SBSI 10-Q Quarterly Report Sept. 30, 2025

SOUTHSIDE BANCSHARES INC

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sbsi-20250930

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number: 001-42396

SOUTHSIDE BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Texas

75-1848732

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

1201 S. Beckham Avenue,

Tyler,

Texas

75701

(Address of Principal Executive Offices)

(Zip Code)

903 - 531-7111

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $1.25 par value

SBSI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the issuer’s common stock, par value $1.25, outstanding as of October 24, 2025 was 30,066,126 shares.

TABLE OF CONTENTS


GLOSSARY OF ACRONYMS, ABBREVIATIONS AND TERMS			1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)			3
CONSOLIDATED BALANCE SHEETS			3
CONSOLIDATED STATEMENTS OF INCOME			4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)			5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY			6
CONSOLIDATED STATEMENTS OF CASH FLOWS			8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			10
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			43
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			65
ITEM 4. CONTROLS AND PROCEDURES			66
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS			66
ITEM 1A. RISK FACTORS			66
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			67
ITEM 3. DEFAULTS UPON SENIOR SECURITIES			67
ITEM 4. MINE SAFETY DISCLOSURES			67
ITEM 5. OTHER INFORMATION			67
ITEM 6. EXHIBITS			68
EXHIBIT INDEX			68
SIGNATURES			69

Table of Contents

SOUTHSIDE BANCSHARES, INC.

Glossary of Acronyms, Abbreviations and Terms

The acronyms, abbreviations and terms listed below are used in various sections of this Form 10-Q, including "Item 1. Financial Statements" and "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations."


Entities:
Southside Bancshares, Inc.						Bank holding company for Southside Bank
Southside Bank						Texas state bank and wholly owned subsidiary of Southside Bancshares, Inc.
Company						Combined entities of Southside Bancshares, Inc. and its subsidiaries, including Southside Bank
Bank						Southside Bank
Southside						Southside Bancshares, Inc.

Other Acronyms, Abbreviations and Terms:
2024 Form 10-K						Southside Bancshares, Inc. Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025
401(k) Plan						401(k) Defined Contribution Plan
Acquired Retirement Plan						OmniAmerican Bank defined benefit pension plan
AFS						Available for sale
ALCO						Asset/Liability Committee
AOCI						Accumulated other comprehensive income or loss
ASC						Accounting Standards Codification
ASU						Accounting Standards Update issued by the FASB
ATM						Automated teller machines
Basel Committee						Basel Committee on Banking Supervision
BOLI						Bank owned life insurance
CDs						Certificates of deposit
CECL						ASC 326, Financial Instruments- Credit Losses, also known as Current Expected Credit Losses
CET1						Common Equity Tier 1
CMOs						Collateralized mortgage obligations
CRE						Commercial real estate
ESOP						Employee Stock Ownership Plan
ETR						Effective tax rate
Exchange Act						Securities Exchange Act of 1934, as amended
FASB						Financial Accounting Standards Board
FDIC						Federal Deposit Insurance Corporation
Federal Reserve						The Board of Governors of the Federal Reserve System
FHLB						Federal Home Loan Bank
FRBNY						Federal Reserve Bank of New York
FRDW						Federal Reserve Discount Window
FTE						Fully-taxable equivalents measurements (non-GAAP)
GAAP						United States generally accepted accounting principles
GSEs						U.S. government-sponsored enterprises
Guidelines						Interagency Guidelines Prescribing Standards for Safety and Soundness adopted by federal banking agencies
HTM						Held to maturity
ITM						Interactive teller machines

Southside Bancshares, Inc. |1

Table of Contents


MBS						Mortgage-backed securities
MVPE						Market value of portfolio equity
OREO						Other real estate owned
Plan						Stock Repurchase Plan
Repurchase agreements						Securities sold under agreements to repurchase
Restoration Plan						Nonfunded supplemental retirement plan
Retirement Plan						Defined benefit pension plan
ROU						Right-of-use
RSU						Restricted stock units
SBA						Small Business Administration
SEC						U.S. Securities and Exchange Commission
SOFR						Secured Overnight Financing Rate provided by the Federal Reserve Bank of New York
U.S.						United States

Southside Bancshares, Inc. |2

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(UNAUDITED)
(in thousands, except share amounts)


	September 30, 2025		December 31, 2024

ASSETS
Cash and due from banks	$	90,519	$	91,409
Interest earning deposits	365,263		281,945
Federal funds sold	11,130		52,807
Total cash and cash equivalents	466,912		426,161
Securities:
Securities AFS, at estimated fair value (amortized cost of $ 1,307,864 and $ 1,587,416 , respectively)	1,292,431		1,533,894
Securities HTM (estimated fair value of $ 1,106,186 and $ 1,113,482 , respectively)	1,263,401		1,279,234
FHLB stock, at cost	9,359		33,818
Equity investments	9,552		9,467
Loans held for sale	497		1,946
Loans:
Loans	4,765,289		4,661,597
Less: Allowance for loan losses	( 45,294 )		( 44,884 )
Net loans	4,719,995		4,616,713
Premises and equipment, net	147,187		141,648
Operating lease ROU assets	12,734		13,860
Goodwill	201,116		201,116
Other intangible assets, net	1,161		1,754
Interest receivable	35,413		46,724
Deferred tax asset, net	30,573		34,492
Unsettled trades to sell securities	9,093		—

BOLI	139,697		138,313
Other assets	44,039		38,308
Total assets	$	8,383,160	$	8,517,448

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest bearing	$	1,411,764	$	1,357,152
Interest bearing	5,549,823		5,297,096
Total deposits	6,961,587		6,654,248
Other borrowings	99,374		76,443
FHLB borrowings	101,332		731,909
Subordinated notes, net of unamortized debt issuance costs	239,601		92,042
Trust preferred subordinated debentures, net of unamortized debt issuance costs	60,278		60,274


Operating lease liabilities	14,670		15,779
Other liabilities	71,468		74,811
Total liabilities	7,548,310		7,705,506

Off-balance-sheet arrangements, commitments and contingencies (Note 12)

Shareholders’ equity:
Common stock: ($ 1.25 par value, 80,000,000 shares authorized, 38,103,037 shares issued at September 30, 2025 and 38,077,992 shares issued at December 31, 2024)	47,629		47,598
Paid-in capital	795,346		793,586
Retained earnings	342,023		326,793
Treasury stock: (shares at cost, 8,037,536 at September 30, 2025 and 7,699,182 at December 31, 2024)	( 242,044 )		( 231,137 )
AOCI	( 108,104 )		( 124,898 )
Total shareholders’ equity	834,850		811,942
Total liabilities and shareholders’ equity	$	8,383,160	$	8,517,448

The accompanying notes are an integral part of these consolidated financial statements.

Southside Bancshares, Inc. |3

Table of Contents

SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in thousands, except per share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Interest income:
Loans	$	69,699	$	71,896	$	204,538	$	209,791
Taxable investment securities	5,578		7,150		18,146		21,126
Tax-exempt investment securities	8,245		9,813		25,209		31,611
MBS	14,174		11,976		40,737		33,179
FHLB stock and equity investments	374		582		1,381		1,488
Other interest earning assets	3,826		4,286		10,735		15,452
Total interest and dividend income	101,896		105,703		300,746		312,647
Interest expense:
Deposits	38,758		38,532		113,432		115,196
FHLB borrowings	2,847		6,488		12,405		18,893
Subordinated notes	2,319		937		4,186		2,829
Trust preferred subordinated debentures	1,025		1,180		3,054		3,526
Other borrowings	1,229		3,102		3,833		9,783
Total interest expense	46,178		50,239		136,910		150,227
Net interest income	55,718		55,464		163,836		162,420
Provision for (reversal of) credit losses	1,092		2,389		2,472		1,962
Net interest income after provision for credit losses	54,626		53,075		161,364		160,458
Noninterest income:
Deposit services	6,069		6,199		18,023		18,341
Net gain (loss) on sale of securities AFS	( 24,395 )		( 1,929 )		( 24,949 )		( 2,510 )

Gain (loss) on sale of loans	164		115		318		( 101 )
Trust fees	2,081		1,628		5,725		4,420
BOLI	871		857		2,503		3,408
Brokerage services	1,172		1,068		3,511		3,163
Other	2,048		233		5,247		2,731
Total noninterest income (loss)	( 11,990 )		8,171		10,378		29,452
Noninterest expense:
Salaries and employee benefits	22,803		22,233		67,457		67,330
Net occupancy	3,761		3,613		10,786		10,725

Advertising, travel & entertainment	907		734		2,781		2,479
ATM expense	444		412		1,227		1,105
Professional fees	1,451		1,206		4,372		3,435
Software and data processing	2,770		2,951		8,636		8,667
Communications	321		423		1,046		1,282
FDIC insurance	920		939		2,822		2,859
Amortization of intangibles	172		278		593		922

Other	3,985		3,543		14,160		10,174
Total noninterest expense	37,534		36,332		113,880		108,978
Income before income tax expense	5,102		24,914		57,862		80,932
Income tax expense	189		4,390		9,629		14,224
Net income	$	4,913	$	20,524	$	48,233	$	66,708

Earnings per common share – basic	$	0.16	$	0.68	$	1.59	$	2.20
Earnings per common share – diluted	$	0.16	$	0.68	$	1.59	$	2.20
Cash dividends paid per common share	$	0.36	$	0.36	$	1.08	$	1.08

The accompanying notes are an integral part of these consolidated financial statements.

Southside Bancshares, Inc. |4

Table of Contents

SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(in thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Net income	$	4,913	$	20,524	$	48,233	$	66,708
Other comprehensive income (loss):
Securities AFS and transferred securities:
Change in unrealized holding gain (loss) on AFS securities during the period	16,327		6,593		( 2,504 )		( 1,094 )




Reclassification adjustment for amortization related to AFS and HTM debt securities	2,079		2,119		6,112		6,210

Reclassification adjustment for net (gain) loss on sale of AFS securities, included in net income	24,395		1,929		24,949		2,510

Derivatives:
Change in net unrealized gain (loss) on effective cash flow hedge interest rate swap derivatives	828		( 13,658 )		( 2,715 )		4,641

Reclassification adjustment of net (gain) loss related to derivatives designated as cash flow hedges	( 1,988 )		( 5,688 )		( 6,427 )		( 18,112 )

Retirement plans:
Amortization of net actuarial loss, included in net periodic benefit cost	614		156		1,844		471

Change in net actuarial loss	—		( 1,002 )		—		( 1,002 )
Other comprehensive income (loss), before tax	42,255		( 9,551 )		21,259		( 6,376 )
Income tax (expense) benefit related to items of other comprehensive income (loss)	( 8,874 )		2,006		( 4,465 )		1,339
Other comprehensive income (loss), net of tax	33,381		( 7,545 )		16,794		( 5,037 )
Comprehensive income (loss)	$	38,294	$	12,979	$	65,027	$	61,671

The accompanying notes are an integral part of these consolidated financial statements.

Southside Bancshares, Inc. |5

Table of Contents

SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share and per share data)


	Common Stock		Paid In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
Balance at December 31, 2024	$	47,598	$	793,586	$	326,793	$	( 231,137 )	$	( 124,898 )	$	811,942


Net income	—		—		21,507		—		—		21,507
Other comprehensive income (loss)	—		—		—		—		( 6,916 )		( 6,916 )
Issuance of common stock for dividend reinvestment plan ( 8,897 shares)	11		253		—		—		—		264

Stock compensation expense	—		914		—		—		—		914
Net issuance of common stock under employee stock plans ( 22,675 shares)	—		( 368 )		( 130 )		350		—		( 148 )
Cash dividends paid on common stock ($ 0.36 per share)	—		—		( 10,940 )		—		—		( 10,940 )



Balance at March 31, 2025	47,609		794,385		337,230		( 230,787 )		( 131,814 )		816,623
Net income	—		—		21,813		—		—		21,813
Other comprehensive income (loss)	—		—		—		—		( 9,671 )		( 9,671 )
Issuance of common stock for dividend reinvestment plan ( 8,984 shares)	11		239		—		—		—		250
Purchase of common stock ( 424,435 shares)	—		—		—		( 11,904 )		—		( 11,904 )
Stock compensation expense	—		686		—		—		—		686
Net issuance of common stock under employee stock plans ( 86,579 shares)	—		( 985 )		( 113 )		1,391		—		293
Cash dividends paid on common stock ($ 0.36 per share)	—		—		( 10,890 )		—		—		( 10,890 )



Balance at June 30, 2025	47,620		794,325		348,040		( 241,300 )		( 141,485 )		807,200
Net income	—		—		4,913		—		—		4,913
Other comprehensive income (loss)	—		—		—		—		33,381		33,381
Issuance of common stock for dividend reinvestment plan ( 7,164 shares)	9		216		—		—		—		225
Purchase of common stock ( 26,692 shares)	—		—		—		( 804 )		—		( 804 )
Stock compensation expense	—		790		—		—		—		790
Net issuance of common stock under employee stock plans ( 3,519 shares)	—		15		( 109 )		60		—		( 34 )
Cash dividends paid on common stock ($ 0.36 per share)	—		—		( 10,821 )		—		—		( 10,821 )
Balance at September 30, 2025	$	47,629	$	795,346	$	342,023	$	( 242,044 )	$	( 108,104 )	$	834,850

Southside Bancshares, Inc. |6

Table of Contents

SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued)

(UNAUDITED)

(in thousands, except share and per share data)


	Common Stock		Paid In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
Balance at December 31, 2023	$	47,550	$	788,840	$	282,355	$	( 231,995 )	$	( 113,462 )	$	773,288


Net income	—		—		21,511		—		—		21,511
Other comprehensive income (loss)	—		—		—		—		2,603		2,603
Issuance of common stock for dividend reinvestment plan ( 10,683 shares)	13		293		—		—		—		306

Stock compensation expense	—		756		—		—		—		756
Net issuance of common stock under employee stock plans ( 23,575 shares)	—		75		( 95 )		370		—		350
Cash dividends paid on common stock ($ 0.36 per share)	—		—		( 10,892 )		—		—		( 10,892 )


Balance at March 31, 2024	47,563		789,964		292,879		( 231,625 )		( 110,859 )		787,922
Net income	—		—		24,673		—		—		24,673
Other comprehensive income (loss)	—		—		—		—		( 95 )		( 95 )
Issuance of common stock for dividend reinvestment plan ( 11,060 shares)	14		276		—		—		—		290
Purchase of common stock ( 57,966 shares)	—		—		—		( 1,510 )		—		( 1,510 )
Stock compensation expense	—		761		—		—		—		761
Net issuance of common stock under employee stock plans ( 23,778 shares)	—		( 442 )		( 95 )		371		—		( 166 )
Cash dividends paid on common stock ($ 0.36 per share)	—		—		( 10,905 )		—		—		( 10,905 )


Balance at June 30, 2024	47,577		790,559		306,552		( 232,764 )		( 110,954 )		800,970
Net income	—		—		20,524		—		—		20,524
Other comprehensive income (loss)	—		—		—		—		( 7,545 )		( 7,545 )
Issuance of common stock for dividend reinvestment plan ( 8,701 shares)	11		279		—		—		—		290

Stock compensation expense	—		987		—		—		—		987
Net issuance of common stock under employee stock plans ( 38,553 shares)	—		424		( 121 )		630		—		933
Cash dividends paid on common stock ($ 0.36 per share)	—		—		( 10,905 )		—		—		( 10,905 )
Balance at September 30, 2024	$	47,588	$	792,249	$	316,050	$	( 232,134 )	$	( 118,499 )	$	805,254

The accompanying notes are an integral part of these consolidated financial statements.

Southside Bancshares, Inc. |7

SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Nine Months Ended
	September 30,
	2025		2024
OPERATING ACTIVITIES:
Net income	$	48,233	$	66,708
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and net amortization	8,005		7,518
Securities premium amortization (discount accretion), net	5,708		4,657
Loan (discount accretion) premium amortization, net	660		298
Provision for (reversal of) credit losses	2,472		1,962
Stock compensation expense	2,390		2,504
Deferred tax expense (benefit)	( 546 )		( 878 )

Net (gain) loss on sale of AFS securities	24,949		2,510

Loss on impairment of investments	—		868
Net loss on premises and equipment	1,655		28
Gross proceeds from sales of loans held for sale	13,050		13,423
Gross originations of loans held for sale	( 11,601 )		( 11,289 )
Net (gain) loss on consumer receivables	—		412
Net (gain) loss on OREO	109		95

Gain on purchase of subordinated notes	—		( 178 )
Net change in:
Interest receivable	11,311		12,601
Other assets	90		( 39,564 )
Interest payable	1,648		( 449 )
Other liabilities	( 38,046 )		1,815
Net cash provided by (used in) operating activities	70,087		63,041

INVESTING ACTIVITIES:
Securities AFS:
Purchases	( 594,646 )		( 752,237 )
Sales	411,502		126,248
Maturities, calls and principal repayments	424,932		545,836
Securities HTM:

Maturities, calls and principal repayments	18,107		20,951

Proceeds from redemption of FHLB stock and equity investments	39,564		56,115
Purchases of FHLB stock and equity investments	( 15,190 )		( 84,501 )
Net loan paydowns (originations)	( 105,191 )		( 50,985 )
Proceeds from sales of customer receivables	—		7,600
Purchases of premises and equipment	( 13,195 )		( 6,094 )
Proceeds from (purchases of) BOLI	1,143		4,035
Proceeds from sales of premises and equipment	324		17
Net proceeds from sales of OREO	273		278
Proceeds from sales of repossessed assets	200		114
Net cash provided by (used in) investing activities	167,823		( 132,623 )

(continued)

Southside Bancshares, Inc. | 8



SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(UNAUDITED)
(in thousands)
	Nine Months Ended
	September 30,
	2025		2024
FINANCING ACTIVITIES:
Net change in deposits	307,291		( 114,005 )
Net change in other borrowings	22,931		( 404,010 )
Proceeds from FHLB borrowings	3,346,000		6,068,951
Repayment of FHLB borrowings	( 3,976,577 )		( 5,521,553 )
Net proceeds from issuance of subordinated notes	147,619		—
Purchase/redemption of subordinated notes	—		( 1,805 )
Proceeds from stock option exercises	693		1,403
Cash paid to tax authority related to tax withholding on share-based awards	( 582 )		( 286 )
Purchase of common stock	( 12,622 )		( 1,510 )
Proceeds from the issuance of common stock for dividend reinvestment plan	739		886

Cash dividends paid	( 32,651 )		( 32,702 )
Net cash provided by (used in) financing activities	( 197,159 )		( 4,631 )

Net increase (decrease) in cash and cash equivalents	40,751		( 74,213 )
Cash and cash equivalents at beginning of period	426,161		560,510
Cash and cash equivalents at end of period	$	466,912	$	486,297

SUPPLEMENTAL DISCLOSURES FOR CASH FLOW INFORMATION:

Interest paid	$	135,262	$	150,676
Income taxes paid	$	12,500	$	12,000

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

Loans transferred to other repossessed assets and real estate through foreclosure	$	314	$	806





Unsettled trades to purchase securities	$	—	$	19,904
Unsettled trades to sell securities	$	9,093	$	—

The accompanying notes are an integral part of these consolidated financial statements.

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SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Summary of Significant Accounting and Reporting Policies

Basis of Presentation

In this report, the words “the Company,” “we,” “us,” and “our” refer to the combined entities of Southside Bancshares, Inc. and its subsidiaries, including Southside Bank. The words “Southside” and “Southside Bancshares” refer to Southside Bancshares, Inc. The words “Southside Bank” and “the Bank” refer to Southside Bank.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, not all information required by GAAP for complete financial statements is included in these interim statements. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted only of normal recurring items. The preparation of these consolidated financial statements in accordance with GAAP requires the use of management’s estimates. These estimates are subjective in nature and involve matters of judgment. Actual amounts could differ from these estimates.

Interim results are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the financial statements and notes thereto in our 2024 Form 10-K.

Accounting Changes and Reclassifications

Certain prior period amounts may be reclassified to conform to current year presentation.

2. Earnings Per Share

Earnings per share on a basic and diluted basis are calculated as follows (in thousands, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Basic and Diluted Earnings:
Net income	$	4,913	$	20,524	$	48,233	$	66,708
Less: Earnings allocated to participating securities	3		14		30		41
Net income available to common shareholders	$	4,910	$	20,510	$	48,203	$	66,667
Basic weighted-average shares outstanding	30,067		30,286		30,229		30,276
Add: Stock awards	68		84		87		56
Diluted weighted-average shares outstanding	30,135		30,370		30,316		30,332
Basic earnings per share:
Net income	$	0.16	$	0.68	$	1.59	$	2.20
Diluted earnings per share:
Net income	$	0.16	$	0.68	$	1.59	$	2.20

For the three and nine months ended September 30, 2025, there were approximately 442,000 and 471,000 anti-dilutive shares outstanding, respectively. For the three and nine months ended September 30, 2024, there were 539,000 and 534,000 anti-dilutive shares outstanding, respectively.

