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

Our net income and cash flows depend to a significant extent on the difference between interest rates earned on interest-earning assets and the rates paid on interest-bearing liabilities. These rates are highly sensitive to many factors beyond our control, including general economic conditions and credit and monetary policies of governmental authorities. Changes in the credit or monetary policies of governmental authorities, particularly the Federal Reserve, could significantly impact market interest rates and our financial performance. For instance, changes in the nature of open market transactions in U.S. government securities, the discount rate or the federal funds rate on bank borrowings, and reserve requirements against bank deposits, could lead to increases in the costs associated with our business. In addition, suchSuch changes could influence the interest we receive on loans and securities and the amount of interest we pay on deposits. If the interest rates we pay on deposits increases at a faster rate than the interest we receive on loans and other investments, then our net interest income could be adversely affected. If the Federal Reserve raises interest rates, we may not be able to reflect increasing interest rates in rates charged on loans or paid on deposits due to competitive pressures, which would negatively impact our mix of deposits and other funding sources, reduce demand for our products and services, or otherwise negatively impact our financial condition and results of operations. Decreases in interest rates may increase prepayment speeds of certain assets, which may adversely impact our net interest income. In addition, the impact of these changes may be magnified if we do not effectively manage the relative sensitivity of our assets and liabilities to changes in market interest rates, and our ability to manage such relative sensitivity may be adversely impacted by competitive conditions in the banking industry and in the financial markets. Due to the volatility and changing conditions in the national economy and uncertainty regarding the rate of inflation and the impacts of governmental policies to combat elevated inflation, we cannot predict with certainty how future changes in interest rates, deposit levels and loan demand will impact our business and profitability.

During 2024 and previousIn recent years, in response to rising market interest rates, our cost of funds has increased due to customer migration from lower-cost to higher-cost deposit accounts, including interest-bearing transaction accounts and time deposits, which has negatively impacted our cost of funds and net interest margin.

As of December 31, 2024,2025, we owned $6.17 billion of investment securities, which included $3.64$3.27 billion in held-to-maturity securities and $2.53 billion in available for saleavailable-for-sale securities. The fair value of our investment securities may be adversely affected by market conditions, including changes in interest rates, and the occurrence of any events adversely affecting the issuer of particular securities in our investments portfolio, including changes in the issuer’s credit quality. For available-for-sale securities, the unrealized gains and losses are recorded in equity, net of tax, in accumulated other comprehensive income (“AOCI”).

On a quarterly basis, we analyze whether there has been a decline in fair value below the amortized cost basis of our available for sale investment securities to determine whether there is a credit loss associated with the decline in fair value. We consider the nature of the collateral, potential future changes in collateral values, default rates, delinquency rates, third-party guarantees, credit ratings, interest rate changes since purchase, volatility of the security’s fair value and historical loss information for financial assets secured with similar collateral among other factors. We use a systematic methodology to determine the allowance for credit losses (“ACL”) for any investment securities held to maturity. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on theany held-to-maturity portfolio. We consider the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the investment portfolio. Our estimate of the ACL involves a high degree of judgment; therefore, our process for determining expected credit losses may result in a range of expected credit losses. We would monitor theany held-to-maturity portfolio on a quarterly basis to determine whether a valuation account needs to be recorded. Because of changing economic and market conditions affecting issuers, we may be required to recognize expected credit losses on securities in future periods, which could have a material adverse effect on our business, financial condition or results of operations.

It is likely that some portion of our loans will become delinquent, and some loans may only be partially repaid or may never be repaid. We maintain an allowance for credit losses, which is a reserve established through a provision for credit losses charged to expense, that results from management’s review of the existing portfolio and management’s assessment of the portfolio’s collectability. Our methodology for establishing the appropriateness of the allowance for credit losses inherently involves a high degree of subjectivity and judgmentdifficult andjudgments, requiresrequiring management to make significant estimates and predictions regarding credit risks, future market conditions, and other interrelated factors, all of which are subject to material changes and may not necessarily be in our control. Some assumptions require management to forecast how borrowers will perform in changing and unprecedented economic conditions. If our methodology is flawed, or if we experience changes in market or economic conditions, or in conditions of our borrowers, the allowance may become inadequate, which would result in additional provisions to increase the allowance to an appropriate level. This could negatively impact our business, including through a material decrease in our earnings. If we fail to accurately identify the appropriate economic indicators, to accurately estimate the timing of future changes in economic conditions, or to accurately estimate the impacts of future changes in economic conditions to our borrowers, the accuracy of our loss forecasts and allowance estimates could be adversely impacted. In addition, prudential regulators also periodically review our allowance for credit losses and have the ability, based on their perspective, which may be different from ours, to require that we make adjustments to the allowance, which could also have a negative effect on our results of operations or financial condition. Although we believe our allowance for credit losses are adequate to absorb losses that are inherent in our loan portfolio, we cannot predict the timing or severity of such losses nor give any assurance that our allowance will be adequate in the future.

Loans secured by real estate make up a substantial portion of our loan portfolio. In making certain of these loans, we rely on estimates concerning the value of the real estate provided by independent appraisers. However, these appraisals are only estimates of value, and mistakes of fact or judgementjudgment on the part of the appraiser could adversely affect the reliability of their appraisals. Furthermore, the value of the real estate could change (including by declining) based on events occurring after the time of the appraisal, and preparing foreclosed real estate for sale, and then selling such real estate collateral, may impose significant additional costs on us. We, therefore, may not be able to fully recover the outstanding balance of a loan in the event of its default if the real estate serving as collateral has declined in value from its original estimate, which could have a material adverse impact on our business, financial condition or results of operations.

Our business, financial condition, and results of operations and liquidity could be adversely affected by developments impacting the financial services industry, such as recent bank failures or concerns involving liquidity.industry.

PriorOur eventsfinancial performance and liquidity are highly dependent on conditions in the financial services industry,industry. such as the 2023 closures of Silicon Valley Bank, Signature Bank and First Republic Bank, have caused general uncertainty and concern regarding the adequacy of liquidity of the financial services industry generally. While we rely on different sources of funding to meet potential liquidity needs, ourOur business strategies are largely based on access to funding from customer deposits and supplemental funding provided by wholesale or other secondary liquidity sources. Events in the financial services industry can cause general uncertainty and concern regarding the adequacy of liquidity in the financial services industry generally, for example following certain significant bank closures during 2023. Deposit levels may be affected by various industry factors, including interest rates paid by competitors, general interest rate levels, returns available to customers on alternative investments, conditions in the financial services industry specifically and general economic conditions that impact the amount of liquidity in the economy and savings levels, and also by factors that impact customers’ perception of our financial condition and capital and liquidity levels. In response to the closures of Silicon Valley Bank and Signature Bank, in 2023 the Secretary of the U.S. Department of the Treasury approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank and Signature Bank in a manner that fully protected depositors by utilizing the Deposit Insurance Fund, and the Federal Reserve announced it would make available additional funding for eligible depository institutions to help assure banks have the ability to meet the needs of their depositors. While these steps by the banking regulators to support liquidity in the industry, including following certain significant bank closures during 2023, have helped customers’ perception of the financial markets and financial services industry generally, a number of factors, including further bank closures, or deposit outflows (and particularly sudden deposit outflows) from banks, may drive additional deposit outflows, increased borrowing and funding costs, and increased competition for liquidity, any of which could have a material adverse impact on our financial performance or financial condition.

