Sierra Bancorp (NASDAQ:BSRR), parent of Bank of the Sierra, today announced its unaudited financial results for the three-and six-month periods ended June 30, 2022. Sierra Bancorp reported consolidated net income of $9.2 million, or $0.61 per diluted share, for the second quarter of 2022, compared to $11.7 million, or $0.76 per diluted share, in the second quarter of 2021. On a linked-quarter basis, the Company increased net income by $1.8 million, or 24%.

For the first six months of 2022, the Company recognized net income of $16.6 million as compared to $22.8 million for the same period in 2021. The Company's financial performance metrics for the first half of 2022 include an annualized return on average equity of 10.10%, a return on average assets of 0.98%, and diluted earnings per share of $1.10.

"In this uncertain time of volatile interest rates and higher inflation, the strength of our loyal customer base provides us with a foundation of core deposits that position us to prudently increase loan production. I believe that these fundamentals remain a critical part of our success," stated Kevin McPhaill, President and CEO. "It is through our entire banking team's efforts that we continue to post solid financial results, and this last quarter is no exception with a 24% increase in net income on a linked quarter basis. Thanks to our strong capital position, recently expanded lending teams, and our low-cost core deposit base, we are excited about our prospects in the second half of 2022!" McPhaill concluded.

Financial Highlights

Quarterly Changes (comparisons to the second quarter of 2021)

Net interest income decreased $0.6 million, or 2%, due primarily to a $0.4 million increase in interest expense from the issuance of subordinated debt during the third quarter of 2021 and higher cost of funds on interest-bearing liabilities due to the recent increases in the prime interest rate.
Noninterest income increased $3.8 million, primarily due to a $3.2 million gain on sale of other assets, $0.4 million in life insurance proceeds, a $0.2 million recovery on an acquired loan, and a $1.0 million recovery of prior year legal expenses, partially offset by a $1.4 million negative variance in corporate owned life insurance with income linked to the Company's nonqualified deferred compensation plan.
The provision for credit losses on loans and leases was $2.5 million under the new current expected credit losses ("CECL") methodology, as compared to a $2.1 million benefit under the incurred loss model in the same quarter of 2021, for a net increase of $4.6 million. This is driven primarily from the replacement of allowance due to $2.3 million in net loan charge offs during the second quarter of 2022.
All capital ratios remain well above the regulatory requirements for a well-capitalized institution. The Community Bank Leverage ratio was 11.72% for Bank of the Sierra. The Sierra Bancorp leverage ratio was 10.45%.
Our Board of Directors declared a cash dividend of $0.23 per share on July 21, 2022. This is the 94^th consecutive quarterly dividend paid by Sierra Bancorp. The cash dividend is payable on August 15, 2022 to shareholders of record at the close of business on August 1, 2022.

Linked Quarter Changes (comparisons to the three months ended March 31, 2022)

Net income improved by $1.8 million, or 24%, driven mostly by a $1.8 million increase in net interest income, and higher noninterest income, offset by unfavorable changes in the provision for credit losses and noninterest expense. The increase in net interest income was driven by higher average earning assets and a 22 basis point increase in the yield on earning assets, partially offset by a 5 basis point increase in the cost of interest-bearing liabilities.
Noninterest income increased by $4.4 million, or 72%, for same reasons as outlined in the quarterly comparison above.
The provision for credit losses on loans and leases increased $1.9 million to $2.5 million due mostly to charge-offs in the second quarter as the quantitative and qualitative components of the allowance for credit losses remained consistent with the prior quarter.
Noninterest expense increased $1.9 million, or 10%, mostly in other operating expense, due to a $0.7 million increase in other expense due to a proactive approach to a regulatory change in the treatment of non-sufficient fund charges on representments, a $0.4 million increase in recruitment costs for our new lending teams, and a $0.3 million increase in postage and supplies due to mailing of new account agreements to customers.

Year to-Date Changes (comparisons to the first six-months of 2021)

Net income decreased by $6.2 million due mostly to a $5.0 million increase in the provision for credit losses, as well as lower net interest income on a change in mix of average earning assets, partially offset by higher noninterest income.
The provision for credit losses on loans and leases was $3.1 million, an increase of $5.0 million, due to a change from the incurred loss method to the current expected credit loss method, coupled with higher charge-offs in 2022 on two loan relationships.
Net interest income decreased by $4.4 million, or 8%, due mostly to the change in mix of interest earning assets with average loan balances increasing and investments increasing. In addition, the cost of interest-bearing liabilities was higher due to increases in index rates on certain floating rate liabilities.
Noninterest income increased $3.1 million, or 23%, for the same reasons as noted above in the quarterly comparison, combined with a $1.0 million gain on the sale of investment securities, and a $2.6 million negative variance in BOLI income tied to our nonqualified deferred compensation plan.

