FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Commission file number: 000-33063 SIERRA BANCORP (Exact name of Registrant as specified in its charter) California 33-0937517 (State of Incorporation) (IRS Employer Identification No) 86 North Main Street, Porterville, California 93257 (Address of principal executive offices) ( ...

Financial Performance - Sierra Bancorp reported revenue of $39.21 million for the quarter ended June 2025, a year-over-year increase of 3.7% [1] - The EPS for the same period was $0.78, compared to $0.71 a year ago, indicating a positive growth in earnings [1] - The reported revenue exceeded the Zacks Consensus Estimate of $38.35 million, resulting in a surprise of +2.23% [1] - The company delivered an EPS surprise of +5.41%, with the consensus EPS estimate being $0.74 [1] Key Metrics - Net Interest Margin was reported at 3.7%, slightly below the average estimate of 3.8% based on three analysts [4] - The Efficiency Ratio (tax-equivalent) was 59.4%, compared to the average estimate of 59.6% based on three analysts [4] - Net Charge-Offs as a percentage of Average Loans stood at 0.3%, higher than the average estimate of 0.1% [4] - Average Interest-Earning Assets were $3.39 billion, exceeding the average estimate of $3.36 billion from two analysts [4] - Total Non-performing Loans were reported at $14.98 million, lower than the estimated $16.35 million by two analysts [4] - Total Nonperforming Assets matched the Non-performing Loans figure at $14.98 million, also below the $16.35 million average estimate [4] - Total Non-interest Income was $8.55 million, surpassing the average estimate of $7.21 million from three analysts [4] - Net Interest Income was reported at $30.65 million, slightly below the average estimate of $31.03 million from three analysts [4] Stock Performance - Shares of Sierra Bancorp have returned +2.4% over the past month, compared to the Zacks S&P 500 composite's +4.9% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Insights - Sierra Bancorp reported quarterly earnings of $0.78 per share, exceeding the Zacks Consensus Estimate of $0.74 per share, and showing an increase from $0.71 per share a year ago, resulting in an earnings surprise of +5.41% [1] - The company achieved revenues of $39.21 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 2.23% and up from $37.8 million year-over-year [2] - The stock has gained approximately 5.5% since the beginning of the year, while the S&P 500 has increased by 8.6% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.75 on revenues of $39.1 million, and for the current fiscal year, it is $2.95 on revenues of $153.7 million [7] - The estimate revisions trend for Sierra Bancorp was favorable prior to the earnings release, leading to a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Banks - West industry, to which Sierra Bancorp belongs, is currently ranked in the top 36% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8]

