for the quarter ended September 30, 2021 as compared to the same quarter in 2020, and $0.9 million, or 4% for the year-to-date period ended September 30, 2021 as compared to the same period in 2020. The quarterly and year-to-date comparisons were primarily impacted by higher interchange income however, the comparable year-to-date periods also included an increase of $0.4 million in the valuation gain of restricted equity investments owned by the Company, a $0.4 million favorable fluctuation in income on Bank-Owned Life Insurance (BOLI) associated with deferred compensation plans, and a $0.6 million favorable change in low-income housing tax credit fund expenses. The year-to-date increases were offset by a $0.4 million gain on the sale of debt securities from the restructuring of the portfolio in 2020 and a $1.5 million nonrecurring gain on the wrap up of low-income housing tax credit funds also in 2020.

Service charges on customer deposit account income increased $0.2 million, or 8%, to $3.2 million in the third quarter of 2021 as compared to the third quarter of 2020. This increase is primarily due to increases in analysis fee income during the comparable periods. This service charge income was $0.1 million lower, or 1%, in the first nine months of 2021, as compared to the same period in 2020. The slight decline for the year-to-date comparison is primarily a result of decreases in overdraft income, mostly offset by increases in analysis fee income.

Noninterest Expense

Total noninterest expense increased by $1.6 million, or 8%, in the third quarter of 2021 relative to the third quarter of 2020, and by $6.2 million, or 11%, in the first nine months of 2021 as compared to the same period in 2020.

Salaries and Benefits were $0.9 million, or 9%, higher in the third quarter of 2021 as compared to the third quarter of 2020 and $3.1 million, or 10%, higher for the first nine months of 2021 compared to the same period in 2020. Salary expense deferrals related to the decrease in loan originations were primarily responsible for the negative variance; there was a decrease in salary deferrals of $0.5 million for the quarterly comparison and $2.2 million for the year-to-date comparison. There were 482 full-time equivalent employees at September 30, 2021 as compared to 491 at September 30, 2020.

Occupancy expenses were $0.2 million lower for the third quarter of 2021 as compared to the same quarter in 2020 and $0.1 million higher for the first nine months of 2021 as compared to the same period in 2020. The primary reason for decrease in the quarterly comparison was the closure of five branch facilities earlier in the year, which included the early termination of two leases immediately. The acceleration of leasehold improvements was responsible for the slight increase in the year-to-date comparison.

Other noninterest expense increased $0.9 million, or 12% for the third quarter 2021 as compared to the third quarter in 2020, and increased $3.1 million, or 17% for the first nine months of 2021 as compared to the same period in 2020. The variance for the third quarter of 2021 compared to the same period in 2020 was primarily driven by an increase of $0.6 million in legal and accounting costs due mostly to an increase in litigation costs. Additionally, there were increases of $0.3 million in data processing costs resulting from increases in core banking system expenses, and $0.4 million in increase in checkcard processing costs due to higher debit card usage. These higher costs were partially offset by a $0.4 million decrease in foreclosed assets costs, due to the sale of all but two bank owned properties. For the year-over-year comparison the categories of increase were the same as with the quarterly comparison, along with a $0.3 million increase in FDIC assessments and a $0.3 million increase in deferred compensation expense for directors, which is linked to the changes in BOLI income.

The Company's provision for income taxes was 24.1% of pre-tax income in the third quarter of 2021 relative to 23.4% in the third quarter of 2020, and 25.0% of pre-tax income for the first nine months of 2021 relative to 23.5% for the same period in 2020. The increase in effective tax rate in the third quarter of 2021 is due to tax credits and tax-exempt income representing a smaller percentage of total taxable income.

Sierra Bancorp Financial Results

October 25, 2021

Page 6

Balance Sheet Summary

Balance sheet changes during the first nine months of 2021 include an increase in total assets of $222.0 million, or 7%, primarily a result of increases in cash and due from banks and investments securities of $350.9 million and $188.3 million, respectively, net of a $320.6 million decrease in net loan balances.

