FIRST FINANCIAL BANKSHARES INC

Previous wording

general economic conditions, including the impact of the current federal government shutdown, our local, state and national real estate markets and employment trends;

Current wording

general economic conditions, including the impact of government shutdowns, our local, state and national real estate markets, and employment trends;

Previous wording

government intervention in the U.S. financial system including the effects of recent legislative, tax, accounting, tariffs, and regulatory actions and reforms, including the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Jumpstart Our Business Startups Act, the Consumer Financial Protection Bureau (“CFPB”), the Inflation Reduction Act of 2022, the capital ratios of Basel III as adopted by the federal banking authorities and the Tax Cuts and Jobs Act;

Current wording

government intervention in the U.S. financial system including the effects of recent legislative, tax, accounting, tariffs, and regulatory actions and reforms, including the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Jumpstart Our Business Startups Act, the Consumer Financial Protection Bureau (“CFPB”), the Inflation Reduction Act of 2022, the capital ratios of Basel III as adopted by the federal banking authorities and the Tax Cuts and Jobs Act, and the One Big Beautiful Bill Act ("OBBBA");

Previous wording

fluctuations in the market value and liquidity of the investment securities we have classified as held-for-sale ("HFS"), including the effects of changes in market interest rates;

Current wording

fluctuations in the market value and liquidity of the investment securities we have classified as available-for-sale ("AFS"), including the effects of changes in market interest rates;

Previous wording

In addition, financial markets and global supply chains may continue to be adversely affected by the current or anticipated impact of military conflict, including the current Russian invasion of Ukraine, the Israel-Palestine conflict and other world events, terrorism or other geopolitical events.

Current wording

In addition, financial markets and global supply chains may continue to be adversely affected by the current or anticipated impact of military conflict, including the current Ukraine and Middle East conflicts and other world events, terrorism or other geopolitical events.

Previous wording

We deem our most critical accounting policies to be (i) our allowance for credit losses and our provision for credit losses and (ii) our valuation of financial instruments. We have other significant accounting policies and continue to evaluate the materiality of their impact on our consolidated financial statements, but we believe these other policies either do not generally require us to make estimates and judgments that are difficult or subjective, or it is less likely they would have a material impact on our reported results for a given period. A discussion of (i) our allowance for credit losses and our provision for credit losses and (ii) our valuation of financial instruments is included in Note 1 to our Consolidated Financial Statements beginning on page 10.

Current wording

We deem our most critical accounting policies to be (i) our allowance for credit losses and our provision for credit losses and (ii) our valuation of financial instruments. We have other significant accounting policies and continue to evaluate the materiality of their impact on our consolidated financial statements, but we believe these other policies either do not generally require us to make estimates and judgments that are difficult or subjective, or it is less likely they would have a material impact on our reported results for a given period. A discussion of (i) our allowance for credit losses and our provision for credit losses and (ii) our valuation of financial instruments is included in Notes 1, 3, and 9 to our Consolidated Financial Statements.

Previous wording

The prior authorization had been in place since July 27, 2021. The stock repurchase plan authorizes management to repurchase and retire the stock at such time as repurchases and retirements are considered beneficial to the Company and stockholders. Any repurchase of stock will be made through the open market, block trades, or in privately negotiated transactions in accordance with applicable laws and regulations. Under the repurchase plan, there is no minimum number of shares that the Company is required to repurchase. Under the authorization effective through July 31, 2024, the Company repurchased and retired 101,337 shares (all during September 2023) at an average price of $26.99 per share. There have been no repurchases during 2024 or 2025.

Current wording

The prior authorization had been in place since July 27, 2021. The stock repurchase plan authorizes management to repurchase and retire the stock at such time as repurchases and retirements are considered beneficial to the Company and stockholders. Any repurchase of stock will be made through the open market, block trades, or in privately negotiated transactions in accordance with applicable laws and regulations. Under the repurchase plan, there is no minimum number of shares that the Company is required to repurchase. There have been no repurchases during 2025 or through March 31, 2026.

Previous wording

Net earnings for the nine-months ended September 30, 2025 were $180.27 million, an increase of 11.84% when compared to earnings of $161.19 million for the nine-months ended September 30, 2024. Diluted earnings per share was $1.26 for the first nine months of 2025 and $1.13 for the first nine months of 2024.

Current wording

Performance Summary. Net earnings for the first quarter of 2026 were $71.54 million, an increase of 16.62% when compared to earnings of $61.35 million for the first quarter of 2025. Diluted earnings per share was $0.50 for the first quarter of 2026 and $0.43 for the first quarter of 2025.

Previous wording

The return on average assets was 1.44% for the third quarter of 2025, as compared to 1.66% for the third quarter of 2024. The return on average equity was 11.85% for the third quarter of 2025, as compared to 14.00% for the third quarter of 2024.

