SOUTHSIDE BANCSHARES INC

Previous wording

Certain statements of other than historical fact that are contained in this report may be considered to be “forward-looking statements” within the meaning of and subject to the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. These statements may include words such as “expect,” “estimate,” “project,” “anticipate,” “appear,” “believe,” “could,” “should,” “may,” “might,” “will,” “would,” “seek,” “intend,” “probability,” “risk,” “goal,” “target,” “objective,” “plans,” “potential,” and similar expressions. Forward-looking statements are statements with respect to our beliefs, plans, expectations, objectives, goals, anticipations, assumptions, estimates, intentions and future performance and are subject to significant known and unknown risks and uncertainties, which could cause our actual results to differ materially from the results discussed in the forward-looking statements. For example, benefits of the Share Repurchase Plan, trends in asset quality, capital, liquidity, our ability to sell nonperforming assets, expense reductions, planned operational efficiencies and earnings from growth and certain market risk disclosures, including the impact of interest rates and our expectations regarding rate changes, tax reform, inflation, the impacts related to or resulting from other economic factors are based upon information presently available to management and are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future. Accordingly, our results could materially differ from those that have been estimated. The most significant factor that could cause future results to differ materially from those anticipated by our forward-looking statements include the ongoing impact of higher inflation levels, interest rate fluctuations, including the impact of changes in interest rates on our financial projections, models and guidance, and general economic and recessionary concerns, as well as the effects of declines in the real estate market, tariffs or trade wars (including reduced consumer spending, lower economic growth or recession, reduced demand for U.S. exports, disruptions to supply chains and decreased demand for other banking products and services), high unemployment and increasing insurance costs, as well as the financial stress to borrowers as a result of the foregoing, all of which could impact economic growth and could cause a reduction in financial transactions and business activities, including decreased deposits and reduced loan originations and our ability to manage liquidity in a rapidly changing and unpredictable market. Other factors that could cause ac…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Certain statements of other than historical fact that are contained in this report may be considered to be “forward-looking statements” within the meaning of and subject to the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. These statements may include words such as “expect,” “estimate,” “project,” “anticipate,” “appear,” “believe,” “could,” “should,” “may,” “might,” “will,” “would,” “seek,” “intend,” “probability,” “risk,” “goal,” “target,” “objective,” “plans,” “potential,” and similar expressions. Forward-looking statements are statements with respect to our beliefs, plans, expectations, objectives, goals, anticipations, assumptions, estimates, intentions and future performance and are subject to significant known and unknown risks and uncertainties, which could cause our actual results to differ materially from the results discussed in the forward-looking statements. For example, trends in asset quality, capital, liquidity, our ability to sell nonperforming assets, expense reductions, planned operational efficiencies and earnings from growth and certain market risk disclosures, including the impact of interest rates and our expectations regarding rate changes, tax reform, inflation, the impacts related to or resulting from other economic factors are based upon information presently available to management and are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future. Accordingly, our results could materially differ from those that have been estimated. The most significant factors that could cause future results to differ materially from those anticipated by our forward-looking statements include general economic conditions in our markets, including the ongoing impact of higher inflation levels, interest rate fluctuations, including the impact of changes in interest rates on our financial projections, models and guidance, as well as the effects of declines in the real estate market, tariffs or trade wars (including reduced consumer spending, lower economic growth or recession, reduced demand for U.S. exports, disruptions to supply chains and decreased demand for other banking products and services), high unemployment and increasing insurance costs, as well as the financial stress to borrowers as a result of the foregoing, all of which could impact economic growth and could cause a reduction in financial transactions and business activities, including decreased deposits and reduced loan originations and our ability to manage liquidity in a rapidly changing and unpredictable market. Other factors that could cause actual results to differ materiall…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Continued tariff announcements and ongoing tariff negotiations have caused some uncertainty related to potential inflation levels and its impact on the overall economy. While it is too early to discern the likely outcome of these tariff announcements and negotiations, the current economic conditions and growth prospects for our markets continue to reflect a solid and overall positive outlook. Overall, the Texas markets we serve remain healthy and continue to report both job and population growth.

Current wording

Continued tariff announcements and ongoing tariff negotiations have caused some uncertainty related to inflation levels and its impact on the overall economy. While it is too early to discern the likely outcome of these tariff announcements and negotiations, the current economic conditions and growth prospects for our markets continue to reflect a solid and positive outlook. Overall, the Texas markets we serve remain healthy and continue to report both job and population growth.

Previous wording

Our deposits were $6.63 billion at June 30, 2025, a decrease of $22.3 million, or 0.3%, from December 31, 2024. At June 30, 2025, we had 178,970 total deposit accounts with an average balance of $34,000. Our estimated uninsured deposits were 38.5% of total deposits as of June 30, 2025. When excluding affiliate deposits (Southside-owned deposits) and public fund deposits (all collateralized), our total estimated deposits without insurance or collateral was 21.1% of total deposits as of June 30, 2025.

Current wording

Our deposits were $6.96 billion at September 30, 2025, an increase of $307.3 million, or 4.6%, from December 31, 2024. At September 30, 2025, we had 179,097 total deposit accounts with an average balance of $34,000. Our estimated uninsured deposits were 36.9% of total deposits as of September 30, 2025. When excluding affiliate deposits (Southside-owned deposits) and public fund deposits (all collateralized), our total estimated deposits without insurance or collateral was 21.7% of total deposits as of September 30, 2025.

