Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Sierra Bancorp Reports Financial Results for Fourth Quarter and the Year Ending 2022 By: Sierra Bancorp via Business Wire January 30, 2023 at 08:01 AM EST 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/Contacts Kevin McPhaill, President/CEO (559) 782‑4900 or (888) 454‑BANK www.sierrabancorp.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. 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Sierra Bancorp Reports Financial Results for Fourth Quarter and the Year Ending 2022 By: Sierra Bancorp via Business Wire January 30, 2023 at 08:01 AM EST 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/Contacts Kevin McPhaill, President/CEO (559) 782‑4900 or (888) 454‑BANK www.sierrabancorp.com
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/