- Completed $50.0 million issuance of ten-year fixed-to-floating
subordinated debentures at 3.25% during the quarter.
- Net income for the first nine months of 2021 increased $6.9
million, or 26%, as compared to the same period in 2020.
- Return on average assets for the first nine months of 2021
improved to 1.36%, as compared to 1.26% for the same period in
2020.
- Deposit growth of $44.7 million, or 2%, during the third
quarter of 2021 and $196.0 million, or 7%, for the first nine
months of 2021.
Sierra Bancorp (Nasdaq: BSRR), parent of Bank of the Sierra,
today announced its unaudited financial results for the three- and
nine-month periods ended September 30, 2021. Sierra Bancorp
reported consolidated net income of $10.6 million, or $0.69 per
diluted share, for the third quarter of 2021, compared to $10.4
million, or $0.67 per diluted share in the third quarter of
2020.
For the first nine months of 2021, the Company recognized net
income of $33.4 million, or $2.17 per diluted share, as compared to
$26.5 million, or $1.73 per diluted share, for the same period in
2020. The Company’s financial performance metrics for the first
nine months of 2021 include an annualized return on average assets
and a return on average equity of 1.36% and 12.60%, respectively,
compared to 1.26% and 10.90%, respectively, for the same period in
2020.
“The most effective way to do it, is to do it.”
Amelia Earhart
“We are proud of our robust earnings in the third quarter, which
helped the Bank achieve its strongest net income for a nine-month
period in its history,” stated Kevin McPhaill, President and CEO.
“Our continued efforts in both core deposit and diversified earning
asset generation during 2021 have led to overall balance sheet
growth. This success is a result of our banking team’s
determination and perseverance. We are excited and ready for
opportunities in the fourth quarter and next year!” McPhaill
concluded.
Financial Highlights
Quarterly Changes (comparisons to the third quarter of
2020)
- Net income increased $0.3 million to $10.6 million, primarily
due to a $0.6 million negative provision for loan and lease losses
in the third quarter of 2021 as compared to a provision for loan
and lease losses of $2.35 million for the same period in 2020.
Compared to 2020, this decrease in provision is attributable to the
impact of continued improvements in the overall economy and lower
uncertainty, a reduction in historical loss rates, a decline in
specific reserves on impaired loans, net loan recoveries in 2021, a
change in the mix of loans, and lower outstanding balances of net
loans and leases.
- Net interest income decreased by $1.4 million mostly due to a
54 bps decline in the yield on earning assets and a shift in mix
due to higher levels of cash invested overnight with the Federal
Reserve Bank.
- Noninterest income increased $0.4 million or 6% primarily due
to increases in checkcard interchange fees from increased
usage.
- Noninterest expense increased by $1.6 million, due mostly to a
$0.9 million increase in salaries, a $0.4 million increase in
checkcard processing costs, and a $0.5 million increase in legal
expenses.
Year to-Date Changes (comparisons to the first nine-months of
2020)
- Net income increased $6.9 million, or 26%. The most significant
line-item changes were a $8.8 million decrease in the provision for
loan and lease losses, and an increase of $6.5 million or 8% in net
interest income, due mostly to higher average loan balances and a
continued favorable deposit mix.
- Noninterest income increased by $0.9 million, or 4%, due to
checkcard interchange fees, increases in BOLI income, and increases
in the fair market value of equity securities partially offset by
the fact that the third quarter of 2020 had certain nonrecurring
gains on the sales of investments, and other assets that did not
reoccur in the third quarter of 2021.
- Noninterest expense increased $6.2 million, or 11% due mostly
to the increases in salary expense, data processing, checkcard
processing costs and professional services expense.
Balance Sheet Changes (comparisons to December 31,
2020)
- Total assets increased by $222.0 million, or 7%, to $3.4
billion, during the first nine months of the year.
- Cash and due from banks increased $350.9 million, to $422.4
million during the first nine months of the year due mostly to
higher deposit balances coupled with lower loan balances.
- Investment securities increased 35% to $732.3 million primarily
due to bond purchases.
- Gross loans declined $323.3 million due predominantly to a
$181.2 million decline in mortgage warehouse line utilization, a
$63 million decline in real estate loans mostly due to lower
commercial real estate and construction loan balances, and a $76.8
million decrease in commercial and industrial loans, which was
mostly Small Business Administration Paycheck Protection Program
(“SBA PPP”) loan forgiveness.
- Deposits totaled $2.8 billion at September 30, 2021,
representing a year-to-date increase of $196.0 million, or 7%. The
growth in deposits came primarily from core transaction and savings
accounts, while higher-cost time and wholesale brokered deposits
decreased.
- Long-term debt increased to $49.2 million from the issuance of
$50 million in ten year 3.25% fixed to floating subordinated
notes.
Other financial highlights are reflected in the following
table.