Previous wording

Our noninterest bearing deposits represent approximately 20.6% of total deposits. During the three months ended June 30, 2025, our cost of interest bearing deposits decreased 19 basis points to 2.82% from 3.01% for the three months ended June 30, 2024. Our cost of total deposits for the second quarter of 2025 decreased 13 basis points to 2.26% from 2.39% for the three months ended June 30, 2024.

Current wording

Our noninterest bearing deposits represent approximately 20.3% of total deposits. During the three months ended September 30, 2025, our cost of interest bearing deposits decreased 19 basis points to 2.82% from 3.01% for the three months ended September 30, 2024. Our cost of total deposits for the third quarter of 2025 decreased 13 basis points to 2.25% from 2.38% for the three months ended September 30, 2024.

Previous wording

Our cost of interest bearing deposits decreased 16 basis points, from 2.99% for the six months ended June 30, 2024 to 2.83% for the six months ended June 30, 2025. Our cost of total deposits decreased 11 basis points, from 2.37% for the six months ended June 30, 2024 to 2.26% for the six months ended June 30, 2025.

Current wording

Our cost of interest bearing deposits decreased 16 basis points, from 2.99% for the nine months ended September 30, 2024 to 2.83% for the nine months ended September 30, 2025. Our cost of total deposits decreased 11 basis points, from 2.37% for the nine months ended September 30, 2024 to 2.26% for the nine months ended September 30, 2025.

Previous wording

During the six months ended June 30, 2025, our net income decreased $2.9 million, or 6.2%, to $43.3 million from $46.2 million for the same period in 2024. The decrease in net income was primarily a result of the $3.7 million increase in noninterest expense, the $1.8 million increase in the provision for credit losses, partially offset by the $1.2 million increase in net interest income, the $1.1 million increase in noninterest income and the $394,000 decrease in income tax expense. Earnings per diluted common share decreased $0.10, or 6.6%, to $1.42 for the six months ended June 30, 2025, compared to $1.52 for the same period in 2024.

Current wording

During the nine months ended September 30, 2025, our net income decreased $18.5 million, or 27.7%, to $48.2 million from $66.7 million for the same period in 2024. The decrease in net income was largely driven by a $19.1 million decrease in noninterest income and, to a lesser extent, a $4.9 million increase in noninterest expense and a $510,000 increase in provision for credit losses, partially offset by a $4.6 million decrease in income tax expense and a $1.4 million increase in net interest income. Net loss on sale of AFS securities, included in noninterest income, was $24.9 million for the nine months ended September 30, 2025, compared to a net loss of $2.5 million for the same period in 2024. Earnings per diluted common share decreased $0.61, or 27.7%, to $1.59 for the nine months ended September 30, 2025, compared to $2.20 for the same period in 2024.

Previous wording

Our total assets decreased $177.5 million, or 2.1%, to $8.34 billion at June 30, 2025 from $8.52 billion at December 31, 2024. Our securities portfolio decreased by $83.1 million, or 3.0%, to $2.73 billion at June 30, 2025, compared to $2.81 billion at December 31, 2024. The decrease in the securities portfolio was due to decreases in U.S. Treasury securities, MBS and municipal securities during the six months ended June 30, 2025. Our FHLB stock decreased $9.4 million, or 27.9%, to $24.4 million from $33.8 million at December 31, 2024, due to the decrease in our FHLB borrowings during the six months ended June 30, 2025.

Current wording

Our total assets decreased $134.3 million, or 1.6%, to $8.38 billion at September 30, 2025 from $8.52 billion at December 31, 2024. Our securities portfolio decreased by $257.3 million, or 9.1%, to $2.56 billion at September 30, 2025, compared to $2.81 billion at December 31, 2024. The decrease in the securities portfolio was primarily due to decreases in municipal securities and U.S. Treasury securities during the nine months ended September 30, 2025. Our FHLB stock decreased $24.5 million, or 72.3%, to $9.4 million from $33.8 million at December 31, 2024, due to the decrease in our FHLB borrowings during the nine months ended September 30, 2025.

Previous wording

Loans at June 30, 2025 were $4.60 billion, a decrease of $59.7 million, or 1.3%, compared to $4.66 billion at December 31, 2024, due to decreases of $67.4 million in construction loans, $27.2 million in municipal loans, $4.5 million in loans to individuals and $4.3 million in 1-4 family residential loans. These decreases were partially offset by increases of $26.3 million in commercial real estate loans and $17.4 million in commercial loans. Loans held for sale decreased $1.5 million, or 78.0%, to $428,000 at June 30, 2025 from $1.9 million at December 31, 2024.

Current wording

Loans at September 30, 2025 were $4.77 billion, an increase of $103.7 million, or 2.2%, compared to $4.66 billion at December 31, 2024, due to increases of $109.0 million in commercial real estate loans and $66.8 million in commercial loans. These increases were partially offset by decreases of $37.6 million in municipal loans, $18.3 million in construction loans, $10.3 million in 1-4 family residential loans and $5.8 million in loans to individuals. Loans held for sale decreased $1.4 million, or 74.5%, to $497,000 at September 30, 2025 from $1.9 million at December 31, 2024.

