PORTERVILLE, Calif., April 21 /PRNewswire-FirstCall/ -- Sierra Bancorp
(Nasdaq: BSRR), parent of Bank of the Sierra, today announced its financial
results for the quarter ended March 31, 2008. Net income for the first
quarter of 2008 increased 4% to $5.0 million, compared to $4.8 million in
the same quarter a year ago. Diluted earnings per share increased 9%,
rising to $0.51 in the first quarter of 2008 from $0.47 per diluted share
in the first quarter of 2007. Half of the increase in diluted earnings per
share is attributable to higher earnings, while the remainder is due to
lower average diluted shares outstanding for the quarter. Diluted shares
were lower because of share repurchases over the past year, and because of
a significant increase in stock options that were "underwater" at March 31,
2008 and thus excluded from diluted shares. Despite a relatively high loan
loss provision in the first quarter of 2008, Sierra Bancorp still generated
a 19.8% return on average equity and a 1.6% return on average assets for
the quarter. Notable balance sheet changes from December 31, 2007 to March
31, 2008 include an increase of $73 million, or 9%, in deposit balances, a
$26 million drop in Federal Home Loan Bank (FHLB) borrowings, and an
increase of $52 million, or 28%, in investment balances.
"While credit issues had a greater impact on first quarter results than
we originally expected, some favorable developments helped soften the
blow," remarked James C. Holly, President and CEO. "We had a one-time gain
on the redemption of Visa shares, but more significantly, our deposit
acquisition strategy has been highly successful in increasing the number of
transaction accounts and associated service charges, we've maintained a
relatively strong net interest margin, and non-interest expenses are
well-controlled," he explained. "I commend our dedicated employees and
directors for their diligent efforts and intense focus on managing credit
issues, controlling costs, enhancing revenues, and maintaining a stout
return on equity as we fight the headwinds that seem to be flattening
profitability at many other banks," Mr. Holly added.
Financial Highlights
The most significant single item impacting the Company's net income for
the first quarter of 2008 versus the first quarter of 2007 was a $1.4
million increase in our loan loss provision. Some of this increase can be
explained by the $1.2 million increase in net charge-offs, but many of the
charged-off loan balances had specific reserves allocated to them as of the
beginning of the quarter and charging them off did not necessarily create
the need for reserve replenishment. Our first quarter net charge-offs
include unsecured personal lines of credit adding up to $791,000, auto
loans and other consumer installment loans in the amount of $266,000,
commercial loans (primarily unsecured business lines of credit) and the
non-guaranteed portion of SBA loans totaling $597,000, and real estate loan
balances (including equity lines) of $312,000. Deposit account overdrafts
totaling $115,000 were also deemed to be uncollectible and are included in
net charge-offs. In addition to the increase in reserves related to
charge-offs, we created specific reserves for certain acquisition and
development loans and residential construction loans, due to deterioration
in collateral values and in the liquidity of some developers. We had
acquisition and development loans totaling about $31 million, and an
additional $40 million in residential construction loans on our books at
March 31, 2008. Our general reserves for equity loans and unsecured
business and consumer lines were also enhanced, due to the recent uptick in
charge-offs in those loan categories. Our detailed analysis indicates that
as of March 31, 2008, our allowance for loan and lease losses should be
sufficient to cover potential credit losses inherent in loan and lease
balances outstanding as of that date. However, no assurance can be given
that the Company will not experience substantial future losses relative to
the size of the allowance. Our allowance for loan and lease losses was
1.35% of total loans at March 31, 2008.
Net interest income was slightly lower in the first quarter of 2008
than in the first quarter of 2007. While average interest-earning assets
were $31 million higher, the lift created by higher earning assets was
offset by a lower net interest margin. The Company's net interest margin
was 5.12% in the first quarter of 2008 relative to 5.35% in the first
quarter of 2007, a drop of 23 basis points. Our net interest margin was
down due to the fact that average non-interest bearing demand deposits were
$26 million lower, and because competitive pressures kept deposit costs
relatively high despite a drop in short-term market interest rates. Our
current interest rate risk profile indicates minimal exposure to declining
interest rates, all else being equal.
