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

Our earnings and cash flows are largely dependent upon our net interest income. Net interest income is the difference between interest income earned on interest earning assets such as loans and securities and interest expense paid on interest bearing liabilities such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond our control, including the rate of inflation, general economic conditions and policies of various governmental and regulatory agencies (in particular, the Federal Reserve). From July 2023 through August of 2024, the federal funds rate remained steady at 5.25% to 5.50%. In each of the third and fourth quarter of 2024, the Federal Reserve reduced the target federal funds rate by 50 basis points to 4.25% to 4.50%. TheIn the third and fourth quarters of 2025, the Federal Reserve heldreduced the target federal funds rate steadyby 25 basis points and 50 basis points, respectively, to 3.50% to 3.75%. We are currently operating in Januaryan environment in which the Federal Reserve has continued to reduce interest rates, although modestly, with six cuts implemented in 2024 and 2025. However, the inflationary outlook remains uncertain and if the Federal Reserve were to reverse course and rapidly increase the target federal funds rate, the increase in rates could continue to constrain our interest rate spread and may adversely affect our business forecasts. On the other hand, further rapid decreases in interest rates may result in a change in the mix of noninterest and interest-bearing accounts. New appointments to the Board of Governors at the Federal Reserve could result in a change in monetary policy and interest rates. We are unable to predict changes in interest rates, which are affected by factors beyond our control, including inflation, deflation, recession, unemployment, money supply, the impact of tariff and trade policies, increased levels of government debt, and other changes in financial markets. Uncertainty regarding future rates could negatively impact our cost of borrowing and reduce the amount of money our customers borrow or adversely affect their ability to repay outstanding loan balances that may increase due to adjustments in their variable rates.

We are subject to the risk of losses resulting from the failure of borrowers, guarantors and related parties to pay us the interest and principal amounts due on their loans. Although we maintain well-defined credit policies and credit underwriting and monitoring and collection procedures, these policies and procedures may not prevent losses, particularly during periods in which the local, regional or national economy suffers a general decline. The effects of inflationinflation, tariffs, trade wars and recessionary concerns on economic activity could negatively affect the collateral values associated with our existing loans, our ability to liquidate the real estate collateral securing our residential and commercial real estate loans, our ability to maintain loan origination volume and to obtain additional financing, the future demand for or profitability of our lending and services, and the financial condition and credit risk of our customers. Further, in the event of delinquencies, regulatory changes and policies designed to protect borrowers may slow or prevent us from making business decisions or delay us from taking certain remediation actions, such as foreclosure. If borrowers fail to repay their loans, our financial condition and results of operations would be adversely affected.

The development and use of artificial intelligenceAI presents risks and challenges that may adversely impact our business.

The state of the economy and various economic, social and political factors, including inflation, recession, pandemics, unemployment, social unrest/civil disorder, interest rates, declining oil prices and the level of U.S. debt, as well as governmental action and uncertainty resulting from U.S. and global political trends, including tariffs, trade policies, weakness in foreign sovereign debt and currencies, hostile actions of foreign governments may directly and indirectly have a destabilizing effect on our financial condition and results of operations. In addition, the Trumpcurrent administration mayis seekseeking to implement a regulatory reform agenda that iswill different than that of the Biden administration, impactingimpact the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies and potentially resultingresult in uncertainty. Unfavorable or uncertain international, national or regional political or economic environments could drive losses beyond those which are provided for in our allowance for loan losses and result in the following consequences:

Our business faces increasing public, investor, activist, legislative and regulatorypublic scrutiny related to ESG,corporate “anti-ESG”,responsibility DEI and anti-DEI developments.activities. We risk damage to our brand and reputation in certain sectors if we fail to act inresponsibly responseor are perceived to ESGact concerns,too aggressively in a number of areas, such as diversity, equity and inclusion,DEI, environmental stewardship,stewardship (including with respect to climate change), human capital management, support for our local communities, corporate governance and transparency, or fail to consider ESG factors in our business operations.transparency.

Certain investors and shareholder advocates are placing increasing emphasis on how corporations address ESGcorporate responsibility issues in their business strategy when making investment decisions and when developing their investment strategies and proxy recommendations. We may incur increased costs with respect to our ESGcorporate responsibility efforts and if such efforts are negatively perceived, our reputation and stock price may suffer.

ElevatedDespite recent cuts, extended periods of elevated interest rates have decreased the value of a portion of the Company’s securities portfolio, and the Company would realize losses if it were required to sell such securities to meet liquidity needs.

As a result of inflationary pressures and elevated interest rates overin the past tworecent years, the fair value of our securities classified as available for sale and held-to-maturity has declined. This has resulted in unrealized losses on AFS securities embedded in other comprehensive income as a part of shareholders’ equity. If the Company were required to sell such securities to meet liquidity needs, including in the event of deposit outflows or slower deposit growth, it may incur losses, which could impair the Company’s capital, financial condition, and results of operations and require the Company to raise additional capital on unfavorable terms, thereby negatively impacting its profitability. While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.

OurFailures in the analytical and forecasting models relied upon for our accounting estimates and risk management processes relycould have a material adverse effect on analyticalour business, financial condition, and forecastingresults models.of operations.

The process we use to estimate our loan losses and to measure our retirement plan liabilities and the fair value of our financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depend upon the use of analytical and forecasting models. These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. The adoption of CECL in 2020 increased the complexity of these analytical and forecasting models. Even if these assumptions are adequate, the models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation.implementation, including flaws caused by failures in controls, data management, human error or from our reliance on technology. If the models we use for interest rate risk and asset-liability management are inadequate, we may incur increased or unexpected losses upon changes in market interest rates or other market measures. If the methodology we use for determining our loan losses are inadequate, our allowance for loan losses may not be sufficient to support future charge-offs. If the models we use to measure the fair value of financial instruments are inadequate, the fair value of such financial instruments may fluctuate unexpectedly or may not accurately reflect what we could realize upon sale or settlement of such financial instruments. If the key assumptions and models used to measure the retirement plan liabilities and expense are inadequate, the liability may not accurately reflect the amount required to fund the benefit obligation. Any such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations.