Balance Sheet Changes (comparisons to December 31, 2021)

Total assets were relatively unchanged at $3.4 billion with increases in loans and investments partially offset by lower cash balances.
Deposits increased by $69.4 million, or 2%. The growth in deposits came primarily from noninterest-bearing or low-cost transaction and savings accounts, while higher-cost time deposits increased $5.9 million.
Gross loans increased $32.9 million due predominantly to the purchase of $173.1 million in high quality jumbo single family mortgage loan pool purchases. These mortgage loan pool purchases were offset by $201.8 million in loan maturities, charge-offs and payoffs. Organic loan production for the first half of 2022 was $142.1 million, a 61% increase, as compared to $88.3 million for the comparative period in 2021, as the new lending teams hired earlier in the year have been gaining traction in our market.
Investment securities increased $52.3 million, or 5%. On April 1, 2022, the Company transferred $162.1 million of "available-for-sale" investment securities to "held-to-maturity". The securities were transferred at fair market value on the date of transfer. The transfer was initiated to partially insulate other comprehensive income and equity from changes in interest rates. This transfer had no impact on net income, and future price changes on these securities due to changes in interest rates will not affect capital.

Other financial highlights are reflected in the following table.


FINANCIAL HIGHLIGHTS
(Dollars in Thousands, Except Per Share Data, Unaudited)
		As of or for the									As of or for the
		three months ended									six months ended
		6/30/2022			3/31/2022			6/30/2021			6/30/2022			6/30/2021
Net income	$	9,204		$	7,407		$	11,708		$	16,611		$	22,786
Diluted earnings per share	$	0.61		$	0.49		$	0.76		$	1.10		$	1.48
Return on average assets		1.07	%		0.88	%		1.42	%		0.98	%		1.41	%
Return on average equity		11.68	%		8.64	%		13.29	%		10.10	%		13.11	%

Net interest margin (tax-equivalent)		3.40	%		3.21	%		3.60	%		3.31	%		3.76	%
Yield on average loans and leases		4.31	%		4.32	%		4.57	%		4.31	%		4.55	%
Cost of average total deposits		0.11	%		0.08	%		0.09	%		0.10	%		0.09	%
Efficiency ratio (tax-equivalent) ⁽¹⁾		59.19	%		67.08	%		58.79	%		62.70	%		57.57	%

Total assets	$	3,396,635		$	3,418,854		$	3,272,048		$	3,396,635		$	3,272,048
Loans & leases net of deferred fees	$	2,021,581		$	1,982,131		$	2,140,961		$	2,021,581		$	2,140,961
Noninterest demand deposits	$	1,120,413		$	1,104,691		$	1,073,833		$	1,120,413		$	1,073,833
Total deposits	$	2,850,999		$	2,864,943		$	2,775,914		$	2,850,999		$	2,775,914
Noninterest-bearing deposits over total deposits		39.3	%		38.6	%		38.7	%		39.3	%		38.7	%

Shareholders' equity / total assets		8.8	%		9.5	%		10.9	%		8.8	%		10.9	%
Tangible common equity ratio ⁽²⁾		8.0	%		8.7	%		10.1	%		8.0	%		10.1	%
Book value per share	$	19.82		$	21.59		$	23.21		$	19.82		$	23.21
Tangible book value per share ⁽²⁾	$	17.82		$	19.58		$	21.19		$	17.82		$	21.19

(1)	Noninterest expense as a percentage of the sum of net interest income and noninterest income excluding net gains (losses) from securities
(2)	See reconciliation of non-GAAP financial measures to the corresponding GAAP measurement in "Non-GAAP Financial Measures" later in this document

INCOME STATEMENT HIGHLIGHTS

Net Interest Income

Net interest income was $26.6 million, for the second quarter of 2022, a $0.6 million decrease, or 2% under the second quarter of 2021, and decreased $4.4 million, or 8% to $51.3 million for the first six months of 2022 relative to the same period in 2021.

For the second quarter of 2022, growth in average interest-earning assets totaled $117.5 million, or 4%, as compared to the second quarter of 2021. The yield on these balances was 11 basis points lower for the same period. Average loan balances decreased $173.0 million with a 26 basis point decrease in yield, while average investment balances increased $290.6 million with a 79 basis point increase in yield, mostly due to a $388.9 million increase in average collateralized loan obligation balances which have variable rates. There was a 13 basis point increase in the cost of our interest-bearing liabilities for the same period.

