Sierra Bancorp (Nasdaq: BSRR), parent of Bank of the Sierra,
today announced its unaudited financial results for the three-and
twelve-month periods ended December 31, 2022. Sierra Bancorp
reported consolidated net income in the fourth quarter of 2022 of
$7.1 million, or $0.47 per diluted share, compared to net income of
$9.6 million, or $0.63 per diluted share, in the fourth quarter of
2021. The Company's fourth quarter 2022 return on average assets
and return on average equity was 0.79% and 9.62%, respectively, as
compared to 1.10% and 10.47%, respectively, for the same
comparative period in 2021.
For the year ended 2022, the Company recognized net income of
$33.7 million, or $2.25 per diluted share, as compared to $43.0
million, or $2.80 per diluted share, for the same period in 2021.
The Company’s financial performance metrics for the year ended 2022
include a return on average assets and a return on average equity
of 0.97% and 10.66%, respectively, compared to 1.29% and 12.05%,
respectively, for the same period in 2021. The primary reason for
the change in earnings in 2022 as compared to 2021 is due to an
$14.5 million increase in the provision for credit losses on loans
and leases, net of taxes.
“As we exit 2022, we are very proud of the
accomplishments made by our banking team,” stated Kevin McPhaill,
President and CEO. “We successfully grew both loans and deposits
while navigating a challenging rate environment – not an easy task
for most financial institutions. As a community bank, we
demonstrate our commitment to all our markets every day and are
grateful for the positive response from our loyal customers. We
look forward to opportunities in the coming year and will continue
to work closely with our communities and customers to help us all
thrive in 2023 and beyond!” McPhaill concluded.
Financial Highlights
Quarterly Changes (comparisons to the fourth quarter of
2021)
- Net income for the fourth quarter of 2022 decreased $2.5
million or 26%, to $7.1 million. There was a $7.7 million increase
in the provision for credit losses on loan and leases. The increase
in the provision for credit losses is mostly due to a fourth
quarter 2022 charge-off of $6.8 million related to one dairy loan
relationship. This increase in provision for credit losses was
partially offset by a $2.8 million positive net interest income
variance along with a $0.5 million gain on a low-income housing tax
credit fund partnership investment, $0.5 million gain on the sale
of investment securities, and $0.4 million increase in
miscellaneous income.
- The $2.8 million increase to net interest income for the fourth
quarter of 2022 was driven by an $8.9 million expansion in
investment interest income, $6.7 million of which was from
collateralized loan obligations (“CLOs”), partially offset by a
$4.9 million increase in interest expense and a $1.2 million
decline in loan and lease interest income. The increase in interest
expense is largely due to a $3.1 million increase in expense
related to time deposit accounts and a $1.8 million increase in the
cost of borrowed funds. These increases to interest expense are due
to shift from being a net seller of Federal Funds at December 31,
2021 to a net purchaser of funds at December 31, 2022 coupled with
a 368 bp increase to the rate on the Prime Index Certificate of
Deposit account offered by the bank. The rate on the Prime Index
account is tied to a spread to the Wall Street Journal Prime Rate
and varies from Prime minus 400 bps to Prime minus 325 bps. During
2022, the Prime rate increased by 425 basis points. The yield on
interest earning assets increased 91 bps for the fourth quarter of
2022 while the cost of interest-bearing liabilities increased 90
bps resulting in a 32 bp increase in net interest margin.
- Noninterest income for the fourth quarter of 2022 increased
$0.6 million, or 8% due to a $0.3 million increase in other service
charge income, a $0.5 million gain on the sale of securities, and a
$0.5 million gain on a low-income tax credit fund partnership
investment. These favorable variances were partially offset by an
unfavorable change in income related to our investment in a Small
Business Investment Company.
- Noninterest expense for the fourth quarter of 2022 decreased by
$0.7 million. There was a $1.7 million increase in salaries and
benefits from the strategic hiring of lending and management staff,
offset by a positive $2.2 million variance in professional services
costs mostly due to legal expenses.
Year to-Date Changes (comparisons to the year ended
2021)
- Net income for 2022 decreased by $9.4 million, or 22% primarily
due to an $14.5 million increase in the provision for credit losses
on loans and leases, net of taxes.
- Noninterest income for 2022 increased by $2.7 million, or 10%,
due to increased service charge income of $0.7 million, a $1.5
million increase in the nonrecurring gains from the sales of
investment securities, an $0.8 million increase in the gain on
low-income tax credit fund investments and a $3.0 million increase
in gains from the sale of other assets. These increases were
partially offset by a $3.6 million unfavorable variance in the
fluctuation in income on bank-owned life insurance (BOLI) designed
to invest in funds to offset the Company’s deferred compensation
plan described in the next paragraph.
- Noninterest expense increased $1.2 million, or 1%, due mostly
to a $4.6 million increase in salary and benefits expense for new
loan production teams and a $0.7 million restitution payment to
customers charged nonsufficient fund fees on representments in the
past five years, partially offset by lower legal costs,
telecommunications, and a positive variance in director’s deferred
compensation expense which is linked to the unfavorable changes in
bank-owned life insurance income described in the above
paragraph.
Balance Sheet Changes (comparisons to December 31,
2021)
- Total assets increased by $237.6 million, or 7%, to $3.6
billion, during 2022, due mostly to an increase in deposits and
borrowed funds which facilitated loan growth and the purchase of
investment securities in 2022.
- Cash and due from banks decreased $180.4 million to $77.1
million for the year due mostly to an increase in investment
securities.
- Investment securities increased $298.5 million, or 31%, to $1.3
billion primarily due to $181.5 million in strategic purchases of
CLOs, as well as other investment securities.
- Gross loans increased $63.2 million due predominantly to the
purchase of $173.1 million in high quality jumbo single family
mortgage loan pools earlier in the year. Organic loan production
for the year ending 2022 was $292.2 million, as compared to $128.4
million for the comparative period in 2021. These loan increases
were offset by $317.8 million in loan maturities, charge-offs and
payoffs, a $29.7 million decline in PPP balances due to loan
forgiveness by the SBA, and a decline in credit line utilization of
$84.3 million. The decrease in line utilization includes a $35.7
million decline in mortgage warehouse line utilization due to
higher interest rates reducing the demand for mortgages.
