SIERRA BANCORP
For the period ended Jun 30, 2026. Filed Jul 31, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Jul 31, 2026
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Overview of the Results of Operations and Financial Condition
OVERVIEW OF THE RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS SUMMARY
Second Quarter 2026 Compared to Second Quarter 2025
Second quarter 2026 net income was $9.9 million, and $0.77 per diluted share as compared to $10.6 million and $0.78 per diluted share in the second quarter of 2025. The Company’s annualized return on average equity was 10.90% and annualized return on average assets was 1.09% for the quarter ended June 30, 2026, compared to 12.08% and 1.16%,
respectively, for the same quarter in 2025. The primary drivers behind the variance in second quarter net income are as follows:
| ● | A $1.1 million increase in credit loss expense on loans, resulting primarily from a $2.5 million specific reserve on a single agricultural production loan to a borrower in the lumber industry. |
| ● | Net interest income remained stable, decreasing $0.2 million, while noninterest income increased slightly and noninterest expense decreased by $0.3 million. |
| ● | Noninterest income and noninterest expense changes included a $0.4 million increase in earnings from separate account life insurance and a $0.1 million increase in deferred compensation expense. Separate account life insurance income and deferred compensation expense are designed to offset each other. |
| ● | Noninterest expense in the second quarter of 2026 included approximately $0.5 million of severance and recruitment related charges resulting from a restructuring of the executive team. |
First Half of 2026 Compared to First Half of 2025
| ● | Net income increased $2.7 million, or 14%, to $22.4 million for the first six months of 2026. The increase was driven primarily by a $1.3 million increase in noninterest income, a $1.1 million decrease in provision for credit losses, and a $0.9 million decrease in noninterest expense. Diluted earnings per share increased 20% to $1.72 compared to $1.43 in the comparative period. |
| ● | Net interest income increased $0.3 million due primarily to a four basis point increase in net interest margin to 3.75%, partially offset by slightly lower average earning assets. Funding costs declined meaningfully during the period, with cost of funds decreasing to 1.32% from 1.48% and cost of deposits declining to 1.14% from 1.31%. |
| ● | Noninterest income increased $1.3 million, or 9%, compared to the first six months of 2025. The increase was driven primarily by a $0.5 million increase in earnings on separate account life insurance, a $0.3 million increase in cash surrender value income from life insurance, a $0.2 million increase in service charges and fees, and a $0.4 million gain on sale of fixed assets. These favorable variances were partially offset by lower securities gains. |
| ● | Noninterest expense decreased $0.9 million, or 2%, compared to the first six months of 2025. The reduction was driven primarily by lower other operating expenses and deposit service costs, partially offset by increased occupancy expenses and higher professional service costs. |
FINANCIAL CONDITION SUMMARY
June 30, 2026, Relative to December 31, 2025 (unless otherwise noted)
The Company’s assets totaled $3.7 billion at June 30, 2026, a decrease of $108.7 million, or 3% from December 31, 2025. The following provides a summary of key balance sheet changes during the first six months of 2026:
| ● | Investment securities decreased $21.4 million, or 2%, to $894.7 million primarily due to calls of U.S. government agencies and collateralized loan obligations (“CLOs”). |
| ● | Gross loans decreased $90.8 million, or 4%, due to a $60.9 million decrease in mortgage warehouse balances, a $13.9 million decrease in residential real estate loans, a $13.4 million decrease in other commercial loans, a $1.2 million decrease in commercial real estate, and a $2.5 million decrease in farmland loans. These decreases were partially offset by an increase of $1.4 million in construction loans. |
| ● | Mortgage warehouse average balances increased $8.0 million during the second quarter of 2026 compared to the linked quarter, while ending balances declined by $21.0 million. Average balances of commercial real estate and commercial and industrial loans decreased during the quarter, and period-end balances increased slightly. However, loan production strengthened significantly as the quarter progressed, that we believe reflects a shift in |
momentum entering the third quarter of 2026, driven by increasing commercial real estate and commercial and industrial lending opportunities.
| ● | Total deposits increased $54.6 million, or 2%. Growth was concentrated in noninterest-bearing demand deposits and non-maturing interest-bearing deposits. Customer deposits increased $57.5 million, while brokered deposits decreased $2.9 million during the period. |
| ● | Other interest-bearing liabilities declined to $155.0 million at June 30, 2026, from $302.7 million at December 31, 2025, primarily reflecting a reduction in wholesale funding as mortgage warehouse loan balances decreased. The decline consisted of a $102.7 million reduction in overnight borrowings and a $45.0 million reduction in FHLB term advances. Customer repurchase agreements also decreased $8.5 million during the period. |
| ● | Total capital of $366.9 million at June 30, 2026, reflects an increase of $2.0 million compared to December 31, 2025. The increase in equity during the first six months of 2026 was primarily attributable to $22.4 million in net income, partially offset by $14.4 million in share repurchases, $6.8 million in cash dividends declared, and a $1.0 million increase in accumulated other comprehensive loss, related to changes in the fair value of investment securities. The remaining difference was related to activity from stock options and restricted stock during the year. |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.