Previous wording

Our nonperforming assets at June 30, 2025 increased $29.3 million, or 816.9%, to $32.9 million and represented 0.39% of total assets, compared to $3.6 million, or 0.04% of total assets, at December 31, 2024. Nonaccruing loans increased $1.8 million, or 56.9%, to $5.0 million, and the ratio of nonaccruing loans to total loans was 0.11% and 0.07% for June 30, 2025 and December 31, 2024, respectively. There were $27.5 million in restructured loans as of June 30, 2025, compared to $2,000 at December 31, 2024. The increase in restructured loans was due to the extension of maturity in the first quarter of 2025 on a $27.5 million commercial real estate loan to allow for an extended lease up period. Repossessed assets were $19,000 at June 30, 2025, compared to $14,000 at December 31, 2024. There was $380,000 of OREO at June 30, 2025 and $388,000 at December 31, 2024.

Current wording

Our nonperforming assets at September 30, 2025 increased $32.0 million, or 892.1%, to $35.6 million and represented 0.42% of total assets, compared to $3.6 million, or 0.04% of total assets, at December 31, 2024, due primarily to an increase of $27.5 million in restructured loans. The increase in restructured loans was due to the extension of maturity of a $27.5 million commercial real estate loan to allow for an extended lease up period during the first quarter of 2025. Nonaccruing loans increased $4.8 million, or 149.8%, to $8.0 million, and the ratio of nonaccruing loans to total loans was 0.17% and 0.07% for September 30, 2025 and December 31, 2024, respectively. The increase in nonaccrual loans compared to December 31, 2024 was primarily due to a $3.7 million increase in commercial loans and a $1.1 million increase in commercial real estate loans. Repossessed assets were $24,000 at September 30, 2025, compared to $14,000 at December 31, 2024. There was $128,000 of OREO at September 30, 2025 and $388,000 at December 31, 2024.

Previous wording

Our deposits decreased $22.3 million, or 0.3%, to $6.63 billion at June 30, 2025 from $6.65 billion at December 31, 2024, primarily due to a decrease in brokered deposits of $135.7 million, or 18.3%, and a decrease in public fund deposits of $68.5 million, or 5.9%, partially offset by an increase in commercial and retail deposits.

Current wording

Our deposits increased $307.3 million, or 4.6%, to $6.96 billion at September 30, 2025 from $6.65 billion at December 31, 2024, primarily due to an increase in brokered deposits of $152.9 million, or 20.6%, and retail deposits of $319.1 million, or 6.8%, partially offset by a decrease in public fund deposits of $164.7 million, or 13.4%. The increase in retail deposits of $319.1 million consist of $56.6 million of noninterest bearing deposits and $262.5 million of interest bearing deposits.

Previous wording

Total FHLB borrowings decreased $220.4 million, or 30.1%, to $511.5 million at June 30, 2025 from $731.9 million at December 31, 2024.

Current wording

Total FHLB borrowings decreased $630.6 million, or 86.2%, to $101.3 million at September 30, 2025 from $731.9 million at December 31, 2024.

Previous wording

Other borrowings increased $23.4 million, or 30.6%, to $99.8 million at June 30, 2025, from $76.4 million at December 31, 2024.

Current wording

Other borrowings increased $22.9 million, or 30.0%, to $99.4 million at September 30, 2025, from $76.4 million at December 31, 2024.

Previous wording

Our total shareholders’ equity at June 30, 2025 decreased 0.6%, or $4.7 million, to $807.2 million, or 9.7% of total assets, compared to $811.9 million, or 9.5% of total assets, at December 31, 2024. The decrease in shareholders’ equity was the result of cash dividends paid of $21.8 million, other comprehensive loss of $16.6 million and repurchases of $11.9 million of our common stock pursuant to our Stock Repurchase Plan, partially offset by net income of $43.3 million, stock compensation expense of $1.6 million, common stock issued under our dividend reinvestment plan of $514,000, and net issuance of common stock under employee stock plans of $145,000.

Current wording

Our total shareholders’ equity at September 30, 2025 increased 2.8%, or $22.9 million, to $834.9 million, or 10.0% of total assets, compared to $811.9 million, or 9.5% of total assets, at December 31, 2024. The increase in shareholders’ equity was the result of net income of $48.2 million, other comprehensive income of $16.8 million, stock compensation expense of $2.4 million, common stock issued under our dividend reinvestment plan of $739,000 and net issuance of common stock under employee stock plans of $111,000, partially offset by cash dividends paid of $32.7 million and repurchases of $12.7 million of our common stock pursuant to our Stock Repurchase Plan.

Previous wording

We ended the second quarter of 2025 with approximately $383.6 million in available liquidity from the FRDW, in addition to the approximately $1.87 billion available from the credit line with FHLB due primarily to the blanket lien on our loan portfolio and to a lesser extent, securities available as collateral. At June 30, 2025, the estimated deposits, without insurance or collateral, to total deposits, excluding affiliate deposits (Southside-owned deposits) was 21.1%, or $1.40 billion.

