SIERRA BANCORP
For the period ended Jun 30, 2024. Filed Aug 5, 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.
Jun 30, 2024 · Filed Aug 5, 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
Second Quarter 2024 compared to Second Quarter 2023
Second quarter 2024 net income was $10.3 million, a $0.3 million increase or 3%, from the second quarter of 2023 and $0.71 per diluted share in the second quarter of 2024 as compared to $0.67 per diluted share in the second quarter of 2023. The Company’s annualized return on average equity was 11.95% and annualized return on average assets was 1.14% for
the quarter ended June 30, 2024, compared to 13.06% and 1.07%, respectively, for the same quarter in 2023. The primary drivers behind the increase in second quarter net income are as follows:
| ● | Net income increased by $0.3 million, or 3%, to $10.3 million due to higher net interest income and lower noninterest expenses partially offset by an increase in the provision for credit losses, and lower noninterest income. |
| ● | The $1.9 million, or 7%, increase in net interest income was driven by a 30 basis points increase in net interest margin. A $180.9 million decrease in other borrowed funds due to the strategic securities transaction and balance sheet restructuring in early 2024 along with higher loan yields were the primary drivers of the net interest margin increase. |
| ● | Noninterest income decreased $0.4 million, primarily from nonrecurring gains on the sale of investments in the second quarter of 2023. |
| ● | Noninterest expense improved due to a strategic internal reorganization in the fourth quarter of 2023 which optimized our team structure, and better aligned our resources and processes. |
First Half 2024 compared to First Half 2023
Net income for the first half of 2024 was $19.6 million, or $1.35 per diluted share, compared to $18.7 million, or $1.26 per diluted share for the same period in 2023. The Company’s annualized return on average equity was 11.52% and annualized return on average assets was 1.10% for the six months ended June 30, 2024, compared to a return on equity of 12.30% and return on assets of 1.02% for the six months ended June 30, 2023. The primary drivers behind the variance in year-to-date net income are as follows:
| ● | The provision for credit losses on loans was $1.0 million, an increase of $0.7 million, due to higher net charge-offs. |
| ● | Net interest income increased by $2.4 million, or 4%, due mostly to the strategic decision to sell off lower yielding bonds in the fourth quarter of 2023 and the first quarter of 2024, which generated cash used partially to pay off higher cost borrowed funds. |
| ● | Noninterest income increased $1.6 million, or 11%, primarily from an increase in service charges on deposit accounts, and a $0.9 million positive variance in Bank Owned Life Insurance (BOLI) income tied to our nonqualified deferred compensation plan. |
| ● | Noninterest expense increased $1.3 million, or 3% primarily due to increased rent expense from the sale/leaseback transactions in fourth quarter of 2023 and first quarter of 2024. |
FINANCIAL CONDITION SUMMARY
June 30, 2024 relative to December 31, 2023
The Company’s assets totaled $3.7 billion at June 30, 2024, a decrease of $48.6 million, or 1.0% from December 31, 2023. The following provides a summary of key balance sheet changes during the first six months of 2024:
| ● | Investment securities decreased $309.6 million, or 23.0%, to $1.0 billion primarily due to the sale of bonds from the strategic securities transaction and balance sheet restructuring. |
| ● | Gross loans increased $144.5 million, or 7%, due to a $158.1 million increase in mortgage warehouse loans, and a $13.5 million increase in farmland loans, partially offset by smaller declines in other categories. Specifically, there was a $27.0 million decrease in non-agricultural real estate loans, a $0.4 million decline in other commercial loans and a $0.5 million reduction in consumer loans. In addition to strong favorable growth in mortgage |
warehouse, new credit extended, including new fundings on non-mortgage warehouse lines of credit, was $75.3 million YTD 2024 vs $89.6 million YTD 2023.
| ● | Deposits increased by $181.2 million, or 7%. The growth in deposits came primarily from brokered deposits, as overall customer deposits decreased $30.4 million. Brokered deposits added in 2024 had a term of one year or less and were used to fund increases in mortgage warehouse balances in 2024. |
| ● | Other interest-bearing liabilities decreased $239.6 million mostly from a decrease in overnight borrowings facilitated by the strategic balance sheet restructuring in the first quarter of 2024. |
| ● | Total capital of $350.0 million at June 30, 2024, reflects an increase of $11.9 million, or 4%, compared to December 31, 2023. The increase in equity during the first half of 2024, is due to net income of $19.6 million, offset by a $6.7 million dividend paid to shareholders, $7.1 million in share repurchases and a $5.3 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 first half of 2024. |
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