FB Financial Corp: Form 10-Q for the period ended Mar 31, 2026

The following is a discussion of our financial condition as of March 31, 2026 and December 31, 2025, and our results of operations for the three months ended March 31, 2026 and 2025, and should be read in conjunction with our audited consolidated financial statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2025, that was filed with the SEC on February 26, 2026, and with the accompanying unaudited notes to the condensed consolidated financial statements set forth in this Report.

Forward-looking statements

Certain statements contained in this Report that are not historical in nature may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the Company’s future plans, results, strategies, and expectations, including expectations around changing economic markets. These statements can generally be identified by the use of the words and phrases “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim,” “predict,” “continue,” “seek,” and other variations of such words and phrases and similar expressions. These forward-looking statements are not historical facts, and are based upon management’s current expectations, estimates, and projections, many of which, by their nature, are inherently uncertain and beyond the Company’s control. The inclusion of these forward-looking statements should not be regarded as a representation by the Company or any other person that such expectations, estimates, and projections will be achieved. Accordingly, the Company cautions shareholders and investors that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements including, without limitation, (1) current and future economic conditions, including the effects of inflation, interest rate fluctuations, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, and high unemployment rates in the local or regional economies in which the Company operates and/or the US economy generally, (2) changes or the lack of changes in government interest rate policies and the associated impact on the Company’s business, net interest margin, and mortgage operations, (3) increased competition for deposits, (4) changes in the quality or composition of the Company’s loan or investment portfolios, including adverse developments in borrower industries or in the repayment ability of individual borrowers or issuers of investment securities, or the impact of interest rates on the value of our investment securities portfolio, (5) any deterioration in commercial real estate market fundamentals, (6) the Company’s ability to identify potential candidates for, consummate, and achieve synergies from acquisitions, including risks that cost savings and other synergies from completed or future mergers may not be realized (or may be less than or delayed from expectations), challenges in integrating acquired businesses, disruptions to customer, employee, or other relationships, diversion of management attention, and the ability to effectively manage larger or more complex operations post-transaction; (7) the Company’s ability to manage any unexpected outflows of uninsured deposits and avoid selling investment securities or other assets at an unfavorable time or at a loss, (8) the Company’s ability to successfully execute its various business strategies, (9) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including legislative developments, (10) the effectiveness of the Company’s controls and procedures to detect, prevent, mitigate and otherwise manage the risk of fraud or misconduct by internal or external parties, including attempted physical-security and cybersecurity attacks, denial-of-service attacks, hacking, phishing, social-engineering attacks, malware intrusion, data-corruption attempts, system breaches, identity theft, ransomware attacks, environmental conditions, and intentional acts of destruction, (11) the Company’s dependence on information technology systems of third party service providers and the risk of systems failures, interruptions, or breaches of security, (12) the impact, extent and timing of technological changes, (13) concentrations of credit or deposit exposure, (14) the impact of natural disasters, pandemics, acts of war or terrorism, or other catastrophic events, (15) events giving rise to international or regional political instability, including the broader impacts of such events on financial markets and/or global macroeconomic environments, and/or (16) general competitive, economic, political, and market conditions. Further information regarding the Company and factors which could affect the forward-looking statements contained herein can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and in any of the Company’s subsequent filings with the SEC. Many of these factors are beyond the Company’s ability to control or predict. If one or more events related to these or other risks or uncertainties materialize, or if the underlying assumptions prove to be incorrect, actual results may differ materially from the forward-looking statements. Accordingly, shareholders and investors should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this Report, and the Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company.

The Company qualifies all forward-looking statements by these cautionary statements.

Critical accounting policies

Our financial statements are prepared in accordance with GAAP and general practices within the banking industry. Within our financial statements, certain financial information contains approximate measurements of financial effects of transactions and impacts at the consolidated balance sheet dates and our results of operations for the reporting periods. We monitor the status of proposed and newly issued accounting standards to evaluate the impact on our financial condition and results of operations. Our accounting policies, including the impact of any newly issued accounting standards if applicable, are discussed in further detail in Note 1, “Basis of presentation and summary of significant accounting policies,” in the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025.

Financial highlights

The following table presents certain selected historical consolidated statements of income and balance sheets data and key performance indicators and other measures as of the dates or for the periods indicated. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period.

(dollars in thousands, except share data)

49

(1) Non-GAAP financial measure; See "GAAP reconciliation and management explanation of non-GAAP financial measures” and non-GAAP reconciliations herein.

(2) Includes $32.6 million, $27.2 million, and $28.1 million of optional rights to repurchase delinquent GNMA loans as of March 31, 2026, March 31, 2025 and December 31, 2025, respectively.

GAAP reconciliation and management explanation of non-GAAP financial measures

We identify certain financial measures discussed in this Report as being “non-GAAP financial measures.” The non-GAAP financial measures presented in this Report are adjusted efficiency ratio (tax-equivalent basis), tangible book value per common share, tangible common equity to tangible assets and return on average tangible common equity.

In accordance with the SEC’s rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our consolidated statements of income, balance sheets or statements of cash flows. The non-GAAP financial measures that we discuss in this Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in our selected historical consolidated financial data may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures we have discussed in our selected historical consolidated financial data when comparing such non-GAAP financial measures. The following reconciliation tables provide a more detailed analysis of these, and reconciliation for, each of non-GAAP financial measures.

Adjusted efficiency ratio (tax-equivalent basis)

The adjusted efficiency ratio (tax-equivalent basis) is a non-GAAP measure that excludes certain gains, losses and other selected items. Our management uses this measure in its analysis of our performance. Our management believes this measure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains and charges. The most directly comparable financial measure calculated in accordance with GAAP is the efficiency ratio.

The following table presents a reconciliation of our adjusted efficiency ratio (tax-equivalent basis) to our efficiency ratio for the periods below:

(dollars in thousands)

Tangible book value per common share and tangible common equity to tangible assets

Tangible book value per common share and tangible common equity to tangible assets are non-GAAP measures that exclude the impact of goodwill and other intangibles used by management to evaluate capital adequacy. Because intangible assets, such as goodwill and other intangibles, vary extensively from company to company, we believe that the presentation of this information allows investors to more easily compare our capital position to other companies. The most directly comparable financial measure calculated in accordance with GAAP is book value per common share and our total shareholders’ equity to total assets.

The following table presents, as of the dates set forth below, tangible common equity compared with total common shareholders’ equity, tangible book value per common share compared with our book value per common share and common equity to tangible assets compared to total common shareholders’ equity to total assets:

(dollars in thousands, except share data)

Return on average tangible common equity

Return on average tangible common equity is a non-GAAP measure that uses average shareholders’ equity and excludes the impact of goodwill and other intangibles. This measurement is used by management to provide a depiction of our profitability without being impacted by intangible assets, as intangible assets are not directly managed to generate earnings. The most directly comparable financial measure calculated in accordance with GAAP is return on average common shareholders' equity.