Current wording

We ended the third quarter of 2025 with approximately $382.2 million in available liquidity from the FRDW, in addition to the approximately $2.30 billion available from the credit line with FHLB due primarily to the blanket lien on our loan portfolio and to a lesser extent, securities available as collateral. At September 30, 2025, the estimated deposits, without insurance or collateral, to total deposits, excluding affiliate deposits (Southside-owned deposits) was 21.7%, or $1.51 billion.

Previous wording

During the six months ended June 30, 2025, we entered into an additional $200 million cash flow hedge interest rate swap contracts, while $180 million cash flow hedge interest rate swap contracts matured. At June 30, 2025, brokered deposits of $530 million and FHLB advances of $280 million were hedged with our $810 million of cash flow swaps. As of June 30, 2025, a pre-tax unrealized gain of $2.5 million was recognized in other comprehensive income, and there was no ineffective portion of these hedges. In connection with $810.0 million and $790.0 million of the agreements outstanding at June 30, 2025 and December 31, 2024, respectively, the Bank also entered into various interest rate swap contracts that are treated as cash flow hedges under ASC Topic 815, “Derivatives and Hedging” that are expected to be effective in hedging the variability in future cash flows at 3.52% with a remaining average weighted maturity of 1.7 years at June 30, 2025. Refer to “Note 9 – Derivative Financial Instruments and Hedging Activities” in our consolidated financial statements included in this report for a detailed description of our hedging policy and methodology related to derivative instruments.

Current wording

During the nine months ended September 30, 2025, we entered into additional $250 million cash flow hedge interest rate swap contracts, while $180 million cash flow hedge interest rate swap contracts matured. At September 30, 2025, brokered deposits of $760 million and FHLB advances of $100 million were hedged with our $860 million of cash flow swaps. As of September 30, 2025, a pre-tax unrealized gain of $858,000 was recognized in other comprehensive income, and there was no ineffective portion of these hedges. In connection with $860.0 million and $790.0 million of the agreements outstanding at September 30, 2025 and December 31, 2024, respectively, the Bank also entered into various interest rate swap contracts that are treated as cash flow hedges under ASC Topic 815, “Derivatives and Hedging” that are expected to be effective in hedging the variability in future cash flows at 3.47% with a remaining average weighted maturity of 1.5 years at September 30, 2025. Refer to “Note 9 – Derivative Financial Instruments and Hedging Activities” in our consolidated financial statements included in this report for a detailed description of our hedging policy and methodology related to derivative instruments.

Previous wording

Risks associated with this asset structure include a potentially lower net interest rate spread and margin when compared to our peers, changes in the slope of the yield curve, increased interest rate risk, the length of interest rate cycles, changes in volatility or spreads associated with the MBS, municipal and corporate securities, the unpredictable nature of MBS prepayments and credit risks associated with the municipal and corporate securities. See “Part I - Item 1A. Risk Factors – Risks Related to Our Business” in this report for a discussion of risks related to interest rates. An additional risk is significant increases in interest rates, especially long-term interest rates, which could adversely impact the fair value of the AFS securities portfolio and could also impact our equity capital. Due to the unpredictable nature of MBS prepayments, the length of interest rate cycles and the slope of the interest rate yield curve, net interest income could fluctuate more than simulated under the scenarios modeled by our ALCO and described under “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in this report.

Current wording

Risks associated with this asset structure include a potentially lower net interest rate spread and margin when compared to our peers, changes in the slope of the yield curve, increased interest rate risk, the length of interest rate cycles, changes in volatility or spreads associated with the MBS, municipal and corporate securities, the unpredictable nature of MBS prepayments and credit risks associated with the municipal and corporate securities. See “Part I - Item 1A. Risk Factors – Risks Related to Our Business” in the 2024 Form 10-K for a discussion of risks related to interest rates. An additional risk is significant increases in interest rates, especially long-term interest rates, which could adversely impact the fair value of the AFS securities portfolio and could also impact our equity capital. Due to the unpredictable nature of MBS prepayments, the length of interest rate cycles and the slope of the interest rate yield curve, net interest income could fluctuate more than simulated under the scenarios modeled by our ALCO and described under “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in this report.

Previous wording

Our securities portfolio decreased 3.0% from $2.81 billion at December 31, 2024 to $2.73 billion at June 30, 2025. The decrease in the securities portfolio was due to maturities, principal payments and sales of securities during the six months ended June 30, 2025, which more than offset securities purchased.

Current wording

Our securities portfolio decreased 9.1% from $2.81 billion at December 31, 2024 to $2.56 billion at September 30, 2025, with decreases in municipal securities, U.S. Treasury Bills and corporate bonds, partially offset by an increase in U.S. Agency MBS. The decrease in the securities portfolio was due to sales of securities, maturities and principal payments during the nine months ended September 30, 2025, which more than offset securities purchased.

Previous wording

At June 30, 2025, securities as a percentage of assets totaled 32.7%, compared to 33.0% at December 31, 2024, due to an $83.1 million, or 3.0%, decrease in securities and cash and cash equivalents decreased to 4.7% of total assets at June 30, 2025, compared to 5.0% at December 31, 2024. Our balance sheet management strategy is dynamic and is continually evaluated as market conditions warrant.

