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, 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 November 1, 2023, the registrant had 14,701,933 shares of common stock outstanding, including 176,492 shares of unvested restricted stock.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements

SIERRA BANCORP

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)


	September 30, 2023		December 31, 2022
ASSETS	(unaudited)		(audited)
Cash and due from banks	$	84,655	$	72,803
Interest-bearing deposits in banks		3,887		4,328
Total cash & cash equivalents		88,542		77,131
Investment securities
Available-for-sale, net of zero allowance for credit losses at September 30, 2023 and December 31, 2022		1,010,377		934,923

Held-to-maturity, (fair value of $290,956 at September 30, 2023 and $328,011 at December 31, 2022)		323,560		336,944
Allowance for credit losses on held-to-maturity securities		(16)		(63)
Net, investment securities held-to-maturity		323,544		336,881

Loans:
Gross loans		2,100,810		2,052,940
Deferred loan costs (fees), net		163		(123)
Allowance for credit losses on loans		(23,060)		(23,060)
Net loans		2,077,913		2,029,757
Premises and equipment, net		21,926		22,478
Goodwill		27,357		27,357
Other intangible assets, net		1,618		2,275
Bank-owned life insurance		51,332		52,169
Other assets		136,271		125,619
Total assets	$	3,738,880	$	3,608,590

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing	$	1,059,878	$	1,088,199
Interest-bearing		1,809,842		1,757,965
Total deposits		2,869,720		2,846,164
Repurchase agreements		94,865		109,169
Other borrowings		317,000		219,000
Long-term debt		49,281		49,214
Subordinated debentures		35,615		35,481
Allowance for credit losses on unfunded loan commitments		600		840
Other liabilities		62,940		45,140
Total liabilities		3,430,021		3,305,008

Commitments and contingent liabilities (Note 7)

Shareholders' equity
Common stock, no par value; 24,000,000 shares authorized; 14,702,079 and 15,170,372 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		109,638		112,928
Additional paid-in capital		4,934		4,148
Retained earnings		256,201		243,082
Accumulated other comprehensive loss, net		(61,914)		(56,576)
Total shareholders' equity		308,859		303,582
Total liabilities and shareholders' equity	$	3,738,880	$	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 NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

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


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Interest and dividend income
Loans, including fees	$	24,915	$	21,833	$	71,736	$	64,211
Taxable securities		14,375		7,646		39,848		15,613
Tax-exempt securities		2,679		2,346		8,233		5,926
Federal funds sold and other		415		103		861		466
Total interest income		42,384		31,928		120,678		86,216
Interest expense
Deposits		8,767		1,761		22,710		3,105
Federal funds purchased and repurchase agreements		817		71		3,335		231
Federal Home Loan Bank advances		3,522		319		6,692		319
Long-term debt		429		427		1,286		1,284
Subordinated debentures		762		439		2,120		1,024
Total interest expense		14,297		3,017		36,143		5,963
Net interest income		28,087		28,911		84,535		80,253
(Benefit) provision for credit losses		(33)		1,259		157		4,184
Net interest income after provision for credit losses		28,120		27,652		84,378		76,069
Noninterest income
Service charges and fees on deposit accounts		6,055		6,008		17,127		17,464
Net gains on sale of securities available-for-sale		—		—		396		1,032
Increase (decrease) in cash surrender value of life insurance		558		(23)		1,388		(1,252)
Other income		1,149		627		3,444		5,870
Total noninterest income		7,762		6,612		22,355		23,114
Noninterest expense
Salaries and employee benefits		12,623		11,521		37,567		35,070
Occupancy and equipment costs		2,482		2,470		7,251		7,170
Other		7,457		7,005		23,704		21,042
Total noninterest expense		22,562		20,996		68,522		63,282
Income before taxes		13,320		13,268		38,211		35,901
Provision for income taxes		3,435		3,333		9,656		9,355
Net income	$	9,885	$	9,935	$	28,555	$	26,546

PER SHARE DATA
Book value	$	21.01	$	19.56	$	21.01	$	19.56
Cash dividends	$	0.23	$	0.23	$	0.69	$	0.69
Earnings per share basic	$	0.68	$	0.66	$	1.93	$	1.77
Earnings per share diluted	$	0.68	$	0.66	$	1.93	$	1.76
Average shares outstanding, basic		14,583,132		14,954,503		14,762,231		14,968,242
Average shares outstanding, diluted		14,636,477		15,014,048		14,791,696		15,046,883

Total shareholders' equity (in thousands)	$	308,859	$	295,072	$	308,859	$	295,072
Shares outstanding		14,702,079		15,085,675		14,702,079		15,085,675
Dividends paid (in thousands)	$	3,407	$	3,471	$	10,361	$	10,449