We face strong competition from other banks, bank holding companies, and financial services companies.companies and nonbank competitors.

Advancements in technology have created the ability for financial transactions that have historically often involved traditional banks to be conducted through alternative channels. For example, consumers can now hold funds in brokerage accounts and internet-only banks, or indeed with essentially any bank that provides for online account opening and online banking. Consumers can also complete transactions such as the purchase or sale of goods and services, the payment of bills, and the transfer of funds without the direct assistance of banks. Indeed, non-traditional financial services firms, such as financial technology (FinTech) companies, have begun to offer a variety of services traditionally provided by banks and other financial institutions. Consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds, general-purpose reloadable prepaid cards, or in other types of assets, including crypto currencies or other digital assets. The resulting increased competition as trends toward digital financial transactions have accelerated could result in the loss of fee income and customer deposits, which could negatively impact our financial condition, results of operations, and liquidity. It could also require additional, costly investments in technology to remain competitive.

Fraud is a major, and increasing, operational risk, particularly for financial institutions. We continue to experience fraud attempts and losses through, for example, deposit fraud (such as wire fraud and check fraud) and loan fraud. Fraud has also arisen from the misconduct of our employees. The methods used to perpetrate and combat fraud continue to evolve, particularly as advances in technology occur. While we seek to be vigilant in the prevention, detection, and remediation of fraud events, some fraud loss is unavoidable, and the risk of major fraud loss cannot be eliminated. Our business also depends on our employees, as well as third-party service providers, to process a large number of increasingly complex transactions. We could be materially and adversely affected if employees, clients, counterparties, or other third parties caused an operational breakdown or failure, either from human error, fraudulent manipulation, or purposeful damage to any of our operations or systems. Our efforts to combat fraud might not be successful in mitigating or reducing fraudulent attempts resulting in financial losses, increased litigation risk and reputational harm.

To assist with the management of our credit, liquidity, operations, and compliance functions and risks, we have developed, and currently use, various models and other analytical tools, including certain estimations. The models and estimations often take into account assumptions and historical trends and are, in some cases, based on subjective judgments. While these quantitative techniques and approaches improve our decision-making, they also create the possibility that faulty data or flawed quantitative approaches could yield adverse outcomes or regulatory scrutiny. Additionally, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision-making. We also rely on model inputs that are provided by third parties which have similar risks. As such, the models and estimations may not be effective in identifying and managing risks, which could adversely impact our financial condition and results of operations. Inadequate models may also result in compliance failures, which could lead to increased scrutiny by our regulators.

Our businesses are dependent on our ability and the ability of our third-party service providers to process, record and monitor a large number of transactions.transactions and personally identifiable information. If the financial, accounting, data processing or other operating systems and facilities fail to operate properly, become disabled, experience security breaches or have other significant shortcomings, our results of operations could be materially, adversely affected.

Although we and our third party service providers devote significant resources to maintain and regularly upgrade our systems and processes that are designed to protect the security of computer systems, software, networks and other technology assets and the confidentiality, integrity and availability of information belonging to us and our customers, there is no assurance that our security systems and those of our third-party service providers will provide absolute security. Financial services institutions and companies engaged in data processing have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks and other means. Certain financial institutions in the United States have also experienced attacks from technically sophisticated and well-resourced third parties that were intended to disrupt normal business activities by making internet banking systems inaccessible to customers for extended periods. These “denial-of-service” attacks have not breached our data security systems, but require substantial resources to defend, and may affect customer satisfaction and behavior. We, our customers, regulators and other third parties, including other financial services institutions and companies engaged in data processing, have been subject to, and are likely to continue to be the target of, cyber-attacks.

We are charged with maintaining compliance with all applicable banking laws and regulations, including, among others, fair lending, CRA, consumer compliance, BSA and anti-money laundering, capital, and other regulations described herein under “Item 1. Business - Supervision and Regulation.” Our compliance with these laws is costly and potentially restricts certain of our activities, including payment of dividends, mergers and acquisitions, investments, loans, and interest rates charged, interest rates paid and deposits and locations of our offices. Various agencies, including, without limitation, the FRB, CFPB, Arkansas State Bank Department, and the Department of Justice, have the ability to institute proceedings to address compliance failures. Should those agencies be successful in the case of such a proceeding, we could become subject to material sanctions, including, among other things, monetary penalties and restrictions on our ability to engage in mergers and acquisitions and other growth-oriented activities. Compliance failures may also result in litigation instituted by private parties, including consumers, which could result in material adverse impacts on our business.

We are subject to litigation in the ordinary course of our business, and adverse rulings, judgements,judgments, settlements, and other outcomes of such litigation, as well as our associated legal expenses, may adversely affect our results.

•We may not have sufficient earnings since our primary source of income, the payment of dividends to us by our subsidiary bank, is subject to federal and state laws that limit the ability of the bank to pay dividends, and recently we have had to apply for state and federal regulatory approval for certain dividends paid by the Bank to the Company;

If we fail to pay dividends, capital appreciation, if any, of our common stock may be the sole opportunity for gains on an investment in our common stock. In addition, in the event our subsidiary bank becomes unable to pay dividends to us, we may not be able to service our debt or pay our other obligations or pay dividends on our common stock. For more information on these regulatory restrictions on the ability of the Bank to pay dividends to the Company, see “Supervision and Regulation - The Company” above. Accordingly, our inability to receive dividends from our subsidiary bank could also have a material adverse effect on our business, financial condition and results of operations and the value of your investment in our common stock. Our subsidiary bank’s ability to pay dividends or make other payments to us, as well as our ability to pay dividends on our common stock, is limited by the bank’s obligation to maintain sufficient capital and by other general regulatory restrictions on its dividends, including restrictions imposed by state laws and regulations.

We have operations in the mid-south and certain great plains states, areas susceptible to tornados and severe weather events. In addition, our operations and a significant number of our branches are located in the New Madrid Seismic Zone. While we have in place a business continuity plan, such events could potentially disrupt our operations or result in physical damage to our branch office locations. Severe weather events or earthquakes could also impact the value of any collateral we hold, or significantly disrupt the local economies in the markets that we serve, manifesting in a decline in loan originations, as well as an increase in the risk of delinquencies, defaults, and foreclosures. Those disruptions could result in declines in economic conditions in our geographic markets or industries in which our borrowers and customers operate and impact their ability to repay loans or maintain deposits. In recent years, federal banking regulators have focused on the physical and financial risks to financial institutions associated with climate change; although, expectations with respect to these matters have been shifting, and it is difficult to predict changes in priorities and requirements with respect to these matters, including any changes in compliance costs relating to such changes.

