With an improving earnings picture and a solid outlook for the industry, this Zacks Rank #1 (Strong Buy) bank could be an interesting pick for your portfolio.

About the Company

Sierra Bancorp (BSRR) 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

For the second quarter of 2013, Sierra reported a net income of $3.8 million, up 48%, from the second quarter of 2012. On a per share basis, earnings were $0.27 in Q2 2013, up from $0.18 in Q2 2012 and almost double of the Zacks consensus estimate of $0.14 per share.

The increase was primarily the result of lower credit-related costs, which was somewhat offset by a decline in net interest income and higher compensation expense.

The Company's ROA was 1.09% in the second quarter of 2013, up from 0.76% in the prior-year quarter. ROE also increased to 8.62% from 6.02% during the same period last year.

Strong Capital Position; Increasing Dividends and Buybacks

The bank’s capital ratios remained very strong as of the end of the second quarter, with total risk-based capital ratio at 20.87%, tier one risk-based capital ratio at 19.62% and tier one leverage ratio at 13.82%.

Last month, the company announced its regular quarterly cash dividend of $0.07 per share, up $0.01 per share, or 17% from $0.06 per share. Earlier this year, the company had announced the reactivation of its stock repurchase program and increased the number of shares authorized for repurchase to 700,000, or 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 September 2013 quarter and the fiscal year 2013. Zacks consensus estimates for the third quarter and the fiscal year 2013 now stand at $0.17 and $0.78 per share, up from $0.15 and $0.63 per share, 30 days ago.

Solid Industry Outlook

Banks are in a great position to benefit from the current environment of rising long-term rates and steepening yield curve. Further 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