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 and general economic and recessionary concerns, 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, our ability to manage liquidity in a rapidly changing and unpredictable market, labor shortages and changes in interest rates by the Federal Reserve. Other factors that could cause actual results to differ materially from those indicated by forward-looking statements include, but are not limited to, the following:

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 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 materially from those indicated by forward-looking statements include, but are not limited to,…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

•general (i) political conditions, including, without limitation, governmental action and uncertainty resulting from U.S. and global political trends and (ii) economic conditions, either globally, nationally, in the State of Texas, or in the specific markets in which we operate, including, without limitation, the deterioration of the commercial real estate, residential real estate, construction and development, energy, oil and gas, credit or liquidity markets, which could cause an adverse change in our net interest margin, or a decline in the value of our assets, which could result in realized losses, as well as the risk of an economic slowdown or recession;

Current wording

•general (i) political conditions, including, without limitation, governmental action and uncertainty resulting from U.S. and global political trends and (ii) economic conditions, either globally, nationally, in the State of Texas, or in the specific markets in which we operate, including, without limitation, the deterioration of the commercial real estate, residential real estate, construction and development, energy, oil and gas, credit or liquidity markets, which could cause an adverse change in our net interest margin, or a decline in the value of our assets, which could result in realized losses, as well as the risks of an economic slowdown or recession and the effects of inflationary pressures, changes in interest rates, tariffs or trade wars (including reduced consumer spending, supply chain issues and adverse impacts to credit quality) and the related financial stress on borrowers and changes to customer behavior and credit risk as a result of the foregoing;

Previous wording

•current or future legislation, regulatory changes or changes in monetary or fiscal policy that adversely affect the businesses in which we or our customers or our borrowers are engaged, including the impact of the Dodd-Frank Act, the Federal Reserve’s actions to manage interest rates, the capital requirements promulgated by the Basel Committee, the CARES Act, the Economic Aid Act, tariffs, trade policies and other regulatory responses to economic conditions;

Current wording

•current or future legislation, regulatory changes or changes in monetary or fiscal policy that adversely affect the businesses in which we or our customers or our borrowers are engaged, including the Federal Reserve’s actions to manage interest rates, tariffs, trade policies, supply chain disruptions, immigration policies and/or disputes and other regulatory responses to economic conditions;

Previous wording

•potential impacts of the adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto;

Current wording

•potential impacts of the adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto (including increases in the cost of our deposit insurance assessments);

Previous wording

•technological changes, including potential cyber-security incidents and other disruptions, or innovations to the financial services industry, including as a result of the increased telework environment;

Current wording

•technological changes, including potential cyber-security incidents and other disruptions, developments in AI, or innovations to the financial services industry, including as a result of the increased telework environment;

Previous wording

•the potential implementation under the new presidential administration of a regulatory reform agenda that is different than that of the prior administration, impacting the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies;

Current wording

•the implementation under the presidential administration of a regulatory reform agenda that is different than that of the prior administration, impacting the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies;

Previous wording

•credit risks of borrowers, including any increase in those risks due to changing economic conditions;

Current wording

•credit risks of borrowers, including any increase in those risks due to changing economic conditions, including inflation, tariffs and immigration policies;

Previous wording

•changes in consumer spending, borrowing and saving habits, including as a result of inflation, fluctuating interest rates and recessionary concerns;

Current wording

•changes in consumer spending, borrowing and saving habits, including as a result of inflation, tariffs, supply chain disruptions, fluctuating interest rates and recessionary concerns;

Previous wording

The economic conditions and growth prospects for our markets continue to reflect a solid and positive overall outlook. Higher inflation levels and higher interest rates could have a negative impact on both our consumer and commercial borrowers. Currently, the Texas markets we serve continue to remain healthy due to 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 interest rates and 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. Higher inflation levels and interest rate fluctuations could have a negative impact on both our consumer and commercial borrowers in the future. Overall, however, the Texas markets we serve remain healthy.

