CULLEN/FROST BANKERS, INC.

Previous wording

The following discussion should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2025, and the other information included in the 2025 Form 10-K. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results for the year ending December 31, 2026 or any future period.

Current wording

The following discussion should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2025, and the other information included in the 2025 Form 10-K. Operating results for the three and six months ended June 30, 2026 are not necessarily indicative of the results for the year ending December 31, 2026 or any future period.

Previous wording

In addition, military conflict between the U.S. and Iran has contributed to heightened uncertainty and volatility in global markets. Such conditions can result in price volatility in energy and commodity markets, changes in inflation expectations, increased financial market volatility, and potential disruptions to global supply chains and trade flows. The timing, magnitude, and duration of these impacts are uncertain and may evolve rapidly based on geopolitical developments, policy responses, and market conditions. Heightened geopolitical uncertainty may influence Federal Reserve policy decisions and broader financial conditions, including interest‑rate volatility, funding costs, and liquidity conditions. These factors could adversely affect our funding profile; customer credit quality, particularly in sectors sensitive to energy prices, global trade, or economic cycles; and the market value of certain financial instruments. Prolonged volatility could also negatively impact economic growth, increase borrower stress, and contribute to higher credit losses, any of which could have a material adverse effect on our business, financial condition, and results of operations. We will continue to monitor these developments and adjust our risk management and capital planning strategies as appropriate.

Current wording

In addition, recent military conflict involving the U.S. and Iran, including direct military actions, attacks affecting commercial shipping in and around the Strait of Hormuz, and subsequent retaliatory military strikes, has contributed to heightened geopolitical uncertainty, increased volatility in global financial markets, and significant fluctuations in energy and commodity prices. While diplomatic communications and negotiations may continue, recent statements by U.S. and Iranian officials, including indications that the previously announced ceasefire framework is no longer in effect, have increased the risk of further military escalation and broader regional instability. Ongoing developments in the Middle East, including potential disruptions to maritime trade routes and energy infrastructure, could adversely affect global supply chains, inflation expectations, economic activity, and market conditions. The timing, magnitude, duration, and geographic scope of any further conflict remain highly uncertain and may evolve rapidly in response to military actions, diplomatic developments, government policy decisions, sanctions, and market reactions. Heightened geopolitical uncertainty and volatility in energy markets may influence monetary policy decisions, interest-rate expectations, funding markets, liquidity conditions, foreign-exchange markets, and investor risk sentiment. These factors could adversely affect our funding profile; customer and counterparty credit quality, particularly in sectors sensitive to energy prices, global trade, transportation, manufacturing, and broader economic cycles; and the market value of certain financial instruments. Prolonged market volatility, additional military escalation involving the United States, Iran, or other regional actors, disruptions to global energy supplies or shipping lanes, expanded sanctions, or a deterioration in global economic conditions could negatively impact economic growth, increase borrower stress, reduce business activity, and contribute to higher credit losses and operational risks, including cyber-related incidents, any of which could have a material adverse effect on our business, financial condition, results of operations, and prospects. We will continue to monitor geopolitical developments and assess their potential impact on our customers, operations, liquidity position, capital levels, market exposures, and overall risk profile, and we may adjust our risk management, liquidity management, capital planning, and business continuity strategies as appropriate.

Previous wording

Furthermore, financial markets, international relations, and global supply chains continue to be significantly impacted by evolving U.S. trade policies and practices. The scope, duration, and ultimate impact of tariffs on us, our customers, financial markets, and the U.S. and global economies remain uncertain, particularly following the U.S. Supreme Court’s February 20, 2026 ruling that the International Emergency Economic Powers Act (“IEEPA”) does not authorize presidential tariff authority, which invalidated prior IEEPA‑based tariffs. This ruling has introduced uncertainty regarding the timing and extent of potential tariff refunds, as well as the likelihood of new or replacement tariffs imposed under alternative statutory authorities under U.S. trade law. These developments may affect customer cash flows, credit conditions, supply chain decisions, and overall market activity and volatility, thereby increasing our exposure to operational, credit, and market risks. If such uncertainty negatively affects borrower financial condition or market stability, it could have a material adverse effect on our business, financial condition, and results of operations.

Current wording

Furthermore, financial markets, international relations, and global supply chains continue to be affected by evolving U.S. trade policies and practices. While the U.S. Supreme Court's February 20, 2026 ruling that the International Emergency Economic Powers Act ("IEEPA") does not authorize presidential tariff authority invalidated certain tariffs previously imposed under IEEPA, uncertainty remains regarding tariff refunds, related legal and administrative proceedings, and the scope, duration, and economic impact of replacement or additional trade measures adopted under other U.S. trade laws. Ongoing changes in U.S. trade policy, including the imposition, modification, suspension, or expansion of tariffs and other trade restrictions, may affect customer cash flows, business confidence, capital investment decisions, supply chain strategies, commodity prices, inflation expectations, and market volatility. These developments may increase our exposure to operational, credit, market, liquidity, and compliance risks. Customers with significant exposure to international trade, manufacturing, transportation, agriculture, retail, or other sectors sensitive to global trade and supply chain conditions may experience financial stress, reduced profitability, or weakened operating performance. Trade policy developments may also contribute to volatility in interest rates, foreign exchange markets, and asset valuations. If these developments adversely affect borrower financial condition, market stability, economic growth, or broader business activity, they could have a material adverse effect on our business, financial condition, results of operations, and prospects. We will continue to monitor trade policy developments and adjust our risk management, liquidity management, and capital planning strategies as appropriate.

Previous wording

Net income available to common shareholders totaled $169.3 million, or $2.65 per diluted common share, for the three months ended March 31, 2026, compared to $149.3 million, or $2.30 per diluted common share, for the three months ended March 31, 2025.

Current wording

Net income available to common shareholders totaled $170.4 million, or $2.70 per diluted common share, and $339.7 million, or $5.35 per diluted common share, for the three and six months ended June 30, 2026, respectively, compared to $155.3 million, or $2.39 per diluted common share, and $304.6 million, or $4.69 per diluted common share for the three and six months ended June 30, 2025, respectively.

Previous wording

Net income available to common shareholders increased $20.1 million, or 13.4%, for the three months ended March 31, 2026 compared to the same period in 2025. The increase during the three months ended March 31, 2026 was primarily the result of a $22.3 million increase in net interest income, a $12.3 million increase in non-interest income, and a $6.3 million decrease in credit loss expense partly offset by a $17.6 million increase in non-interest expense and a $3.2 million increase in income tax expense.

