CFR 10-K & 10-Q changes, risk factors and insider trading

We maintain allowances for credit losses on loans, securities and off-balance sheet credit exposures. In the case of loans and securities, allowances for credit losses are contra-asset valuation accounts that are deducted from the amortized cost basis of these assets to present the net amount expected to be collected. In the case of off-balance-sheet credit exposures, the allowance for credit losses is a liability account reported as a component of accrued interest payable and other liabilities in our consolidated balance sheets. The amount of each allowance account represents management's best estimate of current expected credit losses on these financial instruments considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. As a result, the determination of the appropriate level of allowance for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates related to current and expected future credit risks and trends, all of which may undergo material changes. Changes in economic conditions; inflation; interest rate volatility; new information regarding existing loans, credit commitments and securities holdings; the lingering effects of the COVID-19 pandemic or other global pandemics; natural disasters and risks related to climate change; and identification of additional problem loans, ratings down-grades and other factors, both within and outside of our control, may require an increase in the allowances for credit losses on loans, securities and off-balance sheet credit exposures. In addition, bank regulatory agencies periodically review our allowance for credit losses and may require an increase in credit loss expense or the recognition of further loan charge-offs, based on judgments different than those of management. Furthermore, if any charge-offs related to loans, securities or off-balance sheet credit exposures in future periods exceed our allowances for credit losses on loans, securities or off-balance sheet credit exposures, we will need to recognize additional credit loss expense to increase the applicable allowance. Any increase in the allowance for credit losses on loans, securities and/or off-balance sheet credit exposures will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on our business, financial condition and results of operations. See the section captioned “Allowance for Credit Losses” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations elsewhere in this report for further discussion related to our process for determining the appropriate level of the allowance for credit losses.

As of December 31, 2024,2025, commercial real estate mortgage loans comprised approximately 34.5%47.1% of our loan portfolio. Commercial real estate mortgage loans generally involve a greater degree of credit risk than residential real estate mortgage loans because the collateral securing these loans may not be sold as easily as residential real estate and because they typically have larger balances and are more affected by adverse conditions in the economy. Because payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulations. In recent years, commercial real estate markets have been particularly impacted by the economic disruption resulting from the COVID-19 pandemic. The COVID-19 pandemic haswas also been a catalyst for the evolution of various remote work options which have impacted the long-term performance of some types of office properties within our commercial real estate portfolio. Accordingly, the federal banking regulatory agencies have expressed concerns about weaknesses in the current commercial real estate market. Failures in our risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which, accordingly, could have a material adverse effect on our business, financial condition and results of operations.

As of December 31, 2024,2025, we had $1.1 billion of energy loans which comprised approximately 5.4%5.0% of our loan portfolio at that date. Furthermore, energy production and related industries represent a large part of the economies in some of our primary markets. The energy industry and market prices for oil and gas have historically been cyclical. Global wars, military conflicts, terrorism, governmental and social responses to environmental issues and climate change, or other geopolitical events as well as actions by members of the Organization of Petroleum Exporting Countries (“OPEC”) can impact global crude oil and gas production levels and lead to significant volatility in global oil and gas supplies and market prices. Prolonged periods of low oil and gas commodity prices could negatively impact our borrowers' ability to pay, particularly those that utilize higher-cost production technologies such as hydraulic fracking and horizontal drilling, as well as oilfield service providers, energy equipment manufacturers and transportation suppliers, among others. The price per barrel of crude oil was approximately $72$57.95 at both December 31, 2024,2025 and $71.72 at December 31, 2023.2024. While losses in our energy portfolio have not been significant in recent years, we have experienced increased losses within our energy portfolio in years that were impacted by significant oil price volatility. Future oil price volatility could have negative impacts on the U.S. economy, in particular, the economies of energy-dominant states such as Texas, and our borrowers and customers. Such negative impacts could result in an increased rate of loan delinquencies and credit losses which, accordingly, could have a material adverse effect on our business, financial condition and results of operations.

We require liquidity to meet our deposit and debt obligations as they come due. Our access to funding sources in amounts adequate to finance our activities or on terms that are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy generally. Factors that could reduce our access to liquidity sources include a downturn in the Texas or national economy, difficult credit markets or adverse regulatory actions against us. Our access to deposits may also be affected by the liquidity needs of our depositors. A substantial majority of our liabilities are demand, savings, interest checking and money market deposits, which are payable on demand or upon several days’ notice, while by comparison, a substantial portion of our assets are loans, which cannot be called or sold in the same time frame. We may not be able to replace withdrawn or maturing deposits and advances as necessary in the future, especially if a large number of our depositors sought to withdraw their accounts, regardless of the reason. Our access to deposits may be negatively impacted by, among other factors, periods of low interest rates or higher interest rates which could promote increased competition for deposits, including from new financial technology competitors, or provide customers with alternative investment options. Additionally, negative news about us or the banking industry in general could negatively impact market or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits. Furthermore, as we and other regional banking organizations experienced in 2023, the failure of other financial institutions may cause deposit outflows as customers spread deposits among several different banks so as to maximize their amount of FDIC insurance, move deposits to banks deemed "too big to fail" or remove deposits from the banking system entirely. As of December 31, 2024,2025, approximately 54%52% of our deposits were uninsured and we rely on these deposits for liquidity. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations. We may also need to raise additional capital and liquidity through the issuance of stock to comply with regulatory mandates, which could dilute the ownership of existing stockholders, or reduce or even eliminate common stock dividends or share repurchases to preserve capital and liquidity.

We have experienced significant unrealized losses on our available-for sale-securities portfolio as a result of increases inelevated market interest rates. Unrealized losses related to available-for-sale securities are reflected in accumulated other comprehensive income in our consolidated balance sheets and reduce the level of our book capital and tangible common equity. However, such unrealized losses do not affect our regulatory capital ratios. We actively monitor our available-for-securities portfolio and we do not currently anticipate the need to realize material losses from the sale of securities for liquidity purposes. Furthermore, we believe it is unlikely that we would be required to sell any such securities before recovery of their amortized cost bases, which may be at maturity. Nonetheless, our access to liquidity sources could be affected by unrealized losses if securities must be sold at a loss; tangible capital ratios continue to decline from an increase in unrealized losses or realized credit losses; the FHLB or other funding sources reduce capacity; or bank regulators impose restrictions on us that impact the level of interest rates we may pay on deposits or our ability to access brokered deposits. Additionally, significant unrealized losses could negatively impact market and/or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits.

Our internal controls, including fraud detection and controls, disclosure controls and procedures, and corporate governance procedures are based in part on certain assumptions and can provide only reasonable, not absolute, assurancesassurance that the objectives of the controls and procedures are met. Any failure or circumvention of our controls and procedures; failure to comply with regulations related to controls and procedures; or failure to comply with our corporate governance procedures could have a material adverse effect on our reputation, business, financial condition and results of operations, including subjecting us to litigation, regulatory fines, penalties or other sanctions. Furthermore, notwithstanding the proliferation of technology and technology-based risk and control systems, our businesses ultimately rely on people as our greatest resource, and we are subject to the risk that they make mistakes or engage in violations of applicable policies, laws, rules or procedures that in the past have not, and in the future may not always be prevented by our technological processes or by our controls and other procedures intended to prevent and detect such errors or violations. Human errors, malfeasance and other misconduct, even if promptly discovered and remediated, can result in reputational damage or legal risk and have a material adverse effect on our business, financial condition and results of operations.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services.services, including the increased usage of intelligent automation within the industry. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology driven products and services or be successful in marketing these products and services to our customers. In addition, our implementation of certain new technologies, such as those related to artificial intelligence, automation and algorithms, in our business processes may have unintended consequences due to their limitations or our failure to use them effectively. In addition, cloud technologies are also critical to the operation of our systems, and our reliance on cloud technologies is growing. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse effect on our business, financial condition and results of operations.

Reputation risk, or the riskRisk to our earnings, liquidity, and capital from negative public opinion, is inherent in our business. Negative public opinion could adversely affect our ability to keep and attract customers and expose us to adverse legal and regulatory consequences. Negative public opinion could result from our actual or alleged conduct in any number of activities, including (i) lending practices, (ii) branching strategy, (iii) product and service offerings, (iv) corporate governance, (v) regulatory compliance, (vi) mergers and acquisitions, (vii) disclosure, (viii) sharing or inadequate protection of customer information, (ix) successful or attempted cyber-attacks against us, our customers or our third-party partners or vendors and (x) failure to dischargeachieve any publicly announced commitments to employees or ESGother initiatives or to respond adequately to social and sustainabilitystakeholders’ concerns from the viewpoint of our stakeholders fromor actions taken by government regulators and community organizations in response to our conduct.organizations. There has been an increasedis focus by some investors and other stakeholders on topics related to corporate policies and approaches regardingrelated ESGto environmental and diversity, equity and inclusionsocial matters. Due to divergent stakeholder views on these matters, we are at increased risk that any action, or lack thereof, concerning these matters will be perceived negatively by some stakeholders, which could negatively affect our business and reputation. Negative public opinion could also result from adverse news or publicity that impairs the reputation of the financial services industry generally or from the actions of our employees, customers, affiliates or third parties with whom we do business.

In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data. Any failure, interruption or breach in security of these systems could result in significant disruption to our operations. Information security breaches and cybersecurity-related incidents include, but are not limited to, attempts to access information, including customer and company information, malicious code, computer viruses and denial of service attacks that could result in unauthorized access, theft, misuse, loss, release or destruction of data (including confidential customer information), account takeovers, unavailability of service or other events. These types of threats may derive from human error, fraud or malice on the part of external or internal parties or may result from accidental technological failure. Our technologies, systems, networks and software have been and continue to be subject to cybersecurity threats and attacks, which range from uncoordinated individual attempts to sophisticated and targeted measures directed at us. Any failures related to upgrades and maintenance of our technology and information systems could further increase our information and system security risk. Our increased use of cloud and other technologies, such as remote work technologies, adoption of artificial intelligence, and the increased connectivity of third parties and electronic devices to our systems also increases our risk of being subject to a cyber-attack. The risk of a security breach or disruption, particularly through cyber-attack or cyber-intrusion, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

Although we make significant efforts to maintain the security and integrity of our information systems and have implemented various measures to manage the risks of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. It is possible that employees, merchants or our third-party vendors may not follow our cybersecurity policies and procedures, which may expose us to a cyber-attack. Furthermore, even well protected information, networks, systems and facilities remain potentially vulnerable to attempted security breaches or disruptions because the techniques used in such attempts are constantly evolving, including as a result of artificial intelligence, and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is virtually impossible for us to entirely mitigate this risk. In the event of a cyber-attack, we may be delayed in identifying or responding to the attack, which could increase the negative impact of the cyber-attack on our business, financial condition and results of operations. While we maintain specific “cyber” insurance coverage, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cyber threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under our cyber insurance coverage. A security breach or other significant disruption of our information systems or those related to our customers, merchants or our third-party vendors, including as a result of cyber-attacks, could (i) disrupt the proper functioning of our networks and systems and therefore our operations and/or those of our customers; (ii) result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of confidential, sensitive or otherwise valuable information of ours or our customers; (iii) result in a violation of applicable privacy, data breach and other laws, subjecting us to additional regulatory scrutiny and exposing us to civil litigation, enforcement actions, governmental fines and possible financial liability; (iv) require significant management attention and resources to remedy the damages that result; or (v) harm our reputation or cause a decrease in the number of customers that choose to do business with us. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.operations and could result in serious and harmful consequences to our customers.

We rely on certain external vendors to provide products and services necessary to maintain our day-to-day operations. These third-party vendors are sources of operational, cybersecurity, and informationalinformation security risk to us, including risks associated with operational errors, coding errors, information system failures, interruptions or breaches and unauthorized disclosures of sensitive or confidential client or customer information. If these vendors encounter any of these issues, or if we have difficulty communicating with them regarding such issues, we could be exposed to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have a material adverse effect on our business and, in turn, our financial condition and results of operations.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients.customers. Many of these transactions expose us to credit risk in the event of a default by a counterparty or client.customer. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to us. Increased interconnectivity amongst financial institutions also increases the risk of cyber-attacks and information system failures for financial institutions. Any such losses could have a material adverse effect on our business, financial condition and results of operations.

