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 Third Quarter and First Nine Months of 2023 By: Sierra Bancorp via Business Wire October 23, 2023 at 08:01 AM EDT Sierra Bancorp (Nasdaq: BSRR), parent of Bank of the Sierra, today announced its unaudited financial results for the three-and nine-month periods ended September 30, 2023. Sierra Bancorp reported consolidated net income of $9.9 million, or $0.68 per diluted share, for the third quarter of 2023, and $28.5 million, or $1.93 per diluted shares, for the first nine months of 2023. Highlights for the third quarter of 2023: Steady Earnings Net Income of $9.9 million, consistent with the second quarter of 2023 (the prior linked quarter), and up 8% year-to-date compared to the same period last year Return on Average Assets of 1.04% Return on Average Equity of 12.62% Solid Asset Quality Total Nonperforming Loans declined to $0.8 million, or 0.04% of total gross loans Past due loans declined to $0.8 million, the lowest level for the past two years No foreclosed assets at September 30, 2023 Net Charge-offs remained very low at just under $0.1 million Stable Allowance for Credit Losses on loans of $23.1 million Stable Deposits & Liquidity Overall primary and secondary liquidity sources increased to $2.67 billion at September 30, 2023 Total deposits declined by 1.6% during the quarter due mostly to declines in brokered deposits and interest-bearing transaction accounts Total deposits have increased by $23.6 million, or 0.8% year-to-date Noninterest-bearing deposits stable at 37% of total deposits Strong Capital and Solid Asset Growth Total Assets at $3.74 billion, down 1% from prior linked quarter, but up 4% year-to-date Maintained a diversified investment portfolio designed for interest rate risk management and liquidity Repurchased 99,528 shares of stock during the quarter Tangible Book Value per share increased by 1% to $19.04 per share at September 30, 2023 compared to the prior linked quarter Strong regulatory Community Bank Leverage Ratio of 11.00% for our subsidiary Bank Tangible Common Equity Ratio of 7.5% on a consolidated basis and 9.4% for our subsidiary bank Dividend declared of $0.23 per share, payable on November 14, 2023, our 99th consecutive quarterly dividend “The elevator to success is out of order. You’ll have to use the stairs, one step at a time.” - Joe Girard “We are proud of the many accomplishments of our team of focused bankers this past quarter,” stated Kevin McPhaill, CEO and President. “Our continued strong results are even more noteworthy, given the challenging banking environment. In particular, earnings per share increased from last quarter as did tangible common equity per share. Our quarterly results demonstrate our commitment to continued active balance sheet management. Much of our success is the result of our community bank foundation, which gives us unique positioning and strong connections with our customers. As we continue to look for opportunities to improve earnings, we are excited about the remainder of 2023 and the coming year!” concluded Mr. McPhaill. For the first nine months of 2023, the Company recognized net income of $28.6 million, or $1.93 per diluted share, as compared to $26.5 million, or $1.76 per diluted share, for the same period in 2022. The year-over-year improvement is due primarily to higher net interest income of $4.3 million, along with a $4.0 million decrease in the provision for credit losses in 2023, partially offset by a $5.2 million increase in noninterest expense. The Company’s financial performance metrics for the first nine months of 2023 include an annualized return on average assets and a return on average equity of 1.03% and 12.41%, respectively, compared to 1.03% and 10.98%, respectively, for the same period in 2022. Financial Highlights Quarterly Changes (comparisons to the third quarter of 2022) Net income was unchanged at $9.9 million. Net interest income was negatively impacted by compression in the net interest margin. There was a favorable change in the provision for credit losses on loans while improvements made in noninterest income were offset by higher noninterest expenses. Net interest income was $0.8 million lower due to a 33 bp decrease in net interest margin. There was a $231.9 million increase in average interest earning assets with an increased yield of 94 bps, however this was more than offset by a $335.4 million increase in interest bearing liabilities at 184 bps higher cost. Noninterest income increased $1.2 million or 17% primarily due to a $0.6 million increase in bank-owned life insurance, $0.3 million in life insurance proceeds and a $0.2 million increase in service charges on deposit accounts. Asset quality improved considerably as demonstrated by a significant decline in non-performing assets to gross loans plus foreclosed assets. This ratio fell to 0.04% at September 30, 2023, from 1.33% at the same period in 2022. Nonperforming assets declined substantially from $26.8 million at September 30, 2022, to $0.8 million at September 30, 2023, a decline of 97%. Most of the nonperforming assets at September 30, 2022 were related to a single dairy relationship that was foreclosed upon and sold in early 2023. There was a benefit for credit losses for $0.03 million, as compared to a provision for credit losses of $1.3 million in the same quarter of 2022, due to a decrease in specific reserves for individually evaluated loans. Liquidity continues to be very substantial with the primary liquidity ratio at 31.5% and $2.7 billion in overall available liquidity at September 30, 2023. All required capital ratios were above the regulatory guidelines for a well-capitalized institution. The Community Bank Leverage ratio was 11.00% for Bank of the Sierra. The Sierra Bancorp Tier I leverage ratio was 10.08%. Sierra Bancorp repurchased 99,528 shares totaling $2.0 million in the third quarter of 2023. Our Board of Directors declared a cash dividend of $0.23 per share on October 19, 2023. This is the 99th consecutive quarterly dividend paid by Sierra Bancorp. The cash dividend is payable on November 14, 2023, to shareholders of record at the close of business on October 30, 2023. Year to-Date Income Changes (comparisons to the first nine-months of 2022) Net income increased $2.0 million, or 8%. There was an increase of $4.3 million or 5% in net interest income, due mostly to an overall increase in interest rates. We experienced higher yields and balances on loans and investment securities, which were partly offset by higher overall funding costs. Earnings per share increased to $1.93, an increase of 10% from $1.76 per share. The provision for credit losses was $0.2 million, a decrease of $4.0 million due to a decrease in specific reserves on individual loans as well as lower net loan charge-offs. Noninterest income decreased by $0.8 million, or 3%. In 2022 there was a $1.0 million recovery of prior year legal expenses, a $1.0 million gain on the sale of investment securities, and a $3.2 million gain on the sale of other assets with no like corresponding event in 2023. Positively impacting the first nine months of 2023 there was a $2.8 million positive variance in deferred compensation BOLI and a $0.4 million increase in life insurance proceeds. Noninterest expense increased $5.2 million, or 8%, due mostly to the increases in salary expense for new loan production teams and a negative variance in director’s deferred compensation expense which is linked to the favorable changes in bank-owned life insurance income described above. Statement of Condition Changes (comparisons to December 31, 2022) Total assets increased by $130.3 million, or 4%, to $3.7 billion, during the first nine months of the year due mostly to an increase in wholesale deposits and borrowed funds which facilitated the purchase of investment securities as well as modest loan growth. Cash and due from banks increased $11.4 million to $88.5 million during the first nine months of the year due to an increase in interest earning bank balances. Investment securities increased by $62.1 million, or 5%, to $1.2 billion primarily due to strategic purchases of high-quality AAA and AA rated, collateralized loan obligations and government agency securities. Gross loans increased $47.9 million predominantly due to a $42.2 million increase in mortgage warehouse line utilization. In addition, C&I and Agricultural production loans increased, but were partially offset by a decline in Farmland loans due to a foreclosure of a single dairy relationship in early 2023. Deposits totaled $2.9 billion at September 30, 2023, representing a year-to-date increase of $23.6 million, or 1%. The growth in deposits came mostly from a $45.0 million increase in brokered deposits primarily acquired prior to March 2023 as part of the Company’s interest rate risk management and liquidity strategy. Long term debt and subordinated debentures were relatively unchanged. Other interest-bearing liabilities increased $83.7 million, or 26%, and consisted primarily of long term FHLB advances. Other financial highlights are reflected in the following table. FINANCIAL HIGHLIGHTS (Dollars in Thousands, Except Per Share Data, Unaudited) As of or for the As of or for the three months ended nine months ended 9/30/2023 6/30/2023 9/30/2022 9/30/2023 9/30/2022 Net income $ 9,885 $ 9,919 $ 9,935 $ 28,555 $ 26,546 Diluted earnings per share $ 0.68 $ 0.67 $ 0.66 $ 1.93 $ 1.76 Return on average assets 1.04% 1.07% 1.13% 1.03% 1.03% Return on average equity 12.62% 13.06% 12.84% 12.41% 10.98% Net interest margin (tax-equivalent) (1) 3.30% 3.39% 3.63% 3.39% 3.41% Yield on average loans 4.73% 4.74% 4.28% 4.66% 4.30% Yield on investments 5.25% 5.02% 3.51% 5.00% 2.61% Cost of average total deposits 1.20% 1.09% 0.24% 1.04% 0.15% Efficiency ratio (tax-equivalent) (1) (2) 61.46% 62.27% 58.10% 62.83% 61.10% Total assets $ 3,738,880 $ 3,762,461 $ 3,532,289 $ 3,738,880 $ 3,532,289 Loans net of deferred fees $ 2,100,973 $ 2,094,464 $ 2,020,016 $ 2,100,973 $ 2,020,016 Noninterest demand deposits $ 1,059,878 $ 1,066,498 $ 1,118,245 $ 1,059,878 $ 1,118,245 Total deposits $ 2,869,720 $ 2,918,759 $ 2,885,468 $ 2,869,720 $ 2,885,468 Noninterest-bearing deposits over total deposits 36.9% 36.5% 38.8% 36.9% 38.8% Shareholders' equity / total assets 8.3% 8.2% 8.4% 8.3% 8.4% Tangible common equity ratio (2) 7.5% 7.5% 7.6% 7.5% 7.6% Book value per share $ 21.01 $ 20.90 $ 19.56 $ 21.01 $ 19.56 Tangible book value per share (2) $ 19.04 $ 18.93 $ 17.58 $ 19.04 $ 17.58 (1) Computed on a tax equivalent basis utilizing a federal income tax rate of 21%. (2) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures". INCOME STATEMENT HIGHLIGHTS Net Interest Income Net interest income was $28.1 million, for the third quarter of 2023, a $0.8 million decrease, or 3% over the third quarter of 2022, but increased $4.3 million, or 5%, to $84.5 million for the first nine months of 2023 relative to the same period in 2022. For the third quarter of 2023, growth in average interest-earning assets totaled $231.9 million, or 7%, as compared to the third quarter of 2022. The yield on these balances was 94 basis points higher for the same period due mostly to an increase in investment securities as well as loan growth and the result of interest rate increases by the Federal Open Market Committee. This increase in yield was offset by a 184 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. Net interest income for the comparative year-to-date periods increased $4.3 million, or 5%, due to a change in mix of average interest-earning assets, mostly the deployment of lower yielding interest earning due from bank balances into higher yielding investment securities. Investment balances, which includes overnight funds, with an average yield of 5.0% increased $157.0 million, while gross average loan balances yielding 4.7% increased $64.0 million. The overall yield on the average balances of earning assets was 114 basis points higher for the comparative periods, offset by a 171 basis point increase in interest paid on liabilities. The net impact of these various changes was a 2 basis point decrease in our net interest margin for the nine-months ending September 30, 2023, as compared to the same period in 2022. Interest expense was $14.3 million for the third quarter of 2023, an increase of $11.3 million, relative to the third quarter of 2022. For the first nine months of 2023, compared to the same period in 2022, interest expense increased $30.2 million to $36.1 million. The significant increase in interest expense is attributable to an unfavorable shift in interest bearing liabilities and the impact of recent interest rate increases, as the average balance of deposits, including lower cost core deposits decreased $93.2 million while higher cost borrowed funds and wholesale brokered deposits increased by $352.7 million in the third quarter of 2023 as compared to the third quarter of 2022. For the year-to-date comparisons the increase is attributable to a shift from lower cost transaction accounts to higher cost time accounts as well as an increase in borrowed funds. For the first nine months of 2023, higher cost customer time deposits increased $218.9 million, wholesale brokered deposits increased $106.6 million and borrowed funds increased $247.5 million, while lower cost or no cost deposits decreased $278.4 million. Our net interest margin was 3.30% for the third quarter of 2023, as compared to 3.39% for the linked quarter and 3.63% for the third quarter of 2022. While the yield of interest-earning assets increased 9 basis points for the third quarter of 2023 as compared to the linked quarter, the cost of interest-bearing liabilities increased 26 basis points for the same period of comparison. The average balance of interest-earning assets increased $24.7 million for the linked quarter while the increase in interest-bearing liabilities was $9.0 million for the same period. Even though the volume increase of interest earning assets was more than the increase in interest-bearing liabilities, the larger rate increase on liabilities caused the compression in the linked quarter. Any future FOMC rate hikes could cause further compression in the net interest margin, since overnight borrowing funds instantly reprice higher while there is a lag in the increased yield on interest-earning assets. Provision for Loan and Lease Losses The overall provision for credit losses resulted in a benefit of $0.03 million for the third quarter of 2023; there was a $0.1 million provision for credit losses related to loans and leases offset by a $0.2 million benefit for credit losses from unfunded commitments and no provision for held-to-maturity investment securities, relative to a provision for credit losses of $1.3 million in the third quarter of 2022, and a year-to-date provision for credit losses on loans and leases of $0.2 million in 2023 as compared to $4.2 million for the same period in 2022. The Company's $1.3 million decrease in the provision for credit losses on loans and leases in the third quarter of 2023 as compared to the third quarter of 2022, and the $4.0 million year to date decrease in the provision for credit losses, compared to the same period in 2022 was primarily due to the impact of $4.3 million in net charge-offs in the first nine months of 2022 with only $0.4 million in net charge offs for the first nine months of 2023. The decrease in net charge-offs in the first nine months of 2023 was primarily related to a single office building loan relationship that was sold at a discount due to an increased risk of default that would have likely led to a prolonged collection period and a single dairy loan relationship. The Company did not record a provision for credit losses on available-for-sale debt securities. Although there were debt securities in an unrealized loss position the declines in market values were primarily attributable to changes in interest rates and volatility in the financial markets and not a result of an expected credit loss. Noninterest Income Total noninterest income increased $1.2 million, or 17%, for the quarter ended September 30, 2023, as compared to the same quarter in 2022, and decreased $.08 million, or 3% for the year-to-date period ended September 30, 2023, as compared to the same period in 2022. The quarterly and year-to-date comparisons were both impacted by favorable fluctuations in income on bank-owned life insurance (BOLI) with underlying investments mapped directly to the