Our allowance for loan losses may be insufficient.insufficient or we may be adversely affected by credit risk exposures.

From time to time, we evaluate our service offerings and may implement new delivery systems,systems or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts. In developing and marketing new delivery systems and/or new products and services, we may invest significant time and resources.resources to build internal controls, policies and procedures to mitigate those risks, including hiring experienced management to oversee the implementation of the initiative. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations and financial condition.

Our success depends primarily on the general economic conditions in the State of Texas and the local markets within Texas in which we operate. Unlike larger national or other regional banks that are more geographically diversified, we provide banking and financial services to customers primarily in the State of Texas and our local markets. The local economic conditions in these areas have a significant impact on the demand for our products and services, as well as the ability of our customers to repay loans, the value of the collateral securing our loans and the stability of our deposit funding sources. Moreover, a substantial percentage of the securities in our municipal bond portfolio were issued by political subdivisions and agencies within the State of Texas. A significant decline in general economic conditions, caused by inflation, tariffs, trade wars, recession, crude oil prices, acts of terrorism, pandemics, natural or man-made disasters, outbreak of hostilities or other international or domestic occurrences, unemployment, plant or business closings or downsizing, changes in securities markets or other factors could impact these local economic conditions and, in turn, have a material adverse effect on our business, financial condition and results of operations.

We have historically had access to a number of alternative sources of liquidity, but if there is an increase in volatility in the credit and liquidity markets similar to the Great Recession of 2008,markets, there is no assurance that we will be able to obtain such liquidity on terms that are favorable to us, or at all. The cost of out-of-market deposits may exceed the cost of deposits of similar maturity in our local market area, making such deposits unattractive sources of funding; financial institutions may be unwilling to extend credit to banks because of concerns about the banking industry and the economy in general, and there may not be a viable market for raising equity capital.

On August 14, 2025, the Company issued $150.0 million of 7.00% fixed-to-floating rate subordinated notes, with an outstanding balance, net of unamortized debt issuance costs, of $147.5 million as of December 31, 2025, which mature on August 15, 2035. On November 6, 2020, we issued $100.0 million of 3.875% fixed-to-floating rate subordinated notes, with an outstanding balance, net of unamortized debt issuance costs, of $92.0$92.2 million as of December 31, 2024,2025, which maturewe inredeemed Novemberon 2030.February 15, 2026. On September 4, 2003, we issued $20.6 million of floating rate junior subordinated debentures in connection with a $20.0 million trust preferred securities issuance by our subsidiary Southside Statutory Trust III. These junior subordinated debentures mature in September 2033. On August 8 and 10, 2007, we issued $23.2 million and $12.9 million, respectively, of fixed-to-floating rate junior subordinated debentures in connection with $22.5 million and $12.5 million, respectively, trust preferred securities issuances by our subsidiaries Southside Statutory Trust IV and V, respectively. Trust IV matures October 20372037, and Trust V matures September 2037. On October 10, 2007, as part of an acquisition, we assumed $3.6 million of floating rate junior subordinated debentures to Magnolia Trust Company I in connection with $3.5 million of trust preferred securities issued in 2005 that mature in 2035.

Although our common stock is listed for trading on the NYSE,NYSE and NYSE Texas, the trading volume for our common stock is low relative to other larger financial services companies, and you are not assured liquidity with respect to transactions in our common stock. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. Given the lower trading volume of our common stock, significant sales of our common stock or the expectation of these sales,sales could cause our stock price to fall.

Securities analystanalysts might not continue coverage on our common stock, which could adversely affect the market for our common stock.

The trading price of our common stock depends in part on the research and reports that securities analysts publish about us and our business. We do not have any control over these analystsanalysts, and they may not continue to cover our common stock. If securities analysts do not continue to cover our common stock, the lack of research coverage may adversely affect its market price. If securities analysts continue to cover our common stock and our common stock is the subject of an unfavorable report, the price of our common stock may decline. If one or more of these analysts cease to cover us or fail to publish regular reports on us, we could lose visibility in the financial markets, which could cause the price or trading volume of our common stock to decline.

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

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

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

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

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

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

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

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

TheContinued tariff announcements and ongoing tariff negotiations have caused some uncertainty related to inflation levels and its impact on interest rates and the overall economy. While it is too early to discern the likely outcome of these tariff announcements and negotiations, the current economic conditions and growth prospects for our markets continue to reflect a solid and positive overall outlook. Higher inflation levels and higher interest ratesrate fluctuations could have a negative impact on both our consumer and commercial borrowers.borrowers Currently,in the future. Overall, however, the Texas markets we serve continue to remain healthy due to both job and population growth.healthy.

Our noninterest bearing deposits represent approximately 20.4%20.9% of total deposits. Our cost of interest bearing deposits increaseddecreased 6418 basis points, from 2.34% for the year ended December 31, 2023, to 2.98% for the year ended December 31, 2024.2024, Ourto cost of total deposits increased 59 basis points, from 1.77%2.80% for the year ended December 31, 2023,2025. toOur cost of total deposits decreased 13 basis points, from 2.36% for the year ended December 31, 2024.2024, to 2.23% for the year ended December 31, 2025.