The following table presents, as of the dates set forth below, reconciliations of total average tangible common equity to average shareholders’ equity and return on average tangible common equity to return on average shareholders’ equity:

(dollars in thousands)

52

Company overview

We are a financial holding company headquartered in Nashville, Tennessee. We operate primarily through our wholly-owned subsidiary bank, FirstBank, and its subsidiaries. FirstBank provides a comprehensive suite of commercial and consumer banking services to clients in select markets in Tennessee, Alabama, Kentucky, North Carolina and Georgia. As of March 31, 2026, our footprint included 90 full-service branches serving markets across Tennessee, including Nashville, Chattanooga, Knoxville, Memphis, and Jackson in addition to Bowling Green, Kentucky, Columbus and Newnan, Georgia and Birmingham, Anniston, Huntsville, and Auburn, Alabama. Additionally, our banking services extend to community markets throughout our footprint. FirstBank also provides retail mortgage banking services utilizing its bank branch network and mortgage banking offices strategically located throughout the southeastern United States.

We operate through two segments, Banking and Mortgage. We generate most of our revenue in our Banking segment from interest on loans and investments, loan-related fees, trust and investment services and deposit-related fees. Our primary source of funding for our loans is customer deposits, however we have other sources of funds including unsecured credit lines, brokered CDs, and other borrowings. We generate most of our revenue in our Mortgage segment from origination fees and gains on sales in the secondary mortgage loan market, as well as from mortgage servicing revenues.

Mergers and acquisitions

Southern States Bancshares, Inc.

On July 1, 2025, the Company completed its merger with Southern States Bancshares, Inc. and its wholly-owned subsidiary, Southern States Bank, with FB Financial Corporation continuing as the surviving entity. This merger strengthens the Company’s presence in existing markets, such as Birmingham and Huntsville, Alabama, while expanding the Company’s footprint further into Alabama and Georgia. The Company acquired total assets of $2.83 billion, total loans of $2.27 billion and assumed total deposits of $2.47 billion. Under the terms of the agreement, each outstanding share of Southern States common stock was converted into the right to receive 0.80 shares of the Company’s stock. Additionally, fractional shares and outstanding stock options were settled in cash. As a result, total consideration paid was $368.4 million based on the Company’s closing stock price of $45.30 per share on June 30, 2025. The merger resulted in additional goodwill of $107.8 million being recorded based on fair value estimates of total net assets acquired and liabilities assumed in the transaction.

Overview of recent financial performance

Results of operations

Three months ended March 31, 2026 compared to the three months ended March 31, 2025

Our net income increased during the three months ended March 31, 2026 to $57.5 million from $39.4 million for the three months ended March 31, 2025. Diluted earnings per common share was $1.10 and $0.84 for the three months ended March 31, 2026 and 2025, respectively. Our net income represented a ROAA of 1.43% and 1.21% for the three months ended March 31, 2026 and 2025, respectively, and a ROAE of 11.9% and 10.1% for the same periods. Our ratio of ROATCE for the three months ended March 31, 2026 and 2025 was 14.7% and 11.9%, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of tangible common equity and return on average tangible common equity.

During the three months ended March 31, 2026, our net interest income increased to $146.0 million from $107.6 million for the three months ended March 31, 2025. Our net interest margin, on a tax-equivalent basis, increased to 3.94% for the three months ended March 31, 2026 as compared to 3.55% for the three months ended March 31, 2025. The increase in net interest income and net interest margin, on a tax-equivalent basis, reflects a $45.7 million increase in interest income, partially offset by a $7.3 million increase in interest expense.

Provision for credit losses of $3.0 million was recognized for the three months ended March 31, 2026 and $2.3 million for the three months ended March 31, 2025. The increase was driven primarily by charge-off activity during the quarter and higher loan balances, partially offset by modestly improved economic forecasts and changes in commitment reserve rates and the mix of available commitments across calculation segments.

Noninterest income for the three months ended March 31, 2026 increased by $3.3 million to $26.4 million, compared to $23.0 million for the prior year period. The increase in noninterest income was driven by increases in BOLI income primarily related to proceeds received from a death benefit, service charges on deposit accounts and investment services and trust income.

Noninterest expense increased to $95.2 million for the three months ended March 31, 2026, compared with $79.5 million for the three months ended March 31, 2025. The increase in noninterest expense was primarily driven by higher salaries, commissions and benefits of $9.0 million due to increased headcount resulting from the Southern States merger and higher performance‑based compensation. Additionally, other expense increased $3.7 million, driven in part by higher franchise tax expense. Merger-related expenses also increased during the period and included $1.4 million of core deposit intangible amortization, $1.0 million of merger and integration costs and $0.9 million in occupancy expense.

Business segment highlights

We operate our business in two business segments: Banking and Mortgage. See Note 12, “Segment reporting” in the notes to our consolidated financial statements contained herein for a description of these business segments.

Banking

Three months ended March 31, 2026 compared to the three months ended March 31, 2025

The Banking segment contributed $73.5 million of income before taxes for the current period as compared to $47.3 million for the previous period. Net interest income totaled $143.1 million during the three months ended March 31, 2026 compared to $105.8 million during the previous period. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in $2.0 million of provision expense during the current period as compared to $2.2 million during the previous period. The Banking segment recorded noninterest income of $14.0 million in the current period as compared to $10.7 million in the previous period. This increase includes increases in BOLI income, service charges on deposit accounts and investment services and trust income. Noninterest expense increased to $81.6 million for the current period compared to $66.9 million for the for the previous period, primarily due to increases in salaries, commissions and benefits, amortization of core deposit intangibles, occupancy, and merger and integration costs, with the majority of these increases associated with the Southern States merger. Additionally, a franchise tax expense was recognized in the current period.

Mortgage

Three months ended March 31, 2026 compared to the three months ended March 31, 2025

Activity in our Mortgage segment resulted income before income taxes of $0.6 million for the current period, as compared to $1.5 million of income before taxes in the prior period. Net interest income was $2.8 million for the current period and $1.9 million for the prior period. Provisions for credit losses on loans HFI and unfunded loan commitments resulted in provision expense of $1.0 million during the current period compared to $0.1 million of provision expense during the prior period. The increase in provisions for credit losses was due primarily to a change in the CECL loss estimation methodology as of June 30, 2025, which notably impacted the Company's reserves on 100% financed 1-to-4 mortgages, as well as a change in forecasts associated with home prices which impacted mortgage reserves more broadly. Mortgage banking income decreased $0.2 million to $12.3 million during the current period compared to $12.4 million in the prior period.

The components of mortgage banking income for the three months ended March 31, 2026 and 2025 were as follows:

(dollars in thousands)

Noninterest expense for the three months ended March 31, 2026 and 2025 was $13.6 million and $12.6 million, respectively. This increase is reflective of higher commissions and incentives expenses resulting from increased mortgage production during the period.

Results of operations

Throughout the following discussion of our operating results, we present our net interest income, net interest margin and core efficiency ratio on a fully tax-equivalent basis. The fully tax-equivalent basis adjusts for the tax-favored status of net interest income from certain qualifying loans and investments.

Our tax-exempt income is converted to a tax-equivalent basis by adjusting for the combined federal and blended state statutory income tax rate of 26.06% for the three months ended March 31, 2026 and 2025.

