Hancock Whitney Corp: Form 10-Q for the period ended Mar 31, 2026

FORWARD-LOOKING STATEMENTS

The objective of this discussion and analysis is to provide material information relevant to the assessment of the financial condition and results of operations of Hancock Whitney Corporation and its subsidiaries during the three months ended March 31, 2026 and selected comparable prior periods, including an evaluation of the amounts and certainty of cash flows from operations and outside sources. This discussion and analysis is intended to highlight and supplement financial and operating data and information presented elsewhere in this report, including the consolidated financial statements and related notes. The discussion contains forward-looking statements within the meaning and protections of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, our actual results may differ from those expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q and in other reports or documents that we file from time to time with the SEC include, but are not limited to, the following:

• general economic and business conditions in our local markets, including conditions affecting employment levels, interest rates, inflation, the threat of recession, volatile equity capital markets, property and casualty insurance costs, collateral values, customer income, creditworthiness and confidence, spending and savings that may affect customer bankruptcies, defaults, charge-offs and deposit activity; and the impact of the foregoing on customer behavior (including the velocity and levels of deposit withdrawals and loan repayment);
• uncertainties surrounding geopolitical conflict, trade policy, taxation policy, and monetary policy, which continue to impact the outlook for future economic growth; a sustained increase in commodity prices; impacts from current and/or future imposition of tariffs by the United States against other nations; consideration of responsive actions by these nations, including retaliatory tariffs, or the expansion of import fees and tariffs among a larger group of nations is bringing greater ambiguity to the outlook for future economic growth, including reduced consumer spending, lower economic growth or recession, reduced demand for U.S. exports, disruptions to supply chains, impacts from decreased international tourism, decreased demand for banking products and services, and negative credit quality developments arising from the foregoing or other factors;
• adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity and regulatory responses to these developments (including increases in the cost of our deposit insurance assessments), the Company's ability to effectively manage its liquidity risk and any growth plans, and the availability of capital and funding;
• balance sheet and revenue growth expectations may differ from actual results;
• the risk that our provision for credit losses may be inadequate or may be negatively affected by credit risk exposure;
• loan growth expectations;
• management’s predictions about charge-offs;
• fluctuations in commercial and residential real estate values, especially as they relate to the value of collateral supporting the Company's loans;
• the risk that our enterprise risk management framework may not identify or address risks adequately, which may result in unexpected losses;
• the impact of business combinations on our performance and financial condition including our ability to successfully integrate the businesses;
• the potential impact of third-party business combinations in our footprint on our performance and financial condition;
• deposit trends, including growth, pricing and betas;
• credit quality trends;
• changes in interest rates, including actions taken by the Federal Reserve Board and the impact of fluctuations in interest rates on our financial projections, models and guidance;
• net interest margin trends, including the impact of ongoing elevated interest rates;
• changes in the cost and availability of funding due to changes in the deposit and credit markets;
• success of revenue-generating and cost reducing initiatives;
• future expense levels;
• changes in expense to revenue (efficiency ratio), including the risk that we may not realize and/or sustain benefits from efficiency and growth initiatives or that we may not be able to realize cost savings or revenue benefits in the time period expected, which could negatively affect our future profitability;
• the impact of supplemental disclosure items on our results of operations;
• the effectiveness of derivative financial instruments and hedging activities to manage risks;
• risks related to our reliance on third parties to provide key components of our business infrastructure, including the risks related to disruptions in services or financial difficulties of a third-party vendor;
• risks related to potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings or enforcement actions;
• risks related to the ability of our operational framework to manage risks associated with our business such as credit risk and operation risk, including third-party vendors and other service providers, which could, among other things, result in a material breach of operating or security systems as a result of a cyber-attack or similar acts;
• the extensive use, reliability, disruption, and accuracy of the models and data upon which we rely;
• risks related to our implementation of new lines of business, new products and services, new technologies, and expansion of our existing business opportunities;
• risks related to the development and use of artificial intelligence;
• projected tax rates;
• future profitability;
• purchase accounting impacts, such as accretion levels;
• our ability to identify and address potential cybersecurity risks and/or breaches, which may be exacerbated by recent developments in generative artificial intelligence, on our systems and/or third party vendors and service providers on which we rely, a material failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;
• our ability to receive dividends from Hancock Whitney Bank could affect our liquidity, including our ability to pay dividends or take other capital actions;
• the risk that we may be required to make substantial expenditures to keep pace with regulatory initiatives and rapid technology changes in the financial services market;
• the impact on our financial results, reputation, and business if we are unable to comply with all applicable federal and state regulations or other supervisory actions or directives and any necessary capital initiatives;
• our ability to effectively compete with other traditional and non-traditional financial services companies, some of whom possess greater financial resources than we do or are subject to different regulatory standards;
• our ability to maintain adequate internal controls over financial reporting;
• the financial impact of future tax legislation;
• the effects of geopolitical conflicts, war or other conflicts, acts of terrorism, climate change, natural disasters such as hurricanes, freezes, flooding, man-made disasters, such as oil spills, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions, and/or increase costs, including, but not limited to, property and casualty and other insurance costs;
• risks related to diversity, equity and inclusion, and environmental, social and governance legislation, rulemaking, activism and litigation, the scope and pace of which could alter our reputation and shareholder, associate, customer and third-party affiliations;
• changes in laws and regulations affecting our businesses, including governmental monetary and fiscal policies, legislation and regulations relating to bank products and services, increased regulatory scrutiny resulting from bank failures, as well as changes in the enforcement and interpretation of such laws and regulations by applicable governmental and self-regulatory agencies, which could require us to change certain business practices, increase compliance risk, reduce our revenue, impose additional costs on us, or otherwise negatively affect our businesses;
• the impact of federal government shutdowns, and uncertainties stemming from extended durations of such;
• the potential implementation of a regulatory reform agenda impacting rulemaking, supervision, examination and enforcement priorities of the federal banking agencies; and
• the risk that the regulatory environment may not be conducive to or may prohibit the consummation of future mergers and/or business combinations, may increase the length of time and amount of resources required to consummate such transactions, and the potential to reduce anticipated benefits from such mergers or combinations.

Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “forecast,” “goals,” “targets,” “initiatives,” “focus,” “potentially,” “probably,” “projects,” “outlook,” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events.

Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. Additional factors that could cause actual results to differ materially can be found in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, or in other periodic reports that we file with the SEC.

You are cautioned not to place undue reliance on these forward-looking statements. We do not intend, and undertake no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law.

OVERVIEW

Non-GAAP Financial Measures

Management’s Discussion and Analysis of Financial Condition and Results of Operations include non-GAAP measures used to describe our performance. These non-GAAP financial measures have inherent limitations as analytical tools and should not be considered on a standalone basis or as a substitute for analyses of financial condition and results as reported under GAAP. Non-GAAP financial measures are not standardized and therefore, it may not be possible to compare these measures with other companies that present measures having the same or similar names. These disclosures should not be considered an alternative to GAAP.

A reconciliation of those measures to GAAP measures are provided in the Consolidated Financial Results table later in this item. The following is a summary of these non-GAAP measures and an explanation as to why they are deemed useful.

Consistent with the provisions of subpart 229.1400 of the Securities and Exchange Commission’s Regulation S-K, “Disclosures by Bank and Savings and Loan Registrants,” we present net interest income, net interest margin and efficiency ratios on a fully taxable equivalent ("te") basis. The te basis adjusts for the tax-favored status of net interest income from certain loans and investments using a statutory federal tax rate of 21% to increase tax-exempt interest income to a taxable equivalent basis. We believe this measure to be the preferred industry measurement of net interest income, and that it enhances comparability of net interest income arising from taxable and tax-exempt sources.

We present certain additional non-GAAP financial measures to assist the reader with a better understanding of the Company’s performance period over period, and to provide investors with assistance in understanding the success management has experienced in executing its strategic initiatives. The Company highlights certain items that are outside of our principal business and/or are not indicative of forward-looking trends in supplemental disclosure items below our GAAP financial data and presents certain "Adjusted" ratios that exclude these disclosed items. These adjusted ratios provide management and the reader with a measure that may be more indicative of forward-looking trends in our business, as well as demonstrate the effects of significant gains or losses and changes.

