SIERRA BANCORP

Net interest income was $30.6 million for the first quarter of 2026, a $0.5 million increase, or 2% over the first quarter of 2025. Interest expense decreased $0.8 million compared to the first quarter of 2025, primarily due to a reduction in the cost of interest‑bearing liabilities and a modest decline in average interest‑bearing liability balances. The cost of interest‑bearing liabilities decreased approximately 21 basis points, while average interest‑bearing liabilities increased by $74.4 million. Although average interest‑earning assets increased $42.7 million during the period, the yield on those assets declined by approximately 9 basis points compared to the first quarter of 2025, partially offsetting the favorable impact from lower funding costs.

The Company had $1.8 billion in adjustable and variable rate loans and $232.6 million in floating rate bonds, as compared to $227.0 million in floating rate CDs and $36.1 million in floating rate trust preferred securities at March 31, 2026. The adjustable-rate loans have repricing frequencies ranging from 30-days to 10-years. Of the $1.8 billion in adjustable and variable rate loans, $797.4 million reprice or mature in the next twelve months. In addition, there were $513.3 million of fixed-term deposits that reprice or mature within twelve months. Based on current rates of the $797.4 million in adjustable and variable rate loans that reprice or mature over the next twelve months, $197.6 million, or 25%, have a pricing index rate higher than the current index, while $49.0 million, or 6%, have a pricing index rate lower than the current index. The remaining balance of $550.8 million in loans are priced at the current index rate or are expected to mature.

Net interest margin was 3.75% for the first quarter of 2026, as compared to 3.74% for the first quarter of 2025. Compared to the first quarter of 2025, the net interest margin increased one basis point, reflecting the benefit of lower funding costs, partially offset by modest pressure on asset yields. The cost of average total deposits declined to 1.17%, from 1.33% in the first quarter of 2025, while the cost of interest-bearing liabilities declined to 1.94%, from 2.15%, reflecting improved funding mix and lower average balances of higher-cost deposits and borrowings.

Overall, the Company continues to benefit from continued lower cost funding, which was partially offset by lower yields on investment securities, as assets repriced in a lower rate environment, resulting in a stable net interest margin compared to the prior year. The level of net interest income recognized in any given period depends on a combination of factors including the average volume and yield for interest-earning assets, the average volume and cost of interest-bearing liabilities, and the mix of products which comprise the Company’s earning assets, deposits, and other interest-bearing liabilities.

The following tables show average balances for significant balance sheet categories and the amount of interest income or interest expense associated with each category for the noted periods. The tables also display calculated yields on each major component of the Company’s investment and loan portfolios, average rates paid on each key segment of the Company’s interest-bearing liabilities, and net interest margin for the noted periods.

Average Balances and Rates

The Volume and Rate Variances table below sets forth the dollar difference for the comparative periods in interest earned or paid for each major category of interest-earning assets and interest-bearing liabilities, and the amount of such change attributable to fluctuations in average balances (volume) or differences in average interest rates. Volume variances are equal to the increase or decrease in average balances multiplied by prior period rates, and rate variances are equal to the change in rates multiplied by prior period average balances. Variances attributable to both rate and volume changes, calculated by multiplying the change in rates by the change in average balances, have been allocated to the mix variance.

Volume & Rate Variances

The volume variance was favorable at $0.2 million, primarily driven by higher average loan balances, most notably within the mortgage warehouse portfolio, which contributed a favorable volume variance of $1.8 million. This was partially offset by lower average balances in investment securities, which resulted in an unfavorable volume variance of $0.6 million, as excess liquidity was redeployed and certain securities, including collateralized loan obligations, experienced pay‑downs.

The rate variance was a favorable $0.2 million, as favorable rate impacts on loans and interest‑bearing liabilities more than offset unfavorable rate variances on investment securities. Loan yields contributed positively to the rate variance, while interest‑bearing liabilities benefited from lower overall funding costs. These favorable impacts were partially offset by lower yields on variable‑rate investment securities.

The mix variance was a favorable $0.1 million, reflecting changes in the composition of interest‑earning assets and interest‑bearing liabilities, including growth in higher‑yielding loan categories and changes in funding mix.

Overall, the combined impact of these factors resulted in a $0.5 million increase in net interest income for the first quarter of 2026 compared to the prior‑year quarter.

Variances in interest expense were the result of changes discussed under the “Net Interest Income and Net Interest Margin” heading.