SIERRA BANCORP
For the period ended Jun 30, 2025. Filed Aug 1, 2025.
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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, 2025 · Filed Aug 1, 2025
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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 2025 Compared to Second Quarter 2024
Second quarter 2025 net income was $10.6 million, and $0.78 per diluted share as compared to $10.3 million, and $0.71 per diluted share in the second quarter of 2024. The Company’s annualized return on average equity was 12.08% and annualized return on average assets was 1.16% for the quarter ended June 30, 2025, compared to 11.95% and 1.14%, respectively, for the same quarter in 2024. The primary drivers behind the variance in first quarter net income are as follows:
| ● | Net income for the second quarter of 2025 increased $0.4 million, or 4%, to $10.6 million. Net interest income improved $0.5 million and noninterest income increased $0.9 million, or 12%. These favorable changes were partially offset by an increase in the provision for credit losses of $0.3 million, and an increase in noninterest expense of $1.1 million, or 5%. |
| ● | The $0.5 million increase in net interest income for the quarter was mostly driven by a 23 basis point decrease in the cost of deposits and borrowings. The yield on interest earning assets declined 20 basis points, counterbalancing some of the improvements in the cost of funds. |
| ● | Included in the above $0.9 million increase in noninterest income and $1.1 million increase in noninterest expense was an $0.8 million increase in bank-owned life insurance (BOLI) designed to offset changes to deferred compensation expense. Deferred compensation expense increased $0.7 million in the second quarter of 2025 as compared to the same period in 2024 primarily due to increases in the value of participants accounts as a result of market conditions. |
FINANCIAL CONDITION SUMMARY
June 30, 2025 Relative to December 31, 2024
The Company’s assets totaled $3.8 billion at June 30, 2025, an increase of $156.0 million, or 4.0% from December 31, 2024. The following provides a summary of key balance sheet changes during the first six months of 2025:
| ● | Investment securities increased $5.8 million, or 1.0%, to $967.3 million primarily due to purchases of mortgage-backed securities and corporate bonds. Corporate bonds have preferential yields over other types of securities, and fixed-rate mortgage backed securities fit the Company’s asset neutrality position. Collateralized loan obligations (CLOs), continue to aggressively payoff due to tightening spreads and the ability of the issuers to reissue with a lower spread. |
| ● | Gross loans increased $103.3 million, or 4%, due to a $75.5 million increase in mortgage warehouse loans, a $34.1 million increase in commercial real estate loans, a $6.3 million increase in construction loans and an $8.4 million increase in other commercial loans, partially offset by declines in other categories. Specifically, there was an $11.1 million decrease in residential real estate loans, a $9.6 million decrease in farmland loans, and a $0.4 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 $114.5 million year-to-date in 2025 versus $75.3 million year-to-date in 2024. |
| ● | Deposits increased by $82.8 million, or 3%. The growth in deposits came primarily from noninterest bearing demand deposits. There was also a $15.0 million increase in brokered deposits. Overall customer deposits increased $67.8 million. |
| ● | Other interest-bearing liabilities increased $92.0 million; $74.4 million from an increase in overnight borrowings, and $17.6 million from increased customer repurchase balances. Overnight borrowings are used to fund mortgage warehouse line advances. |
| ● | Total capital of $355.7 million at June 30, 2025, reflects a decrease of $1.6 million, relative to year-end 2024. The decrease in equity during the first half of 2025 was due to the addition of $19.7 million in net income, a $2.6 million favorable swing in accumulated other comprehensive income/loss due principally to changes in investment securities’ fair value, $18.0 million in share repurchases and $7.0 million in dividends paid. The remaining difference is related to stock options exercised and restricted stock compensation recognized during the quarter. |
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