Sierra Bancorp(BSRR) - 2025 Q2 - Quarterly Results

Financial Performance Summary Second Quarter and First Six Months 2025 Financial Highlights 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] - The company declared a dividend of $0.25 per share and repurchased 135,641 shares of stock during the quarter[5] Detailed Financial Analysis 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 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] - 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][25] - 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] - 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] Balance Sheet Analysis 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][36] - 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] - Uninsured deposits, excluding collateralized public funds, were estimated to be approximately 26% of total deposit balances[41] Asset Quality and Credit Risk 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] - 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] - 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] Liquidity and Capital 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] 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] Financial Statements and Supplementary Data Consolidated Financial Statements 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 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 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% |