Financial Performance - Net income for Q3 2020 was $10.4 million, or $0.68 per diluted share, compared to $9.0 million, or $0.58 per diluted share in Q3 2019, reflecting a 15.6% increase in net income year-over-year [161]. - The company's annualized return on average equity was 10.90% for the first nine months of 2020, down from 12.33% in the same period of 2019 [164]. - Total shareholders' equity increased by $27.0 million, or 9%, to $336.2 million at September 30, 2020, due to net income and favorable changes in accumulated other comprehensive income [173]. - Total noninterest income increased by $1.2 million, or 21%, for the quarterly comparison and $2.5 million, or 14%, for the year-to-date comparison [224]. - The efficiency ratio improved to 53.74% in Q3 2020 from 55.64% in Q3 2019, and was 56.64% for the first nine months of 2020 compared to 57.51% for the same period in 2019 [233]. Loan and Deposit Growth - Year-to-date 2020 loan growth was $611.8 million, or 35%, driven by a $435.7 million increase in non-agricultural real estate loans and $123.6 million in Paycheck Protection Program (PPP) loans [170]. - Deposits increased by $423.3 million, or 20%, primarily from noninterest bearing or low-cost transaction and savings accounts [171]. - Total loans and leases amounted to $1,956,380 thousand, with a net interest income of $69,538 thousand and a margin of 4.75% [205]. - The loan-to-deposit ratio increased from 82% at September 30, 2019, to over 91% at September 30, 2020, indicating a greater level of high-earning assets [308]. Asset Management - Total assets reached $3.2 billion at September 30, 2020, up from $2.6 billion at December 31, 2019, indicating significant growth in the company's financial position [169]. - The Company maintained strong primary and secondary liquidity sources, with no adverse impact on capital or financial resources due to COVID-19 as of September 30, 2020 [188]. - The Company had cash and due from banks totaling $88.9 million and unpledged investment securities of $339.1 million as of September 30, 2020 [297]. - The Company’s net loans to assets ratio was 74.3% at September 30, 2020, remaining within internal policy guidelines [302]. Credit Quality and Loan Loss Provisions - The provision for loan and lease losses was $6.4 million in the first nine months of 2020, up from $2.1 million in the same period of 2019, reflecting increased uncertainty due to the COVID-19 pandemic [165]. - The allowance for loan and lease losses was $15.6 million at September 30, 2020, an increase of $5.7 million, or 57%, compared to December 31, 2019, primarily due to a $6.4 million loan loss provision recorded during the first nine months of 2020 [270]. - The Company provided $123.6 million in loans under the "Paycheck Protection Program," which carries a full guarantee by the SBA, mitigating the need for an increase in the provision for loan and lease losses [220]. - The Company has taken actions to mitigate credit losses, including permitting payment deferrals and providing bridge loans and SBA PPP loans [220]. Interest Income and Expense - Net interest income increased by $3.7 million to $28.1 million for Q3 2020 compared to Q3 2019, and increased by $3.5 million to $76.0 million for the first nine months of 2020 relative to the same period in 2019 [199]. - The net interest margin for the nine months ended September 30, 2020, was 3.97%, down from 4.20% for the same period in 2019, reflecting pressure from FOMC's emergency rate cuts [187]. - Interest expense for Q3 2020 was $1.0 million, a decline of $2.6 million, or 73%, compared to Q3 2019, attributed to a favorable shift in deposit mix [216]. - A decline of 100 basis points in interest rates could result in a decrease of $5.9 million, or 5.8%, in net interest income for the period ending September 30, 2020 [311]. Operational Efficiency - Noninterest expense increased by $2.6 million, or 5%, primarily due to higher salaries and foreclosed asset expenses [167]. - The Company continues to explore operational efficiency opportunities amid rising costs [232]. - The Company has not experienced any challenges in implementing its business continuity plans during the pandemic [191]. - Approximately 75% of back-office and corporate employees are working remotely, with no adverse effects on operations [190]. Regulatory and Compliance - The Company has deferred the implementation of the CECL accounting method until the end of the national emergency or December 31, 2020, to better assess the impact of COVID-19 on expected lifetime credit losses [220]. - The CARES Act temporarily lowered the required community bank leverage ratio to 8% until the end of 2020 or the end of the national emergency [323]. - The company's regulatory capital ratios as of September 30, 2020, are not applicable due to the adoption of the Community Bank Leverage Ratio Framework [322]. - The company’s disclosure controls and procedures were deemed adequate and effective as of the evaluation date [326].

Table of Contents Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, no par value BSRR The NASDAQ Stock Market LLC Non-accelerated Filer: ☐ Smaller Reporting Company: ☐ Emerging Growth Company: ☐ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 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, 2020 Commission file number: 000-33063 SIERRA BANCORP (Exact n ...

SIERRA BANCORP Investor Presentation 21ST ANNUAL KBW COMMUNITY BANK INVESTOR CONFERENCE VIRTUAL CONFERENCE July 28th through July 30th, 2020 SAFE HARBOR STATEMENT This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of Sierra Bancorp's management and are: • subject to contingencies & uncertainties • not a guarantee of future performance • based on assumptions that m ...

Table of Contents Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, no par value BSRR The NASDAQ Stock Market LLC Non-accelerated Filer: ☐ Smaller Reporting Company: ☐ Emerging Growth Company: ☐ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020 Commission file number: 000-33063 SIERRA BANCORP (Exact ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 Commission file number: 000-33063 SIERRA BANCORP (Exact name of registrant as specified in its charter) California 33-0937517 (State of incorporation) (I.R.S. Employer Identification No.) 86 North Main Street, Porterville, California 93257 (Address of principal executive offices) (Z ...