- Deposits totaled $2.8 billion at December 31, 2022,
representing a year-to-date increase of $64.6 million, or 2%. The
growth in deposits came primarily from an increase in time deposits
of $165.7 million offset by a decrease in other deposit balances of
$101.1 million.
- Short-term debt increased by $221.3 million during 2022 to
$328.2 million at December 31, 2022. Overnight repurchase
agreements increased $2.3 million to $109.2 million, FHLB
borrowings and overnight fed funds increased by $219.0
million.
Other financial highlights are reflected in the following
table.
FINANCIAL HIGHLIGHTS
(Dollars in Thousands, Except per Share
Data, Unaudited)
At or For the
At or For the
Three Months Ended
Twelve Months Ended
12/31/2022
9/30/2022
12/31/2021
12/31/2022
12/31/2021
Net income
$
7,113
$
9,935
$
9,621
$
33,659
$
43,012
Diluted earnings per share
$
0.47
$
0.66
$
0.63
$
2.25
$
2.80
Return on average assets
0.79
%
1.13
%
1.10
%
0.97
%
1.29
%
Return on average equity
9.62
%
12.84
%
10.47
%
10.66
%
12.05
%
Net interest margin (tax-equivalent)
3.63
%
3.63
%
3.31
%
3.47
%
3.56
%
Yield on average loans and leases
4.38
%
4.28
%
4.59
%
4.32
%
4.57
%
Yield on investments
4.40
%
3.51
%
1.55
%
3.07
%
1.66
%
Cost of average total deposits
0.51
%
0.24
%
0.08
%
0.24
%
0.09
%
Efficiency ratio (tax-equivalent)¹
57.55
%
58.10
%
64.86
%
60.16
%
59.92
%
Total assets
$
3,608,590
$
3,532,289
$
3,371,014
$
3,608,590
$
3,371,014
Loans & leases net of deferred
fees
$
2,052,817
$
2,020,016
$
1,987,861
$
2,052,817
$
1,987,861
Noninterest demand deposits
$
1,088,199
$
1,118,245
$
1,084,544
$
1,088,199
$
1,084,544
Total deposits
$
2,846,164
$
2,885,468
$
2,781,572
$
2,846,164
$
2,781,572
Noninterest-bearing deposits over total
deposits
38.2
%
38.8
%
39.0
%
38.2
%
39.0
%
Shareholders' equity / total assets
8.4
%
8.4
%
10.8
%
8.4
%
10.8
%
Tangible Common equity ratio
7.7
%
7.6
%
9.9
%
7.7
%
9.9
%
Book value per share
$
20.01
$
19.56
$
23.74
$
20.01
$
23.74
Tangible book value per share
$
18.06
$
17.58
$
21.73
$
18.06
$
21.73
(1)
Noninterest expense as a percentage of the
sum of net interest income and noninterest income excluding net
gains (losses) from securities.
INCOME STATEMENT HIGHLIGHTS
Net Interest Income
Net interest income was $29.4 million for the fourth quarter of
2022, a $2.8 million increase, or 11% over the fourth quarter of
2021, and increased $0.6 million, or 1%, to $109.6 million for the
year ended 2022 relative to the same period in 2021.
For the fourth quarter of 2022, growth in average
interest-earning assets totaled $52.5 million, or 2%, as compared
to the fourth quarter of 2021. The yield on these balances was 91
basis points higher for the same period due mostly to a shift in
the mix of earning assets and the result of recent interest rate
increases by the Federal Open Market Committee. This increase in
yield was offset by a 90 basis point increase in the cost of our
interest-bearing liabilities for the same period. Although
transaction and savings deposit rates have not changed, higher
costs of time deposits and borrowed funds including overnight
purchases are the primary reasons for the increase in interest
expense.
The Company continues to offer floating rate CDs which are
indexed to prime. These floating rate CDs increased $90.4 million,
or 38%, to $329.3 million at December 31, 2022, as compared to
$238.9 million at December 31, 2021. Due to the increase in the
prime rate during 2022, interest expense on floating rate CDs has
increased $2.5 million for the fourth quarter of 2022 over the
fourth quarter of 2021, and increased $3.8 million for the year
ending 2022 as compared to the same period in 2021. These CDs
require a minimum balance and pay a rate that is 325 – 400 basis
points below the Wall Street Journal Prime rate, with a 20 basis
point minimum rate. Any future increases in the Wall Street Journal
Prime rate will cause this interest expense to increase on the
entire balance of such accounts while a decline in the Prime rate
will result in an immediate reduction of interest expense on the
entire balance of such accounts.
Net interest income for the comparative year-to-date periods
increased $0.6 million, or 1%, due to a change in mix of average
interest-earning assets. Investment balances, with an average yield
of 3.07% increased $284.7 million, while gross average loan
balances yielding 4.32% decreased $163.3 million. The overall yield
on the average balances of earning assets was 15 basis points
higher for the comparative periods, partially offset by a 39 basis
point increase in interest paid on liabilities. The net impact was
a 9 basis point decrease in our net interest margin for the year
ending December 31, 2022, as compared to the same period in
2021.
The increase in investments includes a net increase of $166.2
million of exclusively AAA and AA tranches of floating rate CLOs,
for a total cost basis of $515.0 million at December 31, 2022. The
average yield on such CLOs for December 2022 was 6.11% as compared
to an average yield in December 2021 of 1.51%. These CLOs have
extensive prepurchase analyses performed with respect to the
individual issuances, as well as various internal concentration
limits. Although AAA and AA tranches of CLOs have historically not
had charge-offs, management monitors this portfolio quarterly.