For the quarter, service charges on deposits increased by $893,000, or
57%, relative to the first quarter of 2007. Service charges show
improvement due primarily to returned item and overdraft fees generated by
new consumer checking accounts, a fee increase that became effective
mid-2007, and enhanced overdraft management and collection capabilities for
all transaction accounts. Other non-interest income increased by $346,000,
or 25%. The primary driver behind the increase was a $289,000 one-time gain
resulting from the mandatory redemption of a portion of our Visa shares,
pursuant to Visa's initial public offering in March 2008. Other relatively
large changes in non-interest income categories, which net out to a small
overall increase, are as follows: credit card revenue was $116,000 lower,
bank-owned life insurance (BOLI) income was down by $198,000 due to a first
quarter 2008 loss on our separate account BOLI (although associated
deferred compensation plan expense accruals were also lower), EFT
interchange fees increased by $114,000, we received a $75,000 contingent
final payment in the first quarter of 2008 related to the outsourcing of
our merchant services function in late 2006, one-time gains from the sale
of real property and leased equipment were up by $70,000, and costs
associated with our low-income housing tax credit funds, which are shown as
a reduction in other income, were $82,000 lower.
On the expense side, salaries and benefits declined by $166,000, or 4%,
due to a $244,000 increase in the deferral of current-period salaries
associated with successful loan originations. A decline of $146,000 in
deferred compensation expense stemming from participant losses on deferred
compensation investments also helped offset some of the normal annual
increase in salaries and benefits. Occupancy expense increased by only
$20,000, or 1%, inclusive of a $75,000 increase in property taxes due to
property tax refunds received in the first quarter of the previous year.
Lower depreciation expense on furniture and equipment was the primary
reason for the minimal increase in occupancy expense.
Other non-interest expenses dropped by $295,000, or 10%, due mainly to
a $242,000 offset against deposit services costs to reflect non-recurring
incentive payments received in the first quarter of 2008 for last year's
EFT processing/debit card conversions. The drop in other non-interest
expenses also includes the elimination of $150,000 in costs associated with
credit cards due to the sale of our credit card portfolio last year, and
participant losses in the directors' deferred fee plan, which are reflected
as an expense accrual reduction. Expenses that increased in the first
quarter of 2008 relative to the first quarter of 2007 include demand and
foreclosure costs, appraisal and inspection costs, and internet banking
costs.
Balance sheet changes during the first quarter of 2008 include sizeable
increases in deposits and investment securities. Total deposits increased
by $73 million, or 9%, during the first quarter. Most of growth was in time
deposits, including $30 million obtained from one of the counties in our
market area and $20 million from the State of California. Wholesale-sourced
brokered deposits, which are also included in time certificates of deposit,
increased by $16 million during the quarter. Combined NOW/savings balances
were up by $11 million, or 8%, and money market deposits increased by $10
million, also representing an 8% increase. Non-interest bearing demand
deposits, however, continued to decline, dropping by $18 million, or 8%. We
were able to let $26 million in FHLB borrowings roll off and decreased
overnight fed funds purchased by $7 million due to the aggregate deposit
influx. Additionally, since the investment environment was conducive to
increasing our relative level of investment securities, much of the cash
flow generated by the increase in deposits was utilized to increase
investment balances, which were up by $52 million, or 28%, during the
quarter.
Gross loan balances declined by $4 million during the first quarter of
2008. While organic loan growth in most branches was consistent with our
expectations, aggregate balances declined due to the prepayment of $11
million associated with a single loan relationship and the early payoff of
$3 million in loan participations purchased.
On a positive note, total non-performing assets fell by $712,000, or
7%, during the first three months of 2008, ending the quarter at $8.9
million. The following loans that were included in the non-accruing balance
at December 31, 2007 were resolved during the first quarter of 2008: a $1.2
million commercial note was sold, a $1.1 million loan secured by a personal
residence and land was foreclosed on and subsequently sold, and
single-family residential loans of $415,000 and $125,000 were paid off.