We define Adjusted Pre-Provision Net Revenue as net income excluding provision expense and income tax expense, plus the taxable equivalent adjustment (as defined above), less supplemental disclosure items (as defined above). Management believes that adjusted pre-provision net revenue is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. We define Adjusted Revenue as net interest income (te) and noninterest income less supplemental disclosure items. We define Adjusted Noninterest Expense as noninterest expense less supplemental disclosure items. We define our Efficiency Ratio as noninterest expense to total net interest income (te) and noninterest income, excluding amortization of purchased intangibles and supplemental disclosure items, if applicable. Management believes adjusted revenue, adjusted noninterest expense and the efficiency ratio are useful measures as they provide a greater understanding of ongoing operations and enhance comparability with prior periods.

Securities Portfolio Restructuring

In January 2026, we executed a restructuring of our available for sale securities portfolio whereby we sold securities with an amortized cost of $1.5 billion and average yield of 2.49% and reinvested the $1.4 billion of proceeds with the purchase of securities with an average yield of 4.35%. We anticipate a 50 month payback period to cover the $98.5 million pre-tax loss associated with the sale, or approximately $0.95 per diluted share after tax. The restructure is expected to contribute approximately $23.8 million to net interest income, or $0.23 per diluted share, resulting in increases of 32 basis points (bps) to the securities portfolio yield and 7 bps to net interest margin on an annual basis.

Current Economic Environment

The U.S. economy began the year with hopeful trends despite ongoing pressures of elevated tariffs, sticky inflation and a weakened labor market. In late February, the military conflict in the Middle East caused widespread disruption to energy markets and supply chains and created significant uncertainty as to the near and long term economic effects. Driven by the sharp increase in energy prices, inflation rose to 3.3% on an annualized basis in March 2026, up considerably from a recent trend of about 2.5% annualized. Gross domestic product (GDP) for the first quarter of 2026, once expected to rebound meaningfully from the previous quarter to 2.6% on an annualized basis, was considerably lower at 2.0%. While the Federal Reserve remains committed to its dual mandate of maximum employment and price stability, the typical challenges it faces in balancing these dynamics will deepen in an environment of inflation acceleration and slower growth. During the first quarter of 2026, the Federal Reserve held benchmark interest rate steady at 3.5% to

3.75%. The duration of the conflict in the Middle East and the terms upon which it is resolved will likely be the most consequential variables for current economic conditions.

In the first quarter of 2026, conditions in the financial services industry were mostly favorable despite persistent economic pressures and growing economic uncertainty. Within our markets, we experienced solid loan production, while deposit cost pressures continued to moderate, contributing favorably to our net interest margin and profitability.

Economic Outlook

We utilize economic forecasts produced by Moody’s Analytics (Moody’s) that provide various scenarios to assist in the development of our economic outlook. This outlook discussion utilizes the March 2026 Moody’s forecast, the most current available at March 31, 2026. The forecasts are anchored on a baseline forecast scenario, which Moody’s defines as the “most likely outcome” of where the economy is headed based on current conditions. Several upside and downside scenarios are produced that are derived from the baseline scenario and incorporate varying degrees of favorable and unfavorable adjustments to economic indicators and circumstances as compared to the baseline.

The baseline scenario maintains a mostly optimistic tenor with respect to economic outcomes, including the assumption that the economic impact of the conflict in the Middle East will be short-lived. Key variables underlying the March 2026 baseline forecast include the following: (1) the worst of the hostilities in the conflict in the Middle East will be over by early April, prompting oil prices to quickly recede and to normalize by early 2027; (2) the effective tariff rate of about 11% is expected to remain for the duration of the current administration before eventually falling back to about 2% late in the decade or early next; (3) the Federal Reserve will issue interest rate cuts of 25 basis points each in June and September 2026, returning the benchmark rate to a level that neither restrains nor supports growth; (4) the combination of weak labor demand and softer growth in labor supply will remain a significant headwind to job gains, but these factors create a neutral effect on the unemployment rate, which will remain flat at around 4.5% in the near term; (5) GDP growth is forecasted to increase to 2.8% in 2026 and then slow to 1.8% in 2027 and 2.0% in 2028; (6) the 10-year U.S. Treasury yield is forecasted to average 4.2% in the first quarter of 2026 and remain near that level through the end of the decade due to elevated inflation and fiscal uncertainty.

The S-2 scenario presents a downside alternative to the baseline. The S-2 scenario assumes the conflict in the Middle East persists longer than what is forecasted in baseline scenario, causing oil prices to rise higher. The effective tariff rate increases to about 15% and remains elevated through the end of 2028. The impacts on the economy from tariffs, deportations and elevated oil prices are worse than expected, causing inflation to rise. Further, there is longer and farther-reaching disturbance from other geopolitical conflict. The scenario assumes the unemployment rate will rise considerably to a peak of 7.3% in the first quarter of 2027 and remain elevated before returning to full employment in late 2028. The combination of higher oil prices, rising inflation, tariffs, still elevated interest rates and reduced credit availability causes the U.S. economy to fall into a mild recession beginning in the second quarter of 2026 that lasts for three quarters, with a peak-to-trough decline in GDP of 1% and the stock market contracting 22%. The recession and rising inflation prompts the Federal Reserve to lower its benchmark interest rate only slightly below what is forecasted in the baseline before making more significant cuts as inflation subsides.

Management has deemed certain assumptions underlying the downside S-2 scenario to have a higher likelihood to occur in the near term as those underlying the baseline scenario, and, as such, the S-2 and baseline scenarios were given probability weightings of 60% and 40%, respectively, in the calculation of our allowance for credit losses calculation at March 31, 2026. The weighting of scenarios has changed from the December 31, 2025 calculation of allowance for credit losses, where the baseline scenario and the downside S-2 scenario were each weighted at 50%. The change in weighting does not represent a significant shift in our outlook, but rather is a function of an optimistic shift in the assumptions underlying the baseline forecast.

The credit loss outlook for our portfolio as a whole has not changed materially since December 31, 2025. We continue to closely monitor our portfolio for customers that are sensitive to prolonged inflation, the elevated interest rate environment, tariffs, labor market conditions and/or other economic circumstances that may impact credit quality.

Rapidly evolving changes in geopolitical, fiscal and other policies have created heightened uncertainty as to the impact on the U.S. and global economies. The duration of the conflict in the Middle East is expected to play a pivotal role in economic conditions. The impact of continued inflation, a softening labor market and the Federal Reserve's actions to counter those effects, as well as to respond to other economic concerns, could reduce economic growth in the near term. The full extent of the impact of the conflict in the Middle East and other influential factors are uncertain and may have an adverse effect on the U.S. economy, including the possibility of an economic recession or slower growth in the near or midterm.

Highlights of the First Quarter 2026

We reported net income for the first quarter of 2026 of $47.4 million, or $0.57 per diluted common share, compared to $125.6 million, or $1.49 per diluted common share, in the fourth quarter of 2025 and $119.5 million, or $1.38 per diluted common share, in the first quarter of 2025. The first quarter of 2026 includes a supplemental disclosure item attributable to a net loss on the restructuring of the available for sale securities portfolio totaling $98.6 million pre-tax, or $0.95 per diluted share after tax. There were no supplemental disclosure items in the fourth or first quarters of 2025.

First quarter 2026 results compared to fourth quarter 2025:

• Net income of $47.4 million, or $0.57 per diluted share, reflective of a $98.6 million net loss on restructuring the available for sale securities portfolio
• Adjusted pre-provision net revenue, a non-GAAP measure, totaled $172.9 million, down $1.1 million, or 1%
• Period-end loans totaled $24.0 billion, up $33.4 million, or less than 1%
• Period-end deposits totaled $29.1 billion, down $197.6 million, or 1%
• Criticized commercial loans decreased while total nonaccrual loans increased; annualized net charge-offs to average loans was 0.19%, down from 0.22%
• Allowance for credit losses coverage to total loans remains solid at 1.43%, unchanged from December 31, 2025
• Net interest margin of 3.55%, up 7 bps from prior quarter
• Tangible common equity ratio of 9.93%, down 13 bps; common equity tier 1 ratio of 13.29%, down 36 bps; and total risk-based capital ratio of 15.10%, down 35 bps; reflecting capital deployment to enhance shareholder value
• Efficiency ratio, a non-GAAP measure, was 55.43%, compared to 54.93%

Our results for the first quarter of 2026 reflect a strong start to the year. We continued to deploy capital with the repurchase 1.4 million shares of our common stock, a restructure of our securities portfolio, and an 11% increase the quarterly common stock dividend. Net interest margin expanded despite a declining interest rate environment, due in part to the securities portfolio restructuring. Fee income excluding the securities loss was steady and our expenses were well controlled. Credit metrics remained stable and we maintained a solid allowance for credit losses coverage of 1.43%. We welcomed 27 net new bankers and opened a new financial center as we continue to carry out our organic growth plan while maintaining operational efficiency and proactively managing capital to enhance shareholder value.