[Financial Performance Summary](index=1&type=section&id=Financial%20Performance%20Summary) [Second Quarter and First Six Months 2025 Financial Highlights](index=1&type=section&id=Financial%20Highlights) Sierra Bancorp reported improved financial results for Q2 and the first half of 2025, driven by strong loan and deposit growth, an improved net interest margin, and a favorable efficiency ratio Quarterly and Year-to-Date Performance | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net Income** | $10.6 million | $10.3 million | $19.7 million | $19.6 million | | **Diluted EPS** | $0.78 | $0.71 | $1.43 | $1.35 | Q2 2025 vs. Linked Quarter (Q1 2025) Performance | Metric | Q2 2025 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | **Net Income** | $10.6 million | $9.1 million | +17% | | **Diluted EPS** | $0.78 | $0.65 | +19% | | **Return on Average Assets** | 1.16% | 1.02% | +14 bps | | **Return on Average Equity** | 12.08% | 10.44% | +164 bps | | **Efficiency Ratio** | 59.43% | 60.62% | Improved | - Overall loan growth was strong at **$127.9 million**, or **22% annualized**, during the second quarter[5](index=5&type=chunk) - The company declared a dividend of **$0.25 per share** and repurchased **135,641 shares** of stock during the quarter[5](index=5&type=chunk) [Detailed Financial Analysis](index=6&type=section&id=Detailed%20Financial%20Analysis) This section provides a detailed breakdown of the company's income statement, balance sheet, asset quality, and capital position, analyzing key changes and drivers of performance [Income Statement Analysis](index=6&type=section&id=Income%20Statement%20Analysis) Net interest income increased year-over-year for both the quarter and six-month period, primarily due to a decrease in the cost of interest-bearing liabilities which offset lower asset yields - Q2 2025 net interest income increased by **$0.5 million (2%)** year-over-year to **$30.7 million**, mainly due to a **23 basis point** decrease in interest expense on interest-bearing liabilities[18](index=18&type=chunk) - The provision for credit losses on loans for H1 2025 was **$3.2 million**, a significant increase from **$1.0 million** in H1 2024, primarily due to **$6.3 million** in net charge-offs, including a **$5.3 million** charge-off on a previously evaluated agricultural loan[24](index=24&type=chunk)[25](index=25&type=chunk) - Noninterest income and expense were impacted by market-driven changes in BOLI assets and deferred compensation, with BOLI income increasing by **$0.8 million** and deferred compensation expense rising by **$0.7 million** in Q2 2025 compared to Q2 2024[12](index=12&type=chunk) - The effective tax rate for Q2 2025 decreased to **25.3%** from **27.8%** in Q2 2024, as tax credits and tax-exempt income formed a larger portion of pre-tax income[33](index=33&type=chunk) [Balance Sheet Analysis](index=10&type=section&id=Balance%20Sheet%20Analysis) Total assets grew **4%** to **$3.8 billion** in the first half of 2025, fueled by a **$103.3 million** increase in gross loans, with deposits also increasing by **$82.8 million** and a favorable shift towards noninterest-bearing deposits Balance Sheet Changes (H1 2025) | Metric | Change in H1 2025 | Balance at 6/30/2025 | | :--- | :--- | :--- | | **Total Assets** | +$156.0 million (+4%) | $3.8 billion | | **Gross Loans** | +$103.3 million (+4%) | $2.43 billion | | **Total Deposits** | +$82.8 million (+3%) | $2.97 billion | - Key drivers of loan growth in H1 2025 were a **$75.5 million** increase in mortgage warehouse loans and a **$34.1 million** increase in commercial real estate loans[12](index=12&type=chunk)[36](index=36&type=chunk) - Noninterest-bearing deposits as a percentage of total deposits increased to **35.8%** at June 30, 2025, up from **34.8%** at year-end 2024[40](index=40&type=chunk) - Uninsured deposits, excluding collateralized public funds, were estimated to be approximately **26%** of total deposit balances[41](index=41&type=chunk) [Asset Quality and Credit Risk](index=12&type=section&id=Asset%20Quality%20and%20Credit%20Risk) Asset quality metrics improved in the first half of 2025, with nonperforming assets decreasing and the allowance for credit losses declining due to a specific agricultural loan charge-off Asset Quality Indicators | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total Nonperforming Assets** | $15.0 million | $19.7 million | | **Nonperforming Loans / Gross Loans** | 0.62% | 0.84% | | **Allowance for Credit Losses / Gross Loans** | 0.89% | 1.07% | - The decrease in nonperforming assets was mainly due to the partial charge-off of one agricultural production loan[44](index=44&type=chunk) - The allowance for credit losses on loans decreased by **$3.2 million** in H1 2025, primarily due to the **$5.3 million** charge-off of the agricultural loan which had a corresponding specific allowance in the prior quarter[45](index=45&type=chunk) - Excluding mortgage warehouse loans, which have a low allowance, the allowance for credit losses as a percentage of gross loans was **1.04%** at June 30, 2025[48](index=48&type=chunk) [Liquidity and Capital](index=12&type=section&id=Liquidity%20and%20Capital) The company maintained robust liquidity and capital, with substantial primary and secondary liquidity sources, while regulatory capital ratios remained strong despite a slight capital decrease - Total primary and secondary liquidity sources stood at **$2.31 billion** as of June 30, 2025[43](index=43&type=chunk) Key Capital Ratios (June 30, 2025) | Ratio | Value | | :--- | :--- | | **Community Bank Leverage Ratio (Bank)** | 11.75% | | **Tangible Common Equity Ratio (Consolidated)** | 8.77% | - In H1 2025, total capital decreased by **$1.6 million**, as the **$19.7 million** in net income was offset by **$18.0 million** in share repurchases and **$7.0 million** in dividends[43](index=43&type=chunk) [Financial Statements and Supplementary Data](index=15&type=section&id=Financial%20Statements%20and%20Supplementary%20Data) [Consolidated Financial Statements](index=15&type=section&id=Consolidated%20Financial%20Statements) This section presents the unaudited Consolidated Statement of Condition (Balance Sheet) and Consolidated Income Statement, providing a detailed view of the company's financial position and performance Statement of Condition (Balance Sheet) Highlights (June 30, 2025) | Category | Amount (in thousands) | | :--- | :--- | | **Total Assets** | **$3,770,302** | | Net Loans | $2,412,929 | | Total Investment Securities | $967,318 | | **Total Liabilities** | **$3,414,595** | | Total Deposits | $2,974,469 | | **Total Capital** | **$355,707** | Consolidated Income Statement Highlights (Three Months Ended June 30, 2025) | Category | Amount (in thousands) | | :--- | :--- | | Net Interest Income | $30,653 | | Credit Loss Expense (Total) | $1,200 | | Noninterest Income | $8,553 | | Noninterest Expense | $23,767 | | **Net Income** | **$10,633** | [Supplementary Financial Data](index=10&type=section&id=Supplementary%20Financial%20Data) This section contains various supplementary tables that provide deeper insights into the company's financial health, including detailed breakdowns of credit quality, loan portfolio activity, allowance for credit losses by loan category, and average balance sheet data with corresponding yields and rates Credit Quality Data (June 30, 2025) | Metric | Amount (in thousands) | | :--- | :--- | | Nonperforming loans | $14,981 | | Total nonperforming assets | $14,981 | | Quarterly net charge offs | $6,580 | | Past due loans (30-89 days) | $3,033 | Loan Rollforward (Three Months Ended June 30, 2025) | Category | Amount (in thousands) | | :--- | :--- | | Beginning Balance | $2,306,762 | | New credit extended | $48,147 | | Change in mortgage warehouse | $118,665 | | Pay-downs, maturities, etc. | ($41,556) | | **Ending Balance** | **$2,434,605** | Allowance for Credit Losses by Loan Category (June 30, 2025) | Loan Category | Balance (in thousands) | Allowance (in thousands) | Coverage Ratio | | :--- | :--- | :--- | :--- | | Commercial Real Estate | $1,392,075 | $17,083 | 1.23% | | Residential Real Estate | $371,415 | $1,694 | 0.46% | | Mortgage Warehouse | $401,896 | $451 | 0.11% | | **Total Loans** | **$2,434,609** | **$21,680** | **0.89%** | [Non-GAAP Financial Measures](index=20&type=section&id=Non-GAAP%20Financial%20Measures) This section provides reconciliations for non-GAAP financial measures used in the report to their nearest GAAP equivalents, which management uses to assess the company's performance Reconciliation of Tangible Common Equity (June 30, 2025) | Metric | Amount (in thousands) | | :--- | :--- | | Total stockholders' equity (GAAP) | $355,707 | | Less: goodwill and other intangible assets | $27,651 | | **Tangible common equity (Non-GAAP)** | **$328,056** | Key Non-GAAP Ratios (June 30, 2025) | Ratio | Value | | :--- | :--- | | Tangible book value per common share | $23.98 | | Tangible common equity ratio | 8.77% | | Efficiency Ratio (tax-equivalent) | 59.43% |