Our capital ratios and contingent liquidity sources remain solid. The table below shows our total lines of credit, borrowings, total amounts available for future liquidity, and swapped value as of December 31, 20242025 (in thousands):

During the year ended December 31, 2024,2025, our net income increaseddecreased $1.8$19.3 million, or 2.1%,21.8%, to $88.5$69.2 million from $86.7$88.5 million for the same period in 2023.2024. The increasedecrease in net income was primarilylargely driven by a result$25.8 ofmillion thedecrease $5.9in noninterest income and to a lesser extent, a $4.2 million increase in noninterest income,expense, partially offset by a $5.8$5.5 million decrease in income tax expense, a $5.0 million increase in net interest income and a $293,000 decrease in provision for credit losseslosses. andNet theloss $1.1on millionsale increaseof inAFS netsecurities, interest income, partially offset by the $6.6 million increaseincluded in noninterest expenseincome, andwas the $4.4$32.3 million increase in income tax expense. Earnings per diluted common share increased $0.09, or 3.2%, to $2.91 for the year ended December 31, 2024,2025, compared to $2.82a net loss of $2.5 million for the same period in 2023.2024. Earnings per diluted common share decreased $0.62, or 21.3%, to $2.29 for the year ended December 31, 2025, compared to $2.91 for the same period in 2024.

Our total assets increaseddecreased $232.5$2.9 million, or 2.8%,million to $8.51 billion at December 31, 2025 from $8.52 billion at December 31, 20242024. fromOur $8.28securities portfolio decreased by $109.4 million, or 3.9%, to $2.70 billion, compared to $2.81 billion at December 31, 2023. Our securities portfolio increased by $209.8 million, or 8.1%, to $2.81 billion, compared to $2.60 billion at December 31, 2023.2024. The increasedecrease in the securities portfolio was primarily due to purchasesdecreases ofin MBS,municipal securities and U.S. Treasury securities, partially offset by aan decreaseincrease in municipal bondsMBS during the year ended December 31, 2024.2025. Our FHLB stock increaseddecreased $21.9$19.8 million, or 183.3%,58.4%, to $33.8$14.1 million from $11.9$33.8 million at December 31, 2023,2024, due to the increasedecrease in our FHLB borrowings during the year ended December 31, 2024.2025.

Loans at December 31, 20242025 were $4.66$4.82 billion, an increase of $137.1$156.4 million, or 3.0%,3.4%, compared to $4.66 billion at December 31, 2023,2024, due to increases of $411.3$133.1 million in commercial real estate loansloans, and $43.7$81.6 million in 1-4commercial familyloans residentialand $10.7 million in construction loans. TheThese increases were partially offset by decreases of $251.9 million in construction loans, $50.2$44.2 million in municipal loans, $12.0$16.0 million in 1-4 family residential loans and $8.7 million in loans to individuals and $3.7 million in commercial loans.individuals. Loans held for sale decreased $8.9$0.6 million, or 82.1%,31.6%, to $1.3 million at December 31, 2025 from $1.9 million at December 31, 2024 from $10.9 million at December 31, 2023 due to the sale of a $7.9 million commercial real estate loan relationship during the first quarter of 2024.

Our nonperforming assets at December 31, 20242025 decreasedincreased $412,000,$34.7 million, or 10.3%,965.6%, to $3.6$38.2 million and represented 0.04%0.45% of total assets, compared to $4.0$3.6 million, or 0.05%0.04% of total assets, at December 31, 2023.2024, due primarily to an increase of $27.5 million in restructured loans. The increase in restructured loans was due to the extension of maturity of a $27.5 million commercial real estate loan to allow for an extended lease up period during the first quarter of 2025. Nonaccruing loans decreasedincreased $704,000,$7.3 million, or 18.1%,229.2%, to $3.2$10.5 million, and the ratio of nonaccruing loans to total loans was 0.07%0.22% and 0.09%0.07% for December 31, 20242025 and December 31, 2023,2024, respectively. ThereThe were $2,000increase in restructurednonaccrual loans ascompared ofto December 31, 2024,2024 comparedwas primarily due to $13,000increases atof December$3.2 31,million 2023.in Repossessed1-4 assetsfamily wereresidential $14,000loans, at$3.0 Decembermillion 31,in 2024.commercial loans and $1.0 million in commercial real estate loans. There were no repossessed assets at December 31, 2023.2025, compared to $14,000 at December 31, 2024. There was $388,000 and $99,000$248,000 of OREO at December 31, 20242025 and $388,000 at December 31, 2023, respectively.2024.

Our deposits increased $104.6$210.9 million, or 1.6%,3.2%, withto a$6.87 balancebillion ofat December 31, 2025 from $6.65 billion at December 31, 20242024, fromdue $6.55 billion at December 31, 2023, which consisted ofto an increase in retail deposits of $137.8$359.9 millionmillion, inor interest bearing deposits,7.7%, partially offset by a decrease in public fund deposits of $33.3$78.4 million, or 6.4%, and a decrease in brokered deposits of $70.7 million, or 9.5%. The increase in retail deposits of $359.9 million inconsists of $280.7 million of interest bearing deposits and $79.2 million of noninterest bearing deposits.

Total FHLB borrowings increaseddecreased $519.3$520.8 million, or 244.2%,71.2%, to $211.1 million at December 31, 2025, from $731.9 million at December 31, 2024, from $212.6 million at December 31, 2023.2024.

Our total shareholders’ equity at December 31, 20242025 increased 5.0%,4.4%, or $38.7$35.7 million, to $847.6 million, or 10.0% of total assets, compared to $811.9 million, or 9.5% of total assets, compared to $773.3 million, or 9.3% of total assets, at December 31, 2023.2024. The increase in shareholders’ equity was the result of net income of $88.5$69.2 million, other comprehensive income of $29.3 million, stock compensation expense of $3.5 million, net issuance of common stock under employee stock plans of $2.0$3.0 million and common stock issued under our dividend reinvestment plan of $1.2$1.0 million, partially offset by cash dividends paid of $43.6$43.4 million, other comprehensive loss of $11.4 million and repurchases of $1.5$23.4 million of our common stock pursuant to our Stock Repurchase Plan.Plan and net issuance of common stock under employee stock plans of $91,000.

Key financial indicators management follows include, but are not limited to,to: numerous interest rate sensitivity and interest rate risk indicators,indicators; credit risk, operations risk,risk; liquidity risk,risk; capital risk,risk; regulatory risk,risk; inflation risk,risk; competition risk,risk; yield curve risk,risk; U.S. agency MBS prepayment risk; and economic risk indicators.

