COMMERCE BANCSHARES INC /MO/

Previous wording

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes and with the statistical information and financial data appearing in this report as well as the Company's 2024 Annual Report on Form 10-K. Results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of results to be attained for any other period.

Current wording

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes and with the statistical information and financial data appearing in this report as well as the Company's 2024 Annual Report on Form 10-K. Results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of results to be attained for any other period.

Previous wording

On June 16, 2025, the Company and FineMark Holdings, Inc. ("FineMark") announced they entered into a definitive merger agreement ("Merger Agreement") in which the Company will acquire all outstanding shares of FineMark in an all-stock transaction ("Merger"). Immediately after the merger, FineMark's wholly-owned subsidiary, FineMark National Bank & Trust will merge into the Bank ("Bank Merger"). FineMark is headquartered in Fort Meyers, Florida and has 13 banking offices in Florida, Arizona, and South Carolina. As of June 30, 2025, FineMark disclosed that it had total assets of $3.9 billion (including $2.6 billion in loans), $3.5 billion of total liabilities (including $3.1 billion in deposits), and $373 million of total shareholders' equity. Under the terms of the agreement, the shareholders of FineMark will receive a fixed exchange ratio of .690 shares of Company common stock for each share of FineMark common stock. The transaction is valued at approximately $585 million (with the price based on the closing price of the Company's common shares as of June 13, 2025, the last trading day before the public announcement of the merger). The transaction remains subject to regulatory approval, approval of FineMark shareholders and other customary closing conditions. Pending these approvals, the transaction is anticipated to close on January 1, 2026.

Current wording

On June 16, 2025, the Company and FineMark Holdings, Inc. ("FineMark") announced they entered into a definitive merger agreement ("Merger Agreement") in which the Company will acquire all outstanding shares of FineMark in an all-stock transaction ("Merger"). Immediately after the merger, FineMark's wholly-owned subsidiary, FineMark National Bank & Trust will merge into the Bank ("Bank Merger"). FineMark is headquartered in Fort Meyers, Florida and has 13 banking offices in Florida, Arizona, and South Carolina. As of June 30, 2025, FineMark disclosed that it had total assets of $3.9 billion (including $2.6 billion in loans), $3.5 billion of total liabilities (including $3.1 billion in deposits), and $373 million of total shareholders' equity. Under the terms of the agreement, the shareholders of FineMark will receive a fixed exchange ratio of .690 shares of Company common stock for each share of FineMark common stock. The transaction is valued at approximately $585 million (with the price based on the closing price of the Company's common shares as of June 13, 2025, the last trading day before the public announcement of the merger). The transaction has been approved by the Federal Reserve Bank of Kansas City, the Missouri Division of Finance, and FineMark shareholders. The transaction remains subject to customary closing conditions and is anticipated to close on January 1, 2026.

Previous wording

In connection with the acquisition, the Company incurred merger-related expenses consisting predominantly of professional services for investment banking, legal, and other services associated with the pending transaction that totaled $1.9 million in the second quarter of 2025.

Current wording

In connection with the acquisition, the Company incurred merger-related expenses consisting predominantly of professional services for investment banking, legal, and other services associated with the pending transaction that totaled $3.1 million through the third quarter of 2025.

Previous wording

For the quarter ended June 30, 2025, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $152.5 million, an increase of $12.9 million, or 9.3%, compared to the second quarter of the previous year. For the current quarter, the annualized return on average assets was 1.95%, the annualized return on average equity was 17.40%, and the efficiency ratio was 54.77%. Diluted earnings per common share was $1.14 per share in the current quarter, an increase of 10.7% compared to $1.03 per share in the second quarter of 2024, and increased 16.3% compared to $0.98 per share in the previous quarter.

Current wording

For the quarter ended September 30, 2025, net income attributable to Commerce Bancshares, Inc. (net income) amounted to $141.5 million, an increase of $3.5 million, or 2.5%, compared to the third quarter of the previous year. For the current quarter, the annualized return on average assets was 1.78%, the annualized return on average equity was 15.26%, and the efficiency ratio was 55.26%. Diluted earnings per common share was $1.06 per share in the current quarter, an increase of 5.0% compared to $1.01 per share in the third quarter of 2024, and decreased 7.0% compared to $1.14 per share in the previous quarter.

Previous wording

Compared to the second quarter of last year, net interest income increased $17.9 million, or 6.8%, mainly due to increases in interest income on investment securities and securities purchased under agreements to resell ("resale agreements") of $9.2 million and $6.1 million, respectively, partly offset by a decrease in interest income on loans of $7.0 million. Interest expense on deposits and interest expense on borrowings also decreased $11.0 million and $4.6 million, respectively. The provision for credit losses increased $129 thousand, or 2.4%, compared to the same quarter in the prior year. Non-interest income increased $13.4 million, or 8.8%, compared to the second quarter of 2024, mainly due to increases in trust fees and capital market fees of $3.3 million and $1.4 million, respectively, along with $5.5 million in gains on the sale of assets. Net gains on investment securities totaled $437 thousand in the current quarter compared to net gains of $3.2 million in the same quarter of last year. Securities gains in the current quarter primarily resulted from net gains in fair value of $4.4 million recorded on private equity investments which were partly offset by net losses of $4.2 million on sales of available for sale debt securities. Non-interest expense increased $12.2 million, or 5.3%, over the second quarter of 2024, mainly due to higher salaries expense, professional and other services expense, and data processing and software expense, partly offset by a non-recurring charitable donation made during the prior year.

Current wording

Compared to the third quarter of last year, net interest income increased $17.1 million, or 6.5%, mainly due to increases in interest income on investment securities and securities purchased under agreements to resell ("resale agreements") of $11.8 million and $4.4 million, respectively, partly offset by a decrease in interest income on loans of $6.2 million. Interest expense on deposits and interest expense on borrowings also decreased $10.9 million and $4.2 million, respectively. The provision for credit losses increased $10.9 million compared to the same quarter in the prior year. Non-interest income increased $2.5 million, or 1.6%, compared to the third quarter of 2024, mainly due to increases in trust fees, brokerage fees and deposit account fees of $3.7 million, $2.1 million, and $2.0 million, respectively. These increases were partly offset by a decrease in bankcard fee income and a decrease in capital market fees of $2.0 million and $857 thousand, respectively. Net gains on investment securities totaled $7.9 million in the current quarter compared to net gains of $3.9 million in the same quarter of last year. Securities gains in the current quarter primarily resulted from net gains in fair value of $8.0 million recorded on private equity investments. Non-interest expense increased $6.4 million, or 2.7%, over the third quarter of 2024, mainly due to higher salaries expense, professional and other services expense, and data processing and software expense of $4.3 million, $2.5 million, and $1.2 million, respectively, partly offset by non-recurring litigation settlement expense during the third quarter of the prior year.

Previous wording

Net income for the first six months of 2025 totaled $284.1 million, an increase of $31.9 million, or 12.6% from the same period last year. Diluted earnings per common share was $2.12, an increase of 14.6% compared to $1.85 per share in the same period last year. For the first six months of 2025, the annualized return on average assets was 1.82%, the annualized return on average equity was 16.63% and the efficiency ratio was 55.18%. Net interest income increased $38.0 million, or 7.4%, over the same period last year. This growth was largely due to an increase in interest income on investment securities and securities purchased under agreements to resell ("resale agreements") of $19.7 million and $11.9 million, respectively, partly offset by a decline in interest income on loans of $17.5 million. Interest expense on deposits and interest expense on borrowings also decreased $20.3 million and $9.8 million, respectively, over the same period last year. The provision for credit losses was $20.1 million for the first six months of 2025, compared to a provision of $10.3 million in the same period last year. Non-interest income increased $23.5 million, or 7.8%, from the first six months of last year largely due to increases in trust fees, deposit fees, and capital market fees. Non-interest expense increased $4.9 million, or 1.0%, over the first six months of last year mainly due to increases in salaries and benefits expense and professional and other services expense, partly offset by non-recurring litigation settlement expense during the prior year.