Net interest income

Net interest income is the principle component of our earnings and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Net interest income and margin are shaped by fluctuations in interest rates as well as changes in volume and mix of earning assets and interest-bearing liabilities.

During the three months ended March 31, 2026, the U.S. Treasury yield curve continued to normalize, with modest steepening in the intermediate and longer‑term maturities as short‑term interest rates declined over the prior year and longer‑term yields remained elevated. This compares to the three months ended March 31, 2025, when the yield curve was in the early stages of normalization following initial short‑term rate reductions and an increase in longer‑term yields. The Federal Funds Target Rate range was 3.50% - 3.75% and 4.25% - 4.50% as of March 31, 2026 and March 31, 2025, respectively.

Three months ended March 31, 2026 compared to the three months ended March 31, 2025

Net interest income increased $38.3 million to $146.8 million for the three months ended March 31, 2026 as compared to $108.4 million for the three months ended March 31, 2025. Net interest margin was 3.94% for the three months ended March 31, 2026 compared to 3.55% for the three months ended March 31, 2025. Net interest income was broadly driven by higher average balances of loans held for investment resulting primarily from the Southern States merger, along with an increase in net interest margin attributable to higher loan yields and a decline in the average cost of interest‑bearing deposits.

Interest income was $226.2 million for the three months ended March 31, 2026, compared to $180.5 million for the three months ended March 31, 2025, an increase of $45.7 million. The increase in interest income was primarily attributable to loans HFI, which increased $47.0 million to $199.1 million for the three months ended March 31, 2026 from $152.2 million for the three months ended March 31, 2025. The increase was driven by higher average balances of loans held for investment supported in part by the Southern States merger, with an incremental increase in yield. The yield on loans HFI increased 10 basis points to 6.51% for the three months ended March 31, 2026 from 6.41% for the three months ended March 31, 2025, largely due to accretion on purchased loans.

The components of our loan yield for the three months ended March 31, 2026 and 2025 were as follows:

(dollars in thousands)

Accretion on purchased loans contributed 17 basis points to the NIM for the three months ended March 31, 2026 as a result of the recent merger. There was no impact of accretion on purchased loans to the NIM for the three months ended March 31, 2025.

Interest expense was $79.4 million for the three months ended March 31, 2026, an increase of $7.3 million as compared to $72.1 million for the three months ended March 31, 2025. The increase was driven by higher average interest‑bearing deposit balances resulting primarily from the recent merger, partially offset by declines in the rates paid on interest‑bearing deposits.

Interest expense on interest-bearing deposit accounts totaled $77.9 million for the three months ended March 31, 2026, an increase of $7.6 million from the prior year, largely due to increases in average balances across most deposit categories, particularly money market deposits and customer time deposits, reflecting balance growth associated with the recent merger. Lower rates paid across these deposit categories partially offset the impact of higher average balances. The average rate paid on interest-bearing deposits was 2.80% for the three months ended March 31, 2026 compared to 3.13% for the three months ended March 31, 2025.

Average balance and interest yield/rate analysis

The table below shows the average balances, income and expense and yield and rates of each of our interest-earning assets and interest-bearing liabilities on a tax equivalent basis, if applicable, for the periods indicated.

(dollars in thousands)

(1) Average balances of nonaccrual loans and overdrafts are included in average loan balances.

(2) Interest income includes the effects of taxable-equivalent adjustments using the combined federal and blended state statutory income tax rate to increase tax-exempt interest income to a tax-

equivalent basis. The net tax-equivalent adjustment amounts included in income were $0.8 million for both the three months ended March 31, 2026 and 2025.

(3) Includes average net unrealized losses on investment securities available for sale of $43.4 million and $132.3 million for the three months ended March 31, 2026 and 2025, respectively.

(4) Includes average of optional rights to repurchase government guaranteed GNMA mortgage loans previously sold that meet certain defined delinquency criteria of $32.0 million and $30.7 million for the three months ended March 31, 2026 and 2025, respectively.

(5) The NIM is calculated by dividing annualized net interest income, on a tax-equivalent basis, by average total earning assets.

Yield/rate and volume analysis

The tables below present the components of the changes in net interest income for the three months ended March 31, 2026 and 2025. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volume and changes due to interest rates, with the changes in both volume and interest rates allocated to these two categories based on the proportionate absolute changes in each category.

(dollars in thousands)

(1) Average loans are presented gross, including nonaccrual loans and overdrafts.

(2) Interest income includes the effects of the tax-equivalent adjustments to increase tax-exempt interest income to a tax-equivalent basis. The net taxable-equivalent adjustment amounts included was $0.8 million for both the three months ended March 31, 2026 and 2025.

Provision for credit losses

The provision for credit losses charged to operating expense is an amount which, in the judgment of management, is necessary to maintain the allowance for credit losses at an appropriate level under the current expected credit loss model. The determination of the amount of the allowance is complex and involves a high degree of judgment and subjectivity.

Our allowance for credit losses calculation as of March 31, 2026 resulted from management’s best estimate of losses over the life of loans and unfunded commitments in our portfolio in accordance with the CECL approach.

Beginning with June 30, 2025, we began to utilize the discounted cash flow estimation technique, adjusted for current conditions and reasonable and supportable forecasts, to estimate the expected credit losses of its loan segments, except consumer and other loans, which utilized the weighted average remaining maturity loss rate technique. See “Note 1, “Basis of presentation and summary of significant accounting policies” in our Annual Report on Form 10-K for the year ended December 31, 2025, for further discussion on the change in estimate.

The discounted cash flow was calibrated using a regression analysis that relates one or more economic variables to our historical default rates and selected peer banks for each loan segment. We determined that national unemployment, national housing price index, national commercial real estate index and prime rates were the key economic variables that were most correlated to our historical loss performance and our peer banks. Reasonable and supportable forecasts of these economic indicators are utilized within the discounted cash flow to estimate expected credit losses for each loan segment. Current and forecast economic conditions, including those affecting these and other economic variables or macroeconomic conditions, such as global conflicts or tariffs, may continue to lead to increased volatility in our calculated level of allowance for credit losses.

Prior to the changes described above, our estimates for credit losses calculation utilized lifetime loss rate model and included economic forecasts for unemployment, gross domestic product, as well as other macroeconomic events which may impact our loan portfolio.

We recognized a provision for credit losses on loans HFI for the three months ended March 31, 2026 and 2025 of $3.8 million and $1.9 million, respectively. The current period provision on loans HFI was driven by loan growth and charge-offs during the quarter offset by slightly improved economic forecasts. For the three months ended March 31, 2025, the provision on loans HFI is due to growth in loan balances in most categories and charge-off activity offset by notable decreases in multi-family and construction lending and slight improvement in economic forecasts.

We recorded a reversal of credit losses on unfunded commitments of $0.8 million and provision expense of $0.4 million for the three months ended March 31, 2026 and 2025, respectively. The reversal of credit losses on unfunded commitments for the three months ended March 31, 2026 was primarily due to changes in segment-level reserve rates and the mix of available commitments among calculation segments. For the three months ended March 31, 2025, the increase in provision for credit losses on unfunded commitments was driven by an increase in outstanding construction commitments partially offset by a broader decrease of outstanding commitment balances across other categories from year-end balances. The increase in construction unfunded commitments was attributable to reduced utilization of existing construction lines which caused an increase in the available commitment in these relationships.