Previous wording

Our deposits were $6.65 billion at December 31, 2024, an increase of $104.6 million, or 1.6%, from December 31, 2023. At December 31, 2024, we had 178,662 total deposit accounts with an average balance of $33,000. Our estimated uninsured deposits were 38.1% of total deposits as of December 31, 2024. When excluding affiliate deposits (Southside-owned deposits) and public fund deposits (all collateralized), our total estimated deposits without insurance or collateral was 19.5% of total deposits as of December 31, 2024.

Current wording

Our deposits were $6.87 billion at December 31, 2025, an increase of $210.9 million, or 3.2%, from December 31, 2024. At December 31, 2025, we had 178,757 total deposit accounts with an average balance of $35,000. Our estimated uninsured deposits were 39.7% of total deposits as of December 31, 2025. When excluding affiliate deposits (Southside-owned deposits) and public fund deposits (all collateralized), our total estimated deposits without insurance or collateral was 23.0% of total deposits as of December 31, 2025.

Previous wording

Our noninterest bearing deposits represent approximately 20.4% of total deposits. Our cost of interest bearing deposits increased 64 basis points, from 2.34% for the year ended December 31, 2023, to 2.98% for the year ended December 31, 2024. Our cost of total deposits increased 59 basis points, from 1.77% for the year ended December 31, 2023, to 2.36% for the year ended December 31, 2024.

Current wording

Our noninterest bearing deposits represent approximately 20.9% of total deposits. Our cost of interest bearing deposits decreased 18 basis points, from 2.98% for the year ended December 31, 2024, to 2.80% for the year ended December 31, 2025. Our cost of total deposits decreased 13 basis points, from 2.36% for the year ended December 31, 2024, to 2.23% for the year ended December 31, 2025.

Previous wording

The table below shows our total lines of credit, borrowings, total amounts available for future liquidity, and swapped value as of December 31, 2024 (in thousands):

Current wording

Our capital ratios and contingent liquidity sources remain solid. The table below shows our total lines of credit, borrowings, total amounts available for future liquidity, and swapped value as of December 31, 2025 (in thousands):

Previous wording

During the year ended December 31, 2024, our net income increased $1.8 million, or 2.1%, to $88.5 million from $86.7 million for the same period in 2023. The increase in net income was primarily a result of the $5.9 million increase in noninterest income, a $5.8 million decrease in provision for credit losses and the $1.1 million increase in net interest income, partially offset by the $6.6 million increase in noninterest expense and the $4.4 million increase in income tax expense. Earnings per diluted common share increased $0.09, or 3.2%, to $2.91 for the year ended December 31, 2024, compared to $2.82 for the same period in 2023.

Current wording

During the year ended December 31, 2025, our net income decreased $19.3 million, or 21.8%, to $69.2 million from $88.5 million for the same period in 2024. The decrease in net income was largely driven by a $25.8 million decrease in noninterest income and to a lesser extent, a $4.2 million increase in noninterest expense, partially offset by a $5.5 million decrease in income tax expense, a $5.0 million increase in net interest income and a $293,000 decrease in provision for credit losses. Net loss on sale of AFS securities, included in noninterest income, was $32.3 million for the year ended December 31, 2025, compared to a net loss of $2.5 million for the same period in 2024. Earnings per diluted common share decreased $0.62, or 21.3%, to $2.29 for the year ended December 31, 2025, compared to $2.91 for the same period in 2024.

Previous wording

Our total assets increased $232.5 million, or 2.8%, to $8.52 billion at December 31, 2024 from $8.28 billion at December 31, 2023. Our securities portfolio increased by $209.8 million, or 8.1%, to $2.81 billion, compared to $2.60 billion at December 31, 2023. The increase in the securities portfolio was primarily due to purchases of MBS, partially offset by a decrease in municipal bonds during the year ended December 31, 2024. Our FHLB stock increased $21.9 million, or 183.3%, to $33.8 million from $11.9 million at December 31, 2023, due to the increase in our FHLB borrowings during the year ended December 31, 2024.