Also, technology and other changes have lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks. In particular, the activity of fintechs/wealthtechs has grown significantly over recent years and is expected to continue to grow. Some fintechs/wealthtechs are not subject to the same regulation as we are, which may allow them to be more competitive. Fintechs/wealthtechs have and may continue to offer bank or bank-like products and a number of such organizations have applied for bank or industrial loan charters while others have partnered with existing banks to allow them to offer deposit products to their customers. Increased competition from fintechs/wealthtechs and the growth of digital banking may also lead to pricing pressures as competitors offer more low-fee and no-fee products In July 2025, President Trump signed into law the GENIUS Act, which establishes a regulatory framework for “payment stablecoins” and their issuers. Consumers and businesses may view payment stablecoins as a substitute for traditional bank deposits, resulting in deposit withdrawals. Depending on consumer and business interest in payment stablecoins, and the characteristics and utility of payment stablecoins, the passage of the GENIUS Act could result in increased competition with respect to our deposit products. However, the GENIUS Act requires the U.S. Treasury Department and federal and state regulators to issue regulations on numerous topics to interpret and implement the statute, so the effect of the GENIUS Act will depend on what those regulations provide.

Additionally, consumers can maintain funds that would have historically been held as bank deposits in brokerage accounts or mutual funds. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. In addition, the emergence, adoption and evolution of new technologies that do not require intermediation, including distributed ledgers such as stablecoin and other digital assets and blockchain, as well as advances in robotic processintelligent automation, could significantly affect the competition for financial services. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. Further, many of our competitors have fewer regulatory constraints and may have lower cost structures than us. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can. Our ability to compete successfully depends on a number of factors, including, among other things, (i) the ability to develop, maintain and build long-term customer relationships based on top quality service, high ethical standards and safe, sound assets; (ii) the ability to expand within our marketplace and with our market position; (iii) the scope, relevance and pricing of products and services offered to meet customer needs and demands; (iv) the rate at which we introduce new products and services relative to our competitors; (v) customer satisfaction with our level of service; and (vi) industry and general economic trends. Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.

We are subject to laws and regulations relating to the privacy of the information of our customers, employees and others, and any failure to comply with these laws and regulations could expose us to liabilitylegal risk and/or reputational damage. As new privacy-related laws and regulations are implemented, the time and resources needed for us to comply with such laws and regulations, as well as our potential liability for non-compliance and reporting obligations in the case of data breaches, may significantly increase.

Acquisitions by financial institutions, including us, are subject to approval by a variety of federal and state regulatory agencies (collectively, “regulatory approvals”). The process for obtaining these required regulatory approvals has become substantially more difficult since the global financial crisis, and ourOur ability to engage in certain merger or acquisition transactions depends on the bank regulators' views at the time as to our capital levels, quality of management, and overall condition, in addition to their assessment of a variety of other factors, including our compliance with law. Regulatory approvals could be delayed, impeded, restrictively conditioned or denied due to existing or new regulatory issues we have, or may have, with regulatory agencies, including, without limitation, issues related to BSA compliance, CRA issues, fair lending laws, fair housing laws, consumer protection laws, unfair, deceptive, or abusive acts or practices regulations and other laws and regulations. We may fail to pursue, evaluate or complete strategic and competitively significant acquisition opportunities as a result of our inability, or perceived or anticipated inability, to obtain regulatory approvals in a timely manner, under reasonable conditions or at all. Difficulties associated with potential acquisitions that may result from these factors could have a material adverse effect on our business, financial condition and results of operations.

Federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government's debt limit may increase the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States. Many of our investment securities are issued by the U.S. government and government agencies and sponsored entities. As a result of uncertain domestic political conditions, including potential future federal government shutdowns, the possibility of the federal government defaulting on its obligations for a period of time due to debt ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government pose liquidity risks. InMost recently, in connection with priorsuccessive politicalfailures disputes over U.S. fiscal and budgetary issues leading toby the U.S. government shutdownto inreverse 2023,the Fitchtrend of large annual fiscal deficits and growing interest costs, Moody's lowered its long-term sovereignissuer credit rating on the U.S. from AAAAaa to AA+.Aa1. A further downgrade, or downgrades by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide.

Our success depends, in large part, on our ability to attract and retain key people. Competition for the best people in many activities engaged in by us is intense including with respect to compensation and emerging workplace practices, accommodations and remote work options, and we may not be able to hire people or to retain them. We do not currently have employment agreements or non-competition agreements with any of our seniorexecutive officers. The unexpected loss of services of key personnel could have a material adverse impact on our business, financial condition and results of operations because of their customer relationships, skills, knowledge of our market, years of industry experience and the difficulty of promptly finding qualified replacement personnel. In addition, the scope and content of U.S. banking regulators' policies on incentive compensation, as well as changes to these policies, could adversely affect our ability to hire, retain and motivate our key employees.

Severe Weather, Natural Disasters, Acts Of War Or TerrorismTerrorism, Pandemics, and Other Adverse External Events Could Significantly Impact Our Business and Our Customers

Severe weather, natural disasters, acts of war or terrorismterrorism, pandemics, and other adverse external events could have a significant impact on our ability to conduct business. In addition, such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses. Furthermore, the occurrence of any such event in the future could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

Climate ChangeRelated Risks Could Have a Material Negative Impact on Us and Our Customers

Certain statements contained in this Annual Report on Form 10-K that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in our future filings with the SEC, in press releases, and in oral and written statements made by us or with our approval that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of Cullen/Frost or its management or Board of Directors, including those relating to products, services or operations; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believesbelieves,”, “anticipatesanticipates,”, “expectsexpects,”, “intendsintends,”, “targetedtargeted,”, “continuecontinue,”, “remainremain,”, “willwill,”, “shouldshould,”, “maymay,” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

•The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board.Board and the implementation of tariffs and other protectionist trade policies.

Net income available to common shareholders increased $66.0 million for 2025 compared to 2024. The decreaseincrease was primarily the result of a $74.1$131.5 million increase in net interest income, a $40.0 million increase in non-interest expenseincome, and a $18.8$20.8 million increasedecrease in credit loss expense partly offset by a $45.9 million increase in net interest income, a $30.6$116.6 million increase in non-interest income,expense and and a $975$9.7 thousandmillion decreaseincrease in income tax expense.

We are primarily funded by core deposits, with non-interest-bearing demand deposits historically being a significant source of funds. This lower-cost funding base is expected to have a positive impact on our net interest income and net interest marginmargin, particularly in arising risingor high interest rate environment.environments. Nonetheless, our access to and pricing of deposits may be negatively impacted by, among other factors, periods of higher interest rates which could promote increased competition for deposits, including from new financial technology competitors, or provide customers with alternative investment options. See Item 7A. Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report for information about our sensitivity to interest rates. Further analysis of the components of our net interest margin is presented below.

Taxable-equivalent net interest income for 20242025 increased $36.2$134.0 million, or 2.2%,7.9%, compared to 2023.2024. Taxable-equivalent net interest income in 2024 included 366 days compared to 365 days in 20232025 as a result of the leap year. The additional day added approximately $3.0 million to taxable-equivalent net interest income during 2024. Excluding the impact of the additional day in 2024 results in an effective increase in taxable-equivalent net interest income of $33.2$137.0 million during 2025 compared to 2024.

The increase in taxable-equivalent net interest income during 20242025 was primarily related to increasesdecreases in the average volumecosts of andinterest-bearing yielddeposit on loansaccounts and increasesrepurchase in the average yields on taxable securities, interest-bearing deposits (primarily amounts held by us in an interest-bearing account at the Federal Reserve), and to a lesser extent, tax-exempt securities,agreements combined with an increase in the average volume of interest-bearingloans, depositsand (primarily amounts held by usincreases in an interest-bearing account at the Federalaverage Reserve),yield on and volume of taxable securities, and, to a lesser extent, tax-exempt securities, among other things. The impact of these items was partly offset by increasesa decrease in the average yield on loans, decreases in the average yield on and volume of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), and a decrease in the average volume of andresell costagreements, onamong timeother depositthings, accounts,combined decreaseswith increases in the average volumes of taxableinterest-bearing deposit accounts and tax-exempt securities, and increases in the average costs of repurchase agreements and money market deposit accounts,agreements, among other things. As a result of the aforementioned fluctuations, the taxable-equivalent net interest margin increased 813 basis points from 3.45% during 2023 to 3.53% during 2024.2024 to 3.66% during 2025.

The average volume of interest-earning assets for 20242025 increased $89.1$2.1 million,billion, or 0.2%,4.6%, compared to 2023.2024. The increase in the average volume of interest-earning assets during 20242025 was primarily related to a $1.9$1.4 billion increase in average loansloans, a $938.4 million increase in average taxable securities, and a $208.0$173.1 million increase in average tax-exempt securities, partly offset by a $376.1 million decrease in average interest-bearing deposits (primarily amounts held by us in an interest-bearing account at the Federal Reserve) partly offset byand a $1.2 billion decrease in average taxable securities, a $766.5 million decrease in average tax-exempt securities, a $31.0$42.3 million decrease in average resell agreements and a $20.7 million decrease in average federal funds sold.agreements.

The average yield on interest-earning assets increaseddecreased 3614 basis points from 4.82% during 2023 to 5.18% during 2024 to 5.04% during 2025 while the average rate paid on interest-bearing liabilities increaseddecreased 3344 basis points from 2.19% in 2023 to 2.52% in 2024.2024 to 2.08% in 2025. The average taxable-equivalent yields on interest-earning assets during the comparable periods was impacted by changes in market interest rates (as noted in the table above) and changes in the volume and relative mix of interest-earning assets.

The average taxable-equivalent yield on loans increaseddecreased 3044 basis points from 6.69% during 2023 to 6.99% during 2024.2024 to 6.55% during 2025. The average taxable-equivalent yield on loans during 20242025 was partly impacted by changes in market interest rates (as noted in the table above). The average volume of loans increased $1.9$1.4 billion, or 10.7%,7.3%, in 20242025 compared to 2023.2024. Loans made up approximately 42.8%43.9% of average interest-earning assets during 20242025 compared to 38.7%42.8% during 2023.2024.

The average taxable-equivalent yield on securities was 3.38%3.77% during 2024,2025, increasing 1439 basis points compared to 3.24%3.38% during 2023.2024. The average yield on taxable securities was 2.92%3.41% during 20242025 compared to 2.72%2.92% during 2023,2024, increasing 2049 basis points, while the average yield on tax exempt securities was 4.31%4.52% during 20242025 compared to 4.26%4.31% during 2023,2024, increasing 521 basis points. Tax exempt securities made up approximately 35.2%34.1% of total average securities during 2024,2025, compared to 35.5%35.2% during 2023.2024. The average volume of total securities decreasedincreased $2.0$1.1 billion, or 9.5%,5.9%, during 20242025 compared to 2023.2024. Securities made up approximately 40.8%41.3% of average interest-earning assets in 20242025 compared to 45.1%40.8% in 2023. The decrease during 2024 was primarily related to the use of funds provided by maturities, calls and principal repayments of these securities to support the origination of loans.2024.

Average interest-bearing deposits (primarily amounts held by us in an interest-bearing account at the Federal Reserve), during 20242025 increaseddecreased $208.0$376.1 million, or 2.8%,5.0%, compared to 2023.2024. Interest-bearing deposits made up approximately 16.3%14.8% of average interest-earning assets during 20242025 compared to approximately 15.9%16.3% in 2023.2024. The increasedecrease during 20242025 was partlyprimarily related to fundsthe providedreinvestment byof maturities,amounts callsheld in an interest-bearing account at the Federal Reserve into securities and principal repayments of securities.loans. The average yield on interest-bearing deposits was 4.31% during 2025 and 5.27% during 2024 and 5.13% during 2023.2024. The average yield on interest-bearing deposits during 20242025 was impacted by a higherlower average interest rate paid on reserves held at the Federal Reserve, compared to 2023.2024.