FINANCIAL HIGHLIGHTS
(Dollars in Thousands, Except Per Share
Data, Unaudited)
As of or for the
As of or for the
three months ended
nine months ended
9/30/2021
6/30/2021
9/30/2020
9/30/2021
9/30/2020
Net income
$
10,605
$
11,708
$
10,356
$
33,391
$
26,465
Diluted earnings per share
$
0.69
$
0.76
$
0.68
$
2.17
$
1.73
Return on average assets
1.26
%
1.42
%
1.34
%
1.36
%
1.26
%
Return on average equity
11.62
%
13.29
%
12.34
%
12.60
%
10.90
%
Net interest margin (tax-equivalent)
3.46
%
3.60
%
3.98
%
3.66
%
3.97
%
Yield on average loans and leases
4.61
%
4.57
%
4.56
%
4.57
%
4.75
%
Cost of average total deposits
0.08
%
0.09
%
0.10
%
0.09
%
0.19
%
Efficiency ratio (tax-equivalent) (1)
59.75
%
58.79
%
53.74
%
58.29
%
56.64
%
Total assets
$
3,442,739
$
3,272,048
$
3,199,618
$
3,442,739
$
3,199,618
Loans & leases net of deferred
fees
$
2,137,214
$
2,140,961
$
2,377,222
$
2,137,214
$
2,377,222
Noninterest demand deposits
$
1,111,411
$
1,073,833
$
975,750
$
1,111,411
$
975,750
Total deposits
$
2,820,646
$
2,775,914
$
2,591,713
$
2,820,646
$
2,591,713
Noninterest-bearing deposits over total
deposits
39.4
%
38.7
%
37.6
%
39.4
%
37.6
%
Shareholders equity / total assets
10.6
%
10.9
%
10.5
%
10.6
%
10.5
%
Tangible common equity ratio (2)
9.8
%
10.1
%
9.6
%
9.8
%
9.6
%
Book value per share
$
23.70
$
23.21
$
21.92
$
23.70
$
21.92
Tangible book value per share (2)
$
21.69
$
21.19
$
19.84
$
21.69
$
19.84
(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
(2)
See reconciliation of non-GAAP financial
measures to the corresponding GAAP measurement in "Non-GAAP
Financial Measures" later in this document
INCOME STATEMENT HIGHLIGHTS
Net Interest Income
Net interest income was $26.7 million, for the third quarter of
2021, a $1.4 million decrease, or 5% over the third quarter of
2020, and increased $6.4 million, or 8% to $82.5 million for the
first nine months of 2021 relative to the same period in 2020.
For the third quarter of 2021, growth in average
interest-earning assets totaled $267.0 million, or 9%, as compared
to the third quarter of 2020. The yield on these balances was 54
basis points lower for the same period due mostly to a shift in the
mix of earning assets to lower yielding investment securities,
including cash held overnight at the Federal Reserve Bank. This
decrease in yield was slightly offset by an 2 basis point drop in
the cost of our interest-bearing liabilities for the same
period.
Net interest income for the comparative year-to-date periods
increased due to a $465.0 million, or 18% growth in average
interest-earning assets. The yield on these average balances was 43
basis points lower for the same period, but was partially offset by
a 17 basis point drop in interest paid on liabilities. The net
impact of this lower rate was a 31 basis point decrease in our net
interest margin for the nine-months ending September 30, 2021 as
compared to the same period in 2020.
Loan income during the third quarter 2021 included $0.8 million
related to fee income, net of origination costs, recognized on SBA
PPP loans. Similarly, SBA PPP loan fees, net of origination costs
of $3.3 million were recognized for the nine months ended September
30, 2021. At September 30, 2021, approximately $1.6 million of
unearned fees, net of origination costs related to SBA PPP loans
remains on the balance sheet.
Interest expense was $0.9 million for the third quarter of 2021,
a decline of $0.1 million, or 6%, relative to the third quarter of
2020. For the first nine months of 2021, compared to the first nine
months of 2020, interest expense declined $1.8 million, or 39%, to
$2.7 million. The significant decline in interest expense is
attributable to a favorable shift in deposit mix as the average
balance of higher cost time deposits declined by $134.8 million or
31% in the third quarter of 2021 as compared to the third quarter
of 2020, and fell by $38.5 million or 9% for the first nine months
of 2021 as compared to the same period in 2020, while lower or no
cost transaction and savings accounts increased $198.2 million, or
17%, for the third quarter of 2021 compared to the same period in
2020 and increased by $241.1 million, or 23%, for the first nine
months of 2021 over the same nine months in 2020.
Our net interest margin was significantly impacted by the
additional overnight cash balances resulting from increased
liquidity from deposit growth in 2021 coupled with lower loan
balances. This additional liquidity was mostly deployed in
overnight funding resulting in $380.0 million in average overnight
cash during the third quarter 2021 and $256.0 million in average
balances for the year-to-date period ending September 30, 2021.
This overnight funding earned an average rate of 15 and 13 basis
points, respectively, for the third quarter and nine-months ending
September 30, 2021.
In addition, investment yields have continued to decline given
the overall rate environment in 2021. The overall impact of a lower
net interest margin was more than offset by higher earning assets
in 2021 as compared to 2020 for the year-to-date comparisons.
However, for the third quarter of 2021 as compared to the same
quarter in 2020, the $267.0 million increase in average interest
earning balances did not fully offset the impact of the 54 bps
decline in yield.
Provision for Loan and Lease Losses
The Company recorded a net benefit related to loan and lease
loss provision of $0.6 million in the third quarter of 2021
relative to a provision of $2.4 million in the third quarter of
2020, and a year-to-date net benefit for loan and lease loss
provision of $2.5 million in 2021 as compared to $6.4 million loan
and lease loss provision expense for the same period in 2020. The
Company's $3.0 million, or 126%, favorable decline in provision for
loan and lease losses in the third quarter of 2021 as compared to
the third quarter of 2020, and the $8.8 million favorable decrease,
or 139%, in the first nine months of 2021 compared to the same
period in 2020 is due mostly to lower historical loan loss rates, a
decline in outstanding balances on loans, a change in the mix of
loans, and net year-to-date 2021 recoveries of previously
charged-off loan balances. During 2021, management adjusted its
qualitative risk factors under our current incurred loss model for
improved economic conditions, improvements in the severity and
volume of past due loans, and a reduction in the level of
concentrations of credit in non-owner occupied real estate
loans.