Current wording

Net income for the first nine months of 2025 totaled $425.6 million, an increase of $35.4 million, or 9.1% from the same period last year. Diluted earnings per common share was $3.18, an increase of 11.2% compared to $2.86 per share in the same period last year. For the first nine months of 2025, the annualized return on average assets was 1.81%, the annualized return on average equity was 16.15% and the efficiency ratio was 55.21%. Net interest income increased $55.1 million, or 7.1%, over the same period last year. This growth was largely due to increases in interest income on investment securities and securities purchased under agreements to resell ("resale agreements") of $31.5 million and $16.2 million, respectively, partly offset by a decrease in interest income on loans of $23.7 million. Interest expense on deposits and interest expense on borrowings also decreased $31.2 million and $14.0 million, respectively, over the same period last year. The provision for credit losses was $40.1 million for the first nine months of 2025, compared to a provision of $19.4 million in the same period last year. Non-interest income increased $26.0 million, or 5.6%, from the first nine months of last year largely due to increases in trust fees, deposit fees, and brokerage fees of $12.5 million, $5.4 million, and $3.4 million, respectively. Non-interest expense increased $11.3 million, or 1.6%, over the first nine months of last year mainly due to increases in salaries and benefits expense and professional and other services expense of $11.5 million and $8.2 million, respectively, partly offset by non-recurring litigation settlement expense of $10 million and non-recurring charitable donations of $5.0 million during the prior year.

Previous wording

Net interest income in the second quarter of 2025 was $280.1 million, an increase of $17.9 million over the second quarter of 2024. On a fully taxable-equivalent (FTE) basis, net interest income totaled $282.4 million in the second quarter of 2025, up $17.9 million over the same period last year and up $11.0 million over the previous quarter. The increase in net interest income compared to the second quarter of 2024 was mainly due to higher interest income earned on investment securities (FTE) of $9.2 million and lower deposit interest expense of $11.1 million, partly offset by lower interest income earned on loans (FTE) of $7.0 million. The increase in total interest earned on investment securities (FTE) was mainly the result of higher average balances of U.S. government and federal agency securities, while the decrease in deposit interest expense was due to lower average rates paid, partly offset by higher average balances. Interest income earned on loans (FTE) decreased mainly due to lower average rates, partly offset by higher average balances. The Company's net yield on earning assets (FTE) was 3.70% in the current quarter compared to 3.55% in the second quarter of 2024.

Current wording

Net interest income in the third quarter of 2025 was $279.5 million, an increase of $17.1 million over the third quarter of 2024. On a fully taxable-equivalent (FTE) basis, net interest income totaled $281.8 million in the third quarter of 2025, up $17.1 million over the same period last year and down $658 thousand from the previous quarter. The increase in net interest income compared to the third quarter of 2024 was mainly due to higher interest income earned on investment securities (FTE) of $11.7 million and lower deposit interest expense of $10.9 million, partly offset by lower interest income earned on loans (FTE) of $6.1 million and deposits at the Federal Reserve of $7.9 million. The increase in total interest earned on investment securities (FTE) was mainly the result of higher average balances and rates earned on U.S. government and federal agency securities and higher average rates earned on asset-backed securities. The decrease in deposit interest expense was mainly due to lower average rates paid, while the decrease in interest earned on deposits at the Federal Reserve was mainly due to lower rates earned. Interest income earned on loans (FTE) decreased mainly due to lower average rates, partly offset by higher average balances. The Company's net yield on earning assets (FTE) was 3.64% in the current quarter compared to 3.50% in the third quarter of 2024.

Previous wording

Total interest income (FTE) increased $2.2 million over the second quarter of 2024. Interest income on loans (FTE) was $262.1 million during the second quarter of 2025, a decrease of $7.0 million, or 2.6%, from the same quarter last year. The decrease in loan interest income from the same quarter of last year was primarily due to a decline of 29 basis points in the average rate earned, partly offset by growth of $321.3 million, or 1.9%, in average loan balances. Most of the decrease in interest income occurred in the construction and land, business real estate and business loan categories. The largest decrease to interest income occurred in construction and land loan interest, which declined $4.2 million due to a 97 basis point decrease in the average rate earned, coupled with a decline in average balances of $40.7 million, or 2.8%. Business real estate loan interest income decreased $2.7 million due to a decrease of 34 basis points in the average rate earned, slightly offset by higher average balances of $26.3 million. Business loan interest income declined $1.7 million due to a 39 basis point decrease in the average rate earned, partly offset by higher average balances of $266.9 million, or 4.5%. Consumer credit card loan interest income declined $784 thousand mainly due to a 78 basis point decrease in the average rate earned. These decreases in interest income were partly offset by an increase in personal real estate loan interest income of $2.1 million mainly due to a 26 basis point increase in the average rate earned.

Current wording

Total interest income (FTE) increased $2.1 million over the third quarter of 2024. Interest income on loans (FTE) was $265.6 million during the third quarter of 2025, a decrease of $6.2 million, or 2.3%, from the same quarter last year. The decrease in loan interest income from the same quarter of last year was primarily due to a decline of 33 basis points in the average rate earned, partly offset by growth of $468.5 million, or 2.8%, in average loan balances. Most of the decrease in interest income occurred in the construction and land, business and business real estate loan categories. The largest decrease to interest income occurred in construction and land loan interest, which declined $3.8 million due to a 107 basis point decrease in the average rate earned. Business loan interest income declined $2.7 million due to a 45 basis point decrease in the average rate earned, partly offset by higher average balances of $263.2 million, or 4.4%. Business real estate loan interest income decreased $1.1 million due to a decrease of 36 basis points in the average rate earned, partly offset by higher average balances of $134.8 million, or 3.8%. Consumer credit card loan interest income declined $938 thousand mainly due to an 80 basis point decrease in the average rate earned. These decreases in interest income were partly offset by an increase in personal real estate loan interest income of $2.1 million mainly due to a 24 basis point increase in the average rate earned.

Previous wording

Interest income on investment securities (FTE) was $80.6 million during the second quarter of 2025, which was an increase of $9.2 million over the same quarter last year. The increase in interest income occurred mainly in interest earned on U.S. government and federal agency securities which grew $13.0 million due to a $1.4 billion increase in average balances, partly offset by a 76 basis point decrease in the average rate earned. Interest income related to the Company's U.S. Treasury inflation-protected securities, which is tied to the non-seasonally adjusted Consumer Price Index (CPI-U), decreased $2.8 million from the same quarter last year. Interest income earned on asset-backed securities grew $3.6 million due to a 123 basis point increase in the average rate earned, partly offset by a decrease in average balances of $200.2 million, or 11.2%. These increases to interest income were partly offset by a decline in interest income on mortgage-backed securities of $4.7 million, driven by lower average balances of $912.4 million, or 16.4%. In addition, the Company recorded a $1.0 million adjustment to premium amortization at June 30, 2025, which increased interest income and reflected slower forward prepayment speed estimates on mortgage-backed securities. This increase was higher than the $740 thousand adjustment increasing income in the same quarter last year. Interest income earned on state and municipal obligations declined $1.3 million mainly due to a $289.9 million, or 27.1%, decrease in average balances. Interest earned on other securities decreased $1.3 million mainly due to a $207.8 million, or 27.1%, decrease in average balances. Additionally, the average rate earned on investment securities during the three months ended June 30, 2025 increased 41 basis points over the same period in the prior year. The average balance of the total investment portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $10.2 billion in the second quarter of 2025, compared to $10.4 billion in the second quarter of 2024.