Company’s deferred compensation plan. The quarterly comparison was also positively impacted by an increase in service charges on deposit accounts for $0.2 million, life insurance proceeds for $0.3 million, and $0.4 million in income from an investment in an SBA loan fund. The year-to-date decrease is the result of 2022 events that did not recur in 2023, including a $1.0 million gain on the sale of debt securities, $3.6 million from gains on the sale of other assets, and the recovery of prior period legal expenses, partially offset by income from an investment in an SBA loan fund for $1.0 million in 2023. Service charges on customer deposit accounts were basically unchanged at $6.1 million in the third quarter of 2023 as compared to the third quarter of 2022, however for the year-to-date comparison there was a $0.3 million decrease primarily due to decreases in ATM and debit card income. Noninterest Expense Total noninterest expense increased by $1.6 million, or 7%, in the third quarter of 2023 relative to the third quarter of 2022, and by $5.2 million, or 8%, for the first nine months of 2023 as compared to the same period in 2022. Salaries and Benefits were $1.1 million, or 10%, higher in the third quarter of 2023 as compared to the third quarter of 2022 and $2.5 million, or 7%, higher for the first nine months of 2023 compared to the same period in 2022. The reason for this increase is primarily due to the hiring of higher paid new lending teams and management staff for both the quarterly and year-to-date comparisons. There were 487 full-time equivalent employees at September 30, 2023 as compared to 491 at December 31, 2022 and 500 at September 30, 2022. Occupancy expenses were relatively unchanged for the third quarter and the first nine-months of 2023 as compared to the same periods in 2022. Other noninterest expense increased $0.5 million, or 6%, for the third quarter 2023 as compared to the third quarter in 2022, and increased $2.7 million, or 13%, for the first nine months of 2023 as compared to the same period in 2022. The variances for the third quarter of 2023 compared to the same period in 2022 were primarily driven by a $0.6 million unfavorable variance in directors deferred compensation expense, linked to the changes in BOLI income, higher FDIC assessment costs, increased marketing costs associated with a deposit acquisition campaign and elevated debit card losses. These increased expenses were partially offset by lower costs in core processing, debit card processing and ATM network costs. For the year-over-year comparison, the categories of increase were the same as with the quarterly comparison, along with a $0.2 million decrease in deposit statement costs offset by increased foreclosed asset costs related to the foreclosure and subsequent sale of one large loan relationship in the first quarter of 2023. The Company's provision for income taxes was 25.8% of pre-tax income in the third quarter of 2023 relative to 25.1% in the third quarter of 2022, and 25.2% of pre-tax income for the first nine months of 2023 relative to 26.1% for the same period in 2022. The changes in effective tax rate for both the quarterly and year-to-date comparisons is due to the volatility in the Bank Owned Life Insurance asset value associated with our non-qualified deferred compensation plans. Balance Sheet Summary Balance sheet changes during the first nine months of 2023 include an increase in total assets of $130.3 million, or 4%, primarily a result of a $62.1 million increase in investments securities, and a $47.9 million increase in gross loans. The increase in investment securities of $62.1 million for the year-to-date period consisted primarily of increases in AAA and AA tranches of collateralized loan obligations of $56.5 million and in callable government agency securities for $56.0 million, partially offset by decreases in mortgage-backed securities, corporate bonds and state and municipal bonds. Gross loan balances increased $47.9 million during the first nine months of 2023, as compared to December 31, 2022. The increase was primarily a result of a $42.1 million increase in mortgage warehouse utilization, $22.6 million increase in commercial real estate, and a $35.4 million increase in other commercial loans. 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 $22.4 million decrease in farmland, $11.1 million decrease in other construction and $18.7 million decrease in residential real estate. Further, SBA PPP loan forgiveness resulted in a $1.3 million decline in loan balances, included in the other commercial loan variance noted above. As indicated in the loan roll forward below, new credit extended for the third quarter of 2023 decreased $14.0 million over the same period in 2022 and decreased $66.4 million for the year-to-date comparisons. This decline in organic loan growth is attributable to competitive pressures in our market and management’s unwillingness to compromise the quality of new loans originated, combined with a lack of demand due to the current high interest rate environment. We also had $37.0 million in loan paydowns and maturities, and a decrease in mortgage warehouse and credit line utilization of $25.5 million in the third quarter. LOAN ROLLFORWARD (Dollars in Thousands, Unaudited) For the three months ended: For the nine months ended: September 30, 2023 June 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Gross loans beginning balance $ 2,094,391 $ 2,033,968 $ 2,022,662 $ 2,052,940 $ 1,989,726 New credit extended 68,980 37,030 82,958 158,619 225,054 Loan purchases — — — — 173,082 Changes in line of credit utilization (22,517 ) 6,622 (7,811 ) (41,685 ) (45,201 ) Change in mortgage warehouse (3,032 ) 42,145 (11,581 ) 42,146 (54,630 ) Pay-downs, maturities, charge-offs and amortization (1) (37,012 ) (25,374 ) (65,864 ) (111,210 ) (267,667 ) Gross loans ending balance 2,100,810 2,094,391 2,020,364 2,100,810 2,020,364 (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 $216.4 million at September 30, 2023, compared to $219.7 million at December 31, 2022. Total line utilization, excluding mortgage warehouse and overdraft lines, was 59.7% at September 30, 2022 and 58.7% at December 31, 2022. Mortgage warehouse utilization increased to 25.0% at September 30, 2023, as compared to 9.9% at December 31, 2022. PPP loans continue to decline as borrowers receive forgiveness on these loans. There were nine loans for $0.4 million outstanding at September 30, 2023, compared to fourteen loans for $1.8 million at December 31, 2022. Deposit balances reflect growth of $23.6 million, or 1%, during the first nine months of 2023. Core non-maturity deposits decreased by $173.6 million, or 7%, while customer time deposits increased by $152.1 million, or 38%. Wholesale brokered deposits increased by $45.0 million, or 38%. Overall noninterest-bearing deposits as a percent of total deposits at September 30, 2023, were 36.9%, as compared to 38.2% at December 31, 2022. Other interest-bearing liabilities of $411.9 million on September 30, 2023, consist of $94.9 million in customer repurchase agreements, $182.0 million of FHLB borrowings and $135.0 million in fed funds purchased. The Company continues to have substantial liquidity. At September 30, 2023, and December 31, 2022, the Company had the following sources of primary and secondary liquidity (Dollars in Thousands, Unaudited): Primary and secondary liquidity sources September 30, 2023 December 31, 2022 Cash and cash equivalents $ 88,542 $ 77,131 Unpledged investment securities 854,730 1,097,164 Excess pledged securities 326,343 43,096 FHLB borrowing availability 657,548 718,842 Unsecured lines of credit 362,785 237,000 Funds available through fed discount window 383,943 42,278 Totals $ 2,673,891 $ 2,215,511 Total capital of $308.9 million at September 30, 2023 reflects an increase of $5.3 million, or 2%, relative to year-end 2022. The increase in equity during the first nine months of 2023 was due to the addition of $28.6 million in net income, offset by a $5.3 million unfavorable swing in accumulated other comprehensive income/loss, due principally to changes in investment securities’ fair value, $8.5 million in share repurchases, and $10.4 million in dividends paid. The remaining difference is related to the impact of restricted stock. Asset Quality Total nonperforming assets, comprised of nonaccrual loans and foreclosed assets, decreased by $18.8 million to $0.8 million for the first nine months of 2023. The Company's ratio of nonperforming loans to gross loans decreased to 0.4% at September 30, 2023 from 0.95% at December 31, 2022. The decrease resulted from a decrease in non-accrual loan balances, primarily as a result of the foreclosure and sale of one loan relationship in the dairy industry consisting of four separate loans in the first quarter of 2023. All the Company's nonperforming assets are individually evaluated for credit loss quarterly and management believes the established allowance for credit loss on such loans is appropriate. The Company's allowance for credit losses on loans and leases was $23.1 million at both September 30, 2023, and December 31, 2022. The flat allowance for credit losses on loans and leases was due to fewer net charge offs during the first nine-months of 2023 along with modest loan growth. The allowance for credit losses on loans and leases was 1.10% of gross loans at September 30, 2023, and 1.12% of gross loans at December 31, 2022. Management's detailed analysis indicates that the Company's allowance for credit losses on loans and leases should be sufficient to cover credit losses for the life of the loans and leases outstanding as of September 30, 2023, 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 an agricultural credit center in Templeton, California, and a dedicated loan production office in Roseville, California. In 2023, 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 and a BBB+ rating from Kroll. 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 including the impact to the Company and its customers resulting from changes to, and the level of, inflation and interest rates; changes in laws, rules, regulations, or interpretations to which the Company is subject; the Company’s ability to maintain and grow its deposit base; loan demand and continued portfolio performance, the Company's ability to attract and retain skilled employees, customers' service expectations; cyber security risks: the Company's ability to successfully deploy new technology, the success of acquisitions and branch expansion; operational risks including the ability to detect and prevent errors and fraud; the effectiveness of the Company’s enterprise risk management framework; the impact of adverse developments at other banks, including bank failures, that impact general sentiment regarding the stability and liquidity of banks that could affect stock price; changes to valuations of the Company’s assets and liabilities including the allowance for credit losses, earning assets, and intangible assets; changes to the availability of liquidity sources including borrowing lines and the ability to pledge or sell certain assets; costs related to litigation; the effects of severe weather events, pandemics, other public health crises, acts of war or terrorism, and other external events on our business; and other factors detailed in the Company's SEC filings, including the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's most recent Form 10‑K and Form 10‑Q. STATEMENT OF CONDITION (Dollars in Thousands, Unaudited) ASSETS 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Cash and due from banks $ 88,542 $ 103,483 $ 83,506 $ 77,131 $ 86,683 Investment securities Available-for-sale, at fair value 1,010,377 1,027,538 1,040,920 934,923 1,069,434 Held-to-maturity, at amortized cost, net of allowance for credit losses 323,544 328,478 332,728 336,881 156,211 Real estate loans Residential real estate 418,782 426,608 433,185 437,446 441,262 Commercial real estate 1,331,989 1,317,945 1,318,627 1,309,410 1,291,315 Other construction/land 7,320 16,020 15,653 18,412 18,315 Farmland 90,993 92,728 92,906 113,394 117,385 Total real estate loans 1,849,084 1,853,301 1,860,371 1,878,662 1,868,277 Other commercial 140,081 126,360 101,118 104,715 101,437 Mortgage warehouse lines 107,584 110,617 68,472 65,439 46,553 Consumer loans 4,061 4,113 4,007 4,124 4,097 Gross loans 2,100,810 2,094,391 2,033,968 2,052,940 2,020,364 Deferred loan fees 163 73 24 (123 ) (348 ) Allowance for credit losses on loans (23,060 ) (23,010 ) (23,090 ) (23,060 ) (23,790 ) Net loans 2,077,913 2,071,454 2,010,902 2,029,757 1,996,226 Bank premises and equipment 21,926 22,072 22,321 22,478 22,688 Other assets 216,578 209,436 203,607 207,420 201,047 Total assets $ 3,738,880 $ 3,762,461 $ 3,693,984 $ 3,608,590 $ 3,532,289 LIABILITIES AND CAPITAL Noninterest demand deposits $ 1,059,878 $ 1,066,498 $ 1,041,748 $ 1,088,199 $ 1,118,245 Interest-bearing transaction accounts 561,257 584,263 637,549 641,581 732,468 Savings deposits 400,940 415,793 441,758 456,981 481,882 Money market deposits 130,914 124,834 123,162 139,795 140,620 Customer time deposits 551,731 552,371 519,771 399,608 332,253 Wholesale brokered deposits 165,000 175,000 185,000 120,000 80,000 Total deposits 2,869,720 2,918,759 2,948,988 2,846,164 2,885,468 Long-term debt 49,281 49,259 89,236 49,214 49,196 Subordinated debentures 35,615 35,570 35,526 35,481 35,436 Other interest-bearing liabilities 411,865 398,922 270,861 328,169 215,112 Total deposits and interest-bearing liabilities 3,366,481 3,402,510 3,344,611 3,259,028 3,185,212 Allowance for credit losses on unfunded loan commitments 600 750 850 840 940 Other liabilities 62,940 49,609 41,513 45,140 51,065 Total capital 308,859 309,592 307,010 303,582 295,072 Total liabilities and capital $ 3,738,880 $ 3,762,461 $ 3,693,984 $ 3,608,590 $ 3,532,289 GOODWILL AND INTANGIBLE ASSETS (Dollars in Thousands, Unaudited) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Goodwill $ 27,357 $ 27,357 $ 27,357 $ 27,357 $ 27,357 Core deposit intangible 1,618 1,837 2,056 2,275 2,517 Total intangible assets $ 28,975 $ 29,194 $ 29,413 $ 29,632 $ 29,874 CREDIT QUALITY (Dollars in Thousands, Unaudited) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Non-accruing loans $ 781 $ 1,141 $ 938 $ 19,579 $ 26,772 Foreclosed assets — — — — — Total nonperforming assets $ 781 $ 1,141 $ 938 $ 19,579 $ 26,772 Quarterly net charge offs $ 67 $ 157 $ 220 $ 7,268 $ 224 Past due & still accruing (30-89) $ 806 $ 1,873 $ 1,241 $ 1,203 $ 1,242 Non-performing loans to gross loans 0.04% 0.05% 0.05% 0.95% 1.33% NPA's to loans plus foreclosed assets 0.04% 0.05% 0.05% 0.95% �� 1.33% Allowance for credit losses on loans 1.10% 1.10% 1.14% 1.12% 1.18% SELECT PERIOD-END STATISTICS (Unaudited) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Shareholders' equity / total assets 8.3% 8.2% 8.3% 8.4% 8.4% Gross loans / deposits 73.2% 71.8% 69.0% 72.1% 70.0% Noninterest-bearing deposits / total deposits 36.9% 36.5% 35.3% 38.2% 38.8% CONSOLIDATED INCOME STATEMENT (Dollars in Thousands, Unaudited) For the three months ended: For the nine months ended: 9/30/2023 6/30/2023 9/30/2022 9/30/2023 9/30/2022 Interest income $ 42,384 $ 40,875 $ 31,928 $ 120,678 $ 86,216 Interest expense 14,297 12,558 3,017 36,143 5,963 Net interest income 28,087 28,317 28,911 84,535 80,253 (Benefit) provision for credit losses (33 ) (70 ) 1,259 157 4,184 Net interest income after provision 28,120 28,387 27,652 84,378 76,069 Service charges and fees on deposit accounts 6,055 5,691 6,008 17,127 17,464 Gain on sale of investments - 351 - 396 1,032 BOLI income (expense) 558 658 (23 ) 1,388 (1,252 ) Other noninterest income 1,149 1,313 627 3,444 5,870 Total noninterest income 7,762 8,013 6,612 22,355 23,114 Salaries and benefits 12,623 12,129 11,521 37,567 35,070 Occupancy expense 2,482 2,438 2,470 7,251 7,170 Other noninterest expenses 7,457 8,401 7,005 23,704 21,042 Total noninterest expense 22,562 22,968 20,996 68,522 63,282 Income before taxes 13,320 13,432 13,268 38,211 35,901 Provision for income taxes 3,435 3,513 3,333 9,656 9,355 Net income $ 9,885 $ 9,919 $ 9,935 $ 28,555 $ 26,546 TAX DATA Tax-exempt muni income $ 2,679 $ 2,741 $ 2,346 $ 8,233 $ 5,926 Interest income - fully tax equivalent $ 43,096 $ 41,604 $ 32,552 $ 122,867 $ 87,791 PER SHARE DATA (Unaudited) For the three months ended: For the nine months ended: 9/30/2023 6/30/2023 9/30/2022 9/30/2023 9/30/2022 Basic earnings per share $ 0.68 $ 0.67 $ 0.66 $ 