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INVESTOR RELATIONS

Press Release

Sierra Bancorp Announces Earnings Accompanied by Solid Asset and Deposit Growth

Company Release - 7/20/2020 8:01 AM ET
  • Loans & Leases, Net of Fees increased by $408.7 million, or 23% quarter-over-quarter, including $116.2 million in Paycheck Protection Program loans and $109.5 million of seasonal increases in mortgage warehouse lines
  • Deposits grew by $327.4 million, or 15% during the second quarter of 2020
  • Quarterly deposit growth was highlighted by a $245.0 million increase in noninterest demand deposits which lowered our quarterly cost of average total deposits to 0.15% as compared to 0.34% in the prior linked quarter

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, 2020. Sierra Bancorp reported consolidated net income of $8.3 million, or $0.54 per diluted share, for the second quarter of 2020, compared to $8.8 million, or $0.57 per diluted share, in the second quarter of 2019. The Company's return on average assets and return on average equity were 1.19% and 10.30%, respectively, in the second quarter of 2020, as compared to 1.39% and 12.27%, respectively, in the second quarter of 2019.

For the first six months of 2020, the Company recognized net income of $16.1 million as compared to $17.7 million for the same period in 2019. The Company's financial performance metrics for the first half of 2020 include an annualized return on average equity of 10.14%, a return on average assets of 1.21%, and diluted earnings per share of $1.05.

"Some people want it to happen, some wish it would happen, others make it happen." - Michael Jordan

“We are proud of our team’s ability to move quickly during the pandemic so our bank could operate effectively,” stated Kevin McPhaill, President and CEO. “During the second quarter, we elected to participate in the Paycheck Protection Program to help our customers through these challenging times. Also, we experienced exceptional growth in our mortgage warehouse lines and solid organic growth primarily due to our loan production groups in Northern and Southern California. We had strong deposit growth during this period as well. All of these events led to significant asset growth as we reached $3.0 billion in total assets – another record for us! While we know the pandemic continues to evolve and we are in a very dynamic environment, our team is capable and ready for the challenge. We are proud of our second quarter results and remain cautiously optimistic as we look to the second half of the year,” McPhaill concluded.

Financial Highlights

Quarterly Changes (comparisons to the second quarter of 2019)

  • The change in quarterly net income was primarily due to a $1.8 million increase in the provision for loan and lease losses due to continued economic uncertainty.
  • Overall net interest income remained relatively unchanged as declines in loan yields were mostly offset by higher balances and lower interest expense.
  • The $0.8 million favorable increase in noninterest income is due to a $0.7 million gain from the disposal of a low-income housing tax credit fund investment, a $0.5 million increase in bank-owned life insurance (BOLI) income, and a $0.4 million gain from the sale of debt securities. These increases were partially offset by a $0.5 million decline in customer service charges.
  • Noninterest expense increased by $0.2 million, or 1%, due mostly to higher deferred compensation expense.

Year to-Date Changes (comparisons to the first six-months of 2019)

  • Net income declined by $1.6 million due mostly to an increase of $3.3 million in the provision for loan and lease losses, offset by the corresponding increases previously discussed in noninterest income for the quarterly comparison.
  • Noninterest income increased by $1.2 million, or 11%, due mostly to the changes described above.

Balance Sheet Changes (comparisons to December 31, 2019)

  • Total assets increased to $3.1 billion, representing an increase of $516.2 million, or 20%, during the first half of the year.
  • Loan growth in 2020 of $444.0 million, or 25%, highlighted by a $205.2 million increase in non-agricultural real estate loans, a $149.0 million favorable change in outstanding balances of mortgage warehouse lines, and a $106.0 million increase in commercial and industrial loans.
  • Deposits totaled $2.5 billion at June 30, 2020, representing a year-to-date increase of $338.4 million, or 16%. The growth in deposits came primarily from core transaction and savings accounts, while higher-cost time deposits decreased.

Other financial highlights are reflected in the following table.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINANCIAL HIGHLIGHTS (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

At or For the

 

 

 

 

 

 

 

 

 

 

At or For the

 

 

 

Three Months

 

 

 

At or For the

 

 

 

 

Three Months Ended

 

Increase

 

Ended

 

Increase

 

Six Months Ended

 

Increase

 

 

6/30/2020

 

3/31/2020

 

(Decrease)

 

6/30/2019

 

(Decrease)

 

6/30/2020

 

6/30/2019

 

(Decrease)

Net Income

 

$ 8,303

 

$ 7,807

 

+6%

 

$ 8,829

 

-6%

 

$ 16,110

 

$ 17,724

 

-9%

Diluted Earnings per share

 

0.54

 

0.51

 

+6%

 

0.57

 

-5%

 

1.05

 

1.15

 

-9%

Return on Average Assets

 

1.19%

 

1.23%

 

-3%

 

1.39%

 

-14%

 

1.21%

 

1.41%

 

-14%

Return on Average Equity

 

10.30%

 

9.97%

 

+3%

 

12.27%

 

-16%

 

10.14%

 

12.62%

 

-20%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest Margin (Tax-Equiv.)