Current wording

Net income available to common shareholders increased $15.1 million, or 9.7%, for the three months ended June 30, 2026 and increased $35.1 million, or 11.5%, for the six months ended June 30, 2026, compared to the same periods in 2025. The increase during the three months ended June 30, 2026 was primarily the result of an $18.1 million increase in net interest income, an $11.0 million increase in non-interest income, and a $3.4 million decrease in credit loss expense partly offset by a $14.6 million increase in non-interest expense and a $2.9 million increase in income tax expense. The increase during the six months ended June 30, 2026 was primarily the result of a $40.4 million increase in net interest income, a $23.3 million increase in non-interest income, and a $9.7 million decrease in credit loss expense partly offset by a $32.2 million increase in non-interest expense and a $6.1 million increase in income tax expense.

Previous wording

Net interest income is the difference between interest income on earning assets, such as loans and securities, and interest expense on liabilities, such as deposits and borrowings, which are used to fund those assets. Net interest income is our largest source of revenue, representing 76.3% of total revenue during the first three months of 2026. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities affect net interest income and net interest margin.

Current wording

Net interest income is the difference between interest income on earning assets, such as loans and securities, and interest expense on liabilities, such as deposits and borrowings, which are used to fund those assets. Net interest income is our largest source of revenue, representing 77.0% of total revenue during the first six months of 2026. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities affect net interest income and net interest margin.

Previous wording

The Federal Reserve influences market interest rates, including the deposit and loan rates offered by many financial institutions. As of March 31, 2026, approximately 40.0% of our loans had a fixed interest rate, while the remaining loans had floating interest rates that were primarily tied to a benchmark developed by the American Financial Exchange, the Secured Overnight Financing Rate (“SOFR”) (approximately 39.1%); the prime interest rate (approximately 18.9%); or the American Interbank Offered Rate (“AMERIBOR”) (approximately 2.0%). Certain other loans are tied to other indices; however, such loans represent an immaterial portion of our loan portfolio as of March 31, 2026.

Current wording

The Federal Reserve influences market interest rates, including the deposit and loan rates offered by many financial institutions. As of June 30, 2026, approximately 40.4% of our loans had a fixed interest rate, while the remaining loans had floating interest rates that were primarily tied to a benchmark developed by the American Financial Exchange, the Secured Overnight Financing Rate (“SOFR”) (approximately 39.6%); the prime interest rate (approximately 18.6%); or the American Interbank Offered Rate (“AMERIBOR”) (approximately 1.4%). Certain other loans are tied to other indices; however, such loans represent an immaterial portion of our loan portfolio as of June 30, 2026.

Previous wording

As of March 31, 2026, the target range for the federal funds rate was 3.50% to 3.75%. In March 2026, the Federal Reserve released projections whereby the midpoint of the projected appropriate target range for the federal funds rate would fall to 3.4% by the end of 2026 and subsequently decrease to 3.1% by the end of 2027. While there can be no assurance that any decreases in the federal funds rate will occur, these projections imply up to a 25 basis point decrease in the federal funds rate during the remainder of 2026, followed by a 25 basis point decrease in 2027.

Current wording

As of June 30, 2026, the target range for the federal funds rate was 3.50% to 3.75%. In June 2026, the Federal Reserve released projections whereby the midpoint of the projected appropriate target range for the federal funds rate would rise to 3.8% by the end of 2026 and subsequently decrease to 3.6% by the end of 2027. While there can be no assurance that any increases or decreases in the federal funds rate will occur, these projections imply up to a 25 basis point increase in the federal funds rate during the remainder of 2026, followed by a 25 basis point decrease in 2027.

Previous wording

The following table presents the changes in taxable-equivalent net interest income and identifies the changes due to differences in the average volume of earning assets and interest-bearing liabilities and the changes due to changes in the average interest rate on those assets and liabilities. The changes in net interest income due to changes in both average volume and average interest rate have been allocated to the average volume change or the average interest rate change in proportion to the absolute amounts of the change attributable to each factor. The comparison between the quarters also includes, when applicable, an additional change factor that reflects the effect of the difference in the number of days in each period for assets and liabilities that accrue interest based upon the actual number of days in the period.

Current wording

The following table presents the changes in taxable-equivalent net interest income and identifies the changes due to differences in the average volume of earning assets and interest-bearing liabilities and the changes due to changes in the average interest rate on those assets and liabilities. The changes in net interest income due to changes in both average volume and average interest rate have been allocated to the average volume change or the average interest rate change in proportion to the absolute amounts of the change attributable to each factor.

Previous wording

Taxable-equivalent net interest income for the three months ended March 31, 2026, increased $24.4 million, or 5.6%, compared to the same period in 2025. The increase in taxable-equivalent net interest income during the three months ended March 31, 2026 was primarily related to decreases in the average costs of interest-bearing deposit accounts and repurchase agreements combined with increases in the average volumes of loans and tax-exempt securities and increases in the average tax-equivalent yields on tax-exempt and taxable securities. The impact of these items was partly offset by a decrease in the average yield on loans, decreases in the average yield on and volume of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) and a decrease in the average volume of taxable securities combined with an increase in the average volume of interest-bearing deposit accounts, among other things. As a result of these offsetting fluctuations, the taxable-equivalent net interest margin increased 14 basis points from 3.60% during the three months ended March 31, 2025 to 3.74% during the three months ended March 31, 2026.

Current wording

The increases in taxable-equivalent net interest income during the three and six months ended June 30, 2026 were primarily attributable to lower average costs of interest-bearing deposit accounts and repurchase agreements, as well as increases in the average volumes of loans and tax-exempt securities and higher average tax-equivalent yields on taxable and tax-exempt securities. These favorable variances were partially offset by lower average yields on loans, lower average yields on and volumes of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), lower average volumes of taxable securities, and higher average volumes of interest-bearing deposit accounts, among other things.

Previous wording

The increase in the average volume of interest-earning assets during the three months ended March 31, 2026 was primarily related to a $1.2 billion increase in average loans and a $608.2 million increase in average tax-exempt securities partly offset by a $486.0 million decrease in average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) and a $139.5 million decrease in average taxable securities. The average taxable-equivalent yield on interest-earning assets decreased 11 basis points from 4.99% during the three months ended March 31, 2025 to 4.88% during the three months ended March 31, 2026. The average taxable-equivalent yields on interest-earning assets during comparable periods were impacted by changes in market interest rates (as noted in the table above) and changes in the volumes and relative mixes of interest-earning assets.

Current wording

The increase in the average volume of interest-earning assets during the six months ended June 30, 2026 was primarily related to a $1.4 billion increase in average loans and a $515.3 million increase in average tax-exempt securities partly offset by a $423.1 million decrease in average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) and a $158.0 million decrease in average taxable securities, among other things. The average taxable-equivalent yield on interest-earning assets decreased 13 basis points from 5.03% during the six months ended June 30, 2025 to 4.90% during the six months ended June 30, 2026. The average taxable-equivalent yields on interest-earning assets during comparable periods were impacted by changes in market interest rates (as noted in the table above) and changes in the volumes and relative mixes of interest-earning assets.

