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 JUNE 30, 2022

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 August 1, 2022, the registrant had 15,091,213 shares of common stock outstanding, including 146,173 shares of unvested restricted stock.

FORM 10-Q

Table of Contents

					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 (Loss)			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				37
		Forward-Looking Statements			37
		Critical Accounting Policies			38
		Overview of the Results of Operations and Financial Condition			38
		Earnings Performance			41
			Net Interest Income and Net Interest Margin		41
			Provision for Credit Losses on Loans and Leases		47
			Noninterest Income and Noninterest Expense		48
			Provision for Income Taxes		50
		Balance Sheet Analysis			51
			Earning Assets		51
				Investments	51
				Loan and Lease Portfolio	52
				Nonperforming Assets	54
				Allowance for Credit Losses on Loans and Leases	55
				Off-Balance Sheet Arrangements	57
			Other Assets		58
			Deposits and Interest Bearing Liabilities		58
				Deposits	58
				Other Interest Bearing Liabilities	59
			Noninterest Bearing Liabilities		60
		Liquidity and Market Risk Management			60
		Capital Resources			63
	Item 3. Qualitative & Quantitative Disclosures about Market Risk				65
	Item 4. Controls and Procedures				65
Part II - Other Information					66
	Item 1. - Legal Proceedings				66
	Item 1A. - Risk Factors				66
	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

PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements

SIERRA BANCORP

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

	June 30, 2022		December 31, 2021
ASSETS	(unaudited)		(audited)
Cash and due from banks	$	82,081	$	63,147
Interest bearing deposits in banks		79,794		194,381
Total cash & cash equivalents		161,875		257,528
Investment securties
Available-for-sale, at fair value (net of zero allowance for credit losses at June 30, 2022 and December 31, 2021)		864,178		973,314
Held-to-maturity, at amortized cost (fair value of $147,147 at June 30, 2022 and $0 at December 31, 2021)		161,417		—
Allowance for credit losses on held-to-maturity securities		(18)		—
Net, investment securities held-to-maturity		161,399		—
Loans and leases:
Gross loans and leases		2,022,662		1,989,726
Deferred loan and lease fees, net		(1,081)		(1,865)
Allowance for credit losses on loans and leases		(22,802)		(14,256)
Net loans and leases		1,998,779		1,973,605
Foreclosed assets		2		93
Premises and equipment, net		22,937		23,571
Goodwill		27,357		27,357
Other intangible assets, net		2,769		3,275
Bank-owned life insurance		52,158		54,242
Other assets		105,181		58,029
Total assets	$	3,396,635	$	3,371,014
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing	$	1,120,413	$	1,084,544
Interest bearing		1,730,586		1,697,028
Total deposits		2,850,999		2,781,572
Repurchase agreements		118,014		106,937
Long-term debt		49,173		49,141
Subordinated debentures		35,392		35,302
Allowance for credit losses on unfunded loan commitments		893		203
Other liabilities		43,117		35,365
Total liabilities		3,097,588		3,008,520
Commitments and contingent liabilities (Note 7)
Shareholders' equity
Common stock, no par value; 24,000,000 shares authorized; 15,090,792 and 15,270,010 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		111,727		113,007
Additional paid-in capital		4,585		3,910
Retained earnings		233,179		234,410
Accumulated other comprehensive (loss) income, net		(50,444)		11,167
Total shareholders' equity		299,047		362,494
Total liabilities and shareholders' equity	$	3,396,635	$	3,371,014

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

1

SIERRA BANCORP

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

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

	Three months ended June 30,					Six months ended June 30,
	2022		2021		2022		2021
Interest and dividend income
Loans and leases, including fees	$	21,605	$	24,917	$	42,377	$	51,329
Taxable securities		4,477		1,573		7,966		3,150
Tax-exempt securities		1,854		1,517		3,581		2,967
Federal funds sold and other		270		85		363		104
Total interest income		28,206		28,092		54,287		57,550
Interest expense
Deposits		784		619		1,344		1,227
Short-term borrowings		77		39		159		86
Subordinated debentures		760		245		1,442		493
Total interest expense		1,621		903		2,945		1,806
Net interest income		26,585		27,189		51,342		55,744
Provision (benefit) for credit losses on loans and leases		2,548		(2,100)		3,148		(1,850)
Benefit for credit losses on unfunded loan commitments		(147)		—		(241)		—
Provision for credit losses on held-to-maturity securities		18		—		18		—
Net interest income after provision for credit losses		24,166		29,289		48,417		57,594
Noninterest income
Service charges on deposits		3,204		2,725		6,245		5,491
Other income		7,235		3,887		10,257		7,951
Total noninterest income		10,439		6,612		16,502		13,442
Noninterest expense
Salaries and employee benefits		11,745		10,425		23,550		21,576
Occupancy		2,406		2,626		4,699		5,112
Other		7,962		7,184		14,037		13,818
Total noninterest expense		22,113		20,235		42,286		40,506
Income before taxes		12,492		15,666		22,633		30,530
Provision for income taxes		3,288		3,958		6,022		7,744
Net income	$	9,204	$	11,708	$	16,611	$	22,786
PER SHARE DATA
Book value	$	19.82	$	23.21	$	19.82	$	23.21
Cash dividends	$	0.23	$	0.21	$	0.46	$	0.42
Earnings per share basic	$	0.62	$	0.77	$	1.11	$	1.49
Earnings per share diluted	$	0.61	$	0.76	$	1.10	$	1.48
Average shares outstanding, basic		14,931,701		15,243,698		14,976,774		15,242,451
Average shares outstanding, diluted		15,004,017		15,375,825		15,063,804		15,365,966
Total shareholders' equity (in thousands)	$	299,047	$	357,729	$	299,047	$	357,729
Shares outstanding		15,090,792		15,410,763		15,090,792		15,410,763
Dividends paid (in thousands)	$	3,470	$	3,237	$	6,978	$	6,468

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

2

SIERRA BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(dollars in thousands, unaudited)

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Net income	$	9,204	$	11,708	$	16,611	$	22,786
Other comprehensive (loss) income, before tax:
Unrealized (loss) gains on securities:
Unrealized holding (loss) gain arising during period		(46,476)		1,489		(86,438)		(4,270)
Less: reclassification adjustment for gains included in net income (1)		—		—		(1,032)		—
Other comprehensive (loss) gain, before tax		(46,476)		1,489		(87,470)		(4,270)
Income tax benefit (income) related to items of other comprehensive (loss) income, net of tax		13,740		(441)		25,859		1,262
Other comprehensive (loss) income, before tax:		(32,736)		1,048		(61,611)		(3,008)
Comprehensive (loss) income	$	(23,532)	$	12,756	$	(45,000)	$	19,778

(1) Amounts are included in net gains on investment securities available-for-sale on the Consolidated Statements of Income in noninterest income. There was no income tax expense associated with the reclassification adjustment for either of the three months ended June 30, 2022 and 2021. Income tax expense associated with the reclassification adjustment for the six months ended June 30, 2022 and 2021 were $305 thousand and $0, respectively.

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

3

SIERRA BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND 2021

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

								Accumulated
				Additional				Other
	Common Stock			Paid In		Retained		Comprehensive		Shareholders'
	Shares	Amount		Capital		Earnings		Income (Loss)		Equity
Balance, March 31, 2021	15,410,763	$	113,453	$	3,961	$	216,218	$	14,349	$	347,981
Net income	—		—		—		11,708