Net interest income for the comparative year-to-date periods decreased due to the change in mix on interest earning assets, compounded by an increase in interest rates paid on interest-bearing liabilities. There was a $293.5 million, or 13% decline in average loan and lease balances yielding 24 basis points less for the same period, while average investment balances increased $451.0 million yielding 28 basis points higher for the same period. Average interest-bearing liabilities increased $86.8 million, of which $49.2 million is attributed to the issuance of subordinated debt in the third quarter of 2021, with an 11 basis point overall increase in yield. The net impact of the mix and rate change was a 45 basis point decrease in our net interest margin for the six-months ending June 30, 2022 as compared to the same period in 2021.

Interest expense was $1.6 million for the second quarter of 2022, an increase of $0.7 million, or 80%, relative to the second quarter of 2021. For the first six months of 2022, compared to the first six months of 2021, interest expense increased $1.1 million, or 63%, to $2.9 million. The increase in interest expense is attributable to the issuance of subordinated debt combined with an increase in interest rates paid on certain deposits. Some of the increase in interest expense was mitigated by a favorable shift in deposit mix as the average balance on higher cost time deposits declined by $73.8 million or 17% in the second quarter of 2022 as compared to the second quarter of 2021, and by $116.1 million or 25% for the six months ending 2022 as compared to the same period in 2021, while lower or no cost average transaction and savings accounts increased $153.5 million or 6% for the second quarter of 2022 compared to the same period in 2021 and increased by $205.2 million or 9% over the comparable year to date periods.

Our net interest margin was 3.40% for the second quarter of 2022, as compared to 3.21% for the linked quarter and 3.60% for the second quarter of 2021.

Provision for Credit Losses

The Company recorded a provision for credit losses on loans and leases of $2.5 million in the second quarter of 2022 relative to a benefit of $2.1 million in the second quarter of 2021, and a year-to-date provision for credit losses on loans and leases of $3.1 million in 2022 as compared to a benefit of $1.9 million for the same period in 2021. The Company's $4.6 million, increase in the provision for credit losses on loans and leases in the second quarter of 2022 as compared to the second quarter of 2021, and the $5.0 million year to date increase in the provision for credit losses on loans and leases, compared to the same period in 2021 was primarily due to the impact of $4.1 million in net charge-offs in the first six months of 2022. The increase in net charge-offs in the second quarter of 2022 was primarily related to a single office building loan relationship that was sold at a discount due to an increased risk of default that would have likely led to a prolonged collection period. For the first six months, the increase in net charge-offs also included a single dairy loan relationship that defaulted in late March 2022.

Noninterest Income

Total noninterest income increased by $3.8 million, or 58%, for the quarter ended June 30, 2022 as compared to the same quarter in 2021 and increased $3.1 million, or 23% for the comparable year-to-date periods. The quarterly comparison includes $3.2 million in non-recurring gains resulting from the sale of Visa B stock of $2.6 million and a small business investment company fund investment of $0.6 million, as well as $0.4 million in life insurance proceeds, a $1.0 million recovery of prior year legal expenses, and a $0.2 million gain from a recovery on an acquired loan. In addition, the year-to-date comparison reflects a $1.0 million gain on the sale of investment securities. These favorable adjustments to the quarter and year-to-date comparisons were partially offset by unfavorable declines of $1.4 million and $2.6 million respectively, in the value of separate account corporate-owned life insurance assets tied to non-qualified deferred compensation plans. Investments in the separate account variable life insurance policies are invested in a similar proportionate mix of asset classes that our deferred compensation participants have elected, with the exception of participant elections in a fixed income account. Such election by plan participants in the fixed income account is ignored which creates greater volatility of the corporate owned life insurance asset value as compared to the related liability balance for deferred compensation.

Service charges on customer deposit account income increased by $0.5 million, or 18%, to $3.2 million in the second quarter of 2022 as compared to the second quarter of 2021. This service charge income was $0.8 million higher, or 14% in the first six months of 2022, as compared to the same period in 2021. These increases in the quarterly and year-to-date comparisons are primarily a result of increased analysis fees and overdraft income. Overdraft fees and returned check charges increased $0.2 million to $1.4 million for the second quarter of 2022 and increased $0.4 million to $2.7 million for the first six months of 2022.

Noninterest Expense

Total noninterest expense increased by $1.9 million, or 9%, in the second quarter of 2022 relative to the second quarter of 2021, and by $1.8 million, or 4%, in the first six months of 2022 as compared to the first six months of 2021.

Salaries and Benefits were $1.3 million, or 13%, higher in the second quarter of 2022 as compared to the second quarter of 2021 and $2.0 million, or 9% higher for the first six months of 2022 compared to the same period in 2021. The reason for this increase is primarily due to increased salary expense due to the strategic hiring of lending and management staff for both the quarterly and year-to-date comparisons.