Interest expense was $6.2 million for the fourth quarter of
2022, an increase of $4.9 million, relative to the fourth quarter
of 2021. For the year ended 2022, compared to the same period in
2021, interest expense increased $8.2 million, to $12.2 million.
The increase in interest expense for the quarterly comparison is
attributable to a $225.7 million increase in average
interest-bearing liabilities with a 90 bps increase in cost. The
increase was primarily in higher cost customer time deposits,
wholesale brokered deposits and short-term borrowings. Lower or no
cost average transaction and savings accounts decreased $64.6
million for the quarterly comparison. For the year-to-date
comparisons the increase is primarily impacted by a $118.5 million
increase in the average balance of borrowed funds combined with the
impact of recent interest rate increases, although some favorable
deposit mix changes did positively impact interest expense with
higher cost time deposits falling by $21.5 million or 5%, while
lower or no cost transaction and savings accounts increased $102.0
or 10%.
The Company had $1.3 billion in adjustable and variable rate
loans and $498.4 million in floating rate CLOs, as compared to
$329.3 million in floating rate CDs and $35.5 million in floating
rate trust preferred securities at December 31, 2022. The next rate
adjustment date on the adjustable rate loans vary and can be up to
ten years. It is expected that $255.7 million of the Company’s
adjustable and variable rate loans will reprice in the next twelve
months.
Our net interest margin was 3.63% for the fourth quarter of
2022, as compared to 3.63% for the linked quarter and 3.31% for the
fourth quarter of 2021.
Provision for Credit Losses on Loans and Leases
The Company recorded a provision related to credit losses on
loans and leases of $6.5 million in the fourth quarter of 2022
relative to a net benefit of $1.2 million in the fourth quarter of
2021, and a year-to-date provision for credit losses on loans and
leases of $10.9 million in 2022 as compared to a $3.7 million loan
and lease loss provision net benefit for the same period in 2021.
The Company's $7.7 million unfavorable increase in provision for
credit losses on loans and leases in the fourth quarter of 2022 as
compared to the fourth quarter of 2021, and the $14.5 million
unfavorable increase for the year ending 2022 compared to the same
period in 2021 are primarily due to the impact of $11.5 million in
net charge-offs during the year ending 2022. The elevated net
charge-offs were mostly due to two loan relationships; one dairy
loan relationship with total charge-offs of $8.7 million and a
single office building loan relationship that was sold at a $1.9
million discount due to an increased risk of default that would
have likely led to a prolonged collection period.
Noninterest Income
Total noninterest income reflects increases of $0.6 million, or
8%, for the quarter ended December 31, 2022 as compared to the same
quarter in 2021, and $2.7 million, or 10% for the year ended
December 31, 2022 as compared to the same period in 2021. The
quarterly comparison was primarily impacted by the sale of
investment securities for a gain of $0.5 million. For the
year-to-date comparison there was $0.7 million in higher service
charge income, $1.5 million in gains on the sale of investment
securities, a $0.8 million favorable change in other small business
partnership expenses, and $3.2 million in gains on the sale of
other assets partially offset by a $3.7 million unfavorable
fluctuation in income on Bank-Owned Life Insurance (BOLI)
associated with deferred compensation plans.
Service charges on customer deposit account income decreased
$0.1 million, or 3%, to $3.1 million in the fourth quarter of 2022
as compared to the fourth quarter of 2021. This decrease is
primarily due to lower overdraft income during the comparable
periods. This service charge income was $0.7 million higher, or 6%,
for the year ending December 31, 2022, as compared to the same
period in 2021. The increase for the year-to-date comparison is
primarily a result of increases in analysis fee and overdraft
income.
Noninterest Expense
Total noninterest expense decreased by $0.7 million, or 3%, in
the fourth quarter of 2022 relative to the fourth quarter of 2021,
and increased by $1.2 million, or 1%, for the year ended 2022 as
compared to the same period in 2021.
Salaries and Benefits were $1.7 million, or 17%, higher in the
fourth quarter of 2022 as compared to the fourth quarter of 2021
and $4.6 million, or 11%, higher for the year ended 2022 compared
to the same period in 2021. Overall full-time equivalent employees
were 491 at December 31, 2022 as compared to 480 at December 31,
2021. This increase accounted for the unfavorable quarterly and
year-to-date variances. The increase in FTE was due to the
strategic hiring of lending and management staff during 2022.
Occupancy expenses were $0.2 million higher for the fourth
quarter of 2022 as compared to the same quarter in 2021 and $0.1
million lower for the year ended 2022 as compared to the same
period in 2021. The primary reason for increase in the quarterly
comparison was an increase in furniture and equipment expense to
outfit our new agricultural loan production offices while the
decrease in the year-to-date comparison was from the consolidation
of five branch facilities in 2021.
Other noninterest expense decreased $2.6 million, or 27%, for
the fourth quarter 2022 as compared to the fourth quarter in 2021,
and decreased $3.3 million, or 10%, for the year ended 2022 as
compared to the same period in 2021. The variance for the fourth
quarter of 2022 compared to the same period in 2021 was primarily
driven by a decrease of $2.3 million in legal and audit review
costs due mostly to decreases in legal costs, related legal
reserves, decreased costs related to certain audit functions which
were previously outsourced, and lower hiring/recruiting costs. For
the year-over-year comparison the categories of decrease were legal
costs for $2.5 million, certain audit costs for $0.6 million,
director’s deferred compensation expense for $2.2 million which is
linked to the fluctuation in BOLI income, $0.6 million in reduced
ATM network costs, $0.4 million in lower consultant costs and $0.5
million in reduced telecommunication costs, partially offset by
$0.7 million in restitution payments to customers charged
nonsufficient fund fees in the past five years for representments,
$0.9 million in increased debit card processing costs and $0.4
million in increased core processing costs. In late 2022, the
Company renegotiated its core processing contract and expects
annual savings from this renegotiation of approximately $1.0
million. In addition, the Company is expecting to convert its debit
card processing to a new provider in the second quarter of 2023
which will result in lower processing costs.