Previous wording

The average taxable-equivalent yield on loans decreased 34 basis points from 6.57% during the three months ended March 31, 2025 to 6.23% during the three months ended March 31, 2026. The average taxable-equivalent yield on loans during the three months ended March 31, 2026 was impacted by decreases in market interest rates (as noted in the table above). The average volume of loans for the three months ended March 31, 2026 increased $1.2 billion, or 5.9%, compared to the same period in 2025. Loans made up approximately 45.3% of average interest-earning assets during the three months ended March 31, 2026, compared to 43.8% during the same period in 2025. The increase was primarily related to the use of available funds to originate loans.

Current wording

The average taxable-equivalent yield on loans decreased 43 basis points from 6.60% during the three months ended June 30, 2025 to 6.17% during the three months ended June 30, 2026 while the average taxable-equivalent yield on loans decreased 38 basis points from 6.58% during the six months ended June 30, 2025 to 6.20% during the six months ended June 30, 2026. The average taxable-equivalent yield on loans during the three and six months ended June 30, 2026 were impacted by decreases in market interest rates (as noted in the table above). The average volume of loans for the three months ended June 30, 2026 increased $1.6 billion, or 7.4%, while the average volume of loans for the six months ended June 30, 2026 increased $1.4 billion, or 6.6%, compared to the same periods in 2025. Loans made up approximately 46.1% and 45.7% of average interest-earning assets during the three and six months ended June 30, 2026, compared to 44.2% and 44.0% during the same respective periods in 2025. The increases were primarily related to the use of available funds to originate loans.

Previous wording

Average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) for the three months ended March 31, 2026 decreased $486.0 million, or 6.7%, compared to the same period in 2025. Interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) made up approximately 13.9% of average interest-earning assets during the three months ended March 31, 2026, compared to 15.3% during the same period in 2025. The decrease during the three months ended March 31, 2026 was primarily related to the reinvestment of amounts held in an interest-bearing account at the Federal Reserve into loans and securities. The average yield on interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) was 3.64% during the three months ended March 31, 2026, compared to 4.39% during the same period in 2025. The average yield on interest-bearing deposits during the three months ended March 31, 2026 was impacted by lower average interest rates paid on reserves held at the Federal Reserve, compared to the same period in 2025.

Current wording

Average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) for the three months ended June 30, 2026 decreased $360.8 million, or 5.8%, compared to the same period in 2025 while average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) for the six months ended June 30, 2026 decreased $423.1 million, or 6.3%, compared to the same period in 2025. Interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) made up approximately 11.8% and 12.8% of average interest-earning assets during the three and six months ended June 30, 2026, compared to 12.9% and 14.1% during the same respective periods in 2025. The decreases during the three and six months ended June 30, 2026 were primarily related to the reinvestment of amounts held in an interest-bearing account at the Federal Reserve into loans and securities. The average yields on interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) were 3.65% during both the three and six months ended June 30, 2026, compared to 4.41% and 4.40% during the same respective periods in 2025. The average yields on interest-bearing deposits during the three and six months ended June 30, 2026 were impacted by lower average interest rates paid on reserves held at the Federal Reserve, compared to the same periods in 2025.

Previous wording

The average rate paid on interest-bearing liabilities was 1.72% during the three months ended March 31, 2026, decreasing 40 basis points from 2.12% during the same period in 2025. Average deposits increased $567.9 million, or 1.4%, during the three months ended March 31, 2026, compared to the same period in 2025 and included a $422.1 million increase in average interest-bearing deposits and a $145.8 million increase in average non-interest-bearing deposits. The ratio of average interest-bearing deposits to total average deposits was 67.0% during the three months ended March 31, 2026, compared to 66.9% during the same period in 2025. The average cost of deposits is primarily impacted by changes in market interest rates as well as changes in the volume and relative mix of interest-bearing deposits. The average costs of interest-bearing deposits and total deposits were 1.55% and 1.04%, respectively, during the three months ended March 31, 2026, compared to 1.94% and 1.30%, respectively, during the same period in 2025. The average costs of deposits were impacted by decreases in the interest rates we pay on our interest-bearing deposit products as a result of decreases in market interest rates.

Current wording

The average rate paid on interest-bearing liabilities was 1.77% during the three months ended June 30, 2026, decreasing 35 basis points from 2.12% during the same period in 2025 while the average rate paid on interest-bearing liabilities was 1.75% during the six months ended June 30, 2026, decreasing 37 basis points from 2.12% during the same period in 2025. Average deposits increased $859.6 million, or 2.1%, during the three months ended June 30, 2026, compared to the same period in 2025 and included a $620.4 million increase in average interest-bearing deposits and a $239.2 million increase in average non-interest-bearing deposits. Average deposits increased $714.6 million, or 1.7%, during the six months ended June 30, 2026, compared to the same period in 2025 and included a $521.8 million increase in average interest-bearing deposits and a $192.8 million increase in average non-interest-bearing deposits. The ratios of average interest-bearing deposits to total average deposits were 67.1% and 67.0% during the three and six months ended June 30, 2026, compared to 67.0% and 66.9% during the same respective periods in 2025. The average cost of deposits is primarily impacted by changes in market interest rates as well as changes in the volume and relative mix of interest-bearing deposits. The average costs of interest-bearing deposits and total deposits were 1.61% and 1.08%, respectively, during the three months ended June 30, 2026, compared to 1.93% and 1.29%, respectively, during the same period in 2025. The average costs of interest-bearing deposits and total deposits were 1.58% and 1.06%, respectively, during the six months ended June 30, 2026, compared to 1.93% and 1.29%, respectively, during the same period in 2025. The average costs of deposits during 2026 were impacted by decreases in the interest rates we pay on our interest-bearing deposit products as a result of decreases in market interest rates.

Previous wording

Our net interest spread, which represents the difference between the average rate earned on earning assets and the average rate paid on interest-bearing liabilities, was 3.16% during the three months ended March 31, 2026, compared to 2.87% during the same period in 2025. Our net interest spreads, as well as our net interest margins, will be impacted by future changes in short-term and long-term interest rate levels, as well as the impact from the competitive environment, including from new financial technology competitors, and the availability of alternative investment options. A discussion of the effects of changing interest rates on net interest income is set forth in Item 3. Quantitative and Qualitative Disclosures About Market Risk included elsewhere in this report.