1.93 $ 1.77 Diluted earnings per share $ 0.68 $ 0.67 $ 0.66 $ 1.93 $ 1.76 Common dividends $ 0.23 $ 0.23 $ 0.23 $ 0.69 $ 0.69 Weighted average shares outstanding 14,583,132 14,735,568 14,954,503 14,762,231 14,968,242 Weighted average diluted shares 14,636,477 14,754,764 15,014,048 14,791,696 15,046,883 Book value per basic share (EOP) $ 21.01 $ 20.90 $ 19.56 $ 21.01 $ 19.56 Tangible book value per share (EOP) $ 19.04 $ 18.93 $ 17.58 $ 19.04 $ 17.58 Common shares outstanding (EOP) 14,702,079 14,811,736 15,085,675 14,702,079 15,085,675 KEY FINANCIAL RATIOS (Unaudited) For the three months ended: For the nine months ended: 9/30/2023 6/30/2023 9/30/2022 9/30/2023 9/30/2022 Return on average equity 12.62% 13.06% 12.84% 12.41% 10.98% Return on average assets 1.04% 1.07% 1.13% 1.03% 1.03% Net interest margin (tax-equivalent) (1) 3.30% 3.39% 3.63% 3.39% 3.41% Efficiency ratio (tax-equivalent) (1) (2) 61.46% 62.27% 58.10% 62.83% 61.10% Net charge offs to avg loans (not annualized) 0.00% 0.01% 1.00% 0.02% 21.00% (1) Computed on a tax equivalent basis utilizing a federal income tax rate of 21%. (2) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures". The following non-GAAP schedule reconciles the book value per share to the tangible book value per share and the GAAP equity ratio to the tangible equity ratio as of the dates indicated: NON-GAAP FINANCIAL MEASURES (Dollars in Thousands, Unaudited) 9/30/2023 6/30/2023 9/30/2022 Total stockholders' equity $ 308,859 $ 309,592 $ 295,072 Less: goodwill and other intangible assets 28,975 29,194 29,874 Tangible common equity $ 279,884 $ 280,398 $ 265,198 Total assets $ 3,738,880 $ 3,762,461 $ 3,532,289 Less: goodwill and other intangible assets 28,975 29,194 29,874 Tangible assets $ 3,709,905 $ 3,733,267 $ 3,502,415 Common shares outstanding 14,702,079 14,811,736 15,085,675 Book value per common share $ 21.01 $ 20.90 $ 19.56 Tangible book value per common share $ 19.04 $ 18.93 $ 17.58 Equity ratio - GAAP (total stockholders' equity / total assets 8.26% 8.23% 8.35% Tangible common equity ratio (tangible common equity / tangible assets) 7.54% 7.51% 7.57% For the three months ended: Efficiency Ratio: 9/30/2023 6/30/2023 9/30/2022 Noninterest expense $ 22,562 $ 22,968 $ 20,996 Divided by: Net interest income 28,087 28,317 28,911 Tax-equivalent interest income adjustments 712 729 624 Net interest income, adjusted 28,799 29,046 29,535 Noninterest income 7,762 8,013 6,612 Less gain on sale of securities - 351 - Tax-equivalent noninterest income adjustments 148 175 (6 ) Noninterest income, adjusted 7,910 7,837 6,606 Net interest income plus noninterest income, adjusted $ 36,709 $ 36,883 $ 36,141 Efficiency Ratio (tax-equivalent) 61.46% 62.27% 58.10% NONINTEREST INCOME/EXPENSE (Dollars in Thousands, Unaudited) For the three months ended: For the nine months ended September 30, Noninterest income: 9/30/2023 6/30/2023 9/30/2022 2023 2022 Service charges and fees on deposit accounts $ 6,055 $ 5,691 $ 6,008 $ 17,127 $ 17,464 Net gains on sale of securities available-for-sale — 351 — 396 1,032 Bank-owned life insurance 558 658 (23 ) 1,388 (1,252 ) Other 1,149 1,313 627 3,444 5,870 Total noninterest income $ 7,762 $ 8,013 $ 6,612 $ 22,355 $ 23,114 As a % of average interest earning assets (1) 0.89% 0.93% 0.81% 0.87% 0.96% Noninterest expense: Salaries and employee benefits $ 12,623 $ 12,129 $ 11,521 $ 37,567 $ 35,070 Occupancy and equipment costs 2,482 2,438 2,470 7,251 7,170 Advertising and marketing costs 723 410 466 1,646 1,322 Data processing costs 1,369 1,536 1,564 4,433 4,574 Deposit services costs 2,048 2,532 2,450 6,603 7,112 Loan services costs Loan processing 174 151 128 452 426 Foreclosed assets (60 ) (33 ) (3 ) 665 84 Other operating costs 765 1,490 912 3,244 3,879 Professional services costs Legal & accounting services 493 483 535 1,623 1,753 Director's costs 732 725 (143 ) 1,733 (1,192 ) Other professional service 707 832 855 2,053 2,306 Stationery & supply costs 148 125 114 414 315 Sundry & tellers 358 150 127 838 463 Total noninterest expense $ 22,562 $ 22,968 $ 20,996 $ 68,522 $ 63,282 As a % of average interest earning assets (1) 2.58% 2.68% 2.58% 2.67% 2.64% Efficiency ratio (tax-equivalent) (2)(3) 61.46% 62.27% 58.10% 62.83% 61.10% (1) Annualized (2) Computed on a tax equivalent basis utilizing a federal income tax rate of 21% (3) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures.” AVERAGE BALANCES AND RATES (Dollars in Thousands, Unaudited) For the quarter ended For the quarter ended For the quarter ended September 30, 2023 June 30, 2023 September 30, 2022 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 $ 23,760 $ 415 6.93% $ 35,236 $ 376 4.28% $ 21,845 $ 103 1.87% Taxable 1,005,372 14,375 5.67% 996,117 13,488 5.43% 851,683 7,646 3.56% Non-taxable 345,645 2,679 3.89% 352,718 2,741 3.95% 336,567 2,346 3.50% Total investments 1,374,777 17,469 5.25% 1,384,071 16,605 5.02% 1,210,095 10,095 3.51% Loans: (3) Real estate 1,854,055 20,764 4.44% 1,858,512 20,827 4.49% 1,862,738 19,808 4.22% Agricultural production 37,096 649 6.94% 28,472 496 6.99% 29,724 274 3.66% Commercial 90,348 1,392 6.11% 82,743 1,179 5.72% 75,482 973 5.11% Consumer 4,303 87 8.02% 4,339 88 8.13% 4,228 132 12.39% Mortgage warehouse lines 100,549 2,004 7.91% 78,187 1,658 8.51% 46,969 623 5.26% Other 2,381 19 3.17% 2,483 22 3.55% 2,349 23 3.88% Total loans 2,088,732 24,915 4.73% 2,054,736 24,270 4.74% 2,021,490 21,833 4.28% Total interest earning assets (4) 3,463,509 42,384 4.94% 3,438,807 40,875 4.85% 3,231,585 31,928 4.00% Other earning assets 17,355 16,952 15,717 Non-earning assets 275,883 267,433 255,529 Total assets $ 3,756,747 $ 3,723,192 $ 3,502,831 Liabilities and shareholders' equity Interest-bearing deposits: Demand deposits $ 141,745 $ 413 1.16% $ 144,156 $ 190 0.53% $ 197,731 $ 131 0.26% NOW 427,278 68 0.06% 454,395 76 0.07% 531,205 80 0.06% Savings accounts 408,158 69 0.07% 428,222 62 0.06% 485,167 73 0.06% Money market 127,649 194 0.60% 123,571 72 0.23% 151,816 25 0.07% Time deposits 557,504 6,514 4.64% 540,540 6,022 4.47% 313,764 1,377 1.74% Wholesale brokered deposits 162,065 1,509 3.69% 178,728 1,521 3.41% 63,529 75 0.47% Total interest-bearing deposits 1,824,399 8,767 1.91% 1,869,612 7,943 1.70% 1,743,212 1,761 0.40% Borrowed funds: Repurchase agreements 83,222 53 0.25% 79,694 65 0.33% 113,933 70 0.24% Other borrowings 330,221 4,286 5.15% 279,633 3,430 4.92% 45,597 320 2.78% Long-term debt 49,268 429 3.45% 49,247 429 3.49% 49,182 427 3.44% Subordinated debentures 35,590 762 8.49% 35,547 691 7.80% 35,409 439 4.92% Total borrowed funds 498,301 5,530 4.40% 444,121 4,615 4.17% 244,121 1,256 2.04% Total interest-bearing liabilities 2,322,700 14,297 2.44% 2,313,733 12,558 2.18% 1,987,333 3,017 0.60% Demand deposits - noninterest-bearing 1,064,962 1,050,668 1,140,840 Other liabilities 58,340 54,139 67,603 Shareholders' equity 310,745 304,652 307,055 Total liabilities and shareholders' equity $ 3,756,747 $ 3,723,192 $ 3,502,831 Interest income/interest earning assets 4.94% 4.85% 4.00% Interest expense/interest earning assets 1.64% 1.46% 0.37% Net interest income and margin (5) $ 28,087 3.30% $ 28,317 3.39% $ 28,911 3.63% (1) Average balances are obtained from the best available daily or monthly data and are net of deferred fees and related direct costs. (2) Yields and net interest margin have been computed on a tax equivalent basis utilizing a 21% effective tax rate. (3) Loans are gross of the allowance for possible loan losses. Loan fees have been included in the calculation of interest income. Net loan fees and loan acquisition FMV amortization were $(0.3) million and $0.1 million for the quarters ended September 30, 2023 and 2022, respectively, and $(0.3) million for the quarter ended June 30, 2023. (4) Non-accrual loans have been included in total loans for purposes of computing total earning assets. (5) Net interest margin represents net interest income as a percentage of average interest-earning assets. AVERAGE BALANCES AND RATES (Dollars in Thousands, Unaudited) For the nine months ended For the nine months ended September 30, 2023 September 30, 2022 Average Balance(1) Income/ Expense Yield/ Rate(2) Average Balance(1) Income/ Expense Yield/ Rate(2) Assets Investments: Interest-earning due from banks $ 21,504 $ 861 5.35% $ 120,359 $ 466 0.52% Taxable 991,302 39,848 5.37% 783,384 15,613 2.66% Non-taxable 353,173 8,233 3.95% 305,212 5,926 3.29% Total investments 1,365,979 48,942 5.00% 1,208,955 22,005 2.61% Loans:(3) Real estate $ 1,860,504 $ 61,491 4.42% $ 1,820,568 $ 57,792 4.24% Agricultural 31,232 1,578 6.76% 31,376 809 3.45% Commercial 81,397 3,564 5.85% 84,301 3,351 5.31% Consumer 4,260 263 8.25% 4,313 545 16.89% Mortgage warehouse lines 79,438 4,779 8.04% 52,650 1,626 4.13% Other 2,443 61 3.34% 2,066 88 5.69% Total loans 2,059,274 71,736 4.66% 1,995,274 64,211 4.30% Total interest earning assets (4) 3,425,253 120,678 4.80% 3,204,229 86,216 3.66% Other earning assets 16,680 15,675 Non-earning assets 271,949 235,516 Total assets $ 3,713,882 $ 3,455,420 Liabilities and shareholders' equity Interest bearing deposits: Demand deposits $ 145,316 $ 731 0.67% $ 207,319 $ 357 0.23% NOW 454,900 214 0.06% 540,078 243 0.06% Savings accounts 431,143 196 0.06% 477,904 210 0.06% Money market 128,856 291 0.30% 152,912 71 0.06% Time deposits 520,105 17,043 4.38% 301,173 2,052 0.91% Brokered deposits 167,782 4,235 3.37% 61,189 172 0.38% Total interest bearing deposits 1,848,102 22,710 1.64% 1,740,575 3,105 0.24% Borrowed funds: Repurchase agreements 88,707 199 0.30% 110,505 228 0.28% Other borrowings 262,755 9,828 5.00% 15,480 322 2.78% Long-term debt 49,246 1,286 3.49% 49,162 1,284 3.49% Subordinated debentures 35,545 2,120 7.97% 35,365 1,024 3.87% Total borrowed funds 436,253 13,433 4.12% 210,512 2,858 1.81% Total interest bearing liabilities 2,284,355 36,143 2.12% 1,951,087 5,963 0.41% Demand deposits - noninterest bearing 1,062,114 1,122,556 Other liabilities 59,674 58,393 Shareholders' equity 307,739 323,384 Total liabilities and shareholders' equity $ 3,713,882 $ 3,455,420 Interest income/interest earning assets 4.80% 3.66% Interest expense/interest earning assets 1.41% 0.25% Net interest income and margin(5) $ 84,535 3.39% $ 80,253 3.41% (1) Average balances are obtained from the best available daily or monthly data and are net of deferred fees and related direct costs. (2) Yields and net interest margin have been computed on a tax equivalent basis utilizing a 21% effective tax rate. (3) Loans are gross of the allowance for possible loan losses. Loan fees have been included in the calculation of interest income. Net loan fees and loan acquisition FMV amortization were $(0.7) million and $0.9 million for the nine months ended September 30, 2023 and 2022, respectively. (4) Non-accrual loans have been included in total loans for purposes of computing total earning assets. (5) Net interest margin represents net interest income as a percentage of average interest-earning assets. Category: Financial Source: Sierra Bancorp View source version on businesswire.com: https://www.businesswire.com/news/home/20231023734422/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 Third Quarter and First Nine Months of 2023 By: Sierra Bancorp via Business Wire October 23, 2023 at 08:01 AM EDT Sierra Bancorp (Nasdaq: BSRR), parent of Bank of the Sierra, today announced its unaudited financial results for the three-and nine-month periods ended September 30, 2023. Sierra Bancorp reported consolidated net income of $9.9 million, or $0.68 per diluted share, for the third quarter of 2023, and $28.5 million, or $1.93 per diluted shares, for the first nine months of 2023. Highlights for the third quarter of 2023: Steady Earnings Net Income of $9.9 million, consistent with the second quarter of 2023 (the prior linked quarter), and up 8% year-to-date compared to the same period last year Return on Average Assets of 1.04% Return on Average Equity of 12.62% Solid Asset Quality Total Nonperforming Loans declined to $0.8 million, or 0.04% of total gross loans Past due loans declined to $0.8 million, the lowest level for the past two years No foreclosed assets at September 30, 2023 Net Charge-offs remained very low at just under $0.1 million Stable Allowance for Credit Losses on loans of $23.1 million Stable Deposits & Liquidity Overall primary and secondary liquidity sources increased to $2.67 billion at September 30, 2023 Total deposits declined by 1.6% during the quarter due mostly to declines in brokered deposits and interest-bearing transaction accounts Total deposits have increased by $23.6 million, or 0.8% year-to-date Noninterest-bearing deposits stable at 37% of total deposits Strong Capital and Solid Asset Growth Total Assets at $3.74 billion, down 1% from prior linked quarter, but up 4% year-to-date Maintained a diversified investment portfolio designed for interest rate risk management and liquidity Repurchased 99,528 shares of stock during the quarter Tangible Book Value per share increased by 1% to $19.04 per share at September 30, 2023 compared to the prior linked quarter Strong regulatory Community Bank Leverage Ratio of 11.00% for our subsidiary Bank Tangible Common Equity Ratio of 7.5% on a consolidated basis and 9.4% for our subsidiary bank Dividend declared of $0.23 per share, payable on November 14, 2023, our 99th consecutive quarterly dividend “The elevator to success is out of order. You’ll have to use the stairs, one step at a time.” - Joe Girard “We are proud of the many accomplishments of our team of focused bankers this past quarter,” stated Kevin McPhaill, CEO and President. “Our continued strong results are even more noteworthy, given the challenging banking environment. In particular, earnings per share increased from last quarter as did tangible common equity per share. Our quarterly results demonstrate our commitment to continued active balance sheet management. Much of our success is the result of our community bank foundation, which gives us unique positioning and strong connections with our customers. As we continue to look for opportunities to improve earnings, we are excited about the remainder of 2023 and the coming year!” concluded Mr. McPhaill. For the first nine months of 2023, the Company recognized net income of $28.6 million, or $1.93 per diluted share, as compared to $26.5 million, or $1.76 per diluted share, for the same period in 2022. The year-over-year improvement is due primarily to higher net interest income of $4.3 million, along with a $4.0 million decrease in the provision for credit losses in 2023, partially offset by a $5.2 million increase in noninterest expense. The Company’s financial performance metrics for the first nine months of 2023 include an annualized return on average assets and a return on average equity of 1.03% and 12.41%, respectively, compared to 1.03% and 10.98%, respectively, for the same period in 2022. Financial Highlights Quarterly Changes (comparisons to the third quarter of 2022) Net income was unchanged at $9.9 million. Net interest income was negatively impacted by compression in the net interest margin. There was a favorable change in the provision for credit losses on loans while improvements made in noninterest income were offset by higher noninterest expenses. Net interest income was $0.8 million lower due to a 33 bp decrease in net interest margin. There was a $231.9 million increase in average interest earning assets with an increased yield of 94 bps, however this was more than offset by a $335.4 million increase in interest bearing liabilities at 184 bps higher cost. Noninterest income increased $1.2 million or 17% primarily due to a $0.6 million increase in bank-owned life insurance, $0.3 million in life insurance proceeds and a $0.2 million increase in service charges on deposit accounts. Asset quality improved considerably as demonstrated by a significant decline in non-performing assets to gross loans plus foreclosed assets. This ratio fell to 0.04% at September 30, 2023, from 1.33% at the same period in 2022. Nonperforming assets declined substantially from $26.8 million at September 30, 2022, to $0.8 million at September 30, 2023, a decline of 97%. Most of the nonperforming assets at September 30, 2022 were related to a single dairy relationship that was foreclosed upon and sold in early 2023. There was a benefit for credit losses for $0.03 million, as compared to a provision for credit losses of $1.3 million in the same quarter of 2022, due to a decrease in specific reserves for individually evaluated