 

3.81%

 

4.13%

 

-8%

 

4.21%

 

-10%

 

3.97%

 

4.25%

 

-7%

Yield on Average Loans and Leases

 

4.56%

 

5.21%

 

-12%

 

5.53%

 

-18%

 

4.86%

 

5.58%

 

-13%

Cost of Average Total Deposits

 

0.15%

 

0.34%

 

-56%

 

0.57%

 

-74%

 

0.24%

 

0.57%

 

-58%

Efficiency Ratio (Tax-Equiv.) (1)

 

57.78%

 

58.88%

 

-2%

 

58.17%

 

-1%

 

58.33%

 

58.46%

 

0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

3,110,044

 

2,670,469

 

+16%

 

2,577,032

 

+21%

 

3,110,044

 

2,577,032

 

+21%

Loans & Leases Net of Deferred Fees

 

2,209,480

 

1,800,766

 

+23%

 

1,780,730

 

+24%

 

2,209,480

 

1,780,730

 

+24%

Noninterest Demand Deposits

 

949,662

 

704,700

 

+35%

 

658,900

 

+44%

 

949,662

 

658,900

 

+44%

Total Deposits

 

2,506,754

 

2,179,391

 

+15%

 

2,179,098

 

+15%

 

2,506,754

 

2,179,098

 

+15%

Noninterest-bearing Deposits over Total Deposits

 

37.9%

 

32.3%

 

+17%

 

30.2%

 

+25%

 

37.9%

 

30.2%

 

+25%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders Equity / Total Assets

 

10.5%

 

12.0%

 

-13%

 

11.5%

 

-9%

 

10.5%

 

11.5%

 

-9%

Tangible Common Equity Ratio

 

9.6%

 

10.9%

 

-12%

 

10.4%

 

-8%

 

9.6%

 

10.4%

 

-8%

Book Value per Share

 

$ 21.55

 

$ 21.03

 

+2%

 

$ 19.36

 

+11%

 

$ 21.55

 

$19.36

 

+11%

Tangible Book Value per Share

 

$ 19.43

 

$ 18.89

 

+3%

 

$ 17.19

 

+13%

 

$ 19.43

 

$17.19

 

+13%

(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.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income was relatively unchanged at $24.1 million, for the second quarter of 2020 over the second quarter of 2019, but decreased $0.2 million to $47.9 million for the first six months of 2020 relative to the same period in 2019. For the second quarter of 2020, growth in average interest-earning assets totaled $250 million, or 11%, as compared to the second quarter of 2019. The yield on these balances was 81 basis points lower for the same period. This decrease in yield was partially offset by a 61 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 declined due to a 62 basis point decline in the yield on earning assets partially offset by a 47 basis point drop in interest paid on liabilities. The net impact of this lower rate was a 28 basis point decrease in our net interest margin. Our net interest margin has been impacted primarily by the following:

  • Market conditions, including five interest rate cuts by the Federal Open Market Committee for 225 bps over the past 12 months, negatively impacted our yield on existing adjustable and variable rate portfolio loans and creating a lower initial interest rate for new loan volumes. In addition, given the low rate environment loan demand for our mortgage warehouse lines increased, resulting in a $62.0 million, or 43%, increase in average balances during the second quarter 2020. The average interest rate on mortgage warehouse lines declined to 2.98% from 3.52% for the comparative quarters.
  • Participation in the SBA Paycheck Protection Program (PPP) loans, issuing 1,241 loans for $116.2 million to assist our customers impacted by the COVID-19 Pandemic. Loan fees related to PPP loans are accreted over the stated life of the loan.

On June 30, 2020, our outstanding fixed-rate loans represented 33% of our loan portfolio. Adjustable-rate loans represent 52% of our loan portfolio and range in adjustment periods from 30 days to 10 years with most of these subject to repricing after 3 years. There are $64.9 million of these adjustable-rate loans scheduled to adjust in the next quarter, and $22.4 million will reprice in smaller amounts monthly over the fourth quarter of 2020. Approximately 75% or $857.5 million of these loans will begin repricing after three years, with $519.4 million repricing after five years. About 15% of our total portfolio, or $317.4 million, consists of variable rate loans. Of these variable rate loans, approximately $110.8 million have floors, with $102.4 million at their floors, which limited the overall reduction in rates.

Moreover, discount accretion on loans from whole-bank acquisitions enhanced our net interest margin by one basis point in the second quarter of 2020 as compared to five basis points in the second quarter 2019, and two basis points for the first six months of 2020 relative to four basis points in the first six months of 2019.

Interest expense was $1.2 million for the second quarter of 2020, a decline of $2.3 million, or 65%, relative to the second quarter of 2019. For the first six months of 2020, compared to the first six months of 2019, interest expense declined $3.6 million, or 51%, to $3.5 million. The significant decline in interest expense is attributable to a favorable shift in deposit mix as higher cost time deposits declined by $99.0 million or 18% in the second quarter of 2020 as compared to the second quarter of 2019, and fell by $70.8 million or 14% compared to the fourth quarter of 2019, while lower or no cost transaction and savings accounts increased $418.2 million or 28% for the second quarter of 2020 compared to the same period in 2019 and increased by $402.7 million or 26% over the fourth quarter of 2019.

