FIRST INTERSTATE BANCSYSTEM INC

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Rule 3b-6 promulgated thereunder, that involve inherent risks and uncertainties. Any statements about our plans, objectives, expectations, strategies, beliefs, or future performance or events constitute forward-looking statements. Such statements are identified by words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trends,” “objectives,” “views,” “continues” or similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “may,” or similar expressions. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other important factors that could cause actual results to differ materially from any results, performance or events expressed or implied by such forward-looking statements. A detailed discussion of risks that may cause actual results to differ materially from current expectations in the forward-looking statements is included below in this report under the caption “Risk Factors” and in our Annual Report on Form 10-K for the year ended December 31, 2023, under the captions “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”. These factors and the other risk factors described in our periodic and current reports filed with the SEC from time to time, however, are not necessarily all of the important factors that could cause our actual results, performance, or achievements to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results.

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Rule 3b-6 promulgated thereunder, that involve inherent risks and uncertainties. Any statements about our plans, objectives, expectations, strategies, beliefs, or future performance, financial condition, results of operations, investment portfolio, market position, or events constitute forward-looking statements. Such statements are identified by words or phrases such as “believes,” “expects,” “anticipates,” “plans,” “trends,” “objectives,” “views,” “continues,” “projected,” as well as the negative forms of those words or similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “seek,” “might,” “may,” as well as the negative forms of those words or similar expressions. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other important factors that could cause actual results to differ materially from any results, performance or events expressed or implied by such forward-looking statements. A detailed discussion of risks that may cause actual results to differ materially from current expectations in the forward-looking statements is included below in this report under the caption “Risk Factors” and in our Annual Report on Form 10-K for the year ended December 31, 2024, under the captions “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”. These factors and the other risk factors described in our periodic and current reports filed with the SEC from time to time, however, are not necessarily all of the important factors that could cause our actual results, performance, or achievements to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results.

Previous wording

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Interested parties are urged to read in their entirety the referenced risk factors prior to making any investment decision with respect to the Company. Forward-looking statements speak only as of the date they are made and we do not undertake or assume any obligation to update publicly any of these statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Current wording

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Interested parties are urged to read in their entirety the referenced risk factors prior to making any investment decision with respect to the Company. Forward-looking statements speak only as of the date they are made, and we do not undertake or assume any obligation to update publicly any of these statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Previous wording

We are a financial and bank holding company focused on community banking. Since our incorporation in Montana in 1971, we have grown both organically and through strategic acquisitions. We operate 299 banking offices, including branches and detached drive-up facilities, in communities across fourteen states—Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming. Through our bank subsidiary, First Interstate Bank, we deliver a comprehensive range of banking products and services—including online and mobile banking—to individuals, businesses, government entities, and others throughout our market areas. We are proud to provide lending opportunities to clients that participate in a wide variety of industries, including:

Current wording

We are a financial and bank holding company focused on community banking. Since our incorporation in Montana in 1971, we have grown both organically and through strategic acquisitions. As of March 31, 2025, we operate 300 banking offices, including branches and detached drive-up facilities, in communities across fourteen states—Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming. Through our bank subsidiary, First Interstate Bank, we deliver a comprehensive range of banking products and services—including online and mobile banking—to individuals, businesses, government entities, and others throughout our market areas. We are proud to provide lending opportunities to clients that participate in a wide variety of industries, including:

Previous wording

We also derive income from non-interest sources such as: (i) fees received in connection with various lending and deposit services; (ii) wealth management services, such as trust, employee benefit, investment, and insurance services; (iii) mortgage loan originations, sales, and servicing; (iv) merchant and electronic banking services; and (v) from time-to-time, gains on sales of assets and securities.

Current wording

Our principal business activity is lending to, accepting deposits from, and conducting financial transactions for individuals, businesses, governmental entities, and other entities located in the communities we serve. We derive our income principally from interest charged on loans and, to a lesser extent, from interest and dividends earned on fixed income investments. We also derive income from noninterest sources such as: (i) fees received in connection with various lending and deposit services; (ii) wealth management services, such as trust, employee benefit, investment, and insurance services; (iii) mortgage loan originations, sales, and servicing; (iv) merchant and electronic banking services; and (v) from time-to-time, gains on sales of assets and securities.

