SIERRA BANCORP
For the period ended Jun 30, 2024. Filed Aug 5, 2024.
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Jun 30, 2024 · Filed Aug 5, 2024
Extracted filing text, with the paragraph anchors used by the comparison.
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Allowance for Credit Losses on Loans
ALLOWANCE FOR CREDIT LOSSES* – LOANS*
The allowance for credit losses on loans, a contra-asset, is established through periodic provisions for credit losses on loans. It is maintained at a level that is considered adequate to measure expected losses on individually identified loans, as well as expected losses inherent in the remaining loan portfolio. Specifically identifiable and quantifiable losses are immediately charged off against the allowance; recoveries are generally recorded only when sufficient cash payments are received subsequent to the charge-off.
The Company's allowance for credit losses on loans was $21.6 million at June 30, 2024, and $23.5 million at December 31, 2023. The allowance was 0.97% of total loans at June 30, 2024, and 1.12% of total loans at December 31, 2023. The decreased allowance for credit losses on loans was primarily due to a $1.6 million reduction in the allowance on loans
individually evaluated for expected credit losses. Management's detailed analysis indicates that the Company's allowance for credit losses on loans should be sufficient to cover credit losses for the life of the loans outstanding as of June 30, 2024, but no assurance can be given that the Company will not experience substantial future losses relative to the size of the credit loss allowance for loans. A separate allowance of $0.5 million for potential credit losses inherent in unused commitments is included in other liabilities at June 30, 2024, unchanged from December 31, 2023.
The following table summarizes activity in the credit allowance for losses on loans for the noted periods:
Allowance for Credit Losses on Loans
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| · · For the three months ended · · For the threemonths ended · · For the sixmonths ended · · For the sixmonths ended · · For the year ended | |||||||||||||||
| · June 30, · June 30, · June 30, · June 30, · December 31, | |||||||||||||||
| Balances: · · 2024 · · 2023 · · 2024 · · 2023 · · 2023 | |||||||||||||||
| Average gross loans outstanding during period (1) | | $2,222,996 | | $2,054,736 | | $2,156,762 | | $2,044,302 | | $2,006,283 | |||||
| Gross Loans outstanding at end of period | | $2,234,528 | | $2,094,391 | | $2,234,528 | | $2,094,391 | | $2,090,075 | |||||
| | | | | | | | | | | | | | | | |
| Allowance for credit losses on loans: | | | | | | | | | | | | | | | |
| Balance at beginning of period | | $23,140 | | $23,090 | | $23,500 | | $23,060 | | $23,060 | |||||
| Provision charged to expense | | | 921 | | | 77 | | | 1,018 | | | 327 | | | 4,058 |
| Charge-offs | | | | | | | | | | | | | | | |
| Real estate | | | | | | | | | | | | | | | |
| Residential real estate | | | — | | | — | | | — | | | — | | | 30 |
| Commercial real estate | | | 2,448 | | | — | | | 2,468 | | | — | | | 2,266 |
| Farmland | | | — | | | — | | | 410 | | | 1,248 | | | 1,248 |
| Total real estate | | | 2,448 | | | — | | | 2,878 | | | 1,248 | | | 3,544 |
| Other commercial | | | 40 | | | 52 | | | 326 | | | 390 | | | 1,349 |
| Consumer loans | | | 326 | | | 472 | | | 738 | | | 866 | | | 1,728 |
| Total | | $2,814 | | $524 | | $3,942 | | $2,504 | | $6,621 | |||||
| Recoveries | | | | | | | | | | | | | | | |
| Real estate | | | | | | | | | | | | | | | |
| Residential real estate | | $60 | | $— | | $60 | | $205 | | $206 | |||||
| Commercial real estate | | | — | | | 17 | | | — | | | 17 | | | 274 |
| Farmland | | | — | | | — | | | — | | | 257 | | | — |
| Total real estate | | | 60 | | | 17 | | | 60 | | | 479 | | | 480 |
| Other commercial | | | 103 | | | 80 | | | 544 | | | 1,128 | | | 1,538 |
| Consumer loans | | | 230 | | | 270 | | | 460 | | | 520 | | | 985 |
| Total | | $393 | | $367 | | $1,064 | | $2,127 | | $3,003 | |||||
| Net loan charge-offs | | $2,421 | | $157 | | $2,878 | | $377 | | $3,618 | |||||
| Balance at end of period | | $21,640 | | $23,010 | | $21,640 | | $23,010 | | $23,500 | |||||
| | | | | | | | | | | | | | | | |
| RATIOS | | | | | | | | | | | | | | | |
| Net charge-offs to average Loans (annualized) | | | 0.44% | | | 0.03% | | | 0.27% | | | 0.04% | | | 0.18% |
| Allowance for credit losses on Loans to gross Loans at end of period | | | 0.97% | | | 1.10% | | | 0.97% | | | 1.10% | | | 1.12% |
| Net loan charge-offs to allowance for credit losses on Loans at end of period | | | 11.19% | | | 0.68% | | | 13.30% | | | 1.64% | | | 15.40% |
| Net loan charge-offs to provision for credit losses on Loans | | | 262.87% | | | 203.90% | | | 282.71% | | | 115.29% | | | 89.16% |
| (1) | Average balances are obtained from the best available daily or monthly data and are net of deferred fees and related direct costs. |
The Company’s allowance for credit losses on loans at June 30, 2024 represents Management’s best estimate of expected losses in the loan portfolio as of that date, but no assurance can be given that the Company will not experience substantial losses relative to the size of the allowance. Furthermore, fluctuations in credit quality, changes in economic conditions, updated accounting or regulatory requirements, and/or other factors could induce us to augment or reduce the allowance.
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