Current wording

Our total assets decreased $2.9 million to $8.51 billion at December 31, 2025 from $8.52 billion at December 31, 2024. Our securities portfolio decreased by $109.4 million, or 3.9%, to $2.70 billion, 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, partially offset by an increase in MBS during the year ended December 31, 2025. Our FHLB stock decreased $19.8 million, or 58.4%, to $14.1 million from $33.8 million at December 31, 2024, due to the decrease in our FHLB borrowings during the year ended December 31, 2025.

Previous wording

Loans at December 31, 2024 were $4.66 billion, an increase of $137.1 million, or 3.0%, compared to December 31, 2023, due to increases of $411.3 million in commercial real estate loans and $43.7 million in 1-4 family residential loans. The increases were partially offset by decreases of $251.9 million in construction loans, $50.2 million in municipal loans, $12.0 million in loans to individuals and $3.7 million in commercial loans. Loans held for sale decreased $8.9 million, or 82.1%, to $1.9 million at December 31, 2024 from $10.9 million at December 31, 2023 due to the sale of a $7.9 million commercial real estate loan relationship during the first quarter of 2024.

Current wording

Loans at December 31, 2025 were $4.82 billion, an increase of $156.4 million, or 3.4%, compared to $4.66 billion at December 31, 2024, due to increases of $133.1 million in commercial real estate loans, $81.6 million in commercial loans and $10.7 million in construction loans. These increases were partially offset by decreases of $44.2 million in municipal loans, $16.0 million in 1-4 family residential loans and $8.7 million in loans to individuals. Loans held for sale decreased $0.6 million, or 31.6%, to $1.3 million at December 31, 2025 from $1.9 million at December 31, 2024.

Previous wording

Total FHLB borrowings increased $519.3 million, or 244.2%, to $731.9 million at December 31, 2024, from $212.6 million at December 31, 2023.

Current wording

Total FHLB borrowings decreased $520.8 million, or 71.2%, to $211.1 million at December 31, 2025, from $731.9 million at December 31, 2024.

Previous wording

Our total shareholders’ equity at December 31, 2024 increased 5.0%, or $38.7 million, to $811.9 million, or 9.5% of total assets, compared to $773.3 million, or 9.3% of total assets, at December 31, 2023. The increase in shareholders’ equity was the result of net income of $88.5 million, stock compensation expense of $3.5 million, net issuance of common stock under employee stock plans of $2.0 million and common stock issued under our dividend reinvestment plan of $1.2 million, partially offset by cash dividends paid of $43.6 million, other comprehensive loss of $11.4 million and repurchases of $1.5 million of our common stock pursuant to our Stock Repurchase Plan.

Current wording

Our total shareholders’ equity at December 31, 2025 increased 4.4%, or $35.7 million, to $847.6 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 $69.2 million, other comprehensive income of $29.3 million, stock compensation expense of $3.0 million and common stock issued under our dividend reinvestment plan of $1.0 million, partially offset by cash dividends paid of $43.4 million, repurchases of $23.4 million of our common stock pursuant to our Stock Repurchase Plan and net issuance of common stock under employee stock plans of $91,000.

Previous wording

We ended the fourth quarter of 2024 with approximately $431.7 million in available liquidity from the FRDW, in addition to the approximately $1.72 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 December 31, 2024, the estimated deposits, without insurance or collateral, to total deposits, excluding affiliate deposits (Southside-owned deposits) was 19.5%, or $1.30 billion.

Current wording

We ended 2025 with approximately $241.8 million in available liquidity from the FRDW, in addition to the approximately $2.45 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 December 31, 2025, the estimated deposits without insurance or collateral to total deposits, excluding affiliate deposits (Southside-owned deposits), was 23.0%, or $1.58 billion.