Previous wording

Our principal expenses include: (i) interest expense on deposit accounts and other borrowings; (ii) salaries and employee benefits; (iii) data processing and communication costs primarily associated with maintaining loan and deposit functions; (iv) furniture, equipment, and occupancy expenses for maintaining our facilities; (v) professional fees, including FDIC insurance assessments; (vi) income tax expense; (vii) provisions for credit losses; (viii) intangible amortization; (ix) other real estate owned expenses; and (x) other ancillary expenses including legal expenses, credit card rewards expense, fees associated with originating and closing loans, insurance, and other expenses necessary to support our employees and service our clients. From time to time, we also incur acquisition costs related to our strategic acquisitions.

Current wording

Our principal expenses include: (i) interest expense on deposit accounts and other borrowings; (ii) salaries and employee benefits; (iii) information technology and communication costs primarily associated with maintaining loan and deposit functions; (iv) furniture, equipment, and occupancy expenses for maintaining our facilities; (v) professional fees, including FDIC insurance assessments; (vi) income tax expense; (vii) provisions for credit losses; (viii) intangible amortization; (ix) other real estate owned expenses; and (x) other segment expenses including legal expenses, advertising and promotion, credit card rewards expense, fees associated with originating and closing loans, insurance, and other expenses necessary to support our employees and service our clients. From time to time, we have incurred, and may incur in the future, costs related to our strategic acquisitions, divestitures and other transactions.

Previous wording

Our community banking footprint spans across the Rocky Mountain, Pacific Northwest, Midwest, and Southwest regions, in large part due to our acquisition activity. As part of our normal course of business, we continue to evaluate bank acquisitions and other strategic opportunities on an on-going basis.

Current wording

Our community banking footprint spans across the Rocky Mountain, Pacific Northwest, Midwest, and Southwest regions.

Previous wording

The Company has ample liquidity, and the capital ratios exceed all regulatory requirements to be deemed “well-capitalized” as of September 30, 2024. Our deposit base is diversified, including by depositor, which includes individuals, businesses across multiple industries, governmental units, and other entities, as well as geographically, across the communities we serve.

Current wording

The Company has ample liquidity, and its capital ratios exceed all regulatory requirements to be deemed “well-capitalized” as of March 31, 2025. Our deposit base is diversified, including by depositor, which includes individuals, businesses across multiple industries, governmental units, and other entities, as well as geographically, across the communities we serve.

Previous wording

As of September 30, 2024, our FDIC insured deposits consisted of 65.0% of total deposits, including accounts eligible for pass-through insurance. As of October 28, 2024, the Bank had available borrowing capacity of $4.7 billion with the FHLB and $0.9 billion with the Federal Reserve Bank (“FRB”) based on pledged investment securities and loan collateral.

Current wording

As of March 31, 2025, our FDIC insured deposits were 65.7% of total deposits, including accounts eligible for pass-through insurance. As of April 30, 2025, the Bank had available borrowing capacity of $4.2 billion with the Federal Home Loan Bank (“FHLB”) and $2.6 billion with the Federal Reserve Bank (“FRB”) based on pledged investment securities and loan collateral.

Previous wording

The Federal Reserve stated its current objective is to return the rate of inflation to 2.0% and it is closely monitoring the progress that has been made to achieve this goal. The Federal Reserve increased short-term interest rates 525 basis points between March 16, 2022 and July 29, 2023. With general inflationary pressures easing, since July 2023, the Federal Reserve had paused any further changes to short-term interest rates only to decrease them by 50 basis points in September 2024. While many financial industry experts have speculated that rates will decline further in the near-term, the Federal Reserve has not yet provided definitive guidance on any further changes to short-term interest rates.

Current wording

The Federal Reserve increased short-term interest rates 525 basis points between March 16, 2022 and July 29, 2023. With general inflationary pressures easing since July 2023, the Federal Reserve had paused any further changes to short-term interest rates and decreased them by 100 basis points between September 2024 and March 2025.

Previous wording

The sustained elevation of short-term interest rates have also impacted the Company’s cost of funds, primarily resulting from the shift of non-interest-bearing deposits into higher-cost, interest-bearing, and time deposit balances as well as variable rate debt. The Company’s cost of funds was stable at 1.86% during the three months ended September 30, 2024 and June 30, 2024, and increased from 1.59% during the three months ended September 30, 2023. During the third quarter of 2024, the change in the mix and yield on earning assets offset the changes in the mix and cost of funds, resulting in an increase of the Company’s net interest margin during the three months ended September 30, 2024 to 3.01% from 2.97% during the three months ended June 30, 2024. The change in mix and cost of funds more than offset the change in the mix and yield on earning assets as the net interest margin declined from 3.05% for the three months ended September 30, 2023. The Company’s FTE net interest margin increased to 3.04% during the three months ended September 30, 2024, from 3.00% during the three months ended June 30, 2024, and decreased from 3.07% during the three months ended September 30, 2023.