The Company was subject to the adoption in the first quarter of
2020 of the Current Expected Credit Loss ("CECL") accounting method
under Financial Accounting Standards Board (FASB) Accounting
Standards Update 2016-03 and related amendments, Financial
Instruments – Credit Losses (Topic 326). Prior to the close of the
first quarter of 2020, the Company elected under Section 4014 of
the Coronavirus Aid, Relief, and Economic Security (CARES) Act to
defer the implementation of CECL until the earlier of when the
national emergency related to the outbreak of COVID-19 ends or
December 31, 2020. Later in 2020, the Consolidated Appropriations
Act, 2021 extended the deferral of implementation of CECL to the
earlier of the first day of the fiscal year, beginning after the
national emergency terminates or January 1, 2022. The Company’s
decision to defer the adoption of CECL was done primarily to
provide additional time to better assess the impact of the COVID-19
pandemic on the expected lifetime credit losses. At the time the
decision was made, there was a significant change in economic
uncertainty on the local, regional, and national levels as a result
of local and state stay-at-home orders, as well as relief measures
provided at a national, state, and local level. Further, the
Company has taken actions to serve our communities during the
pandemic, including permitting short-term payment deferrals to
current customers, as well as originating bridge loans and SBA PPP
loans. Upon the adoption of CECL on January 1, 2022, the Company is
expected to record the anticipated increase in the allowance for
credit losses as an adjustment to equity, net of deferred
taxes.
Noninterest Income
Total noninterest income reflects increases of $0.4 million, or
6%, for the quarter ended September 30, 2021 as compared to the
same quarter in 2020, and $0.9 million, or 4%, for the year-to-date
period ended September 30, 2021 as compared to the same period in
2020. The quarterly and year-to-date comparisons were primarily
impacted by higher interchange income, however, the comparable
year-to-date periods also included an increase of $0.4 million in
the valuation gain of restricted equity investments owned by the
Company, a $0.4 million favorable fluctuation in income on
Bank-Owned Life Insurance (BOLI) associated with deferred
compensation plans, and a $0.6 million favorable change in
low-income housing tax credit fund expenses. The year-to-date
increases were offset by a $0.4 million gain on the sale of debt
securities from the restructuring of the portfolio in 2020 and a
$1.5 million nonrecurring gain on the wrap up of low-income housing
tax credit funds also in 2020.
Service charges on customer deposit account income increased
$0.2 million, or 8%, to $3.2 million in the third quarter of 2021
as compared to the third quarter of 2020. This increase is
primarily due to increases in analysis fee income during the
comparable periods. This service charge income was $0.1 million
lower, or 1%, in the first nine months of 2021, as compared to the
same period in 2020. The slight decline for the year-to-date
comparison is primarily a result of decreases in overdraft income,
mostly offset by increases in analysis fee income.
Noninterest Expense
Total noninterest expense increased by $1.6 million, or 8%, in
the third quarter of 2021 relative to the third quarter of 2020,
and by $6.2 million, or 11%, in the first nine months of 2021 as
compared to the same period in 2020.
Salaries and Benefits were $0.9 million, or 9%, higher in the
third quarter of 2021 as compared to the third quarter of 2020 and
$3.1 million, or 10%, higher for the first nine months of 2021
compared to the same period in 2020. Salary expense deferrals
related to the decrease in loan originations were primarily
responsible for the negative variance; there was a decrease in
salary deferrals of $0.5 million for the quarterly comparison and
$2.2 million for the year-to-date comparison. There were 482
full-time equivalent employees at September 30, 2021 as compared to
491 at September 30, 2020.
Occupancy expenses were $0.2 million lower for the third quarter
of 2021 as compared to the same quarter in 2020 and $0.1 million
higher for the first nine months of 2021 as compared to the same
period in 2020. The primary reason for decrease in the quarterly
comparison was the closure of five branch facilities earlier in the
year, which included the early termination of two leases
immediately. The acceleration of leasehold improvements was
responsible for the slight increase in the year-to-date
comparison.
Other noninterest expense increased $0.9 million, or 12%, for
the third quarter 2021 as compared to the third quarter in 2020,
and increased $3.1 million, or 17%, for the first nine months of
2021 as compared to the same period in 2020. The variance for the
third quarter of 2021 compared to the same period in 2020 was
primarily driven by an increase of $0.6 million in legal and
accounting costs due mostly to an increase in litigation costs.
Additionally, there were increases of $0.3 million in data
processing costs resulting from increases in core banking system
expenses, and $0.4 million in increase in checkcard processing
costs due to higher debit card usage. These higher costs were
partially offset by a $0.4 million decrease in foreclosed assets
costs, due to the sale of all but two bank owned properties. For
the year-over-year comparison the categories of increase were the
same as with the quarterly comparison, along with a $0.3 million
increase in FDIC assessments and a $0.3 million increase in
deferred compensation expense for directors, which is linked to the
changes in BOLI income.
The Company's provision for income taxes was 24.1% of pre-tax
income in the third quarter of 2021 relative to 23.4% in the third
quarter of 2020, and 25.0% of pre-tax income for the first nine
months of 2021 relative to 23.5% for the same period in 2020. The
increase in effective tax rate in the third quarter of 2021 is due
to tax credits and tax-exempt income representing a smaller
percentage of total taxable income.
Balance Sheet Summary
Balance sheet changes during the first nine months of 2021
include an increase in total assets of $222.0 million, or 7%,
primarily a result of increases in cash and due from banks and
investments securities of $350.9 million and $188.3 million,
respectively, net of a $320.6 million decrease in net loan
balances.
The increase in investment securities of $188.3 million for the
year-to-date period consisted primarily of increases in government
and agency securities, including mortgage backed securities and
collateralized mortgage obligations, of $13.2 million; municipal
bonds of $64.3 million; corporate securities of $16.3 million; and
AAA and AA tranches of collateralized loan obligations of $94.6
million. The purchases of AAA and AA tranches of collateralized
loan obligations (“CLOs”) in the third quarter of 2021 is primarily
a balance sheet diversification strategy as management continues to
utilize available liquidity. In addition to providing asset class
diversification given the high level of real estate backed earning
assets on the balance sheet, these floating rate CLOs are more
asset sensitive which complements the longer-term fixed-rate
earning assets.