The average rate paid on interest-bearing liabilities was 2.52%2.08% during 2024,2025, increasingdecreasing 3344 basis points from 2.19%2.52% during 2023.2024. Average deposits decreasedincreased $472.8$1.2 million,billion, or 1.1%,3.0%, in 20242025 compared to 2023.2024. Average interest-bearing deposits increased $1.0$1.2 billion in 20242025 compared to 2023,2024, while average non-interest-bearing deposits decreasedincreased $1.5$83.0 billionmillion in 20242025 compared to 2023.2024. The ratio of average interest-bearing deposits to total average deposits was 66.2%67.0% in 20242025 compared to 63.0%66.2% in 2023.2024. The average cost of deposits is primarily impacted by changes in market interest rates as well as changes in the volume and relative mix of interest-bearing deposits. The average rates paid on interest-bearing deposits and total deposits were 1.89% and 1.26%, respectively, in 2025 compared to 2.32% and 1.54%, respectively, in 2024 compared to 1.95% and 1.23%, respectively, in 2023.2024. The average cost of deposits during 20242025 was impacted by an increasedecreases in the interest rates we pay on our interest-bearing deposit products as a result of an increasedecreases in market interest rates.

Trust and Investment Management Fees. Trust and investment management fee income for 20242025 increased $12.0$11.8 million, or 7.8%,7.2%, compared to 2023.2024. Investment management fees are the most significant component of trust and investment management fees, making up approximately 81.3%81.8% and 79.3%81.3% of total trust and investment management fees in 20242025 and 2023,2024, respectively. The increase in trust and investment management fees during 20242025 was primarily related toan increasesincrease in investment management fees (up $12.8$10.4 million) andand, oilto anda gaslesser extent, estate fees (up $1.5$2.0 million), partlyamong offsetother by decreases in estate fees (down $2.3 million) and real estate fees (down $637 thousand).things. Investment management fees are generally based on the market value of assets within an account and are thus impacted by pricevolatility changes withinin the equity and bond markets. The increase in investment management fees during 20242025 werewas primarily related to increasesan increase in the average value of assets maintained in accounts. The increasesincrease in the average valuevalues of assets werewas partly related to higher average equity valuations during 20242025 relative to 2023.2024 and growth in the number of accounts. The increase in oil and gasestate fees during 2025 was primarily related to increased royalties received, in part due to new accounts added in 2023, and, to a lesser extent, an increase in new lease bonuses. The decreases in estate fees and real estate fees were primarily related to decreased transaction volumes relative to 2023.2024.

Service Charges on Deposit Accounts. ServiceOverdraft charges ontotaled deposit$60.6 accountsmillion for($46.7 2024million increasedconsumer $12.7and million,$13.9 ormillion 13.6%,commercial) during 2025 compared to 2023.$51.9 million ($39.1 million consumer and $12.8 million commercial) during 2024. The increase was primarily related to increases in commercial service charges (up $5.5 million) and overdraft charges onduring consumer2025 andwas commercialimpacted accountsby (upan $5.5increase millionin andthe $2.0volume million,of respectively).fee assessed overdrafts relative to 2024, in part due to growth in the number of accounts. The increase in commercial service charges during 20242025 was partly related to an increase in billable services related to analyzed treasury management accounts partlycombined offset bywith the effect of a higherlower average earnings credit rate applied to deposits maintained by treasury management customers which resulted in customers paying for lessmore of their services through fees rather than with earnings credits applied to their deposit balances. The increase in commercial service charges was also partly related, to a lesser extent,related to an increase in service fees on non-analyzed accounts. Overdraft charges totaled $51.9 million ($39.1 million consumer and $12.8 million commercial) during 2024 compared to $44.4 million ($33.6 million consumer and $10.8 million commercial) during 2023. The increase in overdraft charges during 2024 was impacted by an increase in the volume of fee assessed overdrafts relative to 2023, in part due to growth in the number of accounts.

Insurance Commissions and Fees. Insurance commissions and fees for 20242025 increased $3.0$4.2 million, or 5.1%,6.9%, compared to 2023.2024. The increase was primarily the result of increases in commercialbenefit linesplan commissions (up $1.9 million), property and casualty commissions (up $3.5$1.3 million) and contingent commissions (up $332 thousand), partly offset by a decrease in life insurance commissions (downup $1.0$878 millionthousand). The increase in commercialbenefit linesplan commissions was primarily due to premium and exposure rate increases within the existing customer base and an increase in business volume. The increase in property and casualty commissions was primarily related to ancommercial increaselines indue the underlying exposure base, an increase in rates, andto an increase in business volumes.volumes partly offset by variations in the rate and exposure base within the existing customer bases. The decreaseincrease in life insurance commissions was primarily duerelated to aan decreaseincrease in business volumes mostly due to a significant transaction in 2023.volumes.

Contingent income totaled $5.1 million in 2025 and $5.0 million in 2024 and $4.6 million in 2023.2024. Contingent income primarily consists of amounts received from various property and casualty insurance carriers related to the loss performance of insurance policies previously placed. These performance related contingent payments are seasonal in nature and are mostly received during the first quarter of each year. This performance related contingent income totaled $3.7 million in 2025 and $3.4 million in 20242024. and $3.3 million in 2023. While total performance related contingent income remained relatively flat during the comparable years, performancePerformance related contingent income related to commercial lines insurance policies decreased during 2024increased due to a deterioration of theimproved loss performance of commercial lines insurance policies previously placed and lower growth within the commercial lines portfolio, partly due to a tightening of underwriting standards. This decrease was offset by an increase in performance related contingent income related to our personal lines portfolio due to improved loss performance.portfolio. Contingent income also includes amounts received from various benefit plan insurance companies related to the volume of business generated and/or the subsequent retention of such business. This benefit plan related contingent income totaled $1.4 million in 2025 and $1.6 million in 2024 and $1.3 million in 2023.2024.

Net revenues from interchange and card transaction fees for 20242025 increased $1.6$1.8 million, or 8.2%,8.8%, compared to 20232024 primarily due to an increase in transactionincome volumesfrom card transactions partly offset by an increase in network costs. A comparison of gross and net interchange and card transaction fees for the reported periods is presented in the table below.

Federal Reserve rules applicable to financial institutions that have assets of $10 billion or more provide that the maximum permissible interchange fee for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction. An upward adjustment of no more than 1 cent to an issuer's debit card interchange fee is allowed if the card issuer develops and implements policies and procedures reasonably designed to achieve certain fraud-prevention standards. The Federal Reserve also has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product. In OctoberAugust 2023,2025, the U.S. District Court for the District of North Dakota ruled to vacate the Federal ReserveReserve’s issued a proposal under which the maximum permissiblecurrent interchange feerules forbut ansimultaneously electronicstayed debitits transactionown wouldvacatur bepending the sum of 14.4 cents per transaction and 4 basis points multiplied by the value of the transaction. Furthermore, the fraud-prevention adjustment would increase from a maximum of 1 cent to 1.3 cents. The proposal would adopt an approach for future adjustmentsappeal to the interchangecircuit feecourt. cap,The whichoutcome wouldof occurthis everylitigation othercould yearsignificantly basedand onadversely issuer cost data gathered byaffect the Federalfees Reservebanks fromcan largecharge on debit card issuers. Had the proposed maximum interchange fees been in effect during the reported periods, interchange and debit card transaction fees would have been approximately 30% lower. The comment period for this proposal ended in May 2024. The extent to which any such proposed changes in permissible interchange fees will impact our future revenues is currently uncertain.transactions.

Other Charges, Commissions and Fees. Other charges, commissions and fees for 20242025 increased $4.3$4.2 million, or 8.8%,7.8%, compared to 2023.2024. The increase was primarily related to increases in income from the placement of annuities (up $1.7$1.5 million), andcommitment moneyfees marketon accountsunused lines of credit (up $1.4$943 millionthousand);, income from the placement of mutual funds (up $591 thousand), merchant services rebates (up $578 thousand), funds transfer service charges (up $499 thousand), and letter of credit fees (up $933$439 thousand); and merchant services rebates/bonuses (up $888 thousand);, among other things, partly offset by decreasesa decrease in capitalsubscription marketsfee advisory feesincome (down $985 thousand) and other service charges (down $908$740 thousand), among other things.

Net Gain/Loss on Securities Transactions. During 2025, we sold certain available-for-sale securities with amortized costs totaling $45.4 million and realized a net loss of $850 thousand. During 2024, we sold certain available-for-sale securities with amortized costs totaling $123.3 million and realized a net loss of $96 thousand.

Total non-interest expense for 20242025 increased $74.1$116.6 million, or 6.0%,8.9%, compared to 2023.2024. ThisTotal amountnon-interest included $9.0 million and $51.5 million,expense during 2024 andincluded 2023,accruals respectively,totaling $9.0 million related to a special FDICdeposit insurance assessment. During 2025, we reversed $9.7 million of our special deposit insurance assessment accrual based upon a decrease in expected future payments related to the special deposit insurance assessment. Details of the special deposit insurance assessment are discussed below. Excluding the impact of the special deposit insurance assessment, total non-interest expense would have increased $116.7$135.3 million, or 9.9%.10.5%. Changes in the various components of non-interest expense are discussed below.

Salaries and Wages. Salaries and wages increased $73.7$53.3 million, or 13.5%,8.6%, in 20242025 compared to 2023.2024. The increase in salaries and wages was primarily related to an increaseincreases in salaries due to annual merit and market increases and an increase in the number of employees. The increase in the number of employees was partly related to our investment in organic expansion in various markets. Salaries and wages waswere also impacted, to a lesser extent, by increases in incentive compensation and commissions and a decrease in stock-based compensation. We are continuing to experience a competitive labor market which has resulted in and could continue to result in an increase in our staffing costs.

Employee Benefits. Employee benefits expense for 20242025 increased $7.1$23.7 million, or 6.2%,19.3%, compared to 2023.2024. The increase was primarily related to increases in medical/dental benefits expense (up $5.5$11.8 million), 401(k) plan expense (up $7.7 million), and payroll taxes (up $5.1$3.5 million), among other things, partly offset by a decrease in 401(k)/profit sharing plan expense (down $3.2 million), primarily related to discretionary profit sharing contributions, and an increase in the net periodic benefit related to our defined benefit retirement plan (up $828 thousand), among other things..

Net Occupancy. Net occupancy expense for 20242025 increased $4.4$8.2 million, or 3.5%,6.4%, compared to 2023.2024. The increase was primarily related to increases in depreciation on buildings and leasehold improvements (together up $3.6$2.9 million); and repairs/maintenance/service contractslease expense (up $2.7$2.9 million), among other things, partly offset by decreases in utilities expense (down $876 thousand); and property taxes (downup $622$2.2 thousandmillion), among other things. The increases in the aforementioned components of net occupancy expense were impacted, in part, by our expansion efforts.

Technology, Furniture and Equipment. Technology, furniture and equipment expense for 20242025 increased $13.2$17.3 million, or 9.8%,11.6%, compared to 2023.2024. The increase was primarily related to increases in cloud services expense (up $9.2 million), service contracts expense (up $3.4$10.3 million), software amortizationmaintenance (up $1.2$4.9 million), and software maintenance expense (up $1.2 million), among other things. The increase from these items was partly offset by a decrease in depreciation on furniture and equipment (downup $2.3$2.5 million), and service contracts expense (up $1.1 million), among other things.

Deposit Insurance. Deposit insurance expense totaled $18.8 million in 2025 compared to $37.3 million in 2024 compared to $76.6 million in 2023.2024. Deposit insurance expense includeduring 2024 included accruals totaling $9.0 million ($7.1 million after tax) in 2024 and $51.5 million ($40.7 million after tax) in 2023 related to a special deposit insurance assessment discussed below. ExcludingDuring these2025, amountswe reversed a total of $9.7 million ($7.7 million after tax) of our special deposit insurance assessment accrual based upon a decrease in expected future payments related to the special assessment,deposit insurance assessment. Excluding the special assessments from 2024 and reversals in 2025, deposit insurance expense woulddid havenot increasedsignificantly $3.2fluctuate million in 2024 compared to 2023 primarily due to an increase induring the assessmentcomparable rate.periods.