Current wording

Our net interest spreads, which represent the difference between the average yields earned on earning assets and the average rates paid on interest-bearing liabilities, were 3.15% during both the three and six months ended June 30, 2026, compared to 2.95% and 2.91% during the same respective periods in 2025. The net interest spread, as well as the net interest margin, will be impacted by future changes in short-term and long-term interest rate levels, as well as the impact from the competitive environment, including from new financial technology competitors, and the availability of alternative investment options. A discussion of the effects of changing interest rates on net interest income is set forth in Item 3. Quantitative and Qualitative Disclosures About Market Risk included elsewhere in this report.

Previous wording

Total non-interest income for the three months ended March 31, 2026 increased $12.3 million, or 9.9%, compared to the same period in 2025. Changes in the various components of non-interest income are discussed in more detail below.

Current wording

Total non-interest income for the three and six months ended June 30, 2026 increased $11.0 million, or 9.4%, and $23.3 million, or 9.7%, respectively, compared to the same periods in 2025. Changes in the various components of non-interest income are discussed in more detail below.

Previous wording

Trust and Investment Management Fees. Trust and investment management fees increased $5.0 million, or 11.7%, for the three months ended March 31, 2026, compared to the same period in 2025. Investment management fees are the most significant component of trust and investment management fees, making up approximately 82.2% and 81.8% of total trust and investment management fees for the first three months of 2026 and 2025, respectively. The increase in trust and investment management fees was primarily related to an increase in investment management fees (up $4.3 million). Trust and investment management fees during the three months ended March 31, 2026 were also impacted by a one-time, $1.3 million administrative fee associated with a large trust account. Investment management fees are generally based on the market value of assets within an account and are therefore sensitive to volatility in the equity and bond markets. The increase in investment management fees during the three months ended March 31, 2026 was partly related to higher average equity valuations on managed accounts during 2026 relative to 2025 as well as growth in the number of accounts. The increase was also partly related to variation in the timing of certain court-approved fees associated with a large guardianship trust.

Current wording

Trust and Investment Management Fees. Trust and investment management fees increased $4.0 million, or 9.1%, for the three months ended June 30, 2026 and $9.0 million, or 10.4%, for the six months ended June 30, 2026, compared to the same respective periods in 2025. Investment management fees, the most significant component of trust and investment management fees, represented approximately 82.2% and 80.9% of total trust and investment management fees during the first six months of 2026 and 2025, respectively. The increases in trust and investment management fees during the three and six months ended June 30, 2026 were primarily related to increases in investment management fees (up $4.2 million and $8.5 million, respectively). Trust and investment management fees during the six months ended June 30, 2026 were also impacted by a one-time, $1.3 million administrative fee associated with a large trust account. Investment management fees are generally based on the market value of assets within an account and are therefore sensitive to volatility in the equity and bond markets. The increases in investment management fees during the three and six months ended June 30, 2026 were partly related to higher average equity valuations on managed accounts during 2026 relative to 2025 as well as growth in the number of accounts. Investment management fees during the six months ended June 30, 2026 were also positively impacted by variation in the timing of certain court-approved fees associated with a large guardianship trust.

Previous wording

At March 31, 2026, trust assets, including both managed assets and custody assets, were primarily composed of equity securities (47.7% of assets), fixed income securities (30.5% of assets), alternative investments (8.9% of assets) and cash equivalents (7.5% of assets). The estimated fair value of these assets was $50.4 billion (including managed assets of $26.4 billion and custody assets of $24.1 billion) at March 31, 2026, compared to $51.0 billion (including managed assets of $26.7 billion and custody assets of $24.3 billion) at December 31, 2025 and $50.7 billion (including managed assets of $25.3 billion and custody assets of $25.5 billion) at March 31, 2025.

Current wording

At June 30, 2026, trust assets, including both managed assets and custody assets, were primarily composed of equity securities (50.1% of assets), fixed income securities (29.4% of assets), alternative investments (8.6% of assets) and cash equivalents (6.6% of assets). The estimated fair value of these assets was $52.9 billion (including managed assets of $27.8 billion and custody assets of $25.2 billion) at June 30, 2026, compared to $51.0 billion (including managed assets of $26.7 billion and custody assets of $24.3 billion) at December 31, 2025 and $50.9 billion (including managed assets of $25.8 billion and custody assets of $25.1 billion) at June 30, 2025.

Previous wording

Service Charges on Deposit Accounts. Service charges on deposit accounts increased $3.5 million, or 12.4%, for the three months ended March 31, 2026, compared to the same period in 2025. The increase was primarily related to an increase in commercial service charges (up $2.2 million) and overdraft charges on consumer accounts (up $1.3 million). The increase in commercial service charges during the three months ended March 31, 2026 was partly related to an increases in billable services related to analyzed treasury management accounts combined with the effect of a lower average earnings credit rate applied to deposits maintained by treasury management customers which resulted in customers paying for more of their services through fees rather than with earnings credits applied to their deposit balances. The increase in commercial service charges was also partly related to an increase in service fees on non-analyzed accounts. Overdraft charges totaled $15.6 million ($12.0 million consumer and $3.6 million commercial) during the three months ended March 31, 2026, compared to $14.2 million ($10.7 million consumer and $3.5 million commercial) during the same period in 2025. The increase in overdraft charges during the three months ended March 31, 2026 was impacted by higher volumes of fee-assessed overdrafts relative to 2025, in part due to growth in the number of accounts.

Current wording

Service Charges on Deposit Accounts. Service charges on deposit accounts for the three and six months ended June 30, 2026 increased $5.0 million, or 17.2%, and increased $8.6 million, or 14.8%, respectively, compared to the same periods in 2025. The increase during the three months ended June 30, 2026 was primarily related to increases in commercial service charges (up $2.8 million), and overdraft charges on consumer and commercial accounts (up $1.7 million and $360 thousand, respectively). The increase during the six months ended June 30, 2026, was primarily related to increases in commercial service charges (up $5.0 million) and overdraft charges on consumer and commercial accounts (up $3.0 million and $445 thousand, respectively). The increases in commercial service charges during the three and six months ended June 30, 2026 were partly related to increases in billable services related to analyzed treasury management accounts combined with the effect of a lower average earnings credit rate applied to deposits maintained by treasury management customers which resulted in customers paying for more of their services through fees rather than with earnings credits applied to their deposit balances. The increases in commercial service charges were also partly related to increases in service fees on non-analyzed accounts. Overdraft charges totaled $16.7 million ($13.0 million consumer and $3.7 million commercial) during the three months ended June 30, 2026, compared $14.7 million ($11.4 million consumer and $3.3 million commercial) during the same period in 2025. Overdraft charges totaled $32.3 million ($25.0 million consumer and $7.3 million commercial) during the six months ended June 30, 2026, compared to $28.9 million ($22.1 million consumer and $6.8 million commercial) during the same period in 2025. The increases in overdraft charges during the three and six months ended June 30, 2026 were impacted by higher volumes of fee-assessed overdrafts relative to 2025, in part due to growth in the number of accounts.

