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, 2023

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, 2023, the registrant had 14,811,525 shares of common stock outstanding, including 196,637 shares of unvested restricted stock.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements

SIERRA BANCORP

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)


	June 30, 2023		December 31, 2022
ASSETS	(unaudited)		(audited)
Cash and due from banks	$	100,424	$	72,803
Interest bearing deposits in banks		3,059		4,328
Total cash & cash equivalents		103,483		77,131
Investment securities
Available-for-sale, net of zero allowance for credit losses at June 30, 2023 and December 31, 2022		1,027,538		934,923
Held-to-maturity, (fair value of $318,142 at June 30, 2023 and $328,011 at December 31, 2022)		328,494		336,944
Allowance for credit losses on held-to-maturity securities		(16)		(63)
Net, investment securities held-to-maturity		328,478		336,881

Loans:
Gross loans		2,094,391		2,052,940
Deferred loan costs (fees), net		73		(123)
Allowance for credit losses on loans		(23,010)		(23,060)
Net loans		2,071,454		2,029,757
Premises and equipment, net		22,072		22,478
Goodwill		27,357		27,357
Other intangible assets, net		1,837		2,275
Bank-owned life insurance		52,725		52,169
Other assets		127,517		125,619
Total assets	$	3,762,461	$	3,608,590

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing	$	1,066,498	$	1,088,199
Interest bearing		1,852,261		1,757,965
Total deposits		2,918,759		2,846,164
Repurchase agreements		73,722		109,169
Other borrowings		325,200		219,000
Long-term debt		49,259		49,214
Subordinated debentures		35,570		35,481
Allowance for credit losses on unfunded loan commitments		750		840
Other liabilities		49,609		45,140
Total liabilities		3,452,869		3,305,008

Commitments and contingent liabilities (Note 7)

Shareholders' equity
Common stock, no par value; 24,000,000 shares authorized; 14,811,736 and 15,170,372 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		110,097		112,928
Additional paid-in capital		4,887		4,148
Retained earnings		251,119		243,082
Accumulated other comprehensive loss, net		(56,511)		(56,576)
Total shareholders' equity		309,592		303,582
Total liabilities and shareholders' equity	$	3,762,461	$	3,608,590

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

Table of Contents

SIERRA BANCORP

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

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


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Interest and dividend income
Loans, including fees	$	24,270	$	21,605	$	46,821	$	42,377
Taxable securities		13,488		4,477		25,472		7,966
Tax-exempt securities		2,741		1,854		5,555		3,581
Federal funds sold and other		376		270		446		363
Total interest income		40,875		28,206		78,294		54,287
Interest expense
Deposits		7,943		784		13,943		1,344
Federal funds purchased and repurchase agreements		959		77		2,518		159
Federal Home Loan Bank advances		2,536		—		3,169		—
Long-term debt		429		430		857		857
Subordinated debentures		691		330		1,358		585
Total interest expense		12,558		1,621		21,845		2,945
Net interest income		28,317		26,585		56,449		51,342
(Benefit) provision for credit losses		(70)		2,419		190		2,925
Net interest income after provision for credit losses		28,387		24,166		56,259		48,417
Noninterest income
Service charges and fees on deposit accounts		5,691		5,908		11,071		11,457
Net gains on sale of securities available-for-sale		351		—		396		1,032
Increase (decrease) in cash surrender value of life insurance		658		(582)		830		(1,128)
Other income		1,313		5,113		2,296		5,141
Total noninterest income		8,013		10,439		14,593		16,502
Noninterest expense
Salaries and employee benefits		12,129		11,745		24,944		23,550
Occupancy and equipment costs		2,438		2,406		4,769		4,699
Other		8,401		7,962		16,247		14,037
Total noninterest expense		22,968		22,113		45,960		42,286
Income before taxes		13,432		12,492		24,892		22,633
Provision for income taxes		3,513		3,288		6,222		6,022
Net income	$	9,919	$	9,204	$	18,670	$	16,611

PER SHARE DATA
Book value	$	20.90	$	19.82	$	20.90	$	19.82
Cash dividends	$	0.23	$	0.23	$	0.46	$	0.46
Earnings per share basic	$	0.67	$	0.62	$	1.26	$	1.11
Earnings per share diluted	$	0.67	$	0.61	$	1.26	$	1.10
Average shares outstanding, basic		14,735,568		14,931,701		14,853,052		14,976,774
Average shares outstanding, diluted		14,754,764		15,004,017		14,875,508		15,063,804