loans. Liquidity continues to be very substantial with the primary liquidity ratio at 31.5% and $2.7 billion in overall available liquidity at September 30, 2023. All required capital ratios were above the regulatory guidelines for a well-capitalized institution. The Community Bank Leverage ratio was 11.00% for Bank of the Sierra. The Sierra Bancorp Tier I leverage ratio was 10.08%. Sierra Bancorp repurchased 99,528 shares totaling $2.0 million in the third quarter of 2023. Our Board of Directors declared a cash dividend of $0.23 per share on October 19, 2023. This is the 99th consecutive quarterly dividend paid by Sierra Bancorp. The cash dividend is payable on November 14, 2023, to shareholders of record at the close of business on October 30, 2023. Year to-Date Income Changes (comparisons to the first nine-months of 2022) Net income increased $2.0 million, or 8%. There was an increase of $4.3 million or 5% in net interest income, due mostly to an overall increase in interest rates. We experienced higher yields and balances on loans and investment securities, which were partly offset by higher overall funding costs. Earnings per share increased to $1.93, an increase of 10% from $1.76 per share. The provision for credit losses was $0.2 million, a decrease of $4.0 million due to a decrease in specific reserves on individual loans as well as lower net loan charge-offs. Noninterest income decreased by $0.8 million, or 3%. In 2022 there was a $1.0 million recovery of prior year legal expenses, a $1.0 million gain on the sale of investment securities, and a $3.2 million gain on the sale of other assets with no like corresponding event in 2023. Positively impacting the first nine months of 2023 there was a $2.8 million positive variance in deferred compensation BOLI and a $0.4 million increase in life insurance proceeds. Noninterest expense increased $5.2 million, or 8%, due mostly to the increases in salary expense for new loan production teams and a negative variance in director’s deferred compensation expense which is linked to the favorable changes in bank-owned life insurance income described above. Statement of Condition Changes (comparisons to December 31, 2022) Total assets increased by $130.3 million, or 4%, to $3.7 billion, during the first nine months of the year due mostly to an increase in wholesale deposits and borrowed funds which facilitated the purchase of investment securities as well as modest loan growth. Cash and due from banks increased $11.4 million to $88.5 million during the first nine months of the year due to an increase in interest earning bank balances. Investment securities increased by $62.1 million, or 5%, to $1.2 billion primarily due to strategic purchases of high-quality AAA and AA rated, collateralized loan obligations and government agency securities. Gross loans increased $47.9 million predominantly due to a $42.2 million increase in mortgage warehouse line utilization. In addition, C&I and Agricultural production loans increased, but were partially offset by a decline in Farmland loans due to a foreclosure of a single dairy relationship in early 2023. Deposits totaled $2.9 billion at September 30, 2023, representing a year-to-date increase of $23.6 million, or 1%. The growth in deposits came mostly from a $45.0 million increase in brokered deposits primarily acquired prior to March 2023 as part of the Company’s interest rate risk management and liquidity strategy. Long term debt and subordinated debentures were relatively unchanged. Other interest-bearing liabilities increased $83.7 million, or 26%, and consisted primarily of long term FHLB advances. Other financial highlights are reflected in the following table. FINANCIAL HIGHLIGHTS (Dollars in Thousands, Except Per Share Data, Unaudited) As of or for the As of or for the three months ended nine months ended 9/30/2023 6/30/2023 9/30/2022 9/30/2023 9/30/2022 Net income $ 9,885 $ 9,919 $ 9,935 $ 28,555 $ 26,546 Diluted earnings per share $ 0.68 $ 0.67 $ 0.66 $ 1.93 $ 1.76 Return on average assets 1.04% 1.07% 1.13% 1.03% 1.03% Return on average equity 12.62% 13.06% 12.84% 12.41% 10.98% Net interest margin (tax-equivalent) (1) 3.30% 3.39% 3.63% 3.39% 3.41% Yield on average loans 4.73% 4.74% 4.28% 4.66% 4.30% Yield on investments 5.25% 5.02% 3.51% 5.00% 2.61% Cost of average total deposits 1.20% 1.09% 0.24% 1.04% 0.15% Efficiency ratio (tax-equivalent) (1) (2) 61.46% 62.27% 58.10% 62.83% 61.10% Total assets $ 3,738,880 $ 3,762,461 $ 3,532,289 $ 3,738,880 $ 3,532,289 Loans net of deferred fees $ 2,100,973 $ 2,094,464 $ 2,020,016 $ 2,100,973 $ 2,020,016 Noninterest demand deposits $ 1,059,878 $ 1,066,498 $ 1,118,245 $ 1,059,878 $ 1,118,245 Total deposits $ 2,869,720 $ 2,918,759 $ 2,885,468 $ 2,869,720 $ 2,885,468 Noninterest-bearing deposits over total deposits 36.9% 36.5% 38.8% 36.9% 38.8% Shareholders' equity / total assets 8.3% 8.2% 8.4% 8.3% 8.4% Tangible common equity ratio (2) 7.5% 7.5% 7.6% 7.5% 7.6% Book value per share $ 21.01 $ 20.90 $ 19.56 $ 21.01 $ 19.56 Tangible book value per share (2) $ 19.04 $ 18.93 $ 17.58 $ 19.04 $ 17.58 (1) Computed on a tax equivalent basis utilizing a federal income tax rate of 21%. (2) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures". INCOME STATEMENT HIGHLIGHTS Net Interest Income Net interest income was $28.1 million, for the third quarter of 2023, a $0.8 million decrease, or 3% over the third quarter of 2022, but increased $4.3 million, or 5%, to $84.5 million for the first nine months of 2023 relative to the same period in 2022. For the third quarter of 2023, growth in average interest-earning assets totaled $231.9 million, or 7%, as compared to the third quarter of 2022. The yield on these balances was 94 basis points higher for the same period due mostly to an increase in investment securities as well as loan growth and the result of interest rate increases by the Federal Open Market Committee. This increase in yield was offset by a 184 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. Net interest income for the comparative year-to-date periods increased $4.3 million, or 5%, due to a change in mix of average interest-earning assets, mostly the deployment of lower yielding interest earning due from bank balances into higher yielding investment securities. Investment balances, which includes overnight funds, with an average yield of 5.0% increased $157.0 million, while gross average loan balances yielding 4.7% increased $64.0 million. The overall yield on the average balances of earning assets was 114 basis points higher for the comparative periods, offset by a 171 basis point increase in interest paid on liabilities. The net impact of these various changes was a 2 basis point decrease in our net interest margin for the nine-months ending September 30, 2023, as compared to the same period in 2022. Interest expense was $14.3 million for the third quarter of 2023, an increase of $11.3 million, relative to the third quarter of 2022. For the first nine months of 2023, compared to the same period in 2022, interest expense increased $30.2 million to $36.1 million. The significant increase in interest expense is attributable to an unfavorable shift in interest bearing liabilities and the impact of recent interest rate increases, as the average balance of deposits, including lower cost core deposits decreased $93.2 million while higher cost borrowed funds and wholesale brokered deposits increased by $352.7 million in the third quarter of 2023 as compared to the third quarter of 2022. For the year-to-date comparisons the increase is attributable to a shift from lower cost transaction accounts to higher cost time accounts as well as an increase in borrowed funds. For the first nine months of 2023, higher cost customer time deposits increased $218.9 million, wholesale brokered deposits increased $106.6 million and borrowed funds increased $247.5 million, while lower cost or no cost deposits decreased $278.4 million. Our net interest margin was 3.30% for the third quarter of 2023, as compared to 3.39% for the linked quarter and 3.63% for the third quarter of 2022. While the yield of interest-earning assets increased 9 basis points for the third quarter of 2023 as compared to the linked quarter, the cost of interest-bearing liabilities increased 26 basis points for the same period of comparison. The average balance of interest-earning assets increased $24.7 million for the linked quarter while the increase in interest-bearing liabilities was $9.0 million for the same period. Even though the volume increase of interest earning assets was more than the increase in interest-bearing liabilities, the larger rate increase on liabilities caused the compression in the linked quarter. Any future FOMC rate hikes could cause further compression in the net interest margin, since overnight borrowing funds instantly reprice higher while there is a lag in the increased yield on interest-earning assets. Provision for Loan and Lease Losses The overall provision for credit losses resulted in a benefit of $0.03 million for the third quarter of 2023; there was a $0.1 million provision for credit losses related to loans and leases offset by a $0.2 million benefit for credit losses from unfunded commitments and no provision for held-to-maturity investment securities, relative to a provision for credit losses of $1.3 million in the third quarter of 2022, and a year-to-date provision for credit losses on loans and leases of $0.2 million in 2023 as compared to $4.2 million for the same period in 2022. The Company's $1.3 million decrease in the provision for credit losses on loans and leases in the third quarter of 2023 as compared to the third quarter of 2022, and the $4.0 million year to date decrease in the provision for credit losses, compared to the same period in 2022 was primarily due to the impact of $4.3 million in net charge-offs in the first nine months of 2022 with only $0.4 million in net charge offs for the first nine months of 2023. The decrease in net charge-offs in the first nine months of 2023 was primarily related to a single office building loan relationship that was sold at a discount due to an increased risk of default that would have likely led to a prolonged collection period and a single dairy loan relationship. The Company did not record a provision for credit losses on available-for-sale debt securities. Although there were debt securities in an unrealized loss position the declines in market values were primarily attributable to changes in interest rates and volatility in the financial markets and not a result of an expected credit loss. Noninterest Income Total noninterest income increased $1.2 million, or 17%, for the quarter ended September 30, 2023, as compared to the same quarter in 2022, and decreased $.08 million, or 3% for the year-to-date period ended September 30, 2023, as compared to the same period in 2022. The quarterly and year-to-date comparisons were both impacted by favorable fluctuations in income on bank-owned life insurance (BOLI) with underlying investments mapped directly to the Company’s deferred compensation plan. The quarterly comparison was also positively impacted by an increase in service charges on deposit accounts for $0.2 million, life insurance proceeds for $0.3 million, and $0.4 million in income from an investment in an SBA loan fund. The year-to-date decrease is the result of 2022 events that did not recur in 2023, including a $1.0 million gain on the sale of debt securities, $3.6 million from gains on the sale of other assets, and the recovery of prior period legal expenses, partially offset by income from an investment in an SBA loan fund for $1.0 million in 2023. Service charges on customer deposit accounts were basically unchanged at $6.1 million in the third quarter of 2023 as compared to the third quarter of 2022, however for the year-to-date comparison there was a $0.3 million decrease primarily due to decreases in ATM and debit card income. Noninterest Expense Total noninterest expense increased by $1.6 million, or 7%, in the third quarter of 2023 relative to the third quarter of 2022, and by $5.2 million, or 8%, for the first nine months of 2023 as compared to the same period in 2022. Salaries and Benefits were $1.1 million, or 10%, higher in the third quarter of 2023 as compared to the third quarter of 2022 and $2.5 million, or 7%, higher for the first nine months of 2023 compared to the same period in 2022. The reason for this increase is primarily due to the hiring of higher paid new lending teams and management staff for both the quarterly and year-to-date comparisons. There were 487 full-time equivalent employees at September 30, 2023 as compared to 491 at December 31, 2022 and 500 at September 30, 2022. Occupancy expenses were relatively unchanged for the third quarter and the first nine-months of 2023 as compared to the same periods in 2022. Other noninterest expense increased $0.5 million, or 6%, for the third quarter 2023 as compared to the third quarter in 2022, and increased $2.7 million, or 13%, for the first nine months of 2023 as compared to the same period in 2022. The variances for the third quarter of 2023 compared to the same period in 2022 were primarily driven by a $0.6 million unfavorable variance in directors deferred compensation expense, linked to the changes in BOLI income, higher FDIC assessment costs, increased marketing costs associated with a deposit acquisition campaign and elevated debit card losses. These increased expenses were partially offset by lower costs in core processing, debit card processing and ATM network costs. For the year-over-year comparison, the categories of increase were the same as with the quarterly comparison, along with a $0.2 million decrease in deposit statement costs offset by increased foreclosed asset costs related to the foreclosure and subsequent sale of one large loan relationship in the first quarter of 2023. The Company's provision for income taxes was 25.8% of pre-tax income in the third quarter of 2023 relative to 25.1% in the third quarter of 2022, and 25.2% of pre-tax income for the first nine months of 2023 relative to 26.1% for the same period in 2022. The changes in effective tax rate for both the quarterly and year-to-date comparisons is due to the volatility in the Bank Owned Life Insurance asset value associated with our non-qualified deferred compensation plans. Balance Sheet Summary Balance sheet changes during the first nine months of 2023 include an increase in total assets of $130.3 million, or 4%, primarily a result of a $62.1 million increase in investments securities, and a $47.9 million increase in gross loans. The increase in investment securities of $62.1 million for the year-to-date period consisted primarily of increases in AAA and AA tranches of collateralized loan obligations of $56.5 million and in callable government agency securities for $56.0 million, partially offset by decreases in mortgage-backed securities, corporate bonds and state and municipal bonds. Gross loan balances increased $47.9 million during the first nine months of 2023, as compared to December 31, 2022. The increase was primarily a result of a $42.1 million increase in mortgage warehouse utilization, $22.6 million increase in commercial real estate, and a $35.4 million increase in other commercial loans. 