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3. Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component are as follows (in thousands):


	Three Months Ended September 30, 2025

	Unrealized Gains (Losses) on Securities		Unrealized Gains (Losses) on Derivatives		Retirement Plans		Total
Beginning balance, net of tax	$	( 123,451 )	$	( 3 )	$	( 18,031 )	$	( 141,485 )
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassifications	16,327		828		—		17,155
Reclassification adjustments included in net income	26,474		( 1,988 )		614		25,100
Income tax (expense) benefit	( 8,989 )		243		( 128 )		( 8,874 )
Net current-period other comprehensive income (loss), net of tax	33,812		( 917 )		486		33,381
Ending balance, net of tax	$	( 89,639 )	$	( 920 )	$	( 17,545 )	$	( 108,104 )

	Nine Months Ended September 30, 2025

	Unrealized Gains (Losses) on Securities		Unrealized Gains (Losses) on Derivatives		Retirement Plans		Total
Beginning balance, net of tax	$	( 112,199 )	$	6,303	$	( 19,002 )	$	( 124,898 )
Other comprehensive income (loss):
Other comprehensive (loss) income before reclassifications	( 2,504 )		( 2,715 )		—		( 5,219 )
Reclassification adjustments included in net income	31,061		( 6,427 )		1,844		26,478

Income tax (expense) benefit	( 5,997 )		1,919		( 387 )		( 4,465 )
Net current-period other comprehensive income (loss), net of tax	22,560		( 7,223 )		1,457		16,794

Ending balance, net of tax	$	( 89,639 )	$	( 920 )	$	( 17,545 )	$	( 108,104 )

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	Three Months Ended September 30, 2024

	Unrealized Gains (Losses) on Securities		Unrealized Gains (Losses) on Derivatives		Retirement Plans		Total
Beginning balance, net of tax	$	( 109,881 )	$	17,444	$	( 18,517 )	$	( 110,954 )
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassifications	6,593		( 13,658 )		( 1,002 )		( 8,067 )
Reclassification adjustments included in net income	4,048		( 5,688 )		156		( 1,484 )
Income tax (expense) benefit	( 2,235 )		4,063		178		2,006
Net current-period other comprehensive income (loss), net of tax	8,406		( 15,283 )		( 668 )		( 7,545 )
Ending balance, net of tax	$	( 101,475 )	$	2,161	$	( 19,185 )	$	( 118,499 )

	Nine Months Ended September 30, 2024
	Unrealized Gains (Losses) on Securities		Unrealized Gains (Losses) on Derivatives		Retirement Plans		Total
Beginning balance, net of tax	$	( 107,499 )	$	12,803	$	( 18,766 )	$	( 113,462 )


Other comprehensive income (loss):
Other comprehensive income (loss) before reclassifications	( 1,094 )		4,641		( 1,002 )		2,545
Reclassification adjustments included in net income	8,720		( 18,112 )		471		( 8,921 )
Income tax (expense) benefit	( 1,602 )		2,829		112		1,339
Net current-period other comprehensive income (loss), net of tax	6,024		( 10,642 )		( 419 )		( 5,037 )
Ending balance, net of tax	$	( 101,475 )	$	2,161	$	( 19,185 )	$	( 118,499 )

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The reclassification adjustments out of accumulated other comprehensive income (loss) included in net income are presented below (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024






Unrealized gains and losses on securities transferred:
Amortization of unrealized gains and losses (1)	$	( 2,079 )	$	( 2,119 )	$	( 6,112 )	$	( 6,210 )
Tax (expense) benefit	437		445		1,284		1,304
Net of tax	( 1,642 )		( 1,674 )		( 4,828 )		( 4,906 )

Unrealized gains and losses on available for sale securities:
Realized net gain (loss) on sale of securities (2)	( 24,395 )		( 1,929 )		( 24,949 )		( 2,510 )


Tax (expense) benefit	5,123		405		5,239		527
Net of tax	( 19,272 )		( 1,524 )		( 19,710 )		( 1,983 )

Derivatives:
Realized net gain (loss) on interest rate swap derivatives (3)	1,988		5,688		6,427		18,112
Tax (expense) benefit	( 417 )		( 1,195 )		( 1,349 )		( 3,804 )
Net of tax	1,571		4,493		5,078		14,308





Amortization of pension plan:
Net actuarial loss (4)	( 614 )		( 156 )		( 1,844 )		( 471 )


Tax (expense) benefit	128		33		387		99
Net of tax	( 486 )		( 123 )		( 1,457 )		( 372 )
Total reclassifications for the period, net of tax	$	( 19,829 )	$	1,172	$	( 20,917 )	$	7,047

(1) Included in interest income on the consolidated statements of income.

(2) Listed as net gain (loss) on sale of securities AFS on the consolidated statements of income.

(3) Included in interest expense for FHLB borrowings and deposits on the consolidated statements of income.

(4) These AOCI components are included in the computation of net periodic pension cost (income) presented in “Note 8 – Employee Benefit Plans.”

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4. Securities

Debt securities

The amortized cost, gross unrealized gains and losses and estimated fair value of investment and mortgage-backed AFS and HTM securities, net of allowance for credit losses, as of September 30, 2025 and December 31, 2024 are reflected in the tables below (in thousands):


	September 30, 2025
	Amortized		Gross Unrealized		Gross Unrealized		Less: Allowance for		Estimated
AVAILABLE FOR SALE	Cost		Gains		Losses		Credit Losses		Fair Value
Investment securities:
U.S. Treasury	$	49,650	$	12	$	—	$	—	$	49,662

State and political subdivisions	274,142		1,195		27,246		—		248,091
Corporate bonds and other	16,717		460		234		—		16,943

MBS: (1)
Residential	965,126		11,311		998		—		975,439
Commercial	2,229		67		—		—		2,296
Total	$	1,307,864	$	13,045	$	28,478	$	—	$	1,292,431



	Amortized		Gross Unrealized		Gross Unrealized		Estimated		Less: Allowance for		Net Carrying
HELD TO MATURITY	Cost		Gains		Losses		Fair Value		Credit Losses		Amount
Investment securities:














State and political subdivisions	$	1,042,425	$	776	$	149,376	$	893,825	$	26	$	1,042,399
Corporate bonds and other	112,668		665		2,716		110,617		29		112,639
MBS: (1)
Residential	79,349		12		5,416		73,945		—		79,349
Commercial	29,014		—		1,215		27,799		—		29,014
Total	$	1,263,456	$	1,453	$	158,723	$	1,106,186	$	55	$	1,263,401


	December 31, 2024
	Amortized		Gross Unrealized		Gross Unrealized		Less: Allowance for		Estimated
AVAILABLE FOR SALE	Cost		Gains		Losses		Credit Losses		Fair Value
Investment securities:
U.S. Treasury	$	173,880	$	76	$	—	$	—	$	173,956

State and political subdivisions	458,013		36		43,717		—		414,332
Corporate bonds and other	14,646		263		401		—		14,508

MBS: (1)
Residential	935,639		835		10,088		—		926,386
Commercial	5,238		—		526		—		4,712
Total	$	1,587,416	$	1,210	$	54,732	$	—	$	1,533,894




















	Amortized		Gross Unrealized		Gross Unrealized		Estimated		Less: Allowance for		Net Carrying
HELD TO MATURITY	Cost		Gains		Losses		Fair Value		Credit Losses		Amount
Investment securities:
State and political subdivisions	$	1,040,912	$	4,004	$	152,697	$	892,219	$	—	$	1,040,912
Corporate bonds and other	124,095		17		6,553		117,559		—		124,095
MBS: (1)
Residential	84,660		8		8,549		76,119		—		84,660
Commercial	29,567		—		1,982		27,585		—		29,567
Total	$	1,279,234	$	4,029	$	169,781	$	1,113,482	$	—	$	1,279,234

(1) All MBS are issued and/or guaranteed by U.S. government agencies or U.S. GSEs.

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From time to time, we transfer securities from AFS to HTM due to overall balance sheet strategies and our intent and ability to hold these securities until maturity. We did not transfer any securities from AFS to HTM during the nine months ended September 30, 2025 or the year ended December 31, 2024. The remaining net unamortized, unrealized loss on the transferred securities included in AOCI in the accompanying balance sheets totaled $ 98.9 million ($ 78.2 million, net of tax) at September 30, 2025 and $ 105.1 million ($ 83.0 million, net of tax) at December 31, 2024. Any net unrealized gain or loss on the transferred securities included in AOCI at the time of transfer will be amortized over the remaining life of the underlying security as an adjustment to the yield on those securities. Securities transferred with losses included in AOCI continue to be included in management’s assessment for impairment for each individual security.

Investment securities and MBS with carrying values of $ 1.95 billion and $ 2.18 billion were pledged as of September 30, 2025 and December 31, 2024, respectively, to collateralize borrowings from the FRDW, repurchase agreements and public fund deposits, for potential liquidity needs or other purposes as required by law. At September 30, 2025 and December 31, 2024, the amount of excess collateral at the FRDW was $ 382.2 million and $ 431.7 million, respectively.

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The following tables present the fair value and unrealized losses on AFS, if applicable, for which an allowance for credit losses has not been recorded, as well as HTM investment securities and MBS, if applicable, as of September 30, 2025 and December 31, 2024, segregated by major security type and length of time in a continuous loss position (in thousands):


	September 30, 2025
	Less Than 12 Months				More Than 12 Months				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
AVAILABLE FOR SALE
Investment securities:


State and political subdivisions	$	—	$	—	$	200,368	$	27,246	$	200,368	$	27,246
Corporate bonds and other	—		—		5,748		234		5,748		234

MBS:
Residential	64,783		260		10,828		738		75,611		998

Total	$	64,783	$	260	$	216,944	$	28,218	$	281,727	$	28,478

HELD TO MATURITY
Investment securities:
State and political subdivisions	$	127,853	$	5,503	$	716,470	$	143,873	$	844,323	$	149,376
Corporate bonds and other	—		—		84,432		2,716		84,432		2,716
MBS:
Residential	2,460		197		71,055		5,219		73,515		5,416
Commercial	—		—		27,799		1,215		27,799		1,215
Total	$	130,313	$	5,700	$	899,756	$	153,023	$	1,030,069	$	158,723

	December 31, 2024
	Less Than 12 Months				More Than 12 Months				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
AVAILABLE FOR SALE
Investment securities:


State and political subdivisions	$	12,089	$	64	$	398,304	$	43,653	$	410,393	$	43,717
Corporate bonds and other	2,967		33		5,612		368		8,579		401

MBS:
Residential	723,855		6,517		31,527		3,571		755,382		10,088
Commercial	2,223		12		2,489		514		4,712		526
Total	$	741,134	$	6,626	$	437,932	$	48,106	$	1,179,066	$	54,732

HELD TO MATURITY
Investment securities:
State and political subdivisions	$	73,272	$	1,779	$	704,563	$	150,918	$	777,835	$	152,697
Corporate bonds and other	2,212		149		111,392		6,404		113,604		6,553
MBS:
Residential	2,548		292		73,064		8,257		75,612		8,549
Commercial	—		—		27,585		1,982		27,585		1,982
Total	$	78,032	$	2,220	$	916,604	$	167,561	$	994,636	$	169,781

For those AFS debt securities in an unrealized loss position (i) where management has the intent to sell or (ii) where it will more-likely-than-not be required to sell the security before the recovery of its amortized cost basis, we recognize the loss in earnings. For those AFS debt securities in an unrealized loss position that do not meet either of these criteria, management assesses whether the decline in fair value has resulted from credit-related factors, using both qualitative and quantitative criteria. Determining the allowance under the credit loss method requires the use of a discounted cash flow method to assess the credit losses. Any credit-related impairment will be recognized in allowance for credit losses on the balance sheet with a corresponding adjustment to earnings. Noncredit-related temporary impairment, the portion of the impairment relating to factors other than credit (such as changes in market interest rates), is recognized in other comprehensive income, net of tax.

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As of September 30, 2025 and December 31, 2024, we did no t have an allowance for credit losses on our AFS securities, based on our consideration of the qualitative factors associated with each security type in our AFS portfolio. The unrealized losses on our investment and MBS are due to changes in interest rates and spreads and other market conditions. We had 191 and 421 AFS debt securities in an unrealized loss position at September 30, 2025 and December 31, 2024, respectively. Our state and political subdivisions are highly rated municipal securities with a long history of no credit losses. Our AFS MBS are highly rated securities, which are either explicitly or implicitly backed by the U.S. Government through its agencies and which are highly rated by major ratings agencies and also have a long history of no credit losses. Our corporate bonds and other investment securities consist of primarily investment grade bonds.

We assess the likelihood of default and the potential amount of default when assessing our HTM securities for credit losses. We utilize term structures and, due to no prior loss exposure on our state and political subdivision securities or our corporate securities, we currently apply a third-party average loss given default rate to model these securities. We elected to use the collective evaluation method to model our HTM securities, which aligns with our third-party fair value measurement process. The model determined an expected credit loss over the life of the HTM securities of $ 55,000 , and such amount was recognized as credit loss for the nine months ended September 30, 2025, and no provision of credit loss was recognized for the three months ended September 30, 2025. For the three and nine months ended September 30, 2024, no provision for credit loss was recognized. Management evaluated the remote expectation of loss on the HTM portfolio, along with the qualitative factors associated with these securities, as well as the credit loss estimate of the model and concluded that an allowance for credit loss of $ 55,000 was sufficient as of September 30, 2025, due to the securities being highly rated municipals and primarily investment grade corporates with a long history of no credit losses. As of September 30, 2025, two corporate bonds were rated below investment grade.

The accrued interest receivable on our debt securities is excluded from the credit loss estimate and is included in interest receivable on our consolidated balance sheets. As of September 30, 2025, accrued interest receivable on AFS and HTM debt securities totaled $ 7.1 million and $ 7.8 million, respectively. As of December 31, 2024, accrued interest receivable on AFS and HTM debt securities totaled $ 13.6 million and $ 12.9 million, respectively. No HTM debt securities were past-due or on nonaccrual status as of September 30, 2025 or December 31, 2024.

The following table reflects interest income recognized on securities for the periods presented (in thousands):



	Three Months Ended September 30,
	2025		2024
U.S. Treasury	$	734	$	2,315

State and political subdivisions	11,424		12,994

Corporate bonds and other	1,665		1,654
MBS	14,174		11,976
Total interest income on securities	$	27,997	$	28,939



	Nine Months Ended September 30,
	2025		2024
U.S. Treasury	$	3,737	$	6,404

State and political subdivisions	34,743		41,151
Corporate bonds and other	4,875		5,182
MBS	40,737		33,179
Total interest income on securities	$	84,092	$	85,916

There was a $ 24.9 million net realized loss as a result of sales from the AFS securities portfolio for the nine months ended September 30, 2025, which consisted of $ 25.4 million in realized losses and $ 2.0 million in realized gains, as well as a net loss of $ 1.5 million on the unwind of fair value MBS and municipal securities hedges in the AFS securities portfolio. There was a $ 2.5 million net realized loss as a result of sales from the AFS securities portfolio for the nine months ended September 30, 2024, which consisted of $ 6.1 million in realized losses and $ 88,000 in realized gains, offset by a net gain of $ 3.5 million on the unwinding of fair value hedges on municipal securities in the AFS securities portfolio. In addition, during the three months ended September 30, 2024, we recorded an impairment charge of $ 868,000 consisting of a loss of $ 685,000 on the sale of approximately $ 10.0 million of AFS municipal securities and a loss of $ 183,000 on the unwind of the related fair value hedges, sold on October 1, 2024. There were no sales from the HTM portfolio during the three and nine months ended September 30, 2025 or 2024. We calculate realized gains and losses on sales of securities under the specific identification method.

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Expected maturities on our securities may differ from contractual maturities because issuers may have the right to call or prepay obligations. MBS are presented in total by category since MBS are typically issued with stated principal amounts and are backed by pools of mortgages that have loans with varying maturities. The characteristics of the underlying pool of mortgages, such as fixed-rate or adjustable-rate, as well as prepayment risk, are passed on to the security holder. The term of a mortgage-backed pass-through security thus approximates the term of the underlying mortgages and can vary significantly due to prepayments.

The amortized cost and estimated fair value of AFS and HTM securities at September 30, 2025, are presented below by contractual maturity (in thousands):


	September 30, 2025
	Amortized Cost		Fair Value
AVAILABLE FOR SALE
Investment securities:
Due in one year or less	$	50,084	$	50,098
Due after one year through five years	4,991		5,081
Due after five years through ten years	16,007		16,195
Due after ten years	269,427		243,322
	340,509		314,696
MBS:	967,355		977,735
Total	$	1,307,864	$	1,292,431


	September 30, 2025
	Amortized Cost		Fair Value
HELD TO MATURITY
Investment securities:
Due in one year or less	$	140	$	139
Due after one year through five years	25,238		25,351
Due after five years through ten years	125,603		123,125
Due after ten years	1,004,112		855,827
	1,155,093		1,004,442
MBS:	108,363		101,744
Total	$	1,263,456	$	1,106,186

Equity Investments

Equity investments on our consolidated balance sheets include Community Reinvestment Act funds with a readily determinable fair value as well as equity investments without readily determinable fair values. At September 30, 2025 and December 31, 2024, we had equity investments recorded in our consolidated balance sheets of $ 9.6 million and $ 9.5 million, respectively.

Any realized and unrealized gains and losses on equity investments are reported in income. Equity investments without readily determinable fair values are recorded at cost, less impairment, if any. For the three and nine months ended September 30, 2025, there was no gain or loss on the sale of equity securities.

The following is a summary of unrealized and realized gains and losses on equity investments recognized in other noninterest income in the consolidated statements of income during the periods presented (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Net gains (losses) recognized during the period on equity investments	$	51	$	191	$	146	$	112
Less: Net gains recognized during the period on equity investments sold during the period	—		—		—		—
Unrealized gains (losses) recognized during the reporting period on equity investments held at the reporting date	$	51	$	191	$	146	$	112

Equity investments are assessed quarterly for other-than-temporary impairment. Based upon that evaluation, management does no t consider any of our equity investments to be other-than-temporarily impaired at September 30, 2025.

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FHLB Stock

Our FHLB stock, which has limited marketability, is carried at cost and is assessed quarterly for other-than-temporary impairment. Based upon evaluation by management at September 30, 2025, our FHLB stock was no t impaired and thus was not considered to be other-than-temporarily impaired.

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5. Loans and Allowance for Loan Losses

Loans in the accompanying consolidated balance sheets are classified as follows (in thousands):


	September 30, 2025		December 31, 2024
Real estate loans:
Construction	$	519,528	$	537,827
1-4 family residential	730,061		740,396
Commercial	2,688,712		2,579,735
Commercial loans	429,952		363,167
Municipal loans	353,324		390,968
Loans to individuals	43,712		49,504
Total loans	4,765,289		4,661,597
Less: Allowance for loan losses	45,294		44,884
Net loans	$	4,719,995	$	4,616,713

Construction Real Estate Loans

Our construction loans are collateralized by property located primarily in or near the market areas we serve. Some of our construction loans will be owner occupied upon completion. Construction loans for non-owner occupied projects are financed, but these typically have cash flows from leases with tenants, secondary sources of repayment, and in some cases, additional collateral. Our construction loans have both adjustable and fixed interest rates during the construction period. Construction loans to individuals are typically priced and made with the intention of granting the permanent loan on the completed property. Commercial construction loans typically have adjustable interest rates and are subject to underwriting standards similar to that of the commercial real estate loan portfolio. Owner occupied 1-4 family residential construction loans are subject to the underwriting standards of the permanent loan.

1-4 Family Residential Real Estate Loans

Residential loan originations are generated by our mortgage loan officers, in-house origination staff, marketing efforts, present customers, walk-in customers and referrals from real estate agents and builders. We focus our lending efforts primarily on the origination of loans secured by first mortgages on owner occupied 1-4 family residences. Substantially all of our 1-4 family residential originations are secured by properties located in or near our market areas.

Our 1-4 family residential loans generally have maturities ranging from 15 to 30 years. These loans are typically fully amortizing with monthly payments sufficient to repay the total amount of the loan. Our 1-4 family residential loans are made at both fixed and adjustable interest rates.

