SIERRA BANCORP

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Sierra Bancorp

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Sierra Bancorp and its subsidiary (the Company) as of December 31, 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for the year ended December 31, 2023, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 15, 2024, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses – Loans and Leases

As described in Notes 2 and 4 to the financial statements, the Company’s allowance for credit losses totaled $23.5 million as of December 31, 2023. The allowance for credit losses is calculated under the expected credit loss model and is an estimate of life-of-loan and -lease losses.

The allowance for credit losses for loans and leases consists of a collective reserve evaluation for loans and leases with similar risk characteristics and an individual reserve evaluation for loans and leases without similar risk characteristics. The allowance for the collective reserve evaluation is derived from an estimate of expected loan and lease losses primarily using an expected loss methodology that incorporates certain risk characteristics using either the remaining life or discounted cash flow (DCF) methodology depending on the loan and lease portfolio segment.

The discounted cash flow quantitative reserve methodology incorporates the consideration of probability of default (PD) and loss given default (LGD) assumptions to estimate periodic losses, and LGD is derived from the application of the Frye-Jacobs theory which relates LGD to PD based on historical peer data. The Company uses a regression analysis that links historical losses of the Company and its peer group to national unemployment rates in order to calculate expected default rates. The expected default rates are then applied to expected monthly loan balances estimated through the consideration of contractual repayment terms and expected prepayments. The Company utilizes a four-quarter forecast period, after which the expected default rates revert to the historical average over a four-quarter reversion period on a straight-line basis. For the remaining life quantitative reserve method, the Company’s and peer group’s average historical losses are used to determine the loss rates, and the loss rates are applied to expected loan balances over an estimated remaining life of loans. The estimated remaining life is calculated using the Company’s historical attrition data. Reasonable and supportable forecasts of the national unemployment rate, real growth domestic product and the housing price index are considered through estimation of qualitative reserves on portfolios using the remaining life method.

The quantitative estimates are adjusted to incorporate considerations of current trends and conditions that are not captured in the quantitative credit loss estimates through the use of qualitative or environmental factors (qualitative factors). The qualitative reserve is calculated using a combination of numeric frameworks and management’s judgment in order to determine the risk categorization in each of the qualitative factor. The amount of qualitative reserves is also contingent upon the historical peer, life-of-loan equivalent, loss rate ranges and the relative weighting of qualitative factors according to management’s judgment.

The estimation of the allowance for credit losses involves many inputs and assumptions. These inputs and assumptions include, among others, the selection, evaluation and measurement of the reasonable and supportable forecasts and the qualitative factors discussed above, which require management to apply judgment and that are subject to change as forecasted economic events or internal assessments evolve.

We identified the determination and evaluation of the economic forecasts and qualitative factors of the allowance for credit losses as a critical audit matter because auditing the underlying assumptions and evaluation of the economic forecasts and qualitative factors used in the allowance for credit losses involved a degree of complexity and high degree of auditor judgment.

Our audit procedures related to management’s evaluation and establishment of the economic forecasts and qualitative factors in the allowance for credit losses included the following, among others:

/s/RSM US LLP

We have served as the Company's auditor since 2023.

San Francisco, California

March 22, 2024