The accounting policies that we view as critical to us are those relating to estimates and judgments regarding (a) the determination of the adequacy of the allowance for credit losses, (b) acquisition accounting and valuation of loans, (c) the valuation of goodwill and the useful lives applied to intangible assets,assets and (d) the valuation of stock-based compensation plans and (e) income taxes.

To quantitatively test goodwill for impairment, a present value of discounted cash flows calculation is completed and relies on several assumptions that have a level of subjectivity and judgement.judgment. These assumptions are dependent on market and economic conditions. Key inputs to estimate terminal fair value of the Company include projected forecasts, noninterest expense savings and a pricing multiple based on a group of peer banks with similar characteristics. These inputs are discounted by the cost of equity, which includes assumptions involving our beta; equity risk, size and company premiums; and the 20-year treasury rate. Assumptions used in calculating the cost of equity are obtained from market and third-party data. Results are compared to book value; no impairment was indicated as of December 31, 2024.2025. JudgementJudgment is inherent in assessing goodwill for impairment. The various assumptions used in assessing goodwill for impairment involve uncertainties that are beyond our control and could cause actual results to differ materially from those projected.

Our net income available to common shareholdersloss for the year ended December 31, 20242025 was $152.7$397.6 million, or $1.21$(2.95) diluted earnings per share, compared to $175.1net income of $152.7 million, or $1.38$1.21 diluted earnings per share, for the same period in 2023.2024. Included in 2025 results were $630.7 million of certain items, net of tax, that were primarily related to the loss on sale of securities, branch right sizing initiatives, loss on sale of an equipment finance business and early retirement program costs. Included in 2024 results were $25.2 million of certain items, net of tax, that were primarily related to the loss on sale of securities, a FDIC special assessment and branch right sizing initiatives. Included in 2023 results were $32.7 million of certain items, net of tax, that were primarily related to early retirement program costs, loss on sale of securities, a FDIC special assessment and branch right sizing initiatives. Adjusting for these certain items, adjusted earnings for the year ended December 31, 20242025 were $233.1 million, or $1.73 adjusted diluted earnings per share, compared to $177.9 million, or $1.41 adjusted diluted earnings per share, compared to $207.7 million, or $1.64 adjusted diluted earnings per share, in 2023.2024. See GAAP Reconciliation of Non-GAAP Financial Measures for additional discussion and reconciliations of non-GAAP measures.

•Deposits were relatively stable over the year, which highlights the granularity of our deposit base, as well as the long-term relationships we have with many of our customers. Total deposits as of December 31, 20242025 were $21.89$20.18 billion, compared to $22.24$21.89 billion as of December 31, 2023.2024. Uninsured deposits (excluding collateralized deposits and intercompany deposits) as of December 31, 20242025 were approximately $4.63$4.55 billion, or 21%23% of total deposits.

•Capital levels wereremained steadystrong duringover the year,period, with all regulatory capital ratios remaining significantly above “well-capitalized” guidelines as of December 31, 20242025 (see Table 18 in the Risk-Based Capital section below). As of December 31, 2024,2025, our ratio of common equity to total assets was 13.13%,13.93%, the ratio of tangible common equity to tangible assets was 8.29%8.71% and our Tier 1 leverage ratio was 9.74%.10.06%.

•We maintained a significant liquidity position with aThe loan to deposit ratio was 87% as of December 31, 2025, compared to 78% as of December 31, 2024, compared to 76% as of December 31, 2023.2024. Additional liquidity sources available to us as of December 31, 20242025 totaled $10.90$9.32 billionbillion, and our uninsured, non-collateralized deposit coverage ratio was 2.4x.2.0x.

WeDuring the year, we increased the provision for credit losses on two specific credit relationships that we have been watching for some time due to unfavorable events that occurred for both credits. Subsequently, we charged off the uncollectible portion related to both credits during the year ended December 31, 2025. Other than with respect to these two specific credit relationships, we believe credit trends throughout the industry are beginning to normalize after an extended period at historically low levels. Our asset quality metricsin remainour strongportfolio remains sound and reflectreflects our conservative credit culture, as well as our focus on maintaining disciplined pricing and conservative underwriting standards given the current economic environment. Total nonperforming loans as of December 31, 20242025 were $110.8$112.7 million, as compared to $84.5$110.8 million at December 31, 2023.2024. Non-performing assets as a percent of total assets were 0.45%,0.51% comparedand to 0.33%0.45% at December 31, 20242025 and 2023,2024, respectively.

The FRB sets various benchmark interest rates which influence the general market rates of interest, including the deposit and loan rates offered by financial institutions. Between December 2015 and December 2018, the FRB had been gradually raising benchmark interest rates. The FRB target for the federal funds rate, which is the cost to banks of immediately available overnight funds, increased gradually from 0% - 0.50% in December 2015 to 2.25% - 2.50% over a three year period. The federal funds rate was flat until the FRB began to lower the rate in August 2019 and ultimately reduced it to 1.50% - 1.75% in October 2019. During March 2020, the Federal Open Market Committee (“FOMC”) of the FRB substantially reduced interest rates in response to the economic crisis brought on by the COVID-19 pandemic. The federal funds rate was cut to a range of 0% - 0.25%, where it remained throughout 2021 and into early 2022. During March 2022, the FOMC began a series of rate increases in an effort to curb rising inflation. From early 2022 through 2023, the federal funds rate range was increased on eleven occasions and ended 2023 with a range set at 5.25% - 5.50%. DuringFrom 2024,2024 through 2025, as inflation declined, the FOMC cut rates on threesix occasions to a period end range of 4.25%3.50% - 4.50%.3.75%. To date in 2025,2026, rates have been held steady by the FOMC.

Our loan portfolio is significantly affected by changes in the prime interest rate. The prime interest rate, which is the rate offered on loans to borrowers with strong credit, also increased from 3.25% to 5.50% during the years 2015 through 2018. The prime interest rate remained flat until it began to decrease in July 2019 and was eventually reduced to 4.75% in October 2019. Similarly to the reduction in the federal funds rate, the prime rate was cut to 3.25% in mid-March of 2020 in response to the COVID-19 pandemic and remained unchanged throughout 2021 and into early 2022. Paralleling the federal funds rate, multiple increases by the Federal Reserve during 2022 and 2023 increased the prime rate to 8.50% as of the end of 2023 and a series of rate cuts during 2024 and 2025 decreased the prime rate to 7.50%6.75% at the end of 2024.2025. To date in 2025,2026, the prime interest rate has also been held steady.

Our practice is to limit exposure to interest rate movements by maintaining a significant portion of earning assets and interest bearing liabilities in short-term repricing. In the last several years, on average, approximately 44%48% of our loan portfolio and approximately 92%94% of our time deposits have repriced in one year or less. OurAs of December 31, 2025, our current interest rate sensitivity shows that approximately 49%60% of our loans and 97%96% of our time deposits will reprice in the next year, largely contributing to our liability-sensitive position at December 31, 2024.year.