Table of Contents Non-accelerated Filer: ☐ Smaller Reporting Company: ☐ Emerging Growth Company: ☐ Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, no par value BSRR The NASDAQ Stock Market LLC UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019 Commission file number: 000-33063 SIERRA BANCORP (Ex ...

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=Part%20I%20-%20Financial%20Information) This part presents the unaudited financial statements and management's analysis of financial condition and operations [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements and accompanying notes for the period [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This statement details the company's assets, liabilities, and shareholders' equity at the end of the period | Metric | June 30, 2019 (Unaudited) ($ thousands) | December 31, 2018 (Audited) ($ thousands) | |:---|:---|:---| | **ASSETS** ||| | Total cash & cash equivalents | $67,790 | $74,132 | | Securities available-for-sale | $577,266 | $560,479 | | Net loans and leases | $1,770,847 | $1,724,780 | | Total assets | $2,577,032 | $2,522,502 | | **LIABILITIES AND SHAREHOLDERS' EQUITY** ||| | Total deposits | $2,179,098 | $2,116,340 | | Total liabilities | $2,280,180 | $2,249,478 | | Total shareholders' equity | $296,852 | $273,024 | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) This statement outlines the company's revenues, expenses, and net income over the reporting period | Metric | Three Months Ended June 30, 2019 ($ thousands) | Three Months Ended June 30, 2018 ($ thousands) | Six Months Ended June 30, 2019 ($ thousands) | Six Months Ended June 30, 2018 ($ thousands) | |:---|:---|:---|:---|:---| | Total interest income | $27,788 | $24,883 | $55,271 | $48,360 | | Total interest expense | $3,589 | $2,083 | $7,099 | $3,800 | | Net interest income | $24,199 | $22,800 | $48,172 | $44,560 | | Provision for loan losses | $400 | $300 | $700 | $500 | | Total noninterest income | $5,855 | $5,429 | $11,762 | $10,563 | | Total other operating expense | $17,656 | $17,294 | $35,509 | $35,181 | | Income before taxes | $11,998 | $10,635 | $23,725 | $19,442 | | Provision for income taxes | $3,169 | $2,643 | $6,001 | $4,740 | | Net income | $8,829 | $7,992 | $17,724 | $14,702 | | Earnings per share basic | $0.58 | $0.52 | $1.16 | $0.96 | | Earnings per share diluted | $0.57 | $0.52 | $1.15 | $0.95 | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This statement reports net income and other comprehensive income components for the period | Metric | Three Months Ended June 30, 2019 ($ thousands) | Three Months Ended June 30, 2018 ($ thousands) | Six Months Ended June 30, 2019 ($ thousands) | Six Months Ended June 30, 2018 ($ thousands) | |:---|:---|:---|:---|:---| | Net income | $8,829 | $7,992 | $17,724 | $14,702 | | Other comprehensive income (loss), before tax | $9,302 | ($1,192) | $15,463 | ($8,784) | | Income tax expense related to other comprehensive income (loss), net of tax | ($2,750) | $353 | ($4,571) | $2,598 | | Other comprehensive income (loss) | $6,552 | ($839) | $10,892 | ($6,186) | | Comprehensive income | $15,381 | $7,153 | $28,616 | $8,516 | [Consolidated Statements of Changes In Stockholder's Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20In%20Stockholder's%20Equity) This statement details the changes in the company's equity accounts over the reporting period | Metric | June 30, 2019 ($ thousands) | December 31, 2018 ($ thousands) | |:---|:---|:---| | Common Stock | $113,061 | $112,507 | | Additional Paid In Capital | $3,237 | $3,066 | | Retained Earnings | $176,328 | $164,117 | | Accumulated Other Comprehensive Income (Loss) | $4,226 | ($6,666) | | Total Shareholders' Equity | $296,852 | $273,024 | - Total shareholders' equity increased by **$23.8 million** from December 31, 2018, to June 30, 2019, driven by net income, stock option exercises, and a positive swing in accumulated other comprehensive income, partially offset by cash dividends paid[19](index=19&type=chunk)[23](index=23&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities | Metric | Six Months Ended June 30, 2019 ($ thousands) | Six Months Ended June 30, 2018 ($ thousands) | |:---|:---|:---| | Net cash provided by operating activities | $18,694 | $11,132 | | Net cash used in investing activities | ($42,947) | ($78,504) | | Net cash provided by financing activities | $17,911 | $82,337 | | (Decrease) increase in cash and due from banks | ($6,342) | $14,965 | | Cash and cash equivalents, End of period | $67,790 | $85,102 | [Notes to Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed disclosures and explanations for the consolidated financial statements [Note 1 – The Business of Sierra Bancorp](index=9&type=section&id=Note%201%20%E2%80%93%20The%20Business%20of%20Sierra%20Bancorp) This note describes the company's primary business activities, market presence, and corporate structure - Sierra Bancorp is a California-based bank holding company, serving as the sole shareholder of Bank of the Sierra since August 2001, offering retail and commercial banking services through 40 branches[29](index=29&type=chunk)[30](index=30&type=chunk) - As of June 30, 2019, the Company had **total assets of $2.6 billion** and **total deposit accounts of $2.2 billion**, making it the largest bank headquartered in the South San Joaquin Valley[30](index=30&type=chunk) [Note 2 – Basis of Presentation](index=9&type=section&id=Note%202%20%E2%80%93%20Basis%20of%20Presentation) This