Current wording

The recent declines in short-term interest rates have benefited the Company’s cost of funds, primarily resulting in reduced rates on variable rate debt. The Company’s cost of funds decreased to 1.59% during the three months ended March 31, 2025 from 1.72% during the three months ended December 31, 2024, and decreased from 1.87% during the three months ended March 31, 2024. During the first quarter of 2025, the change in the mix and yield on earning assets was more than offset by the changes in the mix and cost of funds, resulting in an increase of the Company’s net interest margin during the three months ended March 31, 2025 to 3.19% from 3.18% during the three months ended December 31, 2024 and from 2.91% for the three months ended March 31, 2024. The Company’s FTE net interest margin increased to 3.22% during the three months ended March 31, 2025, from 3.20% during the three months ended December 31, 2024, and increased from 2.93% during the three months ended March 31, 2024.

Previous wording

A slowdown, downturn, or recession in the U.S. economy could impact the Company by impacting the level of deposits held by our clients, whether through a higher volume of withdrawals or through a lower volume of deposits. Client deposits are one of the Company’s primary lending sources. The credit quality of the Company’s loans may also be impacted if clients must weather adverse economic conditions which could result in an increase in credit losses or other related expenses.

Current wording

A slowdown, downturn, or recession in the U.S. economy or changes in U.S. trade policies could impact the Company by impacting the level of deposits held by our clients, whether through a higher volume of withdrawals or through a lower volume of deposits. Client deposits are one of the Company’s primary lending sources. The credit quality of the Company’s loans may also be impacted if clients must weather adverse economic conditions which could result in an increase in credit losses or other related expenses.

Previous wording

As a banking institution, we monitor and evaluate our financial condition and our results of operations by examining the levels and trends of the line items included in our balance sheet and statements of income, as well as the various financial ratios that are commonly used in our industry and monitored by our regulators. We analyze these ratios and financial trends against both our own historical levels as well as the financial condition and performance of comparable banking institutions in our region and nationally.

Current wording

As a banking institution, we manage and evaluate our financial condition and our results of operations. We monitor and evaluate the levels and trends of the line items included in our balance sheet and statements of income, as well as the various financial ratios that are commonly used in our industry. We analyze these ratios and financial trends against both our own historical levels as well as the financial condition and performance of comparable banking institutions in our region and nationally.

Previous wording

As discussed in our Annual Report on Form 10-K for the year ended December 31, 2023, our financial performance is impacted by a number of external factors outside our control, as well as our ability to execute on the key components of our strategy for continued success and future growth. See Part II – Other Information, “Item 1A – Risk Factors” for an update of the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

As discussed in our Annual Report on Form 10-K for the year ended December 31, 2024, our financial performance is impacted by a number of external factors outside our control, as well as our ability to execute on the key components of our strategy for continued success and future growth. See Part II – Other Information, “Item 1A – Risk Factors” herein for additional information regarding risk factors that may negatively impact our expected results, performance, or achievements.

Previous wording

Our consolidated financial statements are prepared in accordance with GAAP and follow general practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. The most significant accounting policies we follow are summarized in Note 1 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, and are also referenced in Note 1 to the unaudited financial statements in this quarterly report. There have been no material changes during the third quarter of 2024 in our critical accounting estimates and policies from the critical accounting estimates and policies as described in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

Our consolidated financial statements are prepared in accordance with GAAP and follow general practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. The most significant accounting policies we follow are summarized in Note 1 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, and are also referenced in “Note 1 – Basis of Presentation” in the accompanying “Notes to Unaudited Consolidated Financial Statements” included in this report. There have been no material changes during the first quarter of 2025 in our critical accounting estimates and policies from the critical accounting estimates and policies as described in our Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

The preparation of financial statements in conformity with GAAP requires management to measure the Company’s financial position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession are generally not considered. We manage our interest rate risk in several ways. Refer to “Note – Derivatives and Hedging Activities” in the accompanying “Notes to Unaudited Consolidated Financial Statements” for further discussion on how we manage interest rate risk. There can be no assurance that we will not be materially adversely affected by future changes in interest rates, as interest rates are highly sensitive to many factors that are beyond our control.

Current wording

The preparation of financial statements in conformity with GAAP requires management to measure the Company’s financial position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession are generally not considered. We manage our interest rate risk in several ways. Refer to “Note – Derivatives and Hedging Activities” in the accompanying “Notes to Unaudited Consolidated Financial Statements” included in this report for further discussion on how we manage interest rate risk. There can be no assurance that we will not be materially adversely affected by future changes in interest rates, as interest rates are highly sensitive to many factors that are beyond our control.