For the year ended December 31, 2024,2025, net interest income on a fully taxable equivalent basis was $654.3$738.7 million, aan decreaseincrease of $21.3$84.5 million, or 3.2%,12.9%, over the same period in 2023.2024. The decreaseincrease in net interest income was primarily the result of a $102.3$74.5 million increasedecrease in interest income, more than offset by a $123.6$159.0 million increasedecrease in interest expense.

The $123.6$159.0 million increasedecrease in interest expense is mostly due to the increasedecrease in our deposit account rates over the period, combined with the change in deposit mix as the market experiences a shift in consumer sentiment given the attractiveness of higher yielding time deposits in the current higher interest rate environment.period. Interest expense increaseddecreased $113.5$85.8 million due to the increasedecline in rates of 6857 basis points on interest-bearing deposit accounts and increaseddecreased $13.8$42.1 million duerelated to the increasedecrease in time deposit volume over the period. TheFurther, increasea decrease of $31.7 million in interest expense was partially offset by a decrease of $5.4 million related to areductions decreasedin reliancethe amounts outstanding under and rates on otherwholesale borrowings sources over the comparative period. The decline in wholesale borrowings volume, including brokered time deposits, is largely due to the balance sheet repositioning. We continually monitor and look for opportunities to fairly reprice our deposits while remaining competitive in this current challenging rate environment.

Our net interest margin on a fully tax equivalent basis was 2.74%3.32% for the year ended December 31, 2024,2025, downup 458 basis points from 2023.2024. The marginal decreaseincrease in the net interest margin was primarily due to the risingbalance depositsheet raterepositioning pressure from increased market competition and consumer migration toward higher rate deposits, mitigated byduring the increased yields on our earning assets average balances over the comparative periods.period.

Over the course of 2025,2026, we anticipate moderatingcontinued pressureexpansion on our margin dueprimarily related to severalthe factors.full period benefit of the balance sheet repositioning previously discussed. We saw moderate organic loan growth during 2024 and we are cautiously optimistic regarding further modest organic loan growth during 2025,2026, subject to the underlying economy and growth opportunities,economy, with continued focus on maintainingsoundness, prudentprofitability underwriting standardsdiscipline and profitability discipline. We sold $251.5 million of low yield AFS securities in the third quarter of 2024, and used sale proceeds to pay off higher rate wholesale fundings and we will continue to evaluate opportunities to optimize our balance sheet based on changing market conditions.growth. We also expect modestnoninterest income to be stable and incremental increases in noninterest incomeexpenses relatedas we continue to feefocus based services and noninterest expenses related to continuouson improvement initiatives and utilizing cost savings to partially fund targeted investments in technology and talent. Additionally, while our balance sheet is in a favorable position for the repricing of assets and liabilities, there is still much uncertainty as to decisions that will be made by the FOMC and the risks present in the economy.

During 2024,2025, our provision for credit loss expense was $46.8$65.8 million, as compared to an expense of $42.0$46.8 million during 20232024 and an expense of $14.1$42.0 million during 2022.2023. The provision for credit loss expense during 2024 was related to loans2025 and 2024 reflected loan growth, as well as the impact of updated economic assumptions. Additionally, during 2025, a provision expense of $15.6 million was recorded related to two specific credit relationships which migrated to nonperforming during the year.

TotalWe incurred a noninterest loss of $616.0 million in 2025, compared to noninterest income wasof $147.2 million in 2024, compared to $155.6 million in 2023 and $170.1 million in 2022. Noninterest income for 2024 decreased $8.4 million, or 5.4%, from 2023.2024. Included in both 20242025 and 20232024 results were $28.4$801.5 million and $20.6$28.4 million, respectively, of certain items related to the loss on the sale of securities during the period.periods. Additionally during 2025, we recognized a $570,000 loss on early extinguishment of debt. Adjusting for these certain items, adjusted noninterest income for the year ended December 31, 20242025 decreasedincreased $611,000,$10.5 million, or 0.3%,6.0%, from the prior year. See the GAAP Reconciliation of Non-GAAP Financial Measures section for additional discussion and reconciliations of non-GAAP measures.

Table 5: Noninterest Income (Loss)

Recurring fee income (total service charges, wealth management fees, debit and credit card fees) for 20242025 was $124.8$130.1 million, an increase of $3.4$5.3 million, or 2.8%,4.3%, when compared to the 20232024 amounts and was primarily related to the incremental increases discussed above.

Noninterest expense for 20242025 was $557.5$565.1 million, as compared to noninterest expense for 20232024 of $563.1$557.5 million, aan decreaseincrease of $5.5$7.5 million, or 1.0%,1.3%, compared to the prior period. Adjusted noninterest expense, which excludes branch right sizing, FDIC special assessment, early retirement program costs, termination of vendor and software servicesservices, loss on sale of an equipment finance business (for 2025 only) and an FDIC special assessment (for 2024 only), and merger related costs (for 2023 only), for the year ended December 31, 20242025 increased $12.4$7.0 million, or 2.3%,1.3%, from the prior year. See the GAAP Reconciliation of Non-GAAP Financial Measures section for additional discussion and reconciliations of non-GAAP measures.

Salaries and employee benefits expense decreasedincreased by $2.0$13.7 million as compared to 2023, while adjusted salaries and employee benefits expense, which excludes early retirement program costs, increased by $3.7 million as compared to 2023.2024. The increase in adjusted salaries and employee benefits expense reflects annual merit increases, in addition to incentive compensation accrual adjustments given the Company’s financial performance during the periods, in addition to annual merit increases. Early retirement program costs during 2024 and 2023 were $536,000 and $6.2 million, respectively.period.

Deposit insurance expense decreased by $6.0$3.7 million as compared to 2023.2024. Excluding the FDIC special assessment of $1.8 million recorded during the year ended December 31, 2024 and $10.5 million recorded during the year ended December 31, 2023, both of2024, which werewas levied to support the Deposit Insurance Fund following the failure of certain banks in 2023, adjusted deposit insurance expense increaseddecreased by $2.6$1.9 million primarily due to an increased base assessment rate related tofavorable changes in the mix of deposits.deposits, primarily related to the reduction of brokered deposits from the balance sheet restructuring during 2025.

The provision for income taxes for 20242025 was $18.6a benefit of $130.1 million, compared to an expense of $18.6 million in 2024 and $25.5 million in 2023 and $50.1 million in 2022.2023. The effective income tax rates for the years ended 2024,2025, 2024 and 2023 and 2022 were 10.9%,24.7%, 12.7%10.9% and 16.4%,12.7%, respectively. The decreasechange in the provision for income taxes during 20242025 as compared to 2023the andprior 2023 as compared to 2022periods was primarily due to tax exempt income having a larger favorable impact on the rate$801.5 andmillion lowergross staterealized taxes during the periods, both driven by the one time charges to incomeloss from the loss on sale of securities during eachthe respectivetwelve period,months inended additionDecember 31, 2025 related to the FDICbalance specialsheet assessment largely recognizedrepositioning during 2023.the year.

Consumer loans consist of credit card loans and other consumer loans. Consumer loans were $309.0$291.2 million at December 31, 2024,2025, or 1.8%1.7% of total loans, compared to $318.7$309.0 million, or 1.9%1.8% of total loans at December 31, 2023.2024. The decrease in consumer loans was primarily due to loan payoffs and pay downs within both the credit card portfolioand other consumer portfolios during the year.