Previous wording

In connection with $790.0 million of our wholesale funds, the Bank has entered into various variable rate agreements and fixed or variable rate short-term pay agreements with an interest rate tied to SOFR. In connection with $790.0 million and $1.01 billion of the agreements outstanding at December 31, 2024 and December 31, 2023, 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 2.63% with a remaining average weighted maturity of 1.6 years at December 31, 2024. Refer to “Note 11 – 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

At December 31, 2025, brokered deposits of $650 million and FHLB advances of $210 million were hedged with $860 million of cash flow swaps. In connection with this $860.0 million of funding at December 31, 2025, 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 3.42% with a remaining average weighted maturity of 1.3 years at December 31, 2025. During the year ended December 31, 2025, we entered into an additional $250 million in cash flow hedge interest rate swap contracts, while $180 million in cash flow hedge interest rate swap contracts matured. As of December 31, 2025, a pre-tax unrealized loss of $663,000 was recognized in other comprehensive income, and there was no ineffective portion of these hedges. At December 31, 2024, the outstanding balance of cash flow hedges was $790.0 million. Refer to “Note 11 – 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

We utilize wholesale funding and securities to enhance overall profitability, to determine the appropriate leverage of our capital and to determine acceptable levels of credit, interest rate and liquidity risk consistent with prudent capital management. This balance sheet strategy currently consists of borrowing funds from the brokered market, FHLB and the FRDW. These funds are invested primarily in U.S. agency MBS and long-term municipal securities and to a lesser extent, U.S. Treasury Bills and corporate securities. Although the securities purchased often carry lower yields than loans, these securities generally (i) increase the overall quality of our assets because of either the implicit or explicit guarantees of the U.S. Government, and the guarantees of the municipalities, (ii) are more liquid than individual loans and (iii) may be used to collateralize our borrowings or other obligations.

Current wording

We continue to evaluate the lowest cost wholesale funding sources and will utilize either brokered deposits, FHLB advances or FRDW borrowings, or a combination of the three funding sources in addition to utilizing cash flow hedges to mitigate the impacts of interest rate movements. Wholesale funding and securities are utilized to enhance overall profitability, to determine the appropriate leverage of our capital and to determine acceptable levels of credit, interest rate and liquidity risk consistent with prudent capital management. Wholesale funds are invested primarily in U.S. agency MBS and long-term municipal securities and to a lesser extent, corporate securities. Although the securities often carry lower yields than loans, these securities generally (i) increase the overall quality of our assets because of either the implicit or explicit guarantees of the U.S. Government and the guarantees of the municipalities, (ii) are more liquid than individual loans and (iii) may be used to collateralize our borrowings or other obligations.

Previous wording

Our securities portfolio increased 8.1% from $2.60 billion at December 31, 2023 to $2.81 billion at December 31, 2024. The increase in the securities portfolio was due to securities purchased during the year ended December 31, 2024, which more than offset sales of securities and principal payments.

Current wording

Our securities portfolio decreased 3.9% from $2.81 billion at December 31, 2024 to $2.70 billion at December 31, 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 year ended December 31, 2025, which more than offset securities purchased.

Previous wording

At December 31, 2024, securities as a percentage of assets totaled 33.0%, compared to 31.4% at December 31, 2023, due to a $209.8 million, or 8.1%, increase in securities, while cash and cash equivalents decreased to 5.0% of total assets at December 31, 2024, compared to 6.8% at December 31, 2023. Our balance sheet management strategy is dynamic and is continually evaluated as market conditions warrant.

Current wording

At December 31, 2025, securities as a percentage of assets totaled 31.8%, compared to 33.0% at December 31, 2024, due to a $109.4 million, or 3.9%, decrease in securities. Cash and cash equivalents decreased to 4.6% of total assets at December 31, 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

As of December 31, 2024, our total wholesale funding as a percentage of deposits, not including brokered deposits, decreased to 24.9% from 25.5% at December 31, 2023.