Current wording

The return on average assets was 1.89% for the first quarter of 2026, as compared to 1.78% for the first quarter of 2025. The return on average equity was 14.83% for the first quarter of 2026, as compared to 15.12% for the first quarter of 2025.

Previous wording

Tax-equivalent net interest income was $130.41 million for the third quarter of 2025, as compared to $109.74 million for the same period last year. The increase in tax equivalent net interest income for the third quarter of 2025 compared to the same quarter in 2024 was largely attributable to the increases in average loans and the rate of return on taxable and tax-exempt investment securities. Average earning assets were $13.60 billion for the third quarter of 2025, as compared to $12.48 billion during the third quarter of 2024. The increase of $1.13 billion in average earning assets for the third quarter of 2025 when compared to the same period in 2024 was primarily a result of (i) an increase in loans of $605.88 million, (ii) an increase in taxable investment securities of $348.89 million and (iii) an increase in tax-exempt investment securities of $146.55 million. Average interest-bearing liabilities were $9.16 billion for the third quarter of 2025, as compared to $8.37 billion in the same period in 2024. The yield on earning assets increased 16 basis points while the rate paid on interest-bearing liabilities decreased 23 basis points for the third quarter of 2025 when compared to the third quarter of 2024.

Current wording

Tax-equivalent net interest income was $138.58 million for the first quarter of 2026, as compared to $121.49 million for the same period last year. The increase in tax equivalent net interest income for the first quarter of 2026 compared to the same quarter in 2025 was largely attributable to the increases in average loans, the increase in average balance and the rate of return on taxable and tax-exempt investment securities, and a $1.26 million reversal of interest expense. Average earning assets were $14.54 billion for the first quarter of 2026, as compared to $13.16 billion during the first quarter of 2025. The increase of $1.38 billion in average earning assets for the first quarter of 2026 when compared to the same period in 2025 was primarily a result of (i) an increase in loans of $321.05 million, (ii) an increase in taxable investment securities of $570.66 million and (iii) an increase in tax-exempt investment securities of $319.33 million. Average interest-bearing liabilities were $9.91 billion for the first quarter of 2026, as compared to $9.01 billion in the same period in 2025. The yield on earning assets decreased 2 basis points while the rate paid on interest-bearing liabilities decreased 20 basis points for the first quarter of 2026 when compared to the first quarter of 2025.

Previous wording

The net interest margin, on a tax equivalent basis, was 3.80% for the third quarter of 2025, an increase of 30 basis points from the same period in 2024. The net interest margin, on a tax equivalent basis, for the first nine-months of 2025 was 3.79%, an increase of 35 basis points from the same period in 2024. The net interest margin has expanded during the past year primarily due to (i) a shift in asset mix from lower yielding investment securities to higher yielding loans and investment securities funded by strong growth in deposits, and (ii) a lower average cost of deposits following the Federal Reserve 25 basis point cuts in November and December 2024, and again in September 2025. The Federal Reserve decreased interest rates 50 basis points in September 2024, and 25 basis points in November and December 2024, and September 2025, respectively, resulting in a target rate range of 4.00% to 4.25% at September 30, 2025. Most recently, on October 29, 2025, the Federal Reserve decreased rates another 25 basis points resulting in a current target rate of 3.75% - 4.00%.

Current wording

The net interest margin, on a tax equivalent basis, was 3.86% for the first quarter of 2026, an increase of 12 basis points from the same period in 2025. The net interest margin has expanded during the past year primarily due to (i) strong growth in deposits that has enabled the Company to deploy those funds into the higher yielding loans and securities portfolios, (ii) a reduction in cost of deposits, and (iii) investment of lower yielding securities cash flows into higher yielding bonds. The Federal Reserve began increasing interest rates in March 2022 and continuing into 2023 to a peak of 5.25% to 5.50%. Most recently, the Federal Reserve decreased interest rates by 100 basis points in 2024 and 25 basis points in September, October, and December 2025, respectively, resulting in a target rate of 3.50% to 3.75% at March 31, 2026.

Previous wording

There are $1.14 billion of municipal and related deposits which are indexed to short-term treasury rates which have fluctuated with the changes in the applicable rate index. Average municipal and related deposits totaled $1.56 billion and $1.48 billion for the nine-months ended September 30, 2025 and 2024, respectively, with an average rate paid of 3.47% and 4.03%, for the respective nine-months then ended.

Current wording

There are $1.44 billion of municipal and related deposits which are indexed to short-term treasury rates which have continued to fluctuate with the changes in the applicable rate index. Average municipal and related deposits totaled $1.89 billion and $1.60 billion for the three-months ended March 31, 2026 and 2025, respectively, with an average rate paid of 3.02% and 3.39%, for the respective three-months then ended.