Occupancy expenses were $0.2 million lower for the second quarter of 2022 as compared to the same quarter in 2021 and $0.4 million lower for the first half of 2022 as compared to the first half of 2021. The primary reason for this decrease was from a decrease in premises depreciation due to the sale of a branch building which was closed in the third quarter of 2021.

Other noninterest expense increased $0.8 million, or 11% for the second quarter 2022 as compared to the second quarter in 2021, and increased $0.2 million, or 2% for the first half of 2022 as compared to the same period in 2021. The variance for the second quarter of 2022 compared to the same period in 2021 was driven by a $0.7 million accrual for restitution payments to customers charged nonsufficient fund fees in the past five years for representments. This accrual was established after the FDIC published its position in how such representments are characterized for regulatory purposes. The Company also incurred higher costs of $0.3 million associated with postage and mailing of new account agreements to customers. Beginning in the third quarter of 2022, the Company will no longer charge customers for returned item fees, commonly referred to as nonsufficient fund fees. In addition, the Company increased overdraft privilege for both commercial and consumer customers but will limit the number of daily overdraft fees to four per day (previously five per day) and will no longer charge a fee for continuous overdrafts (previously a $35 charge after the 10^th consecutive day an account is in an overdraft position). These changes to our nonsufficient fund fees, overdraft fees and overdraft privilege program are not expected to have a material impact on deposit fee income.

In addition, there was a $0.4 million increase in recruitment costs associated with new lending teams and management staff. For the quarterly and year-to-date comparisons, decreases in deferred compensation expense for directors, which is linked to the changes in life insurance income, partially offset the increases.

The Company's provision for income taxes was 26.3% of pre-tax income in the second quarter of 2022 relative to 25.3% in the second quarter of 2021, and 26.6% of pre-tax income for the first half of 2022 relative to 25.4% for the same period in 2021. The increase in effective tax rate for both the quarterly and year-to-date comparisons is due to the volatility in the Corporate Owned Life Insurance asset value associated with our non-qualified deferred compensation plans. In the second quarter and first half of 2022, the investments associated with the non-qualified deferred compensation plans declined in value, resulting in a non-deductible expense as compared to an increase in value generating non-taxable income for the second quarter, and first half of 2021.

Balance Sheet Summary

Balance sheet changes during the first half of 2022 include an increase in total assets of $25.6 million, or 1%, primarily a result of a $32.9 million increase gross loan balances, a $52.3 million increase in investment securities, a $14.6 million increase in other equity investments, including Low Income Housing Tax Credit Funds, SBA loan funds and limited partnerships, a $28.3 million increase in deferred tax assets, and a $18.9 million increase in cash and due from banks. These changes were partially offset by a $114.6 million decrease in short term investments, primarily overnight investments.

The increase in gross loan balances as compared to December 31, 2021 was primarily a result of an increase in 1-4 family residential real estate loans, mostly from the purchase of $173.1 million in high quality jumbo mortgage loans and a $12.8 million organic increase in multi-family residential loans. Counterbalancing these positive variances were loan paydowns and maturities resulting in net declines in many categories even with higher loan production. In particular, there was a $20.4 million net decrease in construction loans, a $9.9 million net decline in commercial real estate loans, a $37.0 million net reduction in commercial and industrial loans, a $43.0 million unfavorable change in mortgage warehouse line utilization, and a $10.2 net decline in agricultural loans. Further, SBA PPP loan forgiveness resulted in a $23.6 million decline in loan balances, included in the commercial and industrial variance noted above.

As indicated in the loan roll forward below, new credit extended for the second quarter of 2022, increased $97.0 million over the linked quarter to $119.6 million and increased $97.9 million over the same period in 2021. This organic loan growth is attributable to the new agricultural and commercial real estate lending teams added earlier this year. Contributing to our organic growth, loans purchased totaled $173.1 million, however we had $201.8 million in loan paydowns and maturities, along with a $43.0 million decrease in mortgage warehouse line utilization and a $37.4 million decrease in line of credit utilization.


LOAN ROLLFORWARD
(Dollars in Thousands, Unaudited)
	For the three months ended:									For the six months ended:
		June 30, 2022			March 31, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Gross loans beginning balance	$	1,983,331		$	1,989,726		$	2,288,468		$	1,989,726		$	2,463,111
New credit extended		119,553			22,543			21,698			142,096			88,294
Loan purchases		46,364			126,718			—			173,082			—
Changes in line of credit utilization		(17,837	)		(19,553	)		(17,071	)		(37,390	)		(39,657	)
Change in mortgage warehouse		956			(44,005	)		(37,588	)		(43,049	)		(157,327	)
Pay-downs, maturities, charge-offs and amortization⁽¹⁾		(109,705	)		(92,098	)		(110,711	)		(201,803	)		(209,625	)
Gross loans ending balance		2,022,662			1,983,331			2,144,796			2,022,662			2,144,796
Deferred costs and (fees), net		(1,081	)		(1,200	)		(3,835	)		(1,081	)		(3,835	)
Loans, net of deferred costs and (fees)	$	2,021,581		$	1,982,131		$	2,140,961		$	2,021,581		$	2,140,961

(1)	Includes $1.6 million from the sale of a performing loan during the second quarter of 2022.