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 $22.4 million decrease in farmland, $11.1 million decrease in other construction and $18.7 million decrease in residential real estate. Further, SBA PPP loan forgiveness resulted in a $1.3 million decline in loan balances, included in the other commercial loan variance noted above. As indicated in the loan roll forward below, new credit extended for the third quarter of 2023 decreased $14.0 million over the same period in 2022 and decreased $66.4 million for the year-to-date comparisons. This decline in organic loan growth is attributable to competitive pressures in our market and management’s unwillingness to compromise the quality of new loans originated, combined with a lack of demand due to the current high interest rate environment. We also had $37.0 million in loan paydowns and maturities, and a decrease in mortgage warehouse and credit line utilization of $25.5 million in the third quarter. LOAN ROLLFORWARD (Dollars in Thousands, Unaudited) For the three months ended: For the nine months ended: September 30, 2023 June 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Gross loans beginning balance $ 2,094,391 $ 2,033,968 $ 2,022,662 $ 2,052,940 $ 1,989,726 New credit extended 68,980 37,030 82,958 158,619 225,054 Loan purchases — — — — 173,082 Changes in line of credit utilization (22,517 ) 6,622 (7,811 ) (41,685 ) (45,201 ) Change in mortgage warehouse (3,032 ) 42,145 (11,581 ) 42,146 (54,630 ) Pay-downs, maturities, charge-offs and amortization (1) (37,012 ) (25,374 ) (65,864 ) (111,210 ) (267,667 ) Gross loans ending balance 2,100,810 2,094,391 2,020,364 2,100,810 2,020,364 (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 $216.4 million at September 30, 2023, compared to $219.7 million at December 31, 2022. Total line utilization, excluding mortgage warehouse and overdraft lines, was 59.7% at September 30, 2022 and 58.7% at December 31, 2022. Mortgage warehouse utilization increased to 25.0% at September 30, 2023, as compared to 9.9% at December 31, 2022. PPP loans continue to decline as borrowers receive forgiveness on these loans. There were nine loans for $0.4 million outstanding at September 30, 2023, compared to fourteen loans for $1.8 million at December 31, 2022. Deposit balances reflect growth of $23.6 million, or 1%, during the first nine months of 2023. Core non-maturity deposits decreased by $173.6 million, or 7%, while customer time deposits increased by $152.1 million, or 38%. Wholesale brokered deposits increased by $45.0 million, or 38%. Overall noninterest-bearing deposits as a percent of total deposits at September 30, 2023, were 36.9%, as compared to 38.2% at December 31, 2022. Other interest-bearing liabilities of $411.9 million on September 30, 2023, consist of $94.9 million in customer repurchase agreements, $182.0 million of FHLB borrowings and $135.0 million in fed funds purchased. The Company continues to have substantial liquidity. At September 30, 2023, and December 31, 2022, the Company had the following sources of primary and secondary liquidity (Dollars in Thousands, Unaudited): Primary and secondary liquidity sources September 30, 2023 December 31, 2022 Cash and cash equivalents $ 88,542 $ 77,131 Unpledged investment securities 854,730 1,097,164 Excess pledged securities 326,343 43,096 FHLB borrowing availability 657,548 718,842 Unsecured lines of credit 362,785 237,000 Funds available through fed discount window 383,943 42,278 Totals $ 2,673,891 $ 2,215,511 Total capital of $308.9 million at September 30, 2023 reflects an increase of $5.3 million, or 2%, relative to year-end 2022. The increase in equity during the first nine months of 2023 was due to the addition of $28.6 million in net income, offset by a $5.3 million unfavorable swing in accumulated other comprehensive income/loss, due principally to changes in investment securities’ fair value, $8.5 million in share repurchases, and $10.4 million in dividends paid. The remaining difference is related to the impact of restricted stock. Asset Quality Total nonperforming assets, comprised of nonaccrual loans and foreclosed assets, decreased by $18.8 million to $0.8 million for the first nine months of 2023. The Company's ratio of nonperforming loans to gross loans decreased to 0.4% at September 30, 2023 from 0.95% at December 31, 2022. The decrease resulted from a decrease in non-accrual loan balances, primarily as a result of the foreclosure and sale of one loan relationship in the dairy industry consisting of four separate loans in the first quarter of 2023. All the Company's nonperforming assets are individually evaluated for credit loss quarterly and management believes the established allowance for credit loss on such loans is appropriate. The Company's allowance for credit losses on loans and leases was $23.1 million at both September 30, 2023, and December 31, 2022. The flat allowance for credit losses on loans and leases was due to fewer net charge offs during the first nine-months of 2023 along with modest loan growth. The allowance for credit losses on loans and leases was 1.10% of gross loans at September 30, 2023, and 1.12% of gross loans at December 31, 2022. Management's detailed analysis indicates that the Company's allowance for credit losses on loans and leases should be sufficient to cover credit losses for the life of the loans and leases outstanding as of September 30, 2023, 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 an agricultural credit center in Templeton, California, and a dedicated loan production office in Roseville, California. In 2023, 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 and a BBB+ rating from Kroll. 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 including the impact to the Company and its customers resulting from changes to, and the level of, inflation and interest rates; changes in laws, rules, regulations, or interpretations to which the Company is subject; the Company’s ability to maintain and grow its deposit base; loan demand and continued portfolio performance, the Company's ability to attract and retain skilled employees, customers' service expectations; cyber security risks: the Company's ability to successfully deploy new technology, the success of acquisitions and branch expansion; operational risks including the ability to detect and prevent errors and fraud; the effectiveness of the Company’s enterprise risk management framework; the impact of adverse developments at other banks, including bank failures, that impact general sentiment regarding the stability and liquidity of banks that could affect stock price; changes to valuations of the Company’s assets and liabilities including the allowance for credit losses, earning assets, and intangible assets; changes to the availability of liquidity sources including borrowing lines and the ability to pledge or sell certain assets; costs related to litigation; the effects of severe weather events, pandemics, other public health crises, acts of war or terrorism, and other external events on our business; and other factors detailed in the Company's SEC filings, including the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's most recent Form 10‑K and Form 10‑Q. STATEMENT OF CONDITION (Dollars in Thousands, Unaudited) ASSETS 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Cash and due from banks $ 88,542 $ 103,483 $ 83,506 $ 77,131 $ 86,683 Investment securities Available-for-sale, at fair value 1,010,377 1,027,538 1,040,920 934,923 1,069,434 Held-to-maturity, at amortized cost, net of allowance for credit losses 323,544 328,478 332,728 336,881 156,211 Real estate loans Residential real estate 418,782 426,608 433,185 437,446 441,262 Commercial real estate 1,331,989 1,317,945 1,318,627 1,309,410 1,291,315 Other construction/land 7,320 16,020 15,653 18,412 18,315 Farmland 90,993 92,728 92,906 113,394 117,385 Total real estate loans 1,849,084 1,853,301 1,860,371 1,878,662 1,868,277 Other commercial 140,081 126,360 101,118 104,715 101,437 Mortgage warehouse lines 107,584 110,617 68,472 65,439 46,553 Consumer loans 4,061 4,113 4,007 4,124 4,097 Gross loans 2,100,810 2,094,391 2,033,968 2,052,940 2,020,364 Deferred loan fees 163 73 24 (123 ) (348 ) Allowance for credit losses on loans (23,060 ) (23,010 ) (23,090 ) (23,060 ) (23,790 ) Net loans 2,077,913 2,071,454 2,010,902 2,029,757 1,996,226 Bank premises and equipment 21,926 22,072 22,321 22,478 22,688 Other assets 216,578 209,436 203,607 207,420 201,047 Total assets $ 3,738,880 $ 3,762,461 $ 3,693,984 $ 3,608,590 $ 3,532,289 LIABILITIES AND CAPITAL Noninterest demand deposits $ 1,059,878 $ 1,066,498 $ 1,041,748 $ 1,088,199 $ 1,118,245 Interest-bearing transaction accounts 561,257 584,263 637,549 641,581 732,468 Savings deposits 400,940 415,793 441,758 456,981 481,882 Money market deposits 130,914 124,834 123,162 139,795 140,620 Customer time deposits 551,731 552,371 519,771 399,608 332,253 Wholesale brokered deposits 165,000 175,000 185,000 120,000 80,000 Total deposits 2,869,720 2,918,759 2,948,988 2,846,164 2,885,468 Long-term debt 49,281 49,259 89,236 49,214 49,196 Subordinated debentures 35,615 35,570 35,526 35,481 35,436 Other interest-bearing liabilities 411,865 398,922 270,861 328,169 215,112 Total deposits and interest-bearing liabilities 3,366,481 3,402,510 3,344,611 3,259,028 3,185,212 Allowance for credit losses on unfunded loan commitments 600 750 850 840 940 Other liabilities 62,940 49,609 41,513 45,140 51,065 Total capital 308,859 309,592 307,010 303,582 295,072 Total liabilities and capital $ 3,738,880 $ 3,762,461 $ 3,693,984 $ 3,608,590 $ 3,532,289 GOODWILL AND INTANGIBLE ASSETS (Dollars in Thousands, Unaudited) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Goodwill $ 27,357 $ 27,357 $ 27,357 $ 27,357 $ 27,357 Core deposit intangible 1,618 1,837 2,056 2,275 2,517 Total intangible assets $ 28,975 $ 29,194 $ 29,413 $ 29,632 $ 29,874 CREDIT QUALITY (Dollars in Thousands, Unaudited) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Non-accruing loans $ 781 $ 1,141 $ 938 $ 19,579 $ 26,772 Foreclosed assets — — — — — Total nonperforming assets $ 781 $ 1,141 $ 938 $ 19,579 $ 26,772 Quarterly net charge offs $ 67 $ 157 $ 220 $ 7,268 $ 224 Past due & still accruing (30-89) $ 806 $ 1,873 $ 1,241 $ 1,203 $ 1,242 Non-performing loans to gross loans 0.04% 0.05% 0.05% 0.95% 1.33% NPA's to loans plus foreclosed assets 0.04% 0.05% 0.05% 0.95% �� 1.33% Allowance for credit losses on loans 1.10% 1.10% 1.14% 1.12% 1.18% SELECT PERIOD-END STATISTICS (Unaudited) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Shareholders' equity / total assets 8.3% 8.2% 8.3% 8.4% 8.4% Gross loans / deposits 73.2% 71.8% 69.0% 72.1% 70.0% Noninterest-bearing deposits / total deposits 36.9% 36.5% 35.3% 38.2% 38.8% CONSOLIDATED INCOME STATEMENT (Dollars in Thousands, Unaudited) For the three months ended: For the nine months ended: 9/30/2023 6/30/2023 9/30/2022 9/30/2023 9/30/2022 Interest income $ 42,384 $ 40,875 $ 31,928 $ 120,678 $ 86,216 Interest expense 14,297 12,558 3,017 36,143 5,963 Net interest income 28,087 28,317 28,911 84,535 80,253 (Benefit) provision for credit losses (33 ) (70 ) 1,259 157 4,184 Net interest income after provision 28,120 28,387 27,652 84,378 76,069 Service charges and fees on deposit accounts 6,055 5,691 6,008 17,127 17,464 Gain on sale of investments - 351 - 396 1,032 BOLI income (expense) 558 658 (23 ) 1,388 (1,252 ) Other noninterest income 1,149 1,313 627 3,444 5,870 Total noninterest income 7,762 8,013 6,612 22,355 23,114 Salaries and benefits 12,623 12,129 11,521 37,567 35,070 Occupancy expense 2,482 2,438 2,470 7,251 7,170 Other noninterest expenses 7,457 8,401 7,005 23,704 21,042 Total noninterest expense 22,562 22,968 20,996 68,522 63,282 Income before taxes 13,320 13,432 13,268 38,211 35,901 Provision for income taxes 3,435 3,513 3,333 9,656 9,355 Net income $ 9,885 $ 9,919 $ 9,935 $ 28,555 $ 26,546 TAX DATA Tax-exempt muni income $ 2,679 $ 2,741 $ 2,346 $ 8,233 $ 5,926 Interest income - fully tax equivalent $ 43,096 $ 41,604 $ 32,552 $ 122,867 $ 87,791 PER SHARE DATA (Unaudited) For the three months ended: For the nine months ended: 9/30/2023 6/30/2023 9/30/2022 9/30/2023 9/30/2022 Basic earnings per share $ 0.68 $ 0.67 $ 0.66 $ 1.93 $ 1.77 Diluted earnings per share $ 0.68 $ 0.67 $ 0.66 $ 1.93 $ 1.76 Common dividends $ 0.23 $ 0.23 $ 0.23 $ 0.69 $ 0.69 Weighted average shares outstanding 14,583,132 14,735,568 14,954,503 14,762,231 14,968,242 Weighted average diluted shares 14,636,477 14,754,764 15,014,048 14,791,696 15,046,883 Book value per basic share (EOP) $ 21.01 $ 20.90 $ 19.56 $ 21.01 $ 19.56 Tangible book value per share (EOP) $ 19.04 $ 18.93 $ 17.58 $ 19.04 $ 17.58 Common shares outstanding (EOP) 14,702,079 14,811,736 15,085,675 14,702,079 15,085,675 KEY FINANCIAL RATIOS (Unaudited) For the three months ended: For the nine months ended: 9/30/2023 6/30/2023 9/30/2022 9/30/2023 9/30/2022 Return on average equity 12.62% 13.06% 12.84% 12.41% 10.98% Return on average assets 1.04% 1.07% 1.13% 1.03% 1.03% Net interest margin (tax-equivalent) (1) 3.30% 3.39% 3.63% 3.39% 3.41% Efficiency ratio (tax-equivalent) (1) (2) 61.46% 62.27% 58.10% 62.83% 61.10% Net charge offs to avg loans (not annualized) 0.00% 0.01% 1.00% 0.02% 21.00% (1) Computed on a tax equivalent basis utilizing a federal income tax rate of 21%. (2) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures". The following non-GAAP schedule reconciles the book value per share to the tangible book value per share and the GAAP equity ratio to the tangible equity ratio as of the dates indicated: NON-GAAP FINANCIAL MEASURES (Dollars in Thousands, Unaudited) 9/30/2023 6/30/2023 9/30/2022 Total stockholders' equity $ 308,859 $ 309,592 $ 295,072 Less: goodwill and other intangible assets 28,975 29,194 29,874 Tangible common equity $ 279,884 $ 280,398 $ 265,198 Total assets $ 3,738,880 $ 3,762,461 $ 3,532,289 Less: goodwill and other intangible assets 28,975 29,194 29,874 Tangible assets $ 3,709,905 $ 3,733,267 $ 3,502,415 Common shares outstanding 14,702,079 14,811,736 15,085,675 Book value per common share $ 21.01 $ 20.90 $ 19.56 Tangible book value per common share $ 19.04 $ 18.93 $ 17.58 Equity ratio - GAAP (total stockholders' equity / total assets 8.26% 8.23% 8.35% Tangible common equity ratio (tangible common equity / tangible assets) 7.54% 7.51% 7.57% For the three months ended: Efficiency Ratio: 9/30/2023 6/30/2023 9/30/2022 Noninterest expense $ 22,562 $ 22,968 $ 20,996 Divided by: Net interest income 28,087 28,317 28,911 Tax-equivalent interest income adjustments 712 729 624 Net interest income, adjusted 28,799 29,046 29,535 Noninterest income 7,762 8,013 6,612 Less gain on sale of securities - 351 - Tax-equivalent noninterest income adjustments 148 175 (6 ) Noninterest income, adjusted 7,910 7,837 6,606 Net interest income plus noninterest income, adjusted $ 36,709 $ 36,883 $ 36,141 Efficiency Ratio (tax-equivalent) 61.46% 62.27% 58.10% NONINTEREST INCOME/EXPENSE (Dollars in Thousands, Unaudited) For the three months ended: For the nine months ended September 30, Noninterest income: 9/30/2023 6/30/2023 9/30/2022 2023 2022 Service charges and fees on deposit accounts $ 6,055 $ 5,691 $ 6,008 $ 17,127 $ 17,464 Net gains on sale of securities available-for-sale — 351 — 396 1,032 Bank-owned life insurance 558 658 (23 ) 1,388 (1,252 ) Other 1,149 1,313 627 3,444 5,870 Total noninterest income $ 7,762 $ 8,013 $ 6,612 $ 22,355 $ 23,114 As a % of average interest earning assets (1) 0.89% 0.93% 0.81% 0.87% 0.96% Noninterest expense: Salaries and employee benefits $ 12,623 $ 12,129 $ 11,521 $ 37,567 $ 35,070 Occupancy and equipment costs 2,482 2,438 2,470 7,251 7,170 Advertising and marketing costs 723 410 466 1,646 1,322 Data processing costs 1,369 1,536 1,564 4,433 4,574 Deposit services costs 2,048 2,532 2,450 6,603 7,112 Loan services costs Loan processing 174 151 128 452 426 Foreclosed assets (60 ) (33 ) (3 ) 665 84 Other operating costs 765 1,490 912 3,244 3,879 Professional services costs Legal & accounting services 493 483 535 1,623 1,753 Director's costs 732 725 (143 ) 1,733 (1,192 ) Other professional service 707 832 855 2,053 2,306 Stationery & supply costs 148 125 114 414 315 Sundry & tellers 358 150 127 838 463 Total noninterest expense $ 22,562 $ 22,968 $ 20,996 $ 68,522 $ 63,282 As a % of average interest earning assets (1) 2.58% 2.68% 2.58% 2.67% 2.64% Efficiency ratio (tax-equivalent) (2)(3) 61.46% 62.27% 58.10% 62.83% 61.10% (1) Annualized (2) Computed on a tax equivalent basis utilizing a federal income tax rate of 21% (3) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures.” AVERAGE BALANCES AND RATES (Dollars in Thousands, Unaudited) For the quarter ended For the quarter ended For the quarter ended September 30, 2023 June 30, 2023 September 30, 2022 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 $ 23,760 $ 415 6.93% $ 35,236 $ 376 4.28% $ 21,845 $ 103 1.87% Taxable 1,005,372 14,375 5.67% 996,117 13,488 5.43% 851,683 7,646 3.56% Non-taxable 345,645 2,679 3.89% 352,718 2,741 3.95% 336,567 2,346 3.50% Total investments 1,374,777 17,469 5.25% 1,384,071 16,605 5.02% 1,210,095 10,095 3.51% Loans: (3) Real estate 1,854,055 20,764 4.44% 1,858,512 20,827 4.49% 1,862,738 19,808 4.22% Agricultural production 37,096 649 6.94% 28,472 496 6.99% 29,724 274 3.66% Commercial 90,348 1,392 6.11% 82,743 1,179 5.72% 75,482 973 5.11% Consumer 4,303 87 8.02% 4,339 88 8.13% 4,228 132 12.39% Mortgage warehouse lines 100,549 2,004 7.91% 78,187 1,658 8.51% 46,969 623 5.26% Other 2,381 19 3.17% 2,483 22 3.55% 2,349 23 3.88% Total loans 2,088,732 24,915 4.73% 2,054,736 24,270 4.74% 2,021,490 21,833 4.28% Total interest