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What changed in SOUTHSIDE BANCSHARES INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of SOUTHSIDE BANCSHARES INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+444 added−433 removedSource: 10-K (2026-02-27) vs 10-K (2025-02-27)

Top changes in SOUTHSIDE BANCSHARES INC's 2025 10-K

444 paragraphs added · 433 removed · 322 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

85 edited+44 added−64 removed110 unchanged
Biggest changeOn June 30, 2021, FinCEN published the first set of “national AML priorities,” as required by the Bank Secrecy Act, which include, but are not limited to, cybercrime, terrorist financing, fraud, and drug/human trafficking. On June 28, 2024, FinCEN issued a proposed rule that was drafted to implement the new AML program requirements in line with the national AML priorities.
Biggest changeSanctions for violations of the USA PATRIOT Act can be imposed in an amount equal to twice the sum involved in the violating transaction up to $1 million. 16 Table of Contents On June 30, 2021, FinCEN published the first set of “national AML priorities,” as required by the Bank Secrecy Act, which include, but are not limited to, cybercrime, terrorist financing, fraud, and drug/human trafficking.
The FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. The FDICIA imposes progressively more restrictive restraints on operations, management, and capital distributions depending on the category in which an institution is classified.
FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. FDICIA imposes progressively more restrictive restraints on operations, management, and capital distributions depending on the category in which an institution is classified.
The guidance prescribes the following guidelines for examiners to help identify institutions that are potentially exposed to concentration risk and may warrant greater supervisory scrutiny: • total reported loans for construction, land development and other land represent 100 percent or more of the institution’s total capital, or • total CRE loans represent 300 percent or more of the institution’s total capital and the outstanding balance of the institution’s CRE loan portfolio has increased by 50 percent or more during the prior 36 months.
The guidance prescribes the following guidelines for examiners to help identify institutions that are potentially exposed to concentration risk and may warrant greater supervisory scrutiny: • total reported loans for construction, land development and other land represent 100 percent or more of the institution’s total risk-based capital, or • total CRE loans represent 300 percent or more of the institution’s total risk-based capital and the outstanding balance of the institution’s CRE loan portfolio has increased by 50 percent or more during the prior 36 months.
Thereafter, on August 9, 2024, the federal banking regulators published a notice of proposed rulemaking that would update the requirements each agency has issued for its supervised institutions to establish, implement, and maintain effective, risk-based, and reasonably designed AML programs. As of December 31, 2024, the proposed rules have yet to be finalized.
Thereafter, on August 9, 2024, the federal banking regulators published a notice of proposed rulemaking that would update the requirements each agency has issued for its supervised institutions to establish, implement, and maintain effective, risk-based, and reasonably designed AML programs. As of December 31, 2025, the proposed rules have yet to be finalized.
As part of our effort to attract and retain employees, we offer a broad range of benefits, including, but not limited to, 15-30 days of annual paid time off based on length of employment, sick leave, participation in our ESOP, 401(k) match for eligible employees and up to 20 hours of paid time off annually to volunteer.
As part of our effort to attract and retain employees, we offer a broad range of benefits, including, but not limited to, 15-30 days of annual paid time off based on length of employment, sick leave, parental leave, participation in our ESOP, 401(k) match for eligible employees and up to 20 hours of paid time off annually to volunteer.
Many states have also recently implemented or modified their data privacy laws and some may apply to financial institutions. For example, in California, the California Privacy Rights Act became effective on January 1, 2023, and provides new protections for those the Bank customers who reside in that state.
Many states have also recently implemented or modified their data privacy laws, and some may apply to financial institutions. For example, in California, the California Privacy Rights Act became effective on January 1, 2023, and provides new protections for the Bank customers who reside in that state.
These awards identify organizations that excel at creating positive and supportive workplaces for employees. We continuously work toward an outstanding workplace with competitive benefits for employees through our initiatives outlined below. The health, safety and wellness of our employees is a top priority.
These awards identify organizations that excel at creating positive and supportive workplaces for employees. We continuously work toward an outstanding workplace with competitive benefits for employees through our initiatives outlined below. The health, safety and wellness of our employees is a top priority for Southside.
The FDICIA establishes five regulatory capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors, as established by regulation.
FDICIA establishes five regulatory capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors, as established by regulation.