Total shareholders' equity (in thousands)	$	309,592	$	299,047	$	309,592	$	299,047
Shares outstanding		14,811,736		15,090,792		14,811,736		15,090,792
Dividends paid (in thousands)	$	3,459	$	3,470	$	6,954	$	6,978

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

Table of Contents

SIERRA BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(dollars in thousands, unaudited)


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Net income	$	9,919	$	9,204	$	18,670	$	16,611
Other comprehensive (loss) gain, before tax:
Unrealized (loss) gain on securities:
Unrealized holding (loss) gain arising during period		(268)		(46,476)		488		(86,438)
Less: reclassification adjustment for gains included in net income ⁽¹⁾		(351)		—		(396)		(1,032)
Other comprehensive (loss) gain, before tax		(619)		(46,476)		92		(87,470)
Income tax benefit (expense) related to items of other comprehensive (loss) gain , net of tax		183		13,740		(27)		25,859
Other comprehensive (loss) gain, net of tax:		(436)		(32,736)		65		(61,611)
Comprehensive income (loss)	$	9,483	$	(23,532)	$	18,735	$	(45,000)

(1)

Amounts are included in net gains on investment securities available-for-sale on the Consolidated Statements of Income in noninterest income. Income tax expenses associated with the reclassification adjustment for the three months ended June 30, 2023 and 2022 were $0.1 million and $0, respectively. Income tax expenses associated with the reclassification adjustment for the six months ended June 30, 2023 and 2022 were $0.1 million and $0.3 million, respectively.

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

Table of Contents

SIERRA BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022

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


								Accumulated
				Additional				Other
	Common Stock			Paid In		Retained		Comprehensive		Shareholders'
	Shares	Amount		Capital		Earnings		Loss		Equity
Balance, March 31, 2022	15,086,032	$	111,673	$	4,281	$	227,445	$	(17,708)	$	325,691
Net income	—		—		—		9,204		—		9,204
Other comprehensive loss, net of tax	—		—		—		—		(32,736)		(32,736)
Stock options exercised, net of shares surrendered for cashless exercises	5,200		54		(1)		—		—		53
Restricted stock forfeited / cancelled	(440)		—		—		—		—		—
Stock based compensation - stock options	—		—		18		—		—		18
Stock based compensation - restricted stock	—		—		287		—		—		287
Cash dividends - $0.23 per share	—		—		—		(3,470)		—		(3,470)
Balance, June 30, 2022	15,090,792	$	111,727	$	4,585	$	233,179	$	(50,444)	$	299,047

Balance, March 31, 2023	15,050,740	$	111,801	$	4,561	$	246,723	$	(56,075)	$	307,010
Net income	—		—		—		9,919


					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				36
		Forward-Looking Statements			36
		Critical Accounting Policies			37
		Overview of the Results of Operations and Financial Condition			38
		Earnings Performance			39
			Net Interest Income and Net Interest Margin		40
			Provision for Credit Losses on Loans		45
			Noninterest Income and Noninterest Expense		46
			Provision for Income Taxes		48
		Balance Sheet Analysis			48
			Earning Assets		48
				Investments	48
				Loan Portfolio	50
				Nonperforming Assets	52
				Allowance for Credit Losses on Loans	53
				Off-Balance Sheet Arrangements	54
			Other Assets		55
			Deposits and Interest Bearing Liabilities		56
				Deposits	56
				Other Interest Bearing Liabilities	57
			Noninterest Bearing Liabilities		57
		Liquidity and Market Risk Management			57
		Capital Resources			61

	Item 3. Quantitative & Qualitative Disclosures about Market Risk				62

	Item 4. Controls and Procedures				62

Part II - Other Information					63
	Item 1. - Legal Proceedings				63
	Item 1A. - Risk Factors				63
	Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds				63
	Item 3. - Defaults upon Senior Securities				64
	Item 4. - Mine Safety Disclosures				64
	Item 5. - Other Information				64
	Item 6. - Exhibits				65

Signatures					67