Sierra Bancorp(BSRR) - 2022 Q4 - Annual Report

Capital Adequacy and Regulatory Compliance - The Company and the Bank met all capital adequacy requirements as of December 31, 2022, utilizing the Capital Simplification for Qualifying Community Bank Organization[19] - The Company and the Bank qualified as "well capitalized" for regulatory capital purposes as of December 31, 2022[374] - The final rules established a minimum Common Equity Tier 1 capital ratio of 4.5%, with a conservation buffer raising it to 7.0% effective January 1, 2019[372] - The Company is subject to federal regulations that impose capital adequacy requirements, including a minimum Total RBC Ratio of 10% for "well capitalized" institutions[373] Loan Portfolio and Credit Losses - At December 31, 2022, 91.4% of the loan portfolio consisted of real estate loans, with commercial buildings representing approximately 64.7% of all real estate loans[38] - The Company recorded a $10.4 million increase in the allowance for credit losses as of January 1, 2022, due to the adoption of ASU 2016-13[43] - The Company has exposure via loans outstanding to borrowers involved in servicing oil companies totaling $5.3 million as of December 31, 2022[34] - The company's gross loan and lease portfolio was $2.1 billion with an allowance for credit losses of $23.1 million as of December 31, 2022[290] - The allowance for credit losses on loans and leases was $23,060 million in 2022, up from $14,256 million in 2021, representing a significant increase of 62.5%[317] - Provision for credit losses on loans and leases was $10,898,000 in 2022, compared to a benefit of $(3,650,000) in 2021[319] Deposits and Funding - The Bank estimates it had uninsured deposits of $919 million as of December 31, 2022, which may adversely affect funding costs and net income[36] - The Company has a total of $105.9 million in commercial loans and leases, accounting for 5.2% of total loans as of December 31, 2022[41] - Noninterest bearing demand deposit balances increased by $3.7 million, while NOW and interest-bearing demand accounts decreased by $103.0 million, or 14%, in 2022[259] - Total deposits rose to $2,846,164 million in 2022, up from $2,781,572 million in 2021, indicating an increase of about 2.3%[317] - As of December 31, 2022, the total deposits remained unchanged at $2.8 billion compared to December 31, 2021[362] Financial Performance - Net income decreased to $33,659,000 in 2022 from $43,012,000 in 2021, representing a decline of 21.6%[339] - Basic earnings per share for 2022 was $2.25, down from $2.82 in 2021, a decrease of 20.2%[339] - Total interest income for 2022 was $121,819,000, an increase of 7.4% from $113,076,000 in 2021[319] - Noninterest income increased to $30,770,000 in 2022, up from $28,079,000 in 2021, reflecting a growth of 9.6%[339] - Total noninterest expense rose to $84,803,000 in 2022, compared to $83,556,000 in 2021, an increase of 1.5%[339] - Total comprehensive loss income for 2022 was $(34,084,000), compared to a comprehensive income of $35,774,000 in 2021[339] Assets and Liabilities - The company's total assets reached $3,608,590 million in 2022, compared to $3,371,014 million in 2021, marking a growth of approximately 7.0%[317] - The company's total liabilities increased to $3,305,008 million in 2022 from $3,008,520 million in 2021, reflecting a rise of about 9.8%[317] - Shareholders' equity decreased to $303,582 million in 2022 from $362,494 million in 2021, a decline of approximately 16.2%[317] - The balance of shareholders' equity as of December 31, 2022, was $303,582,000[341] Market Position and Competition - The Company ranks second in deposit market share in Tulare County with 18.8% as of June 30, 2022[355] - The Company has experienced significant competition in the banking sector, which may limit its ability to attract and retain customers[35] - The Company has conducted four whole-bank acquisitions since its inception, with the most recent being Ojai Community Bank in October 2017[28] Employee and Community Engagement - The Company increased its minimum wage to $20 per hour on January 1, 2022, to attract and retain skilled employees[389] - The Company actively participates in community events to foster employee integration and well-being, enhancing its corporate values[366] - The Company employs 442 full-time and 46 part-time employees, with a full-time equivalent staffing of 491 as of December 31, 2022[388] Liquidity Management - The primary liquidity ratio was 40% and the net loans to deposits ratio was 72% as of December 31, 2022, exceeding internal policy guidelines of greater than 15% and less than 95% respectively[272] - The company can raise immediate cash for temporary needs by selling unpledged investments or drawing down excess cash in correspondent bank deposit accounts[271] - The company’s liquidity management includes monthly cash flow projections and stress scenarios to ensure adequate liquidity resources[270] Investment Portfolio - As of December 31, 2022, the company's investment portfolio comprised approximately 66% in floating rate or held to maturity securities[269] - The company reported a net investment in held-to-maturity securities of $336,881 million in 2022, with a fair value of $328,011 million[317] - The company is managing potential unrealized losses in its securities portfolio by moving certain securities from available for sale to held to maturity[404]