We ended the fourth quarter of 20242025 with approximately $431.7$241.8 million in available liquidity from the FRDW, in addition to the approximately $1.72$2.45 billion available from the credit line with FHLB due primarily to the blanket lien on our loan portfolio and to a lesser extent, securities available as collateral. At December 31, 2024,2025, the estimated deposits,deposits without insurance or collateral,collateral to total deposits, excluding affiliate deposits (Southside-owned deposits), was 19.5%,23.0%, or $1.30$1.58 billion.

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

Our securities portfolio increaseddecreased 8.1%3.9% from $2.60 billion at December 31, 2023 to $2.81 billion at December 31, 2024.2024 to $2.70 billion at December 31, 2025, with decreases in municipal securities, U.S. Treasury Bills and corporate bonds, partially offset by an increase in U.S. Agency MBS. The increasedecrease in the securities portfolio was due to securitiessales purchasedof securities, maturities and principal payments during the year ended December 31, 2024,2025, which more than offset sales of securities and principal payments.purchased.

At December 31, 2024,2025, securities as a percentage of assets totaled 33.0%,31.8%, compared to 31.4%33.0% at December 31, 2023,2024, due to a $209.8$109.4 million, or 8.1%,3.9%, increasedecrease in securities,securities. while cashCash and cash equivalents decreased to 5.0%4.6% of total assets at December 31, 2024,2025, compared to 6.8%5.0% at December 31, 2023.2024. Our balance sheet management strategy is dynamic and is continually evaluated as market conditions warrant.

Our brokered deposits may consist of CDs and non-maturity deposits which may be raised quickly with terms tailored to our funding needs. We had $115.7$19.8 million in brokered CDs at December 31, 2024.2025, Wea haddecrease nofrom brokered$115.7 CDsmillion at December 31, 2023.2024. At December 31, 2024,2025, our brokered CDs had a weighted average cost of 453406 basis points and remainingmatured maturitieson ofJanuary less8, than 5 months.2026. Our brokered non-maturity deposits decreasedincreased to $627.1$652.4 million at December 31, 2024,2025, of which $480.0$650.0 million are related to our cash flow hedges, from $828.0$627.1 million at December 31, 2023,2024, with a weighted average cost of 321359 and 323321 basis points, respectively. Our wholesale funding policy currently allows for maximum brokered deposits of the lesser of $1.05 billion, or 12% of total assets. Potential higher interest expense and lack of customer loyalty are risks associated with the use of brokered deposits.

Net interest income is one of the principal sources of a financial institution’s earnings stream and represents the difference or spread between interest and fee income generated from interest earning assets and the interest expense paid on interest bearing liabilities. Fluctuations in interest rates or interest rate yield curves, as well as repricing characteristics and volume and changes in the mix of interest earning assets and interest bearing liabilities, materially impact net interest income. During the year ended December 31, 2023, the Federal Reserve increased the target federal funds rate by 100 basis points to 5.25% to 5.50%. During the last four months of 2024, the Federal Reserve reduced target federal funds rate by 100 basis points to 4.25% to 4.50%. During the last four months of 2025, the Federal Reserve reduced target federal funds rate by 75 basis points to 3.50% to 3.75%. If the federal funds rate remains elevated, it may negatively impact our net interest income. See “Part I - Item 1A. Risk Factors – Risks Related to Our Business” in this report for a discussion of risks related to interest rates.

Net interest income was $216.1$221.1 million for the year ended December 31, 2024,2025, compared to $215.0$216.1 million for the same period in 2023,2024, an increase of $1.1$5.0 million, or 0.5%.2.3%. The increase in net interest income for the year ended December 31, 20242025 was due to increases in the average balance and the average yield of interest earning assets, partially offset by increasesdecreases in the average rate paid on our interest bearing liabilities and averagea balancechange in the mix of our interest earning assets and interest bearing liabilities.liabilities, partially offset by the decrease in the average yield of interest earning assets. Total interest income increaseddecreased $54.6$11.3 million, or 15.2%,2.7%, to $414.3$403.1 million for the year ended December 31, 2024,2025, compared to $359.7$414.3 million for the same period in 2023.2024. Total interest expense increaseddecreased $53.5$16.2 million, or 37.0%,8.2%, to $198.2$182.0 million for the year ended December 31, 2024,2025, compared to $144.7$198.2 million for the same period in 2023.2024. Our net interest margin and net interest margin (FTE), a non-GAAP measure, decreasedincreased to 2.81% and 2.93%, respectively, for the year ended December 31, 2025, compared to 2.74% and 2.88%, respectively, for the year ended December 31, 2024, compared to 2.92% and 3.09%, respectively, for the same period in 2023,2024, and our net interest spread and net interest spread (FTE), also a non-GAAP measure, decreasedincreased to 2.14% and 2.26%, respectively, compared to 2.02% and 2.16%, respectively, compared to 2.25% and 2.42%, respectively, for the same period in 2023.2024. See “Non-GAAP Financial Measures” for more information and for a reconciliation to GAAP.

The increasedecrease in total interest expenseincome for the year ended December 31, 2024,2025 was primarily attributable to the increasedecrease in interestthe ratesaverage yield on ourearning interest bearing liabilitiesassets to 3.24% from 2.64%5.25% for the year ended December 31, 2023,2025 andfrom an5.40% increasefor the same period in 2024, partially offset by a change in the average balancemix of our interest bearingearning liabilities of $633.2 million, or 11.5%,assets when compared to the sameyear periodended inDecember 2023.31, 2024.