Current wording

At September 30, 2025, securities as a percentage of assets totaled 30.5%, compared to 33.0% at December 31, 2024, due to a $257.3 million, or 9.1%, decrease in securities. Cash and cash equivalents increased to 5.6% of total assets at September 30, 2025, compared to 5.0% at December 31, 2024. Our balance sheet management strategy is dynamic and is continually evaluated as market conditions warrant.

Previous wording

Our FHLB borrowings decreased 30.1%, or $220.4 million, to $511.5 million at June 30, 2025 from $731.9 million at December 31, 2024. As of June 30, 2025, we had $30.0 million in borrowings from the FRDW. We had no borrowings from the FRDW at December 31, 2024.

Current wording

Our FHLB borrowings decreased 86.2%, or $630.6 million, to $101.3 million at September 30, 2025 from $731.9 million at December 31, 2024. As of September 30, 2025 and December 31, 2024, we had no borrowings from the FRDW.

Previous wording

As of June 30, 2025, our total wholesale funding as a percentage of deposits, not including brokered deposits, decreased to 19.1% from 24.9% at December 31, 2024.

Current wording

As of September 30, 2025, our total wholesale funding as a percentage of deposits, not including brokered deposits, decreased to 16.4% from 24.9% at December 31, 2024.

Previous wording

Our brokered deposits may consist of CDs and non-maturity deposits which may be raised quickly with terms tailored to our funding needs. We had $134.3 million in brokered CDs at June 30, 2025, of which $80.0 million are related to our cash flow hedges, from $115.7 million at December 31, 2024. At June 30, 2025, our brokered CDs had a weighted average cost of 437 basis points and remaining maturities of less than 10 months. Our brokered non-maturity deposits decreased to $472.9 million at June 30, 2025, of which $450.0 million are related to our cash flow hedges, from $627.1 million at December 31, 2024, with a weighted average cost of 350 and 321 basis points, respectively. Our wholesale funding policy currently allows for maximum brokered deposits of the lesser of $1.05 billion, or 12% of total assets. Potential higher interest expense and lack of customer loyalty are risks associated with the use of brokered deposits.

Current wording

Our brokered deposits may consist of CDs and non-maturity deposits which may be raised quickly with terms tailored to our funding needs. We had $192.7 million in brokered CDs at September 30, 2025, of which $80.0 million are related to our cash flow hedges, an increase from $115.7 million at December 31, 2024. At September 30, 2025, our brokered CDs had a weighted average cost of 436 basis points and remaining maturities of less than 11 months. Our brokered non-maturity deposits increased to $703.0 million at September 30, 2025, of which $680.0 million are related to our cash flow hedges, from $627.1 million at December 31, 2024, with a weighted average cost of 364 and 321 basis points, respectively. Our wholesale funding policy currently allows for maximum brokered deposits of the lesser of $1.05 billion, or 12% of total assets. Potential higher interest expense and lack of customer loyalty are risks associated with the use of brokered deposits.

Previous wording

At June 30, 2025, the majority of the securities portfolio was funded by non-maturity deposits, some of which are included in wholesale funding that accounts for approximately 41% of the funding source, of which approximately 71% is swapped at a fixed rate, providing protection from rising interest rates.

Current wording

At September 30, 2025, the majority of the securities portfolio was funded by non-maturity deposits, some of which are included in wholesale funding that accounts for approximately 39% of the funding source, of which approximately 86% is swapped at a fixed rate, providing protection from rising interest rates.

Previous wording

During 2022, we entered into partial term fair value hedges for certain of our fixed rate callable AFS municipal securities. During 2024, we entered into partial term fair value hedges of fixed rate AFS MBS and fixed rate municipal loans using the portfolio layer method. The instruments are designated as fair value hedges as the changes in the fair value of the interest rate swap are expected to partially offset changes in the fair value of the hedged item attributable to changes in the SOFR swap rate, the designated benchmark interest rate. As of June 30, 2025, hedged municipal securities with a carrying amount of $279.9 million are included in our AFS securities portfolio in our consolidated balance sheets, representing approximately 72% of the AFS municipal portfolio. As of June 30, 2025,$164.0 million in hedging instruments were used to hedge a layer of the closed portfolio of AFS MBS with a carrying value of $395.1 million, or 43% of the AFS MBS portfolio, and$155.0 million in hedging instruments were used to hedge a layer of the closed portfolio of municipal loans. These derivative contracts involve the receipt of floating rate interest from a counterparty in exchange for us making fixed-rate payments over the life of the agreement, without the exchange of the underlying notional value.

Current wording

We have partial term fair value hedges for certain of our fixed rate callable AFS municipal securities and partial term fair value hedges of fixed rate AFS MBS and fixed rate municipal loans using the portfolio layer method. The instruments are designated as fair value hedges as the changes in the fair value of the interest rate swap are expected to partially offset changes in the fair value of the hedged item attributable to changes in the SOFR swap rate, the designated benchmark interest rate. As of September 30, 2025, $56.2 million in hedging instruments were used to hedge municipal securities with a carrying amount of $51.2 million are included in our AFS securities portfolio in our consolidated balance sheets, representing approximately 20.6% of the AFS municipal portfolio. As of September 30, 2025,$201.0 million in hedging instruments were used to hedge a layer of the closed portfolio of AFS MBS with a carrying value of $315.2 million, or 32.2% of the AFS MBS portfolio, and$155.0 million in hedging instruments were used to hedge a layer of the closed portfolio of municipal loans. These derivative contracts involve the receipt of floating rate interest from a counterparty in exchange for us making fixed-rate payments over the life of the agreement, without the exchange of the underlying notional value.