Previous wording

Net income decreased $17.2 million to $55.5 million, or $0.54 per share, during the three months ended September 30, 2024, as compared to net income of $72.7 million, or $0.70 per share, for the same period in 2023, and is primarily attributable to a higher provision for credit losses and lower net interest income. Lower net interest income resulted from higher interest expense on interest-bearing liabilities during the 2024 period. This decrease in net interest income was partially offset by higher non-interest income, lower tax expense, and lower non-interest expenses.

Current wording

Net income decreased $8.2 million to $50.2 million, or $0.49 per diluted share, during the three months ended March 31, 2025, as compared to net income of $58.4 million, or $0.57 per diluted share, for the same period in 2024, which is primarily attributable to a higher provision for credit losses, partially offset by higher net interest income. The net interest income increase was the result of lower interest expense on interest bearing liabilities during the 2025 period.

Previous wording

Changes in interest rate spread, which is the difference between interest earned on assets and interest paid on liabilities, has the most significant impact on net interest income. Other factors like volume of loans, investment securities, and other interest-earning assets compared to the volume of interest-bearing deposits and indebtedness also cause changes in our net interest income between periods. Non-interest-bearing sources of funds, such as demand deposits and stockholders’ equity, help to support earning assets.

Current wording

Net interest income, the largest source of our operating income, is derived from interest, dividends, and fees received on interest earning assets, less interest expense incurred on interest bearing liabilities. Interest earning assets primarily include loans and investment securities. Interest bearing liabilities include deposits, short-term borrowings, and various other forms of indebtedness. Net interest income is affected by the level of interest rates, changes in interest rates, the speed of changes to interest rates, and changes in the volume and composition of interest earning assets and interest-bearing liabilities. Changes in interest rate spread, which is the difference between interest earned on assets and interest paid on liabilities, has the most significant impact on net interest income. Other factors like volume of loans, investment securities, and other interest earning assets compared to the volume of interest-bearing deposits, short-term borrowings, and other indebtedness also cause changes in our net interest income between periods. Noninterest-bearing sources of funds, such as demand deposits and stockholders’ equity, help to support earning assets.

Previous wording

Net interest income included interest accretion related to the fair valuation of acquired loans of $4.4 million during the three months ended September 30, 2024, compared to interest accretion of $5.2 million during the three months ended September 30, 2023.

Current wording

Net interest income included interest accretion related to the fair value of acquired loans of $4.7 million during the three months ended March 31, 2025, compared to interest accretion of $6.5 million during the three months ended March 31, 2024.

Previous wording

Our net interest margin ratio decreased 4 basis points to 3.01% for the three months ended September 30, 2024, as compared to 3.05% for the same period in 2023 and our net FTE interest margin ratio, a non-GAAP financial measure, decreased 3 basis points for the three months ended September 30, 2024, as compared to the same period in 2023. Exclusive of the impact of interest accretion on acquired loans, the net FTE interest margin ratio, decreased 3 basis points to 2.97% during the three months ended September 30, 2024, as compared to 3.00% for the same period in 2023. The decreases in net interest margin ratio were primarily a result of higher interest bearing deposit costs and higher FHLB and BTFP borrowings, which were partially offset by increases in interest earned on our loans and a modestly favorable change in the mix of earning assets.

Current wording

Our net interest margin ratio increased 28 basis points to 3.19% for the three months ended March 31, 2025, as compared to 2.91% for the same period in 2024 and our net FTE interest margin ratio, a non-GAAP financial measure, increased 29 basis points for the three months ended March 31, 2025, as compared to the same period in 2024. Exclusive of the impact of interest accretion on acquired loans, the net FTE interest margin ratio increased 30 basis points to 3.14% during the three months ended March 31, 2025, as compared to 2.84% for the same period in 2024. The increases in net interest margin ratio were primarily as a result of lower interest expense resulting from decreased rates on borrowings and decreased other borrowed funds balances.

Previous wording

The table below sets forth a summary of the changes in interest income and interest expense resulting from estimated changes in average asset and liability balances (volume) and estimated changes in average interest rates (referred to as “rate”) for the three and the nine months ended September 30, 2024 and 2023. Changes which are not due solely to volume or rate have been allocated to these categories based on the respective percent changes in average volume and average rate as they compare to each other.