Real estate loans consist of construction and development (“C&D”) loans, single family residential loans and other commercial real estate (“CRE”) loans. Real estate loans were $13.39$13.77 billion at December 31, 2024,2025, or 78.7% of total loans, compared to $13.34$13.39 billion, or 79.2%78.7% of total loans at December 31, 2023,2024, a modestan increase of $53.3$379.7 million, or 0.4%.2.8%. Our C&D loans decreasedincreased by $355.0$84.6 million, or 11.3%,3.0%, single family residential loans increaseddecreased by $48.4$82.5 million, or 1.8%,3.1%, and CRE loans increased by $359.9$377.6 million, or 4.8%. The changes among our real estate portfolio reflected our focus on maintaining conservative underwriting standards and structure guidelines while emphasizing prudent pricing discipline during the period. We expect to continue to manage our C&D and CRE portfolio concentration by developing deeper relationships with our customers.

We continue to maintain good asset quality compared to the industry, and strong asset quality remains a primary focus of our strategy. The allowance for credit losses as a percent of total loans was 1.38%1.28% as of December 31, 2024.2025. Non-performing loans equaled 0.65%0.64% of total loans. Non-performing assets were 0.45%0.51% of total assets, a 126 basis point increase from December 31, 2023.2024. The allowance for credit losses was 212%199% of non-performing loans. Our annualized net charge-offs to total loans for 20242025 was 0.22%.0.47%, a 25 basis point increase from December 31, 2024, primarily due to the charge-offs of two specific credit relationships previously discussed. Excluding credit cards, the annualized net charge-offs to total loans for the same period was 0.19%.0.49%. Annualized net credit card charge-offs to average total credit card loans were 2.93%,2.95%, compared to 2.20%2.93% during 2023,2024, and 14497 basis points better than the most recently published industry average charge-off ratio as reported by the Federal Reserve for all banks.

(1) Includes nonaccrual financial difficulty modifications (formerly known as troubled debt restructurings) of approximately $853,000, $597,000, $282,000, $1.6 million, $2.7 million and $4.4$2.7 million at December 31, 2025, 2024, 2023, 2022, 20212022 and 2020,2021, respectively.

As of December 31, 2024,2025, the allowance for credit losses reflected ana increasedecrease of approximately $9.8$10.6 million from December 31, 2023,2024, while loans increased $160.3$486.2 million over the same period. The allocation in each category within the allowance generally reflects the overall changes in the loan portfolio mix.

The increasedecrease in the allowance for credit losses during 20242025 was predominantly due to the loanutilization of specific reserves related to a deep dive analysis of our nonperforming loans and the sale of a run-off portfolio consisting of small ticket equipment finance loans during the year. Loan growth experienced during the year,year as well asand refreshed economic forecasts.forecasts partially offset these reductions. Our allowance for credit losses at December 31, 20242025 was considered appropriate given the current economic environment and other related factors.

Our securities portfolio is the second largest component of earning assets and provides a significant source of revenue. Securities within the portfolio are classified as either held-to-maturity (“HTM”) or, available-for-sale (“AFS”). or trading.

HTM and AFS investment securities and assets held in trading accounts were $3.64$3.27 billion and $2.53$11.7 billion, respectively,million at December 31, 2024,2025, respectively, compared to the HTM amount of $3.73$3.64 billion and AFS amount of $3.15$2.53 billion at December 31, 2023.2024. We will continue to look for opportunities to maximize the value of the investment portfolio.

As of December 31, 2024,2025, $511.4$58.9 million, or 8.3%,1.8%, of our total portfolio was invested in obligations of U.S. government agencies and U.S. Treasury securities. Our investment portfolio as of December 31, 20242025 also included $2.61$812.3 billion,million, or 42.2%,24.8%, of tax-exempt obligations of state and political subdivisions. A portion of the state and political subdivision debt obligations are rated bonds, primarily issued in states in which we are located, and are evaluated on an ongoing basis. There are no securities of any one state or political subdivision issuer exceeding ten percent of our stockholders’ equity at December 31, 2024.2025.

As permitted by SEC rules, management presents a sequential quarterly analysis of the Company’s performance as we believe that comparing current quarter results to those of the immediately preceding fiscal quarter is more useful in identifying current business trends and provides a more relevant analysis of our business results. Accordingly, we have compared our results of operations for the three months ended MarchJune 31,30, 2026 to our results of operations for the three months ended December 31, 2025 and March 31, 2025,2026, as applicable, throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations. For additional information regarding the Company’s results for the three months ended March 31, 2026, please refer to our first quarter Form 10-Q filed with the SEC on May 6, 2026.

Our net income for the three months ended MarchJune 31,30, 2026 was $68.5$66.7 million, or $0.47$0.46 diluted earnings per share, compared to net income of $78.1$68.5 million, or $0.54 diluted earnings per share, and $32.4 million, or $0.26$0.47 diluted earnings per share, for the three months ended December 31, 2025 and March 31, 2025, respectively.2026. Included in the results were certain items related to our branch/real rightestate sizingrightsizing initiative,costs, severance/early retirement program costs (for the three months ended March 31, 2026), professional services (for the three months ended March 31, 2026),costs, a FDIC special assessment (for the three months ended March 31, 2026), termination of vendor and softwarecertain professional services (for the three months ended DecemberMarch 31, 2025) and loss on sale of an equipment finance business (for the three months ended December 31, 20252026). Excluding these certain items and the tax effect, adjusted earnings for the three months ended MarchJune 31,30, 2026 were $68.6$72.2 million, or $0.47$0.50 adjusted diluted earnings per share, compared to $79.0$68.6 million, or $0.54 adjusted diluted earnings per share, and $33.1 million, or $0.26$0.47 adjusted diluted earnings per share, for the three months ended December 31, 2025 and March 31, 2025, respectively.2026.

We believe the asset quality in our portfolio remains sound and reflects our conservative credit culture, as well as our focus on maintaining disciplined pricing and conservative underwriting standards given the current economic environment. Total nonperforming loans as of MarchJune 31,30, 2026, December 31, 2025, and MarchJune 31,30, 2025 were $141.9$166.0 million, $112.7 million, and $152.4$157.2 million, respectively. Nonperforming assets as a percent of total assets were 0.63%0.72% at MarchJune 31,30, 2026, compared to 0.51% at December 31, 2025 and 0.61%0.62% at MarchJune 31,30, 2025.

As of MarchJune 31,30, 2026, stockholders’ equity was $3.44$3.48 billion, book value per share was $23.70$24.11 and tangible book value per share was $14.03.$14.42.

Total loans were $17.93$18.06 billion at MarchJune 31,30, 2026, compared to $17.49 billion at December 31, 2025. Our unfunded commitments were $4.07$4.38 billion and $3.87 billion as of MarchJune 31,30, 2026 and December 31, 2025, respectively. Our commercial loan pipeline totaled $1.56$1.43 billion as of MarchJune 31,30, 2026, compared to $1.54 billion at December 31, 2025.

