SIERRA BANCORP

Net interest income was $30.7 million for the second quarter of 2025, a $0.5 million increase, or 2%, over the second quarter of 2024. This increase in net interest income for the quarterly comparison was due primarily to a 23 basis point decrease in interest expense on interest-bearing liabilities.

For the second quarter of 2025, although the balance of average interest-earning assets was $58.5 million higher, the yield was 20 basis points lower as compared to the same period in 2024. The primary reason for the decrease in yield came from variable rate investments, in the form of CLO, that had rate resets due to the 100 basis decline in the prime rate in late 2024, and CLO prepayments where the funds could not be reinvested at the original spread or similar rate. There was a 23 basis point decrease in the cost of interest-bearing liabilities for the same period, which had a greater impact than the lower yields on the interest-earning asset side of the balance sheet.

Net interest income for the comparative year-to-date periods increased $1.9 million. As with the quarterly comparison the decrease in the cost of interest-bearing liabilities was greater than the decrease in yield on interest-bearing assets. There was a $61.7 million, or 2%, increase in average interest-earning asset balances yielding 10 basis points lower for the same period, while average interest-bearing liability balances increased $1.7 million, yielding 20 basis points lower for the same period. The favorable net impact of the mix and rate change was a five basis point increase in our net interest margin for the six months ending June 30, 2025, as compared to the same period in 2024.

Interest expense was $12.1 million for the second quarter of 2025, a decrease of $1.3 million, relative to the second quarter of 2024. For the first six months of 2025, compared to the first six months of 2024, interest expense decreased $2.2 million, to $23.4 million. The decrease in interest expense for the quarterly comparison is primarily attributable to a $49.8 million average volume decrease in interest-bearing deposit balances and a 31 basis point decrease in interest rates paid on those balances. This positive variance was partially offset by $45.6 million in higher average balances of borrowed funds, combined with an 11 basis point increase in cost. There was a favorable shift in the deposit mix in the second quarter of 2025 as compared to the same period in 2024 with transaction accounts increasing $112.6 million while higher cost time and brokered deposits decreased. Higher cost customer time deposits decreased by $46.6 million, and wholesale brokered deposits decreased by $63.6 million. There was also a $10.5 million decrease in the average balance of savings and money market accounts. For the first half of 2025, as compared to the same period in 2024, customer time deposits and wholesale brokered deposits decreased $38.6 million, and $12.1 million respectively, while borrowed funds increased $5.5 million. Other deposits increased $74.2 million for the year-to-date comparison.

The Company had $1.7 billion in adjustable and variable rate loans and $359.7 million in floating rate bonds, as compared to $255.3 million in floating rate CDs and $35.9 million in floating rate trust preferred securities at June 30, 2025. The adjustable-rate loans have repricing frequencies ranging from 30-days to 10-years. Of the $1.7 billion in adjustable and variable rate loans, $751.8 million of such adjustable and variable rate loans reprice or mature in the next twelve months. In addition, there are $710.2 million of fixed-term deposits that reprice or mature within twelve months. Based on current rates, of the $751.8 million in adjustable and variable rate loans that reprice or mature over the next twelve months, $263.1 million, or 35%, have a pricing index rate higher than the current index, while $14.3 million, or 2%, have a pricing index rate lower than the current index. The remaining balance of $474.5 million are priced at the current index rate or are expected to mature.

The Company’s net interest margin was 3.68% for the second quarter of 2025, as compared to 3.69% for the second quarter of 2024. Although there was a 20 basis point decrease in the yield on interest earning assets, there was a 23 basis point

decrease in the cost of interest-bearing liabilities. The decrease in cost mitigated most of the decrease in yield on earning assets resulting in a one basis point decrease in net interest margin.

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 rate variance.

Volume & Rate Variances

The volume variance calculated for the second quarter of 2025 relative to the second quarter of 2024 was a favorable $0.5 million; this is primarily from the net impact of a favorable loan volume variance of $3.1 million augmented by a favorable rate reduction in interest bearing liabilities. There was an overall unfavorable rate and volume variance on investment securities, which mostly came from the variable rate investments, in the form of CLOs, partially offsetting the favorable variances in loans and interest-bearing liabilities. There was a modest favorable mix variance of $0.1 million. The

Company’s net interest margin for the second quarter of 2025 was 3.68%, as compared to 3.69% for the second quarter of 2024.

Average interest earning cash balances for the quarterly comparisons have decreased and have a positive impact on the net interest margin since cash balances have been earning approximately 4.7% and have been deployed into mortgage warehouse line advances yielding 7.01%. Average interest-earning cash and due from banks was $18.1 million, a decrease of $25.3 million for the second quarter of 2025 as compared to the same period last year.

Overall average investment securities decreased by $99.4 million for the second quarter of 2025, as compared to the same period in 2024, as paydowns and maturities, exceeded purchases, with the excess used to partially offset brokered deposit maturities. The overall investment portfolio had a tax-equivalent yield of 4.68% at June 30, 2025, with an average life of 5.99 years and average effective duration of 2.09 years for available-for-sale securities. Approximately $320.4 million of the investment securities reprice every 90 days and $80.1 million are subordinated debt with an initial fixed rate period of 5 years and floating thereafter.

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