note explains the accounting principles and conventions used in preparing the financial statements - The unaudited consolidated financial statements are presented in a condensed format, reflecting all necessary normal and recurring adjustments as determined by Management, and should be read with the 2018 Annual Report[31](index=31&type=chunk) [Note 3 – Current Accounting Developments](index=9&type=section&id=Note%203%20%E2%80%93%20Current%20Accounting%20Developments) This note discusses the impact of recently adopted and pending accounting standards on the company - The Company adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019, recognizing approximately **$10 million in right-of-use assets** and corresponding lease liabilities[32](index=32&type=chunk)[34](index=34&type=chunk) - ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), or CECL, becomes effective January 1, 2020, with a preliminary evaluation indicating the allowance for loan and lease losses could **increase by 100% or more**[35](index=35&type=chunk) - The Company implemented ASU 2017-01, Business Combinations (Topic 805), effective January 1, 2018, which narrows the definition of a business and impacted a branch deposit purchase in Q2 2018[36](index=36&type=chunk) - ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), adopted January 1, 2019, requires premium amortization on callable debt securities to the earliest call date, with no material impact[39](index=39&type=chunk) [Note 4 – Share Based Compensation](index=14&type=section&id=Note%204%20%E2%80%93%20Share%20Based%20Compensation) This note details the company's stock incentive plans and related compensation expenses - The Company's 2017 Stock Incentive Plan reserves 850,000 shares for awards, with **667,800 shares remaining available** as of June 30, 2019; stock option expense for H1 2019 was **$267,000**[42](index=42&type=chunk)[43](index=43&type=chunk) [Note 5 – Earnings per Share](index=14&type=section&id=Note%205%20%E2%80%93%20Earnings%20per%20Share) This note provides the calculation of basic and diluted earnings per share | Metric | Q2 2019 | Q2 2018 | H1 2019 | H1 2018 | |:---|:---|:---|:---|:---| | Basic EPS | $0.58 | $0.52 | $1.16 | $0.96 | | Diluted EPS | $0.57 | $0.52 | $1.15 | $0.95 | | Average shares outstanding, basic | 15,329,907 | 15,254,575 | 15,320,784 | 15,243,697 | | Average shares outstanding, diluted | 15,458,320 | 15,429,129 | 15,453,212 | 15,420,886 | [Note 6 – Comprehensive Income](index=14&type=section&id=Note%206%20%E2%80%93%20Comprehensive%20Income) This note explains the components of comprehensive income, including net income and other comprehensive income - Comprehensive income includes net income and other comprehensive income, with the Company's only source of other comprehensive income being unrealized gains and losses on available-for-sale investment securities[46](index=46&type=chunk) [Note 7 – Financial Instruments with Off-Balance-Sheet Risk](index=14&type=section&id=Note%207%20%E2%80%93%20Financial%20Instruments%20with%20Of%20-Balance-Sheet%20Risk) This note discloses financial instruments with off-balance-sheet risk, such as loan commitments and letters of credit | Metric | June 30, 2019 ($ thousands) | December 31, 2018 ($ thousands) | |:---|:---|:---| | Commitments to extend credit | $596,001 | $781,987 | | Standby letters of credit | $9,529 | $8,966 | - The Company uses a **$105 million letter of credit** from the Federal Home Loan Bank as security for certain deposits and credit arrangements, backed by pledged loans[49](index=49&type=chunk) [Note 8 – Fair Value Disclosures and Reporting, the Fair Value Option and Fair Value Measurements](index=16&type=section&id=Note%208%20%E2%80%93%20Fair%20Value%20Disclosures%20and%20Reporting,%20the%20Fair%20Value%20Option%20and%20Fair%20Value%20Measurements) This note details the methodologies and inputs used for fair value measurements of financial instruments - Fair value is defined as the exchange price in an orderly transaction, and the Company uses a three-level hierarchy (Level 1, 2, and 3) for fair value measurements[51](index=51&type=chunk)[52](index=52&type=chunk) | Financial Instrument | June 30, 2019 Carrying Amount ($ thousands) | June 30, 2019 Total Fair Value ($ thousands) | December 31, 2018 Carrying Amount ($ thousands) | December 31, 2018 Total Fair Value ($ thousands) | |:---|:---|:---|:---|:---| | Investment securities available for sale | $577,266 | $577,266 | $560,479 | $560,479 | | Loans and leases, net held for investment | $1,770,838 | $1,791,335 | $1,724,575 | $1,707,463 | | Deposits | $2,179,098 | $2,179,324 | $2,116,340 | $2,115,575 | - Collateral-dependent impaired loans are carried at fair value when collection is improbable and the loan has been written down to the fair value of its underlying collateral[62](index=62&type=chunk) - Foreclosed assets are carried at the lower of cost or fair value, with fair value determined by appraised value less expected selling costs[63](index=63&type=chunk) [Note 9 – Investments](index=22&type=section&id=Note%209%20%E2%80%93%20Investments) This note provides a detailed breakdown of the company's investment securities portfolio - The Company's investment portfolio is classified as 'available for sale' for flexibility in interest rate risk and liquidity management, carried at estimated fair market values[70](index=70&type=chunk) | Investment Type | June 