The increase in investment securities of $188.3 million for the year-to-date period consisted primarily of increases in government and agency securities, including mortgage backed securities and collateralized mortgage obligations, of $13.2 million; municipal bonds of $64.3 million; corporate securities of $16.3 million; and AAA and AA tranches of collateralized loan obligations of $94.6 million. The purchases of AAA and AA tranches of collateralized loan obligations ("CLOs") in the third quarter of 2021 is primarily a balance sheet diversification strategy as management continues to utilize available liquidity. In addition to providing asset class diversification given the high level of real estate backed earning assets on the balance sheet, these floating rate CLOs are more asset sensitive which complements the longer-term fixed-rate earning assets.

Loan balances increased $14.4 million, excluding the impact of the change in SBA PPP loans. SBA PPP loan forgiveness totalled $17.9 million during the third quarter of 2021 as compared to the end of the previous quarter. However, as mentioned above, loan balances declined by $320.6 million as compared to December 31, 2020 primarily as a result of a $181.2 million decline in mortgage warehouse line utilization, a $76.8 million decline in SBA PPP loans due mostly to forgiveness of such loans, and a net decrease of $63.0 million in real estate secured loans, primarily from construction and other commercial real estate loans.

During 2021, the Company strategically lowered its regulatory commercial real estate concentration ratio from 378% at December 31, 2020 to 308% at September 30, 2021, although it is expected to moderately increase this concentration ratio during the fourth quarter of 2021 and into 2022. The overall decline in real estate secured loans during 2021 was partially offset by an increase of $80.4 million in 1-4 family residential real estate loans due to the $121.6 million purchase of mortgage loans during the third quarter of 2021. These loan purchases were designed as a bridge to organic loan growth as the Bank's core loan pipeline continues to improve and the hiring of one or more loan teams that is expected to occur during the fourth quarter of 2021. If successfully hired, the loan teams are anticipated to further diversify the loan portfolio by specializing in various types of commercial and industrial loans.

Unused commitments, excluding mortgage warehouse and consumer overdraft lines, were $224.3 million at September 30, 2021, compared to $260.0 million at December 31, 2020. Total line utilization, excluding mortgage warehouse and consumer overdraft lines, was 54% at September 30, 2021 and 57% at December 31, 2020. Mortgage warehouse utilization declined significantly to 33% at September 30, 2021, as compared to 71% at December 31, 2020.

The Company participated in the SBA PPP as authorized by the CARES Act. We began accepting and funding loans under this program in April 2020. There were 642 loans for $50.7 million outstanding at September 30, 2021, compared to 1,274 loans for $117.2 million at December 31, 2020. During the third quarter of 2021 the SBA forgave $17.9 million of SBA PPP loans.

Deposit balances reflect growth of $196.0 million, or 7%, during the first nine months of 2021. Core non-maturity deposits increased by $358.2 million, or 17%, while customer time deposits decreased by $122.1 million, or 30%. Wholesale brokered deposits decreased by $40.0 million to $60.0 million. Overall noninterest-bearing deposits as a percent of total deposits at September 30, 2021, increased to 39.4%, as compared to 36.0% at December 31, 2020.

Other interest-bearing liabilities of $92.6 million on September 30, 2021 consists exclusively of customer repurchase agreements. Other interest-bearing liabilities at December 31, 2020 of $182.0 million consisted of $100.0 million of fed funds purchased, $39.1 million of customer repurchase agreements, $37.9 million of FHLB overnight borrowings and $5.0 million of FHLB short term borrowings.

Long term debt increased to $49.2 million from the issuance of $50 million in 3.25% fixed - floating subordinated debt with a ten-year maturity in the third quarter of 2021. The Company plans on contributing $25 million of additional

Sierra Bancorp Financial Results

October 25, 2021

Page 7

capital to the Bank in the fourth quarter of 2021, and utilizing the remainder of the funds for general corporate purposes, which may include repurchasing shares, among other things.