Underwriting for 1-4 family residential loans includes debt-to-income analysis, credit history analysis, appraised value and down payment considerations. Changes in the market value of real estate can affect the potential losses in the residential portfolio.

Commercial Real Estate Loans

Commercial real estate loans as of September 30, 2025 consisted of $ 1.92 billion of owner and non-owner occupied real estate, $ 739.1 million of loans secured by multi-family properties and $ 33.2 million of loans secured by farmland. Commercial real estate loans primarily include loans collateralized by retail, commercial office buildings, multi-family residential buildings, medical facilities and offices, senior living, assisted living and skilled nursing facilities, warehouse facilities, hotels and churches. In determining whether to originate commercial real estate loans, we generally consider such factors as the financial condition of the borrower and the debt service coverage of the property. Commercial real estate loans are made at both fixed and adjustable interest rates for terms generally up to 20 years.

Commercial Loans

Our commercial loans are diversified loan types including short-term working capital loans for inventory and accounts receivable and short- and medium-term loans for equipment or other business capital expansion. In our commercial loan underwriting, we assess the creditworthiness, ability to repay and the value and liquidity of the collateral being offered. Terms of commercial loans are generally commensurate with the useful life of the collateral offered.

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Municipal Loans

We have made loans to municipalities and school districts primarily throughout the state of Texas, with a small percentage originating outside of the state. The majority of the loans to municipalities and school districts have tax or revenue pledges and in some cases are additionally supported by collateral. Municipal loans made without a direct pledge of taxes or revenues are usually made based on some type of collateral that represents an essential service. These loans allow us to earn a higher yield than we could if we purchased municipal securities for similar durations.

Loans to Individuals

Substantially all originations of our loans to individuals are made to consumers in our market areas. The majority of loans to individuals are collateralized by titled equipment, which are primarily automobiles. Loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower. The underwriting standards we employ for consumer loans include an application, a determination of the applicant’s payment history on other debts, with the greatest weight being given to payment history with us and an assessment of the borrower’s ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, in relation to the proposed loan amount. Most of our loans to individuals are collateralized, which management believes assists in limiting our exposure.

Credit Quality Indicators

We categorize loans into risk categories on an ongoing basis based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. We use the following definitions for risk ratings:

• Pass (Rating 1 – 4) – This rating is assigned to all satisfactory loans. This category, by definition, consists of acceptable credit. Credit and collateral exceptions should not be present, although their presence would not necessarily prohibit a loan from being rated Pass, if deficiencies are in the process of correction. These loans are not included in the Watch List.

• Pass Watch (Rating 5) – These loans require some degree of special treatment, but not due to credit quality. This category does not include loans specially mentioned or adversely classified; however, particular attention is warranted to characteristics such as:

▪ A lack of, or abnormally extended payment program;

▪ A heavy degree of concentration of collateral without sufficient margin;

▪ A vulnerability to competition through lesser or extensive financial leverage; and

▪ A dependence on a single or few customers or sources of supply and materials without suitable substitutes or alternatives.

• Special Mention (Rating 6) – A Special Mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in our credit position at some future date. Special Mention loans are not adversely classified and do not expose us to sufficient risk to warrant adverse classification.

• Substandard (Rating 7) – Substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

• Doubtful (Rating 8) – Loans classified as Doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation, in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.

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The following tables set forth the amortized cost basis by class of financing receivable and credit quality indicator for the periods presented (in thousands):


September 30, 2025	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Total
	2025		2024		2023		2022		2021		Prior
Construction real estate:
Pass	$	76,105	$	102,162	$	84,508	$	11,572	$	16,301	$	6,425	$	120,107	$	417,180
Pass watch	30,118		180		—		359		—		—		7,943		38,600
Special mention	1,399		—		—		41,461		412		60		20,168		63,500
Substandard	57		—		—		—		54		28		—		139
Doubtful	—		—		109		—		—		—		—		109
Total construction real estate	$	107,679	$	102,342	$	84,617	$	53,392	$	16,767	$	6,513	$	148,218	$	519,528
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

1-4 family residential real estate:
Pass	$	38,412	$	46,113	$	69,888	$	146,765	$	129,517	$	293,589	$	824	$	725,108
Pass watch	—		—		—		—		—		—		—		—
Special mention	—		—		—		—		—		—		—		—
Substandard	—		—		112		—		661		3,602		269		4,644
Doubtful	—		169		—		—		—		140		—		309
Total 1-4 family residential real estate	$	38,412	$	46,282	$	70,000	$	146,765	$	130,178	$	297,331	$	1,093	$	730,061
Current period gross charge-offs	$	—	$	56	$	—	$	—	$	—	$	13	$	—	$	69

Commercial real estate:
Pass	$	485,665	$	247,805	$	358,042	$	502,994	$	420,483	$	309,961	$	43,742	$	2,368,692
Pass watch	—		—		51,900		103,718		—		—		—		155,618
Special mention	21,218		—		1,569		49,716		165		12,515		—		85,183
Substandard	1,074		32,018		—		28,181		12,168		5,778		—		79,219
Doubtful	—		—		—		—		—		—		—		—
Total commercial real estate	$	507,957	$	279,823	$	411,511	$	684,609	$	432,816	$	328,254	$	43,742	$	2,688,712
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial loans:
Pass	$	65,103	$	51,484	$	30,011	$	27,868	$	9,436	$	5,660	$	207,515	$	397,077
Pass watch	—		47		—		329		58		—		—		434
Special mention	103		256		191		540		746		4		6,753		8,593
Substandard	2,901		12,723		298		661		8		63		5,787		22,441
Doubtful	81		805		263		113		104		41		—		1,407
Total commercial loans	$	68,188	$	65,315	$	30,763	$	29,511	$	10,352	$	5,768	$	220,055	$	429,952
Current period gross charge-offs	$	—	$	1,031	$	383	$	140	$	139	$	23	$	—	$	1,716

Municipal loans:
Pass	$	—	$	1,800	$	31,920	$	55,377	$	60,982	$	203,245	$	—	$	353,324
Pass watch	—		—		—		—		—		—		—		—
Special mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total municipal loans	$	—	$	1,800	$	31,920	$	55,377	$	60,982	$	203,245	$	—	$	353,324
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Loans to individuals:
Pass	$	15,298	$	10,135	$	6,091	$	4,564	$	3,083	$	2,222	$	2,012	$	43,405
Pass watch	—		—		—		—		—		—		—		—
Special mention	—		—		—		—		—		—		—		—
Substandard	9		—		6		2		51		3		1		72
Doubtful	191		3		18		20		2		1		—		235
Total loans to individuals	$	15,498	$	10,138	$	6,115	$	4,586	$	3,136	$	2,226	$	2,013	$	43,712
Current period gross charge-offs (1)	$	1,210	$	34	$	15	$	59	$	21	$	18	$	—	$	1,357

Total loans	$	737,734	$	505,700	$	634,926	$	974,240	$	654,231	$	843,337	$	415,121	$	4,765,289
Total current period gross charge-offs (1)	$	1,210	$	1,121	$	398	$	199	$	160	$	54	$	—	$	3,142

(1) Includes $ 886,000 in charged off demand deposit overdrafts reported as 2025 originations.

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December 31, 2024	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Total
	2024		2023		2022		2021		2020		Prior
Construction real estate:
Pass	$	130,555	$	122,724	$	46,499	$	17,710	$	3,564	$	5,923	$	132,096	$	459,071
Pass watch	209		—		59,700		—		574		591		16,999		78,073
Special mention	—		—		—		429		—		72		—		501
Substandard	—		112		—		59		—		—		—		171
Doubtful	—		—		—		—		—		11		—		11
Total construction real estate	$	130,764	$	122,836	$	106,199	$	18,198	$	4,138	$	6,597	$	149,095	$	537,827
Current period gross charge-offs	$	—	$	24	$	—	$	—	$	—	$	—	$	—	$	24

1-4 family residential real estate:
Pass	$	43,040	$	65,458	$	153,335	$	139,048	$	106,116	$	226,550	$	1,524	$	735,071
Pass watch	—		—		—		—		—		—		—		—
Special mention	—		—		—		505		—		—		—		505
Substandard	50		225		—		225		1,326		2,833		—		4,659
Doubtful	—		—		—		—		—		161		—		161
Total 1-4 family residential real estate	$	43,090	$	65,683	$	153,335	$	139,778	$	107,442	$	229,544	$	1,524	$	740,396
Current period gross charge-offs	$	—	$	31	$	—	$	—	$	10	$	220	$	—	$	261

Commercial real estate:
Pass	$	363,370	$	410,213	$	632,216	$	509,927	$	132,562	$	223,551	$	41,568	$	2,313,407
Pass watch	—		11,953		65,206		22,440		4,090		24,599		983		129,271
Special mention	3,983		—		79,280		175		—		13,232		—		96,670
Substandard	—		—		27,994		6,409		250		5,649		—		40,302
Doubtful	—		—		—		—		—		85		—		85
Total commercial real estate	$	367,353	$	422,166	$	804,696	$	538,951	$	136,902	$	267,116	$	42,551	$	2,579,735
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	78	$	—	$	78

Commercial loans:
Pass	$	83,118	$	51,895	$	39,449	$	13,887	$	5,875	$	3,091	$	155,671	$	352,986
Pass watch	—		30		603		787		29		513		4,972		6,934
Special mention	—		327		29		83		—		101		180		720
Substandard	365		99		281		137		22		1		1,100		2,005
Doubtful	31		244		134		61		—		52		—		522
Total commercial loans	$	83,514	$	52,595	$	40,496	$	14,955	$	5,926	$	3,758	$	161,923	$	363,167
Current period gross charge-offs	$	24	$	462	$	590	$	85	$	—	$	12	$	—	$	1,173

Municipal loans:
Pass	$	1,949	$	34,398	$	57,862	$	64,041	$	41,115	$	188,309	$	—	$	387,674
Pass watch	—		—		—		—		892		2,402		—		3,294
Special mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total municipal loans	$	1,949	$	34,398	$	57,862	$	64,041	$	42,007	$	190,711	$	—	$	390,968
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Loans to individuals:
Pass	$	18,765	$	10,881	$	7,719	$	5,949	$	2,900	$	949	$	2,215	$	49,378
Pass watch	—		—		—		—		—		—		—		—
Special mention	—		—		—		—		—		—		—		—
Substandard	—		2		28		—		—		4		1		35
Doubtful	—		8		67		2		8		6		—		91
Total loans to individuals	$	18,765	$	10,891	$	7,814	$	5,951	$	2,908	$	959	$	2,216	$	49,504
Current period gross charge-offs	$	1,655	$	34	$	43	$	26	$	33	$	33	$	—	$	1,824

Total loans	$	645,435	$	708,569	$	1,170,402	$	781,874	$	299,323	$	698,685	$	357,309	$	4,661,597
Total current period gross charge-offs (1)	$	1,679	$	551	$	633	$	111	$	43	$	343	$	—	$	3,360

(1) Includes $ 1.2 million in charged off demand deposit overdrafts reported as 2024 originations.

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Watch List loans reported as 2025 originations as of September 30, 2025 and Watch List loans reported as 2024 originations as of December 31, 2024 were, for the majority, first originated in various years prior to 2025 and 2024, respectively, but were renewed in the respective year.

The following tables present the aging of the amortized cost basis in past due loans by class of loans (in thousands):


	September 30, 2025
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
Real estate loans:
Construction	$	1,481	$	—	$	109	$	1,590	$	517,938	$	519,528
1-4 family residential	638		1,034		441		2,113		727,948		730,061
Commercial	214		1,192		134		1,540		2,687,172		2,688,712
Commercial loans	994		1,508		913		3,415		426,537		429,952
Municipal loans	—		—		—		—		353,324		353,324
Loans to individuals	64		20		17		101		43,611		43,712
Total	$	3,391	$	3,754	$	1,614	$	8,759	$	4,756,530	$	4,765,289


	December 31, 2024
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total
Real estate loans:
Construction	$	92	$	5	$	—	$	97	$	537,730	$	537,827
1-4 family residential	3,217		1,328		262		4,807		735,589		740,396
Commercial	2,054		331		—		2,385		2,577,350		2,579,735
Commercial loans	2,881		649		407		3,937		359,230		363,167
Municipal loans	—		—		—		—		390,968		390,968
Loans to individuals	108		48		20		176		49,328		49,504
Total	$	8,352	$	2,361	$	689	$	11,402	$	4,650,195	$	4,661,597

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The following table sets forth the amortized cost basis of nonperforming assets for the periods presented (in thousands):


	September 30, 2025		December 31, 2024
Nonaccrual loans:
Real estate loans:
Construction	$	128	$	122
1-4 family residential	1,552		1,734
Commercial	1,256		171
Commercial loans	4,766		1,067

Loans to individuals	253		91
Total nonaccrual loans (1)	7,955		3,185

Accruing loans past due more than 90 days	—		—
Restructured loans	27,501		2
OREO	128		388
Repossessed assets	24		14
Total nonperforming assets	$	35,608	$	3,589

(1) Includes $ 1.2 million and $ 63,000 of restructured loans as of September 30, 2025 and December 31, 2024, respectively.

The increase in restructured loans was due to the extension of maturity on a $ 27.5 million commercial real estate loan in the first quarter of 2025. We reversed $ 56,000 and $ 95,000 of interest income on nonaccrual loans during the three and nine months ended September 30, 2025, respectively, and $ 13,000 and $ 75,000 for the three and nine months ended September 30, 2024, respectively. We had $ 3.2 million and $ 650,000 of loans on nonaccrual for which there was no related allowance for credit losses as of September 30, 2025 and December 31, 2024, respectively.

Collateral-dependent loans are loans that we expect the repayment to be provided substantially through the operation or sale of the collateral of the loan and for which we have determined that the borrower is experiencing financial difficulty. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for selling costs. As of September 30, 2025 and December 31, 2024, we had $ 39.3 million and $ 6.9 million, respectively, of collateral-dependent loans, secured mainly by real estate and equipment. There have been no significant changes to the collateral that secures the collateral-dependent assets as of September 30, 2025. Foreclosed assets include OREO and repossessed assets. For 1-4 family residential real estate properties, a loan is recognized as a foreclosed property once legal title to the real estate property has been received upon completion of foreclosure or the borrower has conveyed all interest in the residential property through a deed in lieu of foreclosure. There were no loans secured by 1-4 family residential properties for which formal foreclosure proceedings were in process as of September 30, 2025. There were $ 40,000 of loans secured by 1-4 family residential properties for which formal foreclosure proceedings were in process as of December 31, 2024.

Restructured Loans

A loan is considered restructured if the borrower is experiencing financial difficulties and the loan has been modified. Modifications may include interest rate reductions, restructuring amortization schedules, extensions of maturity or a combination of any of these modifications intended to minimize potential losses. In most instances, interest will continue to be charged on principal balances outstanding during the extended term. Therefore, the financial effects of the recorded investment of loans restructured during the nine months ended September 30, 2025 were not significant.

There were three restructured loans totaling $ 618,000 with extensions of maturity during the three months ended September 30, 2025 and 14 restructured loans totaling $ 28.6 million with extensions of maturity during the nine months ended September 30, 2025. There were 16 restructured loans totaling $ 28.7 million included in nonperforming assets as of September 30, 2025. There was one restructured loan totaling $ 25,000 restructured with an extension of maturity period during the nine months ended September 30, 2024.

On an ongoing basis, performance of restructured loans are monitored for subsequent payment default. Payment default is recognized when the borrower is 90 days or more past due. For the nine months ended September 30, 2025, there were no restructured loans in default. As of September 30, 2024, there was one restructured loan totaling $ 289,000 in default. Payment defaults for restructured loans did not significantly impact the determination of the allowance for loan losses in the periods

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presented. At September 30, 2025, there were no commitments to lend additional funds to borrowers whose loans had been restructured.

Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses by portfolio segment for the periods presented (in thousands):



	Three Months Ended September 30, 2025
	Real Estate
	Construction		1-4 Family Residential		Commercial		Commercial Loans		Municipal Loans		Loans to Individuals		Total
Balance at beginning of period	$	6,194	$	2,781	$	30,701	$	4,433	$	14	$	298	$	44,421
Loans charged-off	—		—		—		( 833 )		—		( 502 )		( 1,335 )
Recoveries of loans charged-off	—		9		4		255		—		223		491
Net loans (charged-off) recovered	—		9		4		( 578 )		—		( 279 )		( 844 )
Provision for (reversal of) loan losses	30		38		383		945		( 1 )		322		1,717
Balance at end of period	$	6,224	$	2,828	$	31,088	$	4,800	$	13	$	341	$	45,294



	Nine Months Ended September 30, 2025
	Real Estate
	Construction		1-4 Family Residential		Commercial		Commercial Loans		Municipal Loans		Loans to Individuals		Total
Balance at beginning of period	$	3,958	$	2,780	$	35,526	$	2,448	$	16	$	156	$	44,884
Loans charged-off	—		( 69 )		—		( 1,716 )		—		( 1,357 )		( 3,142 )
Recoveries of loans charged-off	—		24		13		520		—		586		1,143
Net loans (charged-off) recovered	—		( 45 )		13		( 1,196 )		—		( 771 )		( 1,999 )
Provision for (reversal of) loan losses	2,266		93		( 4,451 )		3,548		( 3 )		956		2,409
Balance at end of period	$	6,224	$	2,828	$	31,088	$	4,800	$	13	$	341	$	45,294



	Three Months Ended September 30, 2024
	Real Estate
	Construction		1-4 Family Residential		Commercial		Commercial Loans		Municipal Loans		Loans to Individuals		Total
Balance at beginning of period	$	4,734	$	2,704	$	31,841	$	2,942	$	18	$	168	$	42,407


Loans charged-off	—		( 133 )		—		( 127 )		—		( 513 )		( 773 )
Recoveries of loans charged-off	—		47		1		92		—		225		365
Net loans (charged-off) recovered	—		( 86 )		1		( 35 )		—		( 288 )		( 408 )
Provision for (reversal of) loan losses	421		172		1,917		( 507 )		( 3 )		277		2,277
Balance at end of period	$	5,155	$	2,790	$	33,759	$	2,400	$	15	$	157	$	44,276

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	Nine Months Ended September 30, 2024
	Real Estate
	Construction		1-4 Family Residential		Commercial		Commercial Loans		Municipal Loans		Loans to Individuals		Total
Balance at beginning of period	$	5,287	$	2,840	$	32,266	$	2,086	$	19	$	176	$	42,674
Loans charged-off (1)	( 24 )		( 261 )		—		( 494 )		—		( 1,349 )		( 2,128 )
Recoveries of loans charged-off	—		91		4		339		—		722		1,156
Net loans (charged-off) recovered	( 24 )		( 170 )		4		( 155 )		—		( 627 )		( 972 )
Provision (reversal) for loan losses (2)	( 108 )		120		1,489		469		( 4 )		608		2,574
Balance at end of period	$	5,155	$	2,790	$	33,759	$	2,400	$	15	$	157	$	44,276

The accrued interest receivable on our loan receivables is excluded from the allowance for credit loss estimate and is included in interest receivable on our consolidated balance sheets. As of September 30, 2025 and December 31, 2024, the accrued interest on our loan portfolio was $ 20.4 million and $ 20.2 million, respectively.

6. Borrowing Arrangements

Information related to borrowings is provided in the table below (dollars in thousands):


	September 30, 2025			December 31, 2024
Other borrowings:
Balance at end of period	$	99,374		$	76,443
Average amount outstanding during the period (1)	106,482			205,743
Maximum amount outstanding during the period (2)	297,359			597,765
Weighted average interest rate during the period (3)	4.8		%	5.7		%
Interest rate at end of period (4)	3.5		%	3.6		%

FHLB borrowings:
Balance at end of period	$	101,332		$	731,909
Average amount outstanding during the period (1)	434,558			601,366
Maximum amount outstanding during the period (2)	651,782			760,046
Weighted average interest rate during the period (3)	3.8		%	4.1		%
Interest rate at end of period (5)	1.9		%	3.7		%

(1) The average amount outstanding during the period was computed by dividing the total daily outstanding principal balances by the number of days in the period.

(2) The maximum amount outstanding at any month-end during the period.

(3) The weighted average interest rate during the period was computed by dividing the actual interest expense (annualized for interim periods) by the average amount outstanding during the period. The weighted average interest rate on FHLB borrowings includes the effect of interest rate swaps.

(4) Stated rate.

(5) The interest rate on FHLB borrowings includes the effect of interest rate swaps.