Loan balances increased $14.4 million, excluding the impact of
the change in SBA PPP loans. SBA PPP loan forgiveness totalled
$17.9 million during the third quarter of 2021 as compared to the
end of the previous quarter. However, as mentioned above, loan
balances declined by $320.6 million as compared to December 31,
2020 primarily as a result of a $181.2 million decline in mortgage
warehouse line utilization, a $76.8 million decline in SBA PPP
loans due mostly to forgiveness of such loans, and a net decrease
of $63.0 million in real estate secured loans, primarily from
construction and other commercial real estate loans.
During 2021, the Company strategically lowered its regulatory
commercial real estate concentration ratio from 378% at December
31, 2020 to 308% at September 30, 2021, although it is expected to
moderately increase this concentration ratio during the fourth
quarter of 2021 and into 2022. The overall decline in real estate
secured loans during 2021 was partially offset by an increase of
$80.4 million in 1-4 family residential real estate loans due to
the $121.6 million purchase of mortgage loans during the third
quarter of 2021. These loan purchases were designed as a bridge to
organic loan growth as the Bank’s core loan pipeline continues to
improve and the hiring of one or more loan teams that is expected
to occur during the fourth quarter of 2021. If successfully hired,
the loan teams are anticipated to further diversify the loan
portfolio by specializing in various types of commercial and
industrial loans.
Unused commitments, excluding mortgage warehouse and consumer
overdraft lines, were $224.3 million at September 30, 2021,
compared to $260.0 million at December 31, 2020. Total line
utilization, excluding mortgage warehouse and consumer overdraft
lines, was 54% at September 30, 2021 and 57% at December 31, 2020.
Mortgage warehouse utilization declined significantly to 33% at
September 30, 2021, as compared to 71% at December 31, 2020.
The Company participated in the SBA PPP as authorized by the
CARES Act. We began accepting and funding loans under this program
in April 2020. There were 642 loans for $50.7 million outstanding
at September 30, 2021, compared to 1,274 loans for $117.2 million
at December 31, 2020. During the third quarter of 2021 the SBA
forgave $17.9 million of SBA PPP loans.
Deposit balances reflect growth of $196.0 million, or 7%, during
the first nine months of 2021. Core non-maturity deposits increased
by $358.2 million, or 17%, while customer time deposits decreased
by $122.1 million, or 30%. Wholesale brokered deposits decreased by
$40.0 million to $60.0 million. Overall noninterest-bearing
deposits as a percent of total deposits at September 30, 2021,
increased to 39.4%, as compared to 36.0% at December 31, 2020.
Other interest-bearing liabilities of $92.6 million on September
30, 2021 consists exclusively of customer repurchase agreements.
Other interest-bearing liabilities at December 31, 2020 of $182.0
million consisted of $100.0 million of fed funds purchased, $39.1
million of customer repurchase agreements, $37.9 million of FHLB
overnight borrowings and $5.0 million of FHLB short term
borrowings.
Long term debt increased to $49.2 million from the issuance of
$50 million in 3.25% fixed – floating subordinated debt with a
ten-year maturity in the third quarter of 2021. The Company plans
on contributing $25 million of additional capital to the Bank in
the fourth quarter of 2021, and utilizing the remainder of the
funds for general corporate purposes, which may include
repurchasing shares, among other things.
Subordinated debentures totaled $35.3 million and $35.1 million
at September 30, 2021 and December 31, 2020, respectively, in the
form of long-term borrowings from trust subsidiaries formed
specifically to issue trust preferred securities.
The Company continues to have substantial liquidity. At
September 30, 2021, and December 31, 2020, the Company had the
following sources of primary and secondary liquidity ($ in
thousands):
Primary and secondary liquidity
sources
September 30, 2021
December 31, 2020
Cash and cash equivalents
$
422,350
$
71,417
Unpledged investment securities
584,066
311,983
Excess pledged securities
43,246
52,892
FHLB borrowing availability
773,125
535,404
Unsecured lines of credit
305,000
230,000
Funds available through fed discount
window
61,867
58,127
Totals
$
2,189,654
$
1,259,823
Total capital of $364.5 million at September 30, 2021 reflects
an increase of $20.6 million, or 6%, relative to year-end 2020. The
increase in equity during the first nine months of 2021 was due to
the addition of $33.4 million in net income, offset by an $3.4
million unfavorable swing in accumulated other comprehensive
income/loss, and $9.8 million in dividends paid. The remaining
difference is related to stock options exercised and restricted
stock granted during the first nine months. The Company executed no
share repurchases under a share repurchase plan during the first
nine months of 2021. In conjunction with an equity compensation
plan, 12,122 shares were repurchased by the company for tax
withholding on restricted stock issued to certain officers of the
Company in the first nine months of 2021.
Asset Quality
Total nonperforming assets, comprised of nonaccrual loans and
foreclosed assets, decreased by $1.7 million to $6.9 million for
the first nine months of 2021. The Company's ratio of nonperforming
loans to gross loans increased to 0.32% at September 30, 2021 from
0.31% at December 31, 2020; this was due to the decrease in gross
loan balances since nonperforming loans decreased $0.8 million
during the same period. All of the Company's impaired assets are
periodically reviewed and are either well-reserved based on current
loss expectations or are carried at the fair value of the
underlying collateral, net of expected disposition costs.