Previous wording

Insurance Commissions and Fees. Insurance commissions and fees increased $1.1 million, or 5.0%, for the three months ended March 31, 2026, compared to the same period in 2025. The increase was primarily the result of increases in benefit plan commissions (up $1.2 million) and contingent income (up $451 thousand), partly offset by a decrease in life insurance commissions (down $465 thousand). The increase in benefit plan commissions was primarily due to premium and exposure rate increases within the existing customer base and an increase in business volumes. The decrease in life insurance commissions was primarily related to a decrease in business volumes.

Current wording

The increase during the three months ended June 30, 2026 was primarily related to increases in property and casualty commissions (up $181 thousand), primarily related to commercial lines, and contingent income (up $102 thousand). The increase during the six months ended June 30, 2026 was primarily related to increases in benefit plan commissions (up $1.2 million) and contingent income (up $553 thousand), partly offset by a decrease in life insurance commissions (down $538 thousand). The increase in benefit plan commissions was primarily due to an increase in business volumes combined with premium and exposure rate increases within the existing customer base. The decrease in life insurance commissions was primarily related to a decrease in business volumes.

Previous wording

Contingent income totaled $4.5 million during the three months ended March 31, 2026 compared to $4.0 million during the three months ended March 31, 2025. Contingent income primarily consists of amounts received from various property and casualty insurance carriers related to portfolio growth and the loss performance of insurance policies previously placed. These performance-related contingent payments are seasonal in nature and are mostly received during the first quarter of each year. Performance-related contingent income totaled $3.8 million during the three months ended March 31, 2026 and $3.5 million during the three months ended March 31, 2025. Contingent income also includes amounts received from various benefit plan insurance companies related to the volume of business generated and/or the subsequent retention of such business. This benefit plan related contingent income totaled $643 thousand during the three months ended March 31, 2026, compared to $517 thousand during the three months ended March 31, 2025.

Current wording

Contingent income totaled $687 thousand and $5.2 million during the three and six months ended June 30, 2026, respectively, compared to $585 thousand and $4.6 million during the same respective periods in 2025. Contingent income primarily consists of amounts received from various property and casualty insurance carriers related to portfolio growth and the loss performance of insurance policies previously placed. These performance-related contingent payments are seasonal in nature and are mostly received during the first quarter of each year. Performance-related contingent income totaled $4.0 million during the six months ended June 30, 2026 and $3.6 million during the six months ended June 30, 2025. Contingent income also includes amounts received from various benefit plan insurance companies related to the volume of business generated and/or the subsequent retention of such business. This benefit plan related contingent income totaled $465 thousand and $1.1 million during the three and six months ended June 30, 2026, respectively, compared to $512 thousand and $1.0 million during the same respective periods in 2025.

Previous wording

Net interchange and card transaction fees increased $1.1 million, or 20.9%, for the three months ended March 31, 2026, compared to the same period in 2025. The increase was primarily due to increased card transaction volumes. A comparison of gross and net interchange and card transaction fees for the reported periods is presented in the table below.

Current wording

Net interchange and card transaction fees for the three and six months ended June 30, 2026 increased $927 thousand, or 16.5%, and increased $2.1 million, or 18.7%, respectively, compared to the same periods in 2025. These increases were primarily due to increased card transaction volumes. A comparison of gross and net interchange and card transaction fees for the reported periods is presented in the table below.

Previous wording

Federal Reserve rules applicable to financial institutions that have assets of $10 billion or more provide that the maximum permissible interchange fee for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction. An upward adjustment of no more than 1 cent to an issuer's debit card interchange fee is allowed if the card issuer develops and implements policies and procedures reasonably designed to achieve certain fraud-prevention standards. The Federal Reserve also has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product. In August 2025, the U.S. District Court for the District of North Dakota ruled to vacate the Federal Reserve’s current interchange rules but simultaneously stayed its own vacatur pending appeal to the circuit court. The outcome of this litigation could have a significant and adverse effect on the fees banks can charge on debit card transactions.

Current wording

Federal Reserve rules applicable to financial institutions that have assets of $10 billion or more provide that the maximum permissible interchange fee for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction. An upward adjustment of up to 1 cent per transaction is permitted if the card issuer develops and implements policies and procedures reasonably designed to meet specified fraud-prevention standards. Federal Reserve rules governing routing and network exclusivity also require issuers to enable at least two unaffiliated networks for routing transactions on each debit or prepaid card product. In August 2025, the U.S. District Court for the District of North Dakota vacated the Federal Reserve's current interchange fee rule but stayed the effect of its ruling pending appeal. As a result, the current interchange fee framework remains in effect while the litigation proceeds. The outcome of this litigation could result in changes to the regulation of debit card interchange fees which could have a significant and adverse effect on the fees banks can charge on debit card transactions.

Previous wording

In October 2023, the Federal Reserve issued a proposal under which the maximum permissible interchange fee for an electronic debit transaction would be the sum of 14.4 cents per transaction and 4 basis points multiplied by the value of the transaction. Furthermore, the fraud-prevention adjustment would increase from a maximum of 1 cent to 1.3 cents. The proposal would adopt an approach for future adjustments to the interchange fee cap, which would occur every other year based on issuer cost data gathered by the Federal Reserve from large debit card issuers. Had the proposed maximum interchange fees been in effect during the reported periods, interchange and debit card transaction fees would have been approximately 30% lower. The comment period for this proposal ended in May 2024. The extent to which any such proposed changes in permissible interchange fees will impact our future revenues is cannot be determined at this time.

Current wording

In October 2023, the Federal Reserve issued a proposal that would reduce the maximum permissible interchange fee for an electronic debit transaction to the sum of 14.4 cents per transaction and 4 basis points multiplied by the value of the transaction, while increasing the maximum fraud-prevention adjustment from 1.0 cent to 1.3 cents. The proposal would also establish a framework for updating the interchange fee cap every two years based on issuer cost data collected by the Federal Reserve from large debit card issuers. Had the proposed interchange fee cap been in effect during the reported periods, interchange and debit card transaction fees would have been approximately 30% lower. The comment period for the proposal ended in May 2024. As of June 30, 2026, the Federal Reserve had not adopted a final rule implementing the proposal. Accordingly, the extent to which any future changes to the interchange fee cap may affect the Company's revenues cannot be determined at this time.

Previous wording

Other Charges, Commissions, and Fees. Other charges, commissions, and fees decreased $318 thousand, or 2.3%, for the three months ended March 31, 2026, compared to the same period in 2025. The decrease was primarily related to decreases income from the placement of annuities (down $300 thousand), subscription fee income (down $156 thousand), and commitment fees on unused lines of credit (down $136 thousand), among other things, partly offset by an increase income from the placement of mutual funds (up $262 thousand), among other things.