Consolidated Financial Results

The following table contains the consolidated financial results for the periods indicated.

(in thousands, except per share data)

44

($ in thousands)

(a) For analytical purposes, management adjusts interest income and net interest income for tax-exempt items to a taxable equivalent basis using a federal income tax rate of 21%.

(b) The tangible common equity ratio is common stockholders’ equity less intangible assets divided by total assets less intangible assets.

(c) The efficiency ratio, a non-GAAP financial measure, is noninterest expense to total net interest (te) and noninterest income, excluding amortization of purchased intangibles and supplemental disclosure items.

(d) Refer to the non-GAAP financial measures section of this analysis for a discussion of these measures.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income (te) for the first quarter of 2026 totaled $287.6 million, up $2.9 million, or 1%, compared to the fourth quarter of 2025, and up $14.9 million, or 5%, compared to the first quarter of 2025.

The $2.9 million increase in net interest income (te) from the fourth quarter of 2025 was driven by both a lower cost of funds and an increase in the securities yield outpacing a decline in loan yields, and growth in average loan balances. Net interest income (te) for the first quarter of 2026 is also net of a $4.1 million reduction as a result of two fewer accrual days. Interest income (te) decreased $6.4 million, reflecting the impact of two fewer accrual days and a decline in loan yields following the two interest rate cuts in the fourth quarter of 2025, partially offset by an increase in the yield on the securities portfolio as a result of the portfolio restructuring completed in January 2026 and growth in the loan portfolio. Interest expense decreased $9.3 million and was primarily rate driven, as reductions in promotional pricing on both interest-bearing transaction accounts and retail time deposits resulted in a lower cost of funds. The decrease in interest expense is also reflective of two fewer accrual days. The net interest margin for the first quarter of

2026 was 3.55%, up 7 bps from the fourth quarter of 2025, driven primarily by higher securities yields as a result of the bond portfolio restructuring, up 25 bps, and lower cost of funds, down 9 bps, partially offset by lower loan yields, down 13 bps, and also by growth in average loan volume.

The $14.9 million increase in net interest income (te) from the first quarter of 2025 was driven primarily by an increase in the securities yield as a result of the portfolio restructuring and other reinvestments, and is also reflective of growth in the loan portfolio, a favorable shift in the mix of interest-bearing deposits, and deposit betas outpacing loan betas. These favorable changes were partially offset by a $717.0 million increase in average other short-term borrowings to fund loan growth. Interest income (te) increased $5.7 million despite the falling interest rate environment. The improvement was driven by an increase in securities yields due to the portfolio restructure, and by loan growth, as average loans were up $897.4 million compared to the same quarter last year; these were partially offset by declines in loan yields and short-term investments yield and volume. The decrease in interest expense of $9.2 million was largely rate driven but also reflective of a favorable shift in the mix of interest-bearing deposits, partially offset by the previously mentioned increase in other short-term borrowings. The net interest margin for the first quarter of 2026 was up 12 bps from the first quarter of 2025, largely attributable to the impact of higher securities yields, up 45 bps, a lower cost of funds, down 15 bps, partially offset by a decrease in loan yields of 22 bps.

The following tables detail the components of our net interest income (te) and net interest margin.

($ in millions)

(a) Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21%.

(b) Includes nonaccrual loans.

(c) Average securities do not include unrealized holding gains/losses on available for sale securities.

Provision for Credit Losses

During the first quarter of 2026, we recorded a provision for credit losses of $13.2 million, compared to $13.1 million in the fourth quarter of 2025 and $10.5 million in the first quarter of 2025. The provision for credit loss in the first quarter of 2026 included net charge-offs of $11.1 million and a reserve build of $2.1 million, compared to net charge-offs of $13.0 million and a reserve build of

$0.1 million in the fourth quarter of 2025 and net charge-offs of $10.3 million and a reserve build of $0.2 million in the first quarter of 2025, reflecting relatively stable results across the comparative periods.

Annualized net charge-offs as a percentage of average loans in the first quarter of 2026 were 0.19%, down from 0.22%, in the fourth quarter of 2025, and up from 0.18% in the first quarter of 2025. Net charge-offs in the first quarter of 2026 included $7.4 million in the commercial portfolio, $3.5 million in the consumer portfolio and $0.2 million in the residential mortgage portfolio. Net charge-offs in the fourth quarter of 2025 included $10.1 million in the commercial portfolio, $3.0 million in the consumer portfolio, partially offset by net recoveries of $0.1 million in the residential mortgage portfolio. Net charge-offs in the first quarter of 2025 included $7.1 million in the commercial portfolio, $3.4 million in the consumer portfolio, partially offset by net recoveries of $0.2 million in the residential mortgage portfolio.

The discussion labeled "Allowance for Credit Losses and Asset Quality" that appears later in this Item provides additional information on these changes and on general credit quality.

Noninterest Income

Noninterest income totaled $7.5 million for the first quarter of 2026, down $99.6 million from the fourth quarter of 2025 and $87.3 million from the first quarter of 2025. Included in noninterest income in the first quarter of 2026 was a $98.6 million loss identified as a supplemental disclosure item attributable to the restructuring of the available for sales securities portfolio. Excluding the supplemental disclosure item, noninterest income totaled $106.1 million, down $1.1 million, or 1%, from the fourth quarter of 2025 and up $11.3 million, or 12%, from the first quarter of 2025. A detailed discussion of noninterest income variances follows.

The components of noninterest income are presented in the following table for the indicated periods.

($ in thousands)

Supplemental Disclosure Items Included in Noninterest Income

(in thousands)

Service charges on deposit accounts include consumer, business, and corporate deposit account servicing fees, as well as nonsufficient funds fees on non-consumer accounts, overdraft and overdraft protection fees, and other customer transaction-related fees. Service charges on deposits totaled $25.9 million for the first quarter of 2026, up $0.3 million, or 1%, from the fourth quarter of 2025 and $1.8 million, or 7%, from the first quarter of 2025. The linked quarter increase was driven primarily by analysis fees on business accounts, partially offset by a decline in consumer overdraft fees. The year over year increase was driven by consumer overdraft fees and analysis fees on business accounts.

Trust fee income represents revenue generated from a full range of trust services, including asset management and custody services provided to individuals, businesses and institutions. Trust fees totaled $24.6 million for the first quarter of 2026, relatively flat compared to the fourth quarter of 2025 and up $6.6 million, or 36%, from the first quarter of 2025. The year over year increase is mostly attributable to personal trust, including $5.3 million as a result of the May 2, 2025 acquisition of Sabal Trust Company, and reflective of both organic and market value-driven growth in our legacy business.

Bank card and ATM fees include interchange and other income from credit and debit card transactions, fees earned from processing card transactions for merchants, and fees earned from ATM transactions. Bank card and ATM fees totaled $22.1 million for the first quarter of 2026, up $0.5 million, or 2%, from the fourth quarter of 2025 and $1.4 million, or 7%, from the first quarter of 2025. The linked quarter increase was driven primarily by merchant service fees and ATM fees. The year over year increase is mostly attributable to interchange fees, due in-part to card focused marketing campaigns, and ATM fees, reflecting a market adjustment on certain fees.

Investment and annuity fees and insurance commissions includes both fees earned from sales of annuity and insurance products, as well as managed account fees. Investment and annuity fees and insurance commissions totaled $12.6 million for the first quarter of 2026, relatively flat compared to the fourth quarter of 2025, and up $1.2 million, or 10%, from the first quarter of 2025. Linked-quarter, small declines in insurance commissions, annuity sales and underwriting fees were largely offset by an increase in fixed income trading fees. The year over year increase was largely driven by fixed income trading fees and investment management fees, partially offset by declines in annuity sales volume and underwriting fees. Investment and annuity fee income can vary from period to period depending on market conditions, impacting demand for products and services and related fees.

Income from secondary mortgage market operations is comprised of income produced from the origination and sales of residential mortgage loans in the secondary market. We offer a full range of mortgage products to our customers and typically sell longer-term fixed-rate loans while retaining the majority of adjustable-rate loans, as well as loans generated through programs to support customer relationships. Secondary mortgage market operations income will vary based on mortgage application volume, pull through rates, the percentage of loans ultimately sold in the secondary market and the timing of such sales. Income from secondary mortgage market operations was $3.5 million in the first quarter of 2026, down $0.2 million, or 4%, from the fourth quarter of 2025, and up $0.1 million, or 2%, compared to the first quarter of 2025. The linked quarter decrease was primarily attributable to a decrease in mortgage loan production. Compared to the first quarter of 2025, an increase in mortgage loan production was mostly offset by a lower percentage of loans sold in the secondary market.