Previous wording

Includes tax equivalent yield adjustment of approximately $3.41 million and $2.63 million in the third quarters of 2025 and 2024, respectively, using an effective tax rate of 21% for both periods.

Current wording

Includes tax equivalent yield adjustment of approximately $3.79 million and $2.70 million in the first quarters of 2026 and 2025, respectively, using an effective tax rate of 21% for both periods.

Previous wording

Noninterest Income. Noninterest income for the third quarter of 2025 was $34.26 million, an increase of $1.90 million, when compared to $32.36 million in the same quarter of 2024. Trust fee income increased to $12.95 million for the third quarter of 2025 compared to $11.69 million for the third quarter of 2024, driven by the increase in market value of trust assets managed to $12.05 billion at September 30, 2025, compared to $10.86 billion at September 30, 2024. Mortgage related income increased to $4.38 million for the third quarter of 2025 compared to $3.36 million in the third quarter of 2024, due to improved origination volume related to lower interest rates and the strategic restructuring of the mortgage lending team.

Current wording

Noninterest Income. Noninterest income for the first quarter of 2026 was $32.10 million, an increase of $1.87 million, when compared to $30.23 million in the same quarter of 2025. Trust fee income increased to $13.36 million for the first quarter of 2026 compared to $12.65 million for the first quarter of 2025, driven by the increase in market value of trust assets managed to $11.91 billion at March 31, 2026, compared to $10.86 billion at March 31, 2025. Service charges on deposits decreased to $6.08 million for the first quarter of 2026 compared with $6.18 million for the first quarter of 2025, driven by a decrease in overdraft fees. Mortgage related income increased to $4.28 million for the first quarter of 2026 compared to $2.83 million in the first quarter of 2025, due to increased volume in mortgage loans originated and better margins.

Previous wording

Noninterest Expense. Total noninterest expense for the third quarter of 2025 was $73.67 million, compared to $66.01 million for the same period of 2024. An important measure in determining whether a financial institution effectively manages noninterest expense is the efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax-equivalent basis and noninterest income. Lower ratios indicate better efficiency since more income is generated with a lower noninterest expense total. Our efficiency ratio was 44.74% for the third quarter of 2025 compared to 46.45% for the same quarter in 2024.

Current wording

Noninterest Expense. Total noninterest expense for the first quarter of 2026 was $76.77 million, compared to $70.34 million for the same period of 2025. An important measure in determining whether a financial institution effectively manages noninterest expense is the efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax-equivalent basis and noninterest income. Lower ratios indicate better efficiency since more income is generated with a lower noninterest expense total. Our efficiency ratio was 44.98% for the first quarter of 2026 compared to 46.36% for the same quarter in 2025.

Previous wording

Salaries, commissions and employee benefits for the first nine months of 2025 totaled $127.32 million, compared to $111.65 million for the same period in 2024. The increase from prior year is primarily a result of merit-based and market driven pay increases, an increase of $1.83 million in profit sharing accruals, and a $1.55 million increase in stock-based compensation. The increase in profit sharing and incentive accruals are directly related to the increase in net income over prior year.

Current wording

Salaries, commissions and employee benefits for the first quarter of 2026 totaled $45.98 million, compared to $42.14 million for the same period in 2025. The increase from prior year is primarily resulting from additions to staff and merit-based and market driven pay increases to officers and employees over the past year.

Previous wording

All other categories of noninterest expense for the third quarter of 2025 totaled $31.06 million, compared to $28.52 million in the same quarter a year ago. Noninterest expense, excluding salary related costs, for the three-months ended September 30, 2025 increased when compared to the same period in 2024 largely due to increases in software amortization and other operational losses.

Current wording

All other categories of noninterest expense for the first quarter of 2026 totaled $30.79 million, compared to $28.19 million in the same quarter a year ago. Noninterest expense, excluding salary related costs, for the three-months ended March 31, 2026 increased when compared to the same period in 2025 largely due to increases in software amortization, professional fees and operational and other losses.

Previous wording

Loans. The portfolio is comprised of loans made to businesses, professionals, individuals, and farm and ranch operations located in the primary trade areas served by our subsidiary bank. As of September 30, 2025, total loans held-for-investment were $8.24 billion, an increase of $330.53 million, as compared to December 31, 2024.

Current wording

Loans. The portfolio is comprised of loans made to businesses, professionals, individuals, and farm and ranch operations located in the primary trade areas served by our subsidiary bank. As of March 31, 2026, total loans held-for-investment were $8.29 billion, an increase of $126.84 million, as compared to December 31, 2025 balances.