The Company's provision for income taxes was 21.1% of pre-tax
income in the fourth quarter of 2022 relative to 24.2% in the
fourth quarter of 2021, and 25.1% of pre-tax income for the year
ended December 31, 2022 relative to 24.8% for the same period in
2021. The decrease in effective tax rate in the fourth quarter is
due to tax credits and tax-exempt income representing a larger
percentage of total taxable income, while the year-to-date increase
is the opposite with tax credits and tax-exempt income representing
a smaller percentage of total taxable income. The decline in
tax-exempt income is due mostly to unfavorable changes in
bank-owned life insurance with investments linked to the Company’s
deferred compensation plan.
Balance Sheet Summary
Balance sheet changes for the year ended December 31, 2022
include an increase in total assets of $237.6 million, or 7%,
primarily as a result of a $298.5 million increase in investment
securities, a $63.2 million increase in gross loans and leases, a
$63.4 million increase in other assets, net of a $180.4 million
decrease in cash and due from banks.
The increase in investment securities of $298.5 million in 2022
consisted primarily of purchases of $60.8 million of U.S.
government agency securities, municipal bonds of $175.6 million,
corporate securities of $36.7 million, AAA and AA tranches of
floating rate CLOs of $181.5 million, and mortgage-backed
securities of $71.9 million, offset by principal paydowns and
maturities. The purchases of AAA and AA tranches of CLOs in 2021
and 2022 were primarily a balance sheet diversification strategy.
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.
Gross loan balances increased $63.2 million during the year
ended December 31, 2022. The increase was primarily a result of an
increase in 1-4 family residential real estate loans, mostly from
the purchase of $173.1 million in high quality jumbo mortgage
loans. Other positive variances from organic growth included a $6.7
million increase in agricultural real estate, and a $38.2 million
increase in multi-family real estate. Negatively impacting these
positive variances were loan paydowns and maturities resulting in
net declines in many categories even with solid loan production. In
particular, there was a $28.3 million net decrease in construction
loans, a $33.0 million decrease in commercial and industrial loans,
a $6.1 million decrease in agricultural production loans and a
$35.7 million unfavorable variance in mortgage warehouse loans.
Further, SBA PPP loan forgiveness resulted in a $29.7 million
decline in loan balances, included in the commercial and industrial
variance noted above.
As indicated in the loan roll forward below, new credit extended
for the fourth quarter of 2022 increased $31.8 million over the
same period in 2021 and increased $163.9 million for the
year-to-date comparisons. This organic loan growth is attributable
to the new agricultural and commercial real estate lending teams
added earlier this year. Contributing to our organic growth, loans
purchased during the year ending 2022 totaled $173.1 million,
however, we had $317.8 million in loan paydowns and maturities,
along with a $35.7 million decrease in mortgage warehouse line
utilization and a $48.6 million decrease in line of credit
utilization.
LOAN ROLLFORWARD
(Dollars in Thousands, Unaudited)
For the three months
ended:
For the twelve months
ended:
December 31, 2022
September 30, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Gross loans beginning balance
$
2,020,364
$
2,022,662
$
2,139,826
$
1,989,726
$
2,463,111
New credit extended
67,170
82,958
35,415
292,224
128,365
Loan purchases
—
—
85,700
173,082
207,991
Changes in line of credit utilization
(3,361
)
(7,811
)
(53,910
)
(48,562
)
(109,419
)
Change in mortgage warehouse
18,885
(11,581
)
(25,302
)
(35,745
)
(206,494
)
Pay-downs, maturities, charge-offs and
amortization (1)
(50,118
)
(65,864
)
(192,003
)
(317,785
)
(493,828
)
Gross loans ending balance
2,052,940
2,020,364
1,989,726
2,052,940
1,989,726
(1)
Includes $1.6 million from the sale of a
performing loan during the second quarter of 2022.
Unused commitments, excluding mortgage warehouse and overdraft
lines, were $219.7 million at December 31, 2022, compared to $219.6
million at December 31, 2021. Total line utilization, excluding
mortgage warehouse and overdraft lines, was 59% at December 31,
2022 and 61% at December 31, 2021 and was 32% at December 31, 2022
and 48% at December 31, 2021, including mortgage warehouse lines.
Mortgage warehouse utilization declined to 10% at December 31,
2022, as compared to 27% at December 31, 2021. Total mortgage
warehouse availability increased to $594.6 million at December 31,
2022 as compared to $276.8 million at December 31, 2021.
PPP loans continue to decline as borrowers receive forgiveness
on these loans. There were 14 loans for $1.8 million outstanding at
December 31, 2022, compared to 440 loans for $31.8 million at
December 31, 2021.
Deposit balances reflect growth of $64.6 million, or 2%, during
the year ended December 31, 2022. Core non-maturity deposits
decreased by $101.1 million, or 4%, while customer time deposits
increased by $105.7 million, or 36%. Wholesale brokered deposits
increased by $60.0 million to $120.0 million. Overall
noninterest-bearing deposits as a percent of total deposits at
December 31, 2022, decreased to 38.2%, as compared to 39.0% at
December 31, 2021.
Long term debt, which consisted of $35.5 million in trust
preferred securities and $49.2 million in subordinated debt was
$84.7 million for the year ended December 31, 2022 and remained
relatively unchanged during 2022.
Other interest-bearing liabilities of $328.2 million on December
31, 2022 consisted of $109.2 million in customer repurchase
agreements, $125.0 million in overnight fed funds purchased, and
$94.0 million in overnight FHLB advances. Other interest-bearing
liabilities at December 31, 2021 consisted exclusively of $106.9
million in customer repurchase agreements.