Net loss on securities transactions totaled $98.6 million for the first quarter of 2026, compared to a net loss of less than $0.1 million in the fourth quarter of 2025 and no gain or loss in the first quarter of 2025. The net loss in the current period resulted from the sale of $1.5 billion of available for sale securities and reflects a strategic decision to restructure the portfolio to enhance future net interest income through deployment of the proceeds into higher-yielding instruments.

Income from bank-owned life insurance (BOLI) is typically generated through insurance benefit proceeds as well as the growth of the cash surrender value of insurance contracts held. Income from BOLI was $5.3 million for the first quarter of 2026, down $0.1 million, or 3%, from the fourth quarter of 2025, and up $0.4 million, or 8%, from the first quarter of 2025. The linked quarter decline was driven by a decrease in mortality gains that was partially offset by an increase in income from change in cash surrender value. The year over year increase was driven by an increase in income from change in cash surrender value that was partially offset by a decline in mortality gains.

Credit related fees include fees assessed on letters of credit and unused portions of loan commitments. Credit related fees were $2.8 million for the first quarter of 2026, down less than $0.1 million, or 2%, from both the fourth and first quarters of 2025, driven by a decline in unused commitment fees that is a function of line of credit availability and utilization.

Income or loss from customer and other derivatives is largely from our customer interest rate derivative program. Income from customer and other derivatives totaled $1.0 million for the first quarter of 2026, down $1.2 million from the fourth quarter of 2025 and up $1.2 million from the first quarter of 2025. The linked quarter decrease was largely attributable to the customer derivative program as a product of volume and mid-term rate movement, as well as a $0.5 million increase in losses resulting from assumption changes to the Visa Class B derivative liability. The year over year increase is also reflective of changes in volume and interest rates and to a $0.2 increase in losses resulting from assumption changes to the Visa Class B derivative liability. Derivative income can be volatile and is dependent upon the composition of the portfolio, volume and mix of sales and termination activity, and market value adjustments due to market interest rate movement.

Net gains on sales of premises, equipment and other assets consist primarily of net revenue earned from sales of excess-bank owned facilities and equipment no longer in use, gains on sales of Small Business Administration (SBA) and other non-residential mortgage loans, and leases and other assets associated with the equipment finance line of business. Net gains on sales of premises, equipment and other assets totaled $2.0 million for the first quarter of 2026, up $0.7 million from the fourth quarter of 2025, and $0.2 million from the first quarter of 2025. The increase from both comparative periods was largely driven by gains on sales of SBA loans. The level of net gains or losses on sales of these assets in a given reporting period will vary based on a variety of circumstances.

Other miscellaneous income is comprised of various items, including income from investments in small business investment companies (SBIC), dividends on Federal Home Loan Bank (FHLB) stock, and fees from loan syndication and other specialty lines of business. Other miscellaneous income totaled $6.3 million, down $0.9 million, or 13%, from the fourth quarter of 2025 and $1.4 million, or 18%, from the first quarter of 2025. The linked quarter decrease was largely driven by a $2.6 million decline in income from SBICs that was partly offset by a $1.5 million increase in syndication fees and a $0.3 million increase in dividends on FHLB stock. The year to date decrease was largely driven by a $2.0 million decline in income from SBICs. SBIC income and syndication fees will vary from period to period, depending on activity.

Noninterest Expense

Noninterest expense for the first quarter of 2026 was $220.7 million, up $2.9 million, or 1%, from the fourth quarter of 2025, and $15.7 million, or 8%, from the first quarter of 2025. The increase from the fourth quarter of 2025 was largely driven by seasonal increases in payroll taxes and benefits, and the increase from the same period in 2025 is attributable to most expense categories. A more detailed discussion of noninterest expense variances follows.

The components of noninterest expense are presented in the following table for the indicated periods.

($ in thousands)

Personnel expense consists of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such as 401(k), pension, and insurance for medical, life and disability. Personnel expense totaled $127.1 million for the first quarter of 2026, up $4.6 million, or 4%, from the fourth quarter of 2025 and $12.8 million, or 11%, from the first quarter of 2025. The linked quarter increase was primarily driven by seasonal increases in payroll taxes and certain employee benefits, and also includes increased commissions and incentives, increased headcount and a lesser benefit from salary deferrals associated with lending activities. These factors were partially offset by decreases in bonus and share-based compensation expense and the impact of two fewer payroll days. The year over year increase reflects increases in most components of this category, and reflects both expected annual increases in salary, incentives, bonus and associated benefit costs, and incremental expense associated with increased headcount that includes both Sabal associates and additional hires of revenue-producing associates. Personnel expense associated with ongoing Sabal operations contributed approximately $2.0 million to the variance compared to the first quarter of 2025.

Occupancy and equipment expenses are primarily composed of lease expenses, depreciation, maintenance and repairs, rent, property taxes, and other equipment expenses. Occupancy and equipment expenses totaled $17.3 million for the first quarter of 2026, down

$1.3 million, or 7%, from the fourth quarter of 2025, and $0.4 million, or 2%, from the first quarter of 2025. The linked quarter decrease was driven primarily by a decline in facility repair and maintenance expenses. The year over year decrease was driven by decreases in facility repair and maintenance and property tax expenses that were partially offset by an increase in leased facility expense.

Data processing expense includes expenses related to third party technology processing and servicing costs, technology project costs and fees associated with bank card and ATM transactions, and credit card reward expenses. Data processing expense was $32.8 million for the first quarter of 2026, up $0.9 million, or 3%, from the fourth quarter of 2025, and $1.5 million, or 5%, from the first quarter of 2025. The linked quarter increase was driven primarily by increases in maintenance on bank owned software and third party processing expenses. The year over year increase was largely attributable to increases in certain third party technology processing, licensing and maintenance and also to activity-based fees including card processing and rewards and rebates, partially offset by a decrease in amortization and maintenance on bank owned software. Data processing expense can vary from period to period, depending on business needs and technology enhancement initiatives.

Professional services expense includes accounting and audit, legal, consulting and certain outsourced service expense. Professional services expense for the first quarter of 2026 totaled $13.6 million, down $1.5 million, or 10%, from the fourth quarter of 2025, and up $1.4 million, or 11%, from the first quarter of 2025. The linked quarter decrease was mostly attributable to legal fees, consulting expenses and outsourced service expenses. The year over year increase was largely attributable to costs associated with consulting and other professional services associated with stand-alone engagements, including process improvement projects. Professional services expense may vary from period to period, generally related to the timing of external service needs.

Deposit insurance and regulatory fees for the first quarter of 2026 totaled $5.0 million, up $1.5 million, or 43%, from the fourth quarter of 2025, and relatively flat compared to the first quarter of 2025. The linked quarter increase was primarily driven by an adjustment in the comparative period to the special assessment by the FDIC to cover losses incurred under the systemic risk exception. The FDIC special assessment expense recorded to date is management's estimate of our portion of the cost attributable to the systemic risk exception based on information from the FDIC. However, the loss estimates resulting from the failures of Silicon Valley Bank and Signature Bank may be subject to further change pending the projected and actual outcome of loss share agreements, joint ventures, and outstanding litigation. The exact amount of losses incurred will not be determined until the FDIC terminates the receiverships of these banks; therefore, the exact exposure to the Company remains unknown.

Other real estate and foreclosed assets expense totaled $0.4 million in the first quarter of 2026, relatively flat compared to the fourth quarter of 2025, and down $1.4 million from the first quarter of 2025. The year over year decrease was largely attributable to a single property that was sold in late 2025. The level of net income or losses associated with holding and maintaining the other real estate owned portfolio can vary depending on sales activity, valuation adjustments and income or expense associated with operating and maintaining foreclosed property. Gains or losses on the sale of other real estate and foreclosed assets may occur periodically and are dependent on the number and type of assets for sale and current market conditions.

Corporate value, franchise and other non-income tax expense for the first quarter of 2026 totaled $4.4 million, up $0.6 million, or 14%, from the fourth quarter of 2025, and $0.1 million, or 3%, from the first quarter of 2025. The linked quarter increase was largely attributable to bank share tax. The year over year increase was driven by an increase in franchise tax that was mostly offset by an decline in bank share tax. The calculation of bank share tax is based on multiple variables, including average quarterly assets, earnings and stockholders’ equity to determine the taxable assessment value and can vary from period to period.