Previous wording

Our results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on assets (loans and investments) and interest expense due on our funding sources (deposits and borrowings) during a particular period. Results of operations are also affected by our noninterest income, provision for credit losses, noninterest expenses and income tax expense. General economic and competitive conditions, particularly changes in interest rates, changes in interest rate yield curves, prepayment rates of MBS and loans, repricing of loan relationships, government policies and actions of regulatory authorities also significantly affect our results of operations. Future changes in applicable laws, regulations or government policies may also have a material impact on our results of operations.

Current wording

Our results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on assets (loans and investments) and interest expense due on our funding sources (deposits and borrowings) during a particular period. Results of operations are also affected by our noninterest income, provision for credit losses, noninterest expenses and income tax expense. General economic and competitive conditions, particularly changes in interest rates, changes in interest rate yield curves, prepayment rates of MBS and loans, repricing of loan relationships, government policies and actions of regulatory authorities also significantly affect our results of operations. Future changes in applicable laws, regulations or government policies may also have a material impact on our results of operations. See “Part I - Item 1A. Risk Factors – Risks Related to Our Business” in the 2024 Form 10-K for further discussion of these risks.

Previous wording

Net interest income is one of the principal sources of a financial institution’s earnings stream and represents the difference or spread between interest and fee income generated from interest earning assets and the interest expense paid on interest bearing liabilities. Fluctuations in interest rates or interest rate yield curves, as well as repricing characteristics and volume and changes in the mix of interest earning assets and interest bearing liabilities, materially impact net interest income. During the six months ended June 30, 2025, the federal funds rate remained unchanged at 4.25% to 4.50%. If the federal funds rate remains elevated, it may negatively impact our net interest income.

Current wording

Net interest income is one of the principal sources of a financial institution’s earnings stream and represents the difference or spread between interest and fee income generated from interest earning assets and the interest expense paid on interest bearing liabilities. Fluctuations in interest rates or interest rate yield curves, as well as repricing characteristics and volume and changes in the mix of interest earning assets and interest bearing liabilities, materially impact net interest income. During the third quarter of 2025, the Federal Reserve reduced the target federal funds rate by 25 basis points to 4.00% to 4.25%. If the federal funds rate remains elevated, it may negatively impact our net interest income.

Previous wording

Net interest income for the three months ended June 30, 2025 increased $658,000, or 1.2%, compared to the same period in 2024. The increase in net interest income was due to decreases in the average rate paid on and average balance of our interest bearing liabilities, partially offset by decreases in the average yield of and average balance of our interest earning assets. Total interest income decreased $5.6 million, or 5.4%, to $98.6 million for the three months ended June 30, 2025, compared to $104.2 million during the same period in 2024. Total interest expense decreased $6.3 million, or 12.4%, to $44.3 million for the three months ended June 30, 2025, compared to $50.6 million for the same period in 2024. Our net interest margin and our net interest margin (FTE), a non-GAAP measure, increased to 2.82% and 2.95%, respectively, for the three months ended June 30, 2025, compared to 2.74% and 2.87%, respectively, for the same period in 2024. Our net interest spread and net interest spread (FTE), also a non-GAAP measure, increased to 2.15% and 2.27%, respectively, for the three months ended June 30, 2025, compared to 2.00% and 2.13%, respectively, for the same period in 2024. See “Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.

Current wording

Net interest income for the three months ended September 30, 2025 increased $254,000, or 0.5%, compared to the same period in 2024. The increase in net interest income was due to the decrease in the average rate paid on our interest bearing liabilities and the increase in the average balance of our interest earning assets, partially offset by the decrease in the average yield of our interest earning assets. Total interest income decreased $3.8 million, or 3.6%, to $101.9 million for the three months ended September 30, 2025, compared to $105.7 million during the same period in 2024. Total interest expense decreased $4.1 million, or 8.1%, to $46.2 million for the three months ended September 30, 2025, compared to $50.2 million for the same period in 2024. Our net interest margin and our net interest margin (FTE), a non-GAAP measure, both decreased by one basis point to 2.81% and 2.94%, respectively, for the three months ended September 30, 2025, compared to 2.82% and 2.95%, respectively, for the same period in 2024. Our net interest spread and net interest spread (FTE), also a non-GAAP measure, increased to 2.14% and 2.26%, respectively, for the three months ended September 30, 2025, compared to 2.10% and 2.23%, respectively, for the same period in 2024. See “Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.