Examples of activities the Federal Reserve has previously determined are closely related to banking include: ◦ factoring accounts receivable; ◦ making, acquiring, brokering or servicing loans and usual related activities; ◦ leasing personal or real property; 7 Table of Contents ◦ operating a nonbank depository institution, such as a savings association; ◦ performing trust company functions; ◦ conducting financial and investment advisory activities; ◦ conducting discount securities brokerage activities; ◦ underwriting and dealing in government obligations and money market instruments; ◦ providing specified management consulting and counseling activities; ◦ performing selected data processing services and support services; ◦ acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; ◦ performing selected insurance underwriting activities; ◦ providing certain community development activities (such as making investments in projects designed primarily to promote community welfare); and ◦ issuing and selling money orders and similar consumer-type payment instruments.
Examples of activities the Federal Reserve has previously determined are closely related to banking include: ◦ factoring accounts receivable; ◦ making, acquiring, brokering or servicing loans and usual related activities; ◦ leasing personal or real property; ◦ operating a nonbank depository institution, such as a savings association; ◦ performing trust company functions; ◦ conducting financial and investment advisory activities; ◦ conducting discount securities brokerage activities; ◦ underwriting and dealing in government obligations and money market instruments; ◦ providing specified management consulting and counseling activities; ◦ performing selected data processing services and support services; ◦ acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; ◦ performing selected insurance underwriting activities; ◦ providing certain community development activities (such as making investments in projects designed primarily to promote community welfare); and ◦ issuing and selling money orders and similar consumer-type payment instruments.
Our 53 branches and 37 drive-thru facilities are located in and around Arlington, Austin, Bullard, Chandler, Cleburne, Cleveland, Dallas, Diboll, Euless, Fort Worth, Frisco, Granbury, Grapevine, Gresham, Gun Barrel City, Hawkins, Hemphill, Houston, Irving, Jacksonville, Jasper, Lindale, Longview, Lufkin, Nacogdoches, Palestine, Pineland, San Augustine, Splendora, The Woodlands, Tyler, Watauga, Weatherford and Whitehouse.
Our 53 branches, 37 drive-thru facilities and two LPOs are located in and around Arlington, Austin, Bullard, Chandler, Cleburne, Cleveland, Dallas, Diboll, Euless, Fort Worth, Frisco, Granbury, Grapevine, Gresham, Gun Barrel City, Hawkins, Hemphill, Houston, Irving, Jacksonville, Jasper, Lindale, Longview, Lufkin, Nacogdoches, Palestine, Pineland, San Augustine, Splendora, The Woodlands, Tyler, Watauga, Weatherford and Whitehouse.
Deposit and other operations also are subject to: • the Truth in Savings Act and Regulation DD, governing disclosure of deposit account terms to consumers; • the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and 16 Table of Contents • the Electronic Fund Transfer Act and Regulation E, which governs automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of ATMs and other electronic banking services, which the CFPB has expanded to include a new compliance regime that governs consumer-initiated cross border electronic transfers.
Deposit and other operations also are subject to: • the Truth in Savings Act and Regulation DD, governing disclosure of deposit account terms to consumers; • the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and • the Electronic Fund Transfer Act and Regulation E, which governs automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of ATMs and other electronic banking services, which the CFPB has expanded to include a new compliance regime that governs consumer-initiated cross border electronic transfers.
Loan operations are also subject to federal laws and regulations applicable to credit transactions, such as: • the Truth in Lending Act and Regulation Z, governing disclosures of credit terms to consumer borrowers; • the Home Mortgage Disclosure Act and Regulation C, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; • the Equal Credit Opportunity Act and Regulation B, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; • the Fair Credit Reporting Act and Regulation V, governing the use and provision of information to consumer reporting agencies; • the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and • the guidance of the various federal agencies charged with the responsibility of implementing such federal laws.
Loan operations are also subject to federal laws and regulations applicable to credit transactions, such as, but not necessarily limited to: • the Truth in Lending Act and Regulation Z, governing disclosures of credit terms to consumer borrowers; • the Home Mortgage Disclosure Act and Regulation C, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; • the Equal Credit Opportunity Act and Regulation B, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; • the Fair Credit Reporting Act and Regulation V, governing the use and provision of information to consumer reporting agencies; • the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and • the guidance of the various federal agencies charged with the responsibility of implementing such federal laws.