earning assets (4) 3,463,509 42,384 4.94% 3,438,807 40,875 4.85% 3,231,585 31,928 4.00% Other earning assets 17,355 16,952 15,717 Non-earning assets 275,883 267,433 255,529 Total assets $ 3,756,747 $ 3,723,192 $ 3,502,831 Liabilities and shareholders' equity Interest-bearing deposits: Demand deposits $ 141,745 $ 413 1.16% $ 144,156 $ 190 0.53% $ 197,731 $ 131 0.26% NOW 427,278 68 0.06% 454,395 76 0.07% 531,205 80 0.06% Savings accounts 408,158 69 0.07% 428,222 62 0.06% 485,167 73 0.06% Money market 127,649 194 0.60% 123,571 72 0.23% 151,816 25 0.07% Time deposits 557,504 6,514 4.64% 540,540 6,022 4.47% 313,764 1,377 1.74% Wholesale brokered deposits 162,065 1,509 3.69% 178,728 1,521 3.41% 63,529 75 0.47% Total interest-bearing deposits 1,824,399 8,767 1.91% 1,869,612 7,943 1.70% 1,743,212 1,761 0.40% Borrowed funds: Repurchase agreements 83,222 53 0.25% 79,694 65 0.33% 113,933 70 0.24% Other borrowings 330,221 4,286 5.15% 279,633 3,430 4.92% 45,597 320 2.78% Long-term debt 49,268 429 3.45% 49,247 429 3.49% 49,182 427 3.44% Subordinated debentures 35,590 762 8.49% 35,547 691 7.80% 35,409 439 4.92% Total borrowed funds 498,301 5,530 4.40% 444,121 4,615 4.17% 244,121 1,256 2.04% Total interest-bearing liabilities 2,322,700 14,297 2.44% 2,313,733 12,558 2.18% 1,987,333 3,017 0.60% Demand deposits - noninterest-bearing 1,064,962 1,050,668 1,140,840 Other liabilities 58,340 54,139 67,603 Shareholders' equity 310,745 304,652 307,055 Total liabilities and shareholders' equity $ 3,756,747 $ 3,723,192 $ 3,502,831 Interest income/interest earning assets 4.94% 4.85% 4.00% Interest expense/interest earning assets 1.64% 1.46% 0.37% Net interest income and margin (5) $ 28,087 3.30% $ 28,317 3.39% $ 28,911 3.63% (1) Average balances are obtained from the best available daily or monthly data and are net of deferred fees and related direct costs. (2) Yields and net interest margin have been computed on a tax equivalent basis utilizing a 21% effective tax rate. (3) Loans are gross of the allowance for possible loan losses. Loan fees have been included in the calculation of interest income. Net loan fees and loan acquisition FMV amortization were $(0.3) million and $0.1 million for the quarters ended September 30, 2023 and 2022, respectively, and $(0.3) million for the quarter ended June 30, 2023. (4) Non-accrual loans have been included in total loans for purposes of computing total earning assets. (5) Net interest margin represents net interest income as a percentage of average interest-earning assets. AVERAGE BALANCES AND RATES (Dollars in Thousands, Unaudited) For the nine months ended For the nine months ended September 30, 2023 September 30, 2022 Average Balance(1) Income/ Expense Yield/ Rate(2) Average Balance(1) Income/ Expense Yield/ Rate(2) Assets Investments: Interest-earning due from banks $ 21,504 $ 861 5.35% $ 120,359 $ 466 0.52% Taxable 991,302 39,848 5.37% 783,384 15,613 2.66% Non-taxable 353,173 8,233 3.95% 305,212 5,926 3.29% Total investments 1,365,979 48,942 5.00% 1,208,955 22,005 2.61% Loans:(3) Real estate $ 1,860,504 $ 61,491 4.42% $ 1,820,568 $ 57,792 4.24% Agricultural 31,232 1,578 6.76% 31,376 809 3.45% Commercial 81,397 3,564 5.85% 84,301 3,351 5.31% Consumer 4,260 263 8.25% 4,313 545 16.89% Mortgage warehouse lines 79,438 4,779 8.04% 52,650 1,626 4.13% Other 2,443 61 3.34% 2,066 88 5.69% Total loans 2,059,274 71,736 4.66% 1,995,274 64,211 4.30% Total interest earning assets (4) 3,425,253 120,678 4.80% 3,204,229 86,216 3.66% Other earning assets 16,680 15,675 Non-earning assets 271,949 235,516 Total assets $ 3,713,882 $ 3,455,420 Liabilities and shareholders' equity Interest bearing deposits: Demand deposits $ 145,316 $ 731 0.67% $ 207,319 $ 357 0.23% NOW 454,900 214 0.06% 540,078 243 0.06% Savings accounts 431,143 196 0.06% 477,904 210 0.06% Money market 128,856 291 0.30% 152,912 71 0.06% Time deposits 520,105 17,043 4.38% 301,173 2,052 0.91% Brokered deposits 167,782 4,235 3.37% 61,189 172 0.38% Total interest bearing deposits 1,848,102 22,710 1.64% 1,740,575 3,105 0.24% Borrowed funds: Repurchase agreements 88,707 199 0.30% 110,505 228 0.28% Other borrowings 262,755 9,828 5.00% 15,480 322 2.78% Long-term debt 49,246 1,286 3.49% 49,162 1,284 3.49% Subordinated debentures 35,545 2,120 7.97% 35,365 1,024 3.87% Total borrowed funds 436,253 13,433 4.12% 210,512 2,858 1.81% Total interest bearing liabilities 2,284,355 36,143 2.12% 1,951,087 5,963 0.41% Demand deposits - noninterest bearing 1,062,114 1,122,556 Other liabilities 59,674 58,393 Shareholders' equity 307,739 323,384 Total liabilities and shareholders' equity $ 3,713,882 $ 3,455,420 Interest income/interest earning assets 4.80% 3.66% Interest expense/interest earning assets 1.41% 0.25% Net interest income and margin(5) $ 84,535 3.39% $ 80,253 3.41% (1) Average balances are obtained from the best available daily or monthly data and are net of deferred fees and related direct costs. (2) Yields and net interest margin have been computed on a tax equivalent basis utilizing a 21% effective tax rate. (3) Loans are gross of the allowance for possible loan losses. Loan fees have been included in the calculation of interest income. Net loan fees and loan acquisition FMV amortization were $(0.7) million and $0.9 million for the nine months ended September 30, 2023 and 2022, respectively. (4) Non-accrual loans have been included in total loans for purposes of computing total earning assets. (5) Net interest margin represents net interest income as a percentage of average interest-earning assets. Category: Financial Source: Sierra Bancorp View source version on businesswire.com: https://www.businesswire.com/news/home/20231023734422/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 nine-month periods ended September 30, 2023. Sierra Bancorp reported consolidated net income of $9.9 million, or $0.68 per diluted share, for the third quarter of 2023, and $28.5 million, or $1.93 per diluted shares, for the first nine months of 2023. Highlights for the third quarter of 2023: Steady Earnings Net Income of $9.9 million, consistent with the second quarter of 2023 (the prior linked quarter), and up 8% year-to-date compared to the same period last year Return on Average Assets of 1.04% Return on Average Equity of 12.62% Solid Asset Quality Total Nonperforming Loans declined to $0.8 million, or 0.04% of total gross loans Past due loans declined to $0.8 million, the lowest level for the past two years No foreclosed assets at September 30, 2023 Net Charge-offs remained very low at just under $0.1 million Stable Allowance for Credit Losses on loans of $23.1 million Stable Deposits & Liquidity Overall primary and secondary liquidity sources increased to $2.67 billion at September 30, 2023 Total deposits declined by 1.6% during the quarter due mostly to declines in brokered deposits and interest-bearing transaction accounts Total deposits have increased by $23.6 million, or 0.8% year-to-date Noninterest-bearing deposits stable at 37% of total deposits Strong Capital and Solid Asset Growth Total Assets at $3.74 billion, down 1% from prior linked quarter, but up 4% year-to-date Maintained a diversified investment portfolio designed for interest rate risk management and liquidity Repurchased 99,528 shares of stock during the quarter Tangible Book Value per share increased by 1% to $19.04 per share at September 30, 2023 compared to the prior linked quarter Strong regulatory Community Bank Leverage Ratio of 11.00% for our subsidiary Bank Tangible Common Equity Ratio of 7.5% on a consolidated basis and 9.4% for our subsidiary bank Dividend declared of $0.23 per share, payable on November 14, 2023, our 99th consecutive quarterly dividend “The elevator to success is out of order. You’ll have to use the stairs, one step at a time.” - Joe Girard “We are proud of the many accomplishments of our team of focused bankers this past quarter,” stated Kevin McPhaill, CEO and President. “Our continued strong results are even more noteworthy, given the challenging banking environment. In particular, earnings per share increased from last quarter as did tangible common equity per share. Our quarterly results demonstrate our commitment to continued active balance sheet management. Much of our success is the result of our community bank foundation, which gives us unique positioning and strong connections with our customers. As we continue to look for opportunities to improve earnings, we are excited about the remainder of 2023 and the coming year!” concluded Mr. McPhaill. For the first nine months of 2023, the Company recognized net income of $28.6 million, or $1.93 per diluted share, as compared to $26.5 million, or $1.76 per diluted share, for the same period in 2022. The year-over-year improvement is due primarily to higher net interest income of $4.3 million, along with a $4.0 million decrease in the provision for credit losses in 2023, partially offset by a $5.2 million increase in noninterest expense. The Company’s financial performance metrics for the first nine months of 2023 include an annualized return on average assets and a return on average equity of 1.03% and 12.41%, respectively, compared to 1.03% and 10.98%, respectively, for the same period in 2022. Financial Highlights Quarterly Changes (comparisons to the third quarter of 2022) Net income was unchanged at $9.9 million. Net interest income was negatively impacted by compression in the net interest margin. There was a favorable change in the provision for credit losses on loans while improvements made in noninterest income were offset by higher noninterest expenses. Net interest income was $0.8 million lower due to a 33 bp decrease in net interest margin. There was a $231.9 million increase in average interest earning assets with an increased yield of 94 bps, however this was more than offset by a $335.4 million increase in interest bearing liabilities at 184 bps higher cost. Noninterest income increased $1.2 million or 17% primarily due to a $0.6 million increase in bank-owned life insurance, $0.3 million in life insurance proceeds and a $0.2 million increase in service charges on deposit accounts. Asset quality improved considerably as demonstrated by a significant decline in non-performing assets to gross loans plus foreclosed assets. This ratio fell to 0.04% at September 30, 2023, from 1.33% at the same period in 2022. Nonperforming assets declined substantially from $26.8 million at September 30, 2022, to $0.8 million at September 30, 2023, a decline of 97%. Most of the nonperforming assets at September 30, 2022 were related to a single dairy relationship that was foreclosed upon and sold in early 2023. There was a benefit for credit losses for $0.03 million, as compared to a provision for credit losses of $1.3 million in the same quarter of 2022, due to a decrease in specific reserves for individually evaluated loans. Liquidity continues to be very substantial with the primary liquidity ratio at 31.5% and $2.7 billion in overall available liquidity at September 30, 2023. All required capital ratios were above the regulatory guidelines for a well-capitalized institution. The Community Bank Leverage ratio was 11.00% for Bank of the Sierra. The Sierra Bancorp Tier I leverage ratio was 10.08%. Sierra Bancorp repurchased 99,528 shares totaling $2.0 million in the third quarter of 2023. Our Board of Directors declared a cash dividend of $0.23 per share on October 19, 2023. This is the 99th consecutive quarterly dividend paid by Sierra Bancorp. The cash dividend is payable on November 14, 2023, to shareholders of record at the close of business on October 30, 2023. Year to-Date Income Changes (comparisons to the first nine-months of 2022) Net income increased $2.0 million, or 8%. There was an increase of $4.3 million or 5% in net interest income, due mostly to an overall increase in interest rates. We experienced higher yields and balances on loans and investment securities, which were partly offset by higher overall funding costs. Earnings per share increased to $1.93, an increase of 10% from $1.76 per share. The provision for credit losses was $0.2 million, a decrease of $4.0 million due to a decrease in specific reserves on individual loans as well as lower net loan charge-offs. Noninterest income decreased by $0.8 million, or 3%. In 2022 there was a $1.0 million recovery of prior year legal expenses, a $1.0 million gain on the sale of investment securities, and a $3.2 million gain on the sale of other assets with no like corresponding event in 2023. Positively impacting the first nine months of 2023 there was a $2.8 million positive variance in deferred compensation BOLI and a $0.4 million increase in life insurance proceeds. Noninterest expense increased $5.2 million, or 8%, due mostly to the increases in salary expense for new loan production teams and a negative variance in director’s deferred compensation expense which is linked to the favorable changes in bank-owned life insurance income described above. Statement of Condition Changes (comparisons to December 31, 2022) Total assets increased by $130.3 million, or 4%, to $3.7 billion, during the first nine months of the year due mostly to an increase in wholesale deposits and borrowed funds which facilitated the purchase of investment securities as well as modest loan growth. Cash and due from banks increased $11.4 million to $88.5 million during the first nine months of the year due to an increase in interest earning bank balances. Investment securities increased by $62.1 million, or 5%, to $1.2 billion primarily due to strategic purchases of high-quality AAA and AA rated, collateralized loan obligations and government agency securities. Gross loans increased $47.9 million predominantly due to a $42.2 million increase in mortgage warehouse line utilization. In addition, C&I and Agricultural production loans increased, but were partially offset by a decline in Farmland loans due to a foreclosure of a single dairy relationship in early 2023. Deposits totaled $2.9 billion at September 30, 2023, representing a year-to-date increase of $23.6 million, or 1%. The growth in deposits came mostly from a $45.0 million increase in brokered deposits primarily acquired prior to March 2023 as part of the Company’s interest rate risk management and liquidity strategy. Long term debt and subordinated debentures were relatively unchanged. Other interest-bearing liabilities increased $83.7 million, or 26%, and consisted primarily of long term FHLB advances. Other financial highlights are reflected in the following table. FINANCIAL HIGHLIGHTS (Dollars in Thousands, Except Per Share Data, Unaudited) As of or for the As of or for the three months ended nine months ended 9/30/2023 6/30/2023 9/30/2022 9/30/2023 9/30/2022 Net income $ 9,885 $ 9,919 $ 9,935 $ 28,555 $ 26,546 Diluted earnings per share $ 0.68 $ 0.67 $ 0.66 $ 1.93 $ 1.76 Return on average assets 1.04% 1.07% 1.13% 1.03% 1.03% Return on average equity 12.62% 13.06% 12.84% 12.41% 10.98% Net interest margin (tax-equivalent) (1) 3.30% 3.39% 3.63% 3.39% 3.41% Yield on average loans 4.73% 4.74% 4.28% 4.66% 4.30% Yield on investments 5.25% 5.02% 3.51% 5.00% 2.61% Cost of average total deposits 1.20% 1.09% 0.24% 1.04% 0.15% Efficiency ratio (tax-equivalent) (1) (2) 61.46% 62.27% 58.10% 62.83% 61.10% Total assets $ 3,738,880 $ 3,762,461 $ 3,532,289 $ 3,738,880 $ 3,532,289 Loans net of deferred fees $ 2,100,973 $ 2,094,464 $ 2,020,016 $ 2,100,973 $ 2,020,016 Noninterest demand deposits $ 1,059,878 $ 1,066,498 $ 1,118,245 $ 1,059,878 $ 1,118,245 Total deposits $ 2,869,720 $ 2,918,759 $ 2,885,468 $ 2,869,720 $ 2,885,468 Noninterest-bearing deposits over total deposits 36.9% 36.5% 38.8% 36.9% 38.8% Shareholders' equity / total assets 8.3% 8.2% 8.4% 8.3% 8.4% Tangible common equity ratio (2) 7.5% 7.5% 7.6% 7.5% 7.6% Book value per share $ 21.01 $ 20.90 $ 19.56 $ 21.01 $ 19.56 Tangible book value per share (2) $ 19.04 $ 18.93 $ 17.58 $ 19.04 $ 17.58 (1) Computed on a tax equivalent basis utilizing a federal income tax rate of 21%. (2) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures". INCOME STATEMENT HIGHLIGHTS Net Interest Income Net interest income was $28.1 million, for the third quarter of 2023, a $0.8 million decrease, or 3% over the third quarter of 2022, but increased $4.3 million, or 5%, to $84.5 million for the first nine months of 2023 relative to the same period in 2022. For the third quarter of 2023, growth in average interest-earning assets totaled $231.9 million, or 7%, as compared to the third