Previous wording

As compared to year-end 2024 balances, total real estate loans increased $288.47 million, total consumer loans increased $72.69 million, total commercial loans decreased $23.91 million, and agricultural loans decreased $6.72 million. Loans averaged $8.25 billion for the third quarter of 2025, an increase of $605.88 million over the prior year third quarter average balances. Loans averaged $8.08 billion for the first nine months of 2025, an increase of $664.83 million from the prior year nine-month period average balances.

Current wording

As compared to year-end 2025 balances, total commercial loans increased $75.44 million, total real estate loans increased $53.43 million, total consumer loans increased $16.17 million, and agricultural loans decreased $18.19 million. Loans averaged $8.27 billion for the first quarter of 2026, an increase of $321.05 million over the prior year first quarter average balances.

Previous wording

Loan portfolio segments include C&I, Municipal, Agricultural, Construction and Development, Farm, Non-Owner Occupied and Owner Occupied CRE, Residential, Consumer Auto and Consumer Non-Auto. This segmentation allows for a more precise pooling of loans with similar credit risk characteristics and credit monitor procedures for the Company’s calculation of its allowance for credit losses.

Current wording

Loan portfolio segments include Commercial & Industrial, Municipal, Agricultural, Construction and Development, Farm, Non-Owner Occupied and Owner Occupied CRE, Residential, Consumer Auto and Consumer Non-Auto. This segmentation allows for a more precise pooling of loans with similar credit risk characteristics and credit monitor procedures for the Company’s calculation of its allowance for credit losses.

Previous wording

Loans held-for-sale, consisting of secondary market mortgage loans, totaled $26.02 million, $20.11 million, and $8.24 million at September 30, 2025 and 2024, and December 31, 2024, respectively. At September 30, 2025 and 2024, and December 31, 2024, $835 thousand, $3.60 million and $442 thousand, respectively, are valued using the lower of cost or fair value, and the remaining amounts are valued under the fair value option.

Current wording

Loans held-for-sale, consisting of secondary market mortgage loans, totaled $22.98 million, $14.35 million, and $29.99 million at March 31, 2026 and 2025, and December 31, 2025, respectively. At March 31, 2026 and 2025, and December 31, 2025, $4.85 million, $351 thousand and $4.56 million, respectively, are valued using the lower of cost or fair value, and the remaining amounts are valued under the fair value option.

Previous wording

Commercial real estate loans (owner and non-owner occupied CRE) represent 23.32% of the Company's total loan portfolio as of September 30, 2025. Non-owner occupied CRE represents $802.68 million, or 9.74%, of the Company's total loan portfolio as of September 30, 2025. The properties securing this portfolio are diverse as to geographic location in Texas as well as industry type. Collateral for CRE loans is located throughout the Company’s markets in central west Texas, the Dallas-Fort Worth metroplex and southeast Texas with less than 3% of properties located outside of the state. The largest concentrations in the CRE portfolio as to type are industrial/manufacturing at approximately 18.90% and multifamily at approximately 7.88% as of September 30, 2025. All additional property CRE portfolio type categories are below the identified concentration levels. Credit underwriting standards are periodically reviewed and adjusted based upon observations from our ongoing monitoring of economic conditions in our lending areas. In response to the current interest rate environment and increases in benchmark rates, the Company has enhanced stress testing and loan review activities to mitigate interest rate reset risk with a specific emphasis on borrowers’ abilities to absorb the impact of higher interest rates on loans.

Current wording

Commercial real estate loans (owner and non-owner occupied CRE) represent 23.63% of the Company's total loan portfolio as of March 31, 2026. Non-owner occupied CRE represents $825.77 million, or 9.97%, of the Company's total loan portfolio as of March 31, 2026. The properties securing this portfolio are diverse as to geographic location in Texas as well as industry type. Collateral for CRE loans is located throughout the Company’s markets in central west Texas, the Dallas-Fort Worth metroplex and southeast Texas with less than 1% of properties located outside of the state. The largest concentrations in the CRE portfolio as to type are industrial/manufacturing at approximately 19.91% and multifamily at approximately 6.11% as of March 31, 2026. All additional property CRE portfolio property type categories are below the identified concentration levels. Credit underwriting standards are periodically reviewed and adjusted based upon observations from our ongoing monitoring of economic conditions in our lending areas. In response to the current interest rate environment and increases in benchmark rates, the Company has enhanced stress testing and loan review activities to mitigate interest rate reset risk with a specific emphasis on borrowers’ abilities to absorb the impact of higher interest rates as loans that were made in a much lower rate environment renew.

Previous wording

The following tables summarize maturity information of our loan portfolio as of September 30, 2025. The tables also presents the portion of loans that have fixed interest rates or variable interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index.

Current wording

The following tables summarize maturity information of our loan portfolio as of March 31, 2026. The tables also present the portion of loans that have fixed interest rates or variable interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index.