Subordinated debentures totaled $35.3 million and $35.1 million at September 30, 2021 and December 31, 2020, respectively, in the form of long-term borrowings from trust subsidiaries formed specifically to issue trust preferred securities.

The Company continues to have substantial liquidity. At September 30, 2021, and December 31, 2020, the Company had the following sources of primary and secondary liquidity ($ in thousands):

Primary and secondary liquidity sources

September 30, 2021

December 31, 2020

Cash and cash equivalents

422,350

71,417

Unpledged investment securities

584,066

311,983

Excess pledged securities

43,246

52,892

FHLB borrowing availability

773,125

535,404

Unsecured lines of credit

305,000

230,000

Funds available through fed discount window

61,867

58,127

Totals

2,189,654

1,259,823

Total capital of $364.5 million at September 30, 2021 reflects an increase of $20.6 million, or 6%, relative to year-end 2020. The increase in equity during the first nine months of 2021 was due to the addition of $33.4 million in net income, offset by an $3.4 million unfavorable swing in accumulated other comprehensive income/loss, and $9.8 million in dividends paid. The remaining difference is related to stock options exercised and restricted stock granted during the first nine months. The Company executed no share repurchases under a share repurchase plan during the first nine months of 2021. In conjunction with an equity compensation plan, 12,122 shares were repurchased by the company for tax withholding on restricted stock issued to certain officers of the Company in the first nine months of 2021.

Asset Quality

Total nonperforming assets, comprised of nonaccrual loans and foreclosed assets, decreased by $1.7 million to $6.9 million for the first nine months of 2021. The Company's ratio of nonperforming loans to gross loans increased to 0.32% at September 30, 2021 from 0.31% at December 31, 2020; this was due to the decrease in gross loan balances since nonperforming loans decreased $0.8 million during the same period. All of the Company's impaired assets are periodically reviewed and are either well-reserved based on current loss expectations or are carried at the fair value of the underlying collateral, net of expected disposition costs.

The Company's allowance for loan and lease losses was $15.6 million at September 30, 2021, as compared to a balance of $17.7 million at December 31, 2020, and $15.6 million at September 30, 2020. The allowance was 0.73% of total loans at September 30, 2021, 0.72% at December 31, 2020 and 0.65% at September 30, 2020.

The $2.1 million decrease in the allowance for loan and lease losses during the first nine months of the year resulted from the $2.5 million benefit associated with loan and lease loss provision combined with net loan recoveries of previously charged off loan balances for $0.3 million. For further information regarding the Company's decision to defer the implementation of CECL under Section 4014 of the CARES Act, as well as further detail on the decrease loan and lease loss provision during the third quarter and first nine months of 2021, please see the discussion above under Provision for Loan and Lease Losses.

Management's detailed analysis indicates that the Company's allowance for loan and lease losses should be sufficient to cover credit losses inherent in loan and lease balances outstanding as of September 30, 2021, but no assurance can be given that the Company will not experience substantial future losses relative to the size of the loan and lease loss allowance.

Sierra Bancorp Financial Results

October 25, 2021

Page 8

The Company provided loan modification deferrals to customers under Section 4013 of the CARES Act, which are not treated as troubled debt restructured loans. As of September 30, 2021, we had three remaining loans for one customer relationship totaling $10.4 million. All of these loans are fully secured by real estate collateral.

About Sierra Bancorp

Sierra Bancorp is the holding company for Bank of the Sierra (www.bankofthesierra.com), which is in its 44th year of operations and is the largest independent bank headquartered in the South San Joaquin Valley. Bank of the Sierra is a community-centric regional bank, which offers a broad range of retail and commercial banking services through full-service branches located within the counties of Tulare, Kern, Kings, Fresno, Ventura, San Luis Obispo and Santa Barbara. The Bank also maintains an online branch and provides specialized lending services through an agricultural credit center, an SBA center and a dedicated loan production office in Roseville, California. In 2021, Bank of the Sierra was recognized as one of the strongest community banks in the country, with a 5-star rating from Bauer Financial.