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Maturities of the obligations associated with our borrowing arrangements based on scheduled repayments at September 30, 2025 are as follows (in thousands):


	Payments Due by Period
	Less than 1 Year		1-2 Years		2-3 Years		3-4 Years		4-5 Years		Thereafter		Total
Other borrowings	$	99,124	$	250	$	—	$	—	$	—	$	—	$	99,374
FHLB borrowings	100,582		401		349		—		—		—		101,332
Total obligations	$	199,706	$	651	$	349	$	—	$	—	$	—	$	200,706

Other borrowings may include federal funds purchased, repurchase agreements and borrowings from the Federal Reserve through the FRDW. Southside Bank has three unsecured lines of credit for the purchase of overnight federal funds at prevailing rates with Frost Bank, Amegy Bank and TIB – The Independent Bankers Bank for $ 40.0 million, $ 25.0 million and $ 15.0 million, respectively. There were no federal funds purchased at September 30, 2025 or December 31, 2024. To provide more liquidity in response to economic conditions in recent years, the Federal Reserve has encouraged broader use of the discount window. At September 30, 2025, the amount of additional funding the Bank could obtain from the FRDW, collateralized by securities, was approximately $ 382.2 million. There were no borrowings from the FRDW at September 30, 2025 or December 31, 2024. Southside Bank has a $ 5.0 million line of credit with Frost Bank to be used to issue letters of credit, and at September 30, 2025, the line had one outstanding letter of credit for $ 155,000 . Southside Bank currently has two outstanding letters of credit from FHLB held as collateral for loans totaling $ 6.2 million.

Southside Bank enters into sales of securities under repurchase agreements. These repurchase agreements totaled $ 99.4 million at September 30, 2025 and $ 76.4 million at December 31, 2024, and had maturities of less than two years . Repurchase agreements are secured by investment and MBS and are stated at the amount of cash received in connection with the transaction.

FHLB borrowings represent borrowings with fixed interest rates ranging from 0.31 % to 4.80 % (including the effect of interest rate swaps) and with remaining maturities of six days to 2.8 years at September 30, 2025. FHLB borrowings may be collateralized by FHLB stock, nonspecified loans and/or securities. At September 30, 2025, the amount of additional funding Southside Bank could obtain from FHLB, collateralized by securities, FHLB stock and nonspecified loans and securities, was approximately $ 2.30 billion, net of FHLB stock purchases required.

7. Long-term Debt

Information related to our long-term debt is summarized as follows for the periods presented (in thousands):


	September 30, 2025		December 31, 2024

Subordinated notes: (1)
3.875 % Subordinated notes, net of unamortized debt issuance costs (2)	$	92,152	$	92,042
7.00 % Subordinated notes, net of unamortized debt issuance costs (3)	147,449		—
Total Subordinated notes	239,601		92,042
Trust preferred subordinated debentures: (4)
Southside Statutory Trust III, net of unamortized debt issuance costs (5)	20,586		20,582
Southside Statutory Trust IV	23,196		23,196
Southside Statutory Trust V	12,887		12,887
Magnolia Trust Company I	3,609		3,609
Total Trust preferred subordinated debentures	60,278		60,274




Total Long-term debt	$	299,879	$	152,316

(1) This debt consists of subordinated notes with a remaining maturity greater than one year that qualify under the risk-based capital guidelines as Tier 2 capital, subject to certain limitations.

(2) The unamortized discount and debt issuance costs reflected in the carrying amount of the subordinated notes totaled approximately $ 848,000 at September 30, 2025 and $ 958,000 at December 31, 2024.

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(3) The unamortized discount and debt issuance costs reflected in the carrying amount of the subordinated notes totaled approximately $2.6 million at September 30, 2025 .

(4) This debt consists of trust preferred securities that qualify under the risk-based capital guidelines as Tier 1 capital, subject to certain limitations.

(5) The unamortized debt issuance costs reflected in the carrying amount of the Southside Statutory Trust III junior subordinated debentures totaled $ 33,000 at September 30, 2025 and $ 37,000 at December 31, 2024.

As of September 30, 2025, the details of the subordinated notes and the trust preferred subordinated debentures are summarized below (dollars in thousands):

Date Issued

Amount Issued

Fixed or Floating Rate

Interest Rate

Maturity Date

3.875 % Subordinated Notes (1)

November 6, 2020

100,000

Fixed-to-Floating

3.875 %

November 15, 2030

7.00 % Subordinated Notes

August 14, 2025

150,000

Fixed-to-Floating

7.00 %

August 15, 2035

Southside Statutory Trust III

September 4, 2003

20,619

Floating

3 month SOFR + 3.20 %

September 4, 2033

Southside Statutory Trust IV

August 8, 2007

23,196

Floating

3 month SOFR + 1.56 %

October 30, 2037

Southside Statutory Trust V

August 10, 2007

12,887

Floating

3 month SOFR + 2.51 %

September 15, 2037

Magnolia Trust Company I (2)

May 20, 2005

3,609

Floating

3 month SOFR + 2.06 %

November 23, 2035

(1) On April 4, 2024 and June 14, 2023, the Company repurchased $ 2.0 million and $ 5.0 million, respectively, of the $ 100 million fixed-to-floating rate subordinated notes that mature on November 15, 2030.

(2) On October 10, 2007, as part of an acquisition we assumed $ 3.6 million of floating rate junior subordinated debentures issued in 2005 to Magnolia Trust Company I .

On November 6, 2020, the Company issued $ 100.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes that mature on November 15, 2030. This debt initially bears interest at a fixed rate of 3.875 % per year through November 14, 2025 and thereafter, adjusts quarterly at a floating rate equal to the then current three-month term SOFR, as published by the FRBNY, plus 366 basis points. The proceeds from the sale of the subordinated notes were used for general corporate purposes.

On August 14, 2025, the Company issued $ 150.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes that mature on August 15, 2035. This debt initially bears interest at a fixed rate of 7.00 % per year through August 15, 2030 and thereafter, adjusts quarterly at a floating rate equal to the then current three-month term SOFR, as published by the FRBNY, plus 357 basis points. The proceeds from the sale of the subordinated notes were used for general corporate purposes.

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8. Employee Benefit Plans

The components of net periodic benefit cost (income) related to our employee benefit plans are as follows (in thousands):



	Three Months Ended September 30,
	Retirement Plan				Acquired Retirement Plan				Restoration Plan
	2025		2024		2025		2024		2025		2024

Interest cost	$	921	$	905	$	28	$	27	$	224	$	215
Expected return on assets	( 1,019 )		( 1,214 )		( 34 )		( 46 )		—		—
Net loss amortization	593		144		—		—		21		12


Net periodic benefit cost (income)	$	495	$	( 165 )	$	( 6 )	$	( 19 )	$	245	$	227



	Nine Months Ended September 30,
	Retirement Plan				Acquired Retirement Plan				Restoration Plan
	2025		2024		2025		2024		2025		2024

Interest cost	$	2,762	$	2,715	$	84	$	79	$	671	$	644
Expected return on assets	( 3,056 )		( 3,643 )		( 102 )		( 136 )		—		—
Net loss amortization	1,780		433		—		—		64		38


Net periodic benefit cost (income)	$	1,486	$	( 495 )	$	( 18 )	$	( 57 )	$	735	$	682

All cost components disclosed above are recorded in other noninterest expense. The noncash adjustment to the employee benefit plan liabilities, consisting of changes in net loss, was $( 1.8 ) million and $ 531,000 for the nine months ended September 30, 2025 and 2024, respectively.

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9. Derivative Financial Instruments and Hedging Activities

Our hedging policy allows the use of interest rate derivative instruments to manage our exposure to interest rate risk or hedge specified assets and liabilities. These instruments may include interest rate swaps and interest rate caps and floors. All derivative instruments are carried on the balance sheet at their estimated fair value and are recorded in other assets or other liabilities, as appropriate.

Derivative instruments may be designated as cash flow hedges of variable rate assets or liabilities, cash flow hedges of forecasted transactions, fair value hedges of a recognized asset or liability or as non-hedging instruments.

Cash Flow Hedges

Gains and losses on derivative instruments designated as cash flow hedges are recorded in AOCI to the extent they are effective. If the hedge is effective, the amount recorded in other comprehensive income is reclassified to interest expense in the same periods that the hedged cash flows impact earnings. We have entered into certain interest rate swap contracts on specific variable rate agreements and fixed rate short-term pay agreements with third parties. These interest rate swap contracts were designated as hedging instruments in cash flow hedges under ASC Topic 815. The objective of the interest rate swap contracts is to manage the expected future cash flows on $ 860.0 million of Bank liabilities. The cash flows from the swap contracts are expected to be highly effective in hedging the variability in future cash flows attributable to fluctuations in the underlying SOFR rate. At September 30, 2025 , the net gains recognized in AOCI that are expected to be reclassified into earnings within the next 12 months were $ 540,000 .

In accordance with ASC Topic 815, if a hedging item is terminated prior to maturity for a cash settlement, the existing gain or loss within AOCI will continue to be reclassified into earnings during the period or periods in which the hedged forecasted transaction affects earnings unless it is probable that the forecasted transaction will not occur by the end of the originally specified time period. These transactions are reevaluated on a monthly basis to determine if the hedged forecasted transactions are still probable of occurring. If at a subsequent evaluation, it is determined that the transactions are probable of not occurring, any related gains or losses recorded in AOCI are immediately recognized in earnings. During the third quarter of 2024, we terminated three interest rate swap contracts designated as a cash flow hedge, and during the second quarter of 2023, we terminated one interest rate swap contract designated as a cash flow hedge. At the time of termination, we determined the hedged forecasted transactions were still probable of occurring. The existing loss in AOCI will be reclassified into earnings in the same periods the hedged forecasted transaction affects earnings.

Fair Value Hedges

Gains and losses on derivative instruments designated as fair value hedges, as well as the change in fair value of the hedged item, are recorded in interest income in the consolidated statements of income. Gains and losses due to changes in fair value of the interest rate swap agreements offset changes in the fair value of the hedged portion of the hedged item. 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 and fixed rate loans using the portfolio layer method. This approach allows us to designate as the hedged item a stated amount of the assets that are not expected to be affected by prepayments, defaults and other factors affecting the timing and amount of cash flows. The fair value portfolio level hedging adjustment on our hedged MBS portfolio and hedged loan portfolio has not been attributed to the individual AFS securities or individual loans in our balance sheet. 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. 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.

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The following table presents the amounts recorded in the consolidated balance sheets related to the cumulative adjustments for fair value hedges (in thousands):


	Amortized Cost of Hedged Assets (2)				Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Items
	September 30, 2025		December 31, 2024		September 30, 2025		December 31, 2024
Securities AFS (1) (3)	$	368,356	$	903,168	$	1,174	$	16,617
Loans (1) (3)	244,309		265,845		43		1,545

1) Amounts include the amortized cost basis of closed portfolios used to designate hedging relationships under the portfolio layer method. The hedged item is a layer of the closed portfolio which is expected to be remaining at the end of the hedging relationship. As of September 30, 2025 and December 31, 2024, the amortized cost basis of the closed MBS portfolio used in these hedging relationships was $ 309.2 million and $ 558.5 million, respectively, the amount of the designated hedged items were $ 201.0 million and $ 134.0 million , respectively, and the cumulative amount of fair value hedging adjustments associated with these MBS hedging relationships was a gain of $ 610,000 and $ 1.1 million, respectively. As of September 30, 2025 and December 31, 2024, the amortized cost basis of the closed loan portfolio used in these hedging relationships was $ 244.3 million and $ 265.8 million, respectively, the amount of the designated hedged items were $ 155.0 million for both periods, and the cumulative amount of fair value hedging adjustments associated with these loan hedging relationships was a gain of $ 43,000 and $ 1.5 million, respectively.

2) Excludes fair value hedging adjustments.

3) Excluded from the table above are the cumulative amount of fair value hedging adjustments for securities AFS and loans for which hedge accounting has been discontinued in the amounts of a loss of $ 769,000 and a loss of $ 3.1 million, respectively, at September 30, 2025, and a loss of $ 4.8 million and a loss of $ 3.7 million, respectively, at December 31, 2024.

Derivatives Designated as Non-Hedging Instruments

From time to time, we may enter into certain interest rate swaps, cap and floor contracts that are not designated as hedging instruments. These interest rate derivative contracts relate to transactions in which we enter into an interest rate swap, cap or floor with a customer while concurrently entering into an offsetting interest rate swap, cap or floor with a third-party financial institution. We agree to pay interest to the customer on a notional amount at a variable rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, we agree to pay a third-party financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. These interest rate derivative contracts allow our customers to effectively convert a variable rate loan to a fixed rate loan. The changes in the fair value of the underlying derivative contracts primarily offset each other and do not significantly impact our results of operations. We recognized swap fee income associated with these derivative contracts immediately based upon the difference in the bid/ask spread of the underlying transactions with the customer and the third-party financial institution. The swap fee income is included in other noninterest income in our consolidated statements of income.

At September 30, 2025 and December 31, 2024, net derivative assets included $ 8.1 million and $ 49.9 million, respectively, of cash collateral received from counterparties under master netting agreements.

The notional amounts of the derivative instruments represent the contractual cash flows pertaining to the underlying agreements. These amounts are not exchanged and are not reflected in the consolidated balance sheets. The fair value of the interest rate swaps are presented at net in other assets and other liabilities and in the net change in each of these financial statement line items in the accompanying consolidated statements of cash flows when a right of offset exists, based on transactions with a single counterparty that are subject to a legally enforceable master netting agreement.

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The following tables present the notional and estimated fair value amount of derivative positions outstanding (in thousands):


	September 30, 2025						December 31, 2024
			Estimated Fair Value						Estimated Fair Value
	Notional Amount (1)		Asset Derivative		Liability Derivative		Notional Amount (1)		Asset Derivative		Liability Derivative
Derivatives designated as hedging instruments
Interest rate contracts:
Swaps-Cash Flow Hedge-Financial institution counterparties	$	860,000	$	4,542	$	3,684	$	790,000	$	12,625	$	1,078
Swaps-Fair Value Hedge-Financial institution counterparties	412,225		1,157		229		602,950		18,331		217
Derivatives designated as non-hedging instruments
Interest rate contracts:
Swaps-Financial institution counterparties	637,248		13,459		7,129		408,749		21,534		1,321
Swaps-Customer counterparties	637,248		7,129		13,459		408,749		1,321		21,534
Gross derivatives			26,287		24,501				53,811		24,150
Offsetting derivative assets/liabilities			( 11,042 )		( 11,042 )				( 2,616 )		( 2,616 )
Cash collateral received/posted			( 8,116 )		—				( 49,874 )		—
Net derivatives included in the consolidated balance sheets (2)			$	7,129	$	13,459			$	1,321	$	21,534

(1) Notional amounts, which represent the extent of involvement in the derivatives market, are used to determine the contractual cash flows required in accordance with the terms of the agreement. These amounts are typically not exchanged, significantly exceed amounts subject to credit or market risk and are not reflected in the consolidated balance sheets.

(2) Net derivative assets are included in other assets and net derivative liabilities are included in other liabilities on the consolidated balance sheets. Included in the fair value of net derivative assets and net derivative liabilities are credit valuation adjustments reflecting counterparty credit risk and our credit risk. At September 30, 2025, we had no credit exposure related to interest rate swaps with financial institutions and $ 7.1 million related to interest rate swaps with customers. At December 31, 2024, we had no credit exposure related to interest rate swaps with financial institutions and $ 1.3 million related to interest rate swaps with customers. The credit risk associated with customer transactions is partially mitigated as these are generally secured by the non-cash collateral securing the underlying transaction being hedged.

The summarized expected weighted average remaining maturity of the notional amount of interest rate swaps and the weighted average interest rates associated with the amounts expected to be received or paid on interest rate swap agreements are presented below (dollars in thousands). Variable rates received on fixed pay swaps are based on overnight SOFR rates in effect at September 30, 2025 and December 31, 2024:


	September 30, 2025							December 31, 2024
			Weighted Average							Weighted Average
	Notional Amount		Remaining Maturity (in years)	Receive Rate		Pay Rate		Notional Amount		Remaining Maturity (in years)	Receive Rate		Pay Rate
Swaps-Cash Flow hedge
Financial institution counterparties	$	860,000	1.5	4.30	%	3.20	%	$	790,000	1.6	4.60	%	2.62	%
Swaps-Fair Value hedge
Financial institution counterparties	412,225		1.4	4.33	%	3.51	%	602,950		3.0	4.76	%	3.33	%
Swaps-Non-hedging
Financial institution counterparties	637,248		4.6	4.36	%	3.51	%	408,749		5.4	4.65	%	3.39	%
Customer counterparties	637,248		4.6	3.51	%	4.36	%	408,749		5.4	3.39	%	4.65	%

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The following table presents amounts included in the consolidated statements of income related to interest rate swap agreements (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Derivatives designated as hedging instruments
Swaps-Cash Flow hedge
Gain (loss) included in interest expense on deposits	$	1,476	$	3,587	$	4,126	$	11,436
Gain (loss) included in interest expense on FHLB borrowings	512		2,101		2,301		6,676

	1,988		5,688		6,427		18,112
Swaps-Fair Value hedge
Gain (loss) included in interest income on tax-exempt investment securities	926		2,142		3,052		7,245
Gain (loss) included in interest income on MBS	392		488		965		754
Gain (loss) included in interest income on loans	268		504		814		591
Derivatives designated as non-hedging instruments
Swaps-Non-hedging
Other noninterest income	741		—		1,566		53

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10. Fair Value Measurement

Fair value is the price that would be received upon the sale of an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants. A fair value measurement assumes the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

Valuation techniques including the market approach, the income approach and/or the cost approach are utilized to determine fair value. Inputs to valuation techniques refer to the assumptions market participants would use in pricing the asset or liability. Valuation policies and procedures are determined by our investment department and reported to our ALCO for review. An entity must consider all aspects of nonperforming risk, including the entity’s own credit standing, when measuring fair value of a liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A fair value hierarchy for valuation inputs gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Certain financial assets are measured at fair value in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of fair value accounting or write-downs of individual assets. A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Securities AFS and Equity Investments with readily determinable fair values – U.S. Treasury securities and equity investments with readily determinable fair values are reported at fair value utilizing Level 1 inputs. Other securities classified as AFS are reported at fair value utilizing Level 2 inputs. For most of these securities, we obtain fair value measurements from independent pricing services and obtain an understanding of the pricing methodologies used by these independent pricing services. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things, as stated in the pricing methodologies of the independent pricing services.

We review and validate the prices supplied by the independent pricing services for reasonableness by comparison to prices obtained from, in some cases, two additional third-party sources. For securities where prices are outside a reasonable range, we further review those securities, based on internal ALCO approved procedures, to determine what a reasonable fair value measurement is for those securities, given available data.

Derivatives – Derivatives are reported at fair value utilizing Level 2 inputs. We obtain fair value measurements from two sources including an independent pricing service and the counterparty to the derivatives designated as hedges. The fair value measurements consider observable data that may include dealer quotes, market spreads, the U.S. Treasury yield curve, live trading levels, trade execution data, credit information and the derivatives’ terms and conditions, among other things. We review the prices supplied by the sources for reasonableness. In addition, we obtain a basic understanding of their underlying pricing methodology. We validate prices supplied by the sources by comparison to one another.

Certain nonfinancial assets and nonfinancial liabilities measured at fair value on a recurring basis include reporting units measured at fair value and tested for goodwill impairment.

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Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis, which means that the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets and financial liabilities measured at fair value on a nonrecurring basis included foreclosed assets and collateral-dependent loans at September 30, 2025 and December 31, 2024.

Foreclosed Assets – Foreclosed assets are initially recorded at fair value less costs to sell. The fair value measurements of foreclosed assets can include Level 2 measurement inputs such as real estate appraisals and comparable real estate sales information, in conjunction with Level 3 measurement inputs such as cash flow projections, qualitative adjustments and sales cost estimates. As a result, the categorization of foreclosed assets is Level 3 of the fair value hierarchy. In connection with the measurement and initial recognition of certain foreclosed assets, we may recognize charge-offs through the allowance for credit losses.

Collateral-Dependent Loans – Certain loans may be reported at the fair value of the underlying collateral if repayment is expected substantially from the operation or sale of the collateral. Collateral values are estimated using Level 3 inputs based on customized discounting criteria or appraisals. At September 30, 2025 and December 31, 2024, the impact of the fair value of collateral-dependent loans was reflected in our allowance for loan losses.

The fair value estimate of financial instruments for which quoted market prices are unavailable is dependent upon the assumptions used. Consequently, those estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Accordingly, the aggregate fair value amounts presented in the fair value tables do not necessarily represent their underlying value.