Additionally, a $196,000 property held in OREO at year-end was sold during
the first quarter of 2008. Loans placed on non-accrual status during the
quarter include a $1.2 million residential construction loan to a
developer, who has completed the six units in his project but has had
difficulty selling them. Other loans and leases downgraded to non-accrual
status in the first quarter of 2008 include a $226,000 commercial real
estate loan, two residential construction loans totaling $410,000, an SBA
loan in the amount of $186,000, a $224,000 lease, and various consumer
loans. A total of $1.5 million in loans which were classified as
"non-accrual" at December 31, 2008, were written down by a combined
$241,000 and acquired into OREO in the first quarter of 2008. Three
additional foreclosures during the first quarter resulted in an ending
balance of $1.9 million for foreclosed assets.
About Sierra Bancorp
Sierra Bancorp is the holding company for Bank of the Sierra
(http://www.bankofthesierra.com), which is in its 31st year of operations
and is the largest independent bank headquartered in the South San Joaquin
Valley. The Company has over $1.2 billion in total assets and currently
maintains 21 branch offices, an agricultural credit center, an SBA center,
and an online "virtual" branch. In January 2008, Sierra Bancorp was
recognized as the 2nd best performing mid-tier bank in the nation and the
6th bank overall by U.S. Banker magazine, based on return on equity.
The statements contained in this release that are not historical facts
are forward-looking statements based on management's current expectations
and beliefs concerning future developments and their potential effects on
the Company. Readers are cautioned not to unduly rely on forward looking
statements. Actual results may differ from those projected. These
forward-looking statements involve risks and uncertainties including but
not limited to the health of the national and California economies, the
Company's ability to attract and retain skilled employees, customers'
service expectations, the Company's ability to successfully deploy new
technology and gain efficiencies there from, the success of branch
expansion, changes in interest rates, loan portfolio performance, the
Company's ability to secure buyers for foreclosed properties, and other
factors detailed in the Company's SEC filings.
CONSOLIDATED INCOME STATEMENT 3-Month Period Ended:
(in $000's, unaudited) 3/31/2008 3/31/2007 % Change
Interest Income $20,398 $21,745 -6.2%
Interest Expense 6,536 7,769 -15.9%
Net Interest Income 13,862 13,976 -0.8%
Provision for Loan & Lease
Losses 2,270 900 152.2%
Net Int after Provision 11,592 13,076 -11.3%
Service Charges 2,468 1,575 56.7%
Loan Sale & Servicing Income 16 37 -56.8%
Other Non-Interest Income 1,719 1,373 25.2%
Gain (Loss) on Investments 45 5 800.0%
Total Non-Interest Income 4,248 2,990 42.1%
Salaries & Benefits 4,498 4,664 -3.6%
Occupancy Expense 1,486 1,466 1.4%
Other Non-Interest Expenses 2,559 2,854 -10.3%
Total Non-Interest
Expense 8,543 8,984 -4.9%
Income Before Taxes 7,297 7,082 3.0%
Provision for Income Taxes 2,338 2,329 0.4%
Net Income $4,959 $4,753 4.3%
TAX DATA
Tax-Exempt Muni Income $578 $547 5.7%
Tax-Exempt BOLI Income $160 $358 -55.3%
Interest Income - Fully
Tax Equiv $20,709 $22,040 -6.0%
NET CHARGE-OFFS $2,069 $867 138.6%
PER SHARE DATA 3-Month Period Ended:
(unaudited) 3/31/2008 3/31/2007 % Change