At December 31, 2024,2025, brokered CDs were 0.3% of deposits, compared to 1.7% of deposits. We had no brokered CDsdeposits at December 31, 2023.2024. Our brokered non-maturity deposits decreasedincreased to 9.5% of deposits at December 31, 2025, compared to 9.4% of deposits at December 31, 2024, compared to 12.6% of deposits at December 31, 2023.2024. Our wholesale funding policy currently allows for maximum brokered deposits of the lesser of $1.05 billion, or 12% of total assets. Potential higher interest expense and lack of customer loyalty are risks associated with the use of brokered deposits.

The following table presents average earning assets and interest bearing liabilities together with the average yield on the earning assets and the average rate of the interest bearing liabilities for the years ended December 31, 2024,2025, 20232024 and 2022.2023. The interest and related yields presented are on a fully taxable-equivalent basis and are therefore,therefore non-GAAP measures. See “Non-GAAP Financial Measures” for more information,information and for a reconciliation to GAAP. The information should be reviewed in conjunction with the consolidated financial statements for the same years then ended (dollars in thousands):

For the year ended December 31, 2024,2025, there was a provision for credit losses of $3.3$3.1 million, compared to $9.2$3.3 million for the year ended December 31, 2023.2024. The decrease in provision expense for the year ended December 31, 2024,2025, compared to 2023,2024, was primarily due to the uncertaintyimprovements in the overall economic environment and its effect on the forecast in ourthe CECL model in 2023.model.

The following table details the provision for (reversal of) loan losses andlosses, provision for (reversal of) off-balance-sheet credit exposures and provision for (reversal of) securities held to maturity for the years ended December 31, 2024,2025, 20232024 and 20222023 (dollars in thousands):

The 16.5%61.8% increasedecrease in noninterest income for the year ended December 31, 2024,2025, when compared to the same period in 2023,2024, was primarily due to aan decreaseincrease in net loss on sale of securities AFS and ana increasedecrease in brokerage servicesBOLI income, partially offset by decreasesincreases in theother netnoninterest income, trust fees, brokerage services income and gain on sale of equity securities, gain on sale of loans, BOLI income and deposit services income.loans.

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

BrokerageTrust services incomefees increased for the year ended December 31, 2024,2025, when compared to the same period in 2023,2024, due to an increase in assetsaccounts under management.management and fee repricing.

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

Critical accounting estimates include a high degree of uncertainty in the underlying assumptions. Management bases its estimates on historical experience, current information and other factors deemed relevant. The development, selection and disclosure of our critical accounting estimates are reviewed with the Audit Committee of the Company’s Board of Directors. Actual results could differ from these estimates. For additional information regarding critical accounting policies, refer to “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates,” “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Allowance for Credit Losses – Loans and Allowance for Credit Losses – Off-Balance-Sheet Credit Exposures,” “Note 1 – Summary of Significant Accounting and Reporting Policies,” “Note 5 – Loans and Allowance for Loan Losses” and “Note 17 – Off-Balance-Sheet Arrangements, Commitments and Contingencies” in the 2025 Form 10-K. As of MarchJune 31,30, 2026, there have been no significant changes to our critical accounting estimates.

Ongoing tariff negotiations and conflict in the Middle East have caused some uncertainty related to inflation levels, energy and gas prices, and their impact on interest rates and the overall economy.economy, including the economy in the State of Texas. While it is too early to discern the likely outcome of these tariff negotiations and military conflicts, the current economic conditions and growth prospects for our markets continue to reflect a solid and overall positive outlook. Higher inflation levels, including higher energy and gas prices, and interest rate fluctuations could have a negative impact on both our consumer and commercial borrowers in the future. Overall, however, we believe that the Texas markets we serve remain healthy.

Our deposits were $6.87$6.17 billion at MarchJune 31,30, 2026, a slight increasedecrease of $9.3$695.8 million, or 0.1%,10.1%, from December 31, 2025. At MarchJune 31,30, 2026, we had 178,823178,853 total deposit accounts with an average balance of $34,000. Our estimated uninsured deposits were 38.4%42.8% of total deposits as of MarchJune 31,30, 2026. When excluding affiliate deposits (Southside-owned deposits) and public fund deposits (all collateralized), our total estimated deposits without insurance or collateral was 21.9%24.9% of total deposits as of MarchJune 31,30, 2026.

Our noninterest bearing deposits represent approximately 20.0%22.8% of total deposits. During the three months ended MarchJune 31,30, 2026, our cost of interest bearing deposits decreased 1833 basis points to 2.65%2.49% from 2.83%2.82% for the three months ended MarchJune 31,30, 2025. Our cost of total deposits for the firstsecond quarter of 2026 decreased 1332 basis points to 2.13%1.94% from 2.26% for the three months ended MarchJune 31,30, 2025.

Our capital ratios and contingent liquidity sources remain solid. The table below shows our total lines of credit, borrowings, total amounts available for future liquidity, and swapped value as of MarchJune 31,30, 2026 (in thousands):

Net income was $23.3$26.8 million for the three months ended MarchJune 31,30, 2026, compared to $21.5$21.8 million for the same period in 2025, an increase of $1.8$5.0 million, or 8.1%.23.0%. The increase in net income was due to a $3.8$3.1 million increase in net interest income, and a $2.4$1.9 million increase in noninterest income, partially offset by a $3.5$581,000 million increasedecrease in noninterest expense,expense and a $652,000$539,000 increasedecrease in provision for credit losseslosses, andpartially offset by a $319,000$1.0 million increase in income tax expense. Earnings per diluted common share were $0.78$0.90 for the three months ended MarchJune 31,30, 2026, compared to $0.71$0.72 for the same period in 2025, an increase of $0.07,$0.18, or 9.9%.25.0%.

Our total assets increased $287.6$249.1 million, or 3.4%,2.9%, to $8.80$8.76 billion at MarchJune 31,30, 2026 from $8.51 billion at December 31, 2025. Our securities portfolio increased by $164.3$78.0 million, or 6.1%,2.9%, to $2.87$2.78 billion at MarchJune 31,30, 2026, compared to $2.70 billion at December 31, 2025. The increase in the securities portfolio was primarily due to an increase in MBS during the threesix months ended MarchJune 31,30, 2026. Our FHLB stock increased $2.3$31.2 million, or 16.4%,222.0%, to $16.4$45.3 million from $14.1 million at December 31, 2025, due to the increase in our FHLB borrowings during the threesix months ended MarchJune 31,30, 2026.