Previous wording

Of the $4.80 billion of variable interest rate loans shown above, loans totaling $2.37 billion mature or reprice over the next twelve months. Of this amount, approximately $2.07 billion will reprice immediately upon changes in the underlying index rate (primarily U.S. prime rate) with the remaining $303.72 million being subject to floors above or ceilings below the current index.

Current wording

Of the $4.77 billion of variable interest rate loans shown above, loans totaling $2.29 billion mature or reprice over the next twelve months. Of this amount, approximately $1.97 billion will reprice immediately upon changes in the underlying index rate (primarily U.S. prime rate) with the remaining $320.35 million being subject to floors above or ceilings below the current index.

Previous wording

Asset Quality. Our loan portfolio is subject to periodic reviews by our centralized independent loan review group, engaged third-parties, as well as periodic examinations by bank regulatory agencies. Loans are placed on nonaccrual status when, in the judgment of management, the collectability of principal or interest under the original terms becomes doubtful. Nonaccrual, past due 90 days or more and still accruing, and foreclosed assets were $58.54 million at September 30, 2025, as compared to $64.42 million at September 30, 2024 and $63.10 million at December 31, 2024. As a percent of loans held-for-investment and foreclosed assets, these assets were 0.71% at September 30, 2025, 0.83% at September 30, 2024, and 0.80% at December 31, 2024. As a percent of total assets, these assets were 0.39% at September 30, 2025, as compared to 0.47% at September 30, 2024 and 0.45% at December 31, 2024, respectively. We believe the level of these assets to be manageable and are not aware of any material classified credits not properly disclosed as nonperforming at September 30, 2025.

Current wording

Asset Quality. Our loan portfolio is subject to periodic reviews by our centralized independent loan review group, engaged third-parties, as well as periodic examinations by bank regulatory agencies. Loans are placed on nonaccrual status when, in the judgment of management, the collectability of principal or interest under the original terms becomes doubtful. Nonaccrual, past due 90 days or more and still accruing, and foreclosed assets were $54.31 million at March 31, 2026, as compared to $61.69 million at March 31, 2025 and $56.49 million at December 31, 2025. As a percent of loans held-for-investment and foreclosed assets, these assets were 0.66% at March 31, 2026, 0.78% at March 31, 2025, and 0.69% at December 31, 2025. As a percent of total assets, these assets were 0.35% at March 31, 2026, as compared to 0.43% at March 31, 2025 and 0.37% at December 31, 2025, respectively. We believe the level of these assets to be manageable and are not aware of any material classified credits not properly disclosed as nonperforming at March 31, 2026.

Previous wording

We record interest payments received on nonaccrual loans as reductions of principal. Prior to the loans being placed on nonaccrual, we recognized interest income on these loans of approximately $1.11 million for the year ended December 31, 2024. If interest on these loans had been recognized on a full accrual basis during the year ended December 31, 2024, such income would have been approximately $5.35 million. Such amounts for the 2025 and 2024 interim periods were not significant.

Current wording

We record interest payments received on nonaccrual loans as reductions of principal. Prior to the loans being placed on nonaccrual, we recognized interest income on loans of approximately $795 thousand for the year ended December 31, 2025. If interest on all nonaccrual loans had been recognized on a full accrual basis during the year ended December 31, 2025, such income would have been approximately $5.69 million. Such amounts for the 2026 and 2025 interim periods were not significant.

Previous wording

Allowance for Credit Losses. The allowance for credit losses is the amount we determine as of a specific date to be appropriate to absorb current expected credit losses on existing loans. For a discussion of our methodology, see our accounting policies in Note 1 to the Consolidated Financial Statements (unaudited).

Current wording

Allowance for Credit Losses. The allowance for credit losses is the amount we determine as of a specific date to be appropriate to absorb current expected credit losses on existing loans. For a discussion of our methodology, see Note 3 to the Consolidated Financial Statements (unaudited).

Previous wording

The provision for loan losses of $25.51 million for the three-months ended September 30, 2025 is combined with the reversal of provision for unfunded commitments of $1.07 million and reported in the net aggregate of $24.44 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended September 30, 2025. The provision for loan losses of $30.93 million for the nine-months ended September 30, 2025 is combined with the provision for unfunded commitments of $165 thousand and reported in the net aggregate of $31.10 million under the provision for credit losses in the consolidated statements of earnings for the nine-months ended September 30, 2025.

Current wording

The provision for loan losses of $2.74 million for the three-months ended March 31, 2026 is combined with the reversal of provision for unfunded commitments of $447 thousand and reported in the net aggregate of $2.29 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended March 31, 2026. The provision for loan losses of $2.99 million for the three-months ended March 31, 2025 is combined with the provision for unfunded commitments of $537 thousand and reported in the net aggregate of $3.53 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended March 31, 2025.