Current wording

Other Charges, Commissions, and Fees. Other charges, commissions, and fees for the three andsix months ended June 30, 2026 decreased $180 thousand, or 1.3%, and $498 thousand, or 1.8%, compared to the same respective periods in 2025. The decreases during the three andsix months ended June 30, 2026 were primarily related to decreases in income from the placement of annuities (down $556 thousand and $856 thousand, respectively) and commitment fees on unused lines of credit (down $274 thousand and $410 thousand, respectively), among other things. These decreases were partially offset by increases in income from the placement of mutual funds (up $474 thousand and $736 thousand, respectively), among other things.

Previous wording

Net Gain/Loss on Securities Transactions. There were no sales of securities during the three months ended March 31, 2026. During the three months ended March 31, 2025, we sold certain available-for-sale securities with amortized costs totaling $38.6 million and realized a net loss of $14 thousand. These sales were primarily made in connection with a municipal tender offer.

Current wording

Net Gain/Loss on Securities Transactions. There were no sales of securities during the six months ended June 30, 2026. During the six months ended June 30, 2025, we sold certain available-for-sale securities with amortized costs totaling $40.1 million and realized a net loss of $14 thousand. These sales were primarily made in connection with a municipal tender offer during the first quarter.

Previous wording

Other Non-Interest Income. Other non-interest income increased $1.9 million, or 14.9%, for the three months ended March 31, 2026, compared to the same period in 2025. The increase was primarily related to increases in sundry and other miscellaneous income (up $2.2 million); benefits received on life insurance policies (up $632 thousand); income from customer derivatives trading and securities trading activities (combined up $456 thousand); and public finance underwriting fees (up $341 thousand); among other things. The increase from these items was partly offset by a decrease in gains on the sale of foreclosed and other assets (down $2.1 million), among other things. Sundry and other miscellaneous income during the three months ended March 31, 2026 included a $2.7 million one-time fee associated with the termination of a customer lease. The increases in income from customer derivative and securities trading activities and public finance underwriting fees were primarily related to increased transaction volumes. Gains on the sale of foreclosed and other assets during the three months ended March 31, 2025 included a $2.5 million gain related to the sale of a foreclosed real estate property.

Current wording

Other Non-Interest Income. Other non-interest income for the three and six months ended June 30, 2026 increased $974 thousand, or 8.9%, and $2.8 million, or 12.1%, respectively, compared to the same periods in 2025. The increase during the three months ended June 30, 2026 was primarily related to an increase in sundry and other miscellaneous income (up $1.5 million), partly offset by a decrease in public finance underwriting fees (down $425 thousand). The increase during the six months ended June 30, 2026 was primarily related to increases in sundry and other miscellaneous income (up $4.0 million); benefits received on life insurance policies (up $585 thousand); and income from customer derivatives trading activities (up $551 thousand); among other things. The increase from these items was partly offset by a decrease in gains on the sale of foreclosed and other assets (down $2.1 million), among other things. Sundry and other miscellaneous income during the six months ended June 30, 2026 included, during the first quarter, a $2.7 million one-time fee associated with the termination of a customer lease recognized and, during the second quarter, $2.2 million related to the refund of certain tax credits associated with payroll taxes paid during the COVID-19 pandemic. The increase in income from customer derivatives trading activities during the six months ended June 30, 2026 and the decrease in public finance underwriting fees during the three months ended June 30, 2026 were primarily attributable to fluctuations in transaction volumes. Gains on the sale of foreclosed and other assets during the six months ended June 30, 2025 included a $2.5 million gain on the sale of a foreclosed real estate property.

Previous wording

Total non-interest expense for the three months ended March 31, 2026 increased $17.6 million, or 5.1%, compared to the same period in 2025. Changes in the various components of non-interest expense are discussed below.

Current wording

Total non-interest expense for the three and six months ended June 30, 2026 increased $14.6 million, or 4.2%, and $32.2 million, or 4.6%, respectively, compared to the same periods in 2025. Changes in the various components of non-interest expense are discussed below.

Previous wording

Salaries and Wages. Salaries and wages increased $5.3 million, or 3.3%, for the three months ended March 31, 2026, compared to the same period in 2025. The increase in salaries and wages was primarily related to an increase in salaries due to annual merit and market increases and an increase in the number of employees. The increase in the number of employees was partly related to our investment in organic expansion in various markets. Salaries and wages during the three months ended March 31, 2026 were also impacted, to a lesser extent, by increases in stock-based compensation and commissions.

Current wording

Salaries and Wages. Salaries and wages for the three and six months ended June 30, 2026 increased $10.8 million, or 6.7%, and $16.1 million, or 5.0%, respectively, compared to the same periods in 2025. The increases were primarily related to annual merit and market-based salary increases, as well as growth in the number of employees. The increase in staffing levels was driven in part by investments in organic expansion across various markets. Salaries and wages for the three and six months ended June 30, 2026 also reflected, to a lesser extent, increases in incentive compensation and stock-based compensation.

Previous wording

Employee Benefits. Employee benefits expense increased $2.5 million, or 5.9%, for the three months ended March 31, 2026, compared to the same period in 2025. The increase was primarily related to increases in medical/dental benefits expense (up $1.7 million), primarily due to an increase in expected costs; payroll taxes (up $792 thousand); and 401(k) plan expense (up $274 thousand). These items were partly offset by an increase in the net periodic pension benefit related to our defined benefit retirement and restoration plans (up $432 thousand).

Current wording

Employee Benefits. Employee benefits expense for the three and six months ended June 30, 2026 increased $2.3 million, or 7.1%, and increased $4.8 million, or 6.4%, respectively, compared to the same periods in 2025. The increases were primarily related to increases in medical and dental benefits expense (up $1.6 million and $3.3 million, respectively), primarily due to higher claims and related costs; payroll taxes (up $530 thousand and $1.3 million, respectively); and 401(k) plan expense (up $333 thousand and $607 thousand, respectively). These increases were partly offset by increases in the net periodic pension benefit related to our defined benefit retirement and restoration plans (up $432 thousand and $864 thousand, respectively).

Previous wording

Our defined benefit retirement and restoration plans were frozen in 2001 which has helped to reduce the volatility in retirement plan expense. We nonetheless still have funding obligations related to these plans and could recognize expense related to these plans in future years, which would be dependent on the return earned on plan assets, the level of interest rates and employee turnover. See Note 11 - Defined Benefit Plans for additional information related to our net periodic pension benefit/expense.

