SIERRA BANCORP
For the period ended Mar 31, 2024. Filed May 6, 2024.
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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.
Mar 31, 2024 · Filed May 6, 2024
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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
First Quarter 2024 compared to First Quarter 2023
First quarter 2024 net income was $9.3 million, a $0.6 million increase or 7%, from the first quarter of 2023 and $0.64 per diluted share in the first quarter of 2024 as compared to $0.58 per diluted share in the first quarter of 2023. The Company’s annualized return on average equity was 11.09% and annualized return on average assets was 1.06% for the
quarter ended March 31, 2024, compared to 11.53% and 0.97%, respectively, for the same quarter in 2023. The primary drivers behind the variance in first quarter net income are as follows:
| ● | Net income for the first quarter of 2024 increased $0.6 million, or 7%, to $9.3 million due primarily to an increase in net interest income of $0.6 million. Additionally, the favorable change in the credit loss expense on loans and improvements in noninterest income, were mostly offset by higher noninterest expenses. |
| ● | The $0.6 million increase in net interest income for the quarter was driven by a 15 basis point increase in the net interest margin due to higher yields on investments and lower costs of borrowings, partially offset by higher deposit costs. |
| ● | Noninterest income for the first quarter of 2024 as compared to the same period in 2023 increased $2.0 million or 31%. There was a favorable variance of $1.0 million in bank owned life insurance (BOLI), a gain on the sale/leaseback of two bank owned branch buildings for $3.8 million, increases in service charges and fees on deposit accounts for $0.3 million or 6%, offset by a loss on the sale of bonds from a balance sheet restructure for $2.9 million. |
| ● | Total noninterest expense increased $1.5 million, or 7%, in the first quarter of 2024 as compared to the first quarter of 2023. Salaries and Benefits were $0.4 million, or 3%, higher in the first quarter of 2024 as compared to the first quarter of 2023 due to several factors, including merit increases for employees due to annual performance evaluations during the first quarter of 2024, higher payroll taxes in the first quarter. Occupancy expense was up $0.7 million for the first quarter of 2024 as compared to the same quarter last year, due to increased rent expense from the sale/leaseback transaction in December 2023. Other noninterest expense increased $0.5 million, or 6%, in the first quarter of 2024 as compared to the first quarter of 2023. The primary reason for the negative variance was increased directors deferred compensation expense which is linked to the fluctuation in BOLI income although lower advertising expenses in the comparative period mitigated some of this negative variance. |
FINANCIAL CONDITION SUMMARY
March 31, 2024 relative to December 31, 2023
The Company’s assets totaled $3.6 billion at March 31, 2024, a decrease of $176.7 million, or 5.0% from December 31, 2023. The following provides a summary of key balance sheet changes during the first three months of 2024:
| ● | Investment securities decreased $281.1 million, or 21.0%, to $1.1 billion primarily due to the sale of bonds from the strategic securities transaction and balance sheet restructuring. |
| ● | Gross loans increased $66.8 million due to an $87.6 million increase in mortgage warehouse line utilization. |
| ● | Deposits increased by $85.8 million, or 3%. The growth in deposits came from brokered deposits, as overall customer deposits decreased $50.9 million. |
| ● | Other borrowings decreased $280.5 million to $80.0 million at March 31, 2024, from $360.5 million at December 31, 2023, and consists of term FHLB advances. The decline in other borrowings is due mostly to a balance sheet restructuring in which the Company sold bonds with an average book yield of 2.61% to paydown borrowed funds at an average rate of 5.52%. |
Total capital of $345.1 million at March 31, 2024, reflects an increase of $7.0 million, or 2%, compared to December 31, 2023. The increase in equity during the first quarter of 2024 is due to net income of $9.3 million, offset by a $3.4 million dividend paid to shareholders, $3.3 million in share repurchases and a $4.1 million favorable swing in other comprehensive income due principally to changes in investment securities’ fair value. The remaining difference is related to equity compensation recognized during the quarter.
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