In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the DIF incurred as a result of bank failures earlier that year and the FDIC's use of the systemic risk exception to cover certain deposits that were otherwise uninsured. The special assessment was based on estimated uninsured deposits as of December 31, 2022 (excluding the first $5.0 billion) and was assessed at a quarterly rate of 3.36 basis points, over eight quarterly assessment periods, beginning in the first quarter of 2024. As a result of this final rule, we accrued $51.5 million ($40.7 million after tax) related to this assessment in the fourth quarter of 2023. This amount was based on our estimate of the full amount of the assessment at that time. In FebruaryDuring 2024, the FDIC notified insured depository institutions thatincreased their loss estimate related to the aforementioned bank failures had increased.failures. As a result, we accrued an additional $7.7$9.0 million ($6.1$7.1 million after tax), related to an expected update of the special assessment during the first quarter ofin 2024. UponAt receiptthat of the update during the second quarter of 2024, we accrued an additional $1.2 million ($984 thousand after tax) related to the special assessment. In June 2024,time, due to the increased estimate of losses, the FDIC announcedalso that it projectsprojected that the special assessment will be collected for an additional two quarters beyond the initial eight-quarter collection period, at a lower rate. This updated assessment was made under the FDIC's final rule whereby the estimated loss pursuant to the systemic risk determination can be periodically adjusted. The FDIC has also retained the ability to cease collection early, extend the special assessment collection period and impose a final shortfall special assessment. The extent to which any such additional future assessments will impact our future deposit insurance expense is currently uncertain.

Other Non-Interest Expense. Other non-interest expense for 20242025 increased $15.0$32.7 million, or 6.6%,13.4%, compared to 2023.2024. The increase included increases in fraud losses (up $6.6 million); sundry and other miscellaneous expense (up $6.3 million), of which $5.8 million related to increased operational losses and asset write-offs; advertising/promotions expense (up $2.8$5.5 million); donations expense (up $4.8 million), primarily related to donations to the Frost Charitable Foundation; professional services expense (up $2.5$2.4 million), which was primarily related to information technology services; travel,business mealsdevelopment and entertainmentexpense (up $2.0$2.2 million); research and platform fees (up $1.5$1.9 million); stationery/printingtravel, expensemeals and entertainment (up $1.3 million); postageand communications expense (up $1.1$1.2 million); and business development expense (up $991 thousand), among other things. The increase from these items wasthings, partly offset by a decrease in donationscheck expensecard expenses (down $2.6$1.6 million) and a decrease in sundry and other miscellaneous expense (down $1.3 thousand), in part due to certain operational losses and write-offs recognized in 2023, among other things.

Net income for 20242025 decreasedincreased $17.5$65.2 million, or 3.0%,11.6%, compared to 2023.2024. The decreaseincrease was primarily the result of a $61.0$130.3 million increase in net interest income, a $25.4 million increase in non-interest expenseincome, and ana $18.8$20.8 million increasedecrease in credit loss expense partly offset by a $48.2 million increase in net interest income and a $13.5$102.0 million increase in non-interest income.expense and a $9.4 million increase in income tax expense.

Net interest income for 20242025 increased $48.2$130.3 million, or 3.1%,8.1%, compared to 2023.2024. The increase was primarily related to increasesdecreases in the average volumecosts of andinterest-bearing yielddeposit on loansaccounts and increasesrepurchase in the average yields on taxable securities, interest-bearing deposits (primarily amounts held by us in an interest-bearing account at the Federal Reserve), and to a lesser extent, tax-exempt securities,agreements combined with an increase in the average volume of interest-bearingloans, depositsand (primarily amounts held by usincreases in an interest-bearing account at the Federalaverage Reserve),yield on and volume of taxable securities, and, to a lesser extent, tax-exempt securities, among other things. The impact of these items was partly offset by increasesa decrease in the average yield on loans, decreases in the average yield on and volume of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), and a decrease in the average volume of andresell costagreements, onamong timeother depositthings, accounts,combined decreaseswith increases in the average volumes of taxableinterest-bearing deposit accounts and tax-exempt securities, and increases in the average costs of repurchase agreements and money market deposit accounts,agreements, among other things. See the analysis of net interest income included in the section captioned “Net Interest Income” included elsewhere in this discussion.

Non-interest income for 20242025 increased $13.5$25.4 million, or 5.4%,9.6%, compared to 2023.2024. The increase was primarily related to increases in service charges on deposit accounts; insurance commissions and fees; andother non-interest income; interchange and card transaction fees; partly offset by a decrease inand other non-interestcharges, income.commissions and fees.

The increase in service charges on deposit accounts was primarily related to increases in commercial service charges and overdraft charges on consumer and commercial accounts The increase in commercial service charges during 2024 was partly related to an increase in billable services partly offset by the effect of a higher average earnings credit rate applied to deposits maintained by treasury management customers. The increase in commercial service charges was also partly related,and, to a lesser extent, tocommercial anaccounts, increaseand incommercial service fees on non-analyzed accounts.charges. The increase in overdraft charges was impacted by an increase in the volume of fee assessed overdrafts in part due to growth in the number of accounts. The increases in insurance commissions and fees were primarily related to increases in commercialbenefit linesplan commissions, property and casualty commissions and contingentlife commissionsinsurance commissions. The increase in other non-interest income was primarily related to increases in gains on the sale of foreclosed and other assets and income from customer securities trading and derivatives trading activities, partly offset by decreasesa decrease in lifepublic insurancefinance commissions.underwriting fees, among other things. The increase in interchange and card transaction fees was primarily due to an increase in transactionincome volumesfrom card transactions partly offset by an increase in network costs. The decreaseincrease in other non-interestcharges, incomecommissions and fees was primarily relateddue to decreasesincreases in sundrycommitment fees on unused lines of credit, merchant services rebates, funds transfer service charges, and otherletter miscellaneousof incomecredit and income from customer derivative and foreign exchange transactions,fees, among other things, partly offset by increasesa decrease in publicsubscription financefee underwriting fees and earnings on the cash surrender value of life insurance,income, among other things. See the analysis of these categories of non-interest income included in the section captioned “Non-Interest Income” included elsewhere in this discussion.

Non-interest expense for 2024 increased $61.0 million, or 5.7%, compared to 2023. The increase was primarily related to increases in salaries and wages; technology, furniture, and equipment expense; other non-interest expense; employee benefit expense; and net occupancy expense, partly offset by a decrease in deposit insurance expense. The increase in salaries and wages was primarily related to an increaseincreases in salaries due to annual merit and market increases and an increase in the number of employees. Salaries and wages were also impacted, to a lesser extent, by increases in incentive compensation and commissions and a decrease in stock-based compensation. The increase in technology, furniture, and equipment expense was primarily related to increases in cloud services expense, service contracts expense, software amortization, and software maintenance expense, among other things. The increase in other non-interest expense included increases in fraud losses; sundry and other miscellaneous expense; advertising/promotions expense; professional servicesdonations expense, which was primarily related to informationdonations technologyto the Frost Charitable Foundation; professional services expense; business development expense; travel, meals and entertainment; stationery/printingand communications expense; postage expense; and business development expense, among other things. The increase from these items wasthings, partly offset by a decrease in donationscheck expensecard and a decrease in sundry and other miscellaneous expense, in part due to certain operational losses and write-offs recognized in 2023,expenses, among other things. The increase in employee benefits expense was primarily related to increases in medical/dental benefits expenseexpense, 401(k) plan expense, and payroll taxes,taxes. The increase in technology, furniture, and equipment expense was primarily related to increases in cloud services expense, software maintenance expense, depreciation on furniture and equipment, and service contracts expense, among other things,things. partly offset by a decrease in 401(k)/profit sharing plan expense and anThe increase in the net periodicoccupancy benefitexpense was primarily related to ourincreases definedin benefitdepreciation retirementon plan,buildings and leasehold improvements; lease expense; and property taxes, among other things. Deposit insurance expense includeduring 2024 included accruals totaling $9.0 million ($7.1 million after tax) in 2024 and $51.5 million ($40.7 million after tax) in 2023 related to a special deposit insurance assessment. ExcludingDuring these2025, amountswe reversed a total of $9.7 million ($7.7 million after tax) of our special deposit insurance assessment accrual based upon a decrease in expected future payments related to the special assessment,deposit insurance assessment. Excluding the special assessments from 2024 and reversals in 2025, deposit insurance expense woulddid havenot increasedsignificantly $3.2fluctuate million in 2024 compared to 2023 primarily due to an increase induring the assessmentcomparable rate.periods. See the analysis of these categories of non-interest expense included in the section captioned “Non-Interest Expense” included elsewhere in this discussion.

Net income for 20242025 increaseddecreased $3.6$929 million,thousand, or 11.0%,2.5%, compared to 2023.2024. The increasedecrease was primarily due to a $17.3$14.8 million increase in non-interest incomeexpense partly offset by a $12.6$13.6 million increase in non-interest expense, and a $968 thousand increase in income tax expense.income.

Non-interest income for 20242025 increased $17.3$13.6 million, or 9.7%,6.9%, compared to 2023.2024. The increase was primarily duerelated to increases in trust and investment management fees; and other charges, commissions, and fees; and other non-interest income.fees. Trust and investment management fee income is the most significant income component for Frost Wealth Advisors. Investment management fees are the most significant component of trust and investment management fees, making up approximately 81.3%81.8% and 79.3%81.3% of total trust and investment management fees for 20242025 and 2023,2024, respectively. The increase in trust and investment management fees was primarily due increasesto an increase in investment management fees andand, oilto anda gaslesser extent, estate fees, partlyamong offsetother by decreases in estate fees and real estate fees.things. The increase in investment management fees was primarily related to an increase in the average value of assets maintained in accounts. The increase in the average value of assets was partly related to higher average equity valuations during 20242025 relative to 2023.2024 and growth in the number of accounts. The increase in oil and gasestate fees was primarily related to increased royalties received, in part due to new accounts added in 2023, and, to a lesser extent, an increase in new lease bonuses. The decreases in estate fees and real estate fees were primarily related to decreased transaction volumes relative to 2023.2024. The increase in other charges, commissions, and fees was primarily related to increases in income from the placement of annuities and moneymutual market accounts, among other things. The increase in other non-interest income was primarily related to an increase in income from customer securities trading transactions,funds, among other things. See the analysis of trust and investment management fees, other non-interest income and other charges, commissions, and fees included in the section captioned “Non-Interest Income” included elsewhere in this discussion.

Non-interest expense for 20242025 increased $12.6$14.8 million, or 8.7%,9.4%, compared to 2023.2024. The increase was primarily duerelated to increases in other non-interest expense; salaries and wages; and employee benefits expense. The increase in other non-interest expense; was primarily related to an increases in the corporate overhead expense allocation and employeeresearch benefitsand platform fees, among other things, partly offset by decreases in sundry and other miscellaneous expense and professional services expense. The increase in salaries and wages was primarily due to an increase in salaries, due to annual merit and market increases, as well as an increases in commissions and incentive compensation, among other things. The increase in other non-interest expense was primarily related to an increase in research and platform fees,commissions, among other things, partly offset by a decreasedecreases in theincentive corporatecompensation overheadand expensestock-based allocation, among other things.compensation. The increase in employee benefits was primarily related to increases in payroll401(k) taxes,plan expense, medical/dental benefits expense, and 401(k)payroll plan expense,taxes, among other things.

The Non-Banks operating segment had a net loss of $15.4$13.6 million for 20242025 compared to a net loss of $13.9$15.4 million in 2023.2024. The increasedecrease in net loss was primarilymostly due to ana increasedecrease in net interest expense due to ana increasedecrease in the average rates paid on our long-term borrowings.borrowings, among other things.