Current wording

The table below sets forth a summary of the changes in interest income and interest expense resulting from estimated changes in average asset and liability balances (volume) and estimated changes in average interest rates (referred to as “rate”) for the three months ended March 31, 2025 and 2024. Changes which are not due solely to volume or rate have been allocated to these categories based on the respective percent changes in average volume and average rate as they compare to each other.

Previous wording

The Company had a $19.8 million provision for credit losses, which included a provision for credit losses of $20.0 million on loans held for investment and a reduction of credit losses for unfunded commitments of $0.2 million during the three months ended September 30, 2024, as compared to an $0.1 million reduction of credit losses during same period in 2023. The provision incorporated the impact of credit movement during the quarter, changes in loan balances, the attributes of the current portfolio, asset quality metrics, a review of the current economic outlook, and net charge-offs of $27.4 million, or an annualized 0.60% of average loans outstanding during the three months ended September 30, 2024, as compared to net charge-offs of $1.1 million, or an annualized 0.02% of average loans outstanding during the same period in 2023. Net loan charge-offs in the third quarter of 2024 were composed of charge-offs of $29.1 million, primarily consisting of a $15.9 million commercial real estate loan and a $6.2 million construction real estate loan. These charge-offs were offset by recoveries of $1.7 million.

Current wording

The Company recorded a $20.0 million provision for credit losses, which included a provision for credit losses of $20.2 million on loans held for investment, a reduction of credit losses for unfunded commitments of $0.1 million, and a reduction of credit losses for investment securities of $0.1 million during the three months ended March 31, 2025, as compared to a $5.3 million provision for credit losses during same period in 2024. The provision incorporated the impact of credit movement during the quarter, changes in loan balances, the attributes of the current portfolio, a review of the current economic outlook, and net charge-offs of $9.0 million. Net charge-offs were an annualized 0.21% of average loans outstanding during the three months ended March 31, 2025, as compared to net charge-offs of $8.4 million, or an annualized 0.18% of average loans outstanding during the same period in 2024. Net loan charge-offs in the first quarter of 2025 were composed of charge-offs of $10.8 million, which were partially offset by recoveries of $1.8 million.

Previous wording

Non-interest income also contributes to our operating results with fee-based revenues such as payment services, mortgage banking and wealth management revenues, service charges on deposit accounts, and other service charges, commissions and fees being our principal source of non-interest income. The following table presents the composition of our non-interest income as of the periods indicated:

Current wording

Noninterest income also contributes to our operating results with fee-based revenues such as payment services, mortgage banking and wealth management revenues, service charges on deposit accounts, and other service charges, commissions and fees. The following table presents the composition of our noninterest income, which was stable, for the periods indicated:

Previous wording

Non-interest expense decreased $1.7 million during the three months ended September 30, 2024 compared to the same period in 2023 driven by lower other expenses and professional fees, which were partially offset by higher salaries and wages, that included $3.8 million in CEO transition related expenses. Non-interest expense decreased $14.3 million during the nine months ended September 30, 2024 as compared to the same period in 2023. The decreases were driven by lower employee benefits, software costs, and other expenses. These decreases were partially offset by increases in salaries and wages that included $3.8 million in CEO transition expenses, expenses related to OREO, and FDIC insurance premiums, driven by $1.5 million in FDIC special assessment accruals in the first quarter of 2024.

Current wording

Noninterest expense increased $0.4 million during the three months ended March 31, 2025 compared to the same period in 2024 driven by higher salaries and wages, which were partially offset by lower FDIC insurance premiums.

Previous wording

Net interest income decreased $8.2 million during the three months ended September 30, 2024, as compared to the same period in 2023, primarily due to an increase in interest expense resulting from higher costs of interest-bearing deposits, partially offset by an increase in interests income on loans.

Current wording

Occupancy, net expense increased $1.4 million during the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to an increase in janitorial, maintenance, repairs, and snow removal costs.

Previous wording

FDIC insurance premiums increased $0.2 million during the three months ended September 30, 2024 and increased $3.8 million during the nine months ended September 30, 2024, compared to the same periods in 2023, primarily resulting from a $1.5 million special assessment accrual recorded during the nine months ended September 30, 2024.

Current wording

FDIC insurance premiums decreased $3.1 million during the three months ended March 31, 2025, primarily resulting from lower assessment fees including a $1.5 million special assessment accrual recorded during the same period in 2024.