Unused commitments, excluding mortgage warehouse and overdraft lines, were $199.4 million at June 30, 2022, compared to $242.3 million at December 31, 2021. Total line utilization, excluding mortgage warehouse and consumer overdraft lines, was 61.2% at June 30, 2022 and 61.0% at December 31, 2021. Mortgage warehouse utilization declined significantly to 12% at June 30, 2022, as compared to 28% at December 31, 2021. It should be noted that approximately $278.0 million of the mortgage warehouse lines were moved to repurchase agreement lines that provide stronger credit protection to the Company, as well as more favorable regulatory capital treatment as these repurchase lines are not considered off-balance sheet commitments.

PPP loans continue to decline as borrowers receive forgiveness on these loans. There were 107 loans for $8.2 million outstanding at June 30, 2022, compared to 440 loans for $31.8 million at December 31, 2021.

Deposit balances reflect growth of $69.4 million, or 2%, during the first six months of 2022. Core non-maturity deposits increased by $63.5 million, or 3%, while customer time deposits increased by $5.9 million, or 2%. Wholesale brokered deposits were unchanged at $60.0 million. Overall noninterest-bearing deposits as a percent of total deposits at June 30, 2022, increased to 39.3%, as compared to 39.0% at December 31, 2021. Other interest-bearing liabilities of $202.6 million on June 30, 2022 consisted of $118.0 million in customer repurchase agreements, $35.4 million in trust preferred securities and $49.2 million in subordinated debentures.

The Company continues to have substantial liquidity. At June 30, 2022, and December 31, 2021, the Company had the following sources of primary and secondary liquidity (Dollars in Thousands):


Primary and secondary liquidity sources		June 30, 2022		December 31, 2021
Cash and cash equivalents	$	161,875	$	257,528
Unpledged investment securities		839,833		806,132
Excess pledged securities		38,245		47,024
FHLB borrowing availability		830,615		787,519
Unsecured lines of credit		305,000		305,000
Funds available through fed discount window		32,762		50,608
Totals	$	2,208,330	$	2,253,811

Total capital of $299.0 million at June 30, 2022 reflects a decrease of $63.4 million, or 18%, relative to year-end 2021. The decrease in equity during the first half of 2022 was due to the addition of $16.6 million in net income, offset by a $61.6 million unfavorable swing in accumulated other comprehensive income/loss due principally to changes in investment securities' fair value, a one-time adjustment from the implementation of CECL on January 1, 2022 for $7.3 million, $4.9 million in share repurchases and net of $7.0 million in dividends paid. The remaining difference is related to stock options exercised and restricted stock compensation recognized during the quarter.

The Company's strong liquidity position enabled the transfer of $162.1 million of "available-for-sale" investment securities to "held-to-maturity" classification effective April 1, 2022. The transfer was initiated to reduce the effect of future rate increases on the available-for-sale portfolio, mark-to-market adjustments, comprehensive income and equity.

Asset Quality

Total nonperforming assets, comprised of nonaccrual loans and foreclosed assets, increased by $25.1 million to $29.7 million for the first half of 2022. The Company's ratio of nonperforming loans to gross loans increased to 1.47% at June 30, 2022 from 0.23% at December 31, 2021. The increase resulted from an increase in non-accrual loan balances, primarily as a result of a downgrade in the first quarter of 2022 of one loan relationship in the dairy industry consisting of four separate loans. All the Company's nonperforming assets are individually evaluated for credit loss quarterly and management believes the established allowance for credit loss on such loans is appropriate.

The Company's allowance for credit losses on loans and leases was $22.8 million at June 30, 2022, as compared to $14.3 million at December 31, 2021. The $8.5 million increase in the allowance for credit losses on loans and leases during the first half of 2022 is due to a $9.5 million one-time adjustment from the implementation of CECL on January 1, 2022, a $3.1 million provision for credit losses on loans and leases, and net loan charge-offs of $4.1 million. In the second quarter of 2022, net loan charge-offs were $2.3 million, including $1.6 million from the sale of a performing loan during the quarter. Such loan was an office building that had previously had interest deferred under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Included in the charge-off was $0.7 million of deferred interest that was not contractually due at the time of sale. Given the potential of a prolonged work-out process with the customer, management determined that the best long-term course of action would be sell this loan rather than waiting for it to become noncurrent and begin a foreclosure process.