Current wording

Interest income on investment securities (FTE) was $75.0 million during the third quarter of 2025, which was an increase of $11.7 million over the same quarter last year. The increase in interest income occurred mainly in interest earned on U.S. government and federal agency securities, which grew $10.1 million due to an $804.3 million increase in average balances and a 38 basis point increase in the average rate earned. Interest income related to the Company's U.S. Treasury inflation-protected securities, which is tied to the non-seasonally adjusted Consumer Price Index (CPI-U), increased $1.6 million over the same quarter last year. Interest income earned on asset-backed securities grew $3.5 million due to a 103 basis point increase in the average rate earned, partly offset by a decrease in average balances of $58.8 million, or 3.9%. Interest earned on other securities increased $1.0 million mainly due to the receipt of $1.3 million in non-accrual interest income from a private equity investment in the third quarter of 2025. These increases to interest income were partly offset by a decline in interest income on mortgage-backed securities of $2.4 million, driven by lower average balances of $621.0 million, or 12.2%. In addition, the Company recorded a $314 thousand adjustment to premium amortization at September 30, 2025, which increased interest income and reflected slower forward prepayment speed estimates on mortgage-backed securities. This increase was higher than the $286 thousand adjustment decreasing income in the same quarter last year. Interest income earned on state and municipal obligations declined $416 thousand mainly due to a $100.5 million, or 11.7%, decrease in average balances. Additionally, the average rate earned on investment securities during the three months ended September 30, 2025 increased 47 basis points over the same period in the prior year. The average balance of the total investment portfolio (excluding unrealized fair value adjustments on available for sale debt securities) was $10.0 billion in both the third quarters of 2025 and 2024.

Previous wording

Interest income on securities purchased under agreements to resell increased $6.1 million over the same quarter last year, due to an increase of 81 basis points in the average rate earned and growth of $546.4 million in the average balance. Interest income on deposits at the Federal Reserve decreased $6.0 million mainly due to a decline of 102 basis points in average rate earned.

Current wording

Interest income on securities purchased under agreements to resell increased $4.4 million over the same quarter last year, due to an increase of 47 basis points in the average rate earned and growth of $375.0 million in the average balance. Interest income on deposits at the Federal Reserve decreased $7.9 million due to declines of 98 basis points in average rate earned and $142.7 million in the average balance.

Previous wording

The average fully taxable-equivalent yield on total interest earning assets was 4.90% in the second quarter of 2025, down from 4.98% in the second quarter of 2024.

Current wording

The average fully taxable-equivalent yield on total interest earning assets was 4.86% in the third quarter of 2025, down from 4.96% in the third quarter of 2024.

Previous wording

Total interest expense decreased $15.6 million compared to the second quarter of 2024 due to decreases of $11.1 million in interest expense on interest bearing deposits and $4.6 million in interest expense on borrowings. The decrease in deposit interest expense resulted from lower interest expense on certificates of deposit of $6.1 million due to a 78 basis point decline in the average rate paid and a decrease of $140.1 million, or 5.6%, in average balances. Interest expense on interest checking and money market deposit accounts decreased $5.0 million due to a 24 basis point decline in average rates paid, partly offset by an increase of $739.5 million, or 5.6%, in average balances. The overall rate paid on total deposits decreased 32 basis points from the same quarter last year. Interest expense on federal funds purchased decreased $2.2 million due to lower average balances of $135.2 million and a 105 basis point decline in the average rate paid. Interest expense on customer repurchase agreements decreased $2.4 million due to a 59 basis point decline in the average rate paid, partly offset by growth of $116.2 million in the average balance. The overall average rate incurred on all interest bearing liabilities was 1.83% and 2.21% in the second quarters of 2025 and 2024, respectively.

Current wording

Total interest expense decreased $15.1 million compared to the third quarter of 2024 due to decreases of $10.9 million in interest expense on interest bearing deposits and $4.2 million in interest expense on borrowings. The decrease in deposit interest expense resulted mainly from lower interest expense on certificates of deposit balances of $6.1 million due to an 81 basis point decline in the average rate paid and a decrease of $111.4 million, or 4.4%, in average balances. Interest expense on interest checking and money market deposit accounts decreased $4.8 million due to a 20 basis point decline in average rates paid, partly offset by an increase of $498.4 million, or 3.8%, in average balances. The overall rate paid on total deposits decreased 29 basis points from the same quarter last year. Interest expense on federal funds purchased decreased $1.4 million due to lower average balances of $76.0 million and a 104 basis point decline in the average rate paid. Interest expense on customer repurchase agreements decreased $2.8 million due to a 68 basis point decline in the average rate paid, partly offset by growth of $167.8 million, or 7.1%, in the average balance. The overall average rate incurred on all interest bearing liabilities was 1.87% and 2.22% in the third quarters of 2025 and 2024, respectively.

Previous wording

Net interest income (FTE) for the first six months of 2025 was $553.8 million compared to $515.9 million for the same period in 2024. For the first six months of 2025, the net interest margin was 3.63% compared to 3.44% for the same period in 2024.

Current wording

Net interest income (FTE) for the first nine months of 2025 was $835.6 million compared to $780.5 million for the same period in 2024. For the first nine months of 2025, the net interest margin was 3.63% compared to 3.46% for the same period in 2024.

Previous wording

Total interest income (FTE) for the first six months of 2025 increased $7.9 million over the same period last year mainly due to higher interest income on investment securities (FTE) and securities purchased under agreements to resell, partly offset by lower interest income on loans (FTE) and deposit balances at the Federal Reserve. Loan interest income (FTE) decreased $17.3 million, or 3.2%, due to a 28 basis point decrease in the average rate earned, partly offset by a $242.7 million, or 1.4%, increase in average loan balances. The decrease in interest earned occurred in the construction and land, business real estate, business and consumer credit card loan categories, partly offset by an increase in the personal real estate loan category. Interest income on investment securities (FTE) increased $19.5 million mainly due to a 48 basis point increase in the average rate earned and an increase of $1.6 billion in average balances of U.S. government and federal agency securities. Interest earned on U.S. government and federal agency securities increased $34.6 million due to higher average balances and an increase in the average rate earned, while interest earned on asset-backed securities increased $5.4 million due to higher average rates earned, partly offset by a decrease in average balances. These increases in interest income on investment securities were partly offset by a decreases in interest earned on mortgage-backed and securities and state and municipal obligations of $12.2 million and $3.8 million, respectively, mainly due to decreases in average balances. Interest earned on other securities decreased $4.4 million due to declines in both average balances and rates earned. Higher interest income of $11.9 million was earned on securities purchased under agreements to resell, which saw growth in both average balances and rates earned. Interest income on balances at the Federal Reserve decreased $6.2 million due to a 102 basis point decline in the average rate earned, partly offset by a $192.6 million increase in the average balance invested.

Current wording

Total interest income (FTE) for the first nine months of 2025 increased $9.9 million over the same period last year mainly due to higher interest income on investment securities (FTE) and securities purchased under agreements to resell, partly offset by lower interest income on loans (FTE) and deposit balances at the Federal Reserve. Loan interest income (FTE) decreased $23.5 million, or 2.9%, due to a 29 basis point decrease in the average rate earned, partly offset by a $318.6 million, or 1.9%, increase in average loan balances. The decrease in interest earned occurred in the construction and land, business real estate, business and consumer credit card loan categories, partly offset by an increase in interest income the personal real estate loan category. Interest income on investment securities (FTE) increased $31.3 million mainly due to a 47 basis point increase in the average rate earned and an increase of $1.3 billion in average balances of U.S. government and federal agency securities. Interest earned on U.S. government and federal agency securities increased $44.7 million due to higher average balances and an increase in the average rate earned, while interest earned on asset-backed securities increased $8.8 million due to higher average rates earned, partly offset by a decrease in average balances. These increases in interest income on investment securities were partly offset by decreases in interest earned on mortgage-backed securities and state and municipal obligations of $14.6 million and $4.2 million, respectively, mainly due to decreases in average balances. Interest earned on other securities decreased $3.4 million due to a decline in average balances. Higher interest income of $16.2 million was earned on securities purchased under agreements to resell, which saw growth in both average balances and rates earned. Interest income on balances at the Federal Reserve decreased $14.0 million due to a 101 basis point decline in the average rate earned, partly offset by an $80.3 million increase in the average balance invested.