The Company continues to have substantial liquidity. At December
31, 2022, and December 31, 2021, the Company had the following
sources of primary and secondary liquidity (Dollars in Thousands,
Unaudited):
Primary and Secondary Liquidity
Sources
December 31, 2022
December 31, 2021
Cash and due from banks
$
77,131
$
257,528
Unpledged investment securities
1,097,164
806,132
Excess pledged securities
43,096
47,024
FHLB borrowing availability
718,842
787,519
Unsecured lines of credit
237,000
305,000
Funds available through fed discount
window
42,278
50,608
Totals
$
2,215,511
$
2,253,811
Total capital of $303.6 million at December 31, 2022 reflects a
decrease of $58.9 million, or 16%, relative to year-end 2021. The
decrease in equity during the year ended December 31, 2022 was
primarily due to a $67.7 million unfavorable swing in accumulated
other comprehensive income (loss), a one-time adjustment from the
implementation of CECL on January 1, 2022, for $7.3 million, $13.9
million in dividends paid, and $4.9 million in share repurchases.
The declines were partially offset by $33.7 million in net income.
The remaining difference is related to stock options exercised and
restricted stock granted during the year.
Asset Quality
Total nonperforming assets, comprised of nonaccrual loans,
increased by $15.0 million to $19.6 million for the year ended
December 31, 2022. The Company's ratio of nonperforming loans to
gross loans increased to 0.96% at December 31, 2022 from 0.23% at
December 31, 2021. The increase resulted from an increase in
non-accrual loan balances, primarily as a result of a downgrade in
the first quarter of 2022 of one loan relationship in the dairy
industry consisting of four separate loans. At December 31, 2022,
nonaccrual loans totaled $19.6 million compared to $4.5 million at
December 31, 2021. 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.
Subsequent to year end, $18.1 million of nonaccrual loans within
the aforementioned dairy relationship were foreclosed upon and were
moved to other real estate owned or other foreclosed assets at net
realizable value. The Company sold a portion of such assets for
$2.4 million, which constituted book value, and continues to
actively work with interested buyers to sell the remaining assets
of the dairy.
The Company's allowance for credit losses on loans and leases
was $23.1 million at December 31, 2022, as compared to a balance of
$14.3 million at December 31, 2021. The allowance was 1.12% of
total loans at December 31, 2022 and was 0.72% of total loans at
December 31, 2021.
The $8.8 million increase in the allowance for credit losses on
loans and leases during the year ended December 31, 2022, resulted
from a $9.5 million one-time adjustment from the implementation of
CECL on January 1, 2022, a $10.9 million provision for credit
losses on loans and leases, offset by net loan charge-offs of $11.5
million.
Management's detailed analysis indicates that the Company's
allowance for credit losses on loans and leases should be
sufficient to cover credit losses inherent in loan and lease
balances outstanding as of December 31, 2022, 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.
About Sierra Bancorp
Sierra Bancorp is the holding Company for Bank of the Sierra
(www.bankofthesierra.com), which is in its 46th 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 agricultural credit centers in
Templeton, California, an SBA center, and a loan production office
in Roseville, California. In 2022, 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, loan portfolio
performance, 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, 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
(Dollars in Thousands, Unaudited)
ASSETS
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
Cash and due from banks
$
77,131
$
86,683
$
161,875
$
253,534
$
257,528
Investment securities
Available-for-sale, at fair value
934,923
1,069,434
864,178
1,025,032
973,314
Held-to-maturity, at amortized cost, net
of allowance for credit losses
336,881
156,211
161,399
-
-
Real estate loans
1-4 family residential construction
-
-
5,542
8,800
21,369
Other construction/land
18,412
18,315
20,816
24,633
25,299
1-4 family - closed-end
416,116
420,136
429,109
398,871
289,457
Equity lines
21,330
21,126
25,260
23,389
26,588
Multi-family residential
91,691
69,665
66,367
59,711
53,458
Commercial real estate - owner
occupied
323,873
324,696
312,060
331,764
334,446
Commercial real estate - non-owner
occupied
893,846
896,954
898,159
857,051
882,888
Farmland
113,394
117,385
101,675
98,865
106,706
Total real estate loans
1,878,662
1,868,277
1,858,988
1,803,084
1,740,211
Agricultural production loans
27,936
31,290
28,660
31,663
33,990
Commercial & industrial
76,779
70,147
72,616
87,173
109,791
Mortgage warehouse lines
65,439
46,553
58,134
57,178
101,184
Consumer loans
4,124
4,097
4,264
4,233
4,550
Gross loans & leases
2,052,940
2,020,364
2,022,662
1,983,331
1,989,726
Deferred loan & lease fees
(123
)
(348
)
(1,081
)
(1,200
)
(1,865
)
Allowance for credit losses on loans and
leases
(23,060
)
(23,790
)
(22,802
)
(22,530
)
(14,256
)
Net loans & leases
2,029,757
1,996,226
1,998,779
1,959,601
1,973,605
Bank premises & equipment
22,478
22,688
22,937
23,239
23,571
Other assets