Provision for Loan and Lease Losses

The Company recorded a loan and lease loss provision of $2.2 million in the second quarter of 2020 relative to a provision of $0.4 million in the second quarter of 2019, and a year-to-date loan loss provision of $4.0 million in 2020 as compared to $0.7 million for the same period in 2019. The Company is subject to the adoption 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) in 2020. However, 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. Although this deferral will still require CECL to be implemented as of January 1, 2020, the Company elected to postpone implementation in order to provide additional time to assess better the impact of the COVID-19 pandemic on the expected lifetime credit losses. There is increased uncertainty on the local, regional, and national economy 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 mitigate the impact on credit losses, including permitting short-term payment deferrals to current customers, as well as providing bridge loans and SBA PPP loans. More time is needed to assess the impact of this uncertainty and related actions on the Company's allowance for loan and lease losses under the CECL methodology.

The Company's $1.8 million, or 450%, increase in provision for loan and lease losses in the second quarter of 2020 as compared to the second quarter of 2019, and the $3.3 million increase, or 471%, in the first six months of 2020 compared to the same period in 2019 is due mostly to the estimated impact that COVID-19 will have on the economy and our loan customers. Management adjusted its qualitative risk factors under our current incurred loss model for economic conditions, changes in the mix of the portfolio due to loans subject to a payment deferral, potential changes in collateral values due to reduced cash flows, and external factors such as government actions. In particular, the uncertainty regarding our customers' ability to repay loans could be adversely impacted by COVID-19 given higher unemployment rates, requests for payment deferrals, temporary business shut-downs, and reduced consumer and business spending.

Noninterest Income

Total noninterest income reflects increases of $1.0 million, or 18%, for the quarterly comparison and $1.2 million, or 11% for the year-to-date period. The quarterly comparison includes a $0.7 million non-recurring gain resulting from the wrap-up of a low-income housing tax credit fund investment and a $0.4 million gain from the sale of debt securities. The gain on debt securities was a result of a restructuring of the portfolio to sell smaller-balance or variable rate SBA and FNMA bonds, as well as certain municipal securities with potential higher credit risk. The quarter also reflects a $0.5 million favorable swing in bank-owned life insurance (BOLI) income, resulting from fluctuations in income on BOLI associated with deferred compensation plans. Those increases were partially offset by lower service charges on deposits. The main difference between the quarterly and year-to-date variances in noninterest income came in BOLI income, which reflects a decrease of $0.3 million for the year-to-date period rather than an increase, again due to significant fluctuations in deferred compensation BOLI income, offset by an increase of $0.2 million in the valuation gain of restricted equity investments owned by the Company.

Service charges on customer deposit account income declined by $0.5 million, or 17%, to $2.6 million in the second quarter of 2020 as compared to the second quarter of 2019. This service charge income was $0.3 million lower, or 5%, in the first six months of 2020, as compared to the same period in 2019. These declines are primarily a result of changes in overdraft income. Waived overdraft fees were similar in both the quarterly and year to date comparison.

Noninterest Expense

Total noninterest expense increased by $0.4 million, or 2%, in the second quarter of 2020 relative to the second quarter of 2019, and by $0.3 million, or 1%, in the first six months of 2020 as compared to the first six months of 2019.

Salaries and Benefits were $0.3 million, or 3%, higher in the second quarter of 2020 as compared to the second quarter of 2019 and $1.2 million higher for the first six months of 2020 compared to the same period in 2019. The reason for this increase is due to several factors, including merit increases for employees due to annual performance evaluations for 2020. These increases were mitigated by the impact of deferred salaries related to loan origination costs, which were $0.8 million higher in the second quarter of 2020 relative to the second quarter of 2019, and $0.5 million higher for the first six months of 2020 compared to the same period in 2019. There have not been any permanent or temporary reductions in employees as a result of COVID-19.

Occupancy expenses were roughly the same for the respective comparative periods. Further, other noninterest expense was relatively unchanged for the second quarter 2020 as compared to the second quarter in 2019, but was $0.9 million lower for the first half of 2020 as compared to the same period in 2019. The variance for year-to-date 2020 compared to the same period in 2019 was primarily driven by a $0.7 million, or 30%, decline in professional services expenses. Those professional services variances include a $0.2 million decrease in FDIC assessments due to the Small Bank Assessment credits applied against FDIC deposit insurance costs, a $0.2 million decrease in deferred compensation expense for directors, which is linked to the changes in BOLI income, and a $0.2 million reduction in consulting costs.

The Company's provision for income taxes was 23.2% of pre-tax income in the second quarter of 2020 relative to 26.4% in the second quarter of 2019, and 23.6% of pre-tax income for the first half of 2020 relative to 25.3% for the same period in 2019. The decline in tax rate in the second quarter of 2020 is due mostly to a higher percent of the income being tax-exempt income.

Balance Sheet Summary

Balance sheet changes during the first half of 2020 include an increase in total assets of $516.2 million, or 20%, due mostly to growth in loan portfolio balances. In addition to $449.5 million in loan growth, there was a $76.5 million increase in cash and due from banks at June 30, 2020, as compared to December 31, 2019. The increase was mostly due to additional cash borrowed at the end of the quarter for expected mortgage line utilization.

For the first six months of 2020, gross loans were up by $449.5 million, or 26%, including increases of $149.0 million in mortgage warehouse lines, $205.2 million increase in non-agricultural real estate loans, and a $106.0 million increase in commercial and industrial loans. Mortgage warehouse loan balances increased due to market factors favorably impacting line utilization due to both mortgage originations and refinancing activity. Non-agricultural real estate loan balances increased due to deliberate and concentrated efforts of our Northern and Southern market loan production teams. The growth in these markets was mostly due to commercial real estate and the primary driver of our $278.7 million increase in non-owner occupied commercial real estate loans. The increases in Commercial and Industrial loan balances were impacted by our participation in the SBA PPP product as authorized by the CARES Act, to assist our customers negatively affected by the COVID-19 pandemic.