Previous wording

Total interest expense for the first six months of 2025 decreased $30.1 million compared to the same period last year. Interest expense on deposits decreased $20.3 million, due to a 28 basis point decline in the average rate paid, partly offset by a $504.5 million increase in average balances. Interest expense on borrowings decreased $9.8 million, due lower interest expense on federal funds purchased of $5.2 million, mainly due to lower average balances, while interest expense on securities sold under agreements to repurchase declined $4.7 million due to lower average rates paid, partly offset by higher average balances. The overall cost of total interest bearing liabilities increased to 1.86% compared to 2.21% in the same period last year.

Current wording

Total interest expense for the first nine months of 2025 decreased $45.2 million compared to the same period last year. Interest expense on deposits decreased $31.2 million, due to a 29 basis point decline in the average rate paid, partly offset by a $458.2 million increase in average balances. Interest expense on borrowings decreased $14.0 million due lower interest expense on federal funds purchased of $6.6 million, resulting from lower average balances and rates, while interest expense on securities sold under agreements to repurchase declined $7.5 million due to lower average rates paid, partly offset by higher average balances. The overall cost of total interest bearing liabilities decreased to 1.86% compared to 2.21% in the same period last year.

Previous wording

The table below is a summary of net bank card transaction fees for the six month periods ended June 30, 2025 and 2024.

Current wording

The table below is a summary of net bank card transaction fees for the nine month periods ended September 30, 2025 and 2024.

Previous wording

For the second quarter of 2025, total non-interest income amounted to $165.6 million compared to $152.2 million in the same quarter last year, which was an increase of $13.4 million, or 8.8%. The increase was mainly due to higher trust fees, capital market fees and gains on sales of assets. Trust fees increased $3.3 million, or 6.3%, mainly due to growth of $2.7 million in private client trust fees. Bank card transaction fees for the current quarter declined $1.1 million, or 2.3%, from the same period last year. Net credit card fees decreased $791 thousand mainly due to higher rewards expense. Net corporate card fees declined $270 thousand mainly due to lower interchange income, partly offset by lower rewards expense. Net debit card fees decreased $123 thousand mainly due to higher network expense, while net merchant fees increased $69 thousand mainly due to lower network expense. Compared to the second quarter of last year, deposit account fees increased $923 thousand, or 3.6%, mainly due to higher corporate cash management fees of $910 thousand. Capital market fees increased $1.4 million, or 29.7%, mainly due to higher trading securities and underwriting income, while consumer brokerage fees increased $905 thousand, or 20.2%, mainly due to higher annuity and advisory fees. Other non-interest income increased $8.0 million, or 55.1%, mainly due to increases of $5.5 million in gains on sales of assets and $956 thousand in tax credit sales income. Additionally, higher fair value adjustments of $1.3 million were recorded on the Company's deferred compensation plan assets and liabilities, which affect both other income and other expense.

Current wording

For the third quarter of 2025, total non-interest income amounted to $161.5 million compared to $159.0 million in the same quarter last year, which was an increase of $2.5 million, or 1.6%. The increase was mainly due to higher trust fees, consumer brokerage service fees and deposit account fees. Trust fees increased $3.7 million, or 6.8%, mainly due to growth of $3.2 million in private client trust fees. Bank card transaction fees for the current quarter declined $2.0 million, or 4.2%, from the same period last year. Net corporate card fees declined $1.7 million mainly due to higher rewards expense, partly offset by higher interchange income. Net credit card fees decreased $336 thousand mainly due to higher rewards expense. Net debit card fees decreased $107 thousand, while net merchant fees increased $89 thousand. Compared to the third quarter of last year, deposit account fees increased $2.0 million, or 8.1%, mainly due to higher corporate cash management fees of $1.8 million. Capital market fees decreased $857 thousand, or 14.3%, mainly due to lower underwriting and trading securities income, while consumer brokerage service fees increased $2.1 million, or 45.0%, mainly due to higher life insurance income and annuity fees. Other non-interest income decreased $2.5 million, or 14.5%, mainly due to lower gains of $4.7 million on the sales of assets, partly offset by increases in cash sweep commissions, tax credit sales income and international fees of $677 thousand, $625 thousand and $408 thousand, respectively.

Previous wording

Non-interest income for the first six months of 2025 was $324.6 million compared to $301.1 million in the first six months of 2024, which was an increase of $23.5 million, or 7.8%. The increase was mainly due to higher trust fees, deposit account fees and gains on sales of assets, partly offset by lower net bank card fees. Trust fees increased $8.8 million, or 8.5%, mainly due to higher private client and institutional trust fees. Bank card transaction fees for the current year declined $2.5 million, or 2.6%, from the same period last year, mainly due to decreases of $1.8 million in net corporate card fees and $955 thousand in net credit card fees, partly offset by an increase in net merchant fees of $589 thousand. Deposit account fees increased $3.4 million, or 6.9%, mainly due to higher corporate cash management fees. Capital market fees increased $2.6 million, or 30.5%, mainly due to higher trading securities and underwriting income. Consumer brokerage fees increased $1.3 million, or 14.4%, mainly due to higher annuity and advisory fees, while loan fees and sales increased $251 thousand, or 3.8%. Other non-interest income increased $9.6 million, or 32.3%, mainly due to increases of $8.0 million in gains on sales of assets, $769 thousand in tax credit sales income and $568 thousand in cash sweep commissions. In addition, increases of $765 thousand in fair value adjustments were recorded the Company's deferred compensation plan assets and liabilities.

Current wording

Non-interest income for the first nine months of 2025 was $486.1 million compared to $460.1 million in the first nine months of 2024, which was an increase of $26.0 million, or 5.6%. The increase was mainly due to higher trust fees, deposit account fees and gains on the sales of assets. Trust fees increased $12.5 million, or 7.9%, mainly due to higher private client and institutional trust fees. Bank card transaction fees for the current year declined $4.5 million, or 3.1%, from the same period last year, mainly due to decreases of $3.5 million in net corporate card fees and $1.3 million in net credit card fees, partly offset by an increase in net merchant fees of $678 thousand. Deposit account fees increased $5.4 million, or 7.3%, mainly due to higher corporate cash management fees. Capital market fees increased $1.8 million, or 12.1%, mainly due to higher trading securities and underwriting income. Consumer brokerage service fees increased $3.4 million, or 24.9%, mainly due to higher life insurance income, annuity fees and advisory fees. Other non-interest income increased $7.1 million, or 15.1%, mainly due to increases of $3.3 million in gains on the sales of assets, $1.4 million in tax credit sales income and $1.2 million in cash sweep commissions. In addition, an increase in fair value adjustments of $777 thousand was recorded on the Company's deferred compensation plan assets and liabilities.

Previous wording

Net gains and losses on investment securities, which were recognized in earnings during the three months ended June 30, 2025 and 2024, are shown in the table above. Net securities gains of $437 thousand were reported in the second quarter of 2025, compared to net gains of $3.2 million in the same period last year. The net gains in the second quarter of 2025 were mainly comprised of net gains in fair value of $4.4 million recorded on private equity investments and net gains of $1.9 million on equity securities. These gains were largely offset by net losses of $4.2 million on sales of available for sale debt securities and net losses on sales of $1.6 million on sales of private equity investments. The net gains on investment securities for the same quarter last year were primarily comprised of net gains of $178.2 million on equity investments, primarily Visa Class C shares, and net gains in fair value of $5.7 million recorded on private equity investments, mostly offset by net losses of $179.1 million on the sale of available for sale securities as part of the planned portfolio repositioning. Additional information about the sale of Visa Class C shares and the Company's available for sale debt portfolio repositioning transactions is discussed in Note 3, Investment Securities.

