Earnings

Sierra Bancorp Reverses Lumber Reserve After Record Profit

The Tip Desk · November 8, 2026 · 4 min read

Third-quarter net income reached $15.3 million, or $1.18 a share, as a $2.5 million specific reserve was reversed and net interest income rose to $32.4 million.

Sierra Bancorp (BSRR), parent of Bank of the Sierra, reported third-quarter net income of $15.3 million, or $1.18 a share, up 54% from $9.9 million, or $0.77 a share, in the second quarter. Return on average assets rose to 1.66% from 1.09%, and return on average equity expanded to 16.49% from 10.90%.

The jump was driven primarily by a $4.3 million favorable swing in credit-loss expense on loans, a $2.0 million increase in net interest income, and a $1.2 million decline in noninterest expense, partly offset by a $0.9 million drop in noninterest income. Credit-loss expense on loans flipped to a $2.0 million benefit from $2.2 million of expense in the linked quarter. The company had established a $2.5 million specific reserve in the second quarter on a lumber-related agricultural loan; that credit was resolved in the third quarter through a sale of the note, recovering substantially all principal, accrued interest and fees, with a $0.1 million charge-off. The allowance for credit losses on loans fell to $21.7 million at September 30 from $23.6 million at June 30.

Net interest income rose $2.0 million, or 6%, to $32.4 million. Included was a $1.1 million recovery of previously unrecognized interest on a separate agricultural nonperforming loan that paid in full. The remainder came from higher earning-asset yields and balances while funding costs stayed relatively flat. Tax-equivalent net interest margin expanded 17 basis points to 3.91% from 3.74% in the second quarter. Average earning assets increased $19.4 million and the yield on those assets rose 15 basis points to 5.17%. The cost of interest-bearing liabilities remained unchanged at 1.92% as average balances of higher-cost overnight and short-term borrowings declined $89.0 million.

The company temporarily paused growth in mortgage warehouse lending amid elevated interest-rate volatility. Period-end mortgage warehouse balances fell $97.1 million during the quarter, but average warehouse balances declined only $20.8 million and related interest income fell $0.2 million. Commercial real estate balances increased $75.3 million, and average commercial and industrial balances rose 15% from the linked quarter. New credit excluding line-of-credit and warehouse utilization totaled $123.7 million, the highest quarterly production since the fourth quarter of 2020.

Noninterest expense decreased $1.2 million, or 5%, to $22.3 million, on a $0.9 million decline in deferred directors’ fee expense, a $0.4 million cut in salaries and benefits, and lower data-processing and deposit-service costs. The efficiency ratio improved to 54.86% from 58.91%. Noninterest income declined $0.9 million, or 10%, to $7.7 million, mainly a $1.3 million drop in separate-account life-insurance earnings, partly offset by a $0.2 million FHLB special dividend and a $0.1 million rise in service charges. Pre-tax pre-provision income increased $2.3 million, or 15%, to $17.8 million.

Total deposits increased $53.7 million to $2.98 billion from $2.93 billion at June 30. Noninterest-bearing deposits were $1.06 billion, or 35.4% of total, versus $1.03 billion, or 35.0%, at June 30. Other interest-bearing liabilities declined $250.7 million, or 83%, to $52.0 million from $302.7 million at year-end 2025 as overnight borrowings fell with the warehouse pause and deposit growth. Nonperforming assets declined to $9.3 million, or 0.38% of loans plus foreclosed assets, from $14.8 million, or 0.58%, at December 31, 2025; classified loans fell to $27.0 million from $31.4 million and past-due loans to $2.5 million from $6.8 million.

The subsidiary bank’s community bank leverage ratio was 12.43% at September 30, versus 13.25% at June 30. Tangible common equity ratio was 9.17% and tangible book value per share was $25.79. The company declared a $0.27 a share dividend payable November 9, 2026.

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