The allowance was 1.13% of gross loans at June 30, 2022, and 0.72% of gross loans at December 31, 2021. Management's detailed analysis indicates that the Company's allowance for credit losses on loans and leases should be sufficient to cover credit losses for the life of the loans and leases outstanding as of June 30, 2022, but no assurance can be given that the Company will not experience substantial future losses relative to the size of the loan and lease loss allowance.

About Sierra Bancorp

Sierra Bancorp is the holding Company for Bank of the Sierra (www.bankofthesierra.com), which is in its 45^th year of operations and is the largest independent bank headquartered in the South San Joaquin Valley. Bank of the Sierra is a community-centric regional bank, which offers a broad range of retail and commercial banking services through full-service branches located within the counties of Tulare, Kern, Kings, Fresno, Ventura, San Luis Obispo, and Santa Barbara. The Bank also maintains an online branch and provides specialized lending services through an agricultural credit center in Templeton, California, an SBA center, and a dedicated loan production office in Roseville, California. In 2022, Bank of the Sierra was recognized as one of the strongest and top-performing community banks in the country, with a 5-star rating from Bauer Financial.

Forward-Looking Statements

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 local economies, the Company's ability to attract and retain skilled employees, customers' service expectations, the Company's ability to successfully deploy new technology, the success of acquisitions and branch expansion, changes in interest rates, loan portfolio performance, and other factors detailed in the Company's SEC filings, including the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's most recent Form 10‑K and Form 10‑Q.


STATEMENT OF CONDITION
(Dollars in Thousands, Unaudited)

ASSETS		6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
Cash and due from banks	$	161,875		$	253,534		$	257,528		$	422,350		$	373,902
Investment securities
Available-for-sale, at fair value		864,178			1,025,032			973,314			732,312			607,474
Held-to-maturity, at amortized cost, net of allowance for credit losses		161,399			-			-			-			-
Real estate loans
1-4 family residential construction		5,542			8,800			21,369			34,720			37,165
Other construction/land		20,816			24,633			25,299			25,512			27,682
1-4 family - closed-end		429,109			398,871			289,457			220,240			106,599
Equity lines		25,260			23,389			26,588			31,341			33,334
Multi-family residential		66,367			59,711			53,458			55,628			58,230
Commercial real estate - owner occupied		312,060			331,764			334,446			345,116			359,021
Commercial real estate - non-owner occupied		898,159			857,051			882,888			995,921			1,048,153
Farmland		101,675			98,865			106,706			124,446			125,783
Total real estate loans		1,858,988			1,803,084			1,740,211			1,832,924			1,795,967
Agricultural production loans		28,660			31,663			33,990			43,296			42,952
Commercial and industrial		72,616			87,173			109,791			132,292			150,632
Mortgage warehouse lines		58,134			57,178			101,184			126,486			150,351
Consumer loans		4,264			4,233			4,550			4,828			4,894
Gross loans and leases		2,022,662			1,983,331			1,989,726			2,139,826			2,144,796
Deferred loan and lease fees		(1,081	)		(1,200	)		(1,865	)		(2,612	)		(3,835	)
Allowance for credit losses on loans and leases		(22,802	)		(22,530	)		(14,256	)		(15,617	)		(16,421	)
Net loans and leases		1,998,779			1,959,601			1,973,605			2,121,597			2,124,540

Bank premises and equipment		22,937			23,239			23,571			24,490			25,949
Other assets		187,467			157,448			142,996			141,990			140,183
Total assets	$	3,396,635		$	3,418,854		$	3,371,014		$	3,442,739		$	3,272,048

LIABILITIES AND CAPITAL
Noninterest demand deposits	$	1,120,413		$	1,104,691		$	1,084,544		$	1,111,411		$	1,073,833
Interest-bearing transaction accounts		736,034			776,457			744,553			765,823			752,137
Savings deposits		482,140			480,178			450,785			451,248			435,076
Money market deposits		152,596			149,918			147,793			141,348			133,977
Customer time deposits		299,816			293,699			293,897			290,816			295,891
Wholesale brokered deposits		60,000			60,000			60,000			60,000			85,000
Total deposits		2,850,999			2,864,943			2,781,572			2,820,646			2,775,914

Long-term debt		49,173			49,151			49,141			49,221			-
Subordinated debentures		35,392			35,347			35,302			35,258			35,213
Other interest-bearing liabilities		118,014			107,760			106,937			92,553			70,535
Total deposits and interest-bearing liabilities		3,053,578			3,057,201			2,972,952			2,997,678			2,881,662