30, 2019 Amortized Cost ($ thousands) | June 30, 2019 Estimated Fair Value ($ thousands) | December 31, 2018 Amortized Cost ($ thousands) | December 31, 2018 Estimated Fair Value ($ thousands) | |:---|:---|:---|:---|:---| | U.S. government agencies | $15,262 | $15,296 | $15,553 | $15,212 | | Mortgage-backed securities | $405,025 | $406,091 | $414,208 | $404,733 | | State and political subdivisions | $150,978 | $155,879 | $140,181 | $140,534 | | Total securities | $571,265 | $577,266 | $569,942 | $560,479 | - The Company had **274 securities with gross unrealized losses** at June 30, 2019, but Management does not believe any are other than temporary; net realized gains for H1 2019 were **$28,000**[72](index=72&type=chunk)[77](index=77&type=chunk) - The Company invests in Low-Income Housing Tax Credit (LIHTC) fund limited partnerships, with a total book balance of **$5.0 million** as of June 30, 2019[84](index=84&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) [Note 10 – Credit Quality and Nonperforming Assets](index=26&type=section&id=Note%2010%20%E2%80%93%20Credit%20Quality%20and%20Nonperforming%20Assets) This note details the credit quality of the loan portfolio and information on nonperforming assets - The Company monitors credit quality using classifications: pass, special mention, substandard, and impaired, with a loan being impaired when full collection is not probable[88](index=88&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) | Credit Quality Classification | June 30, 2019 ($ thousands) | December 31, 2018 ($ thousands) | |:---|:---|:---| | Pass | $1,727,138 | $1,677,847 | | Special Mention | $28,413 | $28,698 | | Substandard | $8,982 | $9,311 | | Impaired | $13,366 | $16,072 | | Total gross loans and leases | $1,777,899 | $1,731,928 | - Gross nonperforming loans totaled **$4.120 million** at June 30, 2019, down from $5.156 million at December 31, 2018; foreclosed assets were **$770,000**, down from $1.082 million[95](index=95&type=chunk) - Troubled Debt Restructurings (TDRs) totaled **$10.276 million** at June 30, 2019, with $1.030 million on non-accrual status[101](index=101&type=chunk)[103](index=103&type=chunk)[105](index=105&type=chunk) - Purchased Credit Impaired (PCI) loans had an unpaid principal balance of **$96,000** at June 30, 2019, with a corresponding allowance for loan losses of $96,000[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) [Note 11 – Allowance for Loan and Lease Losses](index=35&type=section&id=Note%2011%20%E2%80%93%20Allowance%20for%20Loan%20and%20Lease%20Losses) This note explains the methodology for determining the allowance for loan and lease losses and provides a reconciliation of the allowance - The Allowance for Loan and Lease Losses (ALLL) is maintained to absorb probable losses and was **$9.9 million** at June 30, 2019[118](index=118&type=chunk)[216](index=216&type=chunk) | Metric | June 30, 2019 ($ thousands) | December 31, 2018 ($ thousands) | |:---|:---|:---| | Total Impaired Loans | $13,366 | $16,072 | | Related Allowance for Impaired Loans | $1,322 | $2,008 | | Interest Income Recognized on Impaired Loans (H1) | $294 | $693 | | ALLL Activity | Three Months Ended June 30, 2019 ($ thousands) | Six Months Ended June 30, 2019 ($ thousands) | |:---|:---|:---| | Beginning balance | $9,438 | $9,750 | | Provision | $400 | $700 | | Charge-offs | ($816) | ($1,946) | | Recoveries | $861 | $1,379 | | Ending balance | $9,883 | $9,883 | | Net loan charge-offs (recoveries) | ($45) | $567 | - The ALLL to total loans ratio was **0.56%** at June 30, 2019, while the ALLL to nonperforming loans ratio was **239.88%**, up from 189.10% at year-end 2018[216](index=216&type=chunk) [Note 12 – Operating Leases](index=41&type=section&id=Note%2012%20%E2%80%93%20Operating%20Leases) This note provides details on the company's operating lease arrangements and related assets and liabilities - The Company leases space for 21 branch locations and other facilities, with lease expense for H1 2019 totaling **$1.095 million**[137](index=137&type=chunk) - At June 30, 2019, right-of-use assets were **$9.044 million** and operating lease liabilities were **$9.655 million**, with a weighted average lease term of 5.3 years[139](index=139&type=chunk) [Note 13 – Revenue Recognition](index=42&type=section&id=Note%2013%20%E2%80%93%20Revenue%20Recognition) This note describes the company's policies for recognizing revenue from contracts with customers - The Company applies ASU 2014-09 (ASC 606) for noninterest income from customer contracts, with approximately **21% of noninterest revenue** outside the scope of ASC 606 as of June 30, 2019[143](index=143&type=chunk) | Noninterest Income Category | Three Months Ended June 30, 2019 ($ thousands) | Six Months Ended June 30, 2019 ($ thousands) | |:---|:---|:---| | Service charges on deposits | $3,151 | $6,094 | | Other service charges and fees | $2,514 | $4,777 | | Net gains on sale of securities available-for-sale | $22 | $28 | | Bank-owned life insurance (Not within scope of ASC 606) | $127 | $1,027 | | Total noninterest income | $5,855 | $11,762 | [Item 2. Management's Discussion & Analysis of Financial Condition & Results of Operations](index=43&type=section&id=Item%202.