We recognized income tax expense of $123.1 million, for an effective tax rate of 16.0%, in 2025 compared to $113.4 million, for an effective tax rate of 16.3%, in 2024 compared to $114.4 million, for an effective tax rate of 16.1%, in 2023.2024. The effective income tax rates differed from the U.S. statutory federal income tax rate of 21% during 20242025 and 20232024 primarily due to the effect of tax-exempt income from securities, loans and life insurance policies and the income tax effects associated with stock-based compensation,policies, among other things, and their relative proportion to total pre-tax net income. The decreaseincrease in income tax expense during 20242025 was primarily due to aan decreaseincrease in pre-tax net income and ana increasedecrease in tax benefits associated with stock compensation, among other things. The increasedecrease in the effective tax rate during 20242025 was primarily related to an increase in tax-exempt interest from securities combined with a decrease in tax-exempt income from securities and an increase in disallowednon-deductible deposit insuranceinterest premiums, among other things.expense. See Note 12 - Income Taxes in the accompanying notes to consolidated financial statements included elsewhere in this report.

Deposits continue to be our primary source of funding. Average deposits decreasedincreased $472.8$1.2 million,billion, or 1.1%,3.0%, in 20242025 compared to 2023.2024. Non-interest-bearing deposits remain a significant source of funding, which has been a key factor in maintaining our relatively low cost of funds. Average non-interest-bearing deposits totaled 33.8%33.0% of total average deposits in 20242025 compared to 37.0%33.8% in 2023.2024.

We primarily invest funds in loans, securities and interest-bearing deposits (primarily amounts held by us in an interest-bearing account at the Federal Reserve). Average loans increased $1.9$1.4 billion, or 10.7%,7.3%, in 20242025 compared to 20232024 while average securities decreasedincreased $2.0$1.1 billion, or 9.5%,5.9%, in 20242025 compared to 2023.2024. Average interest-bearing deposits (primarily amounts held by us in an interest-bearing account at the Federal Reserve) increaseddecreased $208.0$376.1 million, or 2.8%,5.0%, in 20242025 compared to 2023.2024.

Loan Origination/Risk Management. We have certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions. The amount and type of collateral supporting a loan impacts the level of credit risk related to that loan. Collateral is regularly assessed as a part of the overall on-going credit evaluation of the loan. We continue to explore the credit and reputational risks associated with climate change and their potential impact on the foregoing, while closely monitoring regulatory developments on climate risk.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing our commercial real estate portfolio are diverse in terms of type and geographic location. This diversity helps reduce our exposure to adverse economic events that affect any single market or industry. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. As a general rule, we avoid financing single-purpose projects unless other underwriting factors are present to help mitigate risk. We also utilize third-party experts to provide insight and guidance about economic conditions and trends affecting market areas we serve. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans.loans At December 31, 2024, approximately half of(see the outstandingtable principalbelow balanceunder ofthe oursection commercialcaptioned real“Commercial estateReal loansEstate (excluding constructionLoans”) were secured by owner-occupied properties..

Energy. Energy loans include loans to entities and individuals that are engaged in various energy-related activities including (i) the development and production of oil or natural gas, (ii) providing oil and gas field servicing, (iii) providing energy-related transportation services (iv) providing equipment to support oil and gas drilling (v) refining petrochemicals, or (vi) trading oil, gas and related commodities. Energy loans increaseddecreased $192.2$34.2 million, or 20.5%,3.0%, during 20242025 compared to 2023.2024. The average loan size, the significance of the portfolio and the specialized nature of the energy industry requires a highly prescriptive underwriting policy. Exceptions to this policy are rarely granted. Due to the large borrowing requirements of this customer base, the energy loan portfolio includes participations and purchased shared national credits.

Industry Concentrations. As of December 31, 20242025 and 2023,2024, there were no concentrations of loans related to any single industry, as segregated by Standard Industrial Classification code (“SIC code”), in excess of 10% of total loans. The SIC code system is a federally designed standard industrial numbering system used by us to categorize loans by the borrower’s type of business. The following table summarizes the industry concentrations of our loan portfolio, as segregated by SIC code, stated as a percentage of year-end total loans as of December 31, 2024 and 2023.

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

In addition, recent military conflict betweeninvolving the U.S. and IranIran, including direct military actions, attacks affecting commercial shipping in and around the Strait of Hormuz, and subsequent retaliatory military strikes, has contributed to heightened uncertaintygeopolitical anduncertainty, increased volatility in global markets.financial Suchmarkets, conditionsand cansignificant result in price volatilityfluctuations in energy and commodity markets,prices. changesWhile diplomatic communications and negotiations may continue, recent statements by U.S. and Iranian officials, including indications that the previously announced ceasefire framework is no longer in inflationeffect, expectations,have increased financialthe marketrisk volatility,of further military escalation and broader regional instability. Ongoing developments in the Middle East, including potential disruptions to maritime trade routes and energy infrastructure, could adversely affect global supply chainschains, inflation expectations, economic activity, and trademarket flows.conditions. The timing, magnitude, duration, and durationgeographic scope of theseany impactsfurther areconflict remain highly uncertain and may evolve rapidly basedin onresponse geopoliticalto military actions, diplomatic developments, government policy responses,decisions, sanctions, and market conditions.reactions. Heightened geopolitical uncertainty and volatility in energy markets may influence Federal Reservemonetary policy decisionsdecisions, interest-rate expectations, funding markets, liquidity conditions, foreign-exchange markets, and broaderinvestor financialrisk conditions, including interest‑rate volatility, funding costs, and liquidity conditions.sentiment. These factors could adversely affect our funding profile; customer and counterparty credit quality, particularly in sectors sensitive to energy prices, global trade, ortransportation, manufacturing, and broader economic cycles; and the market value of certain financial instruments. Prolonged volatilitymarket volatility, additional military escalation involving the United States, Iran, or other regional actors, disruptions to global energy supplies or shipping lanes, expanded sanctions, or a deterioration in global economic conditions could also negatively impact economic growth, increase borrower stress, reduce business activity, and contribute to higher credit losses,losses and operational risks, including cyber-related incidents, any of which could have a material adverse effect on our business, financial condition, and results of operations.operations, and prospects. We will continue to monitor thesegeopolitical developments and assess their potential impact on our customers, operations, liquidity position, capital levels, market exposures, and overall risk profile, and we may adjust our risk managementmanagement, liquidity management, capital planning, and capitalbusiness planningcontinuity strategies as appropriate.

Furthermore, financial markets, international relations, and global supply chains continue to be significantly impactedaffected by evolving U.S. trade policies and practices. The scope, duration, and ultimate impact of tariffs on us, our customers, financial markets, and the U.S. and global economies remain uncertain, particularly followingWhile the U.S. Supreme Court’sCourt's February 20, 2026 ruling that the International Emergency Economic Powers Act (“"IEEPA”") does not authorize presidential tariff authority, whichauthority invalidated priorcertain IEEPA‑basedtariffs tariffs.previously Thisimposed rulingunder has introducedIEEPA, uncertainty remains regarding the timing and extent of potential tariff refunds, asrelated welllegal asand administrative proceedings, and the likelihoodscope, duration, and economic impact of newreplacement or replacementadditional tariffstrade imposedmeasures adopted under alternative statutory authorities underother U.S. trade law.laws. TheseOngoing developmentschanges in U.S. trade policy, including the imposition, modification, suspension, or expansion of tariffs and other trade restrictions, may affect customer cash flows, creditbusiness conditions,confidence, capital investment decisions, supply chain decisions,strategies, commodity prices, inflation expectations, and overall market activityvolatility. andThese volatility,developments therebymay increasingincrease our exposure to operational, credit, market, liquidity, and marketcompliance risks. Customers with significant exposure to international trade, manufacturing, transportation, agriculture, retail, or other sectors sensitive to global trade and supply chain conditions may experience financial stress, reduced profitability, or weakened operating performance. Trade policy developments may also contribute to volatility in interest rates, foreign exchange markets, and asset valuations. If suchthese uncertaintydevelopments negativelyadversely affectsaffect borrower financial condition orcondition, market stability, iteconomic growth, or broader business activity, they could have a material adverse effect on our business, financial condition, and results of operations.operations, and prospects. We will continue to monitor trade policy developments and adjust our risk management, liquidity management, and capital planning strategies as appropriate.

Net income available to common shareholders totaled $169.3$170.4 million, or $2.65$2.70 per diluted common share, and $339.7 million, or $5.35 per diluted common share, for the three and six months ended MarchJune 31,30, 2026, respectively, compared to $149.3$155.3 million, or $2.30$2.39 per diluted common share, and $304.6 million, or $4.69 per diluted common share for the three and six months ended MarchJune 31,30, 2025.2025, respectively.

Net income available to common shareholders increased $20.1$15.1 million, or 13.4%,9.7%, for the three months ended MarchJune 31,30, 2026 and increased $35.1 million, or 11.5%, for the six months ended June 30, 2026, compared to the same periodperiods in 2025. The increase during the three months ended MarchJune 31,30, 2026 was primarily the result of aan $22.3$18.1 million increase in net interest income, aan $12.3$11.0 million increase in non-interest income, and a $6.3$3.4 million decrease in credit loss expense partly offset by a $17.6$14.6 million increase in non-interest expense and a $3.2$2.9 million increase in income tax expense. The increase during the six months ended June 30, 2026 was primarily the result of a $40.4 million increase in net interest income, a $23.3 million increase in non-interest income, and a $9.7 million decrease in credit loss expense partly offset by a $32.2 million increase in non-interest expense and a $6.1 million increase in income tax expense.

Net interest income is the difference between interest income on earning assets, such as loans and securities, and interest expense on liabilities, such as deposits and borrowings, which are used to fund those assets. Net interest income is our largest source of revenue, representing 76.3%77.0% of total revenue during the first threesix months of 2026. Net interest margin is the ratio of taxable-equivalent net interest income to average earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities affect net interest income and net interest margin.

The Federal Reserve influences market interest rates, including the deposit and loan rates offered by many financial institutions. As of MarchJune 31,30, 2026, approximately 40.0%40.4% of our loans had a fixed interest rate, while the remaining loans had floating interest rates that were primarily tied to a benchmark developed by the American Financial Exchange, the Secured Overnight Financing Rate (“SOFR”) (approximately 39.1%39.6%); the prime interest rate (approximately 18.9%18.6%); or the American Interbank Offered Rate (“AMERIBOR”) (approximately 2.0%1.4%). Certain other loans are tied to other indices; however, such loans represent an immaterial portion of our loan portfolio as of MarchJune 31,30, 2026.

As of MarchJune 31,30, 2026, the target range for the federal funds rate was 3.50% to 3.75%. In MarchJune 2026, the Federal Reserve released projections whereby the midpoint of the projected appropriate target range for the federal funds rate would fallrise to 3.4%3.8% by the end of 2026 and subsequently decrease to 3.1%3.6% by the end of 2027. While there can be no assurance that any increases or decreases in the federal funds rate will occur, these projections imply up to a 25 basis point decreaseincrease in the federal funds rate during the remainder of 2026, followed by a 25 basis point decrease in 2027.

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

Taxable-equivalent net interest income for the three months ended March 31, 2026, increased $24.4 million, or 5.6%, compared to the same period in 2025. The increaseincreases in taxable-equivalent net interest income during the three and six months ended MarchJune 31,30, 2026 waswere primarily relatedattributable to decreases in thelower average costs of interest-bearing deposit accounts and repurchase agreementsagreements, combinedas withwell as increases in the average volumes of loans and tax-exempt securities and increases in thehigher average tax-equivalent yields on tax-exempttaxable and taxabletax-exempt securities. TheThese impactfavorable ofvariances thesewere items was partlypartially offset by a decrease in thelower average yieldyields on loans, decreases in thelower average yieldyields on and volumevolumes of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), and a decrease in thelower average volumevolumes of taxable securitiessecurities, combinedand with an increase in thehigher average volumevolumes of interest-bearing deposit accounts, among other things. As a result of these offsetting fluctuations, the taxable-equivalent net interest margin increased 14 basis points from 3.60% during the three months ended March 31, 2025 to 3.74% during the three months ended March 31, 2026.