During the three months ended March 31, 2026 and 2025, it was determined that all AFS debt securities that experienced a decline in fair value below amortized cost basis were due to noncredit-related factors. Therefore, there was no provision for credit losses recognized on AFS debt securities during the three months ended March 31, 2026 and 2025.

Noninterest income

The following table sets forth the components of noninterest income for the periods indicated:

(dollars in thousands)

59

Three months ended March 31, 2026 compared to three months ended March 31, 2025

Noninterest income amounted to $26.4 million for the three months ended March 31, 2026, an increase of $3.3 million, as compared to income of $23.0 million for the three months ended March 31, 2025. The increase in total noninterest income was driven by increases in other income, service charges on deposit accounts and investment services and trust income offset by a decrease in mortgage banking income.

Mortgage banking income includes origination fees, gains and losses on the sale of mortgage loans, changes in fair value of mortgage loans and related derivatives, as well as mortgage servicing income, which includes the change in fair value of MSRs and related derivatives. Mortgage banking income was $12.3 million for the three months ended March 31, 2026, a decrease of $0.2 million compared to the prior period.

Investment services and trust income is comprised of wealth management fees and trust and insurance income. This caption increased $0.6 million during the three months ended March 31, 2026 to $4.3 million as compared to $3.7 million during the three months ended March 31, 2025. This growth was driven primarily by higher fees resulting from increased assets under management in existing accounts.

Service charges on deposit accounts include overdraft fees, account analysis fees and other customer transaction-related service charges. Service charges on deposit accounts increased $0.9 million during the three months ended March 31, 2026 to $4.4 million as compared to $3.5 million during the three months ended March 31, 2025. The increase was primarily due to the increase in deposit accounts from the Southern States merger.

ATM and interchange fees represent income related to customers’ utilization of their debit cards and interchange income. ATM and interchange fees were $3.0 million for the three months ended March 31, 2026, compared to $2.7 million for the three months ended March 31, 2025.

Net gain from investment securities was $1 thousand for the three months ended March 31, 2026 compared to $16 thousand for the three months ended March 31, 2025.

Net loss on sales or write-downs of premises and equipment, other real estate owned and other assets improved by $0.3 million for the three months ended March 31, 2026.

Other income is comprised of income recognized that does not typically fit into other income categories and includes components such as BOLI income, swap fees, and equity investments income. Other income increased $1.4 million to $2.7 million during the three months ended March 31, 2026 as compared to $1.3 million during the three months ended March 31, 2025. This increase reflects higher BOLI income of $1.0 million, largely due to $0.8 million of death benefit proceeds recognized during the three months ended March 31, 2026.

Noninterest expense

The following table sets forth the components of noninterest expense for the periods indicated:

(dollars in thousands)

60

Three months ended March 31, 2026 compared to three months ended March 31, 2025

Noninterest expense increased by $15.7 million, or 19.6%, during the three months ended March 31, 2026 to $95.2 million as compared to $79.5 million in the three months ended March 31, 2025. The increase in noninterest expense was attributable to increases in salaries and employee benefits, amortization of core deposit intangible and other intangibles, merger and integration costs associated with the Southern States merger and other noninterest expense.

Salaries, commissions and employee benefits expense is comprised of salaries and wages in addition to other employee benefit costs and represents the largest component of noninterest expense. Salaries, commissions and employee benefits expense increased $9.0 million, or 18.6%, to $57.3 million for the three months ended March 31, 2026 as compared to $48.4 million for the three months ended March 31, 2025. This change was driven by increases in the salaries and benefit costs due to increased headcount resulting from the Southern States merger, combined with an increase in performance-based compensation driven by improvement in the Company’s performance metrics.

Occupancy and equipment expense includes occupancy, depreciation and equipment expense. Occupancy and equipment expense of $7.5 million and $6.6 million was recognized for the three months ended March 31, 2026 and 2025. The increase was driven by the expansion of our branch network in connection with the Southern States merger.

Merger and integration costs include costs associated with the merger, integration and conversion of business combinations. Merger and integration costs were $1.4 million for the three months ended March 31, 2026 associated with the merger with Southern States. These costs primarily include other employee-related costs and costs associated with branch consolidation, conversion and integration activities.

Data processing is comprised of all third-party core operating systems and processing charges as well as payroll processing. Data processing fees were $2.5 million for the three months ended March 31, 2026, compared to $2.3 million for the three months ended March 31, 2025.

Advertising includes expenses related to sponsorships, advertising, marketing, customer relations and business development and public relations. During the three months ended March 31, 2026, advertising expense decreased $0.3 million to $2.1 million compared to $2.5 million during the three months ended March 31, 2025.

Legal and professional fees represent fees incurred for the various support functions, which includes legal, consulting, outsourcing and other professional related fees. Legal and professional fees were $2.0 million for both the three months ended March 31, 2026 and 2025.

Amortization of core deposit and other intangibles was $1.9 million for the three months ended March 31, 2026, compared to $0.7 million for the three months ended March 31, 2025. The increase was primarily due to $1.4 million of amortization associated with the core deposit intangible assumed with the merger of Southern States.

Other noninterest expense increased $3.7 million during the three months ended March 31, 2026 to $20.4 million compared to $16.8 million during the three months ended March 31, 2025. The increase was attributable to a $0.9 million increase in franchise tax expense and modest increases across a range of other expense categories, including software license and maintenance fees, regulatory costs, card transaction fees, contributions and dues, servicing fees and other operating expenses.

Efficiency ratio

The efficiency ratio is one measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense by the sum of net interest income and noninterest income. For an adjusted efficiency ratio, we exclude certain gains, losses and expenses we do not consider core to our business.

Our efficiency ratio was 55.2% and 60.9% for the three months ended March 31, 2026 and 2025, respectively. Our adjusted efficiency ratio, on a tax-equivalent basis, was 54.3% and 59.9% for the three months ended March 31, 2026 and 2025, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of the adjusted efficiency ratio.

Income taxes

Income tax expense was $16.6 million and $9.5 million for the three months ended March 31, 2026 and 2025, respectively. This represents effective tax rates of 22.4% and 19.4% for the three months ended March 31, 2026 and 2025, respectively. The primary differences from the enacted Federal rates are applicable state income taxes and certain non‑deductible expenses, including limitations under Section 162(m). Refer to Note 8 “Income taxes” in the notes to the consolidated financial statements for additional information regarding the Company's income tax expense and effective tax rates.

Financial condition

The following discussion of our financial condition compares balances as of March 31, 2026 and December 31, 2025.

Loan portfolio

The following table sets forth the balance and associated percentage of each class of financing receivable in our loan portfolio as of the dates indicated:

(dollars in thousands)

Our loans HFI portfolio is our most significant earning asset, comprising 75.9% and 76.0% of our total assets at March 31, 2026 and December 31, 2025, respectively. Our strategy is to grow our loan portfolio by originating quality commercial and consumer type loans that comply with our credit policies and that produce revenues consistent with our financial objectives. Our overall lending approach is primarily focused on providing credit to our customers directly in the markets we serve. However, we also participate in loan syndications and participations from other banks (collectively, “participated loans”). As of March 31, 2026 and December 31, 2025, loans HFI included approximately $434.3 million and $433.2 million, respectively, related to participated loans.