Business development-related expenses (including advertising, travel, entertainment and contributions) totaled $10.0 million for the first quarter of 2026, relatively flat compared to the fourth quarter of 2025, and up $2.4 million, or 32%, from the first quarter of 2025. Linked-quarter, decreases in advertising and travel expenses were largely offset by an increase in contributions and sponsorships. The year over year increase was largely attributable to digital media advertising and business development expenses.

All other expenses, excluding amortization of intangibles, is comprised of a variety of other operational expenses and losses, tax credit investment amortization, and net other retirement expense. All other expenses totaled $7.5 million for the first quarter of 2026, down $1.7 million, or 18%, from the fourth quarter of 2025, and $1.2 million, or 14%, from the first quarter of 2025. The decrease from both comparative periods driven largely by a decrease in net other retirement expense as a result of changes in actuarial assumptions for our pension plan.

Income Taxes

The effective income tax rate for the first quarter of 2026 was 19.3% compared to 20.7% in the fourth quarter of 2025 and 19.9% in the first quarter of 2025. The linked-quarter decrease in the effective tax rate is due primarily to a $1.4 million income tax benefit in the first quarter of 2026 related to various discrete items, such as share-based compensation. The first quarter of 2026 effective income tax is lower than the first quarter of 2025 primarily due to lower forecasted annual pre-tax earnings as result of the first quarter 2026 securities portfolio restructuring.

Many factors impact the effective income tax rate including, but not limited to, the level of pre-tax income and relative impact of net tax benefits related to tax credit investments, tax-exempt interest income, bank-owned life insurance, and nondeductible expenses. Additionally, discrete tax items recognized in any given period affect the comparability of the effective income tax rate between periods. Such items include share-based compensation, valuation allowance changes, uncertain tax position changes and tax law changes.

Our effective tax rate has historically varied from the federal statutory rate primarily because of tax-exempt income and tax credits. Interest income on bonds issued by or loans to state and municipal governments and authorities, and earnings from the bank-owned life insurance program are the major components of tax-exempt income. The main source of tax credits has been investments in tax-advantaged securities and tax credit projects. These investments are made primarily in the markets we serve and are directed at tax credits issued under the Federal and State New Market Tax Credit (“NMTC”) programs, Low-Income Housing Tax Credit (“LIHTC”) programs, as well as pre-2018 Qualified Zone Academy Bonds (“QZAB”) and Qualified School Construction Bonds (“QSCB”). These investments generate tax credits, which reduce current and future taxes and are recognized when earned as a benefit in the provision for income taxes.

We have invested in NMTC projects through investments in our own Community Development Entities (“CDE”), as well as other unrelated CDEs. Federal tax credits from NMTC investments are recognized over a seven-year period, while recognition of the benefits from state tax credits varies from three to five years. We have also invested in affordable housing projects that generate federal LIHTC tax credits that are recognized over a ten-year period, beginning in the year the rental activity begins. The amortization of the LIHTC investment cost is recognized as a component of income tax expense in proportion to the tax credits recognized over the ten-year credit period.

Based on tax credit investments that have been made to date in 2026, we expect to realize benefits from federal and state tax credits over the next three years totaling $8.0 million, $5.5 million, and $4.8 million in 2027, 2028, and 2029, respectively. We may continue making investments in tax credit projects; however, our ability to access new credits will depend upon, among other factors, federal and state tax policies and the level of competition for such credits.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Liquidity management ensures that funds are available to meet the cash flow requirements of our depositors and borrowers, while also meeting the operating, capital and strategic cash flow needs of the Company, the Bank and other subsidiaries. As part of the overall asset and liability management process, liquidity management strategies and measurements have been developed to manage and monitor liquidity risk. The following table summarizes available liquidity at March 31, 2026:

($ in thousands)

(a) Amount used includes letters of credit.

Liquidity levels of financial institutions continue to be in heightened focus since the failure of several major regional U.S. banks that experienced large-scale deposit runs in early 2023. At March 31, 2026, our available on and off-balance sheet liquidity of $19.5 billion is well in excess of our estimated uninsured, noncollateralized deposits of approximately $11.4 billion.

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities and repayments of investment securities and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with the Federal Reserve Bank or with other commercial banks are additional sources of liquidity to meet cash flow requirements. Free securities represent unpledged securities that can be sold or used as collateral for borrowings, and include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank discount window. Total pledged securities were $3.5 billion at March 31, 2026, down $379 million from December 31, 2025. The decrease in pledged securities compared to December 31, 2025 is largely attributable to pledges that were released in response to a decrease in public funds deposits. Both securities and FHLB letters of credit are pledged as collateral related to public funds and repurchase agreements. Management has established an internal target for the ratio of free securities to total securities of 20% or greater. As shown in the table below, our ratio of free securities to total securities was 56.35% at March 31, 2026, compared to 51.97% at December 31, 2025.

The liability portion of the balance sheet provides liquidity mainly through the ability to use cash sourced from customer deposit accounts. At March 31, 2026, deposits totaled $29.1 billion, down $197.6 million, or 1%, from December 31, 2025, due primarily to typical seasonal movement in public funds deposits and retail time deposit maturities that were partially offset by growth in transaction and savings deposits. There were no brokered time deposits at March 31, 2026 or December 31, 2025. The use of brokered deposits as a funding source is subject to certain policies regarding the amount, term and interest rate.

Core deposits consist of total deposits excluding certificates of deposit of $250,000 or more and brokered deposits. Core deposits totaled $27.7 billion at March 31, 2026, down $136.7 million, or less than 1%, compared to December 31, 2025. Changes in the level of core deposits will vary based on the level of total deposits and the mix therein. The ratio of core deposits to total deposits was 95.17% at March 31, 2026, compared to 94.99% at December 31, 2025.

Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings from customers provide additional sources of liquidity to meet short-term funding requirements. Besides funding from customer sources, the Bank has a line of credit with the FHLB that is secured by blanket pledges of certain mortgage loans. At March 31, 2026, the bank had $700 million in borrowings and approximately $5.1 billion available under this line. At March 31, 2026, the unused borrowing capacity at the Federal Reserve’s discount window was approximately $3.5 billion. There were no outstanding borrowings with the Federal Reserve at any date during any period covered by this report.

Wholesale funds, which are comprised of short-term borrowings, long-term debt and brokered deposits were 5.62% of core deposits at March 31, 2026, compared to 4.37% at December 31, 2025. At March 31, 2026, wholesale funds totaled $1.6 billion, up $337.5 million from December 31, 2025, largely driven by an increase in FHLB borrowings. The amount of wholesale funds outstanding will vary based on retail deposit levels and current funding needs. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.

Other key measures used to monitor liquidity include the liquid asset ratio and the loan-to-deposit ratio. The liquid asset ratio (liquid assets, consisting of cash, short-term investments and free securities, divided by total liabilities) measures our ability to meet short-term obligations. Our liquid asset ratio was 16.85% at March 31, 2026, compared to 15.63% at December 31, 2025. Management has established a minimum liquid asset ratio of 7.5% and an internal target of 12% or greater. The loan to deposit ratio (average loans outstanding for the reporting period divided by average deposits outstanding) measures the amount of funds the Bank lends for each dollar of deposits on hand. Our average loan-to-deposit ratio for the first quarter of 2026 was 83.11%, compared to 82.30% for the fourth quarter of 2025. Management has an established target range for the loan-to-deposit ratio of 87% to 89%, but will operate outside that range under certain circumstances.

Cash generated from operations is another important source of funds to meet liquidity needs. The Consolidated Statements of Cash Flows included in Part I, Item 1 of this document present operating cash flows and summarize all significant sources and uses of funds during the three months ended March 31, 2026 and 2025.

Dividends received from the Bank have been the primary source of funds available to the Parent for the payment of dividends to our stockholders, repurchasing our common stock in the open market, and for servicing its debt. The liquidity management process takes into account the various regulatory provisions that can limit the amount of dividends the Bank can distribute to the Parent. The Parent targets cash and other liquid assets to provide liquidity in an amount sufficient to fund approximately six quarters of ongoing cash or liquid asset needs, consisting primarily of common stockholder dividends, debt service requirements, and any expected early extinguishment of debt. The Parent may operate below the target level on a temporary basis if a return to the target can be achieved in the near-term, generally not to exceed four quarters. The Parent had cash and liquid assets of $215.6 million at March 31, 2026.

Capital Resources

Stockholders’ equity totaled $4.4 billion at March 31, 2026, down $40.5 million, or 1%, from December 31, 2025. The decrease from December 31, 2025 is primarily attributable to common stock repurchases of $95.4 million, dividends of $41.5 million and long-term incentive plan and dividend reinvestment activity of $2.2 million. These factors were partially offset by net income of $47.4 million and other comprehensive income of $51.1 million.