The average volume of interest-earning assets for the three months ended June 30, 2026 increased $1.4 billion while the average volume of interest-earning assets for the six months ended June 30, 2026 increased $1.3 billion compared to the same periods in 2025. The increase in the average volume of interest-earning assets during the three months ended MarchJune 31,30, 2026 was primarily related to a $1.2$1.6 billion increase in average loansloans, and a $608.2$423.5 million increase in average tax-exempt securitiessecurities, partly offset by a $486.0$360.8 million decrease in average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) and a $139.5$176.3 million decrease in average taxable securities.securities, among other things. The average taxable-equivalent yield on interest-earning assets decreased 1115 basis points from 4.99%5.07% during the three months ended MarchJune 31,30, 2025 to 4.88%4.92% during the three months ended MarchJune 31,30, 2026. The average taxable-equivalent yields on interest-earning assets during comparable periods were impacted by changes in market interest rates (as noted in the table above) and changes in the volumes and relative mixes of interest-earning assets.

The average taxable-equivalent yield on loans decreased 3443 basis points from 6.57%6.60% during the three months ended MarchJune 31,30, 2025 to 6.23%6.17% during the three months ended MarchJune 31,30, 2026 while the average taxable-equivalent yield on loans decreased 38 basis points from 6.58% during the six months ended June 30, 2025 to 6.20% during the six months ended June 30, 2026. The average taxable-equivalent yield on loans during the three and six months ended MarchJune 31,30, 2026 waswere impacted by decreases in market interest rates (as noted in the table above). The average volume of loans for the three months ended MarchJune 31,30, 2026 increased $1.2$1.6 billion, or 5.9%,7.4%, while the average volume of loans for the six months ended June 30, 2026 increased $1.4 billion, or 6.6%, compared to the same periodperiods in 2025. Loans made up approximately 45.3%46.1% and 45.7% of average interest-earning assets during the three and six months ended MarchJune 31,30, 2026, compared to 43.8%44.2% and 44.0% during the same periodrespective periods in 2025. The increaseincreases waswere primarily related to the use of available funds to originate loans.

The average taxable-equivalent yield on securities was 3.85%3.96% during the three months ended MarchJune 31,30, 2026, increasing 2217 basis points from 3.63%3.79% during the three months ended MarchJune 31,30, 2025 while the average taxable-equivalent yield on securities was 3.91% during the six months ended June 30, 2026, increasing 20 basis points from 3.71% during the six months ended June 30, 2025. The average yield on taxable securities was 3.39%3.51% during the three months ended MarchJune 31,30, 2026, increasing 103 basis points from 3.29%3.48% during the same period in 2025 while the average yield on taxable securities was 3.45% during the six months ended June 30, 2026, increasing 7 basis points from 3.38% during the same period in 2025. The average taxable-equivalent yield on tax-exempt securities was 4.73%4.87% during the three months ended MarchJune 31,30, 2026, increasing 3539 basis points from 4.38%4.48% during the same period in 2025 while the average taxable-equivalent yield on tax-exempt securities was 4.80% during the six months ended June 30, 2026, increasing 37 basis points from 4.43% during the same period in 2025. Tax-exempt securities made up approximately 35.8% of total average securities during the three months ended March 31, 2026, compared to 33.5% during the same period in 2025. The average volume of total securities during the three months ended March 31, 2026 increased $468.7 million, or 2.4%, compared to the same period in 2025. Securities made up approximately 40.8% of average interest-earning assets during the three months ended March 31, 2026, compared to 40.9% during the same period in 2025.

Average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) for the three months ended MarchJune 31,30, 2026 decreased $486.0$360.8 million, or 6.7%,5.8%, compared to the same period in 2025 while average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) for the six months ended June 30, 2026 decreased $423.1 million, or 6.3%, compared to the same period in 2025. Interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) made up approximately 13.9%11.8% and 12.8% of average interest-earning assets during the three and six months ended MarchJune 31,30, 2026, compared to 15.3%12.9% and 14.1% during the same periodrespective periods in 2025. The decreasedecreases during the three and six months ended MarchJune 31,30, 2026 waswere primarily related to the reinvestment of amounts held in an interest-bearing account at the Federal Reserve into loans and securities. The average yieldyields on interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) waswere 3.64%3.65% during both the three and six months ended MarchJune 31,30, 2026, compared to 4.39%4.41% and 4.40% during the same periodrespective periods in 2025. The average yieldyields on interest-bearing deposits during the three and six months ended MarchJune 31,30, 2026 waswere impacted by lower average interest rates paid on reserves held at the Federal Reserve, compared to the same periodperiods in 2025.

The average rate paid on interest-bearing liabilities was 1.72%1.77% during the three months ended MarchJune 31,30, 2026, decreasing 4035 basis points from 2.12% during the same period in 2025 while the average rate paid on interest-bearing liabilities was 1.75% during the six months ended June 30, 2026, decreasing 37 basis points from 2.12% during the same period in 2025. Average deposits increased $567.9$859.6 million, or 1.4%,2.1%, during the three months ended MarchJune 31,30, 2026, compared to the same period in 2025 and included a $422.1$620.4 million increase in average interest-bearing deposits and a $145.8$239.2 million increase in average non-interest-bearing deposits. Average deposits increased $714.6 million, or 1.7%, during the six months ended June 30, 2026, compared to the same period in 2025 and included a $521.8 million increase in average interest-bearing deposits and a $192.8 million increase in average non-interest-bearing deposits. The ratioratios of average interest-bearing deposits to total average deposits waswere 67.1% and 67.0% during the three and six months ended MarchJune 31,30, 2026, compared to 67.0% and 66.9% during the same periodrespective periods in 2025. The average cost of deposits is primarily impacted by changes in market interest rates as well as changes in the volume and relative mix of interest-bearing deposits. The average costs of interest-bearing deposits and total deposits were 1.55%1.61% and 1.04%,1.08%, respectively, during the three months ended MarchJune 31,30, 2026, compared to 1.94%1.93% and 1.30%,1.29%, respectively, during the same period in 2025. The average costs of interest-bearing deposits and total deposits were 1.58% and 1.06%, respectively, during the six months ended June 30, 2026, compared to 1.93% and 1.29%, respectively, during the same period in 2025. The average costs of deposits during 2026 were impacted by decreases in the interest rates we pay on our interest-bearing deposit products as a result of decreases in market interest rates.

Our net interest spread,spreads, which representsrepresent the difference between the average rateyields earned on earning assets and the average raterates paid on interest-bearing liabilities, waswere 3.16%3.15% during both the three and six months ended MarchJune 31,30, 2026, compared to 2.87%2.95% and 2.91% during the same periodrespective periods in 2025. OurThe net interest spreads,spread, as well as ourthe net interest margins,margin, will be impacted by future changes in short-term and long-term interest rate levels, as well as the impact from the competitive environment, including from new financial technology competitors, and the availability of alternative investment options. A discussion of the effects of changing interest rates on net interest income is set forth in Item 3. Quantitative and Qualitative Disclosures About Market Risk included elsewhere in this report.

Total non-interest income for the three and six months ended MarchJune 31,30, 2026 increased $12.3$11.0 million, or 9.9%,9.4%, and $23.3 million, or 9.7%, respectively, compared to the same periodperiods in 2025. Changes in the various components of non-interest income are discussed in more detail below.

Trust and Investment Management Fees. Trust and investment management fees increased $5.0$4.0 million, or 11.7%,9.1%, for the three months ended MarchJune 31,30, 2026 and $9.0 million, or 10.4%, for the six months ended June 30, 2026, compared to the same periodrespective periods in 2025. Investment management fees arefees, the most significant component of trust and investment management fees, making uprepresented approximately 82.2% and 81.8%80.9% of total trust and investment management fees forduring the first threesix months of 2026 and 2025, respectively. The increaseincreases in trust and investment management fees wasduring the three and six months ended June 30, 2026 were primarily related to an increaseincreases in investment management fees (up $4.3$4.2 million and $8.5 million, respectively). Trust and investment management fees during the threesix months ended MarchJune 31,30, 2026 were also impacted by a one-time, $1.3 million administrative fee associated with a large trust account. Investment management fees are generally based on the market value of assets within an account and are therefore sensitive to volatility in the equity and bond markets. The increaseincreases in investment management fees during the three and six months ended MarchJune 31,30, 2026 waswere partly related to higher average equity valuations on managed accounts during 2026 relative to 2025 as well as growth in the number of accounts. TheInvestment increasemanagement wasfees during the six months ended June 30, 2026 were also partlypositively relatedimpacted toby variation in the timing of certain court-approved fees associated with a large guardianship trust.

At MarchJune 31,30, 2026, trust assets, including both managed assets and custody assets, were primarily composed of equity securities (47.7%50.1% of assets), fixed income securities (30.5%29.4% of assets), alternative investments (8.9%8.6% of assets) and cash equivalents (7.5%6.6% of assets). The estimated fair value of these assets was $50.4$52.9 billion (including managed assets of $26.4$27.8 billion and custody assets of $24.1$25.2 billion) at MarchJune 31,30, 2026, compared to $51.0 billion (including managed assets of $26.7 billion and custody assets of $24.3 billion) at December 31, 2025 and $50.7$50.9 billion (including managed assets of $25.3$25.8 billion and custody assets of $25.5$25.1 billion) at MarchJune 31,30, 2025.

Service Charges on Deposit Accounts. Service charges on deposit accounts for the three and six months ended June 30, 2026 increased $3.5$5.0 million, or 12.4%,17.2%, forand increased $8.6 million, or 14.8%, respectively, compared to the same periods in 2025. The increase during the three months ended MarchJune 31,30, 2026, compared to the same period in 2025. The increase2026 was primarily related to an increaseincreases in commercial service charges (up $2.2$2.8 million), and overdraft charges on consumer and commercial accounts (up $1.7 million and $360 thousand, respectively). The increase during the six months ended June 30, 2026, was primarily related to increases in commercial service charges (up $5.0 million) and overdraft charges on consumer and commercial accounts (up $1.3$3.0 million and $445 thousand, respectively). The increaseincreases in commercial service charges during the three and six months ended MarchJune 31,30, 2026 waswere partly related to an increases in billable services related to analyzed treasury management accounts combined with the effect of a lower average earnings credit rate applied to deposits maintained by treasury management customers which resulted in customers paying for more of their services through fees rather than with earnings credits applied to their deposit balances. The increaseincreases in commercial service charges waswere also partly related to an increaseincreases in service fees on non-analyzed accounts. Overdraft charges totaled $15.6$16.7 million ($12.0$13.0 million consumer and $3.6$3.7 million commercial) during the three months ended MarchJune 31,30, 2026, compared $14.7 million ($11.4 million consumer and $3.3 million commercial) during the same period in 2025. Overdraft charges totaled $32.3 million ($25.0 million consumer and $7.3 million commercial) during the six months ended June 30, 2026, compared to $14.2$28.9 million ($10.7$22.1 million consumer and $3.5$6.8 million commercial) during the same period in 2025. The increaseincreases in overdraft charges during the three and six months ended MarchJune 31,30, 2026 waswere impacted by higher volumes of fee-assessed overdrafts relative to 2025, in part due to growth in the number of accounts.

InsuranceThe Commissionsincrease and Fees. Insurance commissions and fees increased $1.1 million, or 5.0%, forduring the three months ended MarchJune 31,30, 2026,2026 comparedwas primarily related to the same periodincreases in 2025.property and casualty commissions (up $181 thousand), primarily related to commercial lines, and contingent income (up $102 thousand). The increase during the six months ended June 30, 2026 was primarily therelated result ofto increases in benefit plan commissions (up $1.2 million) and contingent income (up $451$553 thousand), partly offset by a decrease in life insurance commissions (down $465$538 thousand). The increase in benefit plan commissions was primarily due to an increase in business volumes combined with premium and exposure rate increases within the existing customer base and an increase in business volumes.base. The decrease in life insurance commissions was primarily related to a decrease in business volumes.