We also sell loan participations to unaffiliated third-parties as part of our credit risk management and balance sheet management strategy. During the three months ended March 31, 2026 and 2025, we sold $2.4 million and $1.1 million loan participations, respectively. All loans, whether or not we act as a participant, are underwritten to the same standards as all other loans we originate. We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations.

Loan concentrations are considered to exist when there are amounts loaned to a number of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. Our lending activity is heavily concentrated in the geographic market areas we serve, with the highest concentration in Tennessee. This geographic concentration subjects our loan portfolio to the general economic conditions within the state. The risks created by this concentration have been considered by management in the determination of the appropriateness of the allowance for credit losses on loans HFI. As of March 31, 2026 and December 31, 2025, there were no concentrations of loans exceeding 10% of total loans other than our geographic exposure to Tennessee, Alabama and Georgia, as well as the categories of loans disclosed in the table above. We believe our loan portfolio is diversified relative to industry concentrations across the various loan portfolio categories. For additional details related to the concentrations within our loan portfolio, refer to the industry classification and collateral property type concentration tables detailed later in this section.

Banking regulators have established guidelines of less than 100% of Tier 1 capital plus allowance for credit losses in construction lending and less than 300% of Tier 1 capital plus allowance for credit losses in commercial real estate lending that management monitors as part of the risk management process. The construction concentration ratio is a percentage of the outstanding construction and land development loans to total Tier 1 capital plus allowance for credit losses. The commercial real estate concentration ratio is a percentage of the outstanding balance of non-owner occupied commercial real estate, multifamily, and construction and land development loans to Tier 1 capital plus allowance for credit losses. Management strives to operate within the thresholds set forth above. When our ratios are in excess of one or both of these guidelines, banking regulators generally require an increased level of monitoring in these lending areas by management.

The table below shows concentration ratios for the Bank and Company as of March 31, 2026 and December 31, 2025.

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As part of our lending policy and risk management activities, we track lending exposure of commercial and industrial and owner-occupied commercial real estate by industry classification (as defined by the North American Industry Classification System) and type to determine potential risks associated with industry concentrations, and if any risk issues could lead to additional credit loss exposure. The table below provides a summary of our commercial and industrial and owner-occupied commercial real estate portfolios by industry classification.

(dollars in thousands)

(1) Nonperforming loans are those on which the accrual of interest has stopped, as well as loans that are contractually 90 or more days past due on which interest continues to accrue.

Additionally, we track our lending exposure of non-owner occupied commercial real estate and construction by collateral property type to determine potential risks associated with collateral types, and if any risk issues could lead to additional credit loss exposure. The table below provides a summary of our non-owner occupied commercial real estate and construction loan portfolios by collateral property type.

(dollars in thousands)

1) Nonperforming loans are those on which the accrual of interest has stopped, as well as loans that are contractually 90 days or more past due on which interest continues to accrue.

Loan maturity and sensitivities

The following table presents the contractual maturities of our loan portfolio as of March 31, 2026. Loans with scheduled maturities are reported in the maturity category in which the payment is due. Demand loans with no stated maturity and overdrafts are reported in the “due in 1 year or less” category. Loans that have adjustable rates are shown as amortizing to final maturity rather than when the interest rates are next subject to change. The tables do not include prepayment assumptions or scheduled repayments.

For loans due after one year or more, the following table presents the interest rate composition for loans outstanding as of March 31, 2026.

The following table presents the contractual maturities of our loan portfolio segregated into fixed and floating interest rate loans as of March 31, 2026.

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Asset quality

In order to operate with a sound risk profile, we focus on originating loans that we believe to be of high quality. We have established loan approval policies and procedures to assist us in maintaining the overall quality of our loan portfolio. When delinquencies in our loans exist, we rigorously monitor the levels of such delinquencies for any negative or adverse trends. From time to time, we may modify loans to extend the term or make other concessions, including interest rate reduction, a term extension, principal forgiveness, payment deferral, or a combination thereof, to help a borrower with a deteriorating financial condition stay current on their loan and to avoid foreclosure. Furthermore, we are committed to collecting on all of our loans. This practice leads to higher recoveries in the long-term.

Nonperforming assets

Our nonperforming assets consist of nonperforming loans, other real estate owned and other repossessed non-earning assets. As of March 31, 2026 and December 31, 2025, we had $162.0 million and $158.1 million, respectively, in nonperforming assets. Nonperforming loans are those on which the accrual of interest has stopped, as well as loans that are contractually 90 or more days past due on which interest continues to accrue. Accrued interest receivable written off as an adjustment to interest income amounted to $0.2 million and $0.3 million for the three months ended March 31, 2026 and 2025, respectively. Additionally, we had net interest recoveries on nonperforming assets previously charged off of $0.2 million and $0.6 million for the three months ended March 31, 2026 and 2025, respectively.

Nonperforming loans HFI decreased by $1.0 million to $119.5 million as of March 31, 2026 compared to $120.5 million as of December 31, 2025. The decrease in nonperforming loans primarily occurred in our construction and 1-4 family mortgage portfolios partially offset by increases in our commercial real estate portfolios.

As of March 31, 2026 and December 31, 2025, we had $32.6 million and $28.1 million, respectively, of delinquent GNMA optional repurchase loans previously sold included on our consolidated balance sheets in loans held for sale. These are considered nonperforming assets as we do not earn any interest on the unexercised option to repurchase these loans. The following table provides details of our nonperforming assets, the ratio of such loans and other nonperforming assets to total assets, and certain other related information as of the dates presented:

(dollars in thousands)

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We have evaluated our loans HFI classified as nonperforming and believe all nonperforming loans have been adequately reserved for in the allowance for credit losses on loans HFI as of March 31, 2026 and December 31, 2025. Management also continually monitors past due loans for potential credit quality deterioration. Loans not considered nonperforming include loans 30-89 days past due that continue to accrue interest amounting to $86.4 million at March 31, 2026 as compared to $66.8 million at December 31, 2025. The increase from December 31, 2025 to March 31, 2026 primarily occurred within commercial and industrial and construction portfolios partially offset by decreases multi-family and consumer and other portfolios.

Allowance for credit losses

The allowance for credit losses represents the portion of the loan’s amortized cost basis that we do not expect to collect due to credit losses over the loan’s life, considering past events, current conditions, and reasonable and supportable forecasts of future economic conditions. Loan losses are charged against the allowance when we believe the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for credit losses is based on the loan’s amortized cost basis, excluding accrued interest receivable, as we promptly charge off uncollectible accrued interest receivable.