Core Viewpoint - The article emphasizes the importance of value investing and highlights Sierra Bancorp (BSRR) as a strong candidate for value investors due to its attractive financial metrics and strong earnings outlook [2][8]. Group 1: Company Overview - Sierra Bancorp (BSRR) currently holds a Zacks Rank 2 (Buy) and has an A grade for Value, indicating it is considered a strong value stock [4]. - The stock has a Forward P/E ratio of 9.99, which is lower than the industry average of 10.59, suggesting it may be undervalued [4]. - BSRR's Forward P/E has fluctuated between 12.25 and 8.27 over the past year, with a median of 10.25 [4]. Group 2: Financial Metrics - BSRR has a P/B ratio of 1.2, which is attractive compared to the industry's average P/B of 1.30. The P/B ratio has ranged from 1.37 to 0.96 in the past year, with a median of 1.16 [5]. - The company has a P/S ratio of 2.12, slightly below the industry average of 2.18, indicating a competitive position in terms of sales valuation [6]. - BSRR's P/CF ratio stands at 9.31, which is favorable compared to the industry's average P/CF of 10.62. This ratio has varied between 11.60 and 7.39 over the past year, with a median of 9.33 [7]. Group 3: Investment Potential - The combination of BSRR's strong financial metrics and positive earnings outlook suggests that the stock is likely undervalued at present, making it an appealing option for value investors [8].

Company Overview - Sierra Bancorp (BSRR) is headquartered in Porterville and has experienced a price change of 5.95% this year [3] - The company currently pays a dividend of $0.25 per share, resulting in a dividend yield of 3.26%, which is higher than the Banks - West industry's yield of 2.86% and the S&P 500's yield of 1.55% [3] Dividend Performance - The current annualized dividend of Sierra Bancorp is $1.00, reflecting a 6.4% increase from the previous year [4] - Over the past 5 years, the company has increased its dividend 3 times year-over-year, with an average annual increase of 3.88% [4] - The current payout ratio is 35%, indicating that the company paid out 35% of its trailing 12-month earnings per share as dividends [4] Earnings Growth and Future Outlook - For the fiscal year, Sierra Bancorp expects solid earnings growth, with the Zacks Consensus Estimate for 2025 at $2.95 per share, representing a year-over-year earnings growth rate of 4.61% [5] - Future dividend growth will depend on earnings growth and the payout ratio [4] Investment Opportunity - Sierra Bancorp presents a compelling investment opportunity as it offers an attractive dividend and has a strong Zacks Rank of 1 (Strong Buy) [6]