We and the Bank have undertaken efforts to ensure that our incentive compensation plans do not encourage inappropriate risks, consistent with three key principles: incentive compensation arrangements should appropriately balance risk and financial rewards, be compatible with effective controls and risk management, and be supported by strong corporate governance. Change in Control .
The Company and the Bank have undertaken efforts to ensure that our incentive compensation plans do not encourage inappropriate risks, consistent with three key principles: incentive compensation arrangements should appropriately balance risk and financial rewards, be compatible with effective controls and risk management, and be supported by strong corporate governance. Change in Control .
The Bank Secrecy Act, USA PATRIOT Act, and Anti-Money Laundering Act of 2020, along with the related FinCEN regulations, impose numerous requirements with respect to financial institution operations, including the following: • establishment of AML programs, including adoption of written procedures and an ongoing employee training program, designation of a compliance officer and auditing of the program; • establishment of a program specifying procedures for obtaining information from customers seeking to open new accounts, including verifying the identity of customers within a reasonable period of time; • establishment of enhanced due diligence policies, procedures and controls designed to detect and report money laundering, for financial institutions that administer, maintain or manage private bank accounts or correspondent accounts for non-U.S. persons; • prohibitions on correspondent accounts for foreign shell banks and compliance with recordkeeping obligations with respect to correspondent accounts of foreign banks; • filing of suspicious activities reports if a bank believes a customer may be violating U.S. laws and regulations; and 17 Table of Contents • requirements that bank regulators consider bank holding and bank compliance with federal AML laws in connection with proposed merger or acquisition transactions.
The Bank Secrecy Act, USA PATRIOT Act, and Anti-Money Laundering Act of 2020, along with the related FinCEN regulations, impose numerous requirements with respect to financial institution operations, including the following: • establishment of AML programs, including adoption of written procedures and an ongoing employee training program, designation of a compliance officer and auditing of the program; • establishment of a program specifying procedures for obtaining information from customers seeking to open new accounts, including verifying the identity of customers within a reasonable period of time; • establishment of enhanced due diligence policies, procedures and controls designed to detect and report money laundering, for financial institutions that administer, maintain or manage private bank accounts or correspondent accounts for non-U.S. persons; • prohibitions on correspondent accounts for foreign shell banks and compliance with recordkeeping obligations with respect to correspondent accounts of foreign banks; • filing of suspicious activity reports if a bank believes a customer may be violating U.S. laws and regulations; and • requirements that bank regulators consider bank holding and bank compliance with federal AML laws in connection with proposed merger or acquisition transactions.
Effective communication is critical to supporting our employees and is carried out through our weekly newsletters, executive announcements, quarterly Town Hall meetings and our intranet.
Effective communication is critical to supporting our employees and is carried out through our weekly newsletters, executive announcements, quarterly Town Hall meetings and our corporate intranet.
As a result of bank failures in March and May 2023, the DRR fell to 1.10 percent as of June 30, 2023. However, the FDIC projected that the reserve ratio will still reach the statutory minimum of 1.35 percent by the statutory deadline of September 30, 2028 as a result of the FDIC’s prior assessment rate adjustment.
As a result of bank failures in March and May 2023, the DIF reserve ratio fell to 1.10 percent as of June 30, 2023. However, the FDIC projected that the reserve ratio will still reach the statutory minimum of 1.35 percent by the statutory deadline of September 30, 2028, as a result of the FDIC’s prior assessment rate adjustment.
In general, a bank may not extend credit, lease, sell property, or furnish any services or fix or vary the consideration for these products or services on the condition that either: (i) the customer obtain or provide some additional credit, property, or services from or to the bank, the bank holding company or subsidiaries thereof or (ii) the customer not obtain credit, property, or service from a competitor, except to the extent reasonable conditions 15 Table of Contents are imposed to assure the soundness of the credit extended.
In general, a bank may not extend credit, lease, sell property, or furnish any services or fix or vary the consideration for these products or services on the condition that either: (i) the customer obtain or provide some additional credit, property, or services from or to the bank, the bank holding company or subsidiaries thereof or (ii) the customer not obtain credit, property, or service from a competitor, except to the extent reasonable conditions are imposed to assure the soundness of the credit extended.
