Sierra Bancorp (BSRR) Q4 2005 earnings summary

Executive summary

• Record 2005 net income of $16.2 million, up 21% YoY; basic EPS rose to $1.66 from $1.41.

• Q4 net income was $4.336 million and diluted EPS was $0.42.

• Earnings growth was led by higher net interest income and improved credit quality, while non-interest income declined and operating expenses increased.

Financial highlights

• Net interest income rose 17% to $51.0 million; total interest income was $64.4 million and non-interest income was $9.0 million.

• Income before taxes was $24.3 million; net income was $16.194 million versus $13.346 million in 2004.

• Total assets increased 6% to $1.053 billion; deposits rose 10% to $815.7 million and gross loans and leases grew 6% to $741.4 million.

• Non-interest income fell 8% to $9.02 million; operating expense increased 11% to $32.6 million, including $550,000 in OREO write-downs and $200,000 in prior-year SOX 404 audit costs.

Outlook and guidance

• Net interest margin may compress if short-term rates stop rising; net interest income is expected to grow if loans and core deposits expand as planned.

• Management expects 2006 marketing costs not to increase, following a one-time 2005 promotion; this expectation is not assured.

• Future dividends are expected at 30%–35% of prior-year net earnings, subject to earnings, growth needs, and regulatory and legal limits.

• A Delano branch was expected to open in Q3 2006; Bakersfield began operations in February 2006.