SIERRA BANCORP

The following table provides details on the Company’s noninterest income and noninterest expense for the three and nine-month periods ended March 31, 2024, and 2023:

Noninterest Income/Expense

Noninterest Income:

Total noninterest income increased by $2.0 million, or 31%, in the first quarter of 2024 as compared to the same quarter in 2023. The variance was due to a $3.8 million gain on the sale of branch properties that were a part of our sale/leaseback transaction, a $1.0 million increase in BOLI income, a $0.3 million increase in service charges and fees on deposit accounts partially offset by a $2.9 million loss on the sale of lower yielding bonds that were part of a balance sheet restructure.

BOLI income increased by $1.0 million for the first quarter of 2024 as compared to the first quarter of 2023. The variance is due mostly to fluctuations in underlying values of assets in the separate account BOLI policies that are designed to have similar assets to those in the deferred compensation plans. Thus, the higher values in BOLI policies are offset by higher deferred compensation expense reflected primarily in director fees expense. At March 31, 2024, there was $41.9 million in traditional BOLI policies and $11.0 million in separate account BOLI policies associated with the deferred compensation plans.

In the “other” category of noninterest income there was a $0.3 million decrease in the first quarter of 2024 as compared to the first quarter of 2023. The quarterly comparison was negatively impacted by a decrease in life insurance proceeds and a decrease in OREO rental income, as all OREO properties were sold.

Noninterest Expense:

Total noninterest expense increased $1.5 million, or 7%, compared to the first quarter of 2023. The primary driver of higher expense in the first quarter of 2024 is deferred directors’ fees as part of the Company’s deferred compensation plan. The higher deferred compensation expense was offset by higher bank-owned life insurance income.

Salaries and Benefits were $0.4 million, or 3%, higher in the first quarter of 2024 as compared to the first quarter of 2023. The reason for this increase is primarily due to several factors, including merit increases for employees due to annual performance evaluations during the first quarter of 2024, higher payroll taxes in the first quarter. There were 487 full-time equivalent employees at March 31, 2024, as compared to 500 at March 31, 2023.

Occupancy expense was up $0.7 million for the first quarter of 2024 as compared to the same quarter last year. The reason for the increase is mostly due to increased rent expense from the sale/leaseback transaction in December 2023.

Other noninterest expense increased $0.5 million, or 6%, in the first quarter of 2024 as compared to the first quarter of 2023. The primary reason for the negative variance was increased directors deferred compensation expense which is linked to the fluctuation in BOLI income and increased FDIC assessment costs, although lower foreclosed asset operating costs and lower advertising expenses in mitigated some of this negative variance.