Current wording

Net gains and losses on investment securities, which were recognized in earnings during the three months ended September 30, 2025 and 2024, are shown in the table above. Net securities gains of $7.9 million were reported in the third quarter of 2025, compared to net gains of $3.9 million in the same period last year. The net gains in the third quarter of 2025 were mainly comprised of net gains in fair value of $8.0 million recorded on private equity investments. These gains were partially offset by net losses of $111 thousand on equity investments. The net gains on investment securities for the same quarter last year were primarily comprised of net gains in fair value of $7.4 million recorded on private equity investments and net gains of $2.0 million on sales of private equity investments. These gains were largely offset by net losses of $5.4 million on the sale of available for sale securities as part of the planned portfolio repositioning. Additional information about the sale of Visa Class C shares and the Company's available for sale debt portfolio repositioning transactions is discussed in Note 3, Investment Securities.

Previous wording

Net losses on investment securities of $7.2 million were recognized in earnings for the six months ended June 30, 2025, compared to net gains of $3.0 million for the same period in 2024. Net losses in the first half of 2025 were mainly comprised of net losses of $4.2 million on sales of available for sale debt securities and net losses in fair value of $4.1 million recorded on private equity investments, partly offset by net gains of $1.8 million on equity securities. Net gains in the first half of 2024 were mainly comprised of net gains of $178.3 million on equity investments and net gains in fair value of $12.8 million recorded on private equity investments, largely offset by net losses of $187.5 million on sales of available for sale securities. The portion of private equity activity attributable to minority interests is reported as non-controlling interest in the consolidated statements of income and resulted in income of $943 thousand during the first six months of 2025 and expense of $1.8 million during the first six months of 2024.

Current wording

Net gains on investment securities of $731 thousand were recognized in earnings for the nine months ended September 30, 2025, compared to net gains of $6.8 million for the same period in 2024. Net gains in the first nine months of 2025 were mainly comprised of net gains in fair value of $3.8 million recorded on private equity investments and net gains of $1.7 million on equity securities. These gains were largely offset by net losses of $4.2 million on the sale of available for sale securities. Net gains in the first nine months of 2024 were mainly comprised of net gains of $178.1 million on equity investments and net gains in fair value of $20.2 million recorded on private equity investments, largely offset by net losses of $192.9 million on sales of available for sale securities. The portion of private equity activity attributable to minority interests is reported as non-controlling interest in the consolidated statements of income and resulted in expense of $656 thousand during the first nine months of 2025 and expense of $3.4 million during the first nine months of 2024.

Previous wording

Non-interest expense for the second quarter of 2025 amounted to $244.4 million, an increase of $12.2 million, or 5.3%, compared to expense of $232.2 million in the second quarter of last year. The increase in expense over the same period last year was mainly due to higher salaries and employee benefits expense, professional and other services expense and data processing and software expense, partly offset by lower contribution expense. Salaries and employee benefits expense increased $5.9 million, or 4.0%, mainly due to higher healthcare expense of $2.3 million, incentive compensation expense of $2.2 million and full-time salaries expense of $2.1 million. Full-time equivalent employees totaled 4,658 at June 30, 2025, compared to 4,724 at June 30, 2024. Data processing and software expense increased $1.4 million, or 4.4%, mainly due to higher costs for service providers and software. Net occupancy increased $1.1 million, 8.8%, mainly due to higher depreciation expense and lower external rent income. Professional and other services expense increased $4.4 million, or 50.6%, and included $1.9 million in acquisition related legal and professional services expense. Marketing expense increased $618 thousand, or 11.5%, and equipment expense increased $304 thousand, or 3.0%. Supplies and communication expense increased $326 thousand, or 7.0%, mainly due to higher postage and bank card reissuance costs. Deposit insurance expense increased $958 thousand, or 40.7%, mainly due to a $1.2 million accrual adjustment that lowered expense in the prior year from a one-time special assessment by the FDIC to replenish the Deposit Insurance Fund. Other non-interest expense decreased $2.5 million, or 19.2%, mainly due to a $5.0 million donation to a related charitable foundation in 2024 that did not reoccur. This decrease was partly offset by increases of $648 thousand in travel and entertainment expense and $1.3 million in fair value adjustments on the Company's deferred compensation plan assets and liabilities.

Current wording

Non-interest expense for the third quarter of 2025 amounted to $244.0 million, an increase of $6.4 million, or 2.7%, compared to expense of $237.6 million in the third quarter of last year. The increase in expense over the same period last year was mainly due to higher salaries and employee benefits expense, professional and other services expense and data processing and software expense. Salaries and employee benefits expense increased $4.3 million, or 2.8%, mainly due to higher full-time salaries expense of $3.0 million and higher incentive compensation expense of $1.4 million, partly offset by lower healthcare expense of $805 thousand. Full-time equivalent employees totaled 4,666 at September 30, 2025, compared to 4,711 at September 30, 2024. Data processing and software expense increased $1.4 million, or 4.2%, mainly due to higher costs for service providers and software. Professional and other services expense, which increased $2.5 million, or 27.8%, included $1.1 million of acquisition related legal and professional services expense. Other non-interest expense decreased $1.3 million, or 14.0%, mainly due to a $1.5 million reimbursement during the third quarter of 2025 related to a litigation settlement.

Previous wording

Non-interest expense amounted to $482.8 million for the first six months of 2025, an increase of $4.9 million, or 1.0%, over the first six months of 2024. Salaries and benefits expense increased $7.2 million, or 2.4%, mainly due to higher incentive compensation, full-time salaries expense and healthcare expense. Data processing and software expense increased $2.5 million, or 3.9%, due to increased costs for service providers and software expense. Professional and other services expense $5.7 million, or 33.2%, and included $1.9 million in acquisition related legal and professional fees. Occupancy expense increased $1.6 million, or 6.0%, mainly due to higher building depreciation expense and demolition costs. Marketing expense increased $2.4 million, or 25.8%, and equipment expense increased $304 thousand, or 3.0%. Supplies and communication expense increased $628 thousand, or 6.7%, mainly due to higher bank card reissuance costs. Deposit insurance decreased $3.3 million, or 32.0%, mainly due to accrual adjustments in 2024 to the special assessment by the FDIC. Other non-interest expense decreased $12.1 million, or 38.1%, mainly due to litigation settlement expense of $10.0 million, net of insurance, and a $5.0 million donation to a related charitable foundation, both recorded in 2024.

Current wording

Non-interest expense amounted to $726.8 million for the first nine months of 2025, an increase of $11.3 million, or 1.6%, over the first nine months of 2024. Salaries and benefits expense increased $11.5 million, or 2.5%, mainly due to higher full-time salaries expense and incentive compensation expense. Data processing and software expense increased $3.8 million, or 4.0%, due to increased costs for service providers and software expense. Professional and other services expense increased $8.2 million, or 31.4%, and included $3.1 million in acquisition related legal and professional fees. Occupancy expense increased $1.6 million, or 4.1%, mainly due to higher building depreciation expense and demolition costs. Marketing expense increased $1.8 million, or 10.9%, and equipment expense increased $439 thousand, or 2.9%. Supplies and communication expense increased $502 thousand, or 3.5%, mainly due to higher bank card reissuance costs. Deposit insurance decreased $3.2 million, or 23.8%, mainly due to accrual adjustments in 2024 and 2025 to the special assessment by the FDIC. Other non-interest expense decreased $13.4 million, or 32.5%, mainly due to litigation settlement expense of $10.0 million, net of insurance, and a $5.0 million donation to a related charitable foundation, both recorded in 2024. In addition, a $1.5 million reimbursement was recorded in the third quarter of 2025 related to a litigation settlement. These decreases were partly offset by higher travel and entertainment expense of $837 thousand and an increase in fair value adjustments of $777 thousand recorded on the Company's deferred compensation plan assets and liabilities.