Previous wording

Total assets decreased $1,075.7 million, or 3.5%, to $29,595.5 million as of September 30, 2024, from $30,671.2 million as of December 31, 2023, primarily due to decreases in investment securities and loans held for investment which supported declines in deposits and securities sold under repurchase agreements, which was partially offset by an increase in cash and cash equivalents. Significant fluctuations in balance sheet accounts are discussed below. More information regarding the results as of December 31, 2023 can be found in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

Total assets decreased $857.6 million, or 2.9%, to $28,279.8 million as of March 31, 2025, from $29,137.4 million as of December 31, 2024, primarily due to decreases in investment securities and loans. Significant fluctuations in balance sheet accounts are discussed below. More information regarding the results as of December 31, 2024 can be found in our Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

We manage our investment portfolio primarily as a source of liquidity. In doing so, we seek to obtain the highest risk adjusted return within our risk tolerance and liquidity guidelines, while satisfying the pledging requirements for deposits of state and political subdivisions and securities sold under repurchase agreements. Our portfolio is primarily comprised of U.S. Treasury notes, state, county, and municipal, U.S. government agency, U.S. government agency residential and commercial mortgage-backed securities and collateralized mortgage obligations, collateralized loan obligations, private mortgage-backed, and corporate securities. Federal funds sold and interest-bearing deposits in the Bank are additional investments that are classified as cash equivalents rather than as investment securities. Investment securities classified as available-for-sale are recorded at fair value, while investment securities classified as held-to-maturity are recorded at amortized cost. Unrealized gains or losses, net of the deferred tax effect, on available-for-sale securities are reported as increases or decreases in accumulated other comprehensive income or loss, a component of stockholders’ equity.

Current wording

We manage our investment portfolio to obtain the highest yield possible while meeting our risk tolerance and liquidity guidelines and satisfying the pledging requirements for deposits of state and political subdivisions and securities sold under repurchase agreements. Our portfolio principally comprises U.S. treasury notes, U.S. government agency, U.S. government agency commercial mortgage-backed securities, U.S. government residential mortgage-backed securities, U.S. government agency collateralized mortgage obligations, corporate securities, and tax-exempt municipal securities.

Previous wording

Investment securities decreased $773.8 million, or 8.6%, to $8,275.6 million, or 28.0% of total assets, as of September 30, 2024, from $9,049.4 million, or 29.5% of total assets, as of December 31, 2023. The decrease was primarily resulting from normal pay-downs and maturities, partially offset by $134.6 million increase in fair market values and $102.2 million of reinvestment into investment securities.

Current wording

Investment securities decreased $240.8 million, or 3.1%, to $7,503.8 million, or 26.5% of total assets, as of March 31, 2025, from $7,744.6 million, or 26.6% of total assets, as of December 31, 2024. The decrease was primarily resulting from called securities and normal pay-downs and maturities, partially offset by a $70.7 million increase in fair market values and $52.6 million in purchases of investment securities during the period.

Previous wording

As of September 30, 2024 and December 31, 2023, the estimated duration of our investment portfolio was 3.4 and 3.5 years, respectively.

Current wording

As of March 31, 2025 and December 31, 2024, the estimated duration of our investment portfolio was 3.6 and 3.7 years, respectively.

Previous wording

As of September 30, 2024 and December 31, 2023, we had $6,662.4 million and $8,284.5 million, respectively, of investment securities that had been in a continuous loss position for more than twelve months. At September 30, 2024 and December 31, 2023, the Company hadno allowance for credit losses on available-for-sale securities and an allowance for credit losses on held-to maturity securities classified as corporate and municipal securities of $0.7 million and $0.8 million, respectively.

Current wording

As of March 31, 2025 and December 31, 2024, we had $6,249.5 million and $6,296.7 million, respectively, of investment securities that had been in a continuous loss position for more than twelve months. Gross unrealized losses on these securities totaled $627.2 million as of March 31, 2025, and were attributable to changes in interest rates. At March 31, 2025 and December 31, 2024, the Company hadno allowance for credit losses on available-for-sale securities and an allowance for credit losses on held-to maturity securities classified as corporate and municipal securities of $0.8 million and $0.9 million, respectively.

Previous wording

Loans held for investment, net of deferred fees and costs, decreased $252.5 million as of September 30, 2024 as compared to December 31, 2023.

Current wording

Loans held for investment, net of deferred fees and costs, decreased $467.6 million as of March 31, 2025 as compared to December 31, 2024.

Previous wording

Non-accrual loans. We generally place loans on non-accrual status when they become 90 days past due unless they are well secured and in the process of collection or if the collection of principal and interest is in doubt. When a loan is placed on non-accrual status, any interest previously accrued but not collected is reversed from income. Non-accrual loans increased approximately $66.3 million, or 62.3%, to $172.7 million as of September 30, 2024, from $106.4 million as of December 31, 2023, primarily driven by the categorization of a single $54.4 million commercial and industrial loan relationship to non-accrual in the first quarter of 2024. As of September 30, 2024 there were approximately $60.7 million of non-accrual loans for which there was no related allowance for credit losses, as these loans had sufficient collateral securing the loan for repayment.