Current wording

As of December 31, 2025, our total wholesale funding as a percentage of deposits, not including brokered deposits, decreased to 16.0% 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 $115.7 million in brokered CDs at December 31, 2024. We had no brokered CDs at December 31, 2023. At December 31, 2024, our brokered CDs had a weighted average cost of 453 basis points and remaining maturities of less than 5 months. Our brokered non-maturity deposits decreased to $627.1 million at December 31, 2024, of which $480.0 million are related to our cash flow hedges, from $828.0 million at December 31, 2023, with a weighted average cost of 321 and 323 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 $19.8 million in brokered CDs at December 31, 2025, a decrease from $115.7 million at December 31, 2024. At December 31, 2025, our brokered CDs had a weighted average cost of 406 basis points and matured on January 8, 2026. Our brokered non-maturity deposits increased to $652.4 million at December 31, 2025, of which $650.0 million are related to our cash flow hedges, from $627.1 million at December 31, 2024, with a weighted average cost of 359 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

During the year ended December 31, 2024, we entered into an additional $50 million cash flow hedge interest rate swap contract while $150 million cash flow hedge interest rate swap contracts were terminated and $120 million matured. At December 31, 2024, FHLB advances of $310 million and brokered deposits of $480 million were hedged with our $790 million of cash flow swaps. As of December 31, 2024, a pre-tax unrealized gain of $11.5 million was recognized in other comprehensive income, and there was no ineffective portion of these hedges. We continue to evaluate the lowest cost wholesale funding sources and will utilize either brokered deposits, FHLB advances or FRDW borrowings, or a combination of the three funding sources in addition to utilizing cash flow hedges to mitigate the impacts of interest rate movements. At December 31, 2024, the majority of the securities portfolio was funded by non-maturity deposits, some of which are included in wholesale funding that accounts for approximately 51% of the funding source, of which approximately 54% is swapped at a fixed rate, providing protection from rising interest rates.

Current wording

At December 31, 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 37% of the funding source, of which approximately 87% 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 December 31, 2024, hedged municipal securities with a carrying amount of $300.3 million are included in our AFS securities portfolio in our consolidated balance sheets representing approximately 72% of the AFS municipal portfolio. As of December 31, 2024, $134.0 million in hedging instruments were used to hedge a layer of the closed portfolio of AFS MBS with a carrying value of $557.8 million, or 60% 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 December 31, 2025, $24.1 million in hedging instruments were used to hedge municipal securities with a carrying amount of $21.3 million included in our AFS securities portfolio in our consolidated balance sheets, representing approximately 12.0% of the AFS municipal portfolio. As of December 31, 2025, $301.0 million in hedging instruments were used to hedge a layer of the closed portfolio of AFS MBS with a carrying value of $1.08 billion, or 85.8% 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

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 year ended December 31, 2023, the Federal Reserve increased the target federal funds rate by 100 basis points to 5.25% to 5.50%. During the last four months of 2024, the Federal Reserve reduced target federal funds rate by 100 basis points to 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 last four months of 2024, the Federal Reserve reduced target federal funds rate by 100 basis points to 4.25% to 4.50%. During the last four months of 2025, the Federal Reserve reduced target federal funds rate by 75 basis points to 3.50% to 3.75%. If the federal funds rate remains elevated, it may negatively impact our net interest income. See “Part I - Item 1A. Risk Factors – Risks Related to Our Business” in this report for a discussion of risks related to interest rates.

Previous wording

Net interest income was $216.1 million for the year ended December 31, 2024, compared to $215.0 million for the same period in 2023, an increase of $1.1 million, or 0.5%. The increase in net interest income for the year ended December 31, 2024 was due to increases in the average balance and the average yield of interest earning assets, partially offset by increases in the average rate paid on our interest bearing liabilities and average balance of our interest bearing liabilities. Total interest income increased $54.6 million, or 15.2%, to $414.3 million for the year ended December 31, 2024, compared to $359.7 million for the same period in 2023. Total interest expense increased $53.5 million, or 37.0%, to $198.2 million for the year ended December 31, 2024, compared to $144.7 million for the same period in 2023. Our net interest margin and net interest margin (FTE), a non-GAAP measure, decreased to 2.74% and 2.88%, respectively, for the year ended December 31, 2024, compared to 2.92% and 3.09%, respectively, for the same period in 2023, and our net interest spread and net interest spread (FTE), also a non-GAAP measure, decreased to 2.02% and 2.16%, respectively, compared to 2.25% and 2.42%, respectively, for the same period in 2023. See “Non-GAAP Financial Measures” for more information and for a reconciliation to GAAP.