%20Management's%20Discussion%20%26%20Analysis%20of%20Financial%20Condition%20%26%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations [Forward-Looking Statements](index=43&type=section&id=Forward-Looking%20Statements) This section cautions readers about statements that are not historical facts and are subject to risks and uncertainties - The report contains forward-looking statements, which are subject to inherent risks and uncertainties, and actual results may differ materially from forecasts[148](index=148&type=chunk)[149](index=149&type=chunk) [Critical Accounting Policies](index=43&type=section&id=Critical%20Accounting%20Policies) This section highlights accounting policies that are most important to the portrayal of the company's financial condition - Critical accounting policies involve complex and subjective decisions with significant impact on financial statements, including the allowance for loan and lease losses and valuation of impaired assets[151](index=151&type=chunk)[152](index=152&type=chunk) [Overview of the Results of Operations and Financial Condition](index=44&type=section&id=Overview%20of%20the%20Results%20of%20Operations%20and%20Financial%20Condition) This section provides a high-level summary of the company's financial performance and condition Results of Operations Summary | Metric | Q2 2019 ($ thousands) | Q2 2018 ($ thousands) | Change ($ thousands) | Change (%) | |:---|:---|:---|:---|:---| | Net income | $8,829 | $7,992 | $837 | 10% | | Basic EPS | $0.58 | $0.52 | $0.06 | 11.5% | | Diluted EPS | $0.57 | $0.52 | $0.05 | 9.6% | | Annualized return on average equity | 12.27% | 12.44% | -0.17% | -1.4% | | Annualized return on average assets | 1.39% | 1.34% | 0.05% | 3.7% | First Half Results of Operations Summary | Metric | H1 2019 ($ thousands) | H1 2018 ($ thousands) | Change ($ thousands) | Change (%) | |:---|:---|:---|:---|:---| | Net income | $17,724 | $14,702 | $3,022 | 21% | | Basic EPS | $1.16 | $0.96 | $0.20 | 20.8% | | Diluted EPS | $1.15 | $0.95 | $0.20 | 21.1% | | Annualized return on average equity | 12.62% | 11.53% | 1.09% | 9.5% | | Annualized return on average assets | 1.41% | 1.25% | 0.16% | 12.8% | Financial Condition Summary (Balance Sheet Changes) | Metric | June 30, 2019 ($ billions) | December 31, 2018 ($ billions) | Change ($ millions) | Change (%) | |:---|:---|:---|:---|:---| | Total assets | $2.577 | $2.523 | $54 | 2.1% | | Total liabilities | $2.280 | $2.249 | $31 | 1.4% | | Shareholders' equity | $0.297 | $0.273 | $24 | 8.8% | | Cash and cash equivalents | $0.06 | $0.07 | ($6) | -9% | | Gross loans | $1.778 | $1.732 | $46 | 2.7% | | Total nonperforming assets | $0.00489 | $0.006238 | ($1.348) | -21.6% | | Total deposits | $2.179 | $2.116 | $63 | 3% | [Earnings Performance](index=45&type=section&id=Earnings%20Performance) This section analyzes the key drivers of the company's earnings, including net interest and noninterest income - The Company's income is primarily derived from net interest income and noninterest income from customer service charges and other sources[162](index=162&type=chunk) [Net Interest Income and Net Interest Margin](index=47&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) This section analyzes the components of net interest income and the factors affecting the net interest margin Net Interest Income and Margin Trends | Metric | Q2 2019 ($ thousands) | Q2 2018 ($ thousands) | H1 2019 ($ thousands) | H1 2018 ($ thousands) | |:---|:---|:---|:---|:---| | Net interest income | $24,199 | $22,800 | $48,172 | $44,560 | | Change in Net Interest Income (YoY) | +$1,399 | N/A | +$3,612 | N/A | | Change in Net Interest Income (YoY %) | +6% | N/A | +8% | N/A | | Net interest margin | 4.21% | 4.24% | 4.25% | 4.22% | | Change in Net Interest Margin (bps) | -3 bps | N/A | +3 bps | N/A | - The increase in net interest income for Q2 2019 was driven by a **7% growth in average interest-earning assets**, partially offset by a **3 basis point drop in net interest margin**[155](index=155&type=chunk)[164](index=164&type=chunk)[172](index=172&type=chunk) - For H1 2019, net interest income increased due to a **7% rise in average interest-earning assets** and a **3 basis point increase in net interest margin**[156](index=156&type=chunk)[176](index=176&type=chunk) [Provision for Loan and Lease Losses](index=53&type=section&id=Provision%20for%20Loan%20and%20Lease%20Losses) This section discusses the rationale for the provision for loan and lease losses recorded during the period Loan Loss Provision and Net Charge-offs | Metric | Q2 2019 ($ thousands) | Q2 2018 ($ thousands) | H1 2019 ($ thousands) | H1 2018 ($ thousands) | |:---|:---|:---|:---|:---| | Provision for loan losses | $400 | $300 | $700 | $500 | | Net recoveries (charge-offs) | $45 | ($155) | ($567) | ($407) | - The 2019 provision was deemed necessary based on overall credit quality, loan growth, and reserves for impaired loans, with the allowance maintained at an adequate level[178](index=178&type=chunk)[179](index=179&type=chunk) [Noninterest Income and Noninterest Expense](index=55&type=section&id=Noninterest%20Income%20and%20Noninterest%20Expense) This section provides a detailed analysis of the components of noninterest income and expense Noninterest Income Trends | Metric | Q2 2019 ($ thousands) | Q2 2018 ($ thousands) | H1 2019 ($ thousands) | H1 2018 ($ thousands) | |:---|:---|:---|:---|:---| | Total noninterest income | $5,855 | $5,429 | $11,762 | $10,563 | | Change (YoY) | +$426 | N/A | +$1,199 | N/A | | Change (YoY %) | +8% | N/A | +11% | N/A | | Service charges on deposits | $3,151 | $3,027 | $6,094 | $5,974 | | Debit card interchange income (part of Other service