Simmons First National Corporation is a Mid-South based financial holding company that, as of MarchJune 31,30, 2026, has approximately $24.7$24.8 billion in consolidated assets and, through its subsidiaries, conducts financial operations in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas.

To quantitatively test goodwill for impairment, a present value of discounted cash flows calculation is completed and relies on several assumptions that have a level of subjectivity and judgment. These assumptions are dependent on market and economic conditions. Key inputs to estimate terminal fair value of the Company include projected forecasts, noninterest expense savings and a pricing multiple based on a group of peer banks with similar characteristics. These inputs are discounted by the cost of equity, which includes assumptions involving our beta; equity risk, size and company premiums; and the 20-year treasury rate. Assumptions used in calculating the cost of equity are obtained from market and third-party data. Results are compared to book value; no impairment was indicated as of MarchJune 31,30, 2026. Judgment is inherent in assessing goodwill for impairment. The various assumptions used in assessing goodwill for impairment involve uncertainties that are beyond our control and could cause actual results to differ materially from those projected.

Our practice is to limit exposure to interest rate movements by maintaining a significant portion of earning assets and interest bearing liabilities in short-term repricing. In the last several years, on average, approximately 48% of our loan portfolio and approximately 94% of our time deposits have repriced in one year or less. As of MarchJune 31,30, 2026, our interest rate sensitivity shows that approximately 63%67% of our loans and 96% of our time deposits will reprice in the next year.

The decreaseincrease in interest income on a fully taxable equivalent basis primarily resulted from a $3.5$7.0 million decreaseincrease in interest income on loans, coupledmoderated withby a decrease of $2.0 million$879,000 in interest income on investment securities. The decreaseincrease in interest income provided by loans reflects a $9.1$2.5 million decreaseincrease related to loan yield, partiallycoupled offset bywith a $5.6$4.6 million increase attributable to loan volume. TheWhile the loan yield for the firstsecond quarter of 2026 was 6.16%6.15% compared to 6.23%6.16% from the preceding sequential quarter, representingthe aincrease 7during basisthe pointthree decrease.months ended June 30, 2026 was due to the additional day during the period. The decrease in interest income on investment securities was primarily related to a $1.9 million$839,000 decrease in interest income on taxable investment securities, which reflects a $913,000$1.2 million decrease due to the decline in our investment portfolio average balances,balances coupled with a decrease of $1.0 million in interest income on taxable investment securities duerelated to yieldplanned decreasesmaturities overwithin the period of 7 basis points.portfolio.

Net interest income on a fully taxable equivalent basis for the threesix month period ended MarchJune 31,30, 2026 increased $30.3$55.8 million, or 17.9%,16.0%, over the same period in 2025. The increase in net interest income on a fully taxable equivalent basis was the result of a $9.4$20.2 million decrease in fully taxable equivalent interest income, more than offset by a $39.8$75.9 million decrease in interest expense.

Several factors contributed to the increase in net interest income on a fully taxable equivalent basis over the comparative period. During 2025, we completed a balance sheet repositioning that included the transfer of approximately $3.6 billion investment securities classified as held-to-maturity (“HTM”) to the available-for-sale (“AFS”) investment securities portfolio, with a subsequent sale of approximately $3.2 billion in amortized cost basis of low-yielding AFS securities (including certain of those previously classified as HTM). Proceeds from the sale of the investment securities were primarily used to deleverage the balance sheet through the pay-down of higher rate, non-relationship wholesale and public fund deposits, as well as higher rate other borrowings primarily consisting of FHLB advances. The pay-down of higher rate funding was completed in 2025.

The decrease in interest income on a fully taxable equivalent basis primarily resulted from a $18.9$38.4 million decrease in interest income on investment securities, which reflects a $27.6$55.8 million decrease in interest income on investment securities due to the decline in our investment portfolio average balances, which decreased by $2.92$2.93 billion or 47.5%.48.1%. The decrease was partially offset by an increase of $8.6$17.4 million in interest income on investment securities due to yield increases over the period of 8183 basis points and 43 basis points for our taxable and non-taxable investment security portfolios, respectively. These changes were primarily due to the balance sheet repositioning previously discussed, coupled with pay downs and maturities over the period. AAn $9.7$18.8 million increase in interest income on loans reflects an increase attributable to loan volume of $11.2$25.2 million, partially offset by a $1.5$6.4 million decrease in interest income related to loan yield due to a 47 basis point decline in loan yield over the comparative period.

Our net interest margin on a fully taxable equivalent basis was 3.84% for the three and six month periodperiods ended MarchJune 31,30, 2026, as comparedwell to 3.81% and 2.95% for the three months ended December 31, 2025 andas the three months ended March 31, 2025,2026, respectively.3.01% for the six months ended June 30, 2025. Net interest margin experiencedwas aconsistent 3 basis point increase for the three months ended March 31, 2026 compared towith the preceding sequential quarter, while net interest margin increased 8983 basis points during the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025. WhileThe increase in net interest margin expanded slightly during the three months ended March 31, 2026 as compared to the prior sequential quarter, the increase on a year over year comparative basis was primarily driven by the balance sheet repositioning, as well as reduced deposit costs and use of wholesale funding over the comparative periods.

Tables 1 and 2 reflect an analysis of net interest income on a fully taxable equivalent basis for the three months ended MarchJune 31,30, 2026, December 31, 20252026 and March 31, 2026 and the six months ended June 30, 2026 and 2025, respectively.

Table 3 shows, for each major category of earning assets and interest bearing liabilities, the average (computed on a daily basis) amount outstanding, the interest earned or expensed on such amount and the average rate earned or expensed for the three months ended MarchJune 31,30, 2026, December 31, 20252026 and March 31, 2026 and the six months ended June 30, 2026 and 2025, respectively. The table also shows the average rate earned on all earning assets, the average rate expensed on all interest bearing liabilities, the net interest spread and the net interest margin for the same periods. The analysis is presented on a fully taxable equivalent basis. Nonaccrual loans were included in average loans for the purpose of calculating the rate earned on total loans.

Table 4 shows changes in interest income and interest expense resulting from changes in both volume and interest rates for the three and six months ended MarchJune 31,30, 2026 as compared to the three months ended DecemberMarch 31, 20252026 and Marchthe 31,six months ended June 30, 2025, respectively. The changes in interest rate and volume have been allocated to changes in average volume and changes in average rates in proportion to the relationship of absolute dollar amounts of the changes in rates and volume.

The provision for credit losses for the three months ended MarchJune 31,30, 2026 was $14.6$17.4 million as compared to $15.1$14.6 million for the three months ended December 31, 2025 and $26.8 million for the same period ended March 31, 2025.2026. Provision expense for each period was related to loans and reflected loan growth in the quarters, as well as the impact of updated economic assumptions. The provision expense for the three months ended March 31, 2025 also reflected a provision expense of $15.6 million related to two specific credit relationships which migrated to nonperforming during the period.