Current wording

Our defined benefit retirement and restoration plans have been frozen since 2001 which has reduced the volatility of retirement plan expense. However, we continue to have funding obligations associated with these plans, and future pension benefit or expense could fluctuate based on factors such as the performance of plan assets, changes in interest rates, and employee turnover. See Note 11 - Defined Benefit Plans for additional information related to our net periodic pension benefit/expense.

Previous wording

Net Occupancy. Net occupancy expense increased $1.5 million, or 4.4%, for the three months ended March 31, 2026, compared to the same period in 2025. The increase was primarily related to increases in depreciation on buildings and leasehold improvements (together up $875 thousand); a decrease in rental income from tenants (down ($607 thousand); and lease expense (up $300 thousand), among other things.

Current wording

Net Occupancy. Net occupancy expense for the three and six months ended June 30, 2026 increased $583 thousand, or 1.7%, and increased $2.1 million, or 3.0%, respectively, compared to the same periods in 2025. The increase during the three months ended June 30, 2026 was primarily related to increases in depreciation on buildings and leasehold improvements (up $833 thousand); and repairs, maintenance and service contracts expense (up $267 thousand), among other things. These increases were partly offset by decreases in building insurance expense (down $350 thousand) and property tax expense (down $327 thousand), among other things. The increase during the six months ended June 30, 2026 was primarily related to increases in depreciation on buildings and leasehold improvements (up $1.7 million); a decrease in rental income from tenants (down $625 thousand); and an increase in lease expense (up $362 thousand), among other things. These increases were partly offset by a decrease in building insurance expense (down $693 thousand), among other things.

Previous wording

Technology, Furniture, and Equipment. Technology, furniture, and equipment expense increased $1.6 million, or 3.9%, for the three months ended March 31, 2026, compared to the same period in 2025. The increase during the three months ended March 31, 2026 was primarily related to increases in cloud services expense (up $1.8 million), equipment rental (up $189 thousand), and depreciation on furniture and equipment (up $147 thousand), among other things, partly offset by a decrease in software amortization (down $693 thousand).

Current wording

Technology, Furniture, and Equipment. Technology, furniture, and equipment expense for the three and six months ended June 30, 2026 increased $2.0 million, or 4.9%, and $3.5 million, or 4.4%, compared to the same periods in 2025. The increases during the three and six months ended June 30, 2026 were primarily related to increases in cloud services expense (up $1.0 million and $2.8 million, respectively), service contracts expense (up $583 thousand and $623 thousand, respectively), and equipment rental expense (up $342 thousand and $531 thousand, respectively), among other things. These increases were partly offset by decreases in software amortization expense during the three and six months ended June 30, 2026 (down $394 thousand and $1.1 million, respectively).

Previous wording

Deposit Insurance. Deposit insurance expense totaled $7.2 million for the three months ended March 31, 2026, and did not significantly fluctuate compared to the same period in 2025.

Current wording

Deposit Insurance. Deposit insurance expense totaled $6.3 million and $13.5 million for the three and six months ended June 30, 2026, respectively, and did not significantly fluctuate compared to the same periods in 2025.

Previous wording

Other Non-Interest Expense. Other non-interest expense increased $6.7 million, or 10.4%, for the three months ended March 31, 2026, compared to the same period in 2025. The increase included increases in fraud losses, primarily related to deposits (up $2.4 million); advertising/promotions expense (up $1.9 million); amortization of deferred costs on loan commitments (up $1.2 million); professional services expense (up $532 thousand); guard service expense (up $476 thousand); research and platform fees (up $445 thousand); and travel, meals and entertainment (up $439 thousand), among other things. The increases from these items were partly offset by decreases in donations expense (down $937 thousand) and foreclosed assets expense (down $451 thousand), among other things. On April 22, 2026, Sefas Innovation, Inc., a third-party vendor used by Frost Bank, notified us that they experienced a cybersecurity incident that likely involved certain Frost Bank customer data. Our investigation into the incident, including the scope and nature of the data potentially involved, is ongoing. The incident neither affected our systems or networks, nor disrupted our operations. At this time, the incident is not reasonably likely to have a material impact on our financial condition or results of operations.

Current wording

On April 22, 2026, Sefas Innovation, Inc., a third-party vendor used by Frost Bank, notified us that they experienced a cybersecurity incident that likely involved certain Frost Bank customer data. The incident neither affected our systems or networks, nor disrupted our operations. At this time, the incident is not reasonably likely to have a material impact on our financial condition or results of operations.

Previous wording

Net income for the three months ended March 31, 2026 increased $17.9 million, or 12.2%, compared to the same period in 2025. The increase during the three months ended March 31, 2026 was primarily the result of a $22.3 million increase in net interest income, a $7.2 million increase in non-interest income, and a $6.3 million decrease in credit loss expense, partly offset by a $15.4 million increase in non-interest expense and a $2.6 million increase in income tax expense.

Current wording

Net income for the three and six months ended June 30, 2026 increased $15.1 million, or 9.9%, and increased $32.9 million, or 11.0%, respectively, compared to the same periods in 2025. The increase during the three months ended June 30, 2026 was primarily the result of an $18.2 million increase in net interest income, a $7.7 million increase in non-interest income, and a $3.4 million decrease in credit loss expense, partly offset by a $11.2 million increase in non-interest expense and a $3.0 million increase in income tax expense. The increase during the six months ended June 30, 2026 was primarily the result of a $40.5 million increase in net interest income, a $14.9 million increase in non-interest income, and a $9.7 million decrease in credit loss expense partly offset by a $26.6 million increase in non-interest expense and a $5.6 million increase in income tax expense.

Previous wording

Net interest income for the three months ended March 31, 2026 increased $22.3 million, or 5.3%, compared to the same period in 2025. The increase during the three months ended March 31, 2026 was primarily related to decreases in the average costs of interest-bearing deposit accounts and repurchase agreements combined with increases in the average volumes of loans and tax-exempt securities and increases in the average tax-equivalent yields on tax-exempt and taxable securities. The impact of these items was partly offset by a decrease in the average yield on loans, decreases in the average yield on and volume of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) and a decrease in the average volume of taxable securities combined with an increase in the average volume of interest-bearing deposit accounts, among other things. See the analysis of net interest income included in the section captioned “Net Interest Income” included elsewhere in this discussion.

Current wording

Net interest income for the three and six months ended June 30, 2026 increased $18.2 million, or 4.2%, and increased $40.5 million, or 4.8%, respectively, compared to the same periods in 2025. The increases during the three and six months ended June 30, 2026 were primarily attributable to lower average costs of interest-bearing deposit accounts and repurchase agreements, as well as increases in the average volumes of loans and tax-exempt securities and higher average tax-equivalent yields on taxable and tax-exempt securities. These favorable variances were partially offset by lower average yields on loans, lower average yields on and volumes of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), lower average volumes of taxable securities, and higher average volumes of interest-bearing deposit accounts, among other things. See the analysis of net interest income included in the section captioned “Net Interest Income” included elsewhere in this discussion.