The Company's allowance for loan and lease losses was $15.6
million at September 30, 2021, as compared to a balance of $17.7
million at December 31, 2020, and $15.6 million at September 30,
2020. The allowance was 0.73% of total loans at September 30, 2021,
0.72% at December 31, 2020 and 0.65% at September 30, 2020.
The $2.1 million decrease in the allowance for loan and lease
losses during the first nine months of the year resulted from the
$2.5 million benefit associated with loan and lease loss provision
combined with net loan recoveries of previously charged off loan
balances for $0.3 million. For further information regarding the
Company's decision to defer the implementation of CECL under
Section 4014 of the CARES Act, as well as further detail on the
decrease loan and lease loss provision during the third quarter and
first nine months of 2021, please see the discussion above under
Provision for Loan and Lease Losses.
Management's detailed analysis indicates that the Company's
allowance for loan and lease losses should be sufficient to cover
credit losses inherent in loan and lease balances outstanding as of
September 30, 2021, but no assurance can be given that the Company
will not experience substantial future losses relative to the size
of the loan and lease loss allowance.
The Company provided loan modification deferrals to customers
under Section 4013 of the CARES Act, which are not treated as
troubled debt restructured loans. As of September 30, 2021, we had
three remaining loans for one customer relationship totaling $10.4
million. All of these loans are fully secured by real estate
collateral.
About Sierra Bancorp
Sierra Bancorp is the holding company for Bank of the Sierra
(www.bankofthesierra.com), which is in its 44th year of operations
and is the largest independent bank headquartered in the South San
Joaquin Valley. Bank of the Sierra is a community-centric regional
bank, which offers a broad range of retail and commercial banking
services through full-service branches located within the counties
of Tulare, Kern, Kings, Fresno, Ventura, San Luis Obispo and Santa
Barbara. The Bank also maintains an online branch and provides
specialized lending services through an agricultural credit center,
an SBA center and a dedicated loan production office in Roseville,
California. In 2021, Bank of the Sierra was recognized as one of
the strongest community banks in the country, with a 5‑star rating
from Bauer Financial.
Forward-Looking Statements
The statements contained in this release that are not historical
facts are forward-looking statements based on management's current
expectations and beliefs concerning future developments and their
potential effects on the Company. Readers are cautioned not to
unduly rely on forward-looking statements. Actual results may
differ from those projected. These forward-looking statements
involve risks and uncertainties including but not limited to our
borrowers’ actual payment performance as loan deferrals related to
the COVID-19 pandemic expire, changes to statutes, regulations, or
regulatory policies or practices as a result of, or in response to
COVID-19, including the potential adverse impact of loan
modifications and payment deferrals implemented consistent with
recent regulatory guidance, the health of the national and local
economies, the Company's ability to attract and retain skilled
employees, customers' service expectations, the Company's ability
to successfully deploy new technology, the success of acquisitions
and branch expansion, changes in interest rates, loan portfolio
performance, and other factors detailed in the Company's SEC
filings, including the "Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
sections of the Company's most recent Form 10-K and Form 10-Q.
STATEMENT OF CONDITION
(Dollars in Thousands, Unaudited)
ASSETS
9/30/2021
6/30/2021
3/31/2021
12/31/2020
9/30/2020
Cash and due from banks
$
422,350
$
373,902
$
346,211
$
71,417
$
88,933
Investment securities
732,312
607,474
552,931
543,974
577,278
Real estate loans
1-4 family residential construction
34,720
37,165
36,818
48,565
75,532
Other construction/land
25,512
27,682
50,433
71,980
83,797
1-4 family - closed-end
220,240
106,599
126,949
139,836
162,022
Equity lines
31,341
33,334
36,276
38,075
38,620
Multi-family residential
55,628
58,230
58,324
61,865
61,740
Commercial real estate - owner
occupied
345,116
359,021
359,777
343,199
328,832
Commercial real estate - non-owner
occupied
995,921
1,048,153
1,071,532
1,062,498
945,374
Farmland
124,446
125,783
126,157
129,905
127,964
Total real estate loans
1,832,924
1,795,967
1,866,266
1,895,923
1,823,881
Agricultural production loans
43,296
42,952
45,476
44,872
45,782
Commercial and industrial
132,292
150,632
183,762
209,048
217,224
Mortgage warehouse lines
126,486
150,351
187,940
307,679
287,516
Consumer loans
4,828
4,894
5,024
5,589
5,897
Gross loans and leases
2,139,826
2,144,796
2,288,468
2,463,111
2,380,300
Deferred loan and lease fees
(2,612
)
(3,835
)
(3,717
)
(3,147
)
(3,078
)
Allowance for loan and lease losses
(15,617
)
(16,421
)
(18,319
)
(17,738
)
(15,586
)
Net loans and leases
2,121,597
2,124,540
2,266,432
2,442,226
2,361,636