Previous wording

Net loan charge-offs in the second quarter of 2025 amounted to $9.7 million, compared to $10.8 million in the prior quarter and $9.8 million in the second quarter of last year. Comp ared to the same period last year, net loan charge-offs in thesecond quarter of 2025 decreased $67 thousand and decreased $1.1 million from the previous quarter. The decrease from the prior year was mainly driven by decreases of $417 thousand and $190 thousand in business real estate and business loan net charge-offs, respectively, offset by increases of $364 thousand and $339 thousand in consumer and consumer credit card loan net charge-offs, respectively. The decrease in net loan charge-offs for the three months ended June 30, 2025 from the previous quarter was driven by decreases of $802 thousand and $684 thousand in net charge-offs on business real estate and consumer loans, respectively, partially offset by an increase of $386 thousand in net charge-offs on business loans.

Current wording

Net loan charge-offs in the third quarter of 2025 amounted to $10.3 million, compared to $9.7 million in the prior quarter and $9.6 million in the third quarter of last year. Comp ared to the same period last year, net loan charge-offs in thethird quarter of 2025 increased $749 thousand, and increased $638 thousand from the previous quarter. The increase from the prior year was mainly driven by increases of $712 thousand and $242 thousand in business and consumer credit card loan net charge-offs, respectively, offset by a decrease of $449 thousand in consumer loan net charge-offs. The increase in net loan charge-offs for the three months ended September 30, 2025 from the previous quarter was driven by increases of $402 thousand and $394 thousand in net charge-offs on business real estate and business loans, respectively, partially offset by a decrease of $570 thousand in net charge-offs on consumer credit card loans.

Previous wording

For the three months ended June 30, 2025, annualized net charge-offs on average consumer credit card loans were 5.08%, compared to 5.04% in the previous quarter and 4.91% in the same period last year. Consumer loan annualized net charge-offs in the current quarter amounted to .40%, compared to .56% in the prior quarter and .34% in the same period last year. In thesecond quarter of 2025, total annualized net loan charge-offs were .22%, compared to .25% in the previous quarter and .23% in the same period last year.

Current wording

For the three months ended September 30, 2025, annualized net charge-offs on average consumer credit card loans were 4.59%, compared to 5.08% in the previous quarter and 4.46% in the same period last year. Consumer loan annualized net charge-offs in the current quarter amounted to .42%, compared to .40% in the prior quarter and .52% in the same period last year. In thethird quarter of 2025, total annualized net loan charge-offs were .23%, compared to .22% in the previous quarter and .22% in the same period last year.

Previous wording

For the three months ended June 30, 2025, the provision for credit losses on loans was $7.9 million, which was a decrease of $7.2 million from the provision recorded in the prior quarter. The provision for the three months ended March 31, 2025 included an increase in the allowance for credit losses on loans, as well as slightly higher loan net charge-offs, as compared to the provision for the three months ended June 30, 2025. Compared to the same period in the prior year, the provision for credit losses on loans for the three months ended June 30, 2025 was flat. For the six months ended June 30, 2025, the provision for credit losses on loans was $23.0 million, which was an $8.2 million increase over the $14.8 million provision recorded in the same period last year. The increase mainly occurred during the first quarter of 2025, as explained above. Changes in the provision are driven by changes in the estimate for the allowance for credit losses on loans.

Current wording

For the three months ended September 30, 2025, the provision for credit losses on loans was $20.7 million, which was an increase of $12.8 million from the provision recorded in the prior quarter. The provision for the three months ended September 30, 2025 was the result of an increase in the allowance for credit losses on loans. Compared to the same period in the prior year, the provision for credit losses on loans for the three months ended September 30, 2025 increased $8.9 million. For the nine months ended September 30, 2025, the provision for credit losses on loans was $43.8 million, which was a $17.1 million increase over the $26.7 million provision recorded in the same period last year. Changes in the provision are driven by changes in the estimate for the allowance for credit losses on loans.

Previous wording

At June 30, 2025, the allowance for credit losses on loans increased $2.5 million compared to the allowance for credit losses on loans at December 31, 2024. The increase in the allowance for credit losses mainly occurred in the personal banking loan portfolio, which saw an increase of $2.4 million due to increased loss experience in the consumer portfolio, partially offset by a decrease in the allowance for credit losses in the personal real estate loan portfolio. The forecast utilized to estimate the allowance for credit losses at June 30, 2025 reflected a slight decline in key macroeconomic variables. The allowance for credit losses on loans was $165.3 million at June 30, 2025 and was .94%, .95% and .92% of total loans at June 30, 2025, December 31, 2024 and June 30, 2024, respectively.

Current wording

At September 30, 2025, the allowance for credit losses increased $12.9 million compared to the allowance for credit losses on loans at December 31, 2024. The allowance for credit losses on loans increased $6.2 million in the commercial portfolio primarily due to weakness in soft commodity prices impacting certain industries, partially offset by improvement in loss rate assumptions for the Company's construction loans. The allowance for credit losses on the Company's personal banking portfolio increased $6.8 million due to recent increases in charge-off trends impacting expected loss rate assumptions for the consumer credit card, automobile, and other non-real estate consumer portfolios. The forecast utilized to estimate the allowance for credit losses at September 30, 2025 was more pessimistic than the forecast utilized at December 31, 2024 and reflected a slight decline in key macroeconomic variables. The forecast did not assume a recession. The allowance for credit losses on loans was $175.7 million at September 30, 2025 and was .99%, .95% and .94% of total loans at September 30, 2025, December 31, 2024 and September 30, 2024, respectively.

Previous wording

In the current quarter, the provision for credit losses on unfunded lending commitments was a benefit of $2.3 million, compared to a benefit of $2.4 million for the three months ended June 30, 2024. At June 30, 2025, the liability for unfunded lending commitments was $16.0 million, compared to $18.9 million at December 31, 2024 and $20.7 million at June 30, 2024. The liability decreased primarily due to decreases in unfunded lending commitment balances, coupled with improvement in loss rate assumptions for the Company's construction loans. The Company's unfunded lending commitments primarily relate to construction loans, and the Company's estimate for credit losses in its unfunded lending commitments utilizes the same model and forecast as its estimate for credit losses on loans. See Note 2 for further discussion of the model inputs utilized in the Company's estimate of credit losses.

Current wording

In the current quarter, the provision for credit losses on unfunded lending commitments was a benefit of $678 thousand, compared to a benefit of $2.7 million for the three months ended September 30, 2024. At September 30, 2025, the liability for unfunded lending commitments was $15.3 million, compared to $18.9 million at December 31, 2024 and $18.0 million at September 30, 2024. The liability decreased primarily due to decreases in unfunded lending commitment balances, coupled with improvement in loss rate assumptions for the Company's construction loans. The Company's unfunded lending commitments primarily relate to construction loans, and the Company's estimate for credit losses in its unfunded lending commitments utilizes the same model and forecast as its estimate for credit losses on loans. See Note 2 for further discussion of the model inputs utilized in the Company's estimate of credit losses.