Current wording

Non-accrual loans. We generally place loans on non-accrual status when they become 90 days past due unless they are well secured and in the process of collection or if the collection of principal and interest is in doubt. When a loan is placed on non-accrual status, any interest previously accrued but not collected is reversed from income. Non-accrual loans increased approximately $53.6 million, or 38.8%, to $191.9 million as of March 31, 2025, from $138.3 million as of December 31, 2024, primarily due to an increase in non-accrual commercial real estate of $27.5 million, agricultural real estate of $15.2 million, and agricultural loans of $10.6 million during the first quarter of 2025. As of March 31, 2025 there were approximately $116.5 million of non-accrual loans for which there was no related allowance for credit losses, as these loans had sufficient collateral securing the loan for repayment.

Previous wording

Loans contractually past due 90 days or more and still accruing interest. Loans past due 90 days or more accruing interest were $1.8 million as of September 30, 2024, a decrease of $3.1 million, or 63.3%, from $4.9 million as of December 31, 2023.

Current wording

Loans contractually past due 90 days or more and still accruing interest. Loans past due 90 days or more accruing interest were $3.0 million as of March 31, 2025 and December 31, 2024.

Previous wording

Other Real Estate Owned (“OREO”). OREO consists of real property acquired through foreclosure on the collateral underlying defaulted loans. We record OREO at fair value less estimated selling costs. Any excess of loan carrying value over the fair value of the real estate at the time it is acquired, is recorded as a charge against the allowance for credit losses. Estimated losses that result from the ongoing periodic valuation of these properties are charged to earnings in the period in which they are identified. OREO decreased $12.1 million, or 73.3%, to $4.4 million as of September 30, 2024, from $16.5 million as of December 31, 2023, primarily resulting from the disposal of a $9.0 million agricultural real estate property and a $3.0 million commercial property.

Current wording

Other Real Estate Owned (OREO). OREO consists of real property acquired through foreclosure on the collateral underlying defaulted loans. We record OREO at fair value less estimated selling costs. Any excess of loan carrying value over the fair value of the real estate at the time it is acquired, is recorded as a charge against the allowance for credit losses. Estimated losses that result from the ongoing periodic valuation of these properties are charged to earnings in the period in which they are identified. OREO decreased $0.8 million, or 18.6%, to $3.5 million as of March 31, 2025, from $4.3 million as of December 31, 2024, primarily resulting from the disposal of two commercial properties.

Previous wording

(1)Specific valuation allowances associated with collateral-dependent and other individually evaluated loans. Specific valuation allowances are determined based on assessment of the fair value of the collateral underlying the loans as determined through independent appraisals, the present value of future cash flows, observable market prices, and any relevant qualitative or environmental factors impacting loans.

Current wording

(1)A specific valuation allowance associated with collateral-dependent and other individually evaluated loans. Specific valuation allowances are determined based on assessment of the fair value of the collateral underlying the loans as determined through independent appraisals, the present value of future cash flows, observable market prices, and any relevant qualitative or environmental factors impacting loans.

Previous wording

(2)Collective valuation allowances based on loan loss experience and future expectations for similar loans with similar characteristics and trends. The Company applies open pool methodologies for all portfolio segments. The open pool methodology averages quarterly loss rates by modeling segment, calculated as quarter-to-date net charge off balance divided by the end of period balance. Loss rates are recalculated quarterly with recoveries captured in the quarter a loan was charged off, are averaged across a look back period from 2009 to the current period, and are annualized. Macroeconomic-conditioned historical loss rates are applied to loan-level cash flows. Expected future principal and interest cash flows are calculated using contractual repayment terms and prepayment, utilization, interest rate, and probability of default assumptions. Macroeconomic sensitivity models calculate segment-specific multipliers using third party forecast data. The multipliers condition the annual loss rates over the 2-year forecast period, followed by a 1-year straight-line reversion to the unadjusted historical average loss rates. The unadjusted loss rates then apply for the remaining life of the loan. Estimated losses are totaled and aggregated to the segment level.