Bank premises and equipment
24,490
25,949
26,795
27,505
27,216
Other assets
141,990
140,183
133,668
135,620
144,555
Total assets
$
3,442,739
$
3,272,048
$
3,326,037
$
3,220,742
$
3,199,618
LIABILITIES AND CAPITAL
Noninterest demand deposits
$
1,111,411
$
1,073,833
$
1,020,350
$
943,664
$
975,750
Interest-bearing transaction accounts
765,823
752,137
770,271
668,346
656,922
Savings deposits
451,248
435,076
415,230
368,420
361,857
Money market deposits
141,348
133,977
136,653
131,232
126,918
Customer time deposits
290,816
295,891
411,388
412,944
420,266
Wholesale brokered deposits
60,000
85,000
100,000
100,000
50,000
Total deposits
2,820,646
2,775,914
2,853,892
2,624,606
2,591,713
Long-term debt
49,221
-
-
-
-
Subordinated debentures
35,258
35,213
35,169
35,124
35,079
Other interest-bearing liabilities
92,553
70,535
56,527
182,038
194,657
Total deposits and interest-bearing
liabilities
2,997,678
2,881,662
2,945,588
2,841,768
2,821,449
Other liabilities
80,554
32,657
32,468
35,078
41,922
Total capital
364,507
357,729
347,981
343,896
336,247
Total liabilities and capital
$
3,442,739
$
3,272,048
$
3,326,037
$
3,220,742
$
3,199,618
GOODWILL AND INTANGIBLE ASSETS
(Dollars in Thousands, Unaudited)
9/30/2021
6/30/2021
3/31/2021
12/31/2020
9/30/2020
Goodwill
$
27,357
$
27,357
$
27,357
$
27,357
$
27,357
Core deposit intangible
3,527
3,780
4,038
4,307
4,575
Total intangible assets
$
30,884
$
31,137
$
31,395
$
31,664
$
31,932
CREDIT QUALITY
(Dollars in Thousands, Unaudited)
9/30/2021
6/30/2021
3/31/2021
12/31/2020
9/30/2020
Non-accruing loans
$
6,788
$
7,276
$
8,599
$
7,598
$
7,186
Foreclosed assets
93
774
945
971
2,970
Total nonperforming assets
$
6,881
$
8,050
$
9,544
$
8,569
$
10,156
Performing TDR's (not included in
NPA's)
$
5,509
$
10,774
$
10,596
$
11,382
$
7,708
Net (recoveries) / charge offs
$
(329
)
$
(533
)
$
(331
)
$
735
$
687
Past due & still accruing (30-89)
$
380
$
3,197
$
2,991
$
1,656
$
7,201
Loans deferred under CARES Act
$
10,411
$
10,411
$
22,437
$
29,500
$
405,858
Non-performing loans to gross loans
0.32
%
0.34
%
0.38
%
0.31
%
0.30
%
NPA's to loans plus foreclosed assets
0.32
%
0.38
%
0.42
%
0.35
%
0.43
%
Allowance for loan and lease losses to
loans
0.73
%
0.77
%
0.80
%
0.72
%
0.65
%
SELECT PERIOD-END STATISTICS
(Unaudited)
9/30/2021
6/30/2021
3/31/2021
12/31/2020
9/30/2020
Shareholders equity / total assets
10.6
%
10.9
%
10.5
%
10.7
%
10.5
%
Gross loans / deposits
75.9
%
77.3
%
80.2
%
93.8
%
91.8
%
Non-interest bearing deposits / total
deposits
39.4
%
38.7
%
35.8
%
36.0
%
37.6
%
CONSOLIDATED INCOME STATEMENT
(Dollars in Thousands, Unaudited)
For the three months
ended:
For the nine months
ended:
9/30/2021
6/30/2021
9/30/2020
9/30/2021
9/30/2020
Interest income
$
27,629
$
28,092
$
29,043
$
85,179
$
80,481
Interest expense
913
903
969
2,719
4,478
Net interest income
26,716
27,189
28,074
82,460
76,003
(Benefit) / provision for loan and lease
losses
(600
)
(2,100
)
2,350
(2,450
)
6,350
Net interest income after provision
27,316
29,289
25,724
84,910
69,653
Service charges
3,186
2,725
2,950
8,677
8,752
BOLI income
1,048
814
1,310
2,445
1,997
Gain on investments
11
-
-
11
390
Other noninterest income
3,290
3,073
2,845
9,844
8,973
Total noninterest income
7,535
6,612
7,105
20,977
20,112
Salaries and benefits
10,618
10,425
9,698
32,194
29,136
Occupancy expense
2,359
2,626
2,559
7,472
7,390
Other noninterest expenses
7,898
7,184
7,046
21,715
18,630
Total noninterest expense
20,875
20,235
19,303
61,381
55,156
Income before taxes
13,976
15,666
13,526
44,506
34,609
Provision for income taxes
3,371
3,958
3,170
11,115
8,144
Net income
$
10,605
$
11,078
$
10,356
$
33,391
$
26,465
TAX DATA
Tax-exempt muni income
$
1,578
$
1,517
$
1,467
$
4,539
$
4,246
Interest income - fully tax equivalent
$
28,048
$
28,495
$
29,433
$
86,386
$
81,610
PER SHARE DATA
(Unaudited)
For the three months
ended:
For the nine months
ended:
9/30/2021
6/30/2021
9/30/2020
9/30/2021
9/30/2020
Basic earnings per share
$
0.70
$
0.77
$
0.68
$
2.19
$
1.74
Diluted earnings per share
$
0.69
$
0.76
$
0.68
$
2.17
$
1.73
Common dividends
$
0.22
$
0.21
$
0.20
$
0.65
$
0.60
Weighted average shares outstanding
15,257,367
15,243,698
15,192,838
15,247,477
15,215,167
Weighted average diluted shares
15,343,543
15,375,825
15,387,309
15,369,249
15,422,647
Book value per basic share (EOP)
$
23.70
$
23.21
$
21.92
$
23.70
$
21.92
Tangible book value per share (EOP)
$
21.69
$
21.19
$
19.84
$
21.69
$
19.84
Common shares outstanding (EOP)
15,382,518
15,410,763
15,341,723
15,382,518
15,341,723
KEY FINANCIAL RATIOS
(Unaudited)
For the three months
ended:
For the nine months
ended:
9/30/2021
6/30/2021
9/30/2020
9/30/2021
9/30/2020
Return on average equity
11.62
%
13.29
%
12.34
%
12.60
%
10.90
%
Return on average assets
1.26
%
1.42
%
1.34
%
1.36
%
1.26
%
Net interest margin (tax-equivalent)
3.46
%
3.60
%
3.98
%
3.66
%
3.97
%
Efficiency ratio (tax-equivalent)¹
59.78
%
58.79
%
53.74
%
58.29
%
56.64
%
Net (recoveries) charge offs to avg loans
(not annualized)
0.01
%
(0.01
)%
0.01
%
(0.01
)%
0.04
%
(1)
Noninterest expense as a percentage of the
sum of net interest income and noninterest income excluding net
gains (losses) from securities and bank owned life insurance
income.