quarter of 2022. The yield on these balances was 94 basis points higher for the same period due mostly to an increase in investment securities as well as loan growth and the result of interest rate increases by the Federal Open Market Committee. This increase in yield was offset by a 184 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. Net interest income for the comparative year-to-date periods increased $4.3 million, or 5%, due to a change in mix of average interest-earning assets, mostly the deployment of lower yielding interest earning due from bank balances into higher yielding investment securities. Investment balances, which includes overnight funds, with an average yield of 5.0% increased $157.0 million, while gross average loan balances yielding 4.7% increased $64.0 million. The overall yield on the average balances of earning assets was 114 basis points higher for the comparative periods, offset by a 171 basis point increase in interest paid on liabilities. The net impact of these various changes was a 2 basis point decrease in our net interest margin for the nine-months ending September 30, 2023, as compared to the same period in 2022. Interest expense was $14.3 million for the third quarter of 2023, an increase of $11.3 million, relative to the third quarter of 2022. For the first nine months of 2023, compared to the same period in 2022, interest expense increased $30.2 million to $36.1 million. The significant increase in interest expense is attributable to an unfavorable shift in interest bearing liabilities and the impact of recent interest rate increases, as the average balance of deposits, including lower cost core deposits decreased $93.2 million while higher cost borrowed funds and wholesale brokered deposits increased by $352.7 million in the third quarter of 2023 as compared to the third quarter of 2022. For the year-to-date comparisons the increase is attributable to a shift from lower cost transaction accounts to higher cost time accounts as well as an increase in borrowed funds. For the first nine months of 2023, higher cost customer time deposits increased $218.9 million, wholesale brokered deposits increased $106.6 million and borrowed funds increased $247.5 million, while lower cost or no cost deposits decreased $278.4 million. Our net interest margin was 3.30% for the third quarter of 2023, as compared to 3.39% for the linked quarter and 3.63% for the third quarter of 2022. While the yield of interest-earning assets increased 9 basis points for the third quarter of 2023 as compared to the linked quarter, the cost of interest-bearing liabilities increased 26 basis points for the same period of comparison. The average balance of interest-earning assets increased $24.7 million for the linked quarter while the increase in interest-bearing liabilities was $9.0 million for the same period. Even though the volume increase of interest earning assets was more than the increase in interest-bearing liabilities, the larger rate increase on liabilities caused the compression in the linked quarter. Any future FOMC rate hikes could cause further compression in the net interest margin, since overnight borrowing funds instantly reprice higher while there is a lag in the increased yield on interest-earning assets. Provision for Loan and Lease Losses The overall provision for credit losses resulted in a benefit of $0.03 million for the third quarter of 2023; there was a $0.1 million provision for credit losses related to loans and leases offset by a $0.2 million benefit for credit losses from unfunded commitments and no provision for held-to-maturity investment securities, relative to a provision for credit losses of $1.3 million in the third quarter of 2022, and a year-to-date provision for credit losses on loans and leases of $0.2 million in 2023 as compared to $4.2 million for the same period in 2022. The Company's $1.3 million decrease in the provision for credit losses on loans and leases in the third quarter of 2023 as compared to the third quarter of 2022, and the $4.0 million year to date decrease in the provision for credit losses, compared to the same period in 2022 was primarily due to the impact of $4.3 million in net charge-offs in the first nine months of 2022 with only $0.4 million in net charge offs for the first nine months of 2023. The decrease in net charge-offs in the first nine months of 2023 was primarily related to a single office building loan relationship that was sold at a discount due to an increased risk of default that would have likely led to a prolonged collection period and a single dairy loan relationship. The Company did not record a provision for credit losses on available-for-sale debt securities. Although there were debt securities in an unrealized loss position the declines in market values were primarily attributable to changes in interest rates and volatility in the financial markets and not a result of an expected credit loss. Noninterest Income Total noninterest income increased $1.2 million, or 17%, for the quarter ended September 30, 2023, as compared to the same quarter in 2022, and decreased $.08 million, or 3% for the year-to-date period ended September 30, 2023, as compared to the same period in 2022. The quarterly and year-to-date comparisons were both impacted by favorable fluctuations in income on bank-owned life insurance (BOLI) with underlying investments mapped directly to the Company’s deferred compensation plan. The quarterly comparison was also positively impacted by an increase in service charges on deposit accounts for $0.2 million, life insurance proceeds for $0.3 million, and $0.4 million in income from an investment in an SBA loan fund. The year-to-date decrease is the result of 2022 events that did not recur in 2023, including a $1.0 million gain on the sale of debt securities, $3.6 million from gains on the sale of other assets, and the recovery of prior period legal expenses, partially offset by income from an investment in an SBA loan fund for $1.0 million in 2023. Service charges on customer deposit accounts were basically unchanged at $6.1 million in the third quarter of 2023 as compared to the third quarter of 2022, however for the year-to-date comparison there was a $0.3 million decrease primarily due to decreases in ATM and debit card income. Noninterest Expense Total noninterest expense increased by $1.6 million, or 7%, in the third quarter of 2023 relative to the third quarter of 2022, and by $5.2 million, or 8%, for the first nine months of 2023 as compared to the same period in 2022. Salaries and Benefits were $1.1 million, or 10%, higher in the third quarter of 2023 as compared to the third quarter of 2022 and $2.5 million, or 7%, higher for the first nine months of 2023 compared to the same period in 2022. The reason for this increase is primarily due to the hiring of higher paid new lending teams and management staff for both the quarterly and year-to-date comparisons. There were 487 full-time equivalent employees at September 30, 2023 as compared to 491 at December 31, 2022 and 500 at September 30, 2022. Occupancy expenses were relatively unchanged for the third quarter and the first nine-months of 2023 as compared to the same periods in 2022. Other noninterest expense increased $0.5 million, or 6%, for the third quarter 2023 as compared to the third quarter in 2022, and increased $2.7 million, or 13%, for the first nine months of 2023 as compared to the same period in 2022. The variances for the third quarter of 2023 compared to the same period in 2022 were primarily driven by a $0.6 million unfavorable variance in directors deferred compensation expense, linked to the changes in BOLI income, higher FDIC assessment costs, increased marketing costs associated with a deposit acquisition campaign and elevated debit card losses. These increased expenses were partially offset by lower costs in core processing, debit card processing and ATM network costs. For the year-over-year comparison, the categories of increase were the same as with the quarterly comparison, along with a $0.2 million decrease in deposit statement costs offset by increased foreclosed asset costs related to the foreclosure and subsequent sale of one large loan relationship in the first quarter of 2023. The Company's provision for income taxes was 25.8% of pre-tax income in the third quarter of 2023 relative to 25.1% in the third quarter of 2022, and 25.2% of pre-tax income for the first nine months of 2023 relative to 26.1% for the same period in 2022. The changes in effective tax rate for both the quarterly and year-to-date comparisons is due to the volatility in the Bank Owned Life Insurance asset value associated with our non-qualified deferred compensation plans. Balance Sheet Summary Balance sheet changes during the first nine months of 2023 include an increase in total assets of $130.3 million, or 4%, primarily a result of a $62.1 million increase in investments securities, and a $47.9 million increase in gross loans. The increase in investment securities of $62.1 million for the year-to-date period consisted primarily of increases in AAA and AA tranches of collateralized loan obligations of $56.5 million and in callable government agency securities for $56.0 million, partially offset by decreases in mortgage-backed securities, corporate bonds and state and municipal bonds. Gross loan balances increased $47.9 million during the first nine months of 2023, as compared to December 31, 2022. The increase was primarily a result of a $42.1 million increase in mortgage warehouse utilization, $22.6 million increase in commercial real estate, and a $35.4 million increase in other commercial loans. 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 $22.4 million decrease in farmland, $11.1 million decrease in other construction and $18.7 million decrease in residential real estate. Further, SBA PPP loan forgiveness resulted in a $1.3 million decline in loan balances, included in the other commercial loan variance noted above. As indicated in the loan roll forward below, new credit extended for the third quarter of 2023 decreased $14.0 million over the same period in 2022 and decreased $66.4 million for the year-to-date comparisons. This decline in organic loan growth is attributable to competitive pressures in our market and management’s unwillingness to compromise the quality of new loans originated, combined with a lack of demand due to the current high interest rate environment. We also had $37.0 million in loan paydowns and maturities, and a decrease in mortgage warehouse and credit line utilization of $25.5 million in the third quarter. LOAN ROLLFORWARD (Dollars in Thousands, Unaudited) For the three months ended: For the nine months ended: September 30, 2023 June 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Gross loans beginning balance $ 2,094,391 $ 2,033,968 $ 2,022,662 $ 2,052,940 $ 1,989,726 New credit extended 68,980 37,030 82,958 158,619 225,054 Loan purchases — — — — 173,082 Changes in line of credit utilization (22,517 ) 6,622 (7,811 ) (41,685 ) (45,201 ) Change in mortgage warehouse (3,032 ) 42,145 (11,581 ) 42,146 (54,630 ) Pay-downs, maturities, charge-offs and amortization (1) (37,012 ) (25,374 ) (65,864 ) (111,210 ) (267,667 ) Gross loans ending balance 2,100,810 2,094,391 2,020,364 2,100,810 2,020,364 (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 $216.4 million at September 30, 2023, compared to $219.7 million at December 31, 2022. Total line utilization, excluding mortgage warehouse and overdraft lines, was 59.7% at September 30, 2022 and 58.7% at December 31, 2022. Mortgage warehouse utilization increased to 25.0% at September 30, 2023, as compared to 9.9% at December 31, 2022. PPP loans continue to decline as borrowers receive forgiveness on these loans. There were nine loans for $0.4 million outstanding at September 30, 2023, compared to fourteen loans for $1.8 million at December 31, 2022. Deposit balances reflect growth of $23.6 million, or 1%, during the first nine months of 2023. Core non-maturity deposits decreased by $173.6 million, or 7%, while customer time deposits increased by $152.1 million, or 38%. Wholesale brokered deposits increased by $45.0 million, or 38%. Overall noninterest-bearing deposits as a percent of total deposits at September 30, 2023, were 36.9%, as compared to 38.2% at December 31, 2022. Other interest-bearing liabilities of $411.9 million on September 30, 2023, consist of $94.9 million in customer repurchase agreements, $182.0 million of FHLB borrowings and $135.0 million in fed funds purchased. The Company continues to have substantial liquidity. At September 30, 2023, and December 31, 2022, the Company had the following sources of primary and secondary liquidity (Dollars in Thousands, Unaudited): Primary and secondary liquidity sources September 30, 2023 December 31, 2022 Cash and cash equivalents $ 88,542 $ 77,131 Unpledged investment securities 854,730 1,097,164 Excess pledged securities 326,343 43,096 FHLB borrowing availability 657,548 718,842 Unsecured lines of credit 362,785 237,000 Funds available through fed discount window 383,943 42,278 Totals $ 2,673,891 $ 2,215,511 Total capital of $308.9 million at September 30, 2023 reflects an increase of $5.3 million, or 2%, relative to year-end 2022. The increase in equity during the first nine months of 2023 was due to the addition of $28.6 million in net income, offset by a $5.3 million unfavorable swing in accumulated other comprehensive income/loss, due principally to changes in investment securities’ fair value, $8.5 million in share repurchases, and $10.4 million in dividends paid. The remaining difference is related to the impact of restricted stock. Asset Quality Total nonperforming assets, comprised of nonaccrual loans and foreclosed assets, decreased by $18.8 million to $0.8 million for the first nine months of 2023. The Company's ratio of nonperforming loans to gross loans decreased to 0.4% at September 30, 2023 from 0.95% at December 31, 2022. The decrease resulted from a decrease in non-accrual loan balances, primarily as a result of the foreclosure and sale of one loan relationship in the dairy industry consisting of four separate loans in the first quarter of 2023. All the Company's nonperforming assets are individually evaluated for credit loss quarterly and management believes the established allowance for credit loss on such loans is appropriate. The Company's allowance for credit losses on loans and leases was $23.1 million at both September 30, 2023, and December 31, 2022. The flat allowance for credit losses on loans and leases was due to fewer net charge offs during the first nine-months of 2023 along with modest loan growth. The allowance for credit losses on loans and leases was 1.10% of gross loans at September 30, 2023, and 1.12% of gross loans at December 31, 2022. Management's detailed analysis indicates that the Company's allowance for credit losses on loans and leases should be sufficient to cover credit losses for the life of the loans and leases outstanding as of September 30, 2023, 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 an agricultural credit center in Templeton, California, and a dedicated loan production office in Roseville, California. In 2023, 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 and a BBB+ rating from Kroll. 