SIERRA BANCORP
For the period ended Sep 30, 2025. Filed Oct 31, 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.
Sep 30, 2025 · Filed Oct 31, 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
Third Quarter 2025 Compared to Third Quarter 2024
Third quarter 2025 net income was $9.7 million, and $0.72 per diluted share as compared to $10.6 million, and $0.74 per diluted share in the third quarter of 2024. The Company’s annualized return on average equity was 10.81% and annualized return on average assets was 1.04% for the quarter ended September 30, 2025, compared to 11.95% and 1.14%,
respectively, for the same quarter in 2024. The primary drivers behind the variance in third quarter net income are as follows:
| ● | Net income for the third quarter of 2025 decreased $0.9 million, or 9%, to $9.7 million. Net interest income improved $1.2 million, or 4%, and noninterest income increased $0.3 million. These favorable changes were offset by an increase in the provision for credit losses of $2.3 million, and an increase in noninterest expense of $0.8 million, or 4%. |
| ● | The $1.2 million increase in net interest income was due to a 12 basis point increase in net interest margin driven by a 27 basis point decrease in the cost of funds. |
| ● | The provision for credit losses was $3.7 million for the quarter, an increase of $2.3 million, primarily due to an increase in individual reserves during the third quarter of 2025, due to a single agricultural production property. |
| ● | Noninterest expense was $0.8 million higher in the third quarter over the same quarter last year due to an increase in salaries and benefits, and occupancy costs. |
| ● | Included in the line-item changes from the third quarter of 2024 was the increase of $0.3 million in income from corporate owned life insurance income invested to offset the $0.3 million increase in deferred compensation costs. |
First Nine Months of 2025 Compared to First Nine Months of 2024
| ● | Net income decreased $0.8 million, or 3%. The decrease was primarily driven by an increase of $4.6 million in provision for credit losses. This decline was partially offset by an increase of $3.1 million in net interest income, due mostly to a 25 basis point decrease in the cost of interest-bearing liabilities. A favorable decrease in the cost of interest-bearing deposits of 29 basis points and decreases in the average balances of those deposits had the biggest impact on the increase in net interest income. While the Company experienced lower yields and balances on investments, this was mostly offset by increases in yields and balances on loans. Noninterest income decreased by $0.8 million and noninterest expense decreased by $0.2 million. |
| ● | The provision for credit losses was $7.0 million, an increase of $4.6 million, primarily for the reasons stated above. |
| ● | Noninterest income decreased by $0.8 million, or 3%, driven by the net $0.6 million gain from the balance sheet restructuring at the beginning of 2024, with no similar transaction in 2025, and a $0.6 million decrease in service charges and fees on deposit accounts. Partially offsetting these unfavorable variances was a $0.8 million gain on life insurance during the first nine months of 2025. |
| ● | Noninterest expense decreased $0.2 million, due mostly to decreases in professional services and lower sundry losses, partially offset by increases in salaries and benefits and occupancy costs. |
| ● | Included in the line-item changes from the same period in 2024 was the decrease of $0.5 million in income from corporate owned life insurance income invested to offset the $0.5 million decrease in deferred compensation costs. |
FINANCIAL CONDITION SUMMARY
September 30, 2025 Relative to December 31, 2024
The Company’s assets totaled $3.7 billion at September 30, 2025, an increase of $95.1 million, or 3.0% from December 31, 2024. The following provides a summary of key balance sheet changes during the first nine months of 2025:
| ● | Investment securities decreased $70.0 million, or 7.0%, to $891.4 million primarily due to collateralized loan obligations (CLOs), continuing to aggressively payoff due to tightening spreads and the ability of the issuers to reissue with a lower spread. Purchases of mortgage-backed securities and corporate bonds have partially offset |
the run-off of CLOs. Corporate bonds have preferential yields over other types of securities, and fixed rate mortgage-backed securities fit the Company’s asset neutrality position.
| ● | Gross loans increased $160.4 million, due mostly to a $126.3 million increase in mortgage warehouse line utilization, as well as $46.9 million of growth in commercial real estate loans, a $7.9 million increase in other construction loans, and a $7.6 million increase in other commercial loans. This favorable growth was partially offset by an $18.2 million decline in residential real estate loans, a $9.7 million decrease in farmland, and a $0.4 million reduction in consumer loans. |
| ● | Deposits totaled $2.9 billion at September 30, 2025, representing a year-to-date increase of $41.1 million, or 1%. The growth in deposits came mostly from a $65.7 million increase in noninterest-bearing deposits and a $60.6 million increase in interest-bearing demand deposits. The increases were partially offset by decreases in customer time deposits and brokered deposits of $57.3 million and $40.0 million, respectively. |
| ● | Overnight borrowings increased $55.0 million and customer repurchase agreements increased $16.9 million. |
| ● | Total capital of $360.1 million at September 30, 2025, reflects an increase of $2.8 million, relative to year-end 2024. The increase in equity during the first nine months of 2025 was due to the addition of $29.4 million in net income, a $6.1 million favorable swing in accumulated other comprehensive income/loss due principally to changes in investment securities’ fair value, partially offset by $24.3 million in share repurchases and $10.3 million in dividends paid. The remaining difference is related to the impact of equity compensation. |
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