Sierra Bancorp(BSRR) - 2024 Q4 - Annual Report

Regulatory Compliance - As of December 31, 2024 and 2023, both the Company and the Bank qualified as well capitalized for regulatory capital purposes, utilizing the Capital Simplification for Qualifying Community Bank Organization[55]. - The community bank leverage ratio (CBLR) minimum requirement is 9% for calendar year 2022 and beyond[54]. - The Dodd-Frank Act provisions are now fully implemented, impacting most institutions in the banking sector[59]. - The Bank received a "satisfactory" CRA assessment rating in August 2022, indicating compliance with community credit needs[65]. - The final rule for the Community Reinvestment Act (CRA) aims to encourage banks to expand access to credit in low-and moderate-income communities[66]. - The Company continues to monitor challenges to the CRA regulations by various trade groups and other interested parties[67]. - The federal banking agencies issued a final rule requiring banking organizations to notify regulators of significant computer-security incidents within 36 hours[70]. - The Bank actively monitors compliance with the USA Patriot Act and Anti-Money Laundering Act to ensure adequate resources for suspicious activity monitoring[84]. - The Bank is committed to maintaining compliance with incentive compensation policies as per regulatory guidance issued by the FRB and FDIC[85]. - The Company is subject to numerous federal and state consumer protection laws, which require extensive disclosures and prohibit unfair practices[79]. Financial Performance - Net income for 2024 was $40,560 million, compared to$34,844 million in 2023, reflecting a year-over-year increase of 16%[385]. - Total deposits increased to $2,891,668 million in 2024, up from$2,761,223 million in 2023, which is a growth of 5%[383]. - Net interest income after credit loss expense was $115,237 million in 2024, compared to$108,724 million in 2023, an increase of 6%[385]. - Noninterest income totaled $31,521 million in 2024, slightly up from$30,400 million in 2023, indicating a growth of 4%[385]. - Earnings per share (diluted) increased to $2.82 in 2024 from$2.36 in 2023, representing a growth of 19%[385]. - The Company reported total net other comprehensive gains of $4.7 million, net of tax, primarily due to a decline in unrealized losses in its securities portfolio for the year ended December 31, 2024[113]. - Total cash and cash equivalents increased to$100,664 million in 2024 from $78,602 million in 2023, representing a growth of 28$2,331,341 million in 2024, up from $2,090,075 million in 2023, marking an increase of 12$357,302 million in 2024 from $338,097 million in 2023, reflecting an increase of 6$816 million, or 28% of total deposits, as of December 31, 2024[109]. - The concentration of commercial real estate loans has declined from 376% to 236% since December 31, 2020[118]. - The Company had $178.3 million, or 7.6$19.7 million at December 31, 2024, primarily from one nonperforming operating line of credit[115]. - Nonperforming loans may increase, negatively impacting earnings, potentially in a material way depending on severity[123]. - As of December 31, 2024, the company established an allowance for estimated credit losses on loans, which can be affected by changes in economic forecasts and borrower performance[125]. - The Company's allowance for credit losses totaled $24.8 million as of December 31, 2024, representing the principal not expected to be collected over the contractual life of the loans[366]. - The allowance for credit losses is derived from a collective reserve evaluation for loans with similar risk characteristics and an individual reserve evaluation for loans without similar risk characteristics[367]. - The Company utilizes a four-quarter forecast period for expected default rates, which then revert to historical averages over a four-quarter reversion period[368]. - The estimation of the allowance for credit losses involves inputs such as national unemployment rates and housing price indices, which require management judgment and are subject to change[371]. Capital and Shareholder Information - The company is authorized to issue up to 24,000,000 shares of common stock, with 14,223,046 shares outstanding as of December 31, 2024[152]. - There are outstanding options to purchase 239,600 shares of common stock at an average exercise price of$26.50 per share as of December 31, 2024[152]. - Future acquisitions may dilute tangible book value per share, as they typically involve payment of a premium over book and market values[150]. - The company relies heavily on dividends from the Bank, which are subject to regulatory limitations and the Bank's financial condition[151]. - The company must make interest payments on debentures before any dividends can be paid on common stock, impacting dividend availability[155]. Economic and Market Conditions - Interest rates have flattened through 2024, with uncertainty remaining due to inflation and jobs data, potentially affecting local economies[94]. - Changes in interest rates could adversely affect the Bank's profitability, business, and prospects, impacting net interest income and loan demand[96]. - The Company recognizes that negative developments in the banking industry could erode customer and investor confidence, impacting liquidity and results of operations[107]. - The Company’s exposure to credit risk is significantly affected by economic changes in California, particularly in the Southern Central San Joaquin Valley and the Central Coast[427]. Technology and Innovation - The company is evaluating the implementation of AI technology, which poses legal and regulatory risks that could increase compliance costs[167]. - The company faces risks related to technological changes in the financial services industry, which could impact its ability to serve clients effectively[158].