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 including the impact to the Company and its customers resulting from changes to, and the level of, inflation and interest rates; changes in laws, rules, regulations, or interpretations to which the Company is subject; the Company’s ability to maintain and grow its deposit base; loan demand and continued portfolio performance, the Company's ability to attract and retain skilled employees, customers' service expectations; cyber security risks: the Company's ability to successfully deploy new technology, the success of acquisitions and branch expansion; operational risks including the ability to detect and prevent errors and fraud; the effectiveness of the Company’s enterprise risk management framework; the impact of adverse developments at other banks, including bank failures, that impact general sentiment regarding the stability and liquidity of banks that could affect stock price; changes to valuations of the Company’s assets and liabilities including the allowance for credit losses, earning assets, and intangible assets; changes to the availability of liquidity sources including borrowing lines and the ability to pledge or sell certain assets; costs related to litigation; the effects of severe weather events, pandemics, other public health crises, acts of war or terrorism, and other external events on our business; and other factors detailed in the Company's SEC filings, including the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's most recent Form 10‑K and Form 10‑Q. STATEMENT OF CONDITION (Dollars in Thousands, Unaudited) ASSETS 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Cash and due from banks $ 88,542 $ 103,483 $ 83,506 $ 77,131 $ 86,683 Investment securities Available-for-sale, at fair value 1,010,377 1,027,538 1,040,920 934,923 1,069,434 Held-to-maturity, at amortized cost, net of allowance for credit losses 323,544 328,478 332,728 336,881 156,211 Real estate loans Residential real estate 418,782 426,608 433,185 437,446 441,262 Commercial real estate 1,331,989 1,317,945 1,318,627 1,309,410 1,291,315 Other construction/land 7,320 16,020 15,653 18,412 18,315 Farmland 90,993 92,728 92,906 113,394 117,385 Total real estate loans 1,849,084 1,853,301 1,860,371 1,878,662 1,868,277 Other commercial 140,081 126,360 101,118 104,715 101,437 Mortgage warehouse lines 107,584 110,617 68,472 65,439 46,553 Consumer loans 4,061 4,113 4,007 4,124 4,097 Gross loans 2,100,810 2,094,391 2,033,968 2,052,940 2,020,364 Deferred loan fees 163 73 24 (123 ) (348 ) Allowance for credit losses on loans (23,060 ) (23,010 ) (23,090 ) (23,060 ) (23,790 ) Net loans 2,077,913 2,071,454 2,010,902 2,029,757 1,996,226 Bank premises and equipment 21,926 22,072 22,321 22,478 22,688 Other assets 216,578 209,436 203,607 207,420 201,047 Total assets $ 3,738,880 $ 3,762,461 $ 3,693,984 $ 3,608,590 $ 3,532,289 LIABILITIES AND CAPITAL Noninterest demand deposits $ 1,059,878 $ 1,066,498 $ 1,041,748 $ 1,088,199 $ 1,118,245 Interest-bearing transaction accounts 561,257 584,263 637,549 641,581 732,468 Savings deposits 400,940 415,793 441,758 456,981 481,882 Money market deposits 130,914 124,834 123,162 139,795 140,620 Customer time deposits 551,731 552,371 519,771 399,608 332,253 Wholesale brokered deposits 165,000 175,000 185,000 120,000 80,000 Total deposits 2,869,720 2,918,759 2,948,988 2,846,164 2,885,468 Long-term debt 49,281 49,259 89,236 49,214 49,196 Subordinated debentures 35,615 35,570 35,526 35,481 35,436 Other interest-bearing liabilities 411,865 398,922 270,861 328,169 215,112 Total deposits and interest-bearing liabilities 3,366,481 3,402,510 3,344,611 3,259,028 3,185,212 Allowance for credit losses on unfunded loan commitments 600 750 850 840 940 Other liabilities 62,940 49,609 41,513 45,140 51,065 Total capital 308,859 309,592 307,010 303,582 295,072 Total liabilities and capital $ 3,738,880 $ 3,762,461 $ 3,693,984 $ 3,608,590 $ 3,532,289 GOODWILL AND INTANGIBLE ASSETS (Dollars in Thousands, Unaudited) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Goodwill $ 27,357 $ 27,357 $ 27,357 $ 27,357 $ 27,357 Core deposit intangible 1,618 1,837 2,056 2,275 2,517 Total intangible assets $ 28,975 $ 29,194 $ 29,413 $ 29,632 $ 29,874 CREDIT QUALITY (Dollars in Thousands, Unaudited) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Non-accruing loans $ 781 $ 1,141 $ 938 $ 19,579 $ 26,772 Foreclosed assets — — — — — Total nonperforming assets $ 781 $ 1,141 $ 938 $ 19,579 $ 26,772 Quarterly net charge offs $ 67 $ 157 $ 220 $ 7,268 $ 224 Past due & still accruing (30-89) $ 806 $ 1,873 $ 1,241 $ 1,203 $ 1,242 Non-performing loans to gross loans 0.04% 0.05% 0.05% 0.95% 1.33% NPA's to loans plus foreclosed assets 0.04% 0.05% 0.05% 0.95% �� 1.33% Allowance for credit losses on loans 1.10% 1.10% 1.14% 1.12% 1.18% SELECT PERIOD-END STATISTICS (Unaudited) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Shareholders' equity / total assets 8.3% 8.2% 8.3% 8.4% 8.4% Gross loans / deposits 73.2% 71.8% 69.0% 72.1% 70.0% Noninterest-bearing deposits / total deposits 36.9% 36.5% 35.3% 38.2% 38.8% CONSOLIDATED INCOME STATEMENT (Dollars in Thousands, Unaudited) For the three months ended: For the nine months ended: 9/30/2023 6/30/2023 9/30/2022 9/30/2023 9/30/2022 Interest income $ 42,384 $ 40,875 $ 31,928 $ 120,678 $ 86,216 Interest expense 14,297 12,558 3,017 36,143 5,963 Net interest income 28,087 28,317 28,911 84,535 80,253 (Benefit) provision for credit losses (33 ) (70 ) 1,259 157 4,184 Net interest income after provision 28,120 28,387 27,652 84,378 76,069 Service charges and fees on deposit accounts 6,055 5,691 6,008 17,127 17,464 Gain on sale of investments - 351 - 396 1,032 BOLI income (expense) 558 658 (23 ) 1,388 (1,252 ) Other noninterest income 1,149 1,313 627 3,444 5,870 Total noninterest income 7,762 8,013 6,612 22,355 23,114 Salaries and benefits 12,623 12,129 11,521 37,567 35,070 Occupancy expense 2,482 2,438 2,470 7,251 7,170 Other noninterest expenses 7,457 8,401 7,005 23,704 21,042 Total noninterest expense 22,562 22,968 20,996 68,522 63,282 Income before taxes 13,320 13,432 13,268 38,211 35,901 Provision for income taxes 3,435 3,513 3,333 9,656 9,355 Net income $ 9,885 $ 9,919 $ 9,935 $ 28,555 $ 26,546 TAX DATA Tax-exempt muni income $ 2,679 $ 2,741 $ 2,346 $ 8,233 $ 5,926 Interest income - fully tax equivalent $ 43,096 $ 41,604 $ 32,552 $ 122,867 $ 87,791 PER SHARE DATA (Unaudited) For the three months ended: For the nine months ended: 9/30/2023 6/30/2023 9/30/2022 9/30/2023 9/30/2022 Basic earnings per share $ 0.68 $ 0.67 $ 0.66 $ 1.93 $ 1.77 Diluted earnings per share $ 0.68 $ 0.67 $ 0.66 $ 1.93 $ 1.76 Common dividends $ 0.23 $ 0.23 $ 0.23 $ 0.69 $ 0.69 Weighted average shares outstanding 14,583,132 14,735,568 14,954,503 14,762,231 14,968,242 Weighted average diluted shares 14,636,477 14,754,764 15,014,048 14,791,696 15,046,883 Book value per basic share (EOP) $ 21.01 $ 20.90 $ 19.56 $ 21.01 $ 19.56 Tangible book value per share (EOP) $ 19.04 $ 18.93 $ 17.58 $ 19.04 $ 17.58 Common shares outstanding (EOP) 14,702,079 14,811,736 15,085,675 14,702,079 15,085,675 KEY FINANCIAL RATIOS (Unaudited) For the three months ended: For the nine months ended: 9/30/2023 6/30/2023 9/30/2022 9/30/2023 9/30/2022 Return on average equity 12.62% 13.06% 12.84% 12.41% 10.98% Return on average assets 1.04% 1.07% 1.13% 1.03% 1.03% Net interest margin (tax-equivalent) (1) 3.30% 3.39% 3.63% 3.39% 3.41% Efficiency ratio (tax-equivalent) (1) (2) 61.46% 62.27% 58.10% 62.83% 61.10% Net charge offs to avg loans (not annualized) 0.00% 0.01% 1.00% 0.02% 21.00% (1) Computed on a tax equivalent basis utilizing a federal income tax rate of 21%. (2) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures". The following non-GAAP schedule reconciles the book value per share to the tangible book value per share and the GAAP equity ratio to the tangible equity ratio as of the dates indicated: NON-GAAP FINANCIAL MEASURES (Dollars in Thousands, Unaudited) 9/30/2023 6/30/2023 9/30/2022 Total stockholders' equity $ 308,859 $ 309,592 $ 295,072 Less: goodwill and other intangible assets 28,975 29,194 29,874 Tangible common equity $ 279,884 $ 280,398 $ 265,198 Total assets $ 3,738,880 $ 3,762,461 $ 3,532,289 Less: goodwill and other intangible assets 28,975 29,194 29,874 Tangible assets $ 3,709,905 $ 3,733,267 $ 3,502,415 Common shares outstanding 14,702,079 14,811,736 15,085,675 Book value per common share $ 21.01 $ 20.90 $ 19.56 Tangible book value per common share $ 19.04 $ 18.93 $ 17.58 Equity ratio - GAAP (total stockholders' equity / total assets 8.26% 8.23% 8.35% Tangible common equity ratio (tangible common equity / tangible assets) 7.54% 7.51% 7.57% For the three months ended: Efficiency Ratio: 9/30/2023 6/30/2023 9/30/2022 Noninterest expense $ 22,562 $ 22,968 $ 20,996 Divided by: Net interest income 28,087 28,317 28,911 Tax-equivalent interest income adjustments 712 729 624 Net interest income, adjusted 28,799 29,046 29,535 Noninterest income 7,762 8,013 6,612 Less gain on sale of securities - 351 - Tax-equivalent noninterest income adjustments 148 175 (6 ) Noninterest income, adjusted 7,910 7,837 6,606 Net interest income plus noninterest income, adjusted $ 36,709 $ 36,883 $ 36,141 Efficiency Ratio (tax-equivalent) 61.46% 62.27% 58.10% NONINTEREST INCOME/EXPENSE (Dollars in Thousands, Unaudited) For the three months ended: For the nine months ended September 30, Noninterest income: 9/30/2023 6/30/2023 9/30/2022 2023 2022 Service charges and fees on deposit accounts $ 6,055 $ 5,691 $ 6,008 $ 17,127 $ 17,464 Net gains on sale of securities available-for-sale — 351 — 396 1,032 Bank-owned life insurance 558 658 (23 ) 1,388 (1,252 ) Other 1,149 1,313 627 3,444 5,870 Total noninterest income $ 7,762 $ 8,013 $ 6,612 $ 22,355 $ 23,114 As a % of average interest earning assets (1) 0.89% 0.93% 0.81% 0.87% 0.96% Noninterest expense: Salaries and employee benefits $ 12,623 $ 12,129 $ 11,521 $ 37,567 $ 35,070 Occupancy and equipment costs 2,482 2,438 2,470 7,251 7,170 Advertising and marketing costs 723 410 466 1,646 1,322 Data processing costs 1,369 1,536 1,564 4,433 4,574 Deposit services costs 2,048 2,532 2,450 6,603 7,112 Loan services costs Loan processing 174 151 128 452 426 Foreclosed assets (60 ) (33 ) (3 ) 665 84 Other operating costs 765 1,490 912 3,244 3,879 Professional services costs Legal & accounting services 493 483 535 1,623 1,753 Director's costs 732 725 (143 ) 1,733 (1,192 ) Other professional service 707 832 855 2,053 2,306 Stationery & supply costs 148 125 114 414 315 Sundry & tellers 358 150 127 838 463 Total noninterest expense $ 22,562 $ 22,968 $ 20,996 $ 68,522 $ 63,282 As a % of average interest earning assets (1) 2.58% 2.68% 2.58% 2.67% 2.64% Efficiency ratio (tax-equivalent) (2)(3) 61.46% 62.27% 58.10% 62.83% 61.10% (1) Annualized (2) Computed on a tax equivalent basis utilizing a federal income tax rate of 21% (3) See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures.” AVERAGE BALANCES AND RATES (Dollars in Thousands, Unaudited) For the quarter ended For the quarter ended For the quarter ended September 30, 2023 June 30, 2023 September 30, 2022 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 $ 23,760 $ 415 6.93% $ 35,236 $ 376 4.28% $ 21,845 $ 103 1.87% Taxable 1,005,372 14,375 5.67% 996,117 13,488 5.43% 851,683 7,646 3.56% Non-taxable 345,645 2,679 3.89% 352,718 2,741 3.95% 336,567 2,346 3.50% Total investments 1,374,777 17,469 5.25% 1,384,071 16,605 5.02% 1,210,095 10,095 3.51% Loans: (3) Real estate 1,854,055 20,764 4.44% 1,858,512 20,827 4.49% 1,862,738 19,808 4.22% Agricultural production 37,096 649 6.94% 28,472 496 6.99% 29,724 274 3.66% Commercial 90,348 1,392 6.11% 82,743 1,179 5.72% 75,482 973 5.11% Consumer 4,303 87 8.02% 4,339 88 8.13% 4,228 132 12.39% Mortgage warehouse lines 100,549 2,004 7.91% 78,187 1,658 8.51% 46,969 623 5.26% Other 2,381 19 3.17% 2,483 22 3.55% 2,349 23 3.88% Total loans 2,088,732 24,915 4.73% 2,054,736 24,270 4.74% 2,021,490 21,833 4.28% Total interest earning assets (4) 3,463,509 42,384 4.94% 3,438,807 40,875 4.85% 3,231,585 31,928 4.00% Other earning assets 17,355 16,952 15,717 Non-earning assets 275,883 267,433 255,529 Total assets $ 3,756,747 $ 3,723,192 $ 3,502,831 Liabilities and shareholders' equity Interest-bearing deposits: Demand deposits $ 141,745 $ 413 1.16% $ 144,156 $ 190 0.53% $ 197,731 $ 131 0.26% NOW 427,278 68 0.06% 454,395 76 0.07% 531,205 80 0.06% Savings accounts 408,158 69 0.07% 428,222 62 0.06% 485,167 73 0.06% Money market 127,649 194 0.60% 123,571 72 0.23% 151,816 25 0.07% Time deposits 557,504 6,514 4.64% 540,540 6,022 4.47% 313,764 1,377 1.74% Wholesale brokered deposits 162,065 1,509 3.69% 178,728 1,521 3.41% 63,529 75 0.47% Total interest-bearing deposits 1,824,399 8,767 1.91% 1,869,612 7,943 1.70% 1,743,212 1,761 0.40% Borrowed funds: Repurchase agreements 83,222 53 0.25% 79,694 65 0.33% 113,933 70 0.24% Other borrowings 330,221 4,286 5.15% 279,633 3,430 4.92% 45,597 320 2.78% Long-term debt 49,268 429 3.45% 49,247 429 3.49% 49,182 427 3.44% Subordinated debentures 35,590 762 8.49% 35,547 691 7.80% 35,409 439 4.92% Total borrowed funds 498,301 5,530 4.40% 444,121 4,615 4.17% 244,121 1,256 2.04% Total interest-bearing liabilities 2,322,700 14,297 2.44% 2,313,733 12,558 2.18% 1,987,333 3,017 0.60% Demand deposits - noninterest-bearing 1,064,962 1,050,668 1,140,840 Other liabilities 58,340 54,139 67,603 Shareholders' equity 310,745 304,652 307,055 Total liabilities and shareholders' equity $ 3,756,747 $ 3,723,192 $ 3,502,831 Interest income/interest earning assets 4.94% 4.85% 4.00% Interest expense/interest earning assets 1.64% 1.46% 0.37% Net interest income and margin (5) $ 28,087 3.30% $ 28,317 3.39% $ 28,911 3.63% (1) Average balances are obtained from the best available daily or monthly data and are net of deferred fees and related direct costs. (2) Yields and net interest margin have been computed on a tax equivalent basis utilizing a 21% effective tax rate. (3) Loans are gross of the allowance for possible loan losses. Loan fees have been included in the calculation of interest income. Net loan fees and loan acquisition FMV amortization were $(0.3) million and $0.1 million for the quarters ended September 30, 2023 and 2022, respectively, and $(0.3) million for the quarter ended June 30, 2023. (4) Non-accrual loans have been included in total loans for purposes of computing total earning assets. (5) Net interest margin represents net interest income as a percentage of average interest-earning assets. AVERAGE BALANCES AND RATES (Dollars in Thousands, Unaudited) For the nine months ended For the nine months ended September 30, 2023 September 30, 2022 Average Balance(1) Income/ Expense Yield/ Rate(2) Average Balance(1) Income/ Expense Yield/ Rate(2) Assets Investments: Interest-earning due from banks $ 21,504 $ 861 5.35% $ 120,359 $ 466 0.52% Taxable 991,302 39,848 5.37% 783,384 15,613 2.66% Non-taxable 353,173 8,233 3.95% 305,212 5,926 3.29% Total investments 1,365,979 48,942 5.00% 1,208,955 22,005 2.61% Loans:(3) Real estate $ 1,860,504 $ 61,491 4.42% $ 1,820,568 $ 57,792 4.24% Agricultural 31,232 1,578 6.76% 31,376 809 3.45% Commercial 81,397 3,564 5.85% 84,301 3,351 5.31% Consumer 4,260 263 8.25% 4,313 545 16.89% Mortgage warehouse lines 79,438 4,779 8.04% 52,650 1,626 4.13% Other 2,443 61 3.34% 2,066 88 5.69% Total loans 2,059,274 71,736 4.66% 1,995,274 64,211 4.30% Total interest earning assets (4) 3,425,253 120,678 4.80% 3,204,229 86,216 3.66% Other earning assets 16,680 15,675 Non-earning assets 271,949 235,516 Total assets $ 3,713,882 $ 3,455,420 Liabilities and shareholders' equity Interest bearing deposits: Demand deposits $ 145,316 $ 731 0.67% $ 207,319 $ 357 0.23% NOW 454,900 214 0.06% 540,078 243 0.06% Savings accounts 431,143 196 0.06% 477,904 210 0.06% Money market 128,856 291 0.30% 152,912 71 0.06% Time deposits 520,105 17,043 4.38% 301,173 2,052 0.91% Brokered deposits 167,782 4,235 3.37% 61,189 172 0.38% Total interest bearing deposits 1,848,102 22,710 1.64% 1,740,575 3,105 0.24% Borrowed funds: Repurchase agreements 88,707 199 0.30% 110,505 228 0.28% Other borrowings 262,755 9,828 5.00% 15,480 322 2.78% Long-term debt 49,246 1,286 3.49% 49,162 1,284 3.49% Subordinated debentures 35,545 2,120 7.97% 35,365 1,024 3.87% Total borrowed funds 436,253 13,433 4.12% 210,512 2,858 1.81% Total interest bearing liabilities 2,284,355 36,143 2.12% 1,951,087 5,963 0.41% Demand deposits - noninterest bearing 1,062,114 1,122,556 Other liabilities 59,674 58,393 Shareholders' equity 307,739 323,384 Total liabilities and shareholders' equity $ 3,713,882 $ 3,455,420 Interest income/interest earning assets 4.80% 3.66% Interest expense/interest earning assets 1.41% 0.25% Net interest income and margin(5) $ 84,535 3.39% $ 80,253 3.41% (1) Average balances are obtained from the best available daily or monthly data and are net of deferred fees and related direct costs. (2) Yields and net interest margin have been computed on a tax equivalent basis utilizing a 21% effective tax rate. (3) Loans are gross of the allowance for possible loan losses. Loan fees have been included in the calculation of interest income. Net loan fees and loan acquisition FMV amortization were $(0.7) million and $0.9 million for the nine months ended September 30, 2023 and 2022, respectively. (4) Non-accrual loans have been included in total loans for purposes of computing total earning assets. (5) Net interest margin represents net interest income as a percentage of average interest-earning assets. Category: Financial Source: Sierra Bancorp View source version on businesswire.com: https://www.businesswire.com/news/home/20231023734422/en/