For the three month period ended June 30, 2026, total noninterest income was $47.9 million, an increase of approximately $3.7 million or 8.5%, compared to the three month period ended March 31, 2026, total noninterest income was $44.2 million, a decrease of approximately $7.5 million or 14.5%, compared to the three month period ended December 31, 2025 and a decrease of $2.0 million or 4.2%, as compared to the three months ended March 31, 2025.2026. The decreaseincrease for the three month period ended MarchJune 31,30, 2026 as compared to boththe priorpreceding comparativesequential quartersquarter is largely due to a $2.1 million Small Business Investment Company (“SBIC”) negative valuation adjustment recorded during the three months ended March 31, 2026.2026, Duringcoupled thewith prior sequential quarter, proceeds of $3.3$1.1 million in banknet ownedpositive lifeSBIC insurancevaluation deathadjustments benefitsrecorded were recorded, which further contributed toduring the decreasethree betweenmonths comparativeended periods.June 30, 2026. These adjustments are included in “Other income” in the table below.

Table 5 shows noninterest income for the three month periods ended MarchJune 31,30, 2026, December 31, 20252026 and March 31, 2026 and the six months ended June 30, 2026 and 2025, respectively, as well as changes between periods.

Recurring fee income (total service charges, wealth management fees, debit and credit card fees) was $33.3 million, $33.2$33.1 million and $32.0$33.3 million for the three month periods ended MarchJune 31,30, 2026, December 31, 20252026 and March 31, 2026, respectively, and was $66.4 million and $64.0 million for the six month periods ended June 30, 2026 and 2025, respectively.

Noninterest expense consists of salaries and employee benefits, occupancy, equipment, foreclosure losses and other expenses necessary for our operations. Management remains committed to controlling the level of noninterest expense through the continued use of expense control measures.measures and efficiency initiatives. We utilize an extensive profit planning and reporting system involving all subsidiaries. Based on a needs assessment of the business plan for the upcoming year, monthly and annual profit plans are developed, including manpower and capital expenditure budgets. These profit plans are subject to extensive initial reviews and monitored by management monthly. Variances from the plan are reviewed monthly and, when required, management takes corrective action intended to ensure financial goals are met. We also regularly monitor staffing levels at each subsidiary to ensure productivity and overhead are in line with existing workload requirements.

Noninterest expense was $147.7 million for the three monthsmonth period ended June 30, 2026, as compared to noninterest expense of $140.7 million for the three month period ended March 31, 20262026, decreasedrepresenting byan approximatelyincrease $3.9of million$7.1 million, or 2.7%5.0%, as compared to the threepreceding months ended March 31, 2025.quarter. Adjusted noninterest expense, which excludes branch/real estate right sizing,sizing costs, severance/early retirement program costs (for the three months ended March 31, 2026),costs, FDIC special assessment (for the three months ended March 31, 2026) and certain professional services (for the three months ended March 31, 2026), decreasedfor $2.9the three months ended June 30, 2026 was $140.3 million, ora 2.0%,decrease of $323,000 as compared to the three months ended March 31, 2025.2026.

Deposit insurance expense for the three and six months ended MarchJune 31,30, 2026 as compared to the three months ended DecemberMarch 31, 20252026 and threesix months ended MarchJune 31,30, 2025 increased by $2.2 million and decreased by $2.4 million and $3.1$3.6 million, respectively. The decreasevariance for the three and six months ended MarchJune 31,30, 2026 as compared to the prior comparative periods is significantly attributable to a $2.0 million FDIC special assessment recapture recorded in the period.first quarter of 2026.

Other noninterest expense decreasedincreased $388,000$2.2 million during the three month period ended MarchJune 31,30, 2026 as compared to the preceding sequential quarter and decreased $3.6 million$885,000 during the threesix month period ended MarchJune 31,30, 20252026 when compared to the same period in the prior year. WhileThe the variance in other noninterest expenseincrease on a sequential quarter basis is relatively flat, the decrease on a year over year basis for the three month period ended MarchJune 31,30, 2026 is primarily due to a $2.3 million loss on sale of property related to branch/real estate right sizing costs during the three month period ended June 30, 2026, while a $4.3 million charge related to a commercial customer deposit fraud event that was identified during the threesix month period ended MarchJune 31,30, 2025.2025 resulted in a negative variance during the comparative periods.

Table 6 below shows noninterest expense for the three month periods ended MarchJune 31,30, 2026, December 31, 20252026 and March 31, 2026 and the six months ended June 30, 2026 and 2025, respectively, as well as changes between periods.

As of MarchJune 31,30, 2026, AFS investment securities and assets held in trading accounts were $3.15$3.08 billion and $14.5 million, respectively. As of December 31, 2025, AFS and assets held in trading accounts were $3.27 billion and $11.7 million, respectively. We continue to look for opportunities to maximize the value of the investment portfolio.

As of MarchJune 31,30, 2026, we had the ability to hold the securities classified as AFS for a period of time sufficient for a recovery of amortized cost and we believed the accounting standard of “more likely than not” has not been met regarding whether we would be required to sell any of the AFS securities before recovery of amortized cost. As of MarchJune 31,30, 2026, the unrealized losses were largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline. Accordingly, as of MarchJune 31,30, 2026, we believed the declines in fair value are temporary and we did not believe any of the securities are impaired due to reasons of credit quality. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. We expect the cash flows from principal maturities of securities to provide flexibility to fund future loan growth or reduce wholesale funding.

During the third quarter of 2021, we began utilizing interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of $1.00 billion of fixed rate callable municipal securities held in the AFS portfolio. These swap agreements consist of a two year forward start date and involve the payment of fixed interest rates with a weighted average rate of 1.21% in exchange for variable interest rates based on federal funds rates, which became effective during late third quarter of 2023. Securities within these swap agreements have maturity dates varying between 2028 and 2029. For the threesix months ended MarchJune 31,30, 2026, the net amount included in interest income on investment securities in the consolidated statements of income related to these swap agreements was $6.2$12.6 million.

Our loan portfolio averaged $17.66$17.81 billion and $16.92$16.98 billion during the first threesix months of 2026 and 2025, respectively. As of MarchJune 31,30, 2026, total loans were $17.93$18.06 billion, an increase of $440.7$570.2 million from December 31, 2025. The increase in the loan balance during the first threesix months of 2026 when compared to December 31, 2025 is primarily due to growth in the commercial real estate, commercial and industrial and mortgage warehouse portfolios over the comparative period, while we continued to focus on maintaining prudent underwriting standards and pricing discipline. The most significant components of the loan portfolio were loans to businesses (commercial loans, commercial real estate loans and agricultural loans) and individuals (consumer loans, credit card loans and single-family residential real estate loans).

Consumer loans consist of credit card loans and other consumer loans. Consumer loans were $269.0$273.3 million at MarchJune 31,30, 2026, or 1.5% of total loans, compared to $291.2 million, or 1.7% of total loans at December 31, 2025. The decrease in consumer loans from December 31, 2025, to MarchJune 31,30, 2026, was primarily due to loan payoffs and pay downs within both the credit card and other consumer portfolios during the period.

