Sierra Bancorp (BSRR) Q4 2008 earnings summary

Executive summary

• FY08 net income was $13.4M, down 36% YoY; Q4 posted an operating loss and net loss of $1.9M amid sharply higher credit costs and deteriorating real estate values.

• Year-end assets rose 8% to $1.3B, driven mainly by deposit-funded securities growth; loans grew only 2%, while nonperforming assets climbed to $37.0M.

• Management’s 2009 focus: manage problem credits, generate core deposits, limit loan growth and retain staff through a difficult economy.

Financial highlights

• Net income was $13.4M vs. $21.0M in 2007; diluted EPS was $1.37 vs. $2.09.

• Net interest income increased less than 1% to $56.6M; provision for loan losses rose to $19.5M from $3.3M in 2007.

• Non-interest income rose 9% to $16.0M, led by deposit service charges up $3.4M; non-interest expense edged down to $35.9M.

• Q4 net loss was $1.9M, including a $13.6M loan-loss provision; Q4 2007 net income was $4.9M.

Outlook and guidance

• Minimal loan balance growth expected in 2009 as attention shifts to credit quality and core deposit generation.

• 2009 expected to remain difficult; plan is to retain the team, work through problem credits and enter 2010 stronger.

• Planned branch expansion included a second Tulare location, expected to open in Q3 2009, and a leased site in Selma.