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The following tables summarize assets measured at fair value on a recurring and nonrecurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):



			Fair Value Measurements at the End of the Reporting Period Using
September 30, 2025	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring fair value measurements
Investment securities:
U.S. Treasury	$	49,662	$	49,662	$	—	$	—

State and political subdivisions	248,091		—		248,091		—
Corporate bonds and other	16,943		—		16,943		—
MBS: (1)
Residential	975,439		—		975,439		—
Commercial	2,296		—		2,296		—
Equity investments:
Equity investments	5,403		5,403		—		—
Derivative assets:
Interest rate swaps	26,287		—		26,287		—
Total asset recurring fair value measurements	$	1,324,121	$	55,065	$	1,269,056	$	—

Derivative liabilities:
Interest rate swaps	$	24,501	$	—	$	24,501	$	—
Total liability recurring fair value measurements	$	24,501	$	—	$	24,501	$	—

Nonrecurring fair value measurements
Foreclosed assets	$	152	$	—	$	—	$	152
Collateral-dependent loans (2)	37,790		—		—		37,790
Total asset nonrecurring fair value measurements	$	37,942	$	—	$	—	$	37,942

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			Fair Value Measurements at the End of the Reporting Period Using
December 31, 2024	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Recurring fair value measurements
Investment securities:
U.S. Treasury	$	173,956	$	173,956	$	—	$	—

State and political subdivisions	414,332		—		414,332		—
Corporate bonds and other	14,508		—		14,508		—
MBS: (1)
Residential	926,386		—		926,386		—
Commercial	4,712		—		4,712		—
Equity investments:
Equity investments	5,257		5,257		—		—
Derivative assets:
Interest rate swaps	53,811		—		53,811		—
Total asset recurring fair value measurements	$	1,592,962	$	179,213	$	1,413,749	$	—

Derivative liabilities:
Interest rate swaps	$	24,150	$	—	$	24,150	$	—
Total liability recurring fair value measurements	$	24,150	$	—	$	24,150	$	—

Nonrecurring fair value measurements
Foreclosed assets	$	402	$	—	$	—	$	402
Collateral-dependent loans (2)	6,726		—		—		6,726

Total asset nonrecurring fair value measurements	$	7,128	$	—	$	—	$	7,128

(1) All MBS are issued and/or guaranteed by U.S. government agencies or U.S. GSEs.

(2) Consists of individually evaluated loans. Loans for which the fair value of the collateral and commercial real estate fair value of the properties is less than cost basis are presented net of allowance. Losses on these loans represent charge-offs which are netted against the allowance for loan losses.

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Disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, is required when it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other estimation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Such techniques and assumptions, as they apply to individual categories of our financial instruments, are as follows:

Cash and cash equivalents – The carrying amount for cash and cash equivalents is a reasonable estimate of those assets’ fair value.

Investment and MBS HTM – Fair values for these securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices for similar securities or estimates from independent pricing services.

FHLB stock – The carrying amount of FHLB stock is a reasonable estimate of the fair value of those assets.

Equity investments – The carrying value of equity investments without readily determinable fair values are measured at cost less impairment, if any, adjusted for observable price changes for an identical or similar investment of the same issuer. This carrying value is a reasonable estimate of the fair value of those assets.

Loans receivable – We estimate the fair value of our loan portfolio to an exit price notion with adjustments for liquidity, credit and prepayment factors. Nonperforming loans continue to be estimated using discounted cash flow analyses or the underlying value of the collateral where applicable.

Loans held for sale – The fair value of loans held for sale is determined based on expected proceeds, which are based on sales contracts and commitments.

Deposit liabilities – The fair value of demand deposits, savings accounts and certain money market deposits is the amount on demand at the reporting date, which is the carrying value. Fair values for fixed rate CDs are estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities.

Other borrowings – Federal funds purchased generally have original terms to maturity of one day and repurchase agreements generally have terms of less than one year, and therefore both are considered short-term borrowings. Consequently, their carrying value is a reasonable estimate of fair value. Borrowings from the Federal Reserve through the FRDW have original maturities of one year or less, and the fair value is estimated by discounting the future cash flows using rates at which borrowings would be made to borrowers with similar credit ratings and for the same remaining maturities.

FHLB borrowings – The fair value of these borrowings is estimated by discounting the future cash flows using rates at which borrowings would be made to borrowers with similar credit ratings and for the same remaining maturities.

Subordinated notes – The fair value of the subordinated notes is estimated by discounting future cash flows using estimated rates at which long-term debt would be made to borrowers with similar credit ratings and for the remaining maturities.

Trust preferred subordinated debentures – The fair value of the long-term debt is estimated by discounting future cash flows using estimated rates at which long-term debt would be made to borrowers with similar credit ratings and for the remaining maturities.

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The following tables present our financial assets and financial liabilities measured on a nonrecurring basis at both their respective carrying amounts and estimated fair value (in thousands):


			Estimated Fair Value
September 30, 2025	Carrying Amount		Total		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	466,912	$	466,912	$	466,912	$	—	$	—
Investment securities:
HTM, at net carrying value	1,155,038		1,004,442		—		1,004,442		—
MBS:
HTM, at carrying value	108,363		101,744		—		101,744		—
FHLB stock, at cost	9,359		9,359		—		9,359		—
Equity investments	4,149		4,149		—		4,149		—
Loans, net of allowance for loan losses	4,719,995		4,638,790		—		—		4,638,790
Loans held for sale	497		497		—		497		—
Financial liabilities:
Deposits	$	6,961,587	$	6,961,817	$	—	$	6,961,817	$	—
Other borrowings	99,374		99,321		—		99,321		—
FHLB borrowings	101,332		100,384		—		100,384		—
Subordinated notes, net of unamortized debt issuance costs	239,601		238,787		—		238,787		—
Trust preferred subordinated debentures, net of unamortized debt issuance costs	60,278		56,367		—		56,367		—


			Estimated Fair Value
December 31, 2024	Carrying Amount		Total		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	426,161	$	426,161	$	426,161	$	—	$	—
Investment securities:
HTM, at net carrying value	1,165,007		1,009,778		—		1,009,778		—
Mortgage-backed securities:
HTM, at carrying value	114,227		103,704		—		103,704		—
FHLB stock, at cost	33,818		33,818		—		33,818		—
Equity investments	4,210		4,210		—		4,210		—
Loans, net of allowance for loan losses	4,616,713		4,499,646		—		—		4,499,646
Loans held for sale	1,946		1,946		—		1,946		—
Financial liabilities:
Deposits	$	6,654,248	$	6,646,510	$	—	$	6,646,510	$	—
Other borrowings	76,443		76,399		—		76,399		—
FHLB borrowings	731,909		727,177		—		727,177		—
Subordinated notes, net of unamortized debt issuance costs	92,042		88,999		—		88,999		—
Trust preferred subordinated debentures, net of unamortized debt issuance costs	60,274		56,172		—		56,172		—

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11. Income Taxes

The income tax expense included in the accompanying consolidated statements of income consists of the following (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Current income tax expense	$	335	$	5,283	$	10,175	$	15,102
Deferred income tax expense (benefit)	( 146 )		( 893 )		( 546 )		( 878 )
Income tax expense	$	189	$	4,390	$	9,629	$	14,224

The net deferred tax asset totaled $ 30.6 million at September 30, 2025, as compared to $ 34.5 million at December 31, 2024. The decrease in the net deferred tax asset is primarily the result of a decrease in the unrealized loss in the AFS securities portfolio, partially offset by an increase in the estimated fair value of the effective hedging derivatives. No valuation allowance was recorded at September 30, 2025 or December 31, 2024, as management believes it is more likely than not that all of the deferred tax asset items will be realized in future years. Unrecognized tax benefits were not material at September 30, 2025 or December 31, 2024.

We recognized income tax expense of $ 189,000 and $ 9.6 million for an ETR of 3.7 % and 16.6 % for the three and nine months ended September 30, 2025, respectively, compared to income tax expense of $ 4.4 million and $ 14.2 million for an ETR of 17.6 % for both the three and nine months ended September 30, 2024, respectively. The decrease in the ETR for the three and nine months ended September 30, 2025 was primarily due to the impact of the net loss on the sale of AFS securities of $ 24.4 million recorded during the third quarter of 2025 on our tax-exempt income as a percentage of pre-tax income as well as a decrease in state income tax expense compared to the same periods in 2024. The ETR differs from the statutory rate of 21% for the three and nine months ended September 30, 2025 and 2024 primarily due to the effect of tax-exempt income from municipal loans and securities, BOLI and state income tax. We file income tax returns in the U.S. federal jurisdictions and in certain states. We are no longer subject to U.S. federal income tax examinations by tax authorities for years before 2022 or Texas state tax examinations by tax authorities for years before 2020.

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12. Off-Balance-Sheet Arrangements, Commitments and Contingencies

Financial Instruments with Off-Balance-Sheet Risk . In the normal course of business, we are a party to certain financial instruments with off-balance-sheet risk to meet the financing needs of our customers. These off-balance-sheet instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount reflected in the financial statements. The contract or notional amounts of these instruments reflect the extent of involvement and exposure to credit loss that we have in these particular classes of financial instruments. The allowance for credit losses on these off-balance-sheet credit exposures is calculated using the same methodology as loans including a conversion or usage factor to anticipate ultimate exposure and expected losses and is included in other liabilities on our consolidated balance sheets.

Allowance for off-balance-sheet credit exposures were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024

Balance at beginning of period	$	3,774	$	3,208	$	3,141	$	3,932

Provision for (reversal of) off-balance-sheet credit exposures	( 625 )		112		8		( 612 )
Balance at end of period	$	3,149	$	3,320	$	3,149	$	3,320

Contractual commitments to extend credit are agreements to lend to a customer provided the terms established in the contract are met. Commitments to extend credit generally have fixed expiration dates and may require the payment of fees. Since some commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in commitments to extend credit and similarly do not necessarily represent future cash obligations.

Financial instruments with off-balance-sheet risk were as follows (in thousands):


	September 30, 2025		December 31, 2024

Commitments to extend credit	$	854,957	$	865,178
Standby letters of credit	18,930		16,532
Total	$	873,887	$	881,710

We apply the same credit policies in making commitments to extend credit and standby letters of credit as we do for on-balance-sheet instruments. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, upon extension of credit is based on management’s credit evaluation of the borrower. Collateral held varies but may include cash or cash equivalents, negotiable instruments, real estate, accounts receivable, inventory, oil, gas and mineral interests, property, plant and equipment.

Leases . There were no operating lease ROU assets obtained in exchange for new operating lease liabilities during the three or nine months ended September 30, 2025. During the three months ended September 30, 2024, there were no operating lease ROU assets obtained in exchange for new operating lease liabilities. During the nine months ended September 30, 2024, there were $ 372,000 of operating lease ROU assets obtained in exchange for new operating lease liabilities.

Securities . In the normal course of business, we buy and sell securities. At September 30, 2025, there were no unsettled trades to purchase securities and $ 9.1 million unsettled trades to sell securities. At December 31, 2024, there were no unsettled trades to purchase securities and no unsettled trades to sell securities.

Deposits . There were no unsettled issuances of brokered CDs at September 30, 2025 or December 31, 2024.

Litigation . We are involved with various litigation in the normal course of business. Management, after consulting with our legal counsel, believes that any liability resulting from litigation will not have a material effect on our financial position, results of operations or liquidity.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of our consolidated financial condition, changes in our financial condition and results of our operations, and should be read and reviewed in conjunction with the financial statements, and the notes thereto, in this Quarterly Report on Form 10-Q, and in our 2024 Form 10-K. Certain risks, uncertainties and other factors, including those set forth under “Risk Factors” in Part I, Item 1A. of the 2024 Form 10-K and elsewhere in this Quarterly Report on Form 10-Q, may cause actual results to differ materially from the results discussed in the forward-looking statements appearing in this discussion and analysis.

Forward-Looking Statements

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, 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 factors 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 higher inflation levels, interest rate fluctuations, including the impact of changes in interest rates on our financial projections, models and guidance, 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 decreased 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 and our ability to manage liquidity in a rapidly changing and unpredictable 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 risks 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;

• inflation and fluctuations in interest rates that reduce our margins and yields, the fair value of financial instruments, the level of loan originations or prepayments on loans we have made and make, and the cost we pay to retain and attract deposits and secure other types of funding;

• 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 Federal Reserve’s actions to manage interest rates, tariffs, trade policies, supply chain disruptions, immigration policies and/or disputes and other regulatory responses to economic conditions;

• the impact of interest rate fluctuations on our financial projections, models and guidance;

• legislative, tax and regulatory changes including overdraft and late fee caps (if implemented), including those that impact the money supply and inflation;

• acts of terrorism, war or other conflicts, natural disasters, such as hurricanes, freezes, flooding and other man-made disasters, such as oil spills or power outages, health emergencies, epidemics or pandemics, climate change or other

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catastrophic events that may affect general economic conditions or cause other disruptions and/or increase costs, including, but not limited to, property and casualty and other insurance costs;

• 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, or innovations to the financial services industry, including as a result of the increased telework environment;

• our ability to identify and address cyber-security risks such as data security breaches, malware, “denial of service” attacks, “hacking” and identity theft, which may be exacerbated by developments in generative artificial intelligence and which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage of our systems, increased costs, significant losses, or adverse effects to our reputation;

• changes in the interest rate yield curve such as flat, inverted or steep yield curves, or changes in the interest rate environment that impact net interest margins and may impact prepayments on our MBS portfolio;

• the risk that our enterprise risk management framework, compliance program or our corporate governance and supervisory oversight functions may not identify or address risks adequately, which may result in unexpected losses;

• the effect of compliance with legislation or regulatory changes;

• the implementation under the 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 conditions;

• increases in our nonperforming assets;

• risks related to environmental liability as a result of certain lending activity;

• our ability to maintain adequate liquidity to fund operations and growth;

• our ability to control interest rate risk;

• any applicable regulatory limits or other restrictions on the Bank and its ability to pay dividends to us;

• the failure of our assumptions underlying our allowance for credit losses and other estimates;

• the failure to maintain an effective system of controls and procedures, including internal control over financial reporting;

• the effectiveness of our derivative financial instruments and hedging activities to manage risk;

• unexpected outcomes of, and the costs associated with, existing or new litigation involving us;

• potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions;

• changes impacting our balance sheet strategy;

• risks related to actual mortgage prepayments diverging from projections;

• risks related to fluctuations in the price per barrel of crude oil;

• significant increases in competition in the banking and financial services industry;

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

• execution of future acquisitions, reorganization or disposition transactions, including the risk that the anticipated benefits of such transactions are not realized;

• our ability to increase market share and control expenses;

• our ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by our customers;

• the effect of changes in accounting policies and practices;

• adverse changes in the status or financial condition of the GSEs which impact the GSEs’ guarantees or ability to pay or issue debt;

• adverse changes in the credit portfolios of other U.S. financial institutions relative to the performance of certain of our investment securities;

• risks related to actual U.S. agency MBS prepayments exceeding projected prepayment levels;

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• risks related to U.S. agency MBS prepayments increasing due to U.S. government programs designed to assist homeowners to refinance their mortgage that might not otherwise have qualified;

• risks related to loans secured by real estate, including the risk that the value and marketability of collateral could decline;

• risks associated with our common stock and our other securities, including fluctuations in our stock price and general volatility in the stock market; and

• other risks and uncertainties discussed in “Part I – Item 1A. Risk Factors” in the 2024 Form 10-K.

All written or oral forward-looking statements made by us or attributable to us are expressly qualified by this cautionary notice. We disclaim any obligation to update any factors or to announce publicly the result of revisions to any of the forward-looking statements included herein to reflect future events or developments, unless otherwise required by law.

Critical Accounting Estimates

Our accounting and reporting estimates conform with U.S. GAAP and general practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We consider accounting estimates that can (1) be replaced by other reasonable estimates and/or (2) changes to an estimate from period to period that have a material impact on the presentation of our financial condition, changes in financial condition or results of operations as well as (3) those estimates that require significant and complex assumptions about matters that are highly uncertain to be critical accounting estimates. We consider our critical accounting estimates to include allowance for credit losses on loans and off-balance-sheet credit exposure.

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 2024 Form 10-K. As of September 30, 2025, there have been no significant changes to our critical accounting estimates.

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Non-GAAP Financial Measures

Certain non-GAAP measures are used by management to supplement the evaluation of our performance. These include the following fully taxable-equivalent measures: net interest income (FTE), net interest margin (FTE) and net interest spread (FTE), which include the effects of taxable-equivalent adjustments using a federal income tax rate of 21% to increase tax-exempt interest income to a tax-equivalent basis. Interest income earned on certain assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments.

Net interest income (FTE), net interest margin (FTE) and net interest spread (FTE). Net interest income (FTE) is a non-GAAP measure that adjusts for the tax-favored status of net interest income from certain loans and investments and is not permitted under GAAP in the consolidated statements of income. We believe that this measure is the preferred industry measurement of net interest income, and that it enhances comparability of net interest income arising from taxable and tax-exempt sources. The most directly comparable financial measure calculated in accordance with GAAP is our net interest income. Net interest margin (FTE) is the ratio of net interest income (FTE) to average earning assets. The most directly comparable financial measure calculated in accordance with GAAP is our net interest margin. Net interest spread (FTE) is the difference in the average yield on average earning assets on a tax-equivalent basis and the average rate paid on average interest bearing liabilities. The most directly comparable financial measure calculated in accordance with GAAP is our net interest spread.

These non-GAAP financial measures should not be considered alternatives to GAAP-basis financial statements and other bank holding companies may define or calculate these non-GAAP measures or similar measures differently. Whenever we present a non-GAAP financial measure in an SEC filing, we are also required to present the most directly comparable financial measure calculated and presented in accordance with GAAP and reconcile the differences between the non-GAAP financial measure and such comparable GAAP measure.

In the following table we present the reconciliation of net interest income to net interest income adjusted to a fully taxable-equivalent basis assuming a 21% marginal tax rate for interest earned on tax-exempt assets such as municipal loans and investment securities (dollars in thousands), along with the calculation of net interest margin (FTE) and net interest spread (FTE).


Non-GAAP Reconciliations
	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024
Net interest income (GAAP)	$	55,718		$	55,464		$	163,836		$	162,420
Tax equivalent adjustments:
Loans	553			608			1,699			1,897
Tax-exempt investment securities	1,852			2,012			5,492			6,143
Net interest income (FTE) (1)	$	58,123		$	58,084		$	171,027		$	170,460

Average earning assets	$	7,854,552		$	7,823,026		$	7,840,544		$	7,862,245

Net interest margin	2.81		%	2.82		%	2.79		%	2.76		%
Net interest margin (FTE) (1)	2.94		%	2.95		%	2.92		%	2.90		%

Net interest spread	2.14		%	2.10		%	2.12		%	2.04		%
Net interest spread (FTE) (1)	2.26		%	2.23		%	2.24		%	2.18		%

(1) These amounts are presented on a fully taxable-equivalent basis and are non-GAAP measures.

Management believes adjusting net interest income, net interest margin and net interest spread to a fully taxable-equivalent basis is a standard practice in the banking industry as these measures provide useful information to make peer comparisons. Tax-equivalent adjustments are reported in the respective earning asset categories as listed in the “Average Balances with Average Yields and Rates” tables under Results of Operations.

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OVERVIEW

ECONOMIC CONDITIONS

Continued tariff announcements and ongoing tariff negotiations have caused some uncertainty related to inflation levels and its impact on 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 outlook. Overall, the Texas markets we serve remain healthy and continue to report both job and population growth.

DEPOSITS

Our deposits were $6.96 billion at September 30, 2025, an increase of $307.3 million, or 4.6%, from December 31, 2024. At September 30, 2025, we had 179,097 total deposit accounts with an average balance of $34,000. Our estimated uninsured deposits were 36.9% of total deposits as of September 30, 2025. When excluding affiliate deposits (Southside-owned deposits) and public fund deposits (all collateralized), our total estimated deposits without insurance or collateral was 21.7% of total deposits as of September 30, 2025.

Our noninterest bearing deposits represent approximately 20.3% of total deposits. During the three months ended September 30, 2025, our cost of interest bearing deposits decreased 19 basis points to 2.82% from 3.01% for the three months ended September 30, 2024. Our cost of total deposits for the third quarter of 2025 decreased 13 basis points to 2.25% from 2.38% for the three months ended September 30, 2024.