The recent growth in loans, and in particular, real estate loans, was accomplished without relaxing any of the Company’s credit standards that had been tightened after the great recession. Instead, the growth came by diversifying geography with new loan teams announced in the first quarter 2020 in our Northern and Southern California markets. Those teams have maintained these enhanced underwriting standards through the pandemic and have not compromised credit quality when sourcing new loans. However, no assurance can be given as to how these loans will perform over their lifetime.

With regards to line utilization, unused commitments, excluding mortgage warehouse and consumer overdraft lines, were $304.8 million on June 30, 2020, as compared to $303.4 million on December 31, 2019. Total utilization excluding mortgage warehouse and consumer overdraft lines was 86% at June 30, 2020, as compared to 59% at December 31, 2019. Commercial line utilization was 59% on June 30, 2020, as compared to 61% on December 31, 2019. Mortgage warehouse utilization was 79% at June 30, 2020, as compared to 59% on December 31, 2019.

The Company’s total intangible assets decreased slightly to $32.2 million at June 30, 2020, from $32.7 million at December 31, 2019. Goodwill remained at $27.4 million during the first six months of 2020 and was approximately 8% of total capital at June 30, 2020. The Company performed a qualitative test for impairment and determined that no goodwill impairment was probable at June 30, 2020. The Company will continue to evaluate qualitative factors to determine if a quantitative test for goodwill impairment is necessary.

Deposit balances reflect growth of $338.4 million, or 16%, during the first six months of 2020. Core non-maturity deposits increased by $409.1 million, or 25%, while customer time deposits decreased by $30.8 million, or 7%. Wholesale brokered deposits decreased by $40.0 million to $10.0 million. Overall noninterest-bearing deposits as a percent of total deposits at June 30, 2020, increased to 37.9%, as compared to 31.9% at December 31, 2019. Other interest-bearing liabilities of $204.4 million on June 30, 2020, include $41.4 million of customer repurchase agreements, $153.0 million in overnight FHLB borrowings, $5.0 million in short term borrowings, and $5.0 million in long term borrowings. The increase in overnight FHLB borrowings was due mostly to draws for expected higher mortgage warehouse line utilization in the last week of the quarter as average balance of FHLB borrowings was $7.8 million in 2020.

The Company continues to have substantial liquidity. At June 30, 2020, and December 31, 2019, the Company had the following sources of primary and secondary liquidity ($ in thousands):

 

 

 

 

 

 

 

Primary and Secondary Liquidity Sources

 

 

June 30, 2020

 

 

December 31, 2019

Cash and Due From Banks

 

$

88,705

 

$

80,076

Unpledged Investment Securities

 

 

356,903

 

 

366,012

Excess Pledged Securities

 

 

60,462

 

 

70,955

FHLB Borrowing Availability

 

 

293,454

 

 

443,200

Unsecured Lines of Credit

 

 

80,000

 

 

80,000

Funds Available through Fed Discount Window

 

 

60,102

 

 

59,198

Totals

 

$

939,626

 

$

1,099,441

In addition to the primary and secondary sources of liquidity listed above, the Company has also been approved to borrow $116.2 million from the Federal Reserve’s Paycheck Protection Program Liquidity Facility (PPPLF). Should the Company wish to draw on the PPPLF it would be required to pledge individual SBA PPP loans as collateral. The loans are taken as collateral at their face value. Due to the Company’s liquidity throughout the second quarter of 2020 and expected liquidity in the third quarter of 2020, it has elected not to utilize the PPPLF at this time.

Total capital of $327.4 million at June 30, 2020, reflects an increase of $18.1 million, or 6%, relative to year-end 2019. The increase in equity during the first half of 2020 was due to the addition of $16.1 million in net income, and a $10.2 million favorable swing in accumulated other comprehensive income/loss, net of $6.1 million in dividends paid, and $2.6 million in stock repurchases prior to March 15, 2020. The remaining difference is related to stock options exercised during the quarter.

Asset Quality

Total nonperforming assets, comprised of non-accrual loans and foreclosed assets, increased by $2.2 million to $8.7 million for the first half of 2020 primarily due to the impact of one commercial real estate credit that went into foreclosure. The Company's ratio of nonperforming loans to gross loans decreased to 0.26% at June 30, 2020, from 0.33% at December 31, 2019. 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 single loan which moved to other real estate owned during the quarter has a pending contract.

The Company's allowance for loan and lease losses was $13.6 million at June 30, 2020, as compared to a balance of $9.9 million at December 31, 2019, and $9.9 million at June 30, 2019. The $3.6 million increase during the first half of the year resulted from the addition of a $4.0 million loan loss provision in the first half of 2020, less $0.4 million in net loan balances charged off during the period. The additional loan loss provision in the first half of 2020 was precipitated primarily by qualitative factors associated with economic uncertainty during these unprecedented times. 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 increase in provision during the second quarter of 2020, please see the discussion above under Provision for Loan and Lease Losses. The allowance was 0.61% of total loans at June 30, 2020, and 0.56% at both December 31, 2019, and June 30, 2019. 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 June 30, 2020, but no assurance can be given that the Company will not experience substantial future losses relative to the size of the allowance.