Loans at MarchJune 31,30, 2026 were $4.95 billion, an increase of $128.2$131.6 million, or 2.7%, compared to $4.82 billion at December 31, 2025, due to increases of $93.2$51.5 million in construction loans, $40.6$42.9 million in commercial owner-occupied loans, $22.8 million in commercial loans, $15.3 million in commercial real estate loans and $12.2$10.8 million in commercialmunicipal loans. These increases were partially offset by decreases of $9.6 million in municipal loans, $7.1$8.3 million in 1-4 family residential loans and $1.2$3.5 million in loans to individuals. Loans held for sale increaseddecreased $146,000,$1.0 million, or 11.0%,74.4%, to $1.5 million$341,000 at MarchJune 31,30, 2026 from $1.3 million at December 31, 2025.

Our nonperforming assets at MarchJune 31,30, 2026 decreased $28.5$28.4 million, or 74.6%,74.4%, to $9.7$9.8 million and represented 0.11% of total assets, compared to $38.2 million, or 0.45% of total assets, at December 31, 2025, primarily due to a decrease of $27.5 million in restructured loans. The decrease in restructured loans was due to the payoff of a $27.5 million restructured commercial real estate loan in the first quarter that was originally restructured with an extension of maturity in the first quarter of 2025 to allow for an extended lease up period. Nonaccruing loans decreased $927,000,$856,000, or 8.8%,8.2%, to $9.6 million, and the ratio of nonaccruing loans to total loans was 0.19% and 0.22% for MarchJune 31,30, 2026 and December 31, 2025, respectively. Repossessed assets were $7,000$5,000 at MarchJune 31,30, 2026, compared to no repossessed assets at December 31, 2025. There was $128,000$116,000 of OREO at MarchJune 31,30, 2026 and $248,000 at December 31, 2025.

Our deposits increaseddecreased $9.3$695.8 million, or 0.1%,10.1%, andto remained$6.17 relativelybillion unchangedat June 30, 2026, from $6.87 billion at December 31, 2025.2025, Brokereddue to decreases in brokered deposits increasedof $110.7$667.2 million, or 16.5%, partially offset by decreases in retail deposits of $82.0 million, or 1.6%,99.2%, and public fund deposits of $19.4$40.1 million, or 1.7%.3.5%, Thepartially decreaseoffset by an increase in retail deposits of $82.0$11.5 million, or 0.2%. The marginal increase in retail deposits of $11.5 million consists of $53.1a $36.0 million ofincrease in interest bearing deposits, partially offset by a $24.5 million decrease in noninterest bearing deposits and $28.9 million of interest bearing deposits.

OtherTotal FHLB borrowings increased $146.9$784.7 million, or 70.4%,371.7%, to $355.5$995.8 million at MarchJune 31,30, 2026,2026 from $208.7$211.1 million at December 31, 2025, due to a $155.0shift millionfrom increasebrokered indeposits FRDWinto FHLB borrowings.

Our subordinated notes, net of unamortized debt issuance costs, decreased $92.1 million, or 38.4%, to $147.5$147.6 million at MarchJune 31,30, 2026 from $239.7 million at December 31, 2025, as a result of the full redemption of $100.0 million in aggregate principal amount of 3.875% fixed-to-floating rate subordinated notes during the first quarter of 2026. Refer to “Note 7 – Long-term Debt” in our consolidated financial statements included in this report for a detailed description of the terms of the redemption of the subordinated notes.

Our total shareholders’ equity at MarchJune 31,30, 2026 increased 0.9%,4.1%, or $7.2$34.8 million, to $854.9$882.5 million, or 9.7%10.1% of total assets, compared to $847.6 million, or 10.0% of total assets, at December 31, 2025. The increase in shareholders’ equity was the result of net income of $23.3$50.1 million, other comprehensive income of $3.6 million, stock compensation expense of $1.6$2.7 million and common stock issued under our dividend reinvestment plan of $233,000,$466,000, partially offset by cash dividends paid of $10.7 million, other comprehensive loss of $7.0$21.4 million and net issuance of common stock under employee stock plans of $172,000.$499,000.

We ended the firstsecond quarter of 2026 with approximately $384.4$279.3 million in available liquidity from the FRDW, in addition to the approximately $2.22$1.63 billion available from the credit line with FHLB due primarily to the blanket lien on our loan portfolio and to a lesser extent, securities available as collateral. At MarchJune 31,30, 2026, the estimated deposits, without insurance or collateral, to total deposits, excluding affiliate deposits (Southside-owned deposits) was 21.9%,24.9%, or $1.51$1.53 billion.

From time to time, we may enter into certain interest rate swap contracts with third parties using specific variable rate, as well as short-term (generally three months or less) fixed rate borrowings designated as cash flow hedges under ASC Topic 815. At MarchJune 31,30, 2026, we had swap contracts covering $385$325 million in brokeredFHLB depositsborrowings and $230$290 million in FRDW borrowings for a total of $615 million of cash flow hedges. We expect the cash flows from swap contracts to be highly effective in hedging the variability in future cash flows attributable to fluctuations in the underlying SOFR rate. At MarchJune 31,30, 2026, these contracts reflected a weighted average rate of 3.78%3.81% with a remaining average weighted maturity of 1.51.3 years. During the threesix months ended MarchJune 31,30, 2026, $245 million cash flow hedge interest rate swap contracts matured. As of MarchJune 31,30, 2026, a pre-tax unrealized gain of $1.7$3.8 million was recognized in other comprehensive income, and there was no ineffective portion of these hedges. At December 31, 2025, the outstanding balance of cash flow hedges was $860 million. Refer to “Note 9 – Derivative Financial Instruments and Hedging Activities” in our consolidated financial statements included in this report for a detailed description of our hedging policy and methodology related to derivative instruments.