Beginning with June 30, 2025, we began to utilize the discounted cash flow estimation technique, adjusted for current conditions and reasonable and supportable forecasts, to estimate the expected credit losses of its loan segments, except consumer and other loans, which utilized the weighted average remaining maturity loss rate technique. Prior to the changes, the Company primarily used a lifetime loss rate model to determine the allowance for credit losses. We determined that the use of the updated estimate techniques and related inputs and assumptions enhances the transparency, accuracy and relevance of information relating to the allowance for credit losses through the application of data and calculations more clearly calibrated to our historical experience, the nature of our loan portfolio and unfunded commitments, and expectations for future economic conditions and corresponding expected credit losses. Refer to Note 1, “Basis of presentation and summary of significant accounting policies” in the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, that was filed with the SEC on February 26, 2026 for further specific information on the changes.

The following table presents the allocation of the allowance for credit losses by loan HFI category as well as the ratio of loans by loan category compared to the total loans HFI portfolio as of the dates indicated:

(dollars in thousands)

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The following table summarizes activity in our allowance for credit losses on loans HFI during the periods indicated:

(dollars in thousands)

(1) Includes the impact of changes to estimation techniques, inputs and assumptions used to estimate credit losses during the year ended December 31, 2025. See “Note 1, “Basis of presentation and summary of significant accounting policies” in our Annual Report on Form 10-K for the year ended December 31, 2025 for further discussion on the change in estimate.

The following tables details our provision for (reversal of) credit losses on loans HFI and net (charge-offs) recoveries to average loans HFI outstanding by loan category during the periods indicated:

(dollars in thousands)

(1) Includes the impact of changes to estimation techniques, inputs and assumptions used to estimate credit losses during the year ended December 31, 2025. See “Note 1, “Basis of presentation and summary of significant accounting policies” in our Annual Report on Form 10-K for the year ended December 31, 2025 for further discussion on the change in estimate.

The ACL on loans HFI was $186.3 million and $186.0 million and represented 1.49% and 1.50% of loans HFI as of March 31, 2026 and December 31, 2025, respectively. For further information related to the change in the ACL refer to “Provision for credit losses” section herein and Note 4, “Loans and allowance for credit losses on loans HFI” in the notes to our consolidated financial statements.

Our ratio of total nonperforming loans HFI as a percentage of total loans HFI decreased by 1 basis points to 0.96% as of March 31, 2026 compared to December 31, 2025 primarily due to decreases in nonperforming loans in our construction and 1-4 family mortgage portfolios partially offset by increases in commercial real estate portfolios.

For the three months ended March 31, 2026, we experienced net charge-offs of $3.5 million, or 0.11% of average loans HFI, compared to net charge-offs of $3.3 million, or 0.14% for the three months ended March 31, 2025. We also maintain an allowance for credit losses on unfunded commitments in other liabilities, which decreased to $15.4 million as of March 31, 2026 from $16.2 million as of December 31, 2025 primarily due to changes in segment‑level reserve rates and shifts in the mix of available commitments across calculation segments.

Mortgage loans held for sale consisted of $198.8 million of residential real estate mortgage loans in the process of being sold to third-party private investors or government sponsored agencies and $32.6 million of GNMA optional repurchase loans. This compares to $173.0 million of residential real estate mortgage loans in the process of being sold to third-party private investors or government sponsored agencies and $28.1 million of GNMA optional repurchase loans as of December 31, 2025.

Other earning assets

Securities purchased under agreements to resell (“reverse repurchase agreements”)

We enter into agreements with certain customers to purchase investment securities under agreements to resell at specific dates in the future. This investment deploys some of our unused liquidity position into an instrument that improves the return on those funds. Securities purchased under agreements to resell totaled $56.0 million and $45.8 million at March 31, 2026 and December 31, 2025, respectively.

Federal funds sold

Federal funds sold may fluctuate from period to period depending upon our liquidity position at the time and our strategy for deploying liquidity. Federal funds sold totaled $143.0 million and $167.5 million at March 31, 2026 and December 31, 2025, respectively.

AFS debt securities portfolio

Our investment portfolio objectives include maximizing total return after other primary objectives are achieved such as, but not limited to, providing liquidity, capital preservation, and pledging collateral for certain deposit types, various lines of credit and other borrowings. The investment objectives guide the portfolio allocation among security types, maturities, and other attributes.

The fair value of our AFS debt securities portfolio was $1.50 billion and $1.46 billion as of March 31, 2026 and December 31, 2025, respectively. Included in the fair value of AFS debt securities were net unrealized losses of $51.5 million and $47.9 million as of March 31, 2026 and December 31, 2025, respectively. Current net unrealized losses are driven by prevailing interest rate levels versus interest rate levels when many of the bonds were purchased.

During the three months ended March 31, 2026, there were no AFS debt securities sold and we purchased $101.8 million of AFS debt securities. Maturities, prepayments and calls of AFS debt securities totaled $60.1 million for the three months ended March 31, 2026.

During the three months ended March 31, 2025, there were no AFS debt securities sold and we purchased $103.7 million of AFS debt securities. Maturities, prepayments and calls of AFS debt securities totaled $74.9 million for the three months ended March 31, 2025.

The following table sets forth the fair value, scheduled maturities and weighted average yields for our AFS debt securities portfolio as of the dates indicated below:

(dollars in thousands)

(1) Yields on a tax-equivalent basis.

Deposits

Deposits represent the Bank’s primary source of funding. We continue to focus on growing core customer deposits through our relationship driven banking philosophy, community-focused marketing programs and our treasury management services.

Total deposits increased to $14.08 billion as of March 31, 2026 from $13.91 billion as of December 31, 2025. Noninterest‑bearing deposits rose to $2.66 billion from $2.63 billion. Interest‑bearing deposits increased to $11.41 billion from $11.28 billion.

Within interest‑bearing categories, our checking balances were $2.64 billion and $2.65 billion at March 31, 2026 and December 31, 2025, respectively. Money market and savings balances decreased by $83.3 million from December 31, 2025 due to the conclusion of a deposit campaign that ended at year end of 2025. Customer time deposits increased by $280.1 million from December 31, 2025 driven by a by a $150.0 million short-term public funds time deposit and new and existing customer growth into targeted maturity tenors. Brokered and internet time deposits declined $51.4 million to $574.2 million as of March 31, 2026 compared to December 31, 2025 as management elected to allow balances to mature without reissuance.

We also experienced a decrease in the cost of interest‑bearing deposits, reflecting a lower interest rate environment. Average deposit balances by type, together with the average rates per period are reflected in the average balance sheet amounts, interest paid, and rate analysis tables included in this management’s discussion and analysis under the subheading “Results of operations” discussion.

Our deposit base may include certain deposits from related parties as disclosed within Note 15, “Related party transactions” in the notes to our consolidated financial statements included in this Report.

The following table sets forth the distribution by type of our deposit accounts as of the dates indicated:

(dollars in thousands)

Further details related to our deposit customer base is presented below as of the dates indicated:

(dollars in thousands)

(1) Segments are determined based on the customer account level.

The tables below set forth maturity information on time deposits as of March 31, 2026, categorized by balances less than $250 thousand and greater than $250 thousand, exceeding FDIC insurance limits:

(dollars in thousands)

Uninsured deposits are defined as the portion of deposit accounts in U.S. federally insured depository institutions that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit account that are classified as deposits and are not subject to any federal or state deposit insurance regimes. Collateralized deposits are included within our total uninsured deposits.