Forward-Looking Statements

The statements contained in this release that are not historical facts are forward-looking statements based on management's current expectations and beliefs concerning future developments and their potential effects on the Company. Readers are cautioned not to unduly rely on forward-looking statements. Actual results may differ from those projected. These forward-looking statements involve risks and uncertainties including but not limited to our borrowers' actual payment performance as loan deferrals related to the COVID-19 pandemic expire, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, including the potential adverse impact of loan modifications and payment deferrals implemented consistent with recent regulatory guidance, the health of the national and local economies, the Company's ability to attract and retain skilled employees, customers' service expectations, the Company's ability to successfully deploy new technology, the success of acquisitions and branch expansion, changes in interest rates, loan portfolio performance, and other factors detailed in the Company's SEC filings, including the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's most recent Form 10-K and Form 10-Q.

Sierra Bancorp Financial Results

October 25, 2021

Page 9

STATEMENT OF CONDITION

(Dollars in Thousands, Unaudited)

ASSETS

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

Cash and due from banks

422,350

373,902

346,211

71,417

88,933

Investment securities

732,312

607,474

552,931

543,974

577,278

Real estate loans

1-4 family residential construction

34,720

37,165

36,818

48,565

75,532

Other construction/land

25,512

27,682

50,433

71,980

83,797

1-4 family - closed-end

220,240

106,599

126,949

139,836

162,022

Equity lines

31,341

33,334

36,276

38,075

38,620

Multi-family residential

55,628

58,230

58,324

61,865

61,740

Commercial real estate - owner occupied

345,116

359,021

359,777

343,199

328,832

Commercial real estate - non-owner occupied

995,921

1,048,153

1,071,532

1,062,498

945,374

Farmland

124,446

125,783

126,157

129,905

127,964

Total real estate loans

1,832,924

1,795,967

1,866,266

1,895,923

1,823,881

Agricultural production loans

43,296

42,952

45,476

44,872

45,782

Commercial and industrial

132,292

150,632

183,762

209,048

217,224

Mortgage warehouse lines

126,486

150,351

187,940

307,679

287,516

Consumer loans

4,828

4,894

5,024

5,589

5,897

Gross loans and leases

2,139,826

2,144,796

2,288,468

2,463,111

2,380,300

Deferred loan and lease fees

(2,612)

(3,835)

(3,717)

(3,147)

(3,078)

Allowance for loan and lease losses

(15,617)

(16,421)

(18,319)

(17,738)

(15,586)

Net loans and leases

2,121,597

2,124,540

2,266,432

2,442,226

2,361,636

Bank premises and equipment

24,490

25,949

26,795

27,505

27,216

Other assets

141,990

140,183

133,668

135,620

144,555

Total assets

3,442,739

3,272,048

3,326,037

3,220,742

3,199,618

LIABILITIES AND CAPITAL

Noninterest demand deposits

1,111,411

1,073,833

1,020,350

943,664

975,750

Interest-bearing transaction accounts

765,823

752,137

770,271

668,346

656,922

Savings deposits

451,248

435,076

415,230

368,420

361,857

Money market deposits

141,348

133,977

136,653

131,232

126,918

Customer time deposits

290,816

295,891

411,388

412,944

420,266

Wholesale brokered deposits

60,000

85,000

100,000

50,000

Total deposits

2,820,646

2,775,914

2,853,892

2,624,606

2,591,713

Long-term debt

49,221

Subordinated debentures

35,258

35,213

35,169

35,124

35,079

Other interest-bearing liabilities

92,553

70,535

56,527

182,038

194,657

Total deposits and interest-bearing liabilities

2,997,678

2,881,662

2,945,588

2,841,768

2,821,449

Other liabilities

80,554

32,657

32,468

35,078

41,922

Total capital

364,507

357,729

347,981

343,896

336,247

Total liabilities and capital

3,442,739

3,272,048

3,326,037

3,220,742

3,199,618

Sierra Bancorp Financial Results

October 25, 2021

Page 10

GOODWILL AND INTANGIBLE ASSETS

(Dollars in Thousands, Unaudited)