charges and fees) | $1,687 | $1,486 | $3,200 | $2,885 | | Bank-owned life insurance (BOLI) income | $127 | $423 | $1,027 | $626 | Noninterest Expense Trends | Metric | Q2 2019 ($ thousands) | Q2 2018 ($ thousands) | H1 2019 ($ thousands) | H1 2018 ($ thousands) | |:---|:---|:---|:---|:---| | Total noninterest expense | $17,656 | $17,294 | $35,509 | $35,181 | | Change (YoY) | +$362 | N/A | +$328 | N/A | | Change (YoY %) | +2% | N/A | +1% | N/A | | Salaries and employee benefits | $8,994 | $8,997 | $18,237 | $18,180 | | Occupancy and equipment | $2,450 | $2,451 | $4,811 | $4,799 | | Foreclosed assets expense (net) | $41 | ($574) | $61 | ($346) | | Acquisition costs | ($1) | $151 | $22 | $437 | | Overhead efficiency ratio | 58.17% | 60.44% | 58.46% | 63.01% | - Noninterest income for Q2 2019 included nonrecurring gains of **$232,000** from restricted stock write-up and **$100,000** from a low-income housing tax credit fund wrap-up[155](index=155&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) - Noninterest expense increases were primarily due to higher net OREO expense, partially offset by lower nonrecurring acquisition costs, while salaries and benefits remained stable[155](index=155&type=chunk)[158](index=158&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) [Provision for Income Taxes](index=58&type=section&id=Provision%20for%20Income%20Taxes) This section explains the factors contributing to the company's effective tax rate Effective Tax Rate Trends | Metric | Q2 2019 | Q2 2018 | H1 2019 | H1 2018 | |:---|:---|:---|:---|:---| | Provision for income taxes as % of pre-tax income | 26.4% | 24.9% | 25.3% | 24.4% | - The increase in the effective tax rate for 2019 is attributed to **higher pre-tax income** and a **lower level of tax credits**[194](index=194&type=chunk) [Balance Sheet Analysis](index=58&type=section&id=Balance%20Sheet%20Analysis) This section provides a detailed analysis of the Company's balance sheet components [Earning Assets](index=58&type=section&id=Earning%20Assets) This subsection describes the composition and performance of the company's interest-earning assets - The Company's interest-earning assets consist of investments and loans, whose composition, growth, and credit quality significantly determine the Company's financial condition[196](index=196&type=chunk) [Investments](index=58&type=section&id=Investments) This subsection details the composition, changes, and risk characteristics of the investment portfolio - Aggregate investments totaled **$579 million (22% of total assets)** at June 30, 2019, with the investment securities portfolio increasing by **$17 million (3%)** for H1 2019[197](index=197&type=chunk)[198](index=198&type=chunk) - The net unrealized gain on the investment portfolio was **$6 million** at June 30, 2019, a **$15 million positive swing** from a $9 million net unrealized loss at December 31, 2018[201](index=201&type=chunk) - Pledged investment securities totaled **$223 million** at June 30, 2019, leaving **$354 million** in unpledged debt securities[202](index=202&type=chunk) [Loan and Lease Portfolio](index=60&type=section&id=Loan%20and%20Lease%20Portfolio) This subsection analyzes the growth, composition, and credit quality of the loan and lease portfolio - Gross loans and leases increased by **$46 million (3%) to $1.778 billion** at June 30, 2019, primarily due to higher outstanding balances on mortgage warehouse lines[160](index=160&type=chunk)[203](index=203&type=chunk) Loan and Lease Distribution by Type | Loan Type | June 30, 2019 ($ thousands) | June 30, 2019 % of Total | December 31, 2018 ($ thousands) | December 31, 2018 % of Total | |:---|:---|:---|:---|:---| | Total real estate | $1,438,176 | 80.88% | $1,453,930 | 83.95% | | Agricultural | $51,509 | 2.90% | $49,103 | 2.84% | | Commercial and industrial | $124,974 | 7.03% | $128,220 | 7.40% | | Mortgage warehouse lines | $154,954 | 8.72% | $91,813 | 5.30% | | Consumer loans | $8,286 | 0.47% | $8,862 | 0.51% | | Total loans and leases | $1,777,899 | 100.00% | $1,731,928 | 100.00% | - Total real estate loans declined by **$16 million (1%)** in H1 2019, while mortgage warehouse lines saw significant growth, doubling utilization to **46%** at June 30, 2019[206](index=206&type=chunk) [Nonperforming Assets](index=62&type=section&id=Nonperforming%20Assets) This subsection provides an analysis of nonperforming loans, foreclosed assets, and troubled debt restructurings Nonperforming Assets and Performing TDRs | Metric | June 30, 2019 ($ thousands) | December 31, 2018 ($ thousands) | June 30, 2018 ($ thousands) | |:---|:---|:---|:---| | Total nonperforming loans | $4,120 | $5,156 | $3,093 | | Foreclosed assets | $770 | $1,082 | $2,112 | | Total nonperforming assets | $4,890 | $6,238 | $5,205 | | Performing TDRs | $9,246 | $10,920 | $11,981 | | Nonperforming assets as a % of total gross loans and leases and foreclosed assets | 0.27% | 0.36% | 0.32% | - Total nonperforming assets decreased by **$1.348 million (22%)** during H1 2019 due to net charge-offs and credit quality improvement efforts[160](index=160&type=chunk)[211](index=211&type=chunk) - Foreclosed assets decreased by **$312,000 (29%) to $770,000** at June 30, 2019, due to write-downs and sales of properties[212](index=212&type=chunk) [Allowance for Loan and Lease Losses](index=63&type=section&id=Allowance%20for%20Loan%20and%20Lease%20Losses) This subsection discusses the adequacy of the allowance for