Sierra Bancorp (BSRR) Q4 2006 earnings summary

Executive summary

• FY06 net income reached a record $19.2 million, up $3.0 million, or 19%, from 2005; earnings rose in 23 of the prior 24 years.

• Growth in net interest income, fee income and lending supported results, while loan growth was funded partly by higher-cost wholesale borrowings.

• FY06 priorities included adding branches and digital services within the existing market footprint; a five-year strategic plan covers 2007–2011.

Financial highlights

• Net income was $19.2 million vs. $16.2 million in 2005; basic EPS was $1.96 vs. $1.66.

• Net interest income rose $4.8 million, or 10%, as average interest-earning assets grew $103 million, or 11%.

• Non-interest income increased $2.0 million, or 21%, driven mainly by deposit service charges, check-card interchange fees and operating lease income.

• Loan-loss provision was $3.9 million vs. $3.2 million in 2005, reflecting loan growth and greater uncertainty in certain classified loans.

• Operating expense rose $1.2 million, or 4%; salaries and benefits increased $1.1 million, or 7%, including $314,000 of stock-option expense.

Outlook and guidance

• The 2007–2011 strategic plan was approved; 2007 action plans were being developed to support continued growth within the existing geography.

• A consumer checking initiative launched in January 2007 could add up to $800,000 to 2007 operating expense, primarily marketing costs.

• Remote Deposit Capture was planned for a 1Q07 pilot, followed by broader rollout; online account opening and credit approval were also planned.

• Delano opened in March 2007; a fourth Bakersfield location was under consideration for late 2007, and a Selma site was being explored.

• Deposit initiatives targeted consumer and commercial growth in 2007, but planned increases were uncertain.