Previous wording

Credit loss expense for the three months ended March 31, 2026 totaled $6.7 million compared to $13.1 million during the same period in 2025. See the sections captioned “Credit Loss Expense” and “Allowance for Credit Losses” elsewhere in this discussion for further analysis of credit loss expense related to loans and off-balance-sheet commitments.

Current wording

Credit loss expense for the three and six months ended June 30, 2026 totaled $9.8 million and $16.5 million compared to $13.1 million and $26.2 million during the same period in 2025. See the sections captioned “Credit Loss Expense” and “Allowance for Credit Losses” elsewhere in this discussion for further analysis of credit loss expense related to loans and off-balance-sheet commitments.

Previous wording

Non-interest income for the three months ended March 31, 2026 increased $7.2 million, or 9.7%, compared to the same period in 2025. The increase during the three months ended March 31, 2026 was primarily related to increases in service charges on deposit accounts; other non-interest income; interchange and card transaction fees; and insurance commissions and fees. The increase in service charges on deposit accounts was primarily related to an increase in commercial service charges and overdraft charges on consumer accounts. The increase in other non-interest income was primarily related to increases in sundry and other miscellaneous income; benefits received on life insurance policies; income from customer derivatives trading activities; and public finance underwriting fees, among other things, partly offset by a decrease in gains on the sale of foreclosed and other assets, among other things. The increase in interchange and card transaction fees was primarily related to increased card transaction volumes. The increase in insurance commissions and fees was primarily the result of increases in benefit plan commissions and contingent income, partly offset by a decrease in life insurance commissions. See the analysis of these categories of non-interest income included in the section captioned “Non-Interest Income” included elsewhere in this discussion.

Current wording

Non-interest income for the three and six months ended June 30, 2026 increased $7.7 million, or 11.8%, and increased $14.9 million, or 10.7%, respectively, compared to the same periods in 2025. The increases during the three and six months ended June 30, 2026 were primarily related to increases in service charges on deposit accounts; other non-interest income; interchange and card transaction fees; and insurance commissions and fees. The increases in service charges on deposit accounts were primarily related to increases in commercial service charges and overdraft charges on consumer accounts. The increase in other non-interest income during the three months ended June 30, 2026 was primarily related to an increase in sundry and other miscellaneous income partly offset by decreases in income from customer securities trading activities and public finance underwriting fees. The increase in other non-interest income during the six months ended June 30, 2026 was primarily related to increases in sundry and other miscellaneous income; benefits received on life insurance policies; and income from customer derivatives trading activities, among other things, partly offset by a decreases in gains on the sale of foreclosed and other assets, and income from customer securities trading activities, among other things. The increases in interchange and card transaction fees were primarily related to increased card transaction volumes. The increase in insurance commissions and fees during the three months ended June 30, 2026 was primarily related to increases in property and casualty commissions, primarily related to commercial lines, and contingent income, while the increase during the six months ended June 30, 2026 was primarily related to increases in benefit plan commissions and contingent income, partly offset by a decrease in life insurance commissions. See the analysis of these categories of non-interest income included in the section captioned “Non-Interest Income” included elsewhere in this discussion.

Previous wording

Non-interest expense for the three months ended March 31, 2026 increased $15.4 million, or 5.1%, compared to the same period in 2025. The increase during the three months ended March 31, 2026 was primarily due to increases in other non-interest expense; salaries and wages; employee benefits expense; technology, furniture, and equipment expense; and net occupancy expense. The increase in other non-interest expense included increases in fraud losses; advertising/promotions expense; amortization of deferred costs on loan commitments; professional services expense; travel, meals and entertainment; and guard service expense; among other things, partly offset by decreases in donations expense and foreclosed assets expense, among other things. The increase in salaries and wages was primarily related to an increase in salaries due to annual merit and market increases and increases in the number of employees. Salaries and wages were also impacted, to a lesser extent, by an increase in stock-based compensation. The increase in employee benefits expense was primarily related to increases in medical/dental benefits expense, payroll taxes, and 401(k) plan expense, among other things, partly offset by an increase in the net periodic pension benefit related to our defined benefit retirement and restoration plans. The increase in technology, furniture, and equipment expense was primarily related to increases in cloud services expense, equipment rental, and depreciation on furniture and equipment, among other things, partly offset by a decrease in software amortization. The increase in net occupancy expense was primarily related to an increase in depreciation on buildings and leasehold improvements, a decrease in rental income from tenants, and an increase in lease expense, among other things. See the analysis of these categories of non-interest expense included in the section captioned “Non-Interest Expense” included elsewhere in this discussion.

Current wording

Non-interest expense for three and six months ended June 30, 2026 increased $11.2 million, or 3.7%, and increased $26.6 million, or 4.4%, respectively, compared to the same periods in 2025. The increase during the three months ended June 30, 2026 was primarily due to increases in salaries and wages; employee benefits expense; technology, furniture, and equipment expense; and net occupancy expense, partly offset by a decrease in other non-interest expense. The increase during the six months ended June 30, 2026 was primarily due to increases in salaries and wages; other non-interest expense; employee benefits expense; technology, furniture, and equipment expense; and net occupancy expense. The increases in salaries and wages were primarily related to annual merit and market increases and growth in the number of employees. Salaries and wages were also impacted, to a lesser extent, by increases in incentive compensation and stock-based compensation. The decrease in other non-interest expense during the three months ended June 30, 2026 included decreases in sundry and other miscellaneous expense; advertising/promotions expense; business development expense; and amortization of deferred costs on loan commitments, among other things, partly offset by an increase in fraud losses, primarily related to deposits, among other things. The increase in other non-interest expense during the six months ended June 30, 2026 included increases in fraud losses, primarily related to deposits; advertising/promotions expense; travel, meals and entertainment; and amortization of deferred costs on loan commitments, among other things, partly offset by decreases in sundry and other miscellaneous expenses; donations expense; and foreclosed assets expense, among other things. The increases in employee benefits expense were primarily related to increases in medical/dental benefits expense, payroll taxes, and 401(k) plan expense, among other things, partly offset by increases in the net periodic pension benefit related to our defined benefit retirement and restoration plans. The increases in technology, furniture, and equipment expense were primarily related to increases in cloud services expense, service contracts expense, and equipment rental, among other things, partly offset by decreases in software amortization. The increases in net occupancy expense were primarily related to increases in depreciation on buildings and leasehold improvements, among other things, partly offset by decreases in building insurance expense, among other things. See the analysis of these categories of non-interest expense included in the section captioned “Non-Interest Expense” included elsewhere in this discussion.