Contingent income totaled $4.5$687 thousand and $5.2 million during the three and six months ended MarchJune 31,30, 20262026, respectively, compared to $4.0$585 thousand and $4.6 million during the threesame monthsrespective endedperiods March 31,in 2025. Contingent income primarily consists of amounts received from various property and casualty insurance carriers related to portfolio growth and the loss performance of insurance policies previously placed. These performance-related contingent payments are seasonal in nature and are mostly received during the first quarter of each year. Performance-related contingent income totaled $3.8$4.0 million during the threesix months ended MarchJune 31,30, 2026 and $3.5$3.6 million during the threesix months ended MarchJune 31,30, 2025. Contingent income also includes amounts received from various benefit plan insurance companies related to the volume of business generated and/or the subsequent retention of such business. This benefit plan related contingent income totaled $643$465 thousand and $1.1 million during the three and six months ended MarchJune 31,30, 2026, respectively, compared to $517$512 thousand and $1.0 million during the threesame monthsrespective endedperiods March 31,in 2025.

Net interchange and card transaction fees increased $1.1 million, or 20.9%, for the three and six months ended MarchJune 31,30, 2026,2026 increased $927 thousand, or 16.5%, and increased $2.1 million, or 18.7%, respectively, compared to the same periodperiods in 2025. TheThese increaseincreases waswere primarily due to increased card transaction volumes. A comparison of gross and net interchange and card transaction fees for the reported periods is presented in the table below.

Federal Reserve rules applicable to financial institutions that have assets of $10 billion or more provide that the maximum permissible interchange fee for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction. An upward adjustment of noup more thanto 1 cent toper an issuer's debit card interchange feetransaction is allowedpermitted if the card issuer develops and implements policies and procedures reasonably designed to achievemeet certainspecified fraud-prevention standards. The Federal Reserve also has rules governing routing and network exclusivity thatalso require issuers to offerenable at least two unaffiliated networks for routing transactions on each debit or prepaid card product. In August 2025, the U.S. District Court for the District of North Dakota ruled to vacatevacated the Federal Reserve’sReserve's current interchange rulesfee rule but simultaneouslystayed stayedthe effect of its own vacaturruling pending appealappeal. toAs a result, the circuitcurrent court.interchange fee framework remains in effect while the litigation proceeds. The outcome of this litigation could result in changes to the regulation of debit card interchange fees which could have a significant and adverse effect on the fees banks can charge on debit card transactions.

In October 2023, the Federal Reserve issued a proposal underthat whichwould reduce the maximum permissible interchange fee for an electronic debit transaction would beto the sum of 14.4 cents per transaction and 4 basis points multiplied by the value of the transaction.transaction, Furthermore,while increasing the maximum fraud-prevention adjustment would increase from a maximum of 11.0 cent to 1.3 cents. The proposal would adoptalso anestablish approacha framework for future adjustments toupdating the interchange fee cap, which would occurcap every othertwo yearyears based on issuer cost data gatheredcollected by the Federal Reserve from large debit card issuers. Had the proposed maximum interchange feesfee cap been in effect during the reported periods, interchange and debit card transaction fees would have been approximately 30% lower. The comment period for thisthe proposal ended in May 2024. TheAs of June 30, 2026, the Federal Reserve had not adopted a final rule implementing the proposal. Accordingly, the extent to which any such proposedfuture changes into permissiblethe interchange feesfee willcap impactmay ouraffect futurethe Company's revenues is cannot be determined at this time.

Other Charges, Commissions, and Fees. Other charges, commissions, and fees decreased $318 thousand, or 2.3%, for the three and six months ended MarchJune 31,30, 2026,2026 decreased $180 thousand, or 1.3%, and $498 thousand, or 1.8%, compared to the same periodrespective periods in 2025. The decreasedecreases wasduring the three and six months ended June 30, 2026 were primarily related to decreases in income from the placement of annuities (down $300$556 thousand and $856 thousand, respectively), subscription fee income (down $156 thousand), and commitment fees on unused lines of credit (down $136$274 thousand and $410 thousand, respectively), among other things,things. partlyThese decreases were partially offset by anincreases increasein income from the placement of mutual funds (up $262$474 thousand and $736 thousand, respectively), among other things.

Net Gain/Loss on Securities Transactions. There were no sales of securities during the threesix months ended MarchJune 31,30, 2026. During the threesix months ended MarchJune 31,30, 2025, we sold certain available-for-sale securities with amortized costs totaling $38.6$40.1 million and realized a net loss of $14 thousand. These sales were primarily made in connection with a municipal tender offer.offer during the first quarter.

Other Non-Interest Income. Other non-interest income for the three and six months ended June 30, 2026 increased $1.9$974 thousand, or 8.9%, and $2.8 million, or 14.9%,12.1%, forrespectively, compared to the same periods in 2025. The increase during the three months ended MarchJune 31,30, 2026,2026 comparedwas primarily related to thean same periodincrease in 2025.sundry and other miscellaneous income (up $1.5 million), partly offset by a decrease in public finance underwriting fees (down $425 thousand). The increase during the six months ended June 30, 2026 was primarily related to increases in sundry and other miscellaneous income (up $2.2$4.0 million); benefits received on life insurance policies (up $632$585 thousand); and income from customer derivatives trading and securities trading activities (combined up $456 thousand); and public finance underwriting fees (up $341$551 thousand); among other things. The increase from these items was partly offset by a decrease in gains on the sale of foreclosed and other assets (down $2.1 million), among other things. Sundry and other miscellaneous income during the threesix months ended MarchJune 31,30, 2026 includedincluded, during the first quarter, a $2.7 million one-time fee associated with the termination of a customer lease.lease recognized and, during the second quarter, $2.2 million related to the refund of certain tax credits associated with payroll taxes paid during the COVID-19 pandemic. The increasesincrease in income from customer derivative and securitiesderivatives trading activities during the six months ended June 30, 2026 and the decrease in public finance underwriting fees during the three months ended June 30, 2026 were primarily relatedattributable to increasedfluctuations in transaction volumes. Gains on the sale of foreclosed and other assets during the threesix months ended MarchJune 31,30, 2025 included a $2.5 million gain related toon the sale of a foreclosed real estate property.

Total non-interest expense for the three and six months ended MarchJune 31,30, 2026 increased $17.6$14.6 million, or 5.1%,4.2%, and $32.2 million, or 4.6%, respectively, compared to the same periodperiods in 2025. Changes in the various components of non-interest expense are discussed below.

Salaries and Wages. Salaries and wages increased $5.3 million, or 3.3%, for the three and six months ended MarchJune 31,30, 2026,2026 increased $10.8 million, or 6.7%, and $16.1 million, or 5.0%, respectively, compared to the same periodperiods in 2025. The increaseincreases in salaries and wages waswere primarily related to an increase in salaries due to annual merit and marketmarket-based increasessalary andincreases, anas increasewell as growth in the number of employees. The increase in thestaffing number of employeeslevels was partlydriven relatedin topart ourby investmentinvestments in organic expansion inacross various markets. Salaries and wages duringfor the three and six months ended MarchJune 31,30, 2026 were also impacted,reflected, to a lesser extent, by increases in stock-basedincentive compensation and commissions.stock-based compensation.

Employee Benefits. Employee benefits expense increased $2.5 million, or 5.9%, for the three and six months ended MarchJune 31,30, 2026,2026 increased $2.3 million, or 7.1%, and increased $4.8 million, or 6.4%, respectively, compared to the same periodperiods in 2025. The increaseincreases waswere primarily related to increases in medical/ and dental benefits expense (up $1.7$1.6 million and $3.3 million, respectively), primarily due to anhigher increaseclaims inand expectedrelated costs; payroll taxes (up $792$530 thousand and $1.3 million, respectively); and 401(k) plan expense (up $274$333 thousand and $607 thousand, respectively). These itemsincreases were partly offset by an increaseincreases in the net periodic pension benefit related to our defined benefit retirement and restoration plans (up $432 thousand and $864 thousand, respectively).

Our defined benefit retirement and restoration plans werehave been frozen insince 2001 which has helped to reducereduced the volatility inof retirement plan expense. WeHowever, nonethelesswe stillcontinue to have funding obligations relatedassociated towith these plansplans, and couldfuture recognizepension benefit or expense relatedcould tofluctuate these plans in future years, which would be dependentbased on factors such as the returnperformance earned onof plan assets, thechanges level ofin interest ratesrates, and employee turnover. See Note 11 - Defined Benefit Plans for additional information related to our net periodic pension benefit/expense.

Technology, Furniture, and Equipment. Technology, furniture, and equipment expense increased $1.6 million, or 3.9%, for the three and six months ended MarchJune 31,30, 2026,2026 increased $2.0 million, or 4.9%, and $3.5 million, or 4.4%, compared to the same periodperiods in 2025. The increaseincreases during the three and six months ended MarchJune 31,30, 2026 waswere primarily related to increases in cloud services expense (up $1.8$1.0 million and $2.8 million, respectively), service contracts expense (up $583 thousand and $623 thousand, respectively), and equipment rental (up $189 thousand), and depreciation on furniture and equipmentexpense (up $147$342 thousand and $531 thousand, respectively), among other things,things. These increases were partly offset by a decreasedecreases in software amortization expense during the three and six months ended June 30, 2026 (down $693$394 thousand and $1.1 million, respectively).

Deposit Insurance. Deposit insurance expense totaled $7.2$6.3 million and $13.5 million for the three and six months ended MarchJune 31,30, 2026, respectively, and did not significantly fluctuate compared to the same periodperiods in 2025.

Net income for the three and six months ended MarchJune 31,30, 2026 increased $17.9$15.1 million, or 12.2%,9.9%, and increased $32.9 million, or 11.0%, respectively, compared to the same periodperiods in 2025. The increase during the three months ended MarchJune 31,30, 2026 was primarily the result of aan $22.3$18.2 million increase in net interest income, a $7.2$7.7 million increase in non-interest income, and a $6.3$3.4 million decrease in credit loss expense, partly offset by a $15.4$11.2 million increase in non-interest expense and a $2.6$3.0 million increase in income tax expense. The increase during the six months ended June 30, 2026 was primarily the result of a $40.5 million increase in net interest income, a $14.9 million increase in non-interest income, and a $9.7 million decrease in credit loss expense partly offset by a $26.6 million increase in non-interest expense and a $5.6 million increase in income tax expense.

Net interest income for the three and six months ended MarchJune 31,30, 2026 increased $22.3$18.2 million, or 5.3%,4.2%, and increased $40.5 million, or 4.8%, respectively, compared to the same periodperiods in 2025. The increaseincreases during the three and six months ended MarchJune 31,30, 2026 waswere primarily relatedattributable to decreases in thelower average costs of interest-bearing deposit accounts and repurchase agreementsagreements, combinedas withwell as increases in the average volumes of loans and tax-exempt securities and increases in thehigher average tax-equivalent yields on tax-exempttaxable and taxabletax-exempt securities. TheThese impactfavorable ofvariances thesewere items was partlypartially offset by a decrease in thelower average yieldyields on loans, decreases in thelower average yieldyields on and volumevolumes of interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve), and a decrease in thelower average volumevolumes of taxable securitiessecurities, combinedand with an increase in thehigher average volumevolumes of interest-bearing deposit accounts, among other things. See the analysis of net interest income included in the section captioned “Net Interest Income” included elsewhere in this discussion.

Credit loss expense for the three and six months ended MarchJune 31,30, 2026 totaled $6.7$9.8 million and $16.5 million compared to $13.1 million and $26.2 million during the same period in 2025. See the sections captioned “Credit Loss Expense” and “Allowance for Credit Losses” elsewhere in this discussion for further analysis of credit loss expense related to loans and off-balance-sheet commitments.