Allowance for credit losses on unfunded loan commitments		893			1,040			203			203			193
Other liabilities		43,117			34,922			35,365			80,351			32,464
Total capital		299,047			325,691			362,494			364,507			357,729
Total liabilities and capital	$	3,396,635		$	3,418,854		$	3,371,014		$	3,442,739		$	3,272,048

GOODWILL AND INTANGIBLE ASSETS
(Dollars in Thousands, Unaudited)
		6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
Goodwill	$	27,357		$	27,357		$	27,357		$	27,357		$	27,357
Core deposit intangible		2,769			3,022			3,275			3,527			3,780
Total intangible assets	$	30,126		$	30,379		$	30,632		$	30,884		$	31,137

CREDIT QUALITY
(Dollars in Thousands, Unaudited)
		6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
Non-accruing loans	$	29,745		$	30,446		$	4,522		$	6,788		$	7,276
Foreclosed assets		2			93			93			93			774
Total nonperforming assets	$	29,747		$	30,539		$	4,615		$	6,881		$	8,050

Performing TDR's (not included in NPA's)	$	4,714		$	4,568		$	4,910		$	5,509		$	10,774
Net (recoveries) / charge offs	$	4,056		$	1,778		$	(168	)	$	(329	)	$	(533	)

Past due & still accruing (30-89)	$	1,037		$	2,809		$	2,013		$	380		$	3,197

Non-performing loans to gross loans		1.47	%		1.54	%		0.23	%		0.32	%		0.34	%
NPA's to loans plus foreclosed assets		1.47	%		1.54	%		0.23	%		0.32	%		0.38	%
Allowance for credit losses on loans and leases to loans		1.13	%		1.14	%		0.72	%		0.73	%		0.77	%

SELECT PERIOD-END STATISTICS
(Unaudited)
		6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
Shareholders' equity / total assets		8.8	%		9.5	%		10.8	%		10.6	%		10.9	%
Gross loans / deposits		70.9	%		69.2	%		71.5	%		75.9	%		77.3	%
Noninterest-bearing deposits / total deposits		39.3	%		38.6	%		39.0	%		39.4	%		38.7	%


CONSOLIDATED INCOME STATEMENT
(Dollars in Thousands, Unaudited)		For the three months ended:									For the six months ended:
		6/30/2022			3/31/2022			6/30/2021			6/30/2022			6/30/2021
Interest income	$	28,206		$	26,081		$	28,092		$	54,287		$	57,550
Interest expense		1,621			1,325			903			2,945			1,806
Net interest income		26,585			24,756			27,189			51,342			55,744

Provision / (benefit) for credit losses on loans and leases		2,548			600			(2,100	)		3,148			(1,850	)
Benefit for credit losses on unfunded loan commitments		(147	)		(94	)		-			(241	)		-
Provision for credit losses on held-to-maturity securities		18			-			-			18			-
Net interest income after provision		24,166			24,250			29,289			48,417			57,594

Service charges		3,204			3,040			2,725			6,245			5,491
BOLI (expense) income		(582	)		(645	)		814			(1,228	)		1,397
Gain on sale of investments		-			1,032			-			1,032			-
Other noninterest income		7,817			2,636			3,073			10,453			6,554
Total noninterest income		10,439			6,063			6,612			16,502			13,442

Salaries and benefits		11,745			11,805			10,425			23,550			21,576
Occupancy expense		2,406			2,294			2,626			4,699			5,112
Other noninterest expenses		7,962			6,074			7,184			14,037			13,818
Total noninterest expense		22,113			20,173			20,235			42,286			40,506

Income before taxes		12,492			10,140			15,666			22,633			30,530
Provision for income taxes		3,288			2,733			3,958			6,022			7,744
Net income	$	9,204		$	7,407		$	11,708		$	16,611		$	22,786

*TAX DATA*
Tax-exempt muni income	$	1,854		$	1,726		$	1,517		$	3,581		$	2,967
Interest income - fully tax equivalent	$	28,699		$	26,540		$	28,495		$	55,239		$	58,339

PER SHARE DATA
(Unaudited)		For the three months ended:									For the six months ended:
		6/30/2022			3/31/2022			6/30/2021			6/30/2022			6/30/2021
Basic earnings per share	$	0.62		$	0.49		$	0.77		$	1.11		$	1.49
Diluted earnings per share	$	0.61		$	0.49		$	0.76		$	1.10		$	1.48
Common dividends	$	0.23		$	0.23		$	0.21		$	0.46		$	0.42

Weighted average shares outstanding		14,931,701			15,021,138			15,243,698			14,976,774			15,242,451
Weighted average diluted shares		15,004,017			15,120,990			15,375,825			15,063,804			15,365,966

Book value per basic share (EOP)	$	19.82		$	21.59		$	23.21		$	19.82		$	23.21
Tangible book value per share (EOP)	$	17.82		$	19.58		$	21.19		$	17.82		$	21.19