207,420
201,047
187,467
157,448
142,996
Total assets
$
3,608,590
$
3,532,289
$
3,396,635
$
3,418,854
$
3,371,014
LIABILITIES & CAPITAL
Noninterest demand deposits
$
1,088,199
$
1,118,245
$
1,120,413
$
1,104,691
$
1,084,544
Interest-bearing transaction accounts
641,581
732,468
736,034
776,457
744,553
Savings deposits
456,981
481,882
482,140
480,178
450,785
Money market deposits
139,795
140,620
152,596
149,918
147,793
Customer time deposits
399,608
332,253
299,816
293,699
293,897
Wholesale brokered deposits
120,000
80,000
60,000
60,000
60,000
Total deposits
2,846,164
2,885,468
2,850,999
2,864,943
2,781,572
Long-term debt
49,214
49,196
49,173
49,151
49,141
Junior subordinated debentures
35,481
35,436
35,392
35,347
35,302
Other interest-bearing liabilities
328,169
215,112
118,014
107,760
106,937
Total deposits & interest-bearing
liabilities
3,259,028
3,185,212
3,053,578
3,057,201
2,972,952
Allowance for credit losses on unfunded
loan commitments
840
940
893
1,040
203
Other liabilities
45,140
51,065
43,117
34,922
35,365
Total capital
303,582
295,072
299,047
325,691
362,494
Total liabilities & capital
$
3,608,590
$
3,532,289
$
3,396,635
$
3,418,854
$
3,371,014
GOODWILL & INTANGIBLE
ASSETS
(Dollars in Thousands, Unaudited)
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
Goodwill
$
27,357
$
27,357
$
27,357
$
27,357
$
27,357
Core deposit intangible
2,275
2,517
2,769
3,022
3,275
Total intangible assets
$
29,632
$
29,874
$
30,126
$
30,379
$
30,632
CREDIT QUALITY
(Dollars in Thousands, Unaudited)
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
Non-accruing loans
$
19,579
$
26,772
$
29,745
$
30,446
$
4,522
Foreclosed assets
-
-
2
93
93
Total nonperforming assets
$
19,579
$
26,772
$
29,747
$
30,539
$
4,615
Performing TDR's (not included in
NPA's)
$
4,522
$
4,639
$
4,714
$
4,568
$
4,910
Net charge offs (recoveries)
$
11,549
$
4,280
$
4,056
$
1,778
$
(168
)
Past due & still accruing (30-89)
$
1,203
$
1,242
$
1,037
$
2,809
$
2,013
Non-performing loans to gross loans
0.95
%
1.33
%
1.47
%
1.54
%
0.23
%
NPA's to loans plus foreclosed assets
0.95
%
1.33
%
1.47
%
1.54
%
0.23
%
Allowance for loan losses to loans
1.12
%
1.18
%
1.13
%
1.14
%
0.72
%
SELECT PERIOD-END STATISTICS
(Unaudited)
12/31/2022
9/30/2022
6/30/2022
3/31/2022
12/31/2021
Shareholders equity / total assets
8.4
%
8.4
%
8.8
%
9.5
%
10.8
%
Gross loans / deposits
72.1
%
70.0
%
70.9
%
69.2
%
71.5
%
Non-interest bearing deposits / total
deposits
38.2
%
38.8
%
39.3
%
38.6
%
39.0
%
CONSOLIDATED INCOME STATEMENT
(Dollars in Thousands, Unaudited)
For the three months
ended:
For the year ended:
12/31/2022
9/30/2022
12/31/2021
12/31/2022
12/31/2021
Interest income
$
35,603
$
31,928
$
27,897
$
121,819
$
113,076
Interest expense
6,240
3,017
1,331
12,204
4,050
Net interest income
29,363
28,911
26,566
109,615
109,026
Provision (benefit) for loan and lease
losses
6,538
1,212
(1,200
)
10,898
(3,650
)
Provision (benefit) for credit losses on
loans and leases
(100
)
47
-
(294
)
-
(Benefit) provision for credit losses on
unfunded loan commitments
45
-
-
63
-
Net interest income after provision
22,880
27,652
27,766
98,948
112,676
Service charges
3,074
3,216
3,169
12,535
11,846
BOLI income
255
(23
)
203
(996
)
2,648
Gain on investments
456
-
-
1,487
11
Other noninterest income
3,871
3,419
3,730
17,744
13,574
Total noninterest income
7,656
6,612
7,102
30,770
28,079
Salaries & benefits
11,983
11,521
10,237
47,053
42,431
Occupancy expense
2,549
2,470
2,366
9,718
9,837
Other noninterest expenses
6,990
7,005
9,572
28,032
31,288
Total noninterest expense
21,522
20,996
22,175
84,803
83,556
Income before taxes
9,014
13,268
12,693
44,915
57,199
Provision for income taxes
1,901
3,333
3,072
11,256
14,187
Net income
$
7,113
$
9,935
$
9,621
$
33,659
$
43,012
TAX DATA
Tax-exempt municipal income
$
2,879
$
2,346
$
1,761
$
8,805
$
6,218
Interest income - fully tax equivalent
$
36,368
$
32,552
$
28,365
$
124,160
$
114,729
PER SHARE DATA
(Unaudited)
For the three months
ended:
For the year ended:
12/31/2022
9/30/2022
12/31/2021
12/31/2022
12/31/2021
Basic earnings per share
$
0.47
$
0.66
$
0.63
$
2.25
$
2.82
Diluted earnings per share
$
0.47
$
0.66
$
0.63
$
2.25
$
2.80
Common dividends
$
0.23
$
0.23
$
0.22
$
0.92
$
0.87
Weighted average shares outstanding
14,998,567
14,954,503
15,226,834
14,955,756
15,241,957
Weighted average diluted shares
14,994,653
15,014,048
15,297,414
14,989,810
15,353,445
Book value per basic share (EOP)
$
20.01
$
19.56
$
23.74
$
20.01
$
23.74
Tangible book value per share (EOP)
$
18.06
$
17.58
$
21.73
$
18.06
$
21.73
Common shares outstanding (EOP)
15,170,372
15,085,675
15,270,010
15,170,372
15,270,010
KEY FINANCIAL RATIOS
(Unaudited)
For the three months
ended:
For the year ended:
12/31/2022
9/30/2022
12/31/2021
12/31/2022
12/31/2021
Return on average equity
9.62
%
12.84
%
10.47
%
10.66
%
12.05
%
Return on average assets
0.79
%
1.13
%
1.10
%
0.97
%
1.29
%
Net interest margin (tax-equivalent)
3.63
%
3.63
%
3.31
%
3.47
%
3.56
%
Efficiency ratio (tax-equivalent)¹
57.55
%
58.10
%
64.86
%
60.16
%
59.92
%
Net charge-offs (recoveries) to avg loans
(not annualized)
0.36
%
0.01
%
0.01
%
0.58
%
(0.01
)%
(1)
Noninterest expense as a percentage of the
sum of net interest income and noninterest income excluding net
gains (losses) from securities.