The tangible common equity (TCE) ratio was 9.93% at March 31, 2026, down 13 bps from 10.06% at December 31, 2025, driven by common stock repurchases (-27 bps), dividends (-12 bps), tangible asset growth (-2 bps), and stock-based compensation and other (-1 bp), partially offset by tangible net earnings (+15 bps) and other comprehensive income (+15 bps).

The regulatory capital ratios of the Company and the Bank at March 31, 2026 remained well in excess of current regulatory minimum requirements, including capital conservation buffers, by at least $1.0 billion. The Company and the Bank have been categorized as “well-capitalized” in the most recent notices received from our regulators. Refer to the Supervision and Regulation section in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 for further discussion of our capital requirements.

The following table shows the regulatory capital ratios for the Company and the Bank for the indicated periods.

We regularly perform stress analysis on our capital levels. One such scenario includes the hypothetical impact of including accumulated other comprehensive losses on market valuations of available for sale securities and cash flow hedges in regulatory capital and a further stress scenario that includes both those losses plus losses on the held to maturity investment portfolio in regulatory capital. We estimate that our regulatory capital ratios would remain in excess of the well-capitalized minimums under both of these stress scenarios at March 31, 2026.

On January 29, 2026, our board of directors declared a regular quarterly common stock cash dividend of $0.50 per share, marking an 11% increase over the previous quarter's dividend of $0.45 per share. The quarterly common stock cash dividend was paid on March 16, 2026 to shareholders of record on March 5, 2026. The Company has paid uninterrupted dividends to its shareholders since 1967.

In December 2025, our Board of Directors authorized a stock repurchase program, effective January 1, 2026, to repurchase up to 5% of the shares of common stock outstanding as of December 31, 2025, or 4.1 million shares. The authorization is set to expire on December 31, 2026. The shares may be repurchased in the open market, by block purchase, through accelerated share repurchase plans, in privately negotiated transactions or otherwise, in one or more transactions, from time to time, depending upon market conditions and other factors, and in accordance with applicable regulations of the Securities and Exchange Commission. The Company is not obligated to purchase any shares under this program and the repurchase authorization may be terminated or amended by the Board of Directors at any time prior to the expiration date. During the first quarter of 2026, the Company repurchased 1.4 million shares under this program at an average price of $67.58 per share, inclusive of commissions. The Company has accrued an estimated excise tax liability on net share repurchases under this plan of $0.8 million at March 31, 2026.

On March 19, 2026, the federal bank regulatory agencies requested comment on three proposals to modernize the regulatory capital framework for banks of all sizes. The proposals are intended to streamline capital requirements and better align regulatory capital with risk while maintaining the safety and soundness of the banking system. While the agencies anticipate that the amount of overall capital in the banking system will modestly decrease as a result of these proposals, they expect capital levels would still be substantially higher than they were before the financial crisis. In aggregate, the proposals would modestly reduce capital requirements for large banks and moderately reduce requirements for smaller banks, reflecting their more traditional lending activities.

Comments on all three proposals are due by June 18, 2026, and there is not yet a proposed timeline for issuance of a final rule or an implementation date. The Company is in process of evaluating the proposed rules and, based on a preliminary estimate, expects the rules as proposed would have a favorable impact on our capital levels.

BALANCE SHEET ANALYSIS

Short-Term Investments

Short-term investments are held so that funds are available to meet the cash flow needs of both borrowers and depositors. Short-term investments, including interest-bearing bank deposits and federal funds sold, were $223.7 million at March 31, 2026, up $91.4 million from December 31, 2025. Average short-term investments of $439.5 million for the first quarter of 2026 were up $75.7 million from the fourth quarter of 2025. Typically, the balance of short-term investments will change on a daily basis depending upon movement in customer loan and deposit accounts.

Securities

The purpose of the securities portfolio is to increase profitability, mitigate interest rate risk, provide liquidity and comply with regulatory pledging requirements. Our securities portfolio includes securities categorized as available for sale and held to maturity. Available for sale securities are carried at fair value and may be sold prior to maturity. Unrealized gains or losses on available for sale securities, net of deferred taxes, are recorded as accumulated other comprehensive income or loss in stockholders' equity.

Investment in securities totaled $8.0 billion at March 31, 2026, down $66.8 million, or 1%, from December 31, 2025. The decrease was driven by net paydowns and maturities in the held to maturity portfolio, partially offset by favorable movement in the fair value adjustment on the available for sale portfolio. At March 31, 2026, securities available for sale totaled $6.0 billion and securities held to maturity totaled $2.0 billion.

In January 2026, we executed a restructuring of the available for sale securities portfolio to enhance net interest income whereby we sold securities with an amortized cost of $1.5 billion and an average yield of 2.49% and reinvested the $1.4 billion of proceeds with the purchase of securities with an average yield of 4.35%.

Our securities portfolio consists mainly of residential and commercial mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies. We invest only in high quality investment grade securities with a targeted portfolio effective duration generally between two and five and a half years. At March 31, 2026, the average expected maturity of the portfolio was 5.46 years with an effective duration of 4.08 years and a nominal weighted-average yield of 3.23%. Under an immediate, parallel rate shock using increases of 100 bps and 200 bps, the effective durations would be 4.12 years and 4.09 years, respectively. At December 31, 2025, the average expected maturity of the portfolio was 5.18 years with an effective duration of 3.89 years and a nominal weighted-average yield of 2.87%. The changes in expected maturity, effective duration, and nominal weighted-average yield from December 31, 2025 were largely the result of the portfolio restructuring and reinvestment in the portfolio during the period. At March 31, 2026, approximately $387.8 million of our available for sale securities are hedged with $359.0 million in fair value hedges in order to provide protection and flexibility to reposition and/or reprice the portfolio, effectively reducing the duration (market price risk) on the hedged securities. Once effective, fair value hedges synthetically convert the notional amount of the hedged asset over the life of the hedge to a variable rate instrument that is indexed to the federal funds effective rate. At March 31, 2026, fair value hedges with notional amounts totaling $265.0 million are effective.

At the end of each reporting period, we evaluate the securities portfolio for credit loss. Based on our assessments, expected credit loss was not material for any period presented, and therefore no allowance for credit loss was recorded.

Loans

Total loans at March 31, 2026, were $24.0 billion, up $33.4 million, or less than 1%, from December 31, 2025. The net increase in loans was largely driven by growth in commercial real estate across multiple products and equipment finance, partially offset by paydowns, including scheduled payments and prepayments, and lower credit line utilization in other product lines. A more detailed discussion of loan portfolio segment activity follows.

The following table shows the composition of our loan portfolio at each date indicated.

($ in thousands)

Our commercial customer base is diversified over a range of industries. We lend mainly to middle-market and smaller commercial entities, although we do participate in larger shared-credit loan facilities generally with businesses/sponsors operating in our market areas that are well known to the relationship officers. Shared national credits outstanding at March 31, 2026 totaled approximately $2.1 billion, or 8.8% of total loans, up $77.5 million compared to December 31, 2025. At March 31, 2026, our largest industry concentrations in shared national credits include approximately $320 million in finance and insurance, $267 million in real estate rental and leasing, $242 million in manufacturing, $209 million in information, and $203 million in healthcare and social assistance, with the remainder of the balance in other diverse industries.

Commercial and industrial (“C&I”) loans include both non-real estate and owner occupied real estate secured loans. C&I loans totaled $13.0 billion at March 31, 2026, down $68.3 million, or 1%, from December 31, 2025. The decrease is mostly reflective of higher net payoffs and paydowns that were partially offset by growth in equipment finance and owner occupied real estate loans.

Our C&I loan portfolio is well diversified by product, client, and geography throughout our footprint. Nevertheless, we may be exposed to certain concentrations of credit risk which exist in relation to different borrowers or groups of borrowers, specific types of collateral, industries, loan products, or regions. The following table provides detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes for all industries, with the exception of energy, which is based on the borrower’s source of revenue (i.e. a manufacturer whose income is derived from energy-related business is reported as energy).

( $ in thousands )

Commercial real estate - income producing loans totaled approximately $4.4 billion at March 31, 2026, up $99.5 million, or 2%, from December 31, 2025. Construction and land development loans totaled approximately $1.3 billion at March 31, 2026, up $81.1 million, or 7%, from December 31, 2025. These increases reflect strong demand and continued success in our organic growth plan. The following table details the end-of-period aggregated commercial real estate - income producing and construction loan balances by property type. Loans reflected in 1-4 family residential construction include both loans to construction builders as well as single family borrowers.