Current wording

Net interest income was $221.1 million for the year ended December 31, 2025, compared to $216.1 million for the same period in 2024, an increase of $5.0 million, or 2.3%. The increase in net interest income for the year ended December 31, 2025 was due to decreases in the average rate paid on our interest bearing liabilities and a change in the mix of our interest earning assets and interest bearing liabilities, partially offset by the decrease in the average yield of interest earning assets. Total interest income decreased $11.3 million, or 2.7%, to $403.1 million for the year ended December 31, 2025, compared to $414.3 million for the same period in 2024. Total interest expense decreased $16.2 million, or 8.2%, to $182.0 million for the year ended December 31, 2025, compared to $198.2 million for the same period in 2024. Our net interest margin and net interest margin (FTE), a non-GAAP measure, increased to 2.81% and 2.93%, respectively, for the year ended December 31, 2025, compared to 2.74% and 2.88%, respectively, for the same period in 2024, and our net interest spread and net interest spread (FTE), also a non-GAAP measure, increased to 2.14% and 2.26%, respectively, compared to 2.02% and 2.16%, respectively, for the same period in 2024. See “Non-GAAP Financial Measures” for more information and for a reconciliation to GAAP.

Previous wording

The increase in total interest income for the year ended December 31, 2024, was attributable to the increase in the average balance of interest earning assets of $513.9 million, or 7.0%, compared to the year ended December 31, 2023, as well as the increase in the average yield on interest earning assets to 5.40% from 5.06% for the year ended December 31, 2023. The increase in average earning assets was primarily the result of the increase in MBS, loans and interest earning deposits, partially offset by the decrease in tax-exempt investment securities.

Current wording

The decrease in total interest income for the year ended December 31, 2025 was attributable to the decrease in the average yield on earning assets to 5.25% for the year ended December 31, 2025 from 5.40% for the same period in 2024, partially offset by a change in the mix of our interest earning assets when compared to the year ended December 31, 2024.

Previous wording

The increase in total interest expense for the year ended December 31, 2024, was primarily attributable to the increase in interest rates on our interest bearing liabilities to 3.24% from 2.64% for the year ended December 31, 2023, and an increase in the average balance of our interest bearing liabilities of $633.2 million, or 11.5%, when compared to the same period in 2023.

Current wording

The decrease in total interest expense for the year ended December 31, 2025 was attributable to the decrease in the average rate paid on our interest bearing liabilities to 2.99% from 3.24% for the year ended December 31, 2024 and a change in the average balance and mix of our interest bearing liabilities.

Previous wording

Interest bearing demand, savings and noninterest bearing demand deposits are considered the lowest cost deposits and decreased to 83.7% of total average deposits for the year ended December 31, 2024, from 85.9% for the year ended December 31, 2023.

Current wording

Interest bearing demand, savings and noninterest bearing demand deposits are considered the lowest cost deposits and decreased to 79.2% of total average deposits for the year ended December 31, 2025, from 83.7% for the year ended December 31, 2024.

Previous wording

At December 31, 2024, brokered CDs were 1.7% of deposits. We had no brokered CDs at December 31, 2023. Our brokered non-maturity deposits decreased to 9.4% of deposits at December 31, 2024, compared to 12.6% of deposits at December 31, 2023. 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

At December 31, 2025, brokered CDs were 0.3% of deposits, compared to 1.7% of deposits at December 31, 2024. Our brokered non-maturity deposits increased to 9.5% of deposits at December 31, 2025, compared to 9.4% of deposits at December 31, 2024. 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

Note: As of December 31, 2024, 2023 and 2022, loans totaling $3.2 million, $3.9 million and $2.8 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 December 31, 2025, 2024 and 2023, loans totaling $10.5 million, $3.2 million and $3.9 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

For the year ended December 31, 2024, there was a provision for credit losses of $3.3 million, compared to $9.2 million for the year ended December 31, 2023. The decrease in provision expense for the year ended December 31, 2024, compared to 2023, was primarily due to the uncertainty in the economic environment and its effect on the forecast in our CECL model in 2023.