NON-GAAP FINANCIAL MEASURES
(Unaudited)
12/31/2022
9/30/2022
12/31/2021
Total stockholders' equity
$
303,582
$
295,072
$
362,494
Less: goodwill and other intangible
assets
29,632
29,874
30,632
Tangible common equity
$
273,950
$
265,198
$
331,862
Total assets
$
3,608,590
$
3,532,289
$
3,371,014
Less: goodwill and other intangible
assets
29,632
29,874
30,632
Tangible assets
$
3,578,958
$
3,502,415
$
3,340,382
Common shares outstanding
15,170,372
15,085,675
15,270,010
Book value per common share
$
20.01
$
19.56
$
23.74
Tangible book value per common share
$
18.06
$
17.58
$
21.73
Equity ratio - GAAP (total stockholders'
equity / total assets)
8.41
%
8.35
%
10.75
%
Tangible common equity ratio (tangible
common equity / tangible assets)
7.65
%
7.57
%
9.93
%
NONINTEREST INCOME/EXPENSE
(Dollars in Thousands, Unaudited)
For three months
ended:
For twelve months
ended:
Noninterest income:
12/31/2022
9/30/2022
12/31/2021
12/31/2022
12/31/2021
Service charges on deposit accounts
$
3,074
$
3,216
$
3,169
$
12,535
$
11,846
Debit card fees
2,075
2,241
2,165
8,533
8,485
Bank-owned life insurance
255
(23
)
203
(996
)
2,648
Other service charges and fees
667
741
992
2,872
2,939
Gain on sale of securities
456
—
—
1,487
11
Gain (loss) on partnership investments
415
64
(133
)
253
(524
)
Other
714
373
706
6,086
2,674
Total noninterest income
$
7,656
$
6,612
$
7,102
$
30,770
$
28,079
As a % of average interest earning assets
(1)
0.92
%
0.81
%
0.87
%
0.95
%
0.90
%
Noninterest expense:
Salaries and employee benefits
$
11,983
$
11,521
$
10,237
$
47,053
$
42,431
Occupancy costs
Furniture & equipment
484
399
409
1,847
1,720
Premises
2,064
2,071
1,957
7,871
8,117
Advertising and marketing costs
407
466
539
1,729
1,521
Data processing costs
1,627
1,564
1,481
6,202
5,890
Deposit services costs
2,380
2,450
2,298
9,492
9,049
Loan services costs
Loan processing
124
128
158
550
501
Foreclosed assets
—
(3
)
(6
)
84
72
Other operating costs
Telephone & data communications
384
358
431
1,563
2,013
Postage & mail
47
47
56
373
308
Other
351
507
906
2,725
2,176
Professional services costs
Legal & accounting
380
535
2,703
2,133
4,794
Director's deferred compensation
86
(143
)
4
(1,106
)
1,137
Other professional service
806
855
796
3,111
2,878
Stationery & supply costs
172
114
85
486
345
Sundry & tellers
227
127
125
690
604
Total noninterest expense
$
21,522
$
20,996
$
22,179
$
84,803
$
83,556
As a % of average interest earning assets
(1)
2.59
%
2.58
%
2.72
%
2.63
%
2.69
%
Efficiency ratio (2)(3)
57.55
%
58.10
%
64.86
%
60.16
%
59.92
%
(1)
Annualized.
(2)
Tax equivalent.
(3)
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.
AVERAGE BALANCES AND RATES
(Dollars in Thousands, Unaudited)
For the quarter ended
For the quarter ended
For the quarter ended
December 31, 2022
September 30, 2022
December 31, 2021
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:
Federal funds sold/interest-earning due
from's
$ 5,548
$ 52
3.72
%
$ 21,845
$ 103
1.87
%
$ 311,386
$ 120
0.15
%
Taxable
884,020
10,176
4.57
%
851,683
7,646
3.56
%
593,959
2,403
1.61
%
Non-taxable
362,621
2,879
3.99
%
336,567
2,346
3.50
%
285,811
1,679
2.95
%
Total investments
1,252,189
13,107
4.40
%
1,210,095
10,095
3.51
%
1,191,156
4,202
1.55
%
Loans and Leases: (3)
Real estate
1,865,426
19,916
4.24
%
1,862,738
19,808
4.22
%
1,794,285
20,864
4.61
%
Agricultural Production
32,125
368
4.54
%
29,724
274
3.66
%
38,191
361
3.75
%
Commercial
74,370
1,032
5.51
%
75,482
973
5.11
%
118,159
1,457
4.89
%
Consumer
4,267
92
8.55
%
4,228
132
12.39
%
4,720
237
19.92
%
Mortgage warehouse lines
60,408
1,069
7.02
%
46,969
623
5.26
%
90,736
747
3.27
%
Other
2,356
19
3.20
%
2,349
23
3.88
%
1,430
29
8.05
%
Total loans and leases
2,038,952
22,496
4.38
%
2,021,490
21,833
4.28
%
2,047,521
23,695
4.59
%
Total interest earning assets (4)
3,291,141
35,603
4.38
%
3,231,585
31,928
4.00
%
3,238,677
27,897
3.47
%
Other earning assets
22,411
15,717
21,425
Non-earning assets
259,860
255,529
206,344
Total assets
$ 3,573,412
$ 3,502,831
$ 3,466,446
Liabilities and shareholders'
equity
Interest bearing deposits:
Demand deposits
$ 159,206
$ 128
0.32
%
$ 197,731
$ 131
0.26
%
$ 131,810
$ 80
0.24
%
NOW
510,776
78
0.06
%
531,205
80
0.06
%
615,245
112
0.07
%
Savings accounts
470,858
69
0.06
%
485,167
73
0.06
%
451,369
65
0.06
%
Money market
142,861
25
0.07
%
151,816
25
0.07
%
146,174
25
0.07
%
Time Deposits
367,164
2,859
3.09
%
313,764
1,377
1.74
%
291,516
241
0.33
%
Wholesale Brokered Deposits
115,652
554
1.90
%
63,529
75
0.47
%
60,000
49
0.32
%
Total interest bearing deposits
1,766,517
3,713
0.83
%
1,743,212
1,761
0.40
%
1,696,114
572
0.13
%
Borrowed funds:
Other Interest-Bearing Liabilities
253,384
1,519
2.38
%
159,530
390
0.98
%
98,326
86
0.35
%
Long-Term Debt
49,201
429
3.46
%
49,182
427
3.44
%
49,156
430
3.47
%
Subordinated Debentures
35,454
579
6.48
%
35,409
439
4.92
%
35,276
243
2.73
%
Total borrowed funds
338,039
2,527
2.97
%
244,121
1,256
2.04
%
182,758
759
1.65
%
Total interest bearing liabilities
2,104,556
6,240
1.18
%
1,987,333
3,017
0.60
%
1,878,872
1,331
0.28
%
Demand deposits - Noninterest bearing
1,116,622
1,140,840
1,120,323
Other liabilities
58,959
67,603
102,838
Shareholders' equity
293,275
307,055
364,413
Total liabilities and shareholders'
equity
$ 3,573,412
$ 3,502,831
$ 3,466,446
Interest income/interest earning
assets
4.38
%
4.00
%
3.47
%
Interest expense/interest earning
assets
0.75
%
0.37
%
0.16
%
Net interest income and margin
(5)
$ 29,363
3.63
%
$ 28,911
3.63
%
$ 26,566
3.31
%
(1)
Average balances are obtained from the
best available daily or monthly data and are net of deferred fees
and related direct costs.