Group 1 - Sierra Bancorp (BSRR) has returned 11.5% year-to-date, outperforming the Finance sector average return of 9.9% [4] - The Zacks Rank for Sierra Bancorp is 2 (Buy), indicating a positive outlook based on earnings estimates and revisions [3] - The Zacks Consensus Estimate for BSRR's full-year earnings has increased by 2.4% over the past quarter, reflecting improving analyst sentiment [3] Group 2 - Sierra Bancorp belongs to the Banks - West industry, which includes 28 companies and is currently ranked 43 in the Zacks Industry Rank [5] - Stocks in the Banks - West industry have gained about 3% year-to-date, indicating that BSRR is performing better than its peers in this specific group [5] - Commonwealth Bank of Australia Sponsored ADR (CMWAY) is another Finance stock that has outperformed the sector with a year-to-date return of 24.2% [4][6]

Core Viewpoint - Sierra Bancorp (BSRR) has been upgraded to a Zacks Rank 2 (Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on a company's changing earnings picture, which is crucial for predicting near-term stock price movements [2][4]. - An increase in earnings estimates typically leads to higher fair value calculations by institutional investors, resulting in buying or selling actions that affect stock prices [4]. Company Performance and Outlook - The upgrade for Sierra Bancorp indicates a positive outlook for its earnings, suggesting potential buying pressure and an increase in stock price [3][5]. - Analysts have raised their earnings estimates for Sierra Bancorp, with the Zacks Consensus Estimate increasing by 2.3% over the past three months [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong track record of performance, particularly for Zacks Rank 1 stocks, which have averaged a +25% annual return since 1988 [7]. - Sierra Bancorp's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [10].

Company Overview - Sierra Bancorp is based in Porterville and operates in the Finance sector, with a year-to-date share price change of 2.97% [3] - The company currently pays a dividend of $0.25 per share, resulting in a dividend yield of 3.36%, which is higher than the Banks - West industry's yield of 3.2% and the S&P 500's yield of 1.58% [3] Dividend Performance - The current annualized dividend of Sierra Bancorp is $1, reflecting a 6.4% increase from the previous year [4] - Over the past five years, the company has increased its dividend three times, achieving an average annual increase of 3.98% [4] - The current payout ratio is 35%, indicating that the company paid out 35% of its trailing 12-month earnings per share as dividends [4] Earnings Outlook - Sierra Bancorp is expected to see earnings growth this fiscal year, with the Zacks Consensus Estimate for 2025 projected at $2.95 per share, representing a year-over-year growth rate of 4.61% [5] Investment Considerations - Sierra Bancorp is viewed as a compelling investment opportunity due to its attractive dividend and strong Zacks Rank of 2 (Buy) [7]

Core Insights - The article emphasizes the importance of value investing as a strategy to identify strong stocks, particularly through fundamental analysis and traditional valuation metrics [2][3] Group 1: Sierra Bancorp (BSRR) - Sierra Bancorp (BSRR) has a Zacks Rank of 2 (Buy) and an A for Value, indicating strong potential as a value stock [4] - BSRR's current P/E ratio is 9.59, which is lower than the industry average of 10.36, suggesting it may be undervalued [4] - The Forward P/E ratio for BSRR has fluctuated between 8.27 and 12.25 over the past year, with a median of 10.20 [4] - BSRR's P/B ratio is 1.15, compared to the industry's average P/B of 1.26, indicating solid valuation [5] - The P/B ratio for BSRR has ranged from 0.88 to 1.37 in the past year, with a median of 1.15 [5] - BSRR's P/S ratio is 2.03, slightly below the industry's average P/S of 2.16, reinforcing its value proposition [6] - The P/CF ratio for BSRR is 8.86, which is lower than the industry average of 10.33, suggesting a favorable cash flow outlook [7] - BSRR's P/CF has varied from 7.13 to 11.60 over the past year, with a median of 9.26 [7] Group 2: FS Bancorp (FSBW) - FS Bancorp (FSBW) also holds a Zacks Rank of 2 (Buy) and an A for Value, making it another attractive value stock [8] - FSBW's P/B ratio is 1.02, which is lower than the industry's average P/B of 1.26, indicating potential undervaluation [8] - Over the past 52 weeks, FSBW's P/B has fluctuated between 0.92 and 1.31, with a median of 1.08 [8] Group 3: Overall Valuation Insights - Both Sierra Bancorp and FS Bancorp exhibit strong value metrics, suggesting they are likely undervalued in the current market [9] - The strength of their earnings outlook further supports the case for these stocks as impressive value investments at this time [9]