Sierra Bancorp(BSRR) - 2024 Q2 - Quarterly Report

Financial Performance - Net income for Q2 2024 was $10.3 million, a 3% increase from Q2 2023, with diluted earnings per share rising to $0.71 from $0.67[125] - Noninterest income increased by $1.6 million, or 11%, mainly from service charges on deposit accounts[129] - Total noninterest income decreased by $0.4 million, or 5%, for Q2 2024 compared to Q2 2023, but increased by $1.6 million, or 11%, year-to-date[164] - The company reported a net gain of $3.8 million on the sale/leaseback of bank-owned branch locations year-to-date[164] Interest Income and Margin - Net interest income increased by $1.9 million, or 7%, driven by a 30 basis points increase in net interest margin[126] - The net interest margin improved to 3.69% for Q2 2024, up 30 basis points from Q2 2023[140] - The company's net interest income for the three months ended June 30, 2024 was $30,170 thousand, reflecting a net interest margin of 3.69%[144] - Total interest-earning assets amounted to $3,332,615 thousand, generating interest income of $43,495 thousand with an average yield of 5.30% for the three months ended June 30, 2024[144] - The average yield on interest-earning due from banks increased to 5.57%, compared to 4.42% in the previous year[148] Loans and Credit Quality - Gross loans increased by $144.5 million, or 7%, with significant growth in mortgage warehouse loans[130] - The provision for credit losses on loans was $1.0 million, an increase of $0.7 million due to higher net charge-offs[128] - The company experienced a $2.9 million net charge-off in the first six months of 2024, compared to only $0.4 million in the same period for 2023[160] - The balance of nonperforming loans at June 30, 2024, primarily consisted of one nonperforming dairy loan classified as farmland, contributing to a decrease in total nonperforming assets by $1.5 million or 19%[191] - Total nonperforming loans decreased to $6.473 million at June 30, 2024, from $7.985 million at December 31, 2023, with a nonperforming loans ratio of 0.29%[193] Assets and Investments - Total assets decreased by $48.6 million, or 1.0%, to $3.7 billion as of June 30, 2024[130] - Investment securities decreased by $309.6 million, or 23.0%, primarily due to strategic securities transactions[130] - The investment portfolio totaled $1.0 billion, or 28% of total assets, at June 30, 2024, down from $1.3 billion, or 36%, at December 31, 2023[174] - Total available for sale securities decreased to $716.8 million, representing 69.61% of total securities as of June 30, 2024, down from $1,019.2 million or 76.10% as of December 31, 2023[177] Deposits and Funding - Deposits increased by $181.2 million, or 7%, primarily from brokered deposits[131] - Brokered deposits surged by $211.6 million, or 157%, during the first half of 2024, primarily to fund increased usage on mortgage warehouse lines[203] - Total deposits increased by $181.2 million, or 7%, to $2.9 billion as of June 30, 2024, compared to December 31, 2023[203] - Noninterest-bearing demand deposits decreased to 33.5% of total deposits at June 30, 2024, down from 36.98% at December 31, 2023[203] Capital and Equity - Total capital increased by $11.9 million, or 4%, to $350.0 million as of June 30, 2024[132] - Total shareholders' equity increased to $350.0 million at June 30, 2024, up from $338.1 million at the end of 2023, driven by net income of $19.6 million[217] - The Tier 1 Capital to Adjusted Average Assets (Leverage Ratio) was 11.60% as of June 30, 2024, compared to 11.29% at the end of 2023, exceeding the required minimum of 9.00%[219] Expenses and Efficiency - Total noninterest expense declined by $0.3 million, or 1%, in Q2 2024 compared to Q2 2023, but increased by $1.3 million, or 3%, year-to-date[167] - Salaries and employee benefits were $12.03 million in Q2 2024, a decrease of $0.1 million, or 1%, compared to Q2 2023[167] - Occupancy expenses increased by $0.7 million in Q2 2024 compared to Q2 2023, attributed to increased rent expenses from sale/leaseback transactions[168] Risk Management and Provisions - The allowance for credit losses on loans was $21.6 million at June 30, 2024, down from $23.5 million at December 31, 2023, representing 0.97% of total loans[193] - The allowance for credit losses on AFS investment securities is maintained at a level considered adequate to measure expected losses, with no unrealized losses attributed to credit deterioration[176] - Management believes that current legal actions are not likely to result in a material adverse effect on the company's financial statements[223] Liquidity - Total primary and secondary liquidity sources amounted to $2.5 billion, representing 86% of total deposits as of June 30, 2024[211] - The Company’s primary liquidity ratio was 23.45% at June 30, 2024, exceeding the internal policy guideline of "greater than 15%"[211] - The Company has sufficient liquidity resources to meet current and anticipated short-term needs, with a cash balance of $15.8 million at the holding company level[211]