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

Our securities portfolio increased $164.3$78.0 million, or 6.1%,2.9%, from $2.70 billion at December 31, 2025 to $2.87$2.78 billion at MarchJune 31,30, 2026, with an increaseincreases in U.S. Agency MBS, and to a lesser extent, corporate bonds, partially offset by decreasesa decrease in corporate bonds and municipal securities. As a result, securities totaled 32.6%31.7% of assets at MarchJune 31,30, 2026, compared to 31.8% at December 31, 2025. The increase in the U.S. Agency MBS was due to the purchase of $313.5$332.4 million of low premium and discounted MBS with coupons ranging from 4.50% to 5.50%. The increase in corporate bonds was due to the purchase of $6.0 million in 6.25% coupon corporate bonds. The net increase in the total securities portfolio was due to securities purchased during the threesix months ended MarchJune 31,30, 2026, which more than offset maturities, principal payments,payments and net amortization and the decrease in the fair value of the portfolio.amortization.

Cash and cash equivalents decreased to 4.4%4.5% of total assets at MarchJune 31,30, 2026, compared to 4.6% at December 31, 2025.

Our FHLB borrowings increased $104.8$784.7 million, or 49.6%,371.7%, to $315.9$995.8 million at MarchJune 31,30, 20262026, from $211.1 million at December 31, 2025. As of MarchJune 31,30, 2026 and December 31, 2025, we had $265.0$355.0 million and $110.0 million, respectively, in borrowings from the FRDW.

As of MarchJune 31,30, 2026, our total wholesale funding as a percentage of deposits, not including brokered deposits, increased to 22.4%22.0% from 16.0% at December 31, 2025.

Our brokered deposits may consist of CDs and non-maturity deposits which may be raised quickly with terms tailored to our funding needs. We had $24.1 million inno brokered CDs at MarchJune 31,30, 2026, of which $10.0 million are relatedcompared to our cash flow hedges, an increase from $19.8 million at December 31, 2025. At March 31, 2026, our brokered CDs had a weighted average cost of 368 basis points and remaining maturities of less than a month. Our brokered non-maturity deposits increaseddecreased to $758.8$5.0 million at MarchJune 31,30, 2026, of which $375.0 million are related to our cash flow hedges, from $652.4 million at December 31, 2025, with a weighted average cost of 376373 and 359 basis points, respectively. Our wholesale funding policy currently allows for maximum brokered deposits of the lesser of $1.05 billion, or 12% of total assets. Potential higher interest expense and lack of customer loyalty are risks associated with the use of brokered deposits.

At MarchJune 31,30, 2026, thea majorityportion of the securities portfolio was funded by non-maturity deposits, some of which are included in wholesale funding that accounts for approximately 47%49% of the funding source, of which approximately 45% is swapped at a fixed rate, providing protection from rising interest rates.

We have partial term fair value hedges for certain of our fixed rate callable AFS municipal securities and partial term fair value hedges of fixed rate AFS MBS using the portfolio layer method. The instruments are designated as fair value hedges as the changes in the fair value of the interest rate swap are expected to partially offset changes in the fair value of the hedged item attributable to changes in the SOFR swap rate, the designated benchmark interest rate. As of MarchJune 31,30, 2026, $24.1 million in hedging instruments were used to hedge municipal securities with a carrying amount of $20.7$21.7 million included in our AFS securities portfolio in our consolidated balance sheets, representing approximately 12.0%12.2% of the AFS municipal portfolio. As of MarchJune 31,30, 2026, $234.0$334.0 million in hedging instruments were used to hedge a layer100.0% of the closed portfolio ofour AFS MBS portfolio with a carrying value of $980.8$1.37 million, or 67.3% of the AFS MBS portfolio.billion. These derivative contracts involve the receipt of floating rate interest from a counterparty in exchange for us making fixed-rate payments over the life of the agreement, without the exchange of the underlying notional value.

Net interest income is one of the principal sources of a financial institution’s earnings stream and represents the difference or spread between interest and fee income generated from interest earning assets and the interest expense paid on interest bearing liabilities. Fluctuations in interest rates or interest rate yield curves, as well as repricing characteristics and volume and changes in the mix of interest earning assets and interest bearing liabilities, materially impact net interest income. During the last four months of 2025, the Federal Reserve reduced the target federal funds rate by 75 basis points to 3.50% to 3.75%. During the threesix months ended MarchJune 31,30, 2026, the Federal Reserve held the target federal funds rate steady. If the federal funds rate remains elevated or is not further reduced, it maycould negatively impact our net interest income.

Net interest income for the three months ended MarchJune 31,30, 2026 increased $3.8$3.1 million, or 7.1%,5.7%, compared to the same period in 2025. The increase in net interest income was primarily due to an increase in the average balance of our interest earning assets and a decrease in the average rate paid on our interest bearing liabilities and an increase in the volume and change in the mix of our interest earning assets,liabilities, partially offset by an increase in the average balance and mix of our interest bearing liabilities.liabilities and a decrease in the average yield of our interest earning assets. Total interest income increased $2.0$5.4 million, or 2.0%,5.4%, to $102.3$103.9 million for the three months ended MarchJune 31,30, 2026, compared to $100.3$98.6 million during the same period in 2025. Total interest expense decreasedincreased $1.9$2.3 million, or 4.0%,5.2%, to $44.6$46.6 million for the three months ended MarchJune 31,30, 2026, compared to $46.4$44.3 million for the same period in 2025. Our net interest margin and our net interest margin (FTE), a non-GAAP measure, both increaseddecreased to 2.91%2.80% and 3.01%,2.90%, respectively, for the three months ended MarchJune 31,30, 2026, compared to 2.74%2.82% and 2.86%,2.95%, respectively, for the same period in 2025. Our net interest spread and net interest spread (FTE), also a non-GAAP measure, increasedwas to 2.28%2.17% and 2.38%,2.26%, respectively, for the three months ended MarchJune 31,30, 2026, compared to 2.08%2.15% and 2.20%,2.27%, respectively, for the same period in 2025. See “Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.