Real estate loans consist of construction and development loans (“C&D”) loans, single-family residential loans and commercial real estate (“CRE”) loans. Real estate loans were $13.95$13.97 billion at MarchJune 31,30, 2026, or 77.8%77.3% of total loans, compared to $13.77 billion, or 78.7%, of total loans at December 31, 2025, an increase of $181.4$199.5 million, or 1.3%.1.4%. Our C&D loans decreased by $251.9$296.2 million, or 8.8%,10.3%, while single family residential loans decreased by $41.3$43.2 million, or 1.6%,1.7%, and CRE loans increased by $474.7$538.8 million, or 5.7%.6.5%. The changes among our real estate portfolio reflected our focus on maintaining conservative underwriting standards and structure guidelines while emphasizing prudent pricing discipline during the first threesix months of 2026. We expect to continue to manage our C&D and CRE portfolio concentration by developing deeper relationships with our customers.

Commercial loans consist of non-real estate loans related to business and agricultural loans. Total commercial loans were $2.85$2.94 billion at MarchJune 31,30, 2026, or 15.9%16.3% of total loans, compared to $2.69 billion, or 15.4% of total loans at December 31, 2025, an increase of $166.3$254.5 million, or 6.2%.9.5%. The increase in commercial loans was largely related to both the increase in commercial and industrial loans of $139.1$134.3 million, or 5.8%.5.6% and increase in agricultural loans of $120.2 million, or 39.2%, primarily due to seasonality of the portfolio, which normally peaks in the third quarter.

Other loans mainly consist of mortgage warehouse lending and municipal loans. Mortgage volume experienced an increase in demand during the first threesix months of 2026 as compared to December 31, 2025, leading to an increase of $115.2$134.2 million in other loans.

Our commercial loan pipeline consisting of all commercial loan opportunities was $1.56$1.43 billion at MarchJune 31,30, 2026 compared to $1.54 billion at December 31, 2025. Commercial loans approved and ready to close at the end of the quarter totaled $651.4$373.9 million.

Total nonperforming assets increased $29.5$52.1 million from December 31, 2025 to MarchJune 31,30, 2026. Nonaccrual loans increased by $29.4$53.5 million from December 31, 2025 and foreclosed assets held for sale and other real estate owned increaseddecreased $466,000$929,000 as compared to December 31, 2025. The increase in nonaccrual loans was primarily due to a single real estate construction relationship totaling $26.9approximately million$44.0 that is well collateralized and that management believes has limited loss content.million.

There were fourfive loan modifications granted to borrowers experiencing financial difficulty during the threesix month period ended MarchJune 31,30, 2026. Such modifications included interest rate reductions and/or term extensions and had a total period-end amortized cost basis of $2.5$2.6 million at MarchJune 31,30, 2026.

The allowance for credit losses as a percent of total loans was 1.28%1.32% as of MarchJune 31,30, 2026. Nonperforming loans equaled 0.79%0.92% of total loans. Nonperforming assets were 0.63%0.72% of total assets, a 1221 basis point increase from December 31, 2025. The allowance for credit losses was 162%143% of nonperforming loans. Our annualized net charge-offs to average total loans ratio for the first threesix months of 2026 was 0.21%. Annualized net credit card charge-offs to average total credit card loans were 2.81%2.69% for the first threesix months of 2026, compared to 2.95% during the full year 2025, and 122132 basis points better than the most recently published industry average charge-off ratio as reported by the Federal Reserve for all banks.

(1)Includes nonaccrual FDMs of approximately $935,000$908,000 and $853,000 at MarchJune 31,30, 2026 and December 31, 2025, respectively.

The interest income on nonaccrual loans is not considered material for the three and six month periods ended MarchJune 31,30, 2026 and 2025.

The amount of provision added to or released from the allowance during the three and six months ended MarchJune 31,30, 2026 and 2025, and for the year ended December 31, 2025, was based on management’s judgment, with consideration given to the composition and asset quality of the portfolio, historical loan loss experience, and assessment of current and expected economic forecasts and conditions. It is management’s practice to review the allowance on a monthly basis, and after considering the factors previously noted, to determine the level of provision made to the allowance.

As of MarchJune 31,30, 2026, the allowance for credit losses reflected an increase of approximately $5.5$13.9 million from December 31, 2025, while total loans increased by $440.7$570.2 million over the same threesix month period. The allocation in each category within the allowance generally reflects the overall changes in the loan portfolio mix.

The increase in the allowance for credit losses during the first threesix months of 2026 was primarily due to the impact of loan growth and updated economic assumptions during the period. Our allowance for credit losses at MarchJune 31,30, 2026 was considered appropriate given the current economic environment and other related factors.

Deposits are our primary source of funding for earning assets and are primarily developed through our network of 221approximately 220 financial centers as of MarchJune 31,30, 2026. We offer a variety of products designed to attract and retain customers with a continuing focus on developing core deposits. Our core deposits consist of all deposits excluding time deposits of $250,000 or more and brokered deposits. As of MarchJune 31,30, 2026, core deposits comprised 83.5%83.8% of our total deposits.

We continually monitor the funding requirements along with competitive interest rates in the markets we serve. Because of our community banking philosophy, our executives in the local markets, with oversight by the Chief Deposit Officer, Asset Liability Committee and the Bank’s Treasury Department, establish the interest rates offered on both core and non-core deposits. This approach helps ensure that the interest rates being paid are competitively priced for each particular deposit product and structured to meet the funding requirements. We believe we are paying a competitive rate when compared with pricing in those markets.

Our total deposits as of MarchJune 31,30, 2026, were $20.20$19.73 billion, compared to $20.18 billion as of December 31, 2025. Noninterest bearing transaction accounts, interest bearing transaction accounts and savings accounts totaled $15.60$15.48 billion at MarchJune 31,30, 2026, compared to $15.47 billion at December 31, 2025, an increase of $130.3$12.4 million. Total time deposits decreased $111.6$468.3 million to $4.60$4.24 billion at MarchJune 31,30, 2026, from $4.71 billion at December 31, 2025. We had $1.91$1.81 billion and $1.89 billion of brokered deposits at MarchJune 31,30, 2026, and December 31, 2025, respectively. We are continuing to refine our product offerings to give customers flexibility of choice while maintaining the ability to adjust interest rates timely in the current rate environment.

Table 11 reflects the classification of the average deposits and the average rate paid on each deposit category which is in excess of 10 percent of average total deposits for the threesix months ended MarchJune 31,30, 2026 and the year ended December 31, 2025.

Our total debt was $762.5$1.25 millionbillion and $620.0 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. The outstanding balance for MarchJune 31,30, 2026 includes $431.6$926.5 million in FHLB advances; $315.7$312.0 million in subordinated notes and unamortized debt issuance costs; and $15.2$14.7 million of other long-term debt. FHLB advances outstanding at MarchJune 31,30, 2026 are primarily whole loanovernight advances, which are due less than one year from origination and therefore are classified as short-term advances. The increase in FHLB advances during the comparative period is primarily due to favorable pricing relative to brokered deposits.