Previous wording

Non-accrual loans totaled $18.9 million at June 30, 2025, an increase of $592.0 thousand from the balance at December 31, 2024. The increase occurred mainly in business non-accrual loans, which increased $309 thousand, as well as construction and land loans, which increased $206 thousand. At June 30, 2025, non-accrual loans were comprised of business real estate (80.0%), revolving home equity (10.5%), business (2.2%), personal real estate (5.0%), and construction and land (2.3%) loans. Foreclosed real estate totaled $397 thousand at June 30, 2025, an increase of $54 thousand compared to December 31, 2024. Loans past due 90 days or more and still accruing interest totaled $25.3 million as of June 30, 2025, an increase of $787 thousand from December 31, 2024. Balances by class for non-accrual loans and loans past due 90 days and still accruing interest are shown in the "Delinquent and non-accrual loans" section in Note 2 to the consolidated financial statements.

Current wording

Non-accrual loans totaled $16.3 million at September 30, 2025, a decrease of $2.0 million from the balance at December 31, 2024. The decrease occurred mainly in revolving home equity non-accrual loans, which decreased $2.0 million. At September 30, 2025, non-accrual loans were comprised of business real estate (91.9%), personal real estate (5.3%) business (1.6%), and construction and land (1.2%) loans. Foreclosed real estate totaled $790 thousand at September 30, 2025, an increase of $447 thousand compared to December 31, 2024. Total loans past due 90 days or more and still accruing interest totaled $21.5 million as of September 30, 2025, a decrease of $3.0 million from December 31, 2024. Balances by class for non-accrual loans and loans past due 90 days and still accruing interest are shown in the "Delinquent and non-accrual loans" section in Note 2 to the consolidated financial statements.

Previous wording

In addition to the non-performing and past due loans mentioned above, the Company also has identified loans for which management has concerns about the ability of the borrowers to meet existing repayment terms. They are classified as substandard under the Company's internal rating system. The loans are generally secured by either real estate or other borrower assets, reducing the potential for loss should they become non-performing. Although these loans are generally identified as potential problem loans, they may never become non-performing. Such loans totaled $276.0 million at June 30, 2025 compared to $330.3 million at December 31, 2024, resulting in a decrease of $54.3 million, or 16.4%.

Current wording

In addition to the non-performing and past due loans mentioned above, the Company also has identified loans for which management has concerns about the ability of the borrowers to meet existing repayment terms. They are classified as substandard under the Company's internal rating system. The loans are generally secured by either real estate or other borrower assets, reducing the potential for loss should they become non-performing. Although these loans are generally identified as potential problem loans, they may never become non-performing. Such loans totaled $274.6 million at September 30, 2025 compared to $330.3 million at December 31, 2024, resulting in a decrease of $55.7 million, or 16.9%.

Previous wording

When borrowers are experiencing financial difficulty, the Company may agree to modify the contractual terms of a loan to a borrower in order to assist the borrower in repaying principal and interest owed to the Company. At June 30, 2025, the Company held $138.1 million of loans that had been modified during the six months ended June 30, 2025. These loans are further discussed in the"Modifications for borrowers experiencing financial difficulty"section in Note 2 to the consolidated financial statements.

Current wording

When borrowers are experiencing financial difficulty, the Company may agree to modify the contractual terms of a loan to a borrower in order to assist the borrower in repaying principal and interest owed to the Company. At September 30, 2025, the Company held $168.3 million of loans that had been modified during the nine months ended September 30, 2025. These loans are further discussed in the"Modifications for borrowers experiencing financial difficulty"section in Note 2 to the consolidated financial statements.

Previous wording

The Company's portfolio of construction and land loans, as shown in the table below, amounted to 8.0% of total loans outstanding at June 30, 2025. The largest component of construction and land loans was commercial construction, which increased $6.1 million during the six months ended June 30, 2025. At June 30, 2025, multi-family residential construction loans totaled approximately $571.7 million, or 47.5%, of the commercial construction loan portfolio, compared to $526.6 million, or 44.0%, at December 31, 2024.

Current wording

The Company's portfolio of construction and land loans, as shown in the table below, amounted to 8.1% of total loans outstanding at September 30, 2025. The largest component of construction and land loans was commercial construction, which increased $24.9 million during the nine months ended September 30, 2025. At September 30, 2025, multi-family residential construction loans totaled approximately $556.3 million, or 45.5%, of the commercial construction loan portfolio, compared to $526.6 million, or 44.0%, at December 31, 2024.

Previous wording

Total business real estate loans were $3.8 billion at June 30, 2025 and comprised 21.3% of the Company's total loan portfolio. These loans include properties such as manufacturing and warehouse buildings, small office and medical buildings, churches, hotels and motels, shopping centers, and other commercial properties. At June 30, 2025, 33.5% of business real estate loans were for owner-occupied real estate properties, which have historically resulted in lower net charge-off rates than non-owner-occupied commercial real estate loans.

Current wording

Total business real estate loans were $3.7 billion at September 30, 2025 and comprised 21.1% of the Company's total loan portfolio. These loans include properties such as manufacturing and warehouse buildings, small office and medical buildings, churches, hotels and motels, shopping centers, and other commercial properties. At September 30, 2025, 32.5% of business real estate loans were for owner-occupied real estate properties, which have historically resulted in lower net charge-off rates than non-owner-occupied commercial real estate loans.

Previous wording

The Company had $364.4 million in revolving home equity loans at June 30, 2025 that were collateralized by residential real estate. Most of these loans (93.5%) are written with terms requiring interest-only monthly payments. These loans are offered in three main product lines: LTV up to 80%, 80% to 90%, and 90% to 100%. As of June 30, 2025, the outstanding principal of loans with an original LTV higher than 80% was $28.2 million, or 7.9% of the portfolio, compared to $31.9 million as of December 31, 2024. Total revolving home equity loan balances over 30 days past due were $3.7 million at June 30, 2025 and $5.6 million at December 31, 2024, and the outstanding balance of revolving home equity loans on non-accrual status was $2.0 million at both June 30, 2025 and December 31, 2024. The weighted average FICO score for the total portfolio balance at June 30, 2025 is 775. At maturity, the accounts are re-underwritten, and if they qualify under the Company's credit, collateral and capacity policies, the borrower is given the option to renew the line of credit or convert the outstanding balance to an amortizing loan. If criteria are not met, amortization is required, or the borrower may pay off the loan. During the remainder of 2025 through 2028, approximately 15% of the Company's current outstanding balances are expected to mature. Of these balances, approximately 82% have a FICO score of 700 or higher. The Company does not expect a significant increase in losses as these loans mature, due to their high FICO scores, low LTVs, and low historical loss levels.

Current wording

The Company had $364.2 million in revolving home equity loans at September 30, 2025 that were collateralized by residential real estate. Most of these loans (94.4%) are written with terms requiring interest-only monthly payments. These loans are offered in three main product lines: LTV up to 80%, 80% to 90%, and 90% to 100%. As of September 30, 2025, the outstanding principal of loans with an original LTV higher than 80% was $28.6 million, or 8.0% of the portfolio, compared to $31.9 million as of December 31, 2024. Total revolving home equity loan balances over 30 days past due were $1.4 million at September 30, 2025 and $5.6 million at December 31, 2024, and there was no outstanding balance for revolving home equity loans on non-accrual status at September 30, 2025 compared to $2.0 million at December 31, 2024. The weighted average FICO score for the total portfolio balance at September 30, 2025 is 777. At maturity, the accounts are re-underwritten, and if they qualify under the Company's credit, collateral and capacity policies, the borrower is given the option to renew the line of credit or convert the outstanding balance to an amortizing loan. If criteria are not met, amortization is required, or the borrower may pay off the loan. During the remainder of 2025 through 2028, approximately 12.3% of the Company's current outstanding balances are expected to mature. Of these balances, approximately 86.6% have a FICO score of 700 or higher. The Company does not expect a significant increase in losses as these loans mature, due to their high FICO scores, low LTVs, and low historical loss levels.