Further details related to our estimated insured or collateralized deposits and uninsured and uncollateralized deposits is presented below as of the dates indicated:

(1) Amounts are shown on a fully consolidated basis and exclude deposits of affiliates that are eliminated in consolidation.

(2) Amounts are shown on an unconsolidated basis consistent with regulatory reporting requirements.

Borrowed funds

Deposits are the primary source of funds for our lending activities and general business purposes. However, we also fund our operations through other channels, including obtaining advances from the FHLB, borrowings from the Federal Reserve’s Discount Window or one-off borrowing programs, purchasing federal funds and engaging in overnight borrowing with correspondent banks, or entering into client repurchase agreements. We use these sources of funds as part of our asset liability management process to control our long-term interest rate risk exposure, even if it may increase our short-term cost of funds.

Our level of short-term borrowings fluctuates daily based on funding needs, the sources of funds to meet those needs, and the overall interest rate environment and cost of public funds.

Securities sold under agreements to repurchase and federal funds purchased

We enter into agreements with certain customers to sell certain securities under agreements to repurchase the security the following day. These agreements are made to provide customers with comprehensive treasury management products as a short-term return for their excess funds. Securities sold under agreements to repurchase totaled $10.5 million and $9.9 million at March 31, 2026 and December 31, 2025, respectively.

We also maintain lines with certain correspondent banks that provide borrowing capacity in the form of federal funds purchased. Federal funds purchased are short-term borrowings that typically mature within one to fourteen days. Borrowings against these lines, which are classified as federal funds purchased, totaled $85.0 million and $90.0 million as of March 31, 2026 and December 31, 2025, respectively.

FHLB advances

As a member of the FHLB system, we may utilize advances from the FHLB in order to provide additional liquidity and funding. Under these short-term agreements, we maintain a line of credit that as of both March 31, 2026 and December 31, 2025 had total borrowing capacity of $2.21 billion. As of March 31, 2026 and December 31, 2025, we had qualifying loans pledged as collateral securing these lines amounting to $3.81 billion and $3.82 billion, respectively. There were no FHLB advances outstanding as of March 31, 2026 or December 31, 2025.

Subordinated debt

During the year ended December 31, 2025, we redeemed $30.9 million of junior subordinated debentures and $100.0 million of ten-year fixed-to-floating rate subordinated notes at the principal amount plus accrued interest, in accordance with the terms of the notes.

On July 1, 2025, we assumed three separate fixed-to-floating rate subordinated notes in connection with our merger with Southern States with a principal balance totaling $92.5 million. As of March 31, 2026, no other subordinated debt remained outstanding apart from the debt assumed through this business combination.

Further details regarding our subordinated debt as of March 31, 2026 are provided below.

(dollars in thousands)

Other borrowings

Other borrowings include our finance lease liability totaling $1.1 million as of both March 31, 2026 and December 31, 2025. Additionally, other borrowings include optional rights to repurchase GNMA loans previously sold that meet certain defined delinquency criteria and are eligible for repurchase totaling $32.6 million and $28.1 million as of March 31, 2026 and December 31, 2025, respectively. See Note 6, “Leases” and Note 11, “Fair value of financial instruments” within the notes to our consolidated financial statements herein for additional information regarding our finance lease and optional rights to repurchase GNMA loans, respectively.

Other borrowings may periodically include borrowings from the Federal Reserve’s Discount Window or other borrowing programs available to us as an additional source of short-term liquidity. As of March 31, 2026 and December 31, 2025, there were no such other borrowings outstanding. Under our Borrower‑in‑Custody arrangement, we are permitted to pledge qualifying loans as collateral while retaining possession of the loan documentation. As of March 31, 2026 and December 31, 2025, we had pledged loan collateral totaling $2.94 billion and $2.88 billion, respectively, to the Federal Reserve under the Borrower-in-Custody program, resulting in total borrowing capacity of $2.32 billion and $2.27 billion, respectively.

Liquidity and capital resources

We are expected to maintain adequate liquidity at the Bank to meet the cash flow requirements of clients who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Our Liquidity Policy is intended to cause the Bank to maintain adequate liquidity and, therefore, enhance our ability to raise funds to support asset growth, meet deposit withdrawals and lending needs and otherwise sustain our operations. We accomplish this through management of the maturities of our interest-earning assets and interest-bearing liabilities. We believe that our present position is adequate to meet our current and future liquidity needs.

We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all of our short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of clients, while maintaining an appropriate balance between assets and liabilities to optimize our net interest margin. We also monitor our liquidity requirements in light of interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits.

As part of our liquidity management strategy, we focus on minimizing our costs of liquidity and attempt to decrease these costs by growing our noninterest-bearing and other low-cost deposits, while replacing higher cost funding sources. While we do not control the types of deposit instruments our clients choose, we do influence those choices with the rates and the deposit specials we offer. Increasing interest rates generally attracts customers to higher cost interest-bearing deposit products as they seek to maximize their yield.

Our investment portfolio is another alternative for meeting liquidity needs. These assets generally have readily available markets that offer conversions to cash as needed. AFS debt securities within our investment portfolio are typically used to secure government, public, trust and other deposits and as collateral for short-term borrowings, letters of credit and derivative instruments. As of March 31, 2026 and December 31, 2025, we had pledged securities with carrying values of $861.4 million and $810.6 million, respectively.

Additional sources of liquidity include federal funds purchased, repurchase agreements, FHLB borrowings, Federal Reserve Discount Window borrowings and lines of credit. Interest is charged at the prevailing market rate on federal funds purchased, reverse repurchase agreements and FHLB advances, and at the Federal Reserve’s primary credit rate for Discount Window borrowings.

Overnight advances obtained from the FHLB are used primarily to meet day to day liquidity needs, particularly when the cost of such borrowing compares favorably to the rates that we would be required to pay to attract deposits. There were no FHLB advances outstanding as of March 31, 2026 or December 31, 2025. As of both March 31, 2026 and December 31, 2025, we had the ability to borrow $2.21 billion through FHLB advances, all of which remained available.

Short‑term borrowings from the Federal Reserve’s Discount Window serve as an additional contingent source of liquidity. The Company accesses the Discount Window through its Borrower‑in‑Custody collateral arrangement, which permits the Bank to pledge qualifying loans while retaining custody of the underlying loan documentation. There were no Federal Reserve Discount Window borrowings outstanding as of March 31, 2026 or December 31, 2025. As of March 31, 2026, we had borrowing capacity of $2.32 billion under the Discount Window Borrower‑in‑Custody program, all of which remained available. As of December 31, 2025, capacity totaled $2.27 billion, all of which remained available.

We also maintained unsecured lines of credit with other commercial banks totaling $405.0 million as of both March 31, 2026 and December 31, 2025. These are unsecured, uncommitted lines of credit typically maturing at various times within the next twelve months. Borrowings against these lines, which are classified as federal funds purchased, totaled $85.0 million and $90.0 million as of March 31, 2026 and December 31, 2025, respectively. As of both March 31, 2026 and December 31, 2025, we also had $50.0 million available through the IntraFi network, which allows us to offer banking customers access to FDIC insurance protection on deposits through our Bank which exceed FDIC insurance limits.