Our cost of interest bearing deposits decreased 16 basis points, from 2.99% for the nine months ended September 30, 2024 to 2.83% for the nine months ended September 30, 2025. Our cost of total deposits decreased 11 basis points, from 2.37% for the nine months ended September 30, 2024 to 2.26% for the nine months ended September 30, 2025.

CAPITAL RESOURCES AND LIQUIDITY

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 September 30, 2025 (in thousands):


	September 30, 2025
	Line of Credit		Borrowings		Total Available for Future Liquidity		Swapped

FHLB advances	$	2,405,433	$	101,332	$	2,304,101	$	100,000
Federal Reserve discount window	382,242		—		382,242		—
Correspondent bank lines of credit	80,000		—		80,000		—
Total liquidity lines	$	2,867,675	$	101,332	$	2,766,343	$	100,000

Operating Results

Net income was $4.9 million for the three months ended September 30, 2025, compared to $20.5 million for the same period in 2024, a decrease of $15.6 million, or 76.1%. The decrease in net income was largely driven by a $20.2 million decrease in noninterest income and, to a lesser extent, a $1.2 million increase in noninterest expense, partially offset by a $4.2 million decrease in income tax expense, a $1.3 million decrease in provision for credit losses and a $254,000 increase in net interest income. Net loss on sale of AFS securities, included in noninterest income, was $24.4 million for the three months ended September 30, 2025, compared to a net loss of $1.9 million for the same period in 2024. Earnings per diluted common share were $0.16 for the three months ended September 30, 2025, compared to $0.68 for the same period in 2024, a decrease of $0.52, or 76.5%.

During the nine months ended September 30, 2025, our net income decreased $18.5 million, or 27.7%, to $48.2 million from $66.7 million for the same period in 2024. The decrease in net income was largely driven by a $19.1 million decrease in noninterest income and, to a lesser extent, a $4.9 million increase in noninterest expense and a $510,000 increase in provision for credit losses, partially offset by a $4.6 million decrease in income tax expense and a $1.4 million increase in net interest income. Net loss on sale of AFS securities, included in noninterest income, was $24.9 million for the nine months ended September 30, 2025, compared to a net loss of $2.5 million for the same period in 2024. Earnings per diluted common share decreased $0.61, or 27.7%, to $1.59 for the nine months ended September 30, 2025, compared to $2.20 for the same period in 2024.

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Financial Condition

Our total assets decreased $134.3 million, or 1.6%, to $8.38 billion at September 30, 2025 from $8.52 billion at December 31, 2024. Our securities portfolio decreased by $257.3 million, or 9.1%, to $2.56 billion at September 30, 2025, compared to $2.81 billion at December 31, 2024. The decrease in the securities portfolio was primarily due to decreases in municipal securities and U.S. Treasury securities during the nine months ended September 30, 2025. Our FHLB stock decreased $24.5 million, or 72.3%, to $9.4 million from $33.8 million at December 31, 2024, due to the decrease in our FHLB borrowings during the nine months ended September 30, 2025.

Loans at September 30, 2025 were $4.77 billion, an increase of $103.7 million, or 2.2%, compared to $4.66 billion at December 31, 2024, due to increases of $109.0 million in commercial real estate loans and $66.8 million in commercial loans. These increases were partially offset by decreases of $37.6 million in municipal loans, $18.3 million in construction loans, $10.3 million in 1-4 family residential loans and $5.8 million in loans to individuals. Loans held for sale decreased $1.4 million, or 74.5%, to $497,000 at September 30, 2025 from $1.9 million at December 31, 2024.

Our nonperforming assets at September 30, 2025 increased $32.0 million, or 892.1%, to $35.6 million and represented 0.42% of total assets, compared to $3.6 million, or 0.04% of total assets, at December 31, 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 increased $4.8 million, or 149.8%, to $8.0 million, and the ratio of nonaccruing loans to total loans was 0.17% and 0.07% for September 30, 2025 and December 31, 2024, respectively. The increase in nonaccrual loans compared to December 31, 2024 was primarily due to a $3.7 million increase in commercial loans and a $1.1 million increase in commercial real estate loans. Repossessed assets were $24,000 at September 30, 2025, compared to $14,000 at December 31, 2024. There was $128,000 of OREO at September 30, 2025 and $388,000 at December 31, 2024.

Our deposits increased $307.3 million, or 4.6%, to $6.96 billion at September 30, 2025 from $6.65 billion at December 31, 2024, primarily due to an increase in brokered deposits of $152.9 million, or 20.6%, and retail deposits of $319.1 million, or 6.8%, partially offset by a decrease in public fund deposits of $164.7 million, or 13.4%. The increase in retail deposits of $319.1 million consist of $56.6 million of noninterest bearing deposits and $262.5 million of interest bearing deposits.

Total FHLB borrowings decreased $630.6 million, or 86.2%, to $101.3 million at September 30, 2025 from $731.9 million at December 31, 2024.

Other borrowings increased $22.9 million, or 30.0%, to $99.4 million at September 30, 2025, from $76.4 million at December 31, 2024.

Our subordinated notes, net of unamortized debt issuance costs, increased $147.6 million, or 160.3%, to $239.6 million at September 30, 2025 from $92.0 million at December 31, 2024, a result of the issuance of $150.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes during the third quarter of 2025.

Our total shareholders’ equity at September 30, 2025 increased 2.8%, or $22.9 million, to $834.9 million, or 10.0% of total assets, compared to $811.9 million, or 9.5% of total assets, at December 31, 2024. The increase in shareholders’ equity was the result of net income of $48.2 million, other comprehensive income of $16.8 million, stock compensation expense of $2.4 million, common stock issued under our dividend reinvestment plan of $739,000 and net issuance of common stock under employee stock plans of $111,000, partially offset by cash dividends paid of $32.7 million and repurchases of $12.7 million of our common stock pursuant to our Stock Repurchase Plan.

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

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Balance Sheet Strategy

Determining the appropriate size of the balance sheet is one of the critical decisions any bank makes. Our balance sheet is not merely the result of a series of micro-decisions, but rather the size is controlled based on the economics of assets compared to the economics of funding and funding sources. Changing interest rate environments and economic conditions require that we monitor the interest rate sensitivity of the assets, the funding driving our growth and closely align ALCO objectives accordingly.

We ended the third quarter of 2025 with approximately $382.2 million in available liquidity from the FRDW, in addition to the approximately $2.30 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 September 30, 2025, the estimated deposits, without insurance or collateral, to total deposits, excluding affiliate deposits (Southside-owned deposits) was 21.7%, or $1.51 billion.

During the nine months ended September 30, 2025, we entered into additional $250 million cash flow hedge interest rate swap contracts, while $180 million cash flow hedge interest rate swap contracts matured. At September 30, 2025, brokered deposits of $760 million and FHLB advances of $100 million were hedged with our $860 million of cash flow swaps. As of September 30, 2025, a pre-tax unrealized gain of $858,000 was recognized in other comprehensive income, and there was no ineffective portion of these hedges. In connection with $860.0 million and $790.0 million of the agreements outstanding at September 30, 2025 and December 31, 2024, respectively, the Bank also entered into various interest rate swap contracts that are treated as cash flow hedges under ASC Topic 815, “Derivatives and Hedging” that are expected to be effective in hedging the variability in future cash flows at 3.47% with a remaining average weighted maturity of 1.5 years at September 30, 2025. 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 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. Wholesale 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 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.

Risks associated with this asset structure include a potentially lower net interest rate spread and margin when compared to our peers, changes in the slope of the yield curve, increased interest rate risk, the length of interest rate cycles, changes in volatility or spreads associated with the MBS, municipal and corporate securities, the unpredictable nature of MBS prepayments and credit risks associated with the municipal and corporate securities. See “Part I - Item 1A. Risk Factors – Risks Related to Our Business” in the 2024 Form 10-K for a discussion of risks related to interest rates. An additional risk is significant increases in interest rates, especially long-term interest rates, which could adversely impact the fair value of the AFS securities portfolio and could also impact our equity capital. Due to the unpredictable nature of MBS prepayments, the length of interest rate cycles and the slope of the interest rate yield curve, net interest income could fluctuate more than simulated under the scenarios modeled by our ALCO and described under “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in this report.

Our securities portfolio decreased 9.1% from $2.81 billion at December 31, 2024 to $2.56 billion at September 30, 2025, with decreases in municipal securities, U.S. Treasury Bills and corporate bonds, partially offset by an increase in U.S. Agency MBS. The decrease in the securities portfolio was due to sales of securities, maturities and principal payments during the nine months ended September 30, 2025, which more than offset securities purchased.

During the three months ended September 30, 2025, we restructured a portion of the securities portfolio to enhance future earnings by selling primarily lower yielding long duration municipal securities and, to a lesser extent, MBS. During the third quarter, we sold $106.3 million of MBS and $217.8 million of municipal securities, which resulted in a net realized loss of $24.4 million. During the nine months ended September 30, 2025, we replaced $182 million of maturing short-term U.S. Treasury Bills to collateralize public fund deposits as needed and purchased $368 million in lower premium, 5.50% to 6.50% coupon MBS.

At September 30, 2025, securities as a percentage of assets totaled 30.5%, compared to 33.0% at December 31, 2024, due to a $257.3 million, or 9.1%, decrease in securities. Cash and cash equivalents increased to 5.6% of total assets at September 30, 2025, compared to 5.0% at December 31, 2024. Our balance sheet management strategy is dynamic and is continually evaluated as market conditions warrant.

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Our FHLB borrowings decreased 86.2%, or $630.6 million, to $101.3 million at September 30, 2025 from $731.9 million at December 31, 2024. As of September 30, 2025 and December 31, 2024, we had no borrowings from the FRDW.

As of September 30, 2025, our total wholesale funding as a percentage of deposits, not including brokered deposits, decreased to 16.4% from 24.9% at December 31, 2024.

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 $192.7 million in brokered CDs at September 30, 2025, of which $80.0 million are related to our cash flow hedges, an increase from $115.7 million at December 31, 2024. At September 30, 2025, our brokered CDs had a weighted average cost of 436 basis points and remaining maturities of less than 11 months. Our brokered non-maturity deposits increased to $703.0 million at September 30, 2025, of which $680.0 million are related to our cash flow hedges, from $627.1 million at December 31, 2024, with a weighted average cost of 364 and 321 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 September 30, 2025, the majority of the securities portfolio was funded by non-maturity deposits, some of which are included in wholesale funding that accounts for approximately 39% of the funding source, of which approximately 86% 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 and fixed rate municipal loans 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 September 30, 2025, $56.2 million in hedging instruments were used to hedge municipal securities with a carrying amount of $51.2 million are included in our AFS securities portfolio in our consolidated balance sheets, representing approximately 20.6% of the AFS municipal portfolio. As of September 30, 2025, $201.0 million in hedging instruments were used to hedge a layer of the closed portfolio of AFS MBS with a carrying value of $315.2 million, or 32.2% of the AFS MBS portfolio, and $155.0 million in hedging instruments were used to hedge a layer of the closed portfolio of municipal loans. 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.

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Results of Operations

Our results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on assets (loans and investments) and interest expense due on our funding sources (deposits and borrowings) during a particular period. Results of operations are also affected by our noninterest income, provision for credit losses, noninterest expenses and income tax expense. General economic and competitive conditions, particularly changes in interest rates, changes in interest rate yield curves, prepayment rates of MBS and loans, repricing of loan relationships, government policies and actions of regulatory authorities also significantly affect our results of operations. Future changes in applicable laws, regulations or government policies may also have a material impact on our results of operations. See “Part I - Item 1A. Risk Factors – Risks Related to Our Business” in the 2024 Form 10-K for further discussion of these risks.

The following table presents net interest income for the periods presented (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Interest income:
Loans	$	69,699	$	71,896	$	204,538	$	209,791
Taxable investment securities	5,578		7,150		18,146		21,126
Tax-exempt investment securities	8,245		9,813		25,209		31,611
MBS	14,174		11,976		40,737		33,179
FHLB stock and equity investments	374		582		1,381		1,488
Other interest earning assets	3,826		4,286		10,735		15,452
Total interest income	101,896		105,703		300,746		312,647
Interest expense:
Deposits	38,758		38,532		113,432		115,196
FHLB borrowings	2,847		6,488		12,405		18,893
Subordinated notes	2,319		937		4,186		2,829
Trust preferred subordinated debentures	1,025		1,180		3,054		3,526
Repurchase agreements	662		899		1,962		2,821
Other borrowings	567		2,203		1,871		6,962
Total interest expense	46,178		50,239		136,910		150,227
Net interest income	$	55,718	$	55,464	$	163,836	$	162,420

Net Interest Income

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 third quarter of 2025, the Federal Reserve reduced the target federal funds rate by 25 basis points to 4.00% to 4.25%. If the federal funds rate remains elevated, it may negatively impact our net interest income.

Net interest income for the three months ended September 30, 2025 increased $254,000, or 0.5%, compared to the same period in 2024. The increase in net interest income was due to the decrease in the average rate paid on our interest bearing liabilities and the increase in the average balance of our interest earning assets, partially offset by the decrease in the average yield of our interest earning assets. Total interest income decreased $3.8 million, or 3.6%, to $101.9 million for the three months ended September 30, 2025, compared to $105.7 million during the same period in 2024. Total interest expense decreased $4.1 million, or 8.1%, to $46.2 million for the three months ended September 30, 2025, compared to $50.2 million for the same period in 2024. Our net interest margin and our net interest margin (FTE), a non-GAAP measure, both decreased by one basis point to 2.81% and 2.94%, respectively, for the three months ended September 30, 2025, compared to 2.82% and 2.95%, respectively, for the same period in 2024. Our net interest spread and net interest spread (FTE), also a non-GAAP measure, increased to 2.14% and 2.26%, respectively, for the three months ended September 30, 2025, compared to 2.10% and 2.23%, respectively, for the same period in 2024. See “Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.

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Net interest income was $163.8 million for the nine months ended September 30, 2025, compared to $162.4 million for the same period in 2024, an increase of $1.4 million, or 0.9%. The increase in net interest income for the nine months ended September 30, 2025 was due to decreases in the average rate paid on and average balance of our interest bearing liabilities and a change in the mix of our interest earning assets, partially offset by the decrease in the average yield of interest earning assets. Total interest income decreased $11.9 million, or 3.8%, to $300.7 million for the nine months ended September 30, 2025, compared to $312.6 million for the same period in 2024. Total interest expense decreased $13.3 million, or 8.9%, to $136.9 million for the nine months ended September 30, 2025, compared to $150.2 million for the same period in 2024. Our net interest margin and net interest margin (FTE), a non-GAAP measure, increased to 2.79% and 2.92%, respectively, for the nine months ended September 30, 2025, compared to 2.76% and 2.90%, respectively, for the same period in 2024, and our net interest spread and net interest spread (FTE), also a non-GAAP measure, increased to 2.12% and 2.24%, respectively, compared to 2.04% and 2.18%, respectively, for the same period in 2024. See “Non-GAAP Financial Measures” for more information and for 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.


	Three Months Ended September 30, 2025 Compared to 2024
	Change Attributable to						Total
Fully Taxable-Equivalent Basis:	Average Volume		Average Yield/Rate		Number of Days		Change
Interest income on:
Loans (1)	$	425	$	(2,678)	$	—	$	(2,253)
Loans held for sale	(1)		2		—		1
Taxable investment securities	(1,046)		(526)		—		(1,572)
Tax-exempt investment securities (1)	(770)		(958)		—		(1,728)
Mortgage-backed and related securities	2,311		(113)		—		2,198
FHLB stock, at cost, and equity investments	(43)		(165)		—		(208)
Interest earning deposits	649		(816)		—		(167)
Federal funds sold	(200)		(93)		—		(293)
Total earning assets	1,325		(5,347)		—		(4,022)
Interest expense on:
Savings accounts	51		231		—		282
CDs	4,471		(1,366)		—		3,105
Interest bearing demand accounts	(623)		(2,538)		—		(3,161)
FHLB borrowings	(3,105)		(536)		—		(3,641)
Subordinated notes, net of unamortized debt issuance costs	979		403		—		1,382
Trust preferred subordinated debentures, net of unamortized debt issuance costs	—		(155)		—		(155)
Repurchase agreements	(82)		(155)		—		(237)
Other borrowings	(1,626)		(10)		—		(1,636)
Total interest bearing liabilities	65		(4,126)		—		(4,061)
Net change	$	1,260	$	(1,221)	$	—	$	39

(1) Interest yields on loans and securities that are nontaxable for federal income tax purposes are presented on a fully taxable-equivalent basis. See “Non-GAAP Financial Measures” for more information and for a reconciliation to GAAP.

The decrease in total interest income for the three months ended September 30, 2025, was attributable to a decrease in the average yield on interest earning assets to 5.27% for the three months ended September 30, 2025, compared to 5.51% for the same period in 2024, partially offset by a $31.5 million, or 0.4%, increase in the average balance of interest earning assets when compared to the same period in 2024. The decrease in total interest expense for the three months ended September 30, 2025, was primarily attributable to the decrease in interest rates on our interest bearing liabilities to 3.01% for the three months ended September 30, 2025 from 3.28% for the same period in 2024.

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The “Average Balances with Average Yields and Rates” table that follows shows 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 September 30, 2025 and 2024. 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.


	Average Balances with Average Yields and Rates (Annualized)
	(unaudited)
	Three Months Ended
	September 30, 2025						September 30, 2024
	Average Balance		Interest		Average Yield/Rate (3)		Average Balance		Interest		Average Yield/Rate (3)
ASSETS
Loans (1)	$	4,640,220	$	70,240	6.01	%	$	4,613,028	$	72,493	6.25	%
Loans held for sale	776		12		6.14	%	871		11		5.02	%
Securities:
Taxable investment securities (2)	669,712		5,578		3.30	%	791,914		7,150		3.59	%
Tax-exempt investment securities (2)	1,094,978		10,097		3.66	%	1,174,445		11,825		4.01	%
Mortgage-backed and related securities (2)	1,058,860		14,174		5.31	%	886,325		11,976		5.38	%
Total securities	2,823,550		29,849		4.19	%	2,852,684		30,951		4.32	%
FHLB stock, at cost, and equity investments	37,937		374		3.91	%	41,159		582		5.63	%
Interest earning deposits	334,523		3,631		4.31	%	281,313		3,798		5.37	%
Federal funds sold	17,546		195		4.41	%	33,971		488		5.71	%
Total earning assets	7,854,552		104,301		5.27	%	7,823,026		108,323		5.51	%
Cash and due from banks	87,815						100,578
Accrued interest and other assets	455,884						455,091
Less: Allowance for loan losses	(44,476)						(42,581)
Total assets	$	8,353,775					$	8,336,114
LIABILITIES AND SHAREHOLDERS’ EQUITY
Savings accounts	$	618,059	1,772		1.14	%	$	598,116	1,490		0.99	%
CDs	1,505,292		15,752		4.15	%	1,087,613		12,647		4.63	%
Interest bearing demand accounts	3,320,993		21,234		2.54	%	3,409,911		24,395		2.85	%
Total interest bearing deposits	5,444,344		38,758		2.82	%	5,095,640		38,532		3.01	%
FHLB borrowings	298,138		2,847		3.79	%	618,708		6,488		4.17	%
Subordinated notes, net of unamortized debt issuance costs	169,196		2,319		5.44	%	91,988		937		4.05	%
Trust preferred subordinated debentures, net of unamortized debt issuance costs	60,277		1,025		6.75	%	60,273		1,180		7.79	%
Repurchase agreements	75,207		662		3.49	%	83,297		899		4.29	%
Other borrowings	35,544		567		6.33	%	137,482		2,203		6.37	%
Total interest bearing liabilities	6,082,706		46,178		3.01	%	6,087,388		50,239		3.28	%
Noninterest bearing deposits	1,375,075						1,344,165
Accrued expenses and other liabilities	83,601						98,331
Total liabilities	7,541,382						7,529,884
Shareholders’ equity	812,393						806,230
Total liabilities and shareholders’ equity	$	8,353,775					$	8,336,114
Net interest income (FTE)			$	58,123					$	58,084
Net interest margin (FTE)					2.94	%					2.95	%
Net interest spread (FTE)					2.26	%					2.23	%

(1) Interest on loans includes net fees on loans that are not material in amount.

(2) For the purpose of calculating the average yield, the average balance of securities do not include unrealized gains and losses on AFS securities.

(3) Yield/rate includes the impact of applicable derivatives.

Note: As of September 30, 2025 and 2024, loans totaling $8.0 million and $7.3 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.

