SIERRA BANCORP

The Company sets aside a provision for income taxes on a monthly basis. The amount of that provision is deter­mined by first applying the Company’s statutory income tax rates to estimated taxable income, which is pre-tax book income adjusted for permanent dif­ferences, and then subtracting available tax credits. Permanent differences include but are not limited to tax-exempt interest income, BOLI income, and certain book expenses that are not allowed as tax deductions. Tax credits consist primarily of those generated by investments in low-income housing tax credit funds. The Company's provision for income taxes was 25.8% of pre-tax income in the first quarter of 2025, relative to 26.3% in the first quarter of 2024. The variance in the effective tax rate, is due to fluctuations in tax credits and related amortization, as well as tax-exempt income as a percentage of total taxable income.