Previous wording

Within the consumer loan portfolio are several direct and indirect product lines, which include loans for the purchase of automobiles, motorcycles, marine and RVs. Auto loans comprised 35.6% of the consumer loan portfolio at June 30, 2025, and outstanding balances for auto loans were $769.1 million and $776.7 million at June 30, 2025 and December 31, 2024, respectively. The balances over 30 days past due amounted to $8.1 million at June 30, 2025 and $14.4 million at December 31, 2024, respectively, and comprised 1.1% of the outstanding balances of these loans at June 30, 2025 and 1.9% at December 31, 2024. For the six months ended June 30, 2025, $190.2 million of new auto loans were originated, compared to $196.4 million during the first six months of 2024. At June 30, 2025, the automobile loan portfolio had a weighted average FICO score of 756, and net charge-offs on auto loans were 1.0% of average auto loans.

Current wording

The consumer loans category is mostly comprised of private banking loans and automobile loans. Private banking loans comprised of 39.2% of the consumer loan portfolio at September 30, 2025. The Company's private banking loans are mostly executive lines of credit, which are secured primarily by assets held by the Company's trust department, and insurance premium finance loans, which are primarily secured by life insurance policies. Automobile loans, which include direct and indirect product lines, comprised 35.8% of the consumer loan portfolio at September 30, 2025, and outstanding balances for auto loans were $778.2 million and $776.7 million at September 30, 2025 and December 31, 2024, respectively. The balances over 30 days past due amounted to $9.3 million at September 30, 2025 and $14.4 million at December 31, 2024, respectively, and comprised 1.2% of the outstanding balances of these loans at September 30, 2025 and 1.9% at December 31, 2024. For the nine months ended September 30, 2025, $282.9 million of new auto loans were originated, compared to $260.6 million during the first nine months of 2024. At September 30, 2025, the automobile loan portfolio had a weighted average FICO score of 756, and net charge-offs on auto loans were .9% of average auto loans.

Previous wording

The Company's consumer loan portfolio also includes fixed rate home equity loans, typically for home repair or remodeling, and these loans comprised 9.9% of the consumer loan portfolio at June 30, 2025. Losses on these loans have historically been low, and the Company saw net recoveries of $16 thousand for the first six months of 2025. Private banking loans comprised 38.4% of the consumer loan portfolio at June 30, 2025. The Company's private banking loans are generally well-collateralized, and at June 30, 2025 were secured primarily by assets held by the Company's trust department. The remaining portion of the Company's consumer loan portfolio is comprised of health services financing, motorcycles, marine and RV loans. Net charge-offs on private banking, health services financing, motorcycle and marine and RV loans totaled $1.4 million in the first six months of 2025 and were .3% of the average balances of these loans at June 30, 2025.

Current wording

The Company's consumer loan portfolio also includes fixed rate home equity loans, typically for home repair or remodeling, and these loans comprised 9.7% of the consumer loan portfolio at September 30, 2025. Losses on these loans have historically been low, and the Company saw net recoveries of $135 thousand for the first nine months of 2025. The remaining portion of the Company's consumer loan portfolio is comprised of healthcare financing, boat, RV, motorcycle, other equipment, and unsecured consumer loans. Net charge-offs on consumer loans, other than automobile loans, totaled $2.3 million in the first nine months of 2025 and were .3% of the average balances of these loans at September 30, 2025.

Previous wording

The Company offers low promotional rates on selected consumer credit card products. Out of a portfolio at June 30, 2025 of $576.2 million in consumer credit card loans outstanding, approximately $122.5 million, or 21.3%, carried a low promotional rate. Within the next six months, $51.7 million of these loans are scheduled to convert to the ongoing higher contractual rate. To mitigate some of the risk involved with this credit card product, the Company performs credit checks and detailed analysis of the customer borrowing profile before approving the loan application. Management believes that the risks in the consumer loan portfolio are reasonable and the anticipated loss ratios are within acceptable parameters.

Current wording

The Company offers low promotional rates on selected consumer credit card products. Out of a portfolio at September 30, 2025 of $575.3 million in consumer credit card loans outstanding, approximately $125.2 million, or 21.8%, carried a low promotional rate. Within the next six months, $51.8 million of these loans are scheduled to convert to the ongoing higher contractual rate. To mitigate some of the risk involved with this credit card product, the Company performs credit checks and detailed analysis of the customer borrowing profile before approving the loan application. Management believes that the risks in the consumer loan portfolio are reasonable and the anticipated loss ratios are within acceptable parameters.

Previous wording

The Company's energy lending portfolio is comprised of lending to the petroleum and natural gas sectors and totaled $330.5 million, or 1.9% of total loans at June 30, 2025, a decrease of $7.6 million from December 31, 2024, as shown in the table below.

Current wording

The Company's energy lending portfolio is comprised of lending to the petroleum and natural gas sectors and totaled $302.0 million, or 1.7% of total loans at September 30, 2025, a decrease of $36.0 million from December 31, 2024, as shown in the table below.

Previous wording

The Company participates in credits of large, publicly traded companies which are defined by regulation as shared national credits, or SNCs. Regulations define SNCs as loans exceeding $100 million that are shared by three or more financial institutions. The Company typically participates in these loans when business operations are maintained in the local communities or regional markets and opportunities to provide other banking services are present. The balance of SNC loans totaled $1.7 billion and $1.6 billion at June 30, 2025 and December 31, 2024, respectively. Additional unfunded commitments at June 30, 2025 totaled $2.3 billion.

Current wording

The Company participates in credits of large, publicly traded companies which are defined by regulation as shared national credits, or SNCs. Regulations define SNCs as loans exceeding $100 million that are shared by three or more financial institutions. The Company typically participates in these loans when business operations are maintained in the local communities or regional markets and opportunities to provide other banking services are present. The balance of SNC loans totaled $1.6 billion at both September 30, 2025 and December 31, 2024. Additional unfunded commitments at September 30, 2025 totaled $2.4 billion.

Previous wording

Income tax expense was $42.4 million in the second quarter of 2025, compared to $37.0 million in the first quarter of 2025 and $38.6 million in the second quarter of 2024. The Company's effective tax rate, including the effect of non-controlling interest, was 21.8% in the second quarter of 2025, compared to 21.9% in the first quarter of 2025 and 21.7% in the second quarter of 2024.

Current wording

Income tax expense was $41.2 million in the third quarter of 2025, compared to $42.4 million in the second quarter of 2025 and $38.2 million in the third quarter of 2024. The Company's effective tax rate, including the effect of non-controlling interest, was 22.5% in the third quarter of 2025, 21.8% in the second quarter of 2025, and 21.7% in the third quarter of 2024. The increase in the effective tax rate compared to the prior quarter was mostly due to state tax law changes enacted in the prior quarter that decreased the effective tax rate. The increase in the effective tax rate compared to the third quarter of 2024 was mostly due to higher state and local income taxes.

Previous wording

At June 30, 2025, total loans increased $445.4 million or 2.6%, compared to balances at December 31, 2024. The increase was mainly due to growth in business and business real estate loans of $274.9 million and $96.6 million, respectively. The increase in business loans was mainly due growth in commercial and industrial lending. In addition, consumer loans, which includes automobile, marine and RV, fixed rate home equity and other consumer loans, increased $84.5 million, mainly due to growth in other consumer loans. These increases were partly offset by a decrease in consumer credit cards loans of $19.8 million.

Current wording

At September 30, 2025, total loans increased $566.7 million or 3.3%, compared to balances at December 31, 2024. The increase was mainly due to growth in business, business real estate, and construction loans of $361.0 million, $83.8 million, and $23.8 million, respectively. The increase in business loans was mainly due to growth in commercial and industrial, commercial credit card and tax-free lending. In addition, consumer loans increased $98.5 million, mainly due to growth in private banking loans. These increases were partially offset by a decrease in consumer credit card loans of $20.6 million.