The maximum permissible interchange fee that 18 Table of Contents an issuer may receive for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction, subject to an upward adjustment of 1 cent if an issuer certifies that it has implemented policies and procedures reasonably designed to achieve the fraud-prevention standards set forth by the Federal Reserve.
The maximum permissible interchange fee that an issuer may receive for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction, subject to an upward adjustment of 1 cent if an issuer certifies that it has implemented policies and procedures reasonably designed to achieve the fraud-prevention standards set forth by the Federal Reserve.
As of December 31, 2024, these rules have not been implemented, although the SEC did adopt final rules implementing the clawback provisions of the Dodd-Frank Act in 2022 and the NYSE did adopt corresponding listing standards for clawback policies in 2023.
As of December 31, 2025, these rules have not been implemented, although the SEC did adopt final rules implementing the clawback provisions of the Dodd-Frank Act in 2022 and the NYSE did adopt corresponding listing standards for clawback policies in 2023.
The BHCA provides that a bank holding company must obtain the prior approval of the Federal Reserve to (i) acquire direct or indirect ownership or control of more than five percent of the outstanding shares of any class of voting securities of any bank or bank holding company, (ii) acquire all or substantially all of the assets of another bank or bank holding company or (iii) merge or consolidate with any other bank holding company.
The BHCA provides that a bank holding company must obtain the prior approval of the Federal Reserve to (i) acquire direct or indirect ownership or control of more than five percent of the outstanding shares of any class of voting securities of any bank or bank holding company, (ii) acquire all or substantially all of the assets of another bank or bank holding 11 Table of Contents company or (iii) merge or consolidate with any other bank holding company.
Federal and state banking agencies require the Company and the Bank to prepare annual reports on financial condition and to conduct an annual audit of financial affairs in compliance with minimum standards and procedures.
Regulatory Examination . Federal and state banking agencies require the Company and the Bank to prepare annual reports on financial condition and to conduct an annual audit of financial affairs in compliance with minimum standards and procedures.
The Company and the Bank are subject to the following risk-based capital ratios: a Common Equity Tier 1 risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital.
The Company and the Bank are subject to the following risk-based capital ratios: a CET1 risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital.
CRE loans generally include land development, construction loans, land and lot loans to individuals, loans secured by multi-family property and nonfarm nonresidential real property where the primary source of repayment is derived from rental income associated with the property.
CRE loans generally include land development, 15 Table of Contents construction loans, land and lot loans to individuals, loans secured by multi-family property and nonfarm nonresidential real property where the primary source of repayment is derived from rental income associated with the property.
Our business, financial condition, results of operations or prospects may be adversely affected, perhaps materially, as a result. 19 Table of Contents
Our business, financial condition, results of operations or prospects may be adversely affected, perhaps materially, as a result. 18 Table of Contents
For the years ended December 31, 2024 and 2023, diluted earnings per common share was $2.91 and $2.82, respectively. We have paid a cash dividend to shareholders every year since 1970 (including dividends paid by Southside Bank prior to the incorporation of Southside Bancshares).
For the years ended December 31, 2025 and 2024, diluted earnings per common share was $2.29 and $2.91, respectively. We have paid a cash dividend to shareholders every year since 1970 (including dividends paid by Southside Bank prior to the incorporation of Southside Bancshares).
The Federal Reserve is also required to consider (i) the financial and managerial resources of the companies involved, including pro forma capital ratios, (ii) the risk to the stability of the United States banking or financial system, (iii) the convenience and needs of the communities to be served, including performance under the CRA and (iv) the effectiveness of the company in combatting money laundering. 11 Table of Contents Regulatory Examination .
The Federal Reserve is also required to consider (i) the financial and managerial resources of the companies involved, including pro forma capital ratios, (ii) the risk to the stability of the United States banking or financial system, (iii) the convenience and needs of the communities to be served, including performance under the CRA and (iv) the effectiveness of the company in combatting money laundering.
At December 31, 2024, our wealth management and trust assets under management were approximately $1.44 billion. Our business strategy includes evaluating expansion opportunities through acquisitions of financial institutions in market areas that could complement our existing franchise.
At December 31, 2025, our wealth management and trust assets under management were approximately $1.65 billion. Our business strategy includes evaluating expansion opportunities through acquisitions of financial institutions in market areas that could complement our existing franchise.