As discussed above under the Provision for Loan and Lease Losses, the Company recorded $4.0 million in provision for loan and lease losses in the first half of 2020 as compared to $0.7 million in the first half of 2019. This increase is primarily due to increased uncertainty of economic risks associated with the COVID-19 pandemic. With respect to exposures related to the COVID-19 pandemic, the Company had 83 relationships in the hospitality industry totaling $222.5 million at June 30, 2020. In addition to loans in the hospitality sector, we have approximately $17.0 million of loans in the oil and gas industry, and $66.0 million of loans to retail businesses at June 30, 2020.

The Company provided payment deferrals to customers under Section 4013 of the CARES Act during the second quarter of 2020. These modifications typically provided deferrals of both principal and interest for 180 days. Further, the Company believed that it was a better use of resources to create a new monitoring process with dedicated internal personnel to monitor the deferrals over the 180-day deferral period. These employees would have likely spent considerable time working through deferral extensions had we initially offered 90-day deferrals. Instead, these dedicated resources within credit administration are proactively engaged with our borrowers who have loan deferrals to better understand each borrower’s situation, as well as determine the likelihood that each borrower will be able to resume payments after the end of the modification period. This new monitoring process started in June with the largest loan relationships. As of June 30, 2020, there were no Section 4013 loan deferrals that were downgraded to impaired or nonaccrual status, or that were treated as a troubled debt restructuring.

As of June 30, 2020, 313 customers, for a total of $386.2 million, had executed a loan modification under Section 4013 of the CARES Act. Approximately 97% of these loan deferrals were for commercial customers with 38% of these modifications, or $145.0 million, in the hospitality industry. In addition, there were $98.7 million, or 26%, that are lessors of real estate, both commercial and residential; $45.5 million, or 12%, in the dairy industry; and $28.7 million, or 7%, related to convenience stores, and $2.7 million, or 0.7%, in the healthcare industry. Of the commercial deferrals, there were $10.1 million that were unsecured. Consumer deferrals totaled $11.2 million, of which $7.5 million were mortgage related.

With respect to the secured commercial loans, the Company’s maximum initial loan-to-values for investor real estate is generally 65%, which would include loans in the hospitality industry. For owner-occupied real estate, we generally lend up to 75% loan-to value. As of June 30, 2020, nearly all of the loan deferral requests that were secured by real estate were below these internal guidelines at loan origination.

About Sierra Bancorp

Sierra Bancorp is the holding company for Bank of the Sierra (www.bankofthesierra.com), which is in its 43rd 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, Los Angeles, 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 Rocklin, California. In 2020, Bank of the Sierra was recognized as one of the strongest and top-performing 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 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STATEMENT OF CONDITION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(balances in $000's, unaudited except 12/31/2019)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jun '20 vs

 

 

 

Jun '20 vs

 

 

 

Jun '20 vs

ASSETS

 

6/30/2020

 

3/31/2020

 

Mar '20

 

12/31/2019

 

Dec '19

 

6/30/2019

 

Jun '19

Cash and Due from Banks

 

$ 156,611

 

$ 106,992

 

+46%

 

$ 80,077

 

+96%

 

$ 67,790

 

+131%

Investment Securities

 

599,333

 

620,154

 

-3%

 

600,799

 

0%

 

577,266

 

+4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real Estate Loans (non-Agricultural)

 

1,463,235

 

1,259,448

 

+16%

 

1,258,081

 

+16%

 

1,285,557

 

+14%

Agricultural Real Estate Loans

 

134,454

 

141,740

 

-5%

 

144,033

 

-7%

 

152,619

 

-12%

Agricultural Production Loans

 

48,516

 

49,199

 

-1%

 

48,036

 

+1%

 

51,509

 

-6%

Comm'l & Industrial Loans & Leases

 

221,502

 

111,990

 

+98%

 

115,532

 

+92%

 

124,974

 

+77%

Mortgage Warehouse Lines

 

338,124

 

228,608

 

+48%

 

189,103

 

+79%

 

154,954

 

+118%

Consumer Loans

 

6,266

 

7,040

 

-11%

 

7,780

 

-19%

 

8,286

 

-24%

Gross Loans & Leases

 

2,212,097

 

1,798,025

 

+23%

 

1,762,565

 

+26%

 

1,777,899

 

+24%

Deferred Loan & Lease Fees

 

(2,617)

 

2,741

 

-195%

 

2,896

 

-190%

 

2,831

 

-192%

Loans & Leases Net of Deferred Fees

 

2,209,480

 

1,800,766

 

+23%

 

1,765,461

 

+25%

 

1,780,730

 

+24%

Allowance for Loan & Lease Losses

 

(13,560)

 

(11,453)

 

+18%

 

(9,923)

 

+37%

 

(9,883)

 

+37%

Net Loans & Leases

 

2,195,920

 

1,789,313

 

+23%

 

1,755,538

 

+25%

 

1,770,847

 

+24%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank Premises & Equipment

 

27,779

 

28,425

 

-2%

 

27,435

 

+1%

 

28,385

 

-2%

Other Assets

 

130,401

 

125,585

 

+4%

 

129,970

 

0%

 

132,744

 

-2%

Total Assets

 

$ 3,110,044

 

$ 2,670,469

 

+16%

 

$ 2,593,819

 

+20%

 

$ 2,577,032

 