Basic Earnings per Share $0.52 $0.49 6.1%
Diluted Earnings per Share $0.51 $0.47 8.5%
Common Dividends $0.17 $0.15 13.3%
Wtd. Avg. Shares Outstanding 9,558,161 9,729,627
Wtd. Avg. Diluted Shares 9,801,531 10,149,369
Book Value per Basic Share
(EOP) $10.65 $9.49 12.2%
Tangible Book Value per Share
(EOP) $10.06 $8.92 12.8%
Common Shares Outstndg. (EOP) 9,521,273 9,758,779
KEY FINANCIAL RATIOS 3-Month Period Ended:
(unaudited) 3/31/2008 3/31/2007
Return on Average Equity 19.82% 21.37%
Return on Average Assets 1.62% 1.60%
Net Interest Margin
(Tax-Equiv.) 5.12% 5.35%
Efficiency Ratio (Tax-Equiv.) 47.16% 51.45%
Net C/O's to Avg Loans (not
annualized) 0.23% 0.10%
AVERAGE BALANCES 3-Month Period Ended:
(in $000's, unaudited) 3/31/2008 3/31/2007 % Change
Average Assets $1,232,798 $1,203,998 2.4%
Average Interest-Earning
Assets $1,113,727 $1,082,527 2.9%
Average Gross Loans & Leases $916,027 $891,208 2.8%
Average Deposits $866,419 $868,396 -0.2%
Average Equity $100,644 $90,196 11.6%
STATEMENT OF CONDITION End of Period:
(in $000's, unaudited) 3/31/2008 12/31/2007 3/31/2007 Annual
Chg
ASSETS
Cash and Due from Banks $43,150 $44,022 $40,908 5.5%
Securities and Fed Funds Sold 236,664 184,917 192,815 22.7%
Agricultural 9,864 13,103 11,690 -15.6%
Commercial & Industrial 138,398 140,323 138,036 0.3%
Real Estate 697,437 696,110 669,738 4.1%
SBA Loans 20,817 20,366 22,678 -8.2%
Consumer Loans 54,528 54,731 54,815 -0.5%
Consumer Credit Card Balances - - 8,189 -100.0%
Gross Loans & Leases 921,044 924,633 905,146 1.8%
Deferred Loan & Lease Fees (2,818) (3,045) (3,662) -23.0%
Loans & Leases Net of
Deferred Fees 918,226 921,588 901,484 1.9%
Allowance for Loan & Lease
Losses (12,478) (12,276) (11,612) 7.5%
Net Loans & Leases 905,748 909,312 889,872 1.8%
Bank Premises & Equipment 18,240 18,255 18,187 0.3%
Other Assets 77,960 77,229 74,062 5.3%
Total Assets $1,281,762 $1,233,735 $1,215,844 5.4%
LIABILITIES & CAPITAL
Demand Deposits $225,318 $243,764 $258,913 -13.0%
NOW / Savings Deposits 149,853 138,378 134,685 11.3%
Money Market Deposits 135,911 126,347 132,642 2.5%
Time Certificates of Deposit 412,466 341,658 375,882 9.7%
Total Deposits 923,548 850,147 902,122 2.4%
Junior Subordinated
Debentures 30,928 30,928 30,928 0.0%
Other Interest-Bearing
Liabilities 207,894 237,082 175,404 18.5%
Total Deposits &
Int.-Bearing Liab. 1,162,370 1,118,157 1,108,454 4.9%
Other Liabilities 18,031 16,114 14,790 21.9%
Total Capital 101,361 99,464 92,600 9.5%
Total Liabilities &
Capital $1,281,762 $1,233,735 $1,215,844 5.4%
CREDIT QUALITY DATA End of Period:
(in $000's, unaudited) 3/31/2008 12/31/2007 3/31/2007 Annual
Chg
Non-Accruing Loans $7,021 $9,052 $649 981.8%
Over 90 Days PD and Still
Accruing - - - 0.0%
Foreclosed Assets 1,875 556 76 2367.1%
Total Non-Performing
Assets $8,896 $9,608 $725 1127.0%
Non-Perf Loans to Total Loans 0.76% 0.98% 0.07%
Non-Perf Assets to Total
Assets 0.69% 0.78% 0.06%
Allowance for Ln Losses to
Loans 1.35% 1.33% 1.28%
OTHER PERIOD-END STATISTICS End of Period:
(unaudited) 3/31/2008 12/31/2007 3/31/2007
Shareholders Equity / Total
Assets 7.9% 8.1% 7.6%
Loans / Deposits 99.7% 108.8% 100.3%
Non-Int. Bearing Dep. / Total
Dep. 24.4% 28.7% 28.7%
SOURCE Sierra Bancorp
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Related links:
http://www.sierrabancorp.com
http://www.bankofthesierra.com
CONTACT:
Ken Taylor, EVP|CFO, or Kevin McPhaill,
EVP|Chief Banking Officer, both of Sierra Bancorp,
+1-559-782-4900, 1-888-454-BANK
|