Quarterly Analysis of Changes in Interest Income and Interest Expense The following table presents on a fully taxable-equivalent basis, a non-GAAP measure, the net change in net interest income and sets forth the dollar amount of increase (decrease) in the average volume of interest earning assets and interest bearing liabilities and changes in yields/rates. Volume/Yield/Rate variances (change in volume times change in yield/rate) have been allocated to amounts attributable to changes in volumes and to changes in yields/rates in proportion to the amounts directly attributable to those changes (in thousands). The comparison between the quarters includes an additional change factor that shows 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.

The increase in total interest income for the three months ended MarchJune 31,30, 2026, was attributable to ana $500.8 million, or 6.5%, increase in the average balance of and a change in the mix of our interest earning assets when compared to the same period in 2025, partially offset by a decrease in the average yield on interest earning assets to 5.17% when compared to 5.25% for the same period in 2025. The decreaseincrease in total interest expense for the three months ended MarchJune 31,30, 2026, was primarily attributable to the decrease in interest rates on our interest bearing liabilities to 2.88% for the three months ended March 31, 2026 from 3.03% for the same period in 2025, partially offset by an increase in the average balance of our interest bearing liabilities of $69.8$449.3 million, or 1.1%, for the three months ended March 31, 2026,7.5%, compared to the same period in 2025, partially offset by the decrease in the average rate paid on our interest bearing liabilities to 2.91% for the three months ended June 30, 2026 from 2.98% for the same period in 2025.

The following table presents average earning assets and interest bearing liabilities together with the average yield on the earning assets and the average rate of the interest bearing liabilities (dollars in thousands) for the three months ended MarchJune 31,30, 2026 and 2025. The interest and related yields presented are on a fully taxable-equivalent basis and are therefore non-GAAP measures. See “Non-GAAP Financial Measures” for more information and for a reconciliation to GAAP.

Note: As of MarchJune 31,30, 2026 and 2025, loans totaling $9.6 million and $4.3$5.0 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

The 23.2%15.3% increase in noninterest income for the three months ended MarchJune 31,30, 2026, when compared to the same period in 2025, was due to increases in BOLI income, trust fees, other noninterest income, deposit services and brokerage services income. The 18.9% increase in noninterest income for the six months ended June 30, 2026, when compared to the same period in 2025, was due to increases in all noninterest income categories, however, the primary increases occurred in other noninterest income, trust feesfees, BOLI and a decrease in net loss on sale of AFS securities.

During the threesix months ended MarchJune 31,30, 2025, we sold MBS that resulted in a net loss on sale of AFS securities of $554,000.

Gain on sale of loans increaseddecreased for the three months ended MarchJune 31,30, 2026, when compared to the same period in 2025, due to a decrease in the volume of loans sold. During the six months ended June 30, 2026, gain on sale of loans increased when compared to the same period in 2025, due to an increase in the volumereturn ofon loans sold.

Trust fees increased for the three and six months ended MarchJune 31,30, 2026, when compared to the same periods in 2025, due to an increase in accounts under managementmanagement, and to a lesser extent, fee repricing.

The increase in BOLI income for the three and six months ended MarchJune 31,30, 2026, when compared to the same periodperiods in 2025, was primarily due to death benefits of $47,000 and $543,000 realized in the first and second quarter of 2026, respectively, for former covered officers, and to a lesser extent, the purchase of a new policy for $5.5 million late in the fourth quarter of 2025 and to a lesser extent, a death benefit of $47,000 realized in the first quarter of 2026 for a former covered officer.2025.

Brokerage services income increased for the three and six months ended MarchJune 31,30, 2026, when compared to the same periodperiods in 2025, due to an increase in assets under management.

Other noninterest income increased for the three and six months ended MarchJune 31,30, 2026, when compared to the same periodperiods in 2025, primarily due to increases in swap fee income, mortgage servicing fee income, merchant services income and letter of credit fees, partially offset by a decrease in equity investmentfee income.

The increasedecrease in noninterest expense for the three months ended MarchJune 31,30, 2026, when compared to the same period in 2025, was primarily due to a decrease in other noninterest expense, partially offset by increases in salaries and employee benefits and professional fees. The increase in noninterest expense for the six months ended June 30, 2026, when compared to the same period in 2025, was primarily due to increases in salaries and employee benefits expense,expense and loss on redemption of subordinated notes, partially offset by a decrease in other noninterest expense and software and data processing expense.

Salaries and employee benefits expense increased during the three and six months ended MarchJune 31,30, 2026, compared to the same periodperiods in 2025, due to increases in direct salary expense, retirement expense and health insurance expense.

For the three and six months ended MarchJune 31,30, 2026, direct salary expense increased $1.4$652,000, or 3.4%, and $2.1 million, or 7.4%,5.4%, respectively, when compared to the same periodperiods in 2025, primarily due to normal salary increases effective in the first quarter of 2026 and an increase in stock compensation expense.

Retirement expense, included in salaries and employee benefits, increased $440,000,$21,000, or 52.7%,2.3%, and $460,000, or 26.3%, for the three and six months ended MarchJune 31,30, 2026, respectively, when compared to the same periodperiods in 2025. This increase during the six months ended June 30, 2026, was primarily due to an increase in our split dollar expense related to the execution of a new split dollar agreement with an executive officer.

Health and life insurance expense, included in salaries and employee benefits, increased $70,000,$29,000, or 3.5%,1.4%, and $99,000, or 2.4%, for the three and six months ended MarchJune 31,30, 2026, respectively, when compared to the same periodperiods in 2025, primarily due to premiums for a new short-term disability policy. We have a self-insured health plan which is supplemented with a stop loss policy.