Current wording

For the year ended December 31, 2025, there was a provision for credit losses of $3.1 million, compared to $3.3 million for the year ended December 31, 2024. The decrease in provision expense for the year ended December 31, 2025, compared to 2024, was primarily due to improvements in the overall economic forecast in the CECL model.

Previous wording

As of December 31, 2024, and 2023, our reviews of the loan portfolio indicated that loan loss allowances of $44.9 million and $42.7 million, respectively, were appropriate to cover expected credit losses in the portfolio. See the section captioned “Allowance for Credit Losses - Loans” elsewhere in this discussion for further analysis of the provision for credit losses for loans.

Current wording

As of December 31, 2025, and 2024, our reviews of the loan portfolio indicated that loan loss allowances of $45.1 million and $44.9 million, respectively, were appropriate to cover expected credit losses in the portfolio. See the section captioned “Allowance for Credit Losses - Loans” elsewhere in this discussion for further analysis of the provision for credit losses for loans.

Previous wording

The balance of the allowance for off-balance-sheet credit exposures at December 31, 2024 and 2023, was $3.1 million and $3.9 million, respectively, and is included in other liabilities. See the section captioned “Allowance for Credit Losses - Off-Balance-Sheet Credit Exposures” elsewhere in this discussion for further analysis of the provision for credit losses for off-balance-sheet credit exposures.

Current wording

The balance of the allowance for off-balance-sheet credit exposures at December 31, 2025 and 2024, was $3.2 million and $3.1 million, respectively, and is included in other liabilities. See the section captioned “Allowance for Credit Losses - Off-Balance-Sheet Credit Exposures” elsewhere in this discussion for further analysis of the provision for credit losses for off-balance-sheet credit exposures.

Previous wording

The following table details the provision for (reversal of) loan losses and provision for (reversal of) off-balance-sheet credit exposures for the years ended December 31, 2024, 2023 and 2022 (dollars in thousands):

Current wording

The following table details the provision for (reversal of) loan losses, provision for (reversal of) off-balance-sheet credit exposures and provision for (reversal of) securities held to maturity for the years ended December 31, 2025, 2024 and 2023 (dollars in thousands):

Previous wording

The 16.5% increase in noninterest income for the year ended December 31, 2024, when compared to the same period in 2023, was primarily due to a decrease in net loss on sale of securities AFS and an increase in brokerage services income, partially offset by decreases in the net gain on sale of equity securities, gain on sale of loans, BOLI income and deposit services income.

Current wording

The 61.8% decrease in noninterest income for the year ended December 31, 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, trust fees, brokerage services income and gain on sale of loans.

Previous wording

During the year ended December 31, 2024, we sold municipal securities that resulted in net losses on sale of AFS securities of $2.5 million. During the year ended December 31, 2023, we sold municipal securities, MBS, and U.S. Treasury securities that resulted in net losses on sale of AFS securities of $16.0 million.

Current wording

During the year ended December 31, 2025, we sold municipal securities, MBS and U.S. Treasury securities that resulted in a net loss on sale of AFS securities of $32.3 million. During the year ended December 31, 2024, we sold municipal securities that resulted in a net loss on sale of AFS securities of $2.5 million.

Previous wording

The decrease in gain on sale of loans for the year ended December 31, 2024, was primarily due to the $412,000 net loss on the sale of a commercial real estate loan relationship during the first quarter of 2024.

Current wording

The increase in gain on sale of loans for the year ended December 31, 2025, was primarily due to the $412,000 net loss on the sale of a commercial real estate loan relationship during the first quarter of 2024.