Analyts have raised their estimates for Sierra after a solid third quarter earnings report, sending the stock back to Zacks Rank # 1 (Strong Buy) on October 25, 2013.
About the Company
Sierra Bancorp (BSRR - Free Report) is the parent of Bank of the Sierra, which it acquired in August 2001. Bank of the Sierra offers a full range of retail and commercial banking services, primarily in the central and southern sections of the San Joaquin Valley. The company has 25 branch offices and more than 400 employees.
Excellent Results and Improving Fundamentals
Sierra reported its Q3 2013 results on October 21, 2013. Net income for the quarter came in at $3.4 million, up more than 100% from the prior-year quarter. The increase was primarily the result of a reduction in loan loss provisions, offset partly by a decline in the net interest income. ROA for the quarter increased to 0.97%, from 0.46% in Q3 2012, while ROE also increased to 7.60% from 3.74%.
Earnings per share increased to $0.23 from $0.12 in the prior-year quarter. The ratio of nonperforming assets to total assets improved to 4.76% at September 30, 2013, from 6.01% as of the end of prior-year quarter.
Strong Capital Position; Returning Cash to Shareholders
The bank has a very strong capital position with Tier I Capital Ratio at 19.75%, up from 18.70% as of the end of the same quarter last year. They had increased their dividend last quarter.
Including dividends paid by Bank of the Sierra prior to the formation of Sierra Bancorp; the company has paid regular cash dividends to shareholders every year since 1987. Earlier this year, the company had reactivated its stock repurchase program with the current authorization at 5% of total outstanding shares.
Positive Earnings Estimates Revisions
As a result of improving outlook for the company, analysts have been revising their estimates for the December 2013 quarter and the fiscal year 2013. Zacks consensus estimates for the fourth quarter and the fiscal year 2013 now stand at $0.22 and $0.88 per share, up from $0.17 and $0.78 per share, 30 days ago.
Solid Industry Outlook
Small regional banks are in a great position to benefit from rising long-term rates and steepening yield curve. Furthermore, as a result of stringent regulations and increased oversight, most banks now have much better capital and liquidity position compared to the position a few years ago. Financials have been one of the best-performing sectors this year, and the situation is likely to continue in the coming months.
The Bottom Line
BSRR is a Zacks Rank No. 1 (Strong Buy) stock. It also has a longer-term Zacks recommendation of "Outperform." Additionally, a Zacks Industry rank of 14 out of 265 indicates a strong likelihood of continued strength in the short to medium term, compared with other industries.
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