( $ in thousands )

The residential mortgage loan portfolio totaled $4.0 billion at March 31, 2026, down $66.8 million, or 2%, compared to December 31, 2025. The composition of the residential mortgage loan portfolio will depend on the volume of loans originated and the percentage ultimately sold in the secondary market.

The consumer loan portfolio totaled $1.3 billion at March 31, 2026, down $12.1 million, or 1%, from December 31, 2025.

Average loans for the first quarter of 2026 of $24.0 billion were up $250.2 million, or 1%, compared to the fourth quarter of 2025.

Allowance for Credit Losses and Asset Quality

Our allowance for credit losses was $343.7 million at March 31, 2026, up $2.1 million from December 31, 2025. The increase in the allowance for credit losses from December 31, 2025 is attributable to a $13.2 million provision for credit losses, partially offset by $11.1 million of net charge-offs. Our overall credit loss outlook is not significantly different from that at December 31, 2025. Uncertainty remains related to geopolitical conflict and economic conditions, which continues to influence our reserve levels. The allowance for loan losses increased $3.6 million and the reserve for unfunded lending commitments decreased $1.5 million from December 31, 2025. The increase in the allowance for loan losses at March 31, 2026 compared to December 31, 2025 includes an increase in individually evaluated reserves on problem loans of $3.8 million and a modest reduction in other funded reserves. The $1.5 million decrease in the reserve for unfunded commitments compared to December 31, 2025 is largely volume driven.

We utilized the March 2026 Moody's economic scenarios in our allowance for credit losses calculation at March 31, 2026. After considering the variables underlying each of the Moody's economic scenarios, management probability-weighted the baseline scenario at 40% and the downside S-2 mild recessionary scenario at 60% in the computation of the allowance for credit losses at March 31, 2026, compared to probability-weighting both the baseline scenario and the downside S-2 mild recessionary scenario at 50% in the computation of the allowance for credit losses at December 31, 2025. The change in the probability weightings from those used at December 31, 2025 does not indicate a significant shift in our overall credit loss outlook, but rather, a response to certain changes in the assumptions underlying the Moody's forecast scenarios that shifted the baseline to a more optimistic outlook. Each of the scenarios considered have varying degrees of severity and duration of impacts to forecasted market conditions, economic indicators, monetary and other governmental policies and geopolitical conditions, among other variables. Refer to the Economic Outlook section of this discussion and analysis for further information on the Moody’s scenarios and our weighting assumptions.

Our allowance for credit losses coverage to total loans was 1.43% at March 31, 2026, unchanged from December 31, 2025. The allowance for credit losses on the commercial portfolio totaled $276.6 million, or 1.48% of that portfolio, at March 31, 2026, compared to $272.0 million, or 1.46%, at December 31, 2025. The allowance for credit losses on the residential mortgage portfolio totaled $41.6 million, or 1.05% of that portfolio, at March 31, 2026, compared to $42.8 million, or 1.07%, at December 31, 2025. The allowance for credit losses on the consumer portfolio totaled $25.6 million, or 1.92% of that portfolio, at March 31, 2026, compared to $26.8 million, or 2.00%, at December 31, 2025.

Criticized commercial loans totaled $522.2 million at March 31, 2026, down $13.2 million, or 2%, from $535.4 million at December 31, 2025. Criticized loans are defined as those having potential weaknesses that deserve management’s close attention (risk-rated as special mention, substandard and doubtful), including both accruing and nonaccruing loans. The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process. In addition, the Company often reviews portfolios of loans to determine if there are areas of risk not specifically identified in its loan by loan approach. Criticized commercial loans comprised 2.79% of that portfolio at March 31, 2026, down from 2.88% at December 31, 2025. We remain focused on identifying specific and broader risk indicators that may be impacting certain segments in our portfolio, and we have not seen signs of significant weakening in any particular industry, sector or geographic segment beyond what we believe has been experienced by the banking industry as a whole. Our criticized commercial loans at March 31, 2026 are diversified across many industries, with the largest concentrations as follows: $97.4 million in real estate, rental and leasing; $71.2 million in manufacturing; $67.4 million in healthcare and social assistance; $63.6 million in retail trade; $53.7 million in wholesale trade; $47.9 million in transportation and warehousing; and $47.8 million in accommodation, food service and entertainment. Commercial loans risk rated pass-watch totaled $550.7 million at March 31, 2026, down $64.1 million, or 10%, from December 31, 2025. The pass-watch risk rating includes credits with performance trends that reflect sufficient risk to cause concern but have not risen to the level of criticized.

Net charge-offs were $11.1 million, or 0.19% of average total loans on an annualized basis in the first quarter of 2026, compared to $13.0 million, or 0.22% of average total loans on an annualized basis in the fourth quarter of 2025. Net charge-offs in the first quarter of 2026 included $7.4 million in the commercial portfolio, $3.5 million in the consumer portfolio and $0.2 million in the residential mortgage portfolio. Net charge-offs in the fourth quarter of 2025 included $10.1 million in the commercial portfolio and $3.0 million in the consumer portfolio partially offset by net recoveries of $0.1 million in the residential mortgage portfolio.

The following table provides a rollforward of the allowance for credit losses, coverage ratios and net charge-off ratios for the periods indicated.

($ in thousands)

The following table sets forth for the periods indicated nonaccrual loans and reportable loan modifications to borrowers experiencing financial difficulty by type, and foreclosed and surplus ORE and other foreclosed assets. The table also includes loans past due 90 days or more and still accruing.

($ in thousands)

Nonaccrual loans plus ORE and foreclosed assets totaled $124.6 million at March 31, 2026, up $2.9 million from December 31, 2025. Nonaccrual loans of $113.3 million increased $6.5 million from December 31, 2025. The ratio of nonaccrual loans to total loans remains relatively low at 0.47% of the total portfolio. ORE and foreclosed assets were $11.3 million at March 31, 2026, down $3.5 million from December 31, 2025. Nonaccrual loans plus ORE and other foreclosed assets as a percentage of total loans, ORE and other foreclosed assets was 0.52% at March 31, 2026, up 1 bp from December 31, 2025.

Deposits

Deposits provide the most significant source of funding for our interest earning assets. Generally, our ability to compete for market share depends on our deposit pricing and our wide range of products and services that are focused on customer needs, among other factors. We offer high-quality banking services with convenient delivery channels, including online and mobile banking. We provide specialized services to our commercial customers to promote commercial deposit growth. These services include treasury management, industry expertise and lockbox services.

Lack of diversity in concentration within a deposit base may increase the risk of events or trends that could prompt a larger-scale demand for deposits outflow. Concerns over a financial institution's ability to protect deposit balances in excess of the federally insured limit may increase the risk of a deposit run. We consider our deposit base to be seasoned, stable and well-diversified. We also offer our customers an insured cash sweep product (ICS) that allows customers to secure deposits above FDIC insured limits. We continue to see demand for the ICS product, with the balance totaling $326.6 million at March 31, 2026, compared to $322.2 million at December 31, 2025. At March 31, 2026, we have calculated our average deposit account size by dividing period-end deposits by the population of accounts with balances to be approximately $37,500, which includes $199,600 in our commercial and small business lines (excluding public funds), $120,600 in our wealth management business line, and $18,200 in our consumer business line.

Further, at March 31, 2026, our sources of liquidity exceed uninsured deposits. We have estimated the Bank’s amount of uninsured deposits using the methodologies and assumptions required for FDIC regulatory reporting to be approximately $14.6 billion at March 31, 2026, down $272.5 million compared to December 31, 2025. Our uninsured deposit total at March 31, 2026, includes approximately $3.2 billion of public funds that have pledged securities as collateral, leaving approximately $11.4 billion of noncollateralized, uninsured deposits compared to total liquidity of $19.5 billion. Our ratio of noncollateralized, uninsured deposits to total deposits was approximately 39.2% at March 31, 2026, compared to 38.6% at December 31, 2025.

Total deposits were $29.1 billion at March 31, 2026, down $197.6 million, or 1%, from December 31, 2025 driven by typical seasonal movement in public funds deposits and retail time deposit maturities that were partially offset by growth in transaction and savings deposits. Average deposits for the first quarter of 2026 were $28.8 billion, up $18.2 million, or less than 1%, from the fourth quarter of 2025.

The following table shows the composition of our deposits at each date indicated.