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Year-to-Date Analysis of Changes in Interest Income and Interest Expense


	Nine Months Ended September 30, 2025 Compared to 2024
	Change Attributable to						Total
Fully Taxable-Equivalent Basis:	Average Volume		Average Yield/Rate		Number of Days		Change
Interest income on:
Loans (1)	$	261	$	(4,926)	$	(772)	$	(5,437)
Loans held for sale	(63)		49		—		(14)
Taxable investment securities	(1,748)		(1,155)		(77)		(2,980)
Tax-exempt investment securities (1)	(3,409)		(3,506)		(138)		(7,053)
Mortgage-backed and related securities	8,167		(488)		(121)		7,558
FHLB stock, at cost, and equity investments	(115)		13		(5)		(107)
Interest earning deposits	(612)		(2,691)		(48)		(3,351)
Federal funds sold	(976)		(381)		(9)		(1,366)
Total earning assets	1,505		(13,085)		(1,170)		(12,750)
Interest expense on:
Savings accounts	3		297		(16)		284
CDs	12,843		(2,272)		(126)		10,445
Interest bearing demand accounts	(3,604)		(8,611)		(278)		(12,493)
FHLB borrowings	(5,115)		(1,304)		(69)		(6,488)
Subordinated notes, net of unamortized debt issuance costs	854		513		(10)		1,357
Trust preferred subordinated debentures, net of unamortized debt issuance costs	—		(459)		(13)		(472)
Repurchase agreements	(398)		(451)		(10)		(859)
Other borrowings	(6,061)		995		(25)		(5,091)
Total interest bearing liabilities	(1,478)		(11,292)		(547)		(13,317)
Net change	$	2,983	$	(1,793)	$	(623)	$	567

The decrease in total interest income was attributable to the decrease in the average yield on earning assets to 5.25% for the nine months ended September 30, 2025 from 5.45% for the same period in 2024, partially offset by a change in the mix of our interest earning assets when compared to the same period in 2024. The decrease in total interest expense for the nine months ended September 30, 2025 was attributable to the decrease in interest rates on our interest bearing liabilities to 3.01% from 3.27% for the same period in 2024 and a decrease in the average balance of our interest bearing liabilities of $44.0 million, or 0.7%, when compared to the same period in 2024.

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The “Average Balances with Average Yields and Rates” table that follows shows 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 nine months ended September 30, 2025 and 2024 . 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.


	Average Balances with Average Yields and Rates (Annualized)
	(unaudited)
	Nine Months Ended
	September 30, 2025						September 30, 2024
	Average Balance		Interest		Average Yield/Rate		Average Balance		Interest		Average Yield/Rate
ASSETS
Loans (1)	$	4,595,316	$	206,198	6.00	%	$	4,589,621	$	211,635	6.16	%
Loans held for sale	879		39		5.93	%	3,721		53		1.90	%
Securities:
Taxable investment securities (2)	717,887		18,146		3.38	%	785,422		21,126		3.59	%
Tax-exempt investment securities (2)	1,120,012		30,701		3.66	%	1,237,884		37,754		4.07	%
Mortgage-backed and related securities (2)	1,034,660		40,737		5.26	%	827,396		33,179		5.36	%
Total securities	2,872,559		89,584		4.17	%	2,850,702		92,059		4.31	%
FHLB stock, at cost, and equity investments	37,444		1,381		4.93	%	40,565		1,488		4.90	%
Interest earning deposits	304,730		9,754		4.28	%	320,371		13,105		5.46	%
Federal funds sold	29,616		981		4.43	%	57,265		2,347		5.47	%
Total earning assets	7,840,544		307,937		5.25	%	7,862,245		320,687		5.45	%
Cash and due from banks	87,305						108,325
Accrued interest and other assets	455,402						440,340
Less: Allowance for loan losses	(44,774)						(43,096)
Total assets	$	8,338,477					$	8,367,814
LIABILITIES AND SHAREHOLDERS’ EQUITY
Savings accounts	$	602,800	4,652		1.03	%	$	602,450	4,368		0.97	%
CDs	1,416,992		45,063		4.25	%	1,016,812		34,618		4.55	%
Interest bearing demand accounts	3,345,909		63,717		2.55	%	3,518,906		76,210		2.89	%
Total interest bearing deposits	5,365,701		113,432		2.83	%	5,138,168		115,196		2.99	%
FHLB borrowings	434,558		12,405		3.82	%	610,893		18,893		4.13	%
Subordinated notes, net of unamortized debt issuance costs	118,067		4,186		4.74	%	92,631		2,829		4.08	%
Trust preferred subordinated debentures, net of unamortized debt issuance costs	60,276		3,054		6.77	%	60,271		3,526		7.81	%
Repurchase agreements	74,264		1,962		3.53	%	87,811		2,821		4.29	%
Other borrowings	32,218		1,871		7.76	%	139,306		6,962		6.68	%
Total interest bearing liabilities	6,085,084		136,910		3.01	%	6,129,080		150,227		3.27	%
Noninterest bearing deposits	1,349,971						1,342,945
Accrued expenses and other liabilities	85,882						99,758
Total liabilities	7,520,937						7,571,783
Shareholders’ equity	817,540						796,031
Total liabilities and shareholders’ equity	$	8,338,477					$	8,367,814
Net interest income (FTE)			$	171,027					$	170,460
Net interest margin (FTE)					2.92	%					2.90	%
Net interest spread (FTE)					2.24	%					2.18	%

(1) Interest on loans includes net fees on loans that are not material in amount.

(2) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

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Noninterest Income

Noninterest income consists of revenue generated from a broad range of financial services and activities and other fee-generating services that we either provide or in which we participate.

The following table details the categories included in noninterest income (dollars in thousands):


	Three Months Ended September 30,				2025
					Change From
	2025		2024		2024
Deposit services	$	6,069	$	6,199	$	(130)	(2.1)	%
Net gain (loss) on sale of securities AFS	(24,395)		(1,929)		(22,466)		(1,164.6)	%

Gain (loss) on sale of loans	164		115		49		42.6	%
Trust fees	2,081		1,628		453		27.8	%
BOLI	871		857		14		1.6	%
Brokerage services	1,172		1,068		104		9.7	%
Other noninterest income	2,048		233		1,815		779.0	%
Total noninterest income (loss)	$	(11,990)	$	8,171	$	(20,161)	(246.7)	%



	Nine Months Ended September 30,			2025
			Change From
		2025		2024		2024
Deposit services				$	18,023	$	18,341	$	(318)	(1.7)	%
Net gain (loss) on sale of securities AFS				(24,949)		(2,510)		(22,439)		(894.0)	%

Gain (loss) on sale of loans				318		(101)		419		414.9	%
Trust fees				5,725		4,420		1,305		29.5	%
BOLI				2,503		3,408		(905)		(26.6)	%
Brokerage services				3,511		3,163		348		11.0	%
Other noninterest income				5,247		2,731		2,516		92.1	%
Total noninterest income				$	10,378	$	29,452	$	(19,074)	(64.8)	%

The 246.7% decrease in noninterest income for the three months ended September 30, 2025, when compared to the same period in 2024, was due to an increase in net loss on sale of securities AFS, partially offset by increases in other noninterest income, gain on sale of loans and trust fees. The 64.8% decrease in noninterest income for the nine months ended September 30, 2025, when compared to the same period in 2024, was due to an increase in net loss on sale of securities AFS and a decrease in BOLI income, partially offset by increases in other noninterest income, gain on sale of loans and trust fees.

During the three and nine months ended September 30, 2025, we sold MBS and municipal securities that resulted in a net loss on sale of AFS securities of $24.4 million and $24.9 million, respectively. During the three and nine months ended September 30, 2024, we sold municipal securities that resulted in a net loss on sale of AFS securities of $1.9 million and $2.5 million, respectively.

Gain on sale of loans increased for the three months ended September 30, 2025, when compared to the same period in 2024, due to an increase in the volume of loans sold. The increase in gain on sale of loans for the nine months ended September 30, 2025, when compared to the same period in 2024, was due to the $412,000 net loss on the sale of a commercial real estate loan relationship during the first quarter of 2024.

Trust fees increased for the three and nine months ended September 30, 2025, when compared to the same periods in 2024, due to an increase in accounts under management and fee repricing.

The decrease in BOLI income for the nine months ended September 30, 2025, when compared to the same period in 2024, was primarily due to a death benefit of $962,000 realized in the second quarter of 2024 for a former covered officer.

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Brokerage services income increased for the three and nine months ended September 30, 2025, when compared to the same periods in 2024, due to an increase in assets under management.

Other noninterest income increased for the three and nine months ended September 30, 2025, when compared to the same periods in 2024, partially due to an impairment loss in the third quarter of 2024 of $868,000 for AFS securities. Additionally, the increase for the three months ended September 30, 2025 was also due to increases in swap fee income, mortgage servicing fee income and deluxe income, partially offset by a decrease in equity investment income. The additional increase for the nine months ended September 30, 2025 was also due to increases in swap fee income, deluxe income and merchant services income, partially offset by the gain recognized on the repurchase of our subordinated notes at a discount during the second quarter of 2024.

Noninterest Expense

We incur certain types of noninterest expenses associated with the operation of our various business activities. The following table details the categories included in noninterest expense (dollars in thousands):


	Three Months Ended September 30,				2025
					Change From
	2025		2024		2024
Salaries and employee benefits	$	22,803	$	22,233	$	570	2.6	%
Net occupancy	3,761		3,613		148		4.1	%

Advertising, travel & entertainment	907		734		173		23.6	%
ATM expense	444		412		32		7.8	%
Professional fees	1,451		1,206		245		20.3	%
Software and data processing	2,770		2,951		(181)		(6.1)	%
Communications	321		423		(102)		(24.1)	%
FDIC insurance	920		939		(19)		(2.0)	%
Amortization of intangibles	172		278		(106)		(38.1)	%

Other noninterest expense	3,985		3,543		442		12.5	%
Total noninterest expense	$	37,534	$	36,332	$	1,202	3.3	%



	Nine Months Ended September 30,			2025
			Change From
		2025		2024		2024
Salaries and employee benefits				$	67,457	$	67,330	$	127	0.2	%
Net occupancy				10,786		10,725		61		0.6	%

Advertising, travel & entertainment				2,781		2,479		302		12.2	%
ATM expense				1,227		1,105		122		11.0	%
Professional fees				4,372		3,435		937		27.3	%
Software and data processing				8,636		8,667		(31)		(0.4)	%
Communications				1,046		1,282		(236)		(18.4)	%
FDIC insurance				2,822		2,859		(37)		(1.3)	%
Amortization of intangibles				593		922		(329)		(35.7)	%

Other noninterest expense				14,160		10,174		3,986		39.2	%
Total noninterest expense				$	113,880	$	108,978	$	4,902	4.5	%

The increase in noninterest expense for the three and nine months ended September 30, 2025, when compared to the same periods in 2024, was primarily due to increases in advertising, travel and entertainment, professional fees, other noninterest expense, and to a lesser extent, salaries and employee benefits expense, partially offset by decreases in communications expense and amortization of intangibles.

Salaries and employee benefits expense increased during the three and nine months ended September 30, 2025, compared to the same periods in 2024, due to increases in direct salary expense and health insurance expense, partially offset by a decrease in retirement expense.

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For the three and nine months ended September 30, 2025, direct salary expense increased $399,000, or 2.1%, and $48,000, or 0.1%, respectively, when compared to the same periods in 2024, primarily due to normal salary increases effective in the first quarter of 2025.

Retirement expense, included in salaries and employee benefits, decreased $24,000, or 2.6%, and $94,000, or 3.4%, for the three and nine months ended September 30, 2025, respectively, when compared to the same periods in 2024. This decrease was due to decreases in our split dollar expense, post-retirement benefits expense and deferred compensation expense, partially offset by an increase in 401(k) matching expense.

Health and life insurance expense, included in salaries and employee benefits, increased $196,000, or 8.7%, and $173,000, or 2.7%, for the three and nine months ended September 30, 2025, respectively, when compared to the same periods in 2024, due to increases in health claims expense and plan administration cost. We have a self-insured health plan which is supplemented with a stop loss policy.

Advertising, travel and entertainment expense increased during the three and nine months ended September 30, 2025, compared to the same periods in 2024, due to increases in media advertising, meals and entertainment and travel related expenses and donations.

ATM expense increased for the nine months ended September 30, 2025, when compared to the same period in 2024, due to an increase in ATM maintenance costs.

Professional fees increased for the three and nine months ended September 30, 2025, when compared to the same periods in 2024, due to increases in managed services, audit, consulting and legal fees.

Communications expense decreased for the three and nine months ended September 30, 2025, when compared to the same periods in 2024, resulting from improved network management efficiency.

Amortization of intangibles decreased for the three and nine months ended September 30, 2025, when compared to the same periods in 2024, due primarily to a decrease in core deposit intangible amortization which is recognized on an accelerated method resulting in a decline in expense over the amortization period.

Other noninterest expense increased for the three and nine months ended September 30, 2025, when compared to the same periods in 2024, primarily due to an increase in non-service cost of the Retirement Plan as a result of the amortization method change from average life expectancy to average future service in the first quarter of 2025 and a one-time charge of $1.2 million on the demolition of an old branch facility following completion of the new branch during the second quarter of 2025, partially offset by a decrease in repossessed asset expense.

Income Taxes

Pre-tax income for the three and nine months ended September 30, 2025 was $5.1 million and $57.9 million, respectively, a decrease of 79.5% and 28.5%, compared to $24.9 million and $80.9 million for the three and nine months ended September 30, 2024. We recorded income tax expense of $189,000 and $9.6 million for the three and nine months ended September 30, 2025, respectively, compared to income tax expense of $4.4 million and $14.2 million for the same periods in 2024. The ETR as a percentage of pre-tax income was 3.7% and 16.6% for the three and nine months ended September 30, 2025, respectively, compared to an ETR as a percentage of pre-tax income of 17.6% for both the three and nine months ended September 30, 2024. The decrease in the ETR for the three and nine months ended September 30, 2025 was primarily due to the impact of the net loss on the sale of AFS securities of $24.4 million recorded during the third quarter of 2025 on our tax-exempt income as a percentage of pre-tax income as well as a decrease in state income tax expense compared to the same periods in 2024.

The ETR differs from the statutory rate of 21% primarily due to the effect of tax-exempt income from municipal loans and securities, BOLI and state income tax. The net deferred tax asset totaled $30.6 million at September 30, 2025, compared to $34.5 million at December 31, 2024. The decrease in the net deferred tax asset is primarily the result of a decrease in the unrealized loss in the AFS securities portfolio partially offset by an increase in the estimated fair value of the effective hedging derivatives.

See “Note 11 – Income Taxes” to our consolidated financial statements included in this report. No valuation allowance was recorded at September 30, 2025 or December 31, 2024, as management believes it is more likely than not that all of the deferred tax asset items will be realized in future years.

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Composition of Loans

One of our main objectives is to seek attractive lending opportunities in Texas, primarily in the market areas in which we operate. Refer to “Part I – Item 1. Business – Market Area” in the 2024 Form 10-K for a discussion of our primary market area and the geographic concentration of our loan portfolio as of December 31, 2024. There were no substantial changes in these concentrations during the nine months ended September 30, 2025. The majority of our loan originations are made to borrowers who live in and/or conduct business in the market areas of Texas in which we operate or adjoin, with the exception of municipal loans, which were made primarily throughout the state of Texas. Municipal loans were made to municipalities, counties, school districts and colleges.

The following table sets forth loan totals by class as of the dates presented (dollars in thousands):


							Compared to
							December 31, 2024		September 30, 2024
	September 30, 2025		December 31, 2024		September 30, 2024		Change (%)		Change (%)

Real estate loans:
Construction	$	519,528	$	537,827	$	585,817	(3.4)	%	(11.3)	%
1-4 family residential	730,061		740,396		755,406		(1.4)	%	(3.4)	%
Commercial	2,688,712		2,579,735		2,422,612		4.2	%	11.0	%
Commercial loans	429,952		363,167		358,854		18.4	%	19.8	%
Municipal loans	353,324		390,968		402,041		(9.6)	%	(12.1)	%
Loans to individuals	43,712		49,504		53,318		(11.7)	%	(18.0)	%
Total loans	$	4,765,289	$	4,661,597	$	4,578,048	2.2	%	4.1	%

Our total loan portfolio increased $103.7 million, or 2.2%, compared to December 31, 2024 and increased $187.2 million, or 4.1%, compared September 30, 2024 with increases in commercial real estate loans and commercial loans when compared to December 31, 2024 and September 30, 2024, partially offset by decreases in the remaining loan categories.

At September 30, 2025, our real estate loans represented 82.6% of our loan portfolio and were comprised of commercial real estate loans of 68.3%, 1-4 family residential loans of 18.5% and construction loans of 13.2%. Commercial real estate loans primarily include loans collateralized by retail, commercial office buildings, multi-family residential buildings, medical facilities and offices, senior living, assisted living and skilled nursing facilities, warehouse facilities, hotels and churches. Our 1-4 family residential loans consist primarily of loans secured by first mortgages on owner occupied 1-4 family residences. Our construction loans are collateralized by property located primarily in or near the market areas we serve. A number of our construction loans will be owner occupied upon completion. Construction loans for non-owner occupied projects are financed, but these typically have cash flows from leases with tenants, secondary sources of repayment, and in some cases, additional collateral.

Nonperforming Assets

Nonperforming assets consist of delinquent loans 90 days or more past due, nonaccrual loans, OREO, repossessed assets and restructured loans. Nonaccrual loans are loans 90 days or more delinquent and collection in full of both the principal and interest is not expected. Additionally, some loans that are not delinquent or that are delinquent less than 90 days may be placed on nonaccrual status if it is probable that we will not receive contractual principal and interest payments in accordance with the terms of the respective loan agreements. When a loan is categorized as nonaccrual, the accrual of interest is discontinued and any accrued balance is reversed for financial statement purposes. OREO represents real estate taken in full or partial satisfaction of debts previously contracted. The dollar amount of OREO is based on a current evaluation of the OREO at the time it is recorded on our books, net of estimated selling costs. Updated valuations are obtained as needed and any additional impairments are recognized. Restructured loans represent loans that have been modified due to the borrower experiencing financial difficulty to provide interest rate reductions or below market interest rates, restructuring amortization schedules and other actions intended to minimize potential losses. Categorization of a loan as nonperforming is not in itself a reliable indicator of potential loan loss. Other factors, such as the value of collateral securing the loan and the financial condition of the borrower are considered in judgments as to potential loan loss.

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The following table sets forth nonperforming assets for the periods presented (dollars in thousands):


							Compared to
							December 31, 2024		September 30, 2024
	September 30, 2025		December 31, 2024		September 30, 2024		Change (%)		Change (%)







Nonaccrual loans	$	7,955	$	3,185	$	7,254	149.8	%	9.7	%
Accruing loans past due more than 90 days	—		—		—		—		—
Restructured loans	27,501		2		—		1,374,950.0	%	100.0	%
OREO	128		388		388		(67.0)	%	(67.0)	%
Repossessed assets	24		14		14		71.4	%	71.4	%
Total nonperforming assets	$	35,608	$	3,589	$	7,656	892.1	%	365.1	%

Total loans	$	4,765,289	$	4,661,597	$	4,578,048
Allowance for loan losses at end of period	45,294		44,884		44,276


Ratio of nonaccruing loans to:
Total loans	0.17	%	0.07	%	0.16	%
Ratio of nonperforming assets to:
Total assets	0.42	%	0.04	%	0.09	%
Total loans	0.75	%	0.08	%	0.17	%
Total loans and OREO	0.75	%	0.08	%	0.17	%
Ratio of allowance for loan losses to:
Nonaccruing loans	569.38	%	1,409.23	%	610.37	%
Nonperforming assets	127.20	%	1,250.60	%	578.32	%
Total loans	0.95	%	0.96	%	0.97	%
Net charge-offs to average loans outstanding	0.06	%	0.04	%	0.03	%

Nonperforming assets hinder our ability to earn interest income. Decreases in earnings can result from both the loss of interest income and the costs associated with maintaining the OREO, for taxes, insurance and other operating expenses. We actively market all OREO properties and do not hold them for investment purposes.