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

Goodwill

27,357

Core deposit intangible

3,527

3,780

4,038

4,307

4,575

Total intangible assets

30,884

31,137

31,395

31,664

31,932

CREDIT QUALITY

(Dollars in Thousands, Unaudited)

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

Non-accruing loans

6,788

7,276

8,599

7,598

7,186

Foreclosed assets

774

945

971

2,970

Total nonperforming assets

6,881

8,050

9,544

8,569

10,156

Performing TDR's (not included in NPA's)

5,509

10,774

10,596

11,382

7,708

Net (recoveries) / charge offs

(329)

(533)

(331)

735

687

Past due & still accruing (30-89)

380

3,197

2,991

1,656

7,201

Loans deferred under CARES Act

10,411

22,437

29,500

405,858

Non-performing loans to gross loans

0.32%

0.34%

0.38%

0.31%

0.30%

NPA's to loans plus foreclosed assets

0.32%

0.38%

0.42%

0.35%

0.43%

Allowance for loan and lease losses to loans

0.73%

0.77%

0.80%

0.72%

0.65%

SELECT PERIOD-END STATISTICS

(Unaudited)

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

Shareholders equity / total assets

10.6%

10.9%

10.5%

10.7%

10.5%

Gross loans / deposits

75.9%

77.3%

80.2%

93.8%

91.8%

Non-interest bearing deposits / total deposits

39.4%

38.7%

35.8%

36.0%

37.6%

Sierra Bancorp Financial Results

October 25, 2021

Page 11

CONSOLIDATED INCOME STATEMENT

(Dollars in Thousands, Unaudited)

For the three months ended:

For the nine months ended:

9/30/2021

6/30/2021

9/30/2020

9/30/2021

9/30/2020

Interest income

27,629

28,092

29,043

85,179

80,481

Interest expense

913

903

969

2,719

4,478

Net interest income

26,716

27,189

28,074

82,460

76,003

(Benefit) / provision for loan and lease losses

(600)

(2,100)

2,350

(2,450)

6,350

Net interest income after provision

27,316

29,289

25,724

84,910

69,653

Service charges

3,186

2,725

2,950

8,677

8,752

BOLI income

1,048

814

1,310

2,445

1,997

Gain on investments

390

Other noninterest income

3,290

3,073

2,845

9,844

8,973

Total noninterest income

7,535

6,612

7,105

20,977

20,112

Salaries and benefits

10,618

10,425

9,698

32,194

29,136

Occupancy expense

2,359

2,626

2,559

7,472

7,390

Other noninterest expenses

7,898

7,184

7,046

21,715

18,630

Total noninterest expense

20,875

20,235

19,303

61,381

55,156

Income before taxes

13,976

15,666

13,526

44,506

34,609

Provision for income taxes

3,371

3,958

3,170

11,115

8,144

Net income

10,605

11,078

10,356

33,391

26,465

TAX DATA

Tax-exempt muni income

1,578

1,517

1,467

4,539

4,246

Interest income - fully tax equivalent

28,048

28,495

29,433

86,386

81,610

Sierra Bancorp Financial Results

October 25, 2021

Page 12

PER SHARE DATA

(Unaudited)

For the three months ended:

For the nine months ended:

9/30/2021

6/30/2021

9/30/2020

9/30/2021

9/30/2020

Basic earnings per share

0.70

0.77

0.68

2.19

1.74

Diluted earnings per share

0.69

0.76

0.68

2.17

1.73

Common dividends

0.22

0.21

0.20

0.65

0.60

Weighted average shares outstanding

15,257,367

15,243,698

15,192,838

15,247,477

15,215,167

Weighted average diluted shares

15,343,543

15,375,825

15,387,309

15,369,249

15,422,647

Book value per basic share (EOP)

23.70

23.21

21.92

23.70

21.92

Tangible book value per share (EOP)

21.69

21.19

19.84

21.69

19.84

Common shares outstanding (EOP)

15,382,518

15,410,763

15,341,723

15,382,518

15,341,723

KEY FINANCIAL RATIOS

(Unaudited)

For the three months ended:

For the nine months ended:

9/30/2021

6/30/2021

9/30/2020

9/30/2021

9/30/2020

Return on average equity

11.62%

13.29%

12.34%

12.60%

10.90%

Return on average assets

1.26%

1.42%

1.34%

1.36%

1.26%

Net interest margin (tax-equivalent)

3.46%

3.60%

3.98%

3.66%

3.97%

Efficiency ratio (tax-equivalent)¹

59.78%

58.79%

53.74%

58.29%

56.64%

Net (recoveries) charge offs to avg loans (not annualized)

0.01%

(0.01)%

0.01%

(0.01)%

0.04%

(1) Noninterest expense as a percentage of the sum of net interest income and noninterest income excluding net gains (losses) from securities and bank owned life insurance income.

The following non-GAAP schedule reconciles the book value per share to the tangible book value per share and the GAAP equity ratio to the tangible equity ratio as of the dates indicated:

NON-GAAP FINANCIAL MEASURES

(Unaudited)

9/30/2021

6/30/2021

9/30/2020

Total stockholders' equity

364,507

357,729

336,247

Less: goodwill and other intangible assets

(30,884)

(31,137)

(31,932)

Tangible common equity

333,623

326,592

304,315

Total assets

3,442,739

3,272,048

3,199,618

Less: goodwill and other intangible assets

(30,884)

(31,137)

(31,932)

Tangible assets

3,411,855

3,240,911

3,167,686

Common shares outstanding

15,382,518

15,410,763

15,341,723

Book value per common share

23.70

23.21

21.92

Tangible book value per common share

21.69

21.19

19.84

Equity ratio - GAAP (total stockholders' equity / total assets

10.59%

10.93%

10.51%

Tangible common equity ratio (tangible common equity / tangible assets)

9.78%

10.08%

9.61%

Sierra Bancorp Financial Results

October 25, 2021

Page 13

NONINTEREST INCOME/EXPENSE

(Dollars in Thousands, Unaudited)

For the three months ended:

For the nine months ended:

Noninterest income:

9/30/2021

6/30/2021

9/30/2020

9/30/2021

9/30/2020

Service charges on deposit accounts

3,186

2,725

2,950

8,677

8,752

Other service charges and fees

2,900

3,050

2,511

8,511

7,418

Net gains on sale of securities available-for-sale

390

Bank-owned life insurance

1,048

814

1,310

2,445

1,997

Other

390

334

1,333

1,555

Total noninterest income

7,535

6,612

7,105

20,977

20,112

As a % of average interest earning assets (1)

0.96%

0.86%

0.99%

0.91%

1.04%

Noninterest expense:

Salaries and employee benefits

10,618

10,425

9,698

32,194

29,136

Occupancy costs

Furniture & equipment

406

453

498

1,312

1,581

Premises

1,953

2,173

2,061

6,160

5,809

Advertising and marketing costs

370

292

324

982

1,350

Data processing costs

1,470

1,513

1,177

4,409

3,365

Deposit services costs

2,402

2,282

2,236

6,752

6,261

Loan services costs

Loan processing

109

289

343

652

Foreclosed assets

(19)