The following non-GAAP schedule reconciles the book value per
share to the tangible book value per share and the GAAP equity
ratio to the tangible equity ratio as of the dates indicated:
NON-GAAP FINANCIAL MEASURES
(Unaudited)
9/30/2021
6/30/2021
9/30/2020
Total stockholders' equity
$
364,507
$
357,729
$
336,247
Less: goodwill and other intangible
assets
(30,884
)
(31,137
)
(31,932
)
Tangible common equity
$
333,623
$
326,592
$
304,315
Total assets
$
3,442,739
$
3,272,048
$
3,199,618
Less: goodwill and other intangible
assets
(30,884
)
(31,137
)
(31,932
)
Tangible assets
$
3,411,855
$
3,240,911
$
3,167,686
Common shares outstanding
15,382,518
15,410,763
15,341,723
Book value per common share
23.70
23.21
21.92
Tangible book value per common share
21.69
21.19
19.84
Equity ratio - GAAP (total stockholders'
equity / total assets
10.59
%
10.93
%
10.51
%
Tangible common equity ratio (tangible
common equity / tangible assets)
9.78
%
10.08
%
9.61
%
NONINTEREST INCOME/EXPENSE
(Dollars in Thousands, Unaudited)
For the three months
ended:
For the nine months
ended:
Noninterest income:
9/30/2021
6/30/2021
9/30/2020
9/30/2021
9/30/2020
Service charges on deposit accounts
$
3,186
$
2,725
$
2,950
$
8,677
$
8,752
Other service charges and fees
2,900
3,050
2,511
8,511
7,418
Net gains on sale of securities
available-for-sale
11
—
—
11
390
Bank-owned life insurance
1,048
814
1,310
2,445
1,997
Other
390
23
334
1,333
1,555
Total noninterest income
$
7,535
$
6,612
$
7,105
$
20,977
$
20,112
As a % of average interest earning assets
(1)
0.96
%
0.86
%
0.99
%
0.91
%
1.04
%
Noninterest expense:
Salaries and employee benefits
$
10,618
$
10,425
$
9,698
$
32,194
$
29,136
Occupancy costs
Furniture & equipment
406
453
498
1,312
1,581
Premises
1,953
2,173
2,061
6,160
5,809
Advertising and marketing costs
370
292
324
982
1,350
Data processing costs
1,470
1,513
1,177
4,409
3,365
Deposit services costs
2,402
2,282
2,236
6,752
6,261
Loan services costs
Loan processing
109
65
289
343
652
Foreclosed assets
(19
)
(10
)
355
78
423
Other operating costs
Telephone & data communications
534
668
485
1,582
1,319
Postage & mail
60
109
90
253
264
Other
470
337
338
1,269
1,090
Professional services costs
Legal & accounting
966
682
317
2,091
1,002
Other professional service
1,320
1,004
1,223
3,219
2,171
Stationery & supply costs
107
73
95
259
341
Sundry & tellers
109
169
117
478
392
Total noninterest expense
$
20,875
$
20,235
$
19,303
$
61,381
$
55,156
As a % of average interest earning assets
(1)
2.66
%
2.64
%
2.70
%
2.67
%
2.85
%
Efficiency ratio (2)(3)
59.75
%
58.79
%
53.74
%
58.30
%
56.64
%
(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
September 30, 2021
June 30, 2021
September 30, 2020
Average Balance (1)
Income/ Expense
Yield/ Rate (2)
Average Balance (1)
Income/ Expense
Yield/ Rate (2)
Average Balance (1)
Income/ Expense
Yield/ Rate (2)
Assets
Investments:
Interest-earning due from banks
$
379,597
$
146
0.15
%
$
308,453
$
85
0.11
%
$
6,942
$
2
0.11
%
Taxable
389,524
1,679
1.71
%
340,690
1,573
1.85
%
366,046
1,832
1.99
%
Non-taxable
259,996
1,578
3.05
%
243,461
1,517
3.16
%
227,283
1,467
3.25
%
Total investments
1,029,117
3,403
1.47
%
892,604
3,175
1.61
%
600,271
3,301
2.45
%
Loans and leases: (3)
Real estate
1,775,611
20,805
4.65
%
1,825,600
21,015
4.62
%
1,700,241
20,467
4.79
%
Agricultural production
43,243
410
3.76
%
43,959
408
3.72
%
47,733
435
3.63
%
Commercial
140,105
1,796
5.09
%
166,554
2,124
5.12
%
226,511
2,485
4.36
%
Consumer
4,862
205
16.73
%
4,978
193
15.55
%
6,226
236
15.08
%
Mortgage warehouse lines
118,036
982
3.30
%
142,348
1,151
3.24
%
262,593
2,087
3.16
%
Other
1,463
28
7.59
%
1,460
26
7.14
%
1,868
32
6.82
%
Total loans and leases
2,083,320
24,226
4.61
%
2,184,899
24,917
4.57
%
2,245,172
25,742
4.56
%
Total interest earning assets (4)
3,112,437
$
27,629
3.58
%
3,077,503
$
28,092
3.71
%
2,845,443
$
29,043
4.12
%
Other earning assets
15,713
15,438
13,190
Non-earning assets
212,116
209,218
215,819
Total assets
$
3,340,266
$
3,302,159
$
3,074,452
Liabilities and shareholders'
equity
Interest bearing deposits:
Demand deposits
$
148,175
$
86
0.23
%
$
161,871
$
91
0.23
%
$
140,634
$
75
0.21
%
NOW
605,620
115
0.08
%
601,339
116
0.08
%
516,915
89
0.07
%
Savings accounts
443,406
63
0.06
%
424,512
59
0.06
%
354,331
51
0.06
%
Money market
139,433
26
0.07
%
139,336