loan and lease losses and related trends - The ALLL was **$9.9 million** at June 30, 2019, with the ALLL to total loans ratio remaining at **0.56%**[216](index=216&type=chunk) - The ALLL to nonperforming loans ratio improved to **239.88%** at June 30, 2019, from 189.10% at December 31, 2018[216](index=216&type=chunk) - A separate allowance of **$384,000** for potential losses in unused commitments is included in other liabilities[216](index=216&type=chunk) [Off-Balance Sheet Arrangements](index=65&type=section&id=Off-Balance%20Sheet%20Arrangements) This subsection discloses and analyzes the company's off-balance sheet arrangements - Unused commitments to extend credit totaled **$596 million** at June 30, 2019, down from $782 million at December 31, 2018[224](index=224&type=chunk) - The Company also had **$10 million** in undrawn letters of credit issued to customers and utilizes a **$105 million FHLB letter of credit** for deposit security[224](index=224&type=chunk)[225](index=225&type=chunk) [Other Assets](index=65&type=section&id=Other%20Assets) This subsection provides a breakdown and analysis of other asset categories - The aggregate balance of 'Other assets' was **$49.5 million** at June 30, 2019, a **$1 million (2%) decrease** from December 31, 2018[160](index=160&type=chunk)[230](index=230&type=chunk) - Key components of other assets included a **$12.7 million** investment in restricted stock, a **$9.0 million** operating lease right-of-use asset, and a **$5.0 million** investment in LIHTC funds[230](index=230&type=chunk) - Goodwill remained at **$27 million**, while other intangible assets decreased by **$537,000 (8%)** due to amortization; no impairment was found[228](index=228&type=chunk)[229](index=229&type=chunk) [Deposits and Interest-Bearing Liabilities](index=67&type=section&id=Deposits%20and%20Interest-Bearing%20Liabilities) This subsection analyzes the composition and trends of the company's funding sources [Deposits](index=67&type=section&id=Deposits) - Deposit balances grew by **$63 million (3%)** during H1 2019, with non-maturity deposits increasing by **$31 million (2%)**[160](index=160&type=chunk)[233](index=233&type=chunk) Deposit Distribution by Type | Deposit Type | June 30, 2019 ($ thousands) | June 30, 2019 % of Total | December 31, 2018 ($ thousands) | December 31, 2018 % of Total | |:---|:---|:---|:---|:---| | Noninterest bearing demand deposits | $658,900 | 30.24% | $662,527 | 31.31% | | Interest bearing demand deposits | $129,733 | 5.95% | $101,243 | 4.78% | | NOW | $441,030 | 20.24% | $434,483 | 20.53% | | Savings | $289,872 | 13.30% | $283,953 | 13.42% | | Money market | $117,010 | 5.37% | $123,807 | 5.85% | | Time, under $250,000 | $225,937 | 10.37% | $212,901 | 10.06% | | Time, $250,000 or more | $266,616 | 12.24% | $247,426 | 11.69% | | Brokered deposits | $50,000 | 2.29% | $50,000 | 2.36% | | Total deposits | $2,179,098 | 100.00% | $2,116,340 | 100.00% | [Other Interest-Bearing Liabilities](index=68&type=section&id=Other%20Interest-Bearing%20Liabilities) - Total non-deposit interest-bearing liabilities decreased by **$40 million (37%)** in H1 2019, primarily due to a reduction in FHLB borrowings[160](index=160&type=chunk)[236](index=236&type=chunk) - FHLB borrowings were **$8.5 million** at June 30, 2019 (vs $56.1 million at Dec 31, 2018), while repurchase agreements increased by **$8 million to $24 million**[236](index=236&type=chunk)[238](index=238&type=chunk) [Noninterest Bearing Liabilities](index=70&type=section&id=Noninterest%20Bearing%20Liabilities) - Other liabilities increased by **$8 million (30%)** during H1 2019, largely due to the operating lease liability established upon adoption of FASB's ASU 2016-02[160](index=160&type=chunk)[240](index=240&type=chunk) [Liquidity and Market Risk Management](index=70&type=section&id=Liquidity%20and%20Market%20Risk%20Management) This subsection discusses the company's liquidity position, funding sources, and management of market risks - The Company maintains adequate liquidity resources, with **$542 million available** on correspondent bank and FHLB lines of credit and an additional **$74 million** from the Federal Reserve Discount Window[242](index=242&type=chunk) - Unpledged debt securities plus excess pledged securities totaled **$416 million** at June 30, 2019, with key liquidity ratios remaining within internal policy guidelines[243](index=243&type=chunk) - The Company's primary market risk exposure is interest rate risk, managed through monthly earnings simulations and economic value of equity (EVE) calculations[247](index=247&type=chunk)[248](index=248&type=chunk)[253](index=253&type=chunk) Estimated Net Interest Income Sensitivity Profile (12-month) | Immediate Change in Rate | -300 bp | -200 bp | -100 bp | +100 bp | +200 bp | +300 bp | +400 bp | |:---|:---|:---|:---|:---|:---|:---|:---| | Change in Net Int. Inc. (in $000's) | -$15,810 | -$8,442 | -$3,729 | +$1,202 | +$1,847 | +$2,481 | +$2,573 | | % Change | -16.39% | -8.75% | -3.86% | +1.25% | +1.91% | +2.57% | +2.67% | Estimated Economic Value of Equity (EVE) Sensitivity Profile | Immediate Change in Rate | -300 bp | -200 bp | -100 bp | +100 bp | +200 bp | +300 bp | +400 bp | |:---|:---|:---|:---|:---|:---|:---|:---| | Change in EVE (in $000's) | -$147,454 | -$162,983 | -$84,297 | +$43,571 | +$69,015 | +$83,884 | +$92,095 | | % Change | -24.95% | -27.58% | -14.27% | +7.37% | +11.68% | +14.20% | +15.58% | - Simulations