(10)

355

423

Other operating costs

Telephone & data communications

534

668

485

1,582

1,319

Postage & mail

109

253

264

Other

470

337

338

1,269

1,090

Professional services costs

Legal & accounting

966

682

317

2,091

1,002

Other professional service

1,320

1,004

1,223

3,219

2,171

Stationery & supply costs

107

259

341

Sundry & tellers

109

169

117

478

392

Total noninterest expense

20,875

20,235

19,303

61,381

55,156

As a % of average interest earning assets (1)

2.66%

2.64%

2.70%

2.67%

2.85%

Efficiency ratio (2)(3)

59.75%

58.79%

53.74%

58.30%

56.64%

Sierra Bancorp Financial Results

October 25, 2021

Page 14

AVERAGE BALANCES AND RATES

(Dollars in Thousands, Unaudited)

For the quarter ended

September 30, 2021

June 30, 2021

September 30, 2020

Average Balance (1)

Income/ Expense

Yield/ Rate (2)

Average Balance (1)

Income/ Expense

Yield/ Rate (2)

Average Balance (1)

Income/ Expense

Yield/ Rate (2)

Assets

Investments:

Interest-earning due from banks

$ 379,597

$ 146

0.15%

$ 308,453

$ 85

0.11%

$ 6,942

$ 2

0.11%

Taxable

389,524

1,679

1.71%

340,690

1,573

1.85%

366,046

1,832

1.99%

Non-taxable

259,996

1,578

3.05%

243,461

1,517

3.16%

227,283

1,467

3.25%

Total investments

1,029,117

3,403

1.47%

892,604

3,175

1.61%

600,271

3,301

2.45%

Loans and leases: (3)

Real estate

1,775,611

20,805

4.65%

1,825,600

21,015

4.62%

1,700,241

20,467

4.79%

Agricultural production

43,243

410

3.76%

43,959

408

3.72%

47,733

435

3.63%

Commercial

140,105

1,796

5.09%

166,554

2,124

5.12%

226,511

2,485

4.36%

Consumer

4,862

205

16.73%

4,978

193

15.55%

6,226

236

15.08%

Mortgage warehouse lines

118,036

982

3.30%

142,348

1,151

3.24%

262,593

2,087

3.16%

Other

1,463

7.59%

1,460

7.14%

1,868

6.82%

Total loans and leases

2,083,320

24,226

4.61%

2,184,899

24,917

4.57%

2,245,172

25,742

4.56%

Total interest earning assets (4)

3,112,437

$ 27,629

3.58%

3,077,503

$ 28,092

3.71%

2,845,443

$ 29,043

4.12%

Other earning assets

15,713

15,438

13,190

Non-earning assets

212,116

209,218

215,819

Total assets

$ 3,340,266

$ 3,302,159

$ 3,074,452

Liabilities and shareholders' equity

Interest bearing deposits:

Demand deposits

$ 148,175

$ 86

0.23%

$ 161,871

$ 91

0.23%

$ 140,634

$ 75

0.21%

NOW

605,620

115

0.08%

601,339

116

0.08%

516,915

0.07%

Savings accounts

443,406

0.06%

424,512

0.06%

354,331

0.06%

Money market

139,433

0.07%

139,336

0.09%

126,567

0.09%

Time deposits

293,379

248

0.31%

337,270

262

0.30%

428,171

383

0.35%

Wholesale brokered deposits

72,283

0.29%

92,418

0.26%

29,696

0.20%

Total interest bearing deposits

1,702,296

591

0.14%

1,756,746

619

0.14%

1,596,314

641

0.16%

Borrowed funds:

Other interest-bearing liabilities

79,132

0.21%

61,186

0.26%

107,596

0.26%

Long-term debt

3,812

3.95%

Subordinated debentures

35,229

243

2.74%

35,185

245

2.79%

35,052

258

2.93%

Total borrowed funds

118,173

322

1.08%

96,371

284

1.18%

142,648

328

0.91%

Total interest bearing liabilities

1,820,469

913

0.20%

1,853,117

$ 903

0.20%

1,738,962

969

0.22%

Demand deposits - noninterest bearing

1,104,506

1,052,494

958,233

Other liabilities

53,134

43,095

43,521

Shareholders' equity

362,157

353,453

333,736

Total liabilities and shareholders' equity

$ 3,340,266

$ 3,302,159

$ 3,074,452

Interest income/interest earning assets

3.58%

3.71%

4.12%

Interest expense/interest earning assets

0.12%

0.11%

0.14%

Net interest income and margin (5)

$ 26,716

3.46%

$ 27,189

3.60%

$ 28,074

3.98%

Sierra Bancorp Financial Results

October 25, 2021

Page 15

AVERAGE BALANCES AND RATES

(Dollars in Thousands, Unaudited)

For the nine months ended

September 30, 2021

September 30, 2020

Average Balance (1)

Income/ Expense

Yield/ Rate (2)

Average Balance (1)

Income/ Expense

Yield/ Rate (2)

Assets

Investments:

Interest-earning due from banks

255,962

250

0.13%

32,332

155

0.64%

Taxable

351,109

4,835

1.84%

392,617

6,542

2.23%

Non-taxable

241,866

4,539

3.18%

213,294

4,246

3.36%

Total investments

848,937

9,624

1.71%

638,243

10,943

2.53%

Loans and leases:(3)

Real estate

1,826,476

63,211

4.63%

1,524,821

57,544

5.04%

Agricultural

44,441

1,237

3.72%

48,022

1,470

4.09%

Commercial

165,916

6,371

5.13%

168,574

4,661

3.69%

Consumer

5,085

594

15.62%

6,822

831

16.27%

Mortgage warehouse lines

167,293

4,061

3.25%

204,839

4,884

3.18%

Other

1,503

7.21%

3,302

148

5.99%

Total loans and leases

2,210,714

75,555

4.57%

1,956,380

69,538

4.75%

Total interest earning assets (4)

3,059,651

85,179

3.77%

2,594,623

80,481

4.20%

Other earning assets

14,817

13,074

Non-earning assets

207,523

206,816

Total assets

3,281,991

2,814,513

Liabilities and shareholders' equity

Interest bearing deposits:

Demand deposits

147,000

251

0.23%

121,246

209

0.23%

NOW

592,177

332

0.07%

485,176

295

0.08%

Savings accounts

419,861

175

0.06%

326,730

170

0.07%

Money market

138,408

0.08%

123,149

101

0.11%

Time deposits

347,253

798

0.59%

443,771

2,374

1.23%

Brokered deposits

88,132

176

0.27%

30,135

219

0.97%

Total interest bearing deposits

1,732,831

1,818

0.14%

1,530,207

3,368

0.29%

Borrowed funds:

Other interest-bearing liabilities

67,981

127

0.39%

62,486

145

0.86%

Long-term debt

1,285

3.95%

Subordinated debentures

35,186

736

2.80%

35,008

965

3.68%

Total borrowed funds

104,452

901

1.15%

97,494

1,110

1.52%

Total interest bearing liabilities

1,800,812

2,719

0.20%

1,627,701

4,478

0.37%

Demand deposits - noninterest bearing

1,045,179

822,882

Other liabilities

45,191

39,646

Shareholders' equity

354,338

324,284

Total liabilities and shareholders' equity

3,281,991

2,814,513

Interest income/interest earning assets

3.77%

4.20%

Interest expense/interest earning assets

0.11%

0.23%

Net interest income and margin(5)

82,460

3.66%

76,003

3.97%

#####################################

Category: Financial

Source: Sierra Bancorp

Disclaimer

Sierra Bancorp published this content on 25 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 October 2021 15:03:02 UTC.