Non-interest income for the three and six months ended MarchJune 31,30, 2026 increased $7.2$7.7 million, or 9.7%,11.8%, and increased $14.9 million, or 10.7%, respectively, compared to the same periodperiods in 2025. The increaseincreases during the three and six months ended MarchJune 31,30, 2026 waswere primarily related to increases in service charges on deposit accounts; other non-interest income; interchange and card transaction fees; and insurance commissions and fees. The increaseincreases in service charges on deposit accounts waswere primarily related to an increaseincreases in commercial service charges and overdraft charges on consumer accounts. The increase in other non-interest income during the three months ended June 30, 2026 was primarily related to an increase in sundry and other miscellaneous income partly offset by decreases in income from customer securities trading activities and public finance underwriting fees. The increase in other non-interest income during the six months ended June 30, 2026 was primarily related to increases in sundry and other miscellaneous income; benefits received on life insurance policies; and income from customer derivatives trading activities; and public finance underwriting fees,activities, among other things, partly offset by a decreasedecreases in gains on the sale of foreclosed and other assets, and income from customer securities trading activities, among other things. The increaseincreases in interchange and card transaction fees waswere primarily related to increased card transaction volumes. The increase in insurance commissions and fees during the three months ended June 30, 2026 was primarily related to increases in property and casualty commissions, primarily related to commercial lines, and contingent income, while the resultincrease ofduring the six months ended June 30, 2026 was primarily related to increases in benefit plan commissions and contingent income, partly offset by a decrease in life insurance commissions. See the analysis of these categories of non-interest income included in the section captioned “Non-Interest Income” included elsewhere in this discussion.

Non-interest expense for thethree threeand six months ended MarchJune 31,30, 2026 increased $15.4$11.2 million, or 5.1%,3.7%, and increased $26.6 million, or 4.4%, respectively, compared to the same periodperiods in 2025. The increase during the three months ended MarchJune 31,30, 2026 was primarily due to increases in other non-interest expense; salaries and wages; employee benefits expense; technology, furniture, and equipment expense; and net occupancy expense.expense, Thepartly increaseoffset by a decrease in other non-interest expenseexpense. includedThe increase during the six months ended June 30, 2026 was primarily due to increases in fraudsalaries lossesand wages; advertising/promotionsother non-interest expense; amortizationemployee of deferred costs on loan commitments; professional servicesbenefits expense; travel,technology, mealsfurniture, and entertainmentequipment expense; and guardnet serviceoccupancy expense; among other things, partly offset by decreases in donations expense and foreclosed assets expense, among other things.expense. The increaseincreases in salaries and wages waswere primarily related to an increase in salaries due to annual merit and market increases and increasesgrowth in the number of employees. Salaries and wages were also impacted, to a lesser extent, by an increaseincreases in incentive compensation and stock-based compensation. The decrease in other non-interest expense during the three months ended June 30, 2026 included decreases in sundry and other miscellaneous expense; advertising/promotions expense; business development expense; and amortization of deferred costs on loan commitments, among other things, partly offset by an increase in fraud losses, primarily related to deposits, among other things. The increase in other non-interest expense during the six months ended June 30, 2026 included increases in fraud losses, primarily related to deposits; advertising/promotions expense; travel, meals and entertainment; and amortization of deferred costs on loan commitments, among other things, partly offset by decreases in sundry and other miscellaneous expenses; donations expense; and foreclosed assets expense, among other things. The increases in employee benefits expense waswere primarily related to increases in medical/dental benefits expense, payroll taxes, and 401(k) plan expense, among other things, partly offset by an increaseincreases in the net periodic pension benefit related to our defined benefit retirement and restoration plans. The increaseincreases in technology, furniture, and equipment expense waswere primarily related to increases in cloud services expense, service contracts expense, and equipment rental, and depreciation on furniture and equipment, among other things, partly offset by a decreasedecreases in software amortization. The increaseincreases in net occupancy expense waswere primarily related to an increaseincreases in depreciation on buildings and leasehold improvements, aamong decreaseother things, partly offset by decreases in rentalbuilding income from tenants, and an increase in leaseinsurance expense, among other things. See the analysis of these categories of non-interest expense included in the section captioned “Non-Interest Expense” included elsewhere in this discussion.

Net income for the three and six months ended MarchJune 31,30, 2026 decreased $565 thousand, or 6.0%, and increased $1.7$1.1 million, or 19.8%,6.2%, respectively, compared to the same periodperiods in 2025. The increase in net incomedecrease during the three months ended MarchJune 31,30, 2026 was primarily the result of a $4.7$3.6 million increase in non-interest expense partly offset by a $3.2 million increase in non-interest income, among other things. The increase during the six months ended June 30, 2026 was primarily the result of a $7.8 million increase in non-interest income partly offset by a $2.3$6.0 million increase in non-interest expense, among other things.

Non-interest income for the three and six months ended MarchJune 31,30, 2026 increased $4.7$3.2 million, or 9.2%,6.1%, and increased $7.8 million, or 7.7%, respectively, compared to the same periodperiods in 2025. The increaseincreases during the three and six months ended MarchJune 31,30, 2026 waswere primarily due to an increaseincreases in trust and investment management fees. The increaseincreases in trust and investment management fees wasduring the three and six months ended June 30, 2026 were primarily related to increases in investment management feesfees. Trust and wasinvestment management fees for the six months ended June 30, 2026, were also impacted by a one-time, $1.3 million administrative fee associated with a large trust account. The increaseincreases in investment management fees wasduring the three and six months ended June 30, 2026 were partly related to higher average equity valuations on managed accounts during 2026 relative to 2025, as well as growth in the number of accounts. TheInvestment increasemanagement wasfees during the six months ended June 30, 2026 were also partlypositively relatedimpacted toby variation in the timing of certain court-approved fees associated with a large guardianship trust. See the analysis of these categories of non-interest income in the section captioned “Non-Interest Income” included elsewhere in this discussion.

Non-interest expense for the three and six months ended MarchJune 31,30, 2026 increased $2.3$3.6 million, or 5.6%,8.7%, and increased $6.0 million, or 7.1%, respectively, compared to the same periodperiods in 2025. The increaseincreases wasduring the three and six months ended June 30, 2026 were primarily related to increases in salaries and wages; other non-interest expense; salariesemployee andbenefits wagesexpense; and net occupancy expense, among other things. The increases in salaries and wages during the three and six months ended June 30, 2026 were primarily related to annual merit and market-based salary increases, as well as growth in the number of employees, and increases in incentive compensation. Salaries and wages during the six months ended June 30, 2026, were also impacted by an increase in commissions expense. The increase in other non-interest expense during the three months ended MarchJune 31,30, 2026 was primarily related to increases in corporateprofessional overheadservices expense allocations;and sundry and other miscellaneous expense, among other things, while the increase during the six months ended June 30, 2026 was primarily related to increases in research and platform fees; and professional services expense, among other things. The increaseincreases in salariesemployee benefits expense during the three and wagessix wasmonths ended June 30, 2026 were primarily duerelated to an increaseincreases in commissionsmedical/dental benefits expense, payroll taxes, and 401(k) plan expense. The increaseincreases in net occupancy expense during the three and six months ended MarchJune 31,30, 2026 waswere related to an increaseincreases in lease expense. See the analysis of these categories of non-interest expense included in the section captioned “Non-Interest Expense” included elsewhere in this discussion.

The Non-Banks operating segment had a net loss of $3.0$3.9 million and $6.9 million during the three and six months ended MarchJune 31,30, 2026, compared to a net loss of $3.5$4.4 million and $8.0 million during the same period in 2025. The decreasedecreases in the net loss during the three and six months ended MarchJune 31,30, 2026 waswere primarily due to a decrease in net interest expense due to decreases in the average rates paid on our long-term borrowings, among other things.

During the three months ended MarchJune 31,30, 2026, we recognized income tax expense of $31.4$32.5 million, for an effective tax rate of 15.5%,15.9%, compared to $28.2$29.6 million, for an effective tax rate of 15.9%, for the same period in 2025. During the six months ended June 30, 2026, we recognized income tax expense of $63.9 million, for an effective tax rate of 15.7%, compared to $57.8 million, for an effective tax rate of 15.8%, for the same period in 2025. The effective income tax rates differed from the U.S. statutory federal income tax rate of 21% during 2026 and 2025 primarily due to the effect of tax-exempt income from securities, loans and life insurance policies andand, for 2025, the income tax effects associated with stock-based compensation, among other things, and their relative proportion to total pre-tax net income. The increaseincreases in income tax expense during the three and six months ended MarchJune 31,30, 2026 waswere primarily due to an increaseincreases in projected pre-tax net income. The decrease in the effective tax raterates during the three and six months ended MarchJune 31,30, 2026 wasdid primarilynot relatedsignificantly fluctuate compared to anthe increasesame respective periods in projected tax-exempt interest from securities combined with a decrease in projected non-deductible deposit interest expense.2025.

Average assets totaled $52.1$52.4 billion for the threesix months ended MarchJune 31,30, 2026 representing2026, an increase of $1.2$1.3 billion, or 2.4%,2.6%, compared to average assets for the same period in 2025. Earning assets increased $1.2$1.3 billion, or 2.5%,2.8%, during the threesix months ended MarchJune 31,30, 2026, compared to earning assets for the same period in 2025. The increase in earning assets was primarily related to a $1.2$1.4 billion increase in average loans and a $608.2$515.3 million increase in average tax-exempt securities partly offset by a $486.0$423.1 million decrease in average interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve) and a $139.5$158.0 million decrease in average taxable securities. Average deposits increased $567.9$714.6 million, or 1.4%,1.7%, during the threesix months ended MarchJune 31,30, 2026, compared to the same period in 2025. The increase included a $422.1$521.8 million increase in interest-bearing deposits and a $145.8$192.8 million increase in non-interest-bearing deposits. Average non-interest-bearing deposits made up 33.0% and 33.1% of average total deposits during the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

Details of our loan portfolio are presented in Note 3 - Loans in the accompanying notes to consolidated financial statements included elsewhere in this report. Loans increased $540.6$1.1 million,billion, or 2.5%,5.0%, from $21.9 billion at December 31, 2025 to $22.4$23.0 billion at MarchJune 31,30, 2026. The majority of our loan portfolio is comprised of commercial and industrial loans, energy loans, and real estate loans. Real estate loans include both commercial and consumer balances. Selected details related to our loan portfolio segments are presented below. Refer to our 2025 Form 10-K for a more detailed discussion of our loan origination and risk management processes.

Commercial and Industrial. Commercial and industrial loans totaled $6.3 billion at both MarchJune 31,30, 2026 and December 31, 2025. Our commercial and industrial loans are a diverse group of loans to small, medium, and large businesses. The purpose of these loans varies from supporting seasonal working capital needs to term financing of equipment. While some short-term loans may be made on an unsecured basis, most are secured by the assets being financed, with collateral margins that are consistent with our loan policy guidelines. The commercial and industrial loan portfolio also includes commercial leases and purchased shared national credits ("SNC"s).

Energy. Energy loans include loans to entities and individuals that are engaged in various energy-related activities including (i) the development and production of oil or natural gas, (ii) providing oil and gas field servicing, (iii) providing energy-related transportation services, (iv) providing equipment to support oil and gas drilling, (v) refining petrochemicals, or (vi) trading oil, gas, and related commodities. Energy loans increased $113.4$39.0 million, or 10.4%,3.6%, fromtotaling approximately $1.1 billion at both June 30, 2026 and December 31, 2025 to $1.2 billion at March 31, 2026.2025. Energy loans are one of our largest industry concentrations, totaling 5.4% of total loans at March 31, 2026, up fromapproximately 5.0% of total loans at both June 30, 2026 and December 31, 2025. The average loan size, the significance of the portfolio, and the specialized nature of the energy industry requires a highly prescriptive underwriting policy. Exceptions to this policy are rarely granted. Due to the large borrowing requirements of this customer base, the energy loan portfolio includes participations and SNCs.