Common shares outstanding (EOP)		15,090,792			15,086,032			15,410,763			15,090,792			15,410,763

KEY FINANCIAL RATIOS
(Unaudited)		For the three months ended:									For the six months ended:
		6/30/2022			3/31/2022			6/30/2021			6/30/2022			6/30/2021
Return on average equity		11.68	%		8.64	%		13.29	%		10.10	%		13.11	%
Return on average assets		1.07	%		0.88	%		1.42	%		0.98	%		1.41	%
Net interest margin (tax-equivalent)		3.40	%		3.21	%		3.60	%		3.31	%		3.76	%
Efficiency ratio (tax-equivalent)⁽¹⁾		59.19	%		67.08	%		58.79	%		62.70	%		57.57	%
Net charge offs (recoveries) to avg loans (not annualized)		0.11	%		0.09	%		(0.01	)%		0.20	%		(0.02	)%

⁽¹⁾

Noninterest expense as a percentage of the sum of net interest income and noninterest income excluding net gains (losses) from securities

NON-GAAP FINANCIAL MEASURES
(Unaudited)
		6/30/2022			3/31/2022			6/30/2021
Total stockholders' equity	$	299,047		$	325,691		$	357,729
Less: goodwill and other intangible assets		30,126			30,379			31,137
Tangible common equity	$	268,921		$	295,312		$	326,592

Total assets	$	3,396,635		$	3,418,854		$	3,272,048
Less: goodwill and other intangible assets		30,126			30,379			31,137
Tangible assets	$	3,366,509		$	3,388,475		$	3,240,911

Common shares outstanding		15,090,792			15,086,032			15,410,763

Book value per common share	$	19.82		$	21.59		$	23.21
Tangible book value per common share	$	17.82		$	19.58		$	21.19
Equity ratio - GAAP (total stockholders' equity / total assets		8.80	%		9.53	%		10.93	%
Tangible common equity ratio (tangible common equity / tangible assets)		7.99	%		8.72	%		10.08	%

NONINTEREST INCOME/EXPENSE
(Dollars in Thousands, Unaudited)
		For the three months ended:									For the six months ended:
Noninterest income:		6/30/2022			3/31/2022			6/30/2021			6/30/2022		6/30/2021
Service charges on deposit accounts	$	3,204		$	3,040		$	2,725		$	6,245		$	5,491
Debit card fees		2,161			2,056			2,235			4,218			—
Bank-owned life insurance		(582	)		(645	)		814			(1,228	)		1,397
Other service charges and fees		732			696			993			1,462			5,611
Gain on sale of securities		—			1,032			—			1,032			—
Loss on tax credit investment		(113	)		(113	)		(114	)		—			—
Other		5,037			(3	)		(41	)		4,773			943
Total noninterest income	$	10,439		$	6,063		$	6,612		$	16,502		$	13,442
As a % of average interest earning assets⁽¹⁾		1.31	%		0.77	%		0.86	%		1.04	%		0.89	%

Noninterest expense:
Salaries and employee benefits	$	11,745		$	11,805		$	10,425		$	23,550		$	21,576
Occupancy costs
Furniture & equipment		511			454			453			964			905
Premises		1,895			1,840			2,173			3,735			4,207
Advertising and marketing costs		449			406			292			855			612
Data processing costs		1,525			1,485			1,513			3,010			2,939
Deposit services costs		2,417			2,245			2,282			4,662			4,350
Loan services costs
Loan processing		186			111			65			297			234
Foreclosed assets		92			(5	)		(10	)		87			98
Other operating costs
Telephone & data communications		377			444			668			821			1,048
Postage & mail		223			56			109			279			193
Other		1,447			419			337			1,868			799
Professional services costs
Legal & accounting services		673			546			682			1,219			1,125
Other professional service		259			143			1,004			402			1,899
Stationery & supply costs		116			85			73			201			151
Sundry & tellers		198			139			169			336			370
Total noninterest expense	$	22,113		$	20,173		$	20,235		$	42,286		$	40,506
As a % of average interest earning assets⁽¹⁾		2.78	%		2.57	%		2.64	%		2.67	%		2.68	%
Efficiency ratio ⁽²⁾⁽³⁾		59.19	%		67.08	%		58.79	%		62.70	%		57.58	%

(1)	Annualized
(2)	Tax equivalent
(3)	Noninterest expense as a percentage of the sum of net interest income and noninterest income excluding net gains (losses) from securities and bank owned life insurance income.

AVERAGE BALANCES AND RATES

(Dollars in Thousands, Unaudited)

For the quarter ended

Sierra Bancorp Reports Financial Results for Second Quarter and First Six Months of 2022