Previous wording

As a percent of average loans, annualized net loan charge-offs were 1.07% for the third quarter of 2025, as compared to 0.04% for the third quarter of 2024. As a percent of average loans, annualized net loan charge-offs were 0.39% for the first nine months of 2025 and 0.03% for the first nine months of 2024, respectively. The allowance for credit losses as a percent of loans held-for-investment was 1.29% as of September 30, 2025, as compared to 1.29% for September 30, 2024 and 1.24% for December 31, 2024, respectively. This quarter was impacted by a $21.55 million credit loss believed to be due to fraudulent activity associated with a commercial borrower. We have reviewed our portfolio to look for systematic issues and believe this to be isolated. We have initiated legal action and are continuing to work with law enforcement. Despite this setback, our core earnings trends remain positive, with year-to-date earnings growth of nearly 12% compared to 2024.

Current wording

As a percent of average loans, annualized net loan charge-offs were 0.02% for the three-months ended March 31, 2026, as compared to 0.01% for the three-months ended March 31, 2025. The allowance for credit losses as a percent of loans held-for-investment was 1.30% as of March 31, 2026, as compared to 1.27% for March 31, 2025 and 1.29% for December 31, 2025, respectively.

Previous wording

Interest-Bearing Demand Deposits in Banks. The Company had interest-bearing deposits in banks of $401.58 million at September 30, 2025 compared to $287.48 million at September 30, 2024 and $503.42 million at December 31, 2024, respectively. At September 30, 2025, interest-bearing deposits in banks included $369.57 million maintained at the Federal Reserve Bank of Dallas and $32.01 million on deposit with the FHLB.

Current wording

Interest-Bearing Demand Deposits in Banks. The Company had interest-bearing deposits in banks of $458.20 million at March 31, 2026 compared to $682.36 million at March 31, 2025 and $826.95 million at December 31, 2025, respectively. At March 31, 2026, interest-bearing deposits in banks included $402.62 million maintained at the Federal Reserve Bank of Dallas and $55.58 million on deposit with the FHLB.

Previous wording

Available-for-Sale Securities. At September 30, 2025, securities with a fair value of $5.26 billion were classified as securities available-for-sale. As compared to December 31, 2024, the available-for-sale portfolio at September 30, 2025 reflected (i) an increase of $526.70 million in mortgage-backed securities, (ii) an increase of $293.67 million in obligations of states and political subdivisions, (iii) a decrease of $171.59 million in U.S. Treasury securities, and (iv) a decrease of $5.72 million in corporate bonds and other securities. Fluctuations in the available-for-sale securities portfolio balances were primarily driven by purchases and calls or maturities, and changes in unrealized losses during the first nine months of 2025. Our mortgage related securities are backed by GNMA, FNMA or FHLMC, or are collateralized by securities backed by these agencies.

Current wording

Available-for-Sale Securities. At March 31, 2026, securities with a fair value of $5.67 billion were classified as securities available-for-sale. As compared to December 31, 2025, the available-for-sale portfolio at March 31, 2026 reflected (i) an increase of $221.49 million in mortgage-backed securities, (ii) a decrease of $40.85 million in U.S. Treasury securities, (iii) a decrease of $21.65 million in obligations of states and political subdivisions, and (iv) a decrease of $4.31 million in corporate bonds and other securities. Fluctuations in the available-for-sale securities portfolio balances were primarily driven by purchases and calls or maturities, and changes in unrealized losses during the first quarter of 2026. Our mortgage related securities are backed by GNMA, FNMA or FHLMC, or are collateralized by securities backed by these agencies.

Previous wording

See the below table and Note 2 to the Consolidated Financial Statements (unaudited) for additional disclosures relating to the maturities and fair values of the investment portfolio at September 30, 2025 and 2024, and December 31, 2024.

Current wording

See the below table and Note 2 to the Consolidated Financial Statements (unaudited) for additional disclosures relating to the maturities and fair values of the investment portfolio at March 31, 2026 and December 31, 2025.

Previous wording

As of September 30, 2025, the investment portfolio had an overall tax equivalent yield of 3.00%, a weighted average life of 6.68 and modified duration of 5.53 years.

Current wording

As of March 31, 2026, the investment portfolio had an overall tax equivalent yield of 3.19%, a weighted average life of 6.71 and modified duration of 5.55 years.

Previous wording

Deposits. Deposits held by our subsidiary bank represent our primary source of funding. Total deposits were $12.85 billion as of September 30, 2025, as compared to $11.76 billion as of September 30, 2024 and $12.10 billion as of December 31, 2024.