Previous wording

Net interest income was $108.1 million for the six months ended June 30, 2025, compared to $107.0 million for the same period in 2024, an increase of $1.2 million, or 1.1%. The increase in net interest income for the six months ended June 30, 2025 was due to decreases in the average rate paid on and average balance of our interest bearing liabilities, partially offset by the decrease in the average yield of interest earning assets. Total interest income decreased $8.1 million, or 3.9%, to $198.9 million for the six months ended June 30, 2025, compared to $206.9 million for the same period in 2024. Total interest expense decreased $9.3 million, or 9.3%, to $90.7 million for the six months ended June 30, 2025, compared to $100.0 million for the same period in 2024. Our net interest margin and net interest margin (FTE), a non-GAAP measure, increased to 2.78% and 2.91%, respectively, for the six months ended June 30, 2025, compared to 2.73% and 2.87%, respectively, for the same period in 2024, and our net interest spread and net interest spread (FTE), also a non-GAAP measure, increased to 2.11% and 2.23%, respectively, compared to 2.01% and 2.15%, respectively, for the same period in 2024. See “Non-GAAP Financial Measures” for more information and for a reconciliation to GAAP.

Current wording

Net interest income was $163.8 million for the nine months ended September 30, 2025, compared to $162.4 million for the same period in 2024, an increase of $1.4 million, or 0.9%. The increase in net interest income for the nine months ended September 30, 2025 was due to decreases in the average rate paid on and average balance of our interest bearing liabilities and a change in the mix of our interest earning assets, partially offset by the decrease in the average yield of interest earning assets. Total interest income decreased $11.9 million, or 3.8%, to $300.7 million for the nine months ended September 30, 2025, compared to $312.6 million for the same period in 2024. Total interest expense decreased $13.3 million, or 8.9%, to $136.9 million for the nine months ended September 30, 2025, compared to $150.2 million for the same period in 2024. Our net interest margin and net interest margin (FTE), a non-GAAP measure, increased to 2.79% and 2.92%, respectively, for the nine months ended September 30, 2025, compared to 2.76% and 2.90%, respectively, for the same period in 2024, and our net interest spread and net interest spread (FTE), also a non-GAAP measure, increased to 2.12% and 2.24%, respectively, compared to 2.04% and 2.18%, respectively, for the same period in 2024. See “Non-GAAP Financial Measures” for more information and for a reconciliation to GAAP.

Previous wording

The decrease in total interest income for the three months ended June 30, 2025, was attributable to a decrease in the average yield on interest earning assets to 5.25% for the three months ended June 30, 2025, compared to 5.45% for the same period in 2024, and a $172.1 million, or 2.2%, decrease in the average balance of interest earning assets when compared to the same period in 2024. The decrease in total interest expense for the three months ended June 30, 2025, was primarily attributable to the decrease in interest rates on our interest bearing liabilities to 2.98% for the three months ended June 30, 2025 from 3.32% for the same period in 2024, and a decrease in the average balance of our interest bearing liabilities of $167.0 million, or 2.7%, for the three months ended June 30, 2025, compared to the same period in 2024. The decrease in average interest bearing liabilities was primarily the result of decreases in FHLB borrowings and other borrowings.

Current wording

The decrease in total interest income for the three months ended September 30, 2025, was attributable to a decrease in the average yield on interest earning assets to 5.27% for the three months ended September 30, 2025, compared to 5.51% for the same period in 2024, partially offset by a $31.5 million, or 0.4%, increase in the average balance of interest earning assets when compared to the same period in 2024. The decrease in total interest expense for the three months ended September 30, 2025, was primarily attributable to the decrease in interest rates on our interest bearing liabilities to 3.01% for the three months ended September 30, 2025 from 3.28% for the same period in 2024.

Previous wording

Note: As of June 30, 2025 and 2024, loans totaling $5.0 million and $6.1 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Current wording

Note: As of September 30, 2025 and 2024, loans totaling $8.0 million and $7.3 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Previous wording

The decrease in total interest income was attributable to the decrease in the average yield on earning assets to 5.24% for the six months ended June 30, 2025 from 5.42% for the same period in 2024. The decrease in total interest expense for the six months ended June 30, 2025 was primarily attributable to the decrease in interest rates on our interest bearing liabilities to 3.01% from 3.27% for the same period in 2024 and a decrease in the average balance of our interest bearing liabilities of $63.9 million, or 1.0%, when compared to the same period in 2024.

Current wording

The decrease in total interest income was attributable to the decrease in the average yield on earning assets to 5.25% for the nine months ended September 30, 2025 from 5.45% for the same period in 2024, partially offset by a change in the mix of our interest earning assets when compared to the same period in 2024. The decrease in total interest expense for the nine months ended September 30, 2025 was attributable to the decrease in interest rates on our interest bearing liabilities to 3.01% from 3.27% for the same period in 2024 and a decrease in the average balance of our interest bearing liabilities of $44.0 million, or 0.7%, when compared to the same period in 2024.

Previous wording

The “Average Balances with Average Yields and Rates” table that follows shows average earning assets and interest bearing liabilities together with the average yield on the earning assets and the average rate of the interest bearing liabilities (dollars in thousands) for the six months ended June 30, 2025 and 2024. The interest and related yields presented are on a fully taxable-equivalent basis and are therefore non-GAAP measures. See “Non-GAAP Financial Measures” for more information, and for a reconciliation to GAAP.

Current wording

The “Average Balances with Average Yields and Rates” table that follows shows average earning assets and interest bearing liabilities together with the average yield on the earning assets and the average rate of the interest bearing liabilities (dollars in thousands) for the nine months ended September 30, 2025 and 2024. The interest and related yields presented are on a fully taxable-equivalent basis and are therefore non-GAAP measures. See “Non-GAAP Financial Measures” for more information, and for a reconciliation to GAAP.

