UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020

Commission file number: 000-33063

SIERRA BANCORP

(Exact name of Registrant as specified in its charter)


California	33-0937517
(State of Incorporation)	(IRS Employer Identification No)

86 North Main Street, Porterville, California 93257

(Address of principal executive offices) (Zip Code)

(559) 782-4900

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

BSRR

The NASDAQ Stock Market LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☐	Accelerated Filer:	☒
Non-accelerated Filer:	☐	Smaller Reporting Company:	☐
Emerging Growth Company:	☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of November 1, 2020, the registrant had 15,359,023 shares of common stock outstanding, including 148,885 shares of unvested restricted stock.

PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements

SIERRA BANCORP

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)


	September 30, 2020		December 31, 2019
ASSETS	(unaudited)		(audited)
Cash and due from banks	$	84,287	$	65,556
Interest-bearing deposits in banks		4,646		14,521
Total cash & cash equivalents		88,933		80,077
Securities available-for-sale		577,278		600,799
Loans and leases:
Gross loans and leases		2,380,300		1,762,565
Deferred loan and lease (fees) and costs, net		(3,078)		2,896
Allowance for loan and lease losses		(15,586)		(9,923)
Net loans and leases		2,361,636		1,755,538
Foreclosed assets		2,970		800
Premises and equipment, net		27,216		27,435
Goodwill		27,357		27,357
Other intangible assets, net		4,575		5,381
Bank-owned life insurance		52,110		50,517
Other assets		57,543		45,915
Total assets	$	3,199,618	$	2,593,819

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing	$	975,750	$	690,950
Interest bearing		1,615,963		1,477,424
Total deposits		2,591,713		2,168,374
Repurchase agreements		36,657		25,711
Short-term borrowings		158,000		20,000
Subordinated debentures, net		35,079		34,945
Other liabilities		41,922		35,504
Total liabilities		2,863,371		2,284,534

Commitments and contingent liabilities (Note 7)

Shareholders' equity
Common stock, no par value; 24,000,000 shares authorized; 15,341,723 and 15,284,538 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		112,645		113,179
Additional paid-in capital		3,644		3,307
Retained earnings		202,464		186,867
Accumulated other comprehensive income (loss), net		17,494		5,932
Total shareholders' equity		336,247		309,285
Total liabilities and shareholders’ equity	$	3,199,618	$	2,593,819

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

SIERRA BANCORP

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands, except per share data, unaudited)


	Three months ended September 30,					Nine months ended September 30,
	2020		2019		2020		2019
Interest and dividend income
Loans and leases, including fees	$	25,742	$	24,118	$	69,538	$	71,877
Taxable securities		1,832		2,484		6,542		7,692
Tax-exempt securities		1,467		1,160		4,246		3,276
Federal funds sold and other		2		139		155		327
Total interest income		29,043		27,901		80,481		83,172
Interest expense
Deposits		641		2,983		3,368		9,031
Short-term borrowings		70		90		145		188
Subordinated debentures		258		453		965		1,406
Total interest expense		969		3,526		4,478		10,625
Net interest income		28,074		24,375		76,003		72,547
Provision for loan losses		2,350		1,350		6,350		2,050
Net interest income after provision for loan losses		25,724		23,025		69,653		70,497
Noninterest income
Service charges on deposits		2,950		3,292		8,752		9,386
Other income		4,155		2,577		11,360		8,245
Total noninterest income		7,105		5,869		20,112		17,631
Other operating expense
Salaries and employee benefits		9,698		8,784		29,136		27,021
Occupancy and equipment		2,559		2,485		7,390		7,296
Other		7,046		5,819		18,630		18,280
Total other operating expense		19,303		17,088		55,156		52,597
Income before taxes		13,526		11,806		34,609		35,531
Provision for income taxes		3,170		2,854		8,144		8,855
Net income	$	10,356	$	8,952	$	26,465	$	26,676

PER SHARE DATA
Book value	$	21.92	$	19.85	$	21.92	$	19.85
Cash dividends	$	0.20	$	0.19	$	0.60	$	0.55
Earnings per share basic	$	0.68	$	0.58	$	1.74	$	1.74
Earnings per share diluted	$	0.68	$	0.58	$	1.73	$	1.73
Average shares outstanding, basic		15,192,838		15,318,580		15,215,167		15,320,041
Average shares outstanding, diluted		15,387,309		15,434,788		15,422,647		15,449,340

Total shareholders’ equity (in thousands)	$	336,247	$	303,353	$	336,247	$	303,353
Shares outstanding		15,341,723		15,284,491		15,341,723		15,284,491
Dividends paid (in thousands)	$	3,039	$	2,914	$	9,136	$	8,427

The accompanying notes are an integral part of these consolidated financial statements.


					Page
Part I - Financial Information					1
	Item 1. Financial Statements (Unaudited)				1
		Consolidated Balance Sheets			1
		Consolidated Statements of Income			2
		Consolidated Statements of Comprehensive Income			3
		Consolidated Statements of Changes In Shareholders’ Equity			4
		Consolidated Statements of Cash Flows			6
		Notes to Consolidated Financial Statements (Unaudited)			7

	Item 2. Management’s Discussion & Analysis of Financial Condition & Results of Operations				36
		Forward-Looking Statements			36
		Critical Accounting Policies			36
		Overview of the Results of Operations and Financial Condition			37
		Earnings Performance			41
			Net Interest Income and Net Interest Margin		41
			Provision for Loan and Lease Losses		46
			Noninterest Income and Noninterest Expense		47
			Provision for Income Taxes		49
		Balance Sheet Analysis			49
			Earning Assets		49
				Investments	49
				Loan and Lease Portfolio	50
				Nonperforming Assets	52
				Allowance for Loan and Lease Losses	54
				Off-Balance Sheet Arrangements	57
			Other Assets		57
			Deposits and Interest-Bearing Liabilities		57
				Deposits	57
				Other Interest-Bearing Liabilities	58
			Noninterest Bearing Liabilities		59
		Liquidity and Market Risk Management			59
		Capital Resources			62

	Item 3. Qualitative & Quantitative Disclosures about Market Risk				64

	Item 4. Controls and Procedures				64

Part II - Other Information					65
	Item 1. - Legal Proceedings				65
	Item 1A. - Risk Factors				65
	Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds				66
	Item 3. - Defaults upon Senior Securities				66
	Item 4. - Mine Safety Disclosures				66
	Item 5. - Other Information				66
	Item 6. - Exhibits				67

Signatures					68


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Net income	$	10,356	$	8,952	$	26,465	$	26,676
Other comprehensive income, before tax:
Unrealized gains on securities:
Unrealized holding gain arising during period		1,867		2,363		16,806		17,855
Less: reclassification adjustment for (gains) losses included in net income ⁽¹⁾		—		—		(390)		(29)
Other comprehensive income, before tax