SIERRA BANCORP

A distribution of the Company’s loans showing the balance and percentage of loans by type is presented for the noted periods in the table below. The balances in the table are after deferred or unamortized loan origination, extension, or commitment fees, and deferred origination costs. While not reflected in the loan totals and not currently comprising a material segment of our lending activities, the Company also occasionally originates and sells, or participates out portions of loans to non-affiliated investors.

Loan Distribution

Gross loans at $2.2 billion, increased $144.4 million or 7% during the first six months of 2024. There was a $158.1 million favorable change in mortgage warehouse lines, a $13.5 million increase in agricultural real estate loans, offset by unfavorable loan variances in all other loan categories, the largest of which was a $27.0 million decrease in other non-agricultural real estate loans.

As indicated in the loan roll forward table below, new credit extended for the second quarter of 2024, increased $5.3 million, and increased $3.3 million year-to-date 2024, over the same period in 2023. Loan growth, excluding mortgage warehouse lines, has been slower in 2024 due to competitive pressures in our market and lower loan demand in the current interest rate environment. The increase of $70.5 million in mortgage warehouse line utilization, was due in part to a $186.0 million increase in mortgage warehouse commitments for the first half of 2024, and subsequent utilization of those lines.

Over the past several years, the Company has strategically focused on reducing concentrations in commercial real estate, especially amongst areas management deemed to be higher risk such as construction, office real estate, and hospitality. At June 30, 2024, the total regulatory CRE concentration ratio of total CRE over Tier 1 Capital plus allowance was 241% as compared to 243% at December 31, 2023 and 243% at June 30, 2023. Further, the overall level of construction and land development lending had declined to 1% of regulatory capital plus allowance for credit losses at June 30, 2024. At June 30, 2024, our non-owner occupied commercial real estate includes $303 million of retail; $152 million of warehouse/industrial; $177 million of office; and $181 million of hospitality. Approximately 5% of the office real estate matures in less than two years.

Unused commitments, excluding mortgage warehouse and overdraft lines, were $247.1 million at June 30, 2024, compared to $203.6 million at December 31, 2023. Total utilization excluding mortgage warehouse and overdraft lines was 57% at June 30, 2024, compared to 62% at December 31, 2023. Mortgage warehouse utilization increased to 54% at June 30, 2024, compared to 36% at December 31, 2023. The increase in mortgage warehouse utilization during the first half of 2024 was due to $186.0 million in new mortgage warehouse lines and subsequent utilization of those lines.

It should be noted that the mortgage warehouse lines were moved to repurchase agreement lines in 2022 and 2023. The repurchase agreement structure provides stronger credit protection to the Company, as well as more favorable regulatory capital treatment as these repurchase lines are not considered off-balance sheet commitments as they are unconditionally cancellable.

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