The federal banking agencies may determine that a banking organization based on its size, complexity, or risk profile must maintain a higher level of capital in order to operate in a safe and sound manner.
The required capital ratios are minimums, and the federal banking agencies may determine that a banking organization based on its size, complexity, or risk profile must maintain a higher level of capital in order to operate in a safe and sound manner.
These 14 Table of Contents guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired.
These guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired.
Professional development is a key priority, which is facilitated through our many corporate initiatives including extensive training programs, corporate mentoring, leadership programs, educational reimbursement and corporate and personal development coaching. We recognize and award employees through several different initiatives centered around service to Southside and initiatives that will impact their communities.
Professional development is a key priority, which is facilitated through our many corporate initiatives including extensive training programs, corporate mentoring, leadership programs, educational reimbursement and corporate and personal development coaching. We recognize and award employees through several different initiatives centered around service to Southside and initiatives that impact workplace culture and the communities we serve.
Accordingly, a bank located anywhere in Texas has the ability, subject to regulatory approval, to establish branch facilities near any of our facilities and within our market area. Similarly, under applicable Federal law, out-of-state banks are permitted to establish branches in Texas.
Pursuant to the Texas Finance Code, all banks located in Texas are authorized to branch statewide. Accordingly, a bank located anywhere in Texas has the ability, subject to regulatory approval, to establish branch facilities near any of our facilities and within our market area. Similarly, under applicable Federal law, out-of-state banks are permitted to establish branches in Texas.
Under federal law, financial institutions are generally prohibited from disclosing consumer nonpublic personal information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure. Financial institutions are further required, subject to certain exceptions, to disclose their privacy policies to customers annually.
Under the financial privacy provisions of the GLBA, financial institutions, including the Bank, are generally prohibited from disclosing consumer nonpublic personal information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure. Financial institutions are further required, subject to certain exceptions, to disclose their privacy policies to customers annually.
In 2024, we continued to focus on the health and wellness of our employees through several company-wide efforts including: a wellness program that allows employees to earn cash rewards; a wellness challenge to encourage healthy habits; as well as wellness communications and webinars throughout the year.
In 2025, we continued to focus on the health and wellness of our employees through several company-wide efforts including a wellness program that allows employees to earn cash rewards, as well as wellness communications and webinars throughout the year.
As a Texas-chartered state bank, Southside Bank is subject to regulation, supervision and examination by the TDB, as its chartering authority, and by the FDIC, as its primary federal regulator and deposit insurer.
As a bank holding company under federal law, the Company is subject to regulation, supervision and examination by the Federal Reserve. As a Texas-chartered state bank, Southside Bank is subject to regulation, supervision and examination by the TDB, as its chartering authority, and by the FDIC, as its primary federal regulator and deposit insurer.
Additional restrictions are imposed on extensions of credit to executive officers. Certain extensions of credit also require the approval of a bank’s board of directors.
Additional restrictions are imposed on extensions of credit to executive officers. Certain extensions of credit also require the approval of a bank’s board of directors. Deposit Insurance and Assessments .
Under the Federal Reserve’s CBCA regulations, a rebuttable presumption of control would arise with respect to an acquisition where, after the transaction, the acquiring party owns, controls or has the power to vote at least 10% (but less than 25%) of our voting securities.
Under the Federal Reserve’s CBCA regulations, a rebuttable presumption of control would arise with respect to an acquisition where, after the transaction, the acquiring party owns, controls or has the power to vote at least 10%.
A bank may, however, offer combined-balance products and may otherwise offer more favorable terms if a customer obtains two or more traditional bank products. The law also expressly permits banks to engage in other forms of tying and authorizes the Federal Reserve Board to grant additional exceptions by regulation or order.
A bank may, however, offer combined-balance products and may otherwise offer more favorable terms if a customer obtains two or more traditional bank products. The law also expressly permits banks to engage in other forms of tying and authorizes the Federal Reserve to grant additional exceptions by regulation or order. Also, certain foreign transactions are exempt from the general rule.
If the FDIC determines that the Bank fails to meet any standards prescribed by the guidelines, it may require the Bank to submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety and soundness compliance plans.
If the FDIC determines that the Bank fails to meet any standards prescribed by the guidelines, it may require the Bank to submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety and soundness compliance plans. Incentive Compensation. See “ Holding Company