Sierra Bancorp earns a record $15.3 million as a reserve reversal and a loan recovery lift the quarter

Sierra Bancorp, the Porterville, California-based parent of Bank of the Sierra, reported record quarterly net income of $15.3 million for the third quarter, or $1.18 per diluted share, against $9.7 million, or $0.72, a year earlier. The 58% increase leaned on a $2.0 million credit-loss benefit, after a $3.7 million expense a year earlier, and a $1.1 million recovery of interest on a nonperforming agricultural loan, while pre-tax pre-provision income rose 8.4% to $17.8 million.

Net income of $15.3 million compared with $9.9 million in the second quarter, a 54% increase, and diluted earnings per share rose to $1.18 from $0.77 sequentially and from $0.72 a year earlier, up 64%. Return on average assets was 1.66% and return on average equity 16.49%, against 1.04% and 10.81% in the third quarter of 2025.

A reserve reversal and one recovered loan carry the quarter

The swing came from credit. Credit loss expense on loans was a benefit of $2.0 million, against expense of $3.7 million a year earlier and $2.2 million in the second quarter — a $5.7 million swing against the year-ago line. The release traces the reversal to a lumber-industry agricultural production credit that carried a $2.5 million specific reserve set in the second quarter; the note was sold to another creditor, producing a $100,000 charge-off and cutting the allowance for credit losses on loans to $21.7 million, or 0.89% of gross loans, from $23.6 million at June 30.

Operating earnings grew far less. Net interest income rose $400,000, or 1%, to $32.4 million, including a $1.1 million recovery of interest on a separate nonperforming agricultural loan, and the tax-equivalent net interest margin widened to 3.91% from 3.78%. Noninterest income fell 4% to $7.7 million and noninterest expense fell 6% to $22.3 million, with 447 full-time equivalent employees against 476 a year earlier. Pre-tax pre-provision income rose 8.4% to $17.8 million and the efficiency ratio improved to 54.86% from 58.05%. Nine-month net income was $37.7 million, up 28% year over year, and diluted earnings per share rose 35% to $2.90.

Mortgage warehouse shrinks while commercial real estate grows

Total assets were $3.68 billion as of September 30, down $154.1 million, or 4%, from December 31, 2025, and gross loans fell $118.3 million, or 5%, to $2.43 billion over the same nine months, leaving them 2.5% below their year-earlier level. Mortgage warehouse facilities were the source of the contraction: the portfolio stood $158.0 million, or 30%, lower than at December 31, 2025, after the company said it "temporarily paused growth" in it to focus on enhanced controls as rate volatility rose. Commercial real estate balances rose $74.1 million over the same period and $75.3 million in the quarter; as of September 30, commercial real estate was 60% of loans and mortgage warehouse 15%.

New credit extended, excluding line and warehouse utilization, reached $123.7 million in the quarter against $49.4 million in the second quarter, which the release calls the highest quarterly level of loan production since the fourth quarter of 2020. Deposits rose $108.3 million, or 4%, to $2.98 billion since December 31, 2025, with noninterest-bearing balances of $1.06 billion, or 35.4% of deposits, and the cost of total deposits down to 1.19% from 1.30% in the third quarter of 2025. Total borrowed funds fell $268.3 million, or 52%, to $250.8 million from December 31, 2025, and asset quality improved: nonperforming loans were 0.38% of gross loans against 0.52% at year-end, and loans past due 30 to 89 days fell to $2.5 million from $6.8 million. Net charge-offs ran at 0.03% of average loans annualized for the nine months.

Capital eases as the dividend holds and buybacks stop

Capital ratios slipped from June 30 while the release described the position as solid. The tangible common equity ratio was 9.17% against 9.19%, shareholders' equity to total assets was 9.84% against 9.86%, and tangible book value per share was $25.79 against $26.19. An $18.6 million unfavorable move in accumulated other comprehensive income, tied to investment securities, weighed on equity, which totaled $361.7 million.

Share repurchases totaled $14.4 million for the nine months, the same figure the July release gave for the first half, implying little or no buyback activity in the third quarter; cash dividends declared were $10.3 million. The subsidiary bank's Community Bank Leverage Ratio was 12.43% and liquidity sources totaled $2.0 billion. The board declared a $0.27 dividend payable November 9, 2026.

The release carries no earnings or revenue guidance, no conference-call details and no date for fourth-quarter results, so the dividend payment is the next dated item. The number to test before then is mortgage warehouse: commitments rose $82.3 million, or 10.6%, over the nine months, most of it in the third quarter, so the pause should be visible in period-end balances.