Current wording

Deposits. Deposits held by our subsidiary bank represent our primary source of funding. Total deposits were $13.25 billion as of March 31, 2026, as compared to $12.47 billion as of March 31, 2025 and $13.35 billion as of December 31, 2025.

Previous wording

Table 9 provides a breakdown of average deposits and rates paid over the three and nine month periods ended September 30, 2025 and 2024, respectively.

Current wording

Table 9 provides a breakdown of average deposits and rates paid over the three month periods ended March 31, 2026 and 2025, respectively.

Previous wording

The estimated amount of uninsured and uncollateralized deposits including related accrued and unpaid interest is approximately $3.96 billion as of September 30, 2025.

Current wording

The estimated amount of uninsured and uncollateralized deposits including related accrued and unpaid interest is approximately $4.00 billion, or 30.17% of total deposits, as of March 31, 2026.

Previous wording

Borrowings. Included in borrowings were federal funds purchased, advances from the FHLB and other borrowings of $21.96 million, $25.98 million and $135.60 million at September 30, 2025 and 2024, and December 31, 2024, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $56.20 million and $24.67 million in the third quarters of 2025 and 2024, respectively. The weighted average interest rates paid on these borrowings were 3.33% and 1.87% for the third quarters of 2025 and 2024, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $52.38 million and $60.06 million in the first nine months of 2025 and 2024, respectively. The weighted average interest rates paid on these borrowings were 2.96% and 3.66% for the first nine months of 2025 and 2024, respectively.

Current wording

Borrowings. Included in borrowings were federal funds purchased, advances from the FHLB and other borrowings of $22.31 million, $26.98 million and $21.68 million at March 31, 2026 and 2025, and December 31, 2025, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $22.16 million and $74.56 million in the first quarters of 2026 and 2025, respectively. The weighted average interest rates paid on these borrowings were 1.35% and 3.06% for the first quarters of 2026 and 2025, respectively.

Previous wording

Repurchase Agreements. Securities sold under repurchase agreements of $50.65 million, $57.56 million and $61.42 million at September 30, 2025 and 2024, and December 31, 2024, respectively. Securities sold under repurchase agreements are generally with significant customers of the Company that require short-term liquidity for their funds for which we pledge certain securities that have a fair value equal to at least the amount of the short-term borrowings. The average balances of securities sold under repurchase agreements were $50.05 million and $100.89 million for the third quarters of 2025 and 2024, respectively. The average rates paid on securities sold under repurchase agreements were 1.66% and 2.92% for the third quarters of 2025 and 2024, respectively. The average balances of securities sold under repurchase agreements were $52.80 million and $209.91 million for the first nine months of 2025 and 2024, respectively. The average rates paid on securities sold under repurchase agreements were 1.62% and 3.31% for the first nine months of 2025 and 2024, respectively. The average balances of securities sold under repurchase agreements has decreased from the prior year as customers have moved funds to IntraFi deposit accounts.

Current wording

Repurchase Agreements. Securities sold under repurchase agreements of $67.95 million, $56.61 million and $62.96 million at March 31, 2026 and 2025, and December 31, 2025, respectively. Securities sold under repurchase agreements are generally with significant customers of the Company that require short-term liquidity for their funds for which we pledge certain securities that have a fair value equal to at least the amount of the short-term borrowings. The average balances of securities sold under repurchase agreements were $62.85 million and $53.92 million for the first quarters of 2026 and 2025, respectively. The average rates paid on securities sold under repurchase agreements were 1.48% and 1.57% for the first quarters of 2026 and 2025, respectively.

Previous wording

The results for the net interest income simulations as of September 30, 2025 and 2024, and December 31, 2024 resulted in an asset sensitive position. These are good faith estimates and assume that the composition of our interest sensitive assets and liabilities existing at each year-end will remain constant over the relevant twelve-month measurement period and that changes in market interest rates are instantaneous and sustained across the yield curve regardless of duration of pricing characteristics on specific assets or liabilities. Also, this analysis does not contemplate any actions that we might undertake in response to changes in market interest rates. We believe these estimates are not necessarily indicative of what actually could occur in the event of immediate interest rate increases or decreases of this magnitude. As interest-bearing assets and liabilities reprice in different time frames and proportions to market interest rate movements, various assumptions must be made based on historical relationships of these variables in reaching any conclusion. Since these correlations are based on competitive and market conditions, we anticipate that our future results will likely be different from the foregoing estimates, and such differences could be material.

