Sierra Bancorp(BSRR) - 2024 Q3 - Quarterly Report

Financial Performance - Net income for Q3 2024 was $10.6 million, or$ 0.74 per diluted share, compared to $0.68 per diluted share in Q3 2023, reflecting a 7% increase in net income [142]. - Noninterest income rose by$ 1.7 million, or 7%, driven by higher service charges and transaction-based fees [148]. - Total noninterest income for Q3 2024 was $7.789 million, unchanged from Q3 2023, but increased by$ 1.7 million, or 7%, year-to-date compared to the same period in 2023 [188]. - The effective tax rate for Q3 2024 was 26.4%, compared to 25.8% in Q3 2023, and 26.8% for the first nine months of 2024, compared to 25.3% for the same period in 2023 [197]. - The company recorded a $3.9 million favorable variance in the first nine months of 2024, with a$ 9.4 million increase in loan balances [177]. Interest Income and Margin - Net interest income increased by $2.7 million, or 10%, to$ 30.8 million in Q3 2024, driven by a 36 basis point increase in net interest margin [155]. - The net interest margin improved to 3.66% in Q3 2024, up 36 basis points from Q3 2023 [163]. - The net interest margin increased by 27 basis points, driven by a 45 basis point rise in yield on interest-earning assets, partially offset by a 28 basis point increase in interest rates on interest-bearing liabilities [164]. - Total interest-earning assets amounted to $3,389,516 with a yield of 5.31% for the three months ended September 30, 2024, compared to 4.94% for the same period in 2023 [169]. - The company's net interest margin for Q3 2024 was 3.66%, compared to 3.30% in Q3 2023 [176]. Loans and Credit Quality - Gross loans increased by$ 230.6 million, with significant growth in mortgage warehouse lines and commercial loans, partially offset by a decrease in residential real estate loans [150]. - The provision for credit losses on loans was $1.2 million for Q3 2024, up from$ 0.1 million in Q3 2023 [182]. - Total nonperforming assets increased by $2.4 million to$ 10.3 million for the first nine months of 2024, with nonperforming loans as a percentage of total gross loans rising to 0.45% from 0.38% at December 31, 2023 [220]. - The allowance for credit losses on loans was $22.7 million at September 30, 2024, down from$ 23.5 million at December 31, 2023, representing 0.98% of gross loans [226]. - The largest increase in loan balances was from mortgage warehouse lines, which have the lowest reserve rate in the allowance for credit losses at 0.14% [226]. Assets and Liabilities - Total assets decreased by $33.6 million, or 1.0%, to$ 3.7 billion as of September 30, 2024, compared to December 31, 2023 [149]. - Total interest-bearing deposits reached $1,945,047 with an average rate of 2.45% for the three months ended September 30, 2024, compared to 1.91% in the same period of 2023 [169]. - Total assets as of September 30, 2024, were$ 3,621,959, a decrease from $3,713,882 in the previous year [171]. - The company reported a decrease in non-earning assets to$ 288,975 from $275,883 year-over-year [168]. - Total non-deposit interest-bearing liabilities decreased by$ 262.1 million due to a balance sheet restructure [243]. Deposits - Deposits totaled $3.0 billion, representing a year-to-date increase of$ 200.9 million, or 7%, primarily from brokered deposits [151]. - Core non-maturity deposits rose by $31.0 million, or 6%, while customer time deposits decreased by$ 5.0 million, or 1% [238]. - Wholesale brokered deposits surged by $175.0 million, or 130%, during the first nine months of 2024 [238]. - Overall uninsured deposits were approximately$ 816.2 million, or 28% of total deposit balances [239]. - The Company's loan-to-deposit ratio was 78% at September 30, 2024, compared to 76% at December 31, 2023 [248]. Capital and Shareholder Equity - Total capital increased by $20.6 million, or 6%, to$ 358.7 million, supported by net income and changes in accumulated other comprehensive income [153]. - As of September 30, 2024, total shareholders' equity increased to $358.7 million from$ 338.1 million at the end of 2023, driven by net income of $30.2 million and offset by$ 10.2 million in dividends and $8.3 million in share repurchases [259]. - The company approved a new share repurchase program in October 2023, authorizing the repurchase of 1,000,000 shares, with 406,809 shares repurchased in the first nine months of 2024 [259]. - The company's Tier 1 Capital to Adjusted Average Assets ratio was 11.70% as of September 30, 2024, compared to 11.29% at the end of 2023, exceeding the minimum requirement of 9.00% [261]. - The company has opted into the community bank leverage ratio framework, maintaining a leverage ratio greater than 9% to meet capital requirements [263]. Risk Management and Sensitivity - For an immediate upward adjustment of 100 basis points in interest rates, net interest income is projected to increase by$ 3.4 million, or 2.5%, over the next 12 months [256]. - A downward adjustment of 100 basis points in interest rates would result in a decrease of $7.0 million, or 5.2%, in net interest income over the same period [256]. - The company models various interest rate scenarios, indicating less sensitivity to expected changes due to the current inverted rate curve [258]. - The company runs stress scenarios for the unconsolidated bank, focusing on the potential runoff of low-cost deposits which significantly impacts net interest income [258]. - The company experienced a favorable swing of$ 7.4 million in other comprehensive income due to changes in investment securities' fair value during the first nine months of 2024 [259].