indicate net interest income could face a **substantial negative impact** if interest rates decline, particularly due to deposit rates hitting a natural floor[249](index=249&type=chunk)[250](index=250&type=chunk) [Capital Resources](index=74&type=section&id=Capital%20Resources) This subsection analyzes the company's capital position, regulatory capital ratios, and capital management strategies - Total shareholders' equity increased by **$23.9 million to $296.9 million** at June 30, 2019, driven by net income and a **$10.9 million favorable swing** in accumulated other comprehensive income[160](index=160&type=chunk)[255](index=255&type=chunk)[259](index=259&type=chunk) Regulatory Capital Ratios (Sierra Bancorp) | Metric | June 30, 2019 | December 31, 2018 | Minimum Requirement to be Well Capitalized | |:---|:---|:---|:---| | Common Equity Tier 1 Capital to Risk-Weighted Assets | 12.95% | 12.61% | 6.50% | | Tier 1 Capital to Risk-weighted Assets | 14.68% | 14.38% | 8.00% | | Total Capital to Risk-weighted Assets | 15.19% | 14.89% | 10.00% | | Tier 1 Capital to Adjusted Average Assets ("Leverage Ratio") | 11.73% | 11.49% | 5.00% | - The Company's and Bank's risk-based capital ratios increased in H1 2019, remaining strong and **well above the 'well capitalized' thresholds**[260](index=260&type=chunk)[261](index=261&type=chunk) [Item 3. Qualitative & Quantitative Disclosures about Market Risk](index=56&type=section&id=Item%203.%20Qualitative%20%26%20Quantitative%20Disclosures%20about%20Market%20Risk) This section refers to the detailed market risk disclosures provided within Item 2 - Information regarding qualitative and quantitative disclosures about market risk is incorporated by reference from the 'Liquidity and Market Risk Management' section within Item 2[262](index=262&type=chunk) [Item 4. Controls and Procedures](index=57&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures - The Company's CEO and CFO concluded that disclosure controls and procedures were **adequate and effective** as of June 30, 2019[264](index=264&type=chunk)[265](index=265&type=chunk) - There were **no significant changes** in the Company's internal controls over financial reporting during Q2 2019 that materially affected, or are reasonably likely to materially affect, these controls[266](index=266&type=chunk) [PART II - OTHER INFORMATION](index=58&type=section&id=Part%20II%20-%20Other%20Information) This part provides other required information, including legal proceedings, risk factors, and exhibits [Item 1. - Legal Proceedings](index=58&type=section&id=Item%201.%20-%20Legal%20Proceedings) This section addresses the Company's involvement in legal proceedings - Management believes any liability from legal proceedings in the normal course of business would **not have a material adverse effect** on the Company's financial condition or operations[269](index=269&type=chunk) [Item 1A. - Risk Factors](index=58&type=section&id=Item%201A.%20-%20Risk%20Factors) This section confirms that there have been no material changes to previously disclosed risk factors - There were **no material changes** from the risk factors disclosed in the Company's Form 10-K for the fiscal year ended December 31, 2018[270](index=270&type=chunk) [Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds](index=58&type=section&id=Item%202.%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides information on stock repurchase activities - The Company **did not repurchase any shares** in Q2 2019, with 478,954 authorized shares remaining available for repurchase under a 2016 plan[271](index=271&type=chunk) [Item 3. - Defaults upon Senior Securities](index=58&type=section&id=Item%203.%20-%20Defaults%20upon%20Senior%20Securities) This section states that there are no applicable defaults upon senior securities - Not applicable[271](index=271&type=chunk) [Item 4. - Mine Safety Disclosures](index=58&type=section&id=Item%204.%20-%20Mine%20Safety%20Disclosures) This section states that there are no applicable mine safety disclosures - Not applicable[271](index=271&type=chunk) [Item 5. - Other Information](index=58&type=section&id=Item%205.%20-%20Other%20Information) This section indicates no other information to disclose - Not applicable[271](index=271&type=chunk) [Item 6. - Exhibits](index=59&type=section&id=Item%206.%20-%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q - The exhibits include various agreements, corporate documents, compensation plans, indentures for debentures, and required certifications[272](index=272&type=chunk) [SIGNATURES](index=60&type=section&id=Signatures) This section contains the signatures of the duly authorized officers of the company - The report was signed on August 7, 2019, by Kevin J. McPhaill, President & Chief Executive Officer, and Kenneth R. Taylor, Chief Financial Officer[274](index=274&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, no par value BSRR The NASDAQ Stock Market LLC FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019 Commission file number: 000-33063 SIERRA BANCORP (Exact name of Registrant as specified in its ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 Commission file number: 000-33063 SIERRA BANCORP (Exact name of registrant as specified in its charter) California 33-0937517 (State of incorporation) (I.R.S. Employer Identification No.) 86 North Main Street, Porterville, California 93257 (Address of principal executive offices) (Zip Code) (559) 782 ...