Current wording

The results for the net interest income simulations as of March 31, 2026 and December 31, 2025 resulted in an asset sensitive position. These are good faith estimates and assume that the composition of our interest sensitive assets and liabilities existing at each year-end will remain constant over the relevant twelve-month measurement period and that changes in market interest rates are instantaneous and sustained across the yield curve regardless of duration of pricing characteristics on specific assets or liabilities. Also, this analysis does not contemplate any actions that we might undertake in response to changes in market interest rates. We believe these estimates are not necessarily indicative of what actually could occur in the event of immediate interest rate increases or decreases of this magnitude. As interest-bearing assets and liabilities reprice in different time frames and proportions to market interest rate movements, various assumptions must be made based on historical relationships of these variables in reaching any conclusion.

Previous wording

The fair value of our investment securities classified as available-for-sale totaled $5.26 billion at September 30, 2025. During the nine months ended September 30, 2025, the corresponding unrealized loss before taxes on the portfolio of $537.55 million at December 31, 2024, changed to an unrealized loss before taxes of $390.96 million at September 30, 2025, which is recorded net of taxes in accumulated other comprehensive earnings (loss) in shareholders' equity. The unrealized gains or losses, net of taxes, on the portfolio are excluded from the calculation of all regulatory capital ratios. The changes in the fair value were driven by changes in interest rates based on expected actions by the Federal Reserve Board and other market conditions. The overall valuation of the portfolio is most correlated to the 5-year U.S. Treasury rates based on the composition and duration of the portfolio. At September 30, 2025, the 5-year U.S. Treasury rate was 3.73% compared to 4.39% at December 31, 2024, representing a 66 basis point decrease during the first nine months of 2025. As of September 30, 2025, an increase of 100 basis points in the 5-year U.S. Treasury rate would result in an increase to unrealized losses by approximately $224.41 million before taxes, while a 100 basis point decrease in the same rate would result in a decrease to unrealized losses by approximately $258.66 million before taxes. We believe that we have the ability to hold these securities to maturity based on our overall liquidity and intent to hold the portfolio.

Current wording

The fair value of our investment securities classified as available-for-sale totaled $5.67 billion at March 31, 2026. During the three months ended March 31, 2026, the corresponding unrealized loss before taxes on the portfolio of $342.03 million at December 31, 2025, changed to an unrealized loss before taxes of $367.52 million at March 31, 2026, which is recorded net of taxes in accumulated other comprehensive earnings (loss) in shareholders' equity. The unrealized gains or losses, net of taxes, on the portfolio are excluded from the calculation of all regulatory capital ratios. The changes in the fair value were driven by changes in interest rates based on expected actions by the Federal Reserve Board and other market conditions. The overall valuation of the portfolio is most correlated to the 5-year U.S. Treasury rates based on the composition and duration of the portfolio. At March 31, 2026, the 5-year U.S. Treasury rate was 3.95% compared to 3.72% at December 31, 2025, representing a 23 basis point increase during the first three months of 2026. As of March 31, 2026, an increase of 100 basis points in the 5-year U.S. Treasury rate would result in an increase to unrealized losses by approximately $270.95 million before taxes, while a 100 basis point decrease in the same rate would result in a decrease to unrealized losses by approximately $236.65 million before taxes. The Company does not intend to sell any impaired available-for-sale securities before fair value recovers to the current amortized cost, and it is more-likely-than-not that the Company will not be required to sell impaired securities before the fair value recovers, which may be maturity.

Previous wording

Total shareholders’ equity was $1.83 billion, or 12.33% of total assets at September 30, 2025, as compared to $1.66 billion, or 12.24% of total assets at September 30, 2024, and $1.61 billion, or 11.49% of total assets at December 31, 2024. Included in shareholders' equity at September 30, 2025, and 2024, and December 31, 2024 were $308.58 million, $329.82 million and $424.29 million, respectively, in unrealized losses on investment securities available-for-sale, net of related income taxes, although such amount is excluded from and does not impact regulatory capital. For the third quarter of 2025, total shareholders' equity averaged $1.75 billion, or 12.13% of average assets, as compared to $1.57 billion, or 11.83% of average assets, during the same period in 2024. For the first nine months of 2025, total shareholders’ equity averaged $1.69 billion, or 11.94% of average assets, as compared to $1.51 billion or 11.42% of average assets, during the same period in 2024.

Current wording

Total shareholders’ equity was $1.94 billion, or 12.63% of total assets at March 31, 2026, as compared to $1.68 billion, or 11.74% of total assets at March 31, 2025, and $1.92 billion, or 12.41% of total assets at December 31, 2025. Included in shareholders' equity at March 31, 2026, and 2025, and December 31, 2025 were $290.06 million, $388.89 million and $269.94 million, respectively, in unrealized losses on investment securities available-for-sale, net of related income taxes, although such amount is excluded from and does not impact regulatory capital. For the first quarter of 2026, total shareholders' equity averaged $1.96 billion, or 12.74% of average assets, as compared to $1.65 billion, or 11.76% of average assets, during the same period in 2025.