(2)
Yields and net interest margin have been
computed on a tax equivalent basis utilizing a 21% effective tax
rate.
(3)
Loans are gross of the allowance for
possible credit losses. Loan fees have been included in the
calculation of interest income. Net loan fees and loan acquisition
FMV amortization were $0.005 million and $0.8 million for the
quarters ended December 31, 2022 and 2021, respectively, and $0.9
million for the quarter ended September 30, 2022.
(4)
Non-accrual loans have been included in
total loans for purposes of computing total earning assets.
(5)
Net interest margin represents net
interest income as a percentage of average interest-earning
assets.
AVERAGE BALANCES AND RATES
(Dollars in Thousands, Unaudited)
For the twelve months
ended
For the twelve months
ended
December 31, 2022
December 31, 2021
Average Balance (1)
Income/ Expense
Yield/ Rate (2)
Average Balance (1)
Income/ Expense
Yield/ Rate (2)
Assets
Investments:
Interest-earning due from banks
$
91,420
$
519
0.57
%
$
269,932
$
370
0.14
%
Taxable
808,750
25,789
3.19
%
406,790
7,239
1.78
%
Non-taxable
319,682
8,805
3.49
%
258,472
6,218
3.05
%
Total investments
1,219,852
35,113
3.07
%
935,194
13,827
1.66
%
Loans and leases:(3)
Real estate
$
1,831,874
$
77,708
4.24
%
$
1,818,362
84,074
4.62
%
Agricultural
31,565
1,176
3.73
%
42,866
1,598
3.73
%
Commercial
81,798
4,383
5.36
%
153,880
7,828
5.09
%
Consumer
4,301
638
14.83
%
4,993
831
16.64
%
Mortgage warehouse lines
54,606
2,695
4.94
%
147,996
4,807
3.25
%
Other
2,139
106
4.96
%
1,485
111
7.47
%
Total loans and leases
2,006,283
86,706
4.32
%
2,169,582
99,249
4.57
%
Total interest earning assets (4)
3,226,135
121,819
3.85
%
3,104,776
113,076
3.70
%
Other earning assets
15,685
15,043
Non-earning assets
243,340
208,665
Total assets
$
3,485,160
$
3,328,484
Liabilities and shareholders'
equity
Interest bearing deposits:
Demand deposits
$
195,192
$
485
0.25
%
$
143,171
$
331
0.23
%
NOW
532,692
322
0.06
%
597,992
444
0.07
%
Savings accounts
476,128
278
0.06
%
427,803
240
0.06
%
Money market
150,378
95
0.06
%
140,365
111
0.08
%
Time deposits
317,806
4,914
0.00
%
333,204
1,039
0.31
%
Brokered deposits
74,917
725
1.55
%
81,041
225
0.28
%
Total interest bearing deposits
1,747,113
6,819
0.97
%
1,723,576
2,390
0.14
%
Borrowed funds:
Other interest-bearing liabilities
158,095
2,069
1.31
%
75,629
213
0.28
%
Long-term debt
49,172
1,713
3.49
%
13,351
468
3.51
%
Subordinated debentures
35,387
1,603
3.87
%
35,208
979
2.78
%
Total borrowed funds
242,654
5,385
2.22
%
124,188
1,660
1.34
%
Total interest bearing liabilities
1,989,767
12,204
0.61
%
1,847,764
4,050
0.22
%
Demand deposits - noninterest bearing
1,121,060
1,064,119
Other liabilities
58,538
59,723
Shareholders' equity
315,795
356,878
Total liabilities and shareholders'
equity
$
3,485,160
$
3,328,484
Interest income/interest earning
assets
3.85
%
3.70
%
Interest expense/interest earning
assets
0.38
%
0.14
%
Net interest income and
margin(5)
$
109,615
3.47
%
$
109,026
3.56
%
(1)
Average balances are obtained from the
best available daily or monthly data and are net of deferred fees
and related direct costs.
(2)
Yields and net interest margin have been
computed on a tax equivalent basis.
(3)
Loans are gross of the allowance for
possible credit losses. Net loan fees have been included in the
calculation of interest income. Net loan fees and loan acquisition
FMV amortization were $0.9 million and $4.2 million for the years
ended December 31, 2022 and 2021, respectively.
(4)
Non-accrual loans are slotted by loan type
and have been included in total loans for purposes of total
interest earning assets.
(5)
Net interest margin represents net
interest income as a percentage of average interest-earning assets
(tax-equivalent).
Category: Financial
Source: Sierra Bancorp
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230130005058/en/
Kevin McPhaill, President/CEO (559) 782‑4900 or (888) 454‑BANK
www.sierrabancorp.com
Sierra Bancorp (NASDAQ:BSRR)
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