Current wording

(2)A collective valuation allowance based on loan loss experience and future expectations for similar loans with similar characteristics and trends. The Company applies open pool methodologies for all portfolio segments. The open pool methodology averages quarterly loss rates by modeling segment, calculated as quarter-to-date net charge off balance divided by the end of period balance. Loss rates are recalculated quarterly with recoveries captured in the quarter a loan was charged off, are averaged across a look back period from 2009 to the current period, and are annualized. Macroeconomic-conditioned historical loss rates are applied to loan-level cash flows. Expected future principal and interest cash flows are calculated using contractual repayment terms and prepayment, utilization, interest rate, and probability of default assumptions. Macroeconomic sensitivity models calculate segment-specific multipliers using third party forecast data. The multipliers condition the annual loss rates over the 2-year forecast period, followed by a 1-year straight-line reversion to the unadjusted historical average loss rates. The unadjusted loss rates then apply for the remaining life of the loan. Estimated losses are totaled and aggregated to the segment level.

Previous wording

(3)Qualitative allowance adjustments are determined based on asset quality trends, industry concentrations, environmental risks, changes in portfolio composition, and other qualitative risk factors, both internal and external to the Company. Other qualitative factors, including changes in loan and lending policies, collateral quality, underwriting standards and personnel, credit review quality, and model imprecision, are also considered.

Current wording

(3)A qualitative valuation allowance determined based on asset quality trends, industry concentrations, environmental risks, changes in portfolio composition, and other qualitative risk factors, both internal and external to the Company. Other qualitative factors, including changes in loan and lending policies, collateral quality, underwriting standards and personnel, credit review quality, and model imprecision, are also considered.

Previous wording

Loans acquired in business combinations are initially recorded at fair value as adjusted for credit risk and an allowance for credit losses at the date of acquisition. For loans with no significant evidence of credit deterioration since origination, the difference between the fair value and the unpaid principal balance of the loan at the acquisition date is amortized into interest income using the effective interest method over the remaining period to contractual maturity. An allowance for credit loss is recorded for the expected credit losses over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense using the same methodology as other loans held for investment.

Current wording

Loans acquired in business combinations are initially recorded at fair value as adjusted for credit risk. For loans with no significant evidence of credit deterioration since origination, the difference between the fair value and the unpaid principal balance of the loan at the acquisition date is amortized into interest income using the effective interest method over the remaining period to contractual maturity. An allowance for credit losses is recorded for the expected credit losses over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense using the same methodology as other loans held for investment.

Previous wording

Loans, or portions thereof, are charged-off against the allowance for credit losses when management believes the collectability of the principal is unlikely, or, with respect to consumer installment loans, according to an established delinquency schedule. Generally, loans are charged-off when (1) there has been no material principal reduction within the previous 90 days and there is no pending sale of collateral or other assets, (2) there is no significant or pending event which will result in principal reduction within the upcoming 90 days, (3) it is clear that we will not be able to collect all or a portion of the loan, (4) payments on the loan are sporadic, will result in an excessive amortization, or are not consistent with the collateral held, or (5) foreclosure or repossession actions are pending. Loan charge-offs do not directly correspond with the receipt of independent appraisals or the use of observable market data if the collateral value is determined to be sufficient to repay the principal balance of the loan.

Current wording

Loans, or portions thereof, are charged-off against the allowance for credit losses when management believes the collectability of the principal is unlikely, or, with respect to consumer installment loans, according to an established delinquency schedule. Generally, loans are charged-off when (1) there has been no material principal reduction within the previous 90 days and there is no pending sale of collateral or other assets, (2) there is no significant or pending event which will result in principal reduction within the upcoming 90 days, (3) it is clear that we will not be able to collect all or a portion of the loan, or (4) foreclosure or repossession actions are pending. Loan charge-offs do not directly correspond with the receipt of independent appraisals or the use of observable market data if the collateral value is determined to be sufficient to repay the principal balance of the loan.

Previous wording

Our allowance for credit losses was $225.4 million, or 1.25% of loans held for investment as of September 30, 2024 compared to $227.7 million, or 1.25% of loans held for investment, as of December 31, 2023. The Company’s allowance for off-balance sheet credit losses was $5.6 million as of September 30, 2024, compared to $18.4 million as of December 31, 2023, due to a decline in off-balance sheet commitments.

Current wording

Our allowance for credit losses was $215.3 million, or 1.24% of loans held for investment as of March 31, 2025 compared to $204.1 million, or 1.14% of loans held for investment, as of December 31, 2024. The increase reflected changes in loan balances, the attributes of the current portfolio, and changes in general economic outlook. The Company’s allowance for off-balance sheet credit losses was $5.1 million as of March 31, 2025, compared to $5.2 million as of December 31, 2024, due to a decline in off-balance sheet commitments.