30
0.09
%
126,567
28
0.09
%
Time deposits
293,379
248
0.31
%
337,270
262
0.30
%
428,171
383
0.35
%
Wholesale brokered deposits
72,283
53
0.29
%
92,418
61
0.26
%
29,696
15
0.20
%
Total interest bearing deposits
1,702,296
591
0.14
%
1,756,746
619
0.14
%
1,596,314
641
0.16
%
Borrowed funds:
Other interest-bearing liabilities
79,132
41
0.21
%
61,186
39
0.26
%
107,596
70
0.26
%
Long-term debt
3,812
38
3.95
%
—
—
—
—
—
—
Subordinated debentures
35,229
243
2.74
%
35,185
245
2.79
%
35,052
258
2.93
%
Total borrowed funds
118,173
322
1.08
%
96,371
284
1.18
%
142,648
328
0.91
%
Total interest bearing liabilities
1,820,469
913
0.20
%
1,853,117
$
903
0.20
%
1,738,962
969
0.22
%
Demand deposits - noninterest bearing
1,104,506
1,052,494
958,233
Other liabilities
53,134
43,095
43,521
Shareholders' equity
362,157
353,453
333,736
Total liabilities and shareholders'
equity
$
3,340,266
$
3,302,159
$
3,074,452
Interest income/interest earning
assets
3.58
%
3.71
%
4.12
%
Interest expense/interest earning
assets
0.12
%
0.11
%
0.14
%
Net interest income and margin
(5)
$
26,716
3.46
%
$
27,189
3.60
%
$
28,074
3.98
%
(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 loan losses. Loan fees have been included in the
calculation of interest income. Net loan fees and loan acquisition
FMV amortization were $1.0 million and $1.3 million for the
quarters ended September 30, 2021 and 2020, respectively, and $1.0
million for the quarter ended June 30, 2021.
(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 nine months
ended
For the nine months
ended
September 30, 2021
September 30, 2020
Average Balance (1)
Income/ Expense
Yield/ Rate (2)
Average Balance (1)
Income/ Expense
Yield/ Rate (2)
Assets
Investments:
Interest-earning due from banks
$
255,962
$
250
0.13
%
$
32,332
$
155
0.64
%
Taxable
351,109
4,835
1.84
%
392,617
6,542
2.23
%
Non-taxable
241,866
4,539
3.18
%
213,294
4,246
3.36
%
Total investments
848,937
9,624
1.71
%
638,243
10,943
2.53
%
Loans and leases:(3)
Real estate
$
1,826,476
$
63,211
4.63
%
$
1,524,821
$
57,544
5.04
%
Agricultural
44,441
1,237
3.72
%
48,022
1,470
4.09
%
Commercial
165,916
6,371
5.13
%
168,574
4,661
3.69
%
Consumer
5,085
594
15.62
%
6,822
831
16.27
%
Mortgage warehouse lines
167,293
4,061
3.25
%
204,839
4,884
3.18
%
Other
1,503
81
7.21
%
3,302
148
5.99
%
Total loans and leases
2,210,714
75,555
4.57
%
1,956,380
69,538
4.75
%
Total interest earning assets (4)
3,059,651
85,179
3.77
%
2,594,623
80,481
4.20
%
Other earning assets
14,817
13,074
Non-earning assets
207,523
206,816
Total assets
$
3,281,991
$
2,814,513
Liabilities and shareholders'
equity
Interest bearing deposits:
Demand deposits
$
147,000
$
251
0.23
%
$
121,246
$
209
0.23
%
NOW
592,177
332
0.07
%
485,176
295
0.08
%
Savings accounts
419,861
175
0.06
%
326,730
170
0.07
%
Money market
138,408
86
0.08
%
123,149
101
0.11
%
Time deposits
347,253
798
0.59
%
443,771
2,374
1.23
%
Brokered deposits
88,132
176
0.27
%
30,135
219
0.97
%
Total interest bearing deposits
1,732,831
1,818
0.14
%
1,530,207
3,368
0.29
%
Borrowed funds:
Other interest-bearing liabilities
67,981
127
0.39
%
62,486
145
0.86
%
Long-term debt
1,285
38
3.95
%
—
—
—
Subordinated debentures
35,186
736
2.80
%
35,008
965
3.68
%
Total borrowed funds
104,452
901
1.15
%
97,494
1,110
1.52
%
Total interest bearing liabilities
1,800,812
2,719
0.20
%
1,627,701
4,478
0.37
%
Demand deposits - noninterest bearing
1,045,179
822,882
Other liabilities
45,191
39,646
Shareholders' equity
354,338
324,284
Total liabilities and shareholders'
equity
$
3,281,991
$
2,814,513
Interest income/interest earning
assets
3.77
%
4.20
%
Interest expense/interest earning
assets
0.11
%
0.23
%
Net interest income and
margin(5)
$
82,460
3.66
%
$
76,003
3.97
%
(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 loan losses. Loan fees have been included in the
calculation of interest income. Net loan fees and loan acquisition
FMV amortization were $3.4 million and $0.9 million for the nine
months ended September 30, 2021 and 2020, respectively.
(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.
Category: Financial Source: Sierra Bancorp
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211025005170/en/
Kevin McPhaill, President/CEO (559) 782‑4900 or (888) 454‑BANK
www.sierrabancorp.com
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