Previous wording

Note: As of June 30, 2025 and 2024, loans totaling $5.0 million and $6.1 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Current wording

Note: As of September 30, 2025 and 2024, loans totaling $8.0 million and $7.3 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Previous wording

The 5.1% increase in noninterest income for the three months ended June 30, 2025, when compared to the same period in 2024, was primarily due to a decrease in net loss on sale of securities AFS and increases in other noninterest income and trust fees, partially offset by a decrease in BOLI income. The 5.1% increase in noninterest income for the six months ended June 30, 2025, when compared to the same period in 2024, was primarily due to increases in trust fees, other noninterest income and gain on sale of loans, partially offset by a decrease in BOLI income.

Current wording

The 246.7% decrease in noninterest income for the three months ended September 30, 2025, when compared to the same period in 2024, was due to an increase in net loss on sale of securities AFS, partially offset by increases in other noninterest income, gain on sale of loans and trust fees. The 64.8% decrease in noninterest income for the nine months ended September 30, 2025, when compared to the same period in 2024, was due to an increase in net loss on sale of securities AFS and a decrease in BOLI income, partially offset by increases in other noninterest income, gain on sale of loans and trust fees.

Previous wording

During the six months ended June 30, 2025, we sold MBS that resulted in a net loss on sale of AFS securities of $554,000. During the three and six months ended June 30, 2024, we sold municipal securities that resulted in a net loss on sale of AFS securities of $563,000 and $581,000, respectively.

Current wording

During the three and nine months ended September 30, 2025, we sold MBS and municipal securities that resulted in a net loss on sale of AFS securities of $24.4 million and $24.9 million, respectively. During the three and nine months ended September 30, 2024, we sold municipal securities that resulted in a net loss on sale of AFS securities of $1.9 million and $2.5 million, respectively.

Previous wording

The decrease in gain on sale of loans for the three months ended June 30, 2025 and the increase for the six months ended June 30, 2025, when compared to the same periods in 2024, was primarily due to a $100,000 recovery in the second quarter of 2024 related to the $512,000 loss on the sale of a commercial real estate loan relationship during the first quarter of 2024.

Current wording

Gain on sale of loans increased for the three months ended September 30, 2025, when compared to the same period in 2024, due to an increase in the volume of loans sold. The increase in gain on sale of loans for the nine months ended September 30, 2025, when compared to the same period in 2024, was due to the $412,000 net loss on the sale of a commercial real estate loan relationship during the first quarter of 2024.

Previous wording

Trust fees increased for the three and six months ended June 30, 2025, when compared to the same periods in 2024, due to an increase in accounts under management and fee repricing.

Current wording

Trust fees increased for the three and nine months ended September 30, 2025, when compared to the same periods in 2024, due to an increase in accounts under management and fee repricing.

Previous wording

The decrease in BOLI income for the three and six months ended June 30, 2025, when compared to the same periods in 2024, was primarily due to a death benefit of $962,000 realized in the second quarter of 2024 for a former covered officer.

Current wording

The decrease in BOLI income for the nine months ended September 30, 2025, when compared to the same period in 2024, was primarily due to a death benefit of $962,000 realized in the second quarter of 2024 for a former covered officer.

Previous wording

Brokerage services income increased for the three and six months ended June 30, 2025, when compared to the same periods in 2024, due to an increase in assets under management.

Current wording

Brokerage services income increased for the three and nine months ended September 30, 2025, when compared to the same periods in 2024, due to an increase in assets under management.

Previous wording

Other noninterest income increased for the three months ended June 30, 2025, when compared to the same period in 2024, primarily due to an increase in swap fee income, partially offset by the gain recognized on the repurchase of our subordinated notes at a discount during the second quarter of 2024. Other noninterest income increased for the six months ended June 30,

Current wording

Other noninterest income increased for the three and nine months ended September 30, 2025, when compared to the same periods in 2024, partially due to an impairment loss in the third quarter of 2024 of $868,000 for AFS securities. Additionally, the increase for the three months ended September 30, 2025 was also due to increases in swap fee income, mortgage servicing fee income and deluxe income, partially offset by a decrease in equity investment income. The additional increase for the nine months ended September 30, 2025 was also due to increases in swap fee income, deluxe income and merchant services income, partially offset by the gain recognized on the repurchase of our subordinated notes at a discount during the second quarter of 2024.

Previous wording

The increase in noninterest expense for the three months ended June 30, 2025, when compared to the same period in 2024, was primarily due to increases in other noninterest expense, professional fees, salaries and employee benefits expense and advertising, travel and entertainment. The increase in noninterest expense for the six months ended June 30, 2025, when compared to the same period in 2024, was primarily due to increases in other noninterest expense and professional fees, partially offset by a decrease in salaries and employee benefits expense.

Current wording

The increase in noninterest expense for the three and nine months ended September 30, 2025, when compared to the same periods in 2024, was primarily due to increases in advertising, travel and entertainment, professional fees, other noninterest expense, and to a lesser extent, salaries and employee benefits expense, partially offset by decreases in communications expense and amortization of intangibles.