+21%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES & CAPITAL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Demand Deposits

 

$ 949,662

 

$ 704,700

 

+35%

 

$ 690,950

 

+37%

 

$ 658,900

 

+44%

Int-Bearing Transaction Accounts

 

641,816

 

576,014

 

+11%

 

549,812

 

+17%

 

570,763

 

+12%

Savings Deposits

 

346,262

 

304,894

 

+14%

 

294,317

 

+18%

 

289,872

 

+19%

Money Market Deposits

 

125,419

 

113,766

 

+10%

 

118,933

 

+5%

 

117,010

 

+7%

Customer Time Deposits

 

433,595

 

450,017

 

-4%

 

464,362

 

-7%

 

492,553

 

-12%

Wholesale Brokered Deposits

 

10,000

 

30,000

 

-67%

 

50,000

 

-80%

 

50,000

 

-80%

Total Deposits

 

2,506,754

 

2,179,391

 

+15%

 

2,168,374

 

+16%

 

2,179,098

 

+15%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Junior Subordinated Debentures

 

35,035

 

34,990

 

0%

 

34,945

 

0%

 

34,856

 

+1%

Other Interest-Bearing Liabilities

 

204,449

 

103,461

 

+98%

 

45,711

 

+347%

 

32,667

 

+526%

Total Deposits & Int.-Bearing Liabilities

 

2,746,238

 

2,317,842

 

+18%

 

2,249,030

 

+22%

 

2,246,621

 

+22%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Liabilities

 

36,373

 

33,168

 

+10%

 

35,504

 

+2%

 

33,559

 

+8%

Total Capital

 

327,433

 

319,459

 

+2%

 

309,285

 

+6%

 

296,852

 

+10%

Total Liabilities & Capital

 

$ 3,110,044

 

$ 2,670,469

 

+16%

 

$ 2,593,819

 

+20%

 

$ 2,577,032

 

+21%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GOODWILL & INTANGIBLE ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(balances in $000's, unaudited except 12/31/2019)

 

 

 

 

 

Jun '20 vs

 

 

 

Jun '20 vs

 

 

 

Jun '20 vs

 

 

6/30/2020

 

3/31/2020

 

Mar '20

 

12/31/2019

 

Dec '19

 

6/30/2019

 

Jun '19

Goodwill

 

$ 27,357

 

$ 27,357

 

0%

 

$ 27,357

 

0%

 

$ 27,357

 

0%

Core Deposit Intangible

 

4,844

 

5,112

 

-5%

 

5,381

 

-10%

 

5,918

 

-18%

Total Intangible Assets

 

$ 32,201

 

$ 32,469

 

-1%

 

$ 32,738

 

-2%

 

$ 33,275

 

-3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CREDIT QUALITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(balances in $000's, unaudited)

 

 

 

 

 

Jun '20 vs

 

 

 

Jun '20 vs

 

 

 

Jun '20 vs

 

 

6/30/2020

 

3/31/2020

 

Mar '20

 

12/31/2019

 

Dec '19

 

6/30/2019

 

Jun '19

Non-Accruing Loans

 

$ 5,808

 

$ 7,351

 

-21%

 

$ 5,737

 

+1%

 

$ 4,120

 

+41%

Foreclosed Assets

 

2,893

 

766

 

+278%

 

800

 

+262%

 

770

 

+276%

Total Nonperforming Assets

 

$ 8,701

 

$ 8,117

 

+7%

 

$ 6,537

 

+33%

 

$ 4,890

 

+78%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing TDR's (not incl. in NPA's)

 

$ 8,708

 

$ 8,188

 

+6%

 

$ 8,415

 

+3%

 

$ 9,246

 

-6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Perf Loans to Gross Loans

 

0.26%

 

0.41%

 

 

 

0.33%

 

 

 

0.23%

 

 

NPA's to Loans plus Foreclosed Assets

 

0.39%

 

0.45%

 

 

 

0.37%

 

 

 

0.27%

 

 

Allowance for Ln Losses to Loans

 

0.61%

 

0.64%

 

 

 

0.56%

 

 

 

0.56%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SELECT PERIOD-END STATISTICS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6/30/2020

 

3/31/2020

 

 

 

12/31/2019

 

 

 

6/30/2019

 

 

Shareholders Equity / Total Assets

 

10.5%

 

12.0%

 

 

 

11.9%

 

 

 

11.5%

 

 

Gross Loans / Deposits

 

88.2%

 

82.5%

 

 

 

81.3%

 

 

 

81.6%

 

 

Non-Int. Bearing Dep. / Total Dep.