Allowance for Credit Losses – Loans

In accordance with ASC 326, the allowance for credit losses on loans is estimated and recognized upon origination of the loan based on expected credit losses. The CECL model uses historical experience and current conditions for homogeneous pools of loans, and reasonable and supportable forecasts about future events. The impact of varying economic conditions and portfolio stress factors are a component of the credit loss models applied to each portfolio. Reserve factors are specific to the loan segments that share similar risk characteristics based on the probability of default assumptions and loss given default assumptions, over the contractual term. The forecasted periods gradually mean-revert the economic inputs to their long-run historical trends. Management evaluates the economic data points used in the Moody’s forecasting scenarios on a quarterly basis to determine the most appropriate impact to the various portfolio characteristics based on management’s view and applies weighting to various forecasting scenarios as deemed appropriate based on known and expected economic activities. Management also considers and may apply relevant qualitative factors, not previously considered, to determine the appropriate allowance level. The use of the CECL model includes significant judgment by management and may differ from those of our peers due to different historical loss patterns, economic forecasts, and the length of time of the reasonable and supportable forecast period and reversion period.

We utilize Moody’s Analytics economic forecast scenarios and assign probability weighting to those scenarios which best reflect management’s views on the economic forecast. The probability weighting and scenarios utilized for the estimate of the allowance were generally reflective of continued economic and repricing uncertainty forecasted in our CECL model as of September 30, 2025.

When determining the appropriate allowance for credit losses on our loan portfolio, our commercial construction and real estate loans, commercial loans and municipal loans utilize the probability of default/loss given default discounted cash flow approach.

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Reserves on these loans are based upon risk factors including the loan type and structure, collateral type, leverage ratio, refinancing risk and origination quality, among others. Our consumer construction real estate loans, 1-4 family residential loans and our loans to individuals use a loss rate based upon risk factors including loan types, origination year and credit scores.

Loans evaluated collectively in a pool are monitored to ensure they continue to exhibit similar risk characteristics with other loans in the pool. If a loan does not share similar risk characteristics with other loans, expected credit losses for that loan are evaluated individually.

As of September 30, 2025, our review of the loan portfolio indicated that an allowance for loan losses of $45.3 million was appropriate to cover expected losses in the portfolio. Changes in economic and other conditions, including the application of the CECL model, may require future adjustments to the allowance for loan losses.

During the nine months ended September 30, 2025, the allowance for loan losses increased $410,000, or 0.9%, to $45.3 million, or 0.95% of total loans, when compared to $44.9 million, or 0.96% of total loans at December 31, 2024.

For the three and nine months ended September 30, 2025, loan charge-offs were $1.3 million and $3.1 million, respectively, and recoveries were $491,000 and $1.1 million, respectively. For the three and nine months ended September 30, 2024, loan charge-offs were $773,000 and $2.1 million, respectively, and recoveries were $365,000 and $1.2 million, respectively. We recorded a provision for credit losses for loans of $1.7 million and $2.4 million for the three and nine months ended September 30, 2025, respectively. For the three and nine months ended September 30, 2024, we recorded a provision for credit losses for loans of $2.3 million and $2.6 million, respectively.

Allowance for Credit Losses – Off-Balance-Sheet Credit Exposures

Allowance for off-balance-sheet credit exposures were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024

Balance at beginning of period	$	3,774	$	3,208	$	3,141	$	3,932

Provision for (reversal of) off-balance-sheet credit exposures	(625)		112		8		(612)
Balance at end of period	$	3,149	$	3,320	$	3,149	$	3,320

Our off-balance-sheet credit exposures include contractual commitments to extend credit and standby letters of credit. For these credit exposures we evaluate the expected credit losses using usage given defaults and credit conversion factors depending on the type of commitment and based upon historical usage rates. These assumptions are reevaluated on an annual basis and adjusted if necessary. For additional information regarding our methodology used to estimate the allowance for credit losses on off-balance-sheet credit exposures, see “Note 12 – Off-Balance-Sheet Arrangements, Commitments and Contingencies” to our consolidated financial statements included in this report.

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Capital Resources and Liquidity

The Company’s Common Equity Tier 1 capital includes common stock and related paid-in capital, net of treasury stock, and retained earnings. The Bank’s Common Equity Tier 1 capital includes common stock and related paid-in capital and retained earnings. In connection with the adoption of the Basel III Capital Rules, we elected to opt-out of the requirement to include accumulated other comprehensive income in Common Equity Tier 1. Common Equity Tier 1 for both the Company and the Bank is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities.

Tier 1 capital includes Common Equity Tier 1 capital and additional Tier 1 capital. For the Company, additional Tier 1 capital at September 30, 2025 included $58.5 million of trust preferred securities. For bank holding companies that had assets of less than $15 billion as of December 31, 2009, trust preferred securities issued prior to May 19, 2010 can be treated as Tier 1 capital to the extent that they do not exceed 25% of Tier 1 capital after the application of capital deductions and adjustments. The Bank did not have any additional Tier 1 capital beyond Common Equity Tier 1 at September 30, 2025.

Total capital includes Tier 1 capital and Tier 2 capital. Tier 2 capital for both the Company and the Bank includes a permissible portion of the allowance for credit losses on loans, off-balance sheet exposures and HTM securities. Tier 2 capital for the Company also includes $239.6 million of qualified subordinated debt as of September 30, 2025. The permissible portion of qualified subordinated notes decreases 20% per year during the final five years of the term of the notes.

In April 2020, the FDIC, Federal Reserve, and the Office of the Comptroller of the Currency issued supplemental instructions allowing banking organizations that implement CECL before the end of 2020, the option to delay for two years an estimate of the CECL methodologies’ effect on regulatory capital, relative to the incurred loss methodologies effect on capital, followed by a three-year transition period. We elected to adopt the five-year transition option, and as of December 31, 2024, the CECL impact on regulatory capital was fully phased and there is no longer a transitional amount.

Management believes that, as of September 30, 2025, we met all capital adequacy requirements to which we were subject. It is management’s intention to maintain our capital at a level acceptable to all regulatory authorities and future dividend payments will be determined accordingly. Regulatory authorities require that any dividend payments made by either the Company or the Bank not exceed earnings for that year. Accordingly, shareholders should not anticipate a continuation of the cash dividend payments simply because of the existence of a dividend reinvestment program. The payment of dividends will depend upon future earnings, our financial condition and other related factors including the discretion of the Board.

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To be categorized as well capitalized we must maintain minimum Common Equity Tier 1 risk-based, Tier 1 risk-based, Total capital risk-based and Tier 1 leverage ratios as set forth in the following table (dollars in thousands):


	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Actions Provisions
September 30, 2025	Amount		Ratio		Amount		Ratio		Amount		Amount
Common Equity Tier 1 (to Risk-Weighted Assets)
Consolidated	$	743,762	12.97	%	$	258,096	4.50	%	N/A		N/A
Bank Only	$	936,723	16.34	%	$	257,954	4.50	%	$	372,600	6.50	%

Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	$	802,229	13.99	%	$	344,128	6.00	%	N/A		N/A
Bank Only	$	936,723	16.34	%	$	343,938	6.00	%	$	458,584	8.00	%

Total Capital (to Risk-Weighted Assets)
Consolidated	$	1,090,315	19.01	%	$	458,838	8.00	%	N/A		N/A
Bank Only	$	985,208	17.19	%	$	458,584	8.00	%	$	573,230	10.00	%

Tier 1 Capital (to Average Assets) (1)
Consolidated	$	802,229	9.78	%	$	328,230	4.00	%	N/A		N/A
Bank Only	$	936,723	11.42	%	$	328,129	4.00	%	$	410,162	5.00	%


	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Actions Provisions
December 31, 2024	Amount		Ratio		Amount		Ratio		Amount		Ratio










Common Equity Tier 1 (to Risk-Weighted Assets)
Consolidated	$	739,351	13.04	%	$	255,228	4.50	%	N/A		N/A
Bank Only	$	870,541	15.35	%	$	255,183	4.50	%	$	368,598	6.50	%

Tier 1 Capital (to Risk-Weighted Assets)
Consolidated	$	797,814	14.07	%	$	340,304	6.00	%	N/A		N/A
Bank Only	$	870,541	15.35	%	$	340,244	6.00	%	$	453,659	8.00	%

Total Capital (to Risk-Weighted Assets)
Consolidated	$	935,308	16.49	%	$	453,739	8.00	%	N/A		N/A
Bank Only	$	915,993	16.15	%	$	453,659	8.00	%	$	567,074	10.00	%

Tier 1 Capital (to Average Assets) (1)
Consolidated	$	797,814	9.67	%	$	330,155	4.00	%	N/A		N/A
Bank Only	$	870,541	10.55	%	$	330,042	4.00	%	$	412,553	5.00	%

(1) Refers to quarterly average assets as calculated in accordance with policies established by bank regulatory agencies.

As of September 30, 2025, Southside Bancshares and Southside Bank met all capital adequacy requirements under the Basel III Capital Rules that became fully phased-in as of January 1, 2019. Refer to the Supervision and Regulation section in the 2024 Form 10-K for further discussion of our capital requirements.

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The table below summarizes our key equity ratios for the periods presented:


	Three Months Ended September 30,
	2025		2024
Return on average assets	0.23	%	0.98	%
Return on average shareholders’ equity	2.40	%	10.13	%
Dividend payout ratio – Basic	225.00	%	52.94	%
Dividend payout ratio – Diluted	225.00	%	52.94	%
Average shareholders’ equity to average total assets	9.72	%	9.67	%
	Nine Months Ended September 30,
	2025		2024
Return on average assets	0.77	%	1.06	%
Return on average shareholders’ equity	7.89	%	11.19	%
Dividend payout ratio – Basic	67.92	%	49.09	%
Dividend payout ratio – Diluted	67.92	%	49.09	%
Average shareholders’ equity to average total assets	9.80	%	9.51	%

Management of Liquidity

Liquidity management involves our ability to convert assets to cash with minimum risk of loss while enabling us to meet our current and future obligations to our customers at any time. This means addressing (1) the immediate cash withdrawal requirements of depositors and other fund providers; (2) the funding requirements of lines and letters of credit; and (3) the short-term credit needs of customers. Liquidity is provided by cash, interest earning deposits and short-term investments that can be readily liquidated with a minimum risk of loss. At September 30, 2025 and December 31, 2024, these investments were 8.8% and 8.6% of total assets, as compared with 10.8% for September 30, 2024. The decrease to 8.8% at September 30, 2025 as compared to September 30, 2024, is largely driven by a decrease in the short-term investment portfolio and cash and due from banks, partially offset by an increase in interest earning deposits. Liquidity is further provided through the matching, by time period, of rate sensitive interest earning assets with rate sensitive interest bearing liabilities. The Bank has three unsecured lines of credit for the purchase of overnight federal funds at prevailing rates with Frost Bank, Amegy Bank and TIB – The Independent Bankers Bank for $40.0 million, $25.0 million and $15.0 million, respectively. There were no federal funds purchased at September 30, 2025 or December 31, 2024. To provide more liquidity in response to economic conditions in recent years, the Federal Reserve has encouraged broader use of the discount window. At September 30, 2025, the amount of additional funding the Bank could obtain from the FRDW, collateralized by securities, was approximately $382.2 million. There were no borrowings from the FRDW at September 30, 2025 or December 31, 2024. At September 30, 2025, the amount of additional funding Southside Bank could obtain from FHLB, collateralized by securities, FHLB stock and nonspecified loans and securities, was approximately $2.30 billion, net of FHLB stock purchases required. The Bank has a $5.0 million line of credit with Frost Bank to be used to issue letters of credit, and at September 30, 2025, the line had one outstanding letter of credit for $155,000. The Bank currently has two outstanding letters of credit from FHLB held as collateral for loans totaling $6.2 million.

Interest rate sensitivity management seeks to avoid fluctuating net interest margins and to enhance consistent growth of net interest income through periods of changing interest rates. The ALCO closely monitors various liquidity ratios and interest rate spreads and margins. The ALCO utilizes a simulation model to perform interest rate simulation tests that apply various interest rate scenarios including immediate shocks and MVPE to assist in determining our overall interest rate risk and the adequacy of our liquidity position. In addition, the ALCO utilizes this simulation model to determine the impact on net interest income of various interest rate scenarios. By utilizing this technology, we can determine changes that need to be made to the asset and liability mix to minimize the change in net interest income under these various interest rate scenarios.

Management continually evaluates our liquidity position and currently believes the Company has adequate funding to meet our financial needs.

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Expansion

We expect to open a traditional branch location at Bellwood Park in Tyler, Texas in 2026.

Recent Accounting Pronouncements

See “Note 1 – Summary of Significant Accounting and Reporting Policies” in our consolidated financial statements included in this Quarterly Report on Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The disclosures set forth in this item are qualified by the section captioned “Forward-Looking Statements” included in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report and other cautionary statements set forth elsewhere in this Quarterly Report on Form 10-Q.

Refer to the discussion of market risks included in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in the 2024 Form 10-K.

In the banking industry, a major risk exposure is changing interest rates. The primary objective of monitoring our interest rate sensitivity, or risk, is to provide management the tools necessary to manage the balance sheet to minimize adverse changes in net interest income as a result of changes in the direction and level of interest rates. Federal Reserve monetary control efforts, the effects of deregulation, economic uncertainty and legislative changes have been significant factors affecting the task of managing interest rate sensitivity positions in recent years.

In an attempt to manage our exposure to changes in interest rates, management closely monitors our exposure to interest rate risk through our ALCO. Our ALCO meets regularly and reviews our interest rate risk position and makes recommendations to our board for adjusting this position. In addition, our board regularly reviews our asset/liability position. We primarily use two methods for measuring and analyzing interest rate risk: net income simulation analysis and MVPE modeling. We utilize the net income simulation model as the primary quantitative tool in measuring the amount of interest rate risk associated with changing market rates. This model quantifies the effects of various interest rate scenarios on projected net interest income and net income over the next 12 months. The model is used to measure the impact on net interest income relative to a base case scenario of rates immediately increasing 100 and 200 basis points or decreasing 50, 100 and 200 basis points over the next 12 months. These simulations incorporate assumptions regarding balance sheet growth and mix, pricing and the repricing and maturity characteristics of the existing and projected balance sheet. The impact of interest rate-related risks such as prepayment, basis and option risk are also considered. The model has interest rate floors and no interest rates are assumed to go negative. We continue to monitor interest rates and anticipate rate changes during the remainder of 2025.

The following table reflects the noted increases and decreases in interest rates under the model simulations and the anticipated impact on net interest income relative to the base case over the next 12 months for the periods presented.


	Anticipated impact over the next 12 months
	September 30,
Rate projections:	2025		2024
Increase:
100 basis points	2.72	%	4.49	%
200 basis points	5.16	%	7.41	%

Decrease:
50 basis points	(0.98)	%	(2.19)	%
100 basis points	(1.71)	%	(3.34)	%
200 basis points	(3.00)	%	(3.62)	%

As part of the overall assumptions, certain assets and liabilities are given reasonable floors. This type of simulation analysis requires numerous assumptions including but not limited to changes in balance sheet mix, prepayment rates on mortgage-related assets and fixed rate loans, cash flows and repricing of all financial instruments, changes in volumes and pricing, future shapes of the yield curve, relationship of market interest rates to each other (basis risk), credit spread and deposit sensitivity. Assumptions are based on management’s best estimates but may not accurately reflect actual results under certain changes in interest rates.

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The ALCO monitors various liquidity ratios to ensure a satisfactory liquidity position. Management continually evaluates the condition of the economy, the pattern of market interest rates and other economic data to determine the types of investments that should be made and at what maturities. Using this analysis, management from time to time assumes calculated interest sensitivity gap positions to maximize net interest income based upon anticipated movements in the general level of interest rates. Regulatory authorities also monitor our gap position along with other liquidity ratios. In addition, as described above, we utilize a simulation model to determine the impact of net interest income under several different interest rate scenarios. By utilizing this model, we can determine changes that could be made to the asset and liability mix to mitigate the change in net interest income under these various interest rate scenarios.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), undertook an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report, and, based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report, in recording, processing, summarizing and reporting in a timely manner the information that the Company is required to disclose in its reports under the Exchange Act and in accumulating and communicating to the Company’s management, including the Company’s CEO and CFO, such information as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

No changes were made to our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are a party to various litigation in the normal course of business. Management, after consulting with our legal counsel, believes that any liability resulting from litigation will not have a material effect on our financial position, results of operations or liquidity.

ITEM 1A. RISK FACTORS

There have been no material changes in the risk factors previously disclosed in the 2024 Form 10-K.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

On July 20, 2023, our board of directors approved a Stock Repurchase Plan authorizing the repurchase of up to 1.0 million shares of the Company’s outstanding common stock. On October 16, 2025, the Board of the Company increased its authorization under the Company’s current Plan by 1.0 million shares, for a total authorization to repurchase up to 2.0 million shares of the Company’s common stock from time to time. Under the Plan, previously approved on July 20, 2023, the Company has repurchased approximately 868,061 shares at an average price per share of $28.43, resulting in approximately 1.1 million shares remaining. Repurchases may be carried out in open market purchases, privately negotiated transactions or pursuant to any trading plan that might be adopted in accordance with Rule 10b5-1 of the Exchange Act, as amended. The Company has no obligation to repurchase any shares under the Plan and may modify, suspend or discontinue the plan at any time.

The following table provides information with respect to purchases made by or on behalf of any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act), of our common stock during the three months ended September 30, 2025:


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Number of Shares That May Yet Be Purchased Under the Stock Repurchase Plan at the End of the Period
July 1, 2025 - July 31, 2025	26,692	$	30.24	26,692	131,939
August 1, 2025 - August 31, 2025	—	—		—	131,939
September 1, 2025 - September 30, 2025	—	—		—	131,939
Total	26,692	$	30.24	26,692

We have not purchased any common stock pursuant to the Plan subsequent to September 30, 2025.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

Pursuant to Item 408(a) of Regulation S-K, none of our directors or executive officers adopted , terminated or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended September 30, 2025.

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ITEM 6. EXHIBITS

Exhibit Index

Incorporated by Reference

Exhibit Number

Exhibit Description

Filed Herewith

Exhibit

Form

Filing Date

File No.

(3)

Articles of Incorporation and Bylaws

3.1

Restated Certificate of Formation of Southside Bancshares, Inc.

3.1

8-K

05/14/2018

0-12247

3.2

Amended and Restated Bylaws of Southside Bancshares, Inc., as amended

3.2

10-Q

04/30/2025

001-42396

(4)

Instruments defining the rights of security holders, including indentures

4.1

Indenture, dated August 14, 2025, between Southside Bancshares, Inc. and Wilmington Trust, National Association, as trustee.

4.1

8-K

08/14/2025

001-42396

4.2

First Supplemental Indenture, dated August 14, 2025, between Southside Bancshares, Inc. and Wilmington Trust, National Association, as trustee.

4.2

8-K

08/14/2025

001-42396

4.3

Form of 7.00% Fixed-to-Floating Rate Subordinated Notes due 2035 (included in Exhibit 4.2).

4.3

8-K

08/14/2025

001-42396

(31)

Rule 13a-14(a)/15d-14(a) Certifications

31.1

Certification of Chief Executive Officer

31.2

Certification of Chief Financial Officer

(32)

Section 1350 Certification

†32

Certification of Executive Officer and Chief Financial Officer

(101)

Interactive Date File

101.INS

XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

104

Cover Page Interactive Data File (embedded within the Inline XBRL document).

† The certification attached as Exhibit 32 accompanies this Quarterly Report on Form 10-Q and is “furnished” to the Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by us for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		SOUTHSIDE BANCSHARES, INC.

DATE:	October 28, 2025	BY:	/s/ Lee R. Gibson
			Lee R. Gibson, CPA
			Chief Executive Officer
			(Principal Executive Officer)




DATE:	October 28, 2025	BY:	/s/ Julie N. Shamburger
			Julie N. Shamburger, CPA
			Chief Financial Officer
			(Principal Financial Officer)

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Part I. Financial Information Item 1. Financial Statements Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

Exhibits

3.1 Restated Certificate of Formation of Southside Bancshares, Inc. 3.1 8-K 05/14/2018 0-12247 3.2 Amended and Restated Bylaws of Southside Bancshares, Inc., as amended 3.2 10-Q 04/30/2025 001-42396 4.1 Indenture, dated August 14, 2025, between Southside Bancshares, Inc. and Wilmington Trust, National Association, as trustee. 4.1 8-K 08/14/2025 001-42396 4.2 First Supplemental Indenture, dated August 14, 2025, between Southside Bancshares, Inc. and Wilmington Trust, National Association, as trustee. 4.2 8-K 08/14/2025 001-42396 4.3 Form of 7.00% Fixed-to-Floating Rate Subordinated Notes due 2035 (included in Exhibit 4.2). 4.3 8-K 08/14/2025 001-42396 31.1 Certification of Chief Executive Officer 31.2 Certification of Chief Financial Officer 32 Certification of Executive Officer and Chief Financial Officer

SBSI 10-Q Quarter ended Sept. 30, 2025

Exhibits