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 NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(dollars in thousands, unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Net income	$	9,885	$	9,935	$	28,555	$	26,546
Other comprehensive (loss) gain, before tax:
Unrealized loss on securities:
Unrealized holding loss arising during period		(7,670)		(14,994)		(7,182)		(101,432)
Less: reclassification adjustment for gains included in net income ⁽¹⁾		—		—		(396)		(1,032)
Other comprehensive loss, before tax		(7,670)		(14,994)		(7,578)		(102,464)
Income tax benefit related to items of other comprehensive loss, net of tax		2,267		4,433		2,240		30,292
Other comprehensive loss, net of tax:		(5,403)		(10,561)		(5,338)		(72,172)
Comprehensive income (loss)	$	4,482	$	(626)	$	23,217	$	(45,626)

(1)

Amounts are included in net gains on investment securities available-for-sale on the Consolidated Statements of Income in noninterest income. There were no income tax expenses associated with the reclassification adjustment for the three months ended September 30, 2023 and 2022. Income tax expenses associated with the reclassification adjustment for the nine months ended September 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 SEPTEMBER 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, June 30, 2022	15,090,792	$	111,727	$	4,585	$	233,179	$	(50,444)	$	299,047
Net income	—		—		—		9,935		—		9,935
Other comprehensive loss, net of tax	—		—		—		—		(10,561)		(10,561)
Stock options exercised, net of shares surrendered for cashless exercises	5,400		458		(397)		—		—		61
Restricted stock surrendered due to employee tax liability	(9,965)		(74)		—		(147)		—		(221)
Restricted stock forfeited / cancelled	(552)		—		—		—		—		—
Stock based compensation - stock options	—		—		18		—		—		18
Stock based compensation - restricted stock	—		—		264		—		—		264
Cash dividends - $0.23 per share	—		—		—		(3,471)		—		(3,471)
Balance, September 30, 2022	15,085,675	$	112,111	$	4,470	$	239,496	$	(61,005)	$	295,072

Balance, June 30, 2023	14,811,736	$	110,097	$	4,887	$	251,119	$	(56,511)	$	309,592
Other comprehensive loss, net of tax	—		—		—		—		(5,403)		(5,403)
Restricted shares withheld for taxes	(10,129)		(76)		—		(136)		—		(212)
Restricted stock vested in period	—		374		(374)		—		—		—
Stock based compensation - stock options	—		—		16		—		—		16
Stock based compensation - restricted stock	—		—		405		—		—		405
Stock repurchase	(99,528)		(740)		—		(1,260)		—		(2,000)
Excise tax on stock repurchase	—		(17)		—		—		—		(17)
Cash dividends - $0.23 per share	—		—		—		(3,407)		—		(3,407)
Balance, September 30, 2023	14,702,079	$	109,638	$	4,934	$	256,201	$	(61,914)	$	308,859

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 NINE MONTHS ENDED SEPTEMBER 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) Income		Equity
Balance, December 31, 2021	15,270,010	$	113,007	$	3,910	$	234,410	$	11,167	$	362,494
Cumulative change in accounting principle	—		—		—		(7,315)		—		(7,315)
Net income	—		—		—		26,546		—		26,546
Other comprehensive loss, net of tax	—		—		—		—		(72,172)		(72,172)
Stock options exercised, net of shares surrendered for cashless exercises	10,600		512		(398)		—		—		114
Restricted stock surrendered due to employee tax liability	(11,161)		(83)		—		(170)		—		(253)
Restricted stock forfeited / cancelled	(1,212)		—		—		—		—		—
Stock based compensation - stock options	—		—		66		—		—		66
Stock based compensation - restricted stock	—		—		892		—		—		892
Stock repurchase	(182,562)		(1,325)		—		(3,526)		—		(4,851)
Stock issued-acquisition	—		—		—		—		—		—
Cash dividends - $0.69 per share	—		—		—		(10,449)		—		(10,449)
Balance, September 30, 2022	15,085,675	$	112,111	$	4,470	$	239,496	$	(61,005)	$	295,072

Balance, December 31, 2022	15,170,372	$	112,928	$	4,148	$	243,082	$	(56,576)	$	303,582
Net income	—		—		—		28,555		—		28,555
Other comprehensive income, net of tax	—		—		—		—		(5,338)		(5,338)
Restricted stock granted	29,064		—		—		—		—		—
Restricted shares withheld for taxes	(11,893)		(89)		—		(159)		—		(248)
Restricted stock forfeited / cancelled	(4,370)		—		—		—		—		—
Restricted stock vested in period	—		454		(454)		—		—		—
Stock based compensation - stock options	—		—		53		—		—		53
Stock based compensation - restricted stock	—		—		1,187		—


					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		39
			Provision for Credit Losses on Loans		44
			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	52
				Off-Balance Sheet Arrangements	54
			Other Assets		55
			Deposits and Interest-Bearing Liabilities		55
				Deposits	55
				Other Interest-Bearing Liabilities	56
			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				64
	Item 3. - Defaults upon Senior Securities				65
	Item 4. - Mine Safety Disclosures				65
	Item 5. - Other Information				65
	Item 6. - Exhibits				66

Signatures					68