($ in thousands)

Noninterest-bearing demand deposits totaled $10.3 billion at March 31, 2026, down $30.1 million, or less than 1%, from December 31, 2025. The decline was driven by a seasonal decrease in public fund balances that was partially offset by growth in commercial noninterest-bearing demand deposits. Noninterest-bearing demand deposits comprised 36% of total deposits at March 31, 2026, up from 35% at December 31, 2025.

Interest-bearing transaction and savings accounts totaled $12.3 billion at March 31, 2026, up $260.5 million, or 2%, from December 31, 2025, reflective of growth and shifting in mix within interest-bearing deposits. Interest-bearing public fund deposits totaled $2.9 billion at March 31, 2026, down $280.0 million, or 9%, from December 31, 2025 that is mostly attributable to seasonal outflows. Retail time deposits totaled $3.5 billion at March 31, 2026, down $148.0 million, or 4%, from December 31, 2025. The decline in retail time deposits is mostly attributable to maturities that did not renew, reflective of interest rate movement, including promotional rate reductions; a portion of these deposits shifted into interest-bearing transaction and savings accounts or non-interest bearing accounts. We had no brokered time deposits at March 31, 2026 or December 31, 2025. The Company uses brokered deposits as one component of its funding strategy, subject to certain policies regarding the amount, term and interest rate.

The rate paid on interest-bearing deposits for the first quarter of 2026 was 2.25%, down 17 bps from 2.42% in the fourth quarter of 2025, reflective of the interest rate environment and product pricing, both of which may have fostered a favorable shift in the mix of interest-bearing deposits. Rates paid on deposits will vary based on prevailing interest rates and promotional rate offerings on the various product types. The following table sets forth average balances and weighted-average rates paid on deposits for the first quarter of 2026 and the fourth and the first quarters of 2025.

($ in millions)

The following sets forth the maturities of time certificates of deposit greater than $250,000 at March 31, 2026.

($ in thousands)

Short-Term Borrowings

At March 31, 2026, short-term borrowings totaled $1.4 billion, up $343.2 million from December 31, 2025, driven primarily by FHLB borrowings. Average short-term borrowings of $1.4 billion in the first quarter of 2026 were up $183.2 million, or 15%, from the fourth quarter of 2025.

Short-term borrowings are a core portion of the Company’s funding strategy and can fluctuate depending on our funding needs and the sources utilized. Customer repurchase agreements and borrowings from the Federal Home Loan Bank (FHLB) are the major sources of short-term borrowings. Customer repurchase agreements are offered mainly to commercial customers to assist them with their cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, amounts available will vary. FHLB borrowings are collateralized by certain residential mortgage and commercial real estate loans included in the Bank’s loan portfolio, subject to specific criteria. FHLB borrowings totaled $700 million at March 31, 2026 compared to $400 million at December 31, 2025.

Long-Term Debt

Long-term debt totaled $193.8 million at March 31, 2026, down $5.6 million, or 3%, from December 31, 2025, due to tax credit entity activity.

Long-term debt at March 31, 2026 includes subordinated notes payable with an aggregate principal amount of $172.5 million, a stated maturity of June 15, 2060, and a fixed rate of 6.25% per annum that qualify as Tier 2 capital of certain regulatory capital ratios. Subject to prior approval by the Federal Reserve, the Company may redeem these notes in whole or in part on any of its quarterly interest payment dates.

OFF-BALANCE SHEET ARRANGEMENTS

Loan Commitments and Letters of Credit

In the normal course of business, the Bank enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Bank to varying degrees of credit risk and interest rate risk in much the same way as funded loans. Under regulatory capital guidelines, the Company and Bank must include unfunded commitments meeting certain criteria in risk-weighted capital calculations.

Commitments to extend credit include revolving commercial credit lines, non-revolving loan commitments issued mainly to finance the acquisition and development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent our future cash requirements.

A substantial majority of the letters of credit are standby agreements that obligate the Bank to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit enhancement to its customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.

The contractual amounts of these instruments reflect our exposure to credit risk. The Bank undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support. At March 31, 2026, the Company had a reserve for credit losses on unfunded lending commitments totaling $32.4 million.

The following table shows the commitments to extend credit and letters of credit at March 31, 2026 according to expiration date.

($ in thousands)

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2025.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and with those generally practiced within the banking industry which require management to make estimates and assumptions about future events. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, and the resulting estimates form the basis for making judgments about the carrying values of certain assets and liabilities not readily apparent from other sources. Actual results could differ significantly from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 16 to our consolidated financial statements included elsewhere in this report.

Our primary market risk is interest rate risk that stems from uncertainty with respect to the absolute and relative levels of future market interest rates that affect our financial products and services. In an attempt to manage our exposure to interest rate risk, management measures the sensitivity of our net interest income and cash flows under various market interest rate scenarios, establishes interest rate risk management policies and implements asset/liability management strategies designed to promote a relatively stable net interest margin under varying rate environments.

Net Interest Income at Risk

The following table presents an analysis of our interest rate risk as measured by the estimated changes in net interest income resulting from an instantaneous and sustained parallel shift in rates at March 31, 2026. Shifts are measured in 100 basis point increments in a range from -500 to +500 basis points from base case, with -300 through +300 basis points presented in the table below. Our interest rate sensitivity modeling incorporates a number of assumptions including loan and deposit repricing characteristics, the rate of loan prepayments and other factors. The base scenario assumes that the current interest rate environment is held constant over a 24-month forecast period and is the scenario to which all others are compared in order to measure the change in net interest income. Policy limits on the change in net interest income under a variety of interest rate scenarios are approved by the Board of Directors. All policy scenarios assume a static volume forecast where the balance sheet is held constant, although other scenarios are modeled.

The results indicate a general asset sensitivity across most scenarios driven primarily by repricing of cash flows in the investment and loan portfolios. With short-term rates stabilizing, the funding mix continues a gradual shift to more rate sensitive deposits. This shift leads to lower overall net interest income at risk, as deposit repricing is expected to offset rate adjustments in the floating rate loan book. Furthermore, due to the funding mix shift, the Company is currently less sensitive to changes in short-term rate movements with interest rate risk being driven more by changes in the mid to long-term segment of the yield curve. When deemed prudent, management has taken actions to mitigate exposure to interest rate risk with on- or off-balance sheet financial instruments and intends to do so in the future. Possible actions include, but are not limited to, changes in the pricing of loan and deposit products, modifying the composition of earning assets and interest-bearing liabilities, and adding to, modifying or terminating existing interest rate swap agreements or other financial instruments used for interest rate risk management purposes.

Even if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities would perform as anticipated. Additionally, a change in the U.S. Treasury rates in the designated amounts accompanied by a change in the shape of the U.S. Treasury yield curve would cause significantly different changes to net interest income than indicated above. Strategic management of our balance sheet and earnings is fluid and would be adjusted to accommodate these movements. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented above. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Certain assets such as adjustable-rate loans have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Also, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. All of these factors are considered in monitoring exposure to interest rate risk.

Economic Value of Equity (EVE)

EVE simulation involves calculating the present value of all future cash flows from assets and subtracting the present value of all future cash outflows from liabilities including the impact of off-balance sheet items such as interest rate hedges. This analysis results in a theoretical market value of the Bank's equity or EVE. Management’s focus on EVE analysis is not on the resulting calculation of EVE itself, but instead on the sensitivity of EVE to changes in market rates. Policy limits on the change in EVE under a variety of interest rate scenarios are approved by the Board of Directors. The following table presents an analysis of the change in the Bank’s EVE resulting from instantaneous and parallel shifts in rates as of March 31, 2026. Shifts are measured in 100 basis point increments ranging from -500 to +500 basis points from base case, with -300 through +300 basis points presented in table below.

The net changes in EVE presented in the preceding table are within the parameters approved by the Board of Directors. Because EVE measures the present value of cash flows over the estimated lives of instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon (i.e., the current year). Further, EVE does not consider factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, possible hedging activities, or changing product spreads, each of which could mitigate the adverse impact of changes in interest rates.

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2026, the Company’s disclosure controls and procedures were effective.

Our management, including the Chief Executive Officer and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during the three month period ended March 31, 2026, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

In addition to the other information set forth in this Report, in evaluating an investment in the Company’s securities, investors should consider carefully, among other things, the risk factors previously disclosed in Part I, Item 1A of our 2025 Form 10-K. which could materially affect the Company's business, financial position, results of operations, cash flows, or future results. Please be aware that these risks may change over time and other risks may prove to be important in the future. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our business, financial condition or results of operations, or the trading price of our securities.

There are no material changes during the period covered by this Report to the risk factors previously disclosed in our 2025 Form 10-K.