Our current on-balance sheet liquidity and available sources of liquidity are summarized in the table below:

(dollars in thousands)

(1) Includes capacity available per internal policy in the form of brokered deposits and unsecured lines of credit.

(2) Amounts are shown on a fully consolidated basis and exclude deposits of affiliates that are eliminated in consolidation.

The Company also maintains the ability to access capital markets to meet its liquidity needs. The Company may utilize various methods to raise capital, including through the sale of common stock, preferred stock, debt securities, warrants, rights, or other securities. Specific terms and prices would be determined at the time of any such offering. In the past, the Company has utilized capital markets to generate liquidity in the form of common stock and subordinated debt primarily for the purpose of funding acquisitions.

The Company is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. The Company’s main source of funding is dividends declared and paid by the Bank to the Company. Statutory and regulatory limitations exist that affect the ability of the Bank to pay dividends to the Company. Management believes that these limitations will not impact the Company’s ability to meet its ongoing short-term cash obligations. For additional information regarding dividend restrictions, see the “Item 1. Business - Supervision and regulation,” “Item 1A. Risk Factors - Risks related to our business” and “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Dividends,” each of which is set forth in our Annual Report on Form 10-K for the year ended December 31, 2025.

Due to state banking laws and the Federal Reserve's Regulation H, the Bank may not declare dividends in any calendar year in an amount exceeding the total of its net income for that year combined with its retained net income of the preceding two years, without the prior approval of the TDFI and/or Federal Reserve. In addition, dividends paid by the Bank to the Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements. Dividends paid by the Bank to the holding company were made in accordance with applicable state banking laws and the Federal Reserve’s Regulation H. During the three months ended March 31, 2026 and 2025, the Board approved cash dividends totaling $35.8 million and $9.8 million, respectively, for payment from the Bank to the holding company. Subsequent to March 31, 2026, the Board approved an additional dividend of $35.6 million to be paid during the second quarter of 2026.

During the three months ended March 31, 2026, the Company declared shareholder dividends of $0.21 per share, or $11.1 million. During the three months ended March 31, 2025, the Company declared shareholder dividends of $0.19 per share, or $9.0 million. Subsequent to three months ended March 31, 2026, the Company declared a quarterly dividend in the amount of $0.21 per share, payable on May 26, 2026, to stockholders of record as of May 12, 2026.

Our total shareholders’ equity was $1.97 billion and $1.95 billion as of March 31, 2026 and December 31, 2025, respectively. The increase in shareholders’ equity was primarily attributable to net income of $57.5 million. This increase was partially offset by dividends declared of $11.1 million and stock repurchases of $21.8 million. Book value per common share was $38.39 as of March 31, 2026 and $37.64 as of December 31, 2025.

Our capital management consists of providing adequate equity to support our current and future operations. We are subject to various regulatory capital requirements administered by state and federal banking agencies, including the TDFI, Federal Reserve and the FDIC. Failure to meet minimum capital requirements may prompt certain actions by regulators that, if undertaken, could have a direct material adverse effect on our financial condition and results of operations. The Federal Reserve and the FDIC have issued guidelines governing the levels of capital that banks must maintain. As of March 31, 2026 and December 31, 2025, we met all capital adequacy requirements for which we were subject. See additional discussion regarding our capital adequacy and ratios within Note 13, “Minimum capital requirements” in the notes to our consolidated financial statements contained herein.

(1) Applicable to Bank level capital.

Capital ratios are well above regulatory requirements for well-capitalized institutions. Management uses risk-based capital ratios in its analysis of the measures to assess the quality of capital and believes that investors may find it useful in their analysis of the Company.

Interest rate sensitivity

Our market risk arises primarily from interest rate risk inherent in the normal course of lending and deposit-taking activities. Management believes that our ability to successfully respond to changes in interest rates will have a significant impact on our financial results. To that end, management actively monitors and manages our interest rate risk exposure.

The ALCO, which is authorized by our Board of Directors, monitors our interest rate sensitivity and makes decisions relating to that process. The ALCO’s goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk so as to minimize the adverse impact of changes in interest rates on net interest income and capital in either a rising or declining interest rate environment. Profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings because the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis.

We monitor the impact of changes in interest rates on our net interest income and economic value of equity using rate shock analysis. Net interest income simulations measure the short-term earnings exposure from changes in market rates of interest in a rigorous and explicit fashion. Our current financial position is combined with assumptions regarding future business to calculate net interest income under varying hypothetical rate scenarios. EVE measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time. A decrease in EVE due to a specified rate change indicates a decline in the long-term earnings capacity of the balance sheet assuming that the rate change remains in effect over the life of the current balance sheet. For purposes of calculating EVE, a zero percent floor is assumed on discount factors.

The following analysis depicts the estimated impact on net interest income and EVE of immediate changes in interest rates at the specified levels for the periods presented:

(1) The percentage change represents the projected net interest income for 12 months on a static balance sheet in a stable interest rate environment compared to the projected net interest income in the various rate scenarios.

(2) The percentage change in this column represents our EVE in a stable interest rate environment compared to EVE in the various rate scenarios.

The results for the net interest income simulations as of March 31, 2026 and December 31, 2025 resulted in an asset sensitive position. The primary influence of our asset sensitivity is the floating rate structure in many of our loans held for investment as well as the composition of our liabilities which is primarily customer deposits. Our floating-rate loan portfolio is indexed to market rates and the timing and magnitude of loan and deposit repricing varies in proportion to market rate fluctuations. We actively monitor and perform stress tests on our deposit betas as part of our overall management of interest rate risk. This requires the use of various assumptions based on historical relationships of these variables in reaching any conclusion. Since these correlations are based on competitive pricing in the market, we anticipate that our future results will likely be different from the scenario results presented above and such differences could be material.

The preceding measures assume no change in the size or asset/liability compositions of the balance sheet. Thus, the measures do not reflect any actions the ALCO may undertake in response to such changes in interest rates. The scenarios assume instantaneous movements in interest rates in increments up to 400 basis points and down to 300 basis points. As interest rates are adjusted over a period of time, it is our strategy to proactively change the volume and mix of our balance sheet in order to mitigate our interest rate risk. The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions regarding characteristics of new business and the behavior of existing positions. These business assumptions are based upon our experience, business plans and published industry experience. Key assumptions employed in the model include asset prepayment speeds, competitive factors, the relative price sensitivity of certain assets and liabilities and the expected life of non-maturity deposits. Because these assumptions are inherently uncertain, actual results may differ from simulated results.

We may utilize derivative financial instruments as part of an ongoing effort to mitigate interest rate risk exposure to interest rate fluctuations and facilitate the needs of our customers. For more information about our derivative financial instruments, see Note 10, “Derivatives” in the notes to our consolidated financial statements.

Evaluation of Disclosure Controls and Procedures

An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Report was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Report, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is: (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errors and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

There have been no material changes to the risk factors set forth in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2025.