 

37.9%

 

32.3%

 

 

 

31.9%

 

 

 

30.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED INCOME STATEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in $000's, unaudited)

 

 

Qtr Ended:

2Q20 vs

 

Qtr Ended:

2Q20 vs

 

Six Months Ended:

YTD20 vs

 

 

 

6/30/2020

 

3/31/2020

1Q20

 

6/30/2019

2Q19

 

6/30/2020

 

6/30/2019

YTD19

Interest Income

 

$

25,386

$

26,051

-3%

$

27,788

-9%

$

51,437

$

55,271

-7%

Interest Expense

 

 

1,243

 

2,264

-45%

 

3,589

-65%

 

3,508

 

7,099

-51%

Net Interest Income

 

 

24,143

 

23,787

+1%

 

24,199

0%

 

47,929

 

48,172

-1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for Loan & Lease Losses

 

 

2,200

 

1,800

+22%

 

400

+450%

 

4,000

 

700

+471%

Net Int after Provision

 

 

21,943

 

21,987

0%

 

23,799

-8%

 

43,929

 

47,472

-7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service Charges

 

 

2,618

 

3,183

-18%

 

3,151

-17%

 

5,802

 

6,094

-5%

BOLI Income

 

 

649

 

38

+1608%

 

127

+411%

 

687

 

1,027

-33%

Gain (Loss) on Investments

 

 

390

 

-

NM

 

22

+1673%

 

390

 

28

+1293%

Other Noninterest Income

 

 

3,243

 

2,885

+12%

 

2,555

+27%

 

6,128

 

4,613

+33%

Total Noninterest Income

 

 

6,900

 

6,106

+13%

 

5,855

+18%

 

13,007

 

11,762

+11%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries & Benefits

 

 

9,266

 

10,172

-9%

 

8,994

+3%

 

19,438

 

18,237

+7%

Occupancy Expense

 

 

2,504

 

2,327

+8%

 

2,450

+2%

 

4,832

 

4,811

0%

Other Noninterest Expenses

 

 

6,263

 

5,319

+18%

 

6,212

+1%

 

11,581

 

12,461

-7%

Total Noninterest Expense

 

 

18,033

 

17,818

+1%

 

17,656

+2%

 

35,851

 

35,509

+1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Before Taxes

 

 

10,810

 

10,275

+5%

 

11,998

-10%

 

21,085

 

23,725

-11%

Provision for Income Taxes

 

 

2,507

 

2,468

+2%

 

3,169

-21%

 

4,975

 

6,001

-17%

Net Income

 

$

8,303

$

7,807

+6%

$

8,829

-6%

$

16,110

$

17,724

-9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TAX DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax-Exempt Muni Income

 

$

1,440

$

1,339

+8%

$

1,072

+34%

$

2,778

$

2,117

+31%

Interest Income - Fully Tax Equivalent

 

$

25,769

$

26,407

-2%

$

28,073

-8%

$

52,175

$

55,834

-7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET CHARGE-OFFS

 

$

93

$

270

-66%

$

(45)

NM

$

363

$

567

-36%

Note: An "NM" designation indicates that the percentage change is "Not Meaningful", likely due to the fact that numbers for the comparative periods are of opposite signs or because the denominator is zero 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PER SHARE DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

Qtr Ended:

2Q20 vs

 

Qtr Ended:

2Q20 vs

 

Six Months Ended:

YTD20 vs

 

 

 

6/30/2020

 

3/31/2020

1Q20

 

6/30/2019

2Q19

 

6/30/2020

 

6/30/2019

YTD19

Basic Earnings per Share

 

 

$0.55

 

$0.51

+8%

 

$0.58

-5%

 

$1.06

 

$1.16

-9%

Diluted Earnings per Share

 

 

$0.54

 

$0.51

+6%

 

$0.57

-5%

 

$1.05

 

$1.15

-9%

Common Dividends

 

 

$0.20

 

$0.20

0%

 

$0.18

+11%

 

$0.40

 

$0.36

+11%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wtd. Avg. Shares Outstanding

 

 

15,191,823

 

15,262,252

0%

 

15,329,907

-1%

 

15,226,748

 

15,320,784

-1%

Wtd. Avg. Diluted Shares

 

 

15,237,655

 

15,340,017

-1%

 

15,458,320

-1%

 

15,288,009

 

15,453,212

-1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book Value per Basic Share (EOP)

 

 

$21.55

 

$21.03

+2%

 

$19.36

+11%

 

$21.55

 

$19.36

+11%

Tangible Book Value per Share (EOP)

 

 

$19.43

 

$18.89

+3%

 

$17.19

+13%

 

$19.43

 

$17.19

+13%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares Outstanding (EOP)

 

 

15,192,838

 

15,190,038

0%

 

15,332,550

-1%

 

15,192,838

 

15,332,550

-1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KEY FINANCIAL RATIOS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

Qtr Ended:

 

 

Qtr Ended:

 

 

Six Months Ended:

 

 

 

 

6/30/2020

 

3/31/2020

 

 

6/30/2019

 

 

6/30/2020

 

6/30/2019

 

Return on Average Equity

 

 

10.30%

 

9.97%

 

 

12.27%

 

 

10.14%

 

12.62%

 

Return on Average Assets

 

 

1.19%

 

1.23%

 

 

1.39%

 

 

1.21%

 

1.41%

 

Net Interest Margin (Tax-Equiv.)

 

 

3.81%

 

4.13%

 

 

4.21%

 

 

3.97%

 

4.25%

 

Efficiency Ratio (Tax-Equiv.)

 

 

57.78%

 

58.88%

 

 

58.17%

 

 

58.33%

 

58.46%

 

Net C/O's to Avg Loans (not annualized)

 

 

0.00%

 

0.02%

 

 

0.00%

 

 

0.02%

 

0.03%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AVERAGE BALANCE SHEET, INTEREST INCOME/EXPENSE, & YIELD/RATE

 

 

 

 

 

 

 

 

 

 

(balances in $000's, unaudited)

 

For the quarter ended

For the quarter ended

For the quarter ended

 

 

June 30, 2020

March 31, 2020

June 30, 2019

 

 

Average Balance

 

Income/ Expense

 

Yield/ Rate

Average Balance

 

Income/ Expense

 

Yield/ Rate

Average Balance

 

Income/ Expense

 

Yield/ Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal funds sold/int-earning due from's

 

$ 53,209

 

$ 12

 

0.09%

$ 37,124

 

$ 140

 

1.52%

$ 18,795

 

$ 115

 

2.45%

Taxable

 

403,517

 

2,250

 

2.24%

408,591

 

2,460

 

2.42%

425,498

 

2,591

 

2.44%

Non-taxable

 

216,746

 

1,440

 

3.38%

195,690

 

1,339

 

3.48%

149,555

 

1,072

 

3.64%

Total investments

 

673,472

 

3,702

 

2.44%

641,405

 

3,939

 

2.69%

593,848

 

3,778

 

2.74%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and Leases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate

 

1,477,380

 

18,355

 

5.00%

1,394,911

 

18,722

 

5.40%

1,459,871

 

20,098

 

5.52%

Agricultural Production

 

47,806

 

452

 

3.80%

48,532

 

583

 

4.83%

51,285

 

793

 

6.20%

Commercial

 

170,876

 

1,080

 

2.54%

107,696

 

1,097

 

4.10%

120,081

 

1,537

 

5.13%

Consumer

 

6,667

 

225

 

13.57%

7,583

 

368

 

19.52%

8,661

 

292

 

13.52%

Mortgage warehouse lines

 

206,669

 

1,532

 

2.98%

144,621

 

1,264

 

3.52%

98,249

 

1,239

 

5.06%

Other

 

2,811

 

39

 

5.58%

5,242

 

78

 

5.98%

3,426

 

51

 

5.97%

Total loans and leases

 

1,912,209

 

21,683

 

4.56%

1,708,585

 

22,112

 

5.21%

1,741,573

 

24,010

 

5.53%

Total interest earning assets

 

2,585,681

 

$ 25,385

 

4.01%

2,349,990

 

$ 26,051

 

4.52%

2,335,421

 

$ 27,788

 

4.82%

Other earning assets

 

13,190

 

 

 

 

12,841

 

 

 

 

12,505

 

 

 

 

Non-earning assets

 

207,623

 

 

 

 

196,906

 

 

 

 

204,491

 

 

 

 

Total assets

 

$ 2,806,494

 

 

 

 

$ 2,559,737

 

 

 

 

$ 2,552,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

$ 134,159

 

$ 71

 

0.21%

$ 88,731

 

$ 62

 

0.28%

$ 120,018

 

$ 88

 

0.29%

NOW

 

481,679

 

83

 

0.07%

456,586

 

122

 

0.11%

437,040

 

134

 

0.12%

Savings accounts

 

327,833

 

46

 

0.06%

297,721

 

73

 

0.10%

289,767

 

77

 

0.11%

Money market

 

125,594

 

31

 

0.10%

117,249

 

43

 

0.15%

123,482

 

43

 

0.14%

Time Deposits

 

442,762

 

625

 

0.57%

460,551

 

1,367

 

1.19%

489,486

 

2,467

 

2.02%

Wholesale Brokered Deposits

 

19,890

 

37

 

0.75%

40,824

 

167

 

1.65%

47,890

 

284

 

2.38%

Total interest bearing deposits

 

1,531,917

 

893

 

0.23%

1,461,662

 

1,834

 

0.50%

1,507,683

 

3,093

 

0.82%

Borrowed funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Junior Subordinated Debentures

 

35,009

 

311

 

3.57%

34,962

 

394

 

4.53%

34,830

 

470

 

5.41%

Other Interest-Bearing Liabilities

 

45,936

 

39

 

0.34%

33,432

 

36

 

0.43%

22,546

 

26

 

0.46%

Total borrowed funds

 

80,945

 

350

 

1.74%

68,394

 

430

 

2.53%

57,376

 

496

 

3.47%

Total interest bearing liabilities

 

1,612,862

 

$ 1,243

 

0.31%

1,530,056

 

$ 2,264

 

0.60%

1,565,059

 

$ 3,589

 

0.92%

Demand deposits - Noninterest bearing

 

830,333

 

 

 

 

678,592

 

 

 

 

655,136

 

 

 

 

Other liabilities

 

39,155

 

 

 

 

36,220

 

 

 

 

43,550

 

 

 

 

Shareholders' equity

 

324,144

 

 

 

 

314,869

 

 

 

 

288,672

 

 

 

 

Total liabilities and shareholders' equity

 

$ 2,806,494

 

 

 

 

$ 2,559,737

 

 

 

 

$ 2,552,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income/interest earning assets

 

 

 

 

 

4.01%

 

 

 

 

4.52%

 

 

 

 

4.82%

Interest expense/interest earning assets

 

 

 

 

 

0.20%

 

 

 

 

0.39%

 

 

 

 

0.61%

Net interest income and margin

 

 

 

$ 24,142

 

3.81%

 

 

$ 23,787

 

4.13%

 

 

$ 24,199

 

4.21%

Note: Where impacted by non-taxable income, yields and net interest margins have been computed on a tax equivalent basis utilizing a 21% tax rate

 

Kevin McPhaill, President/CEO
(559) 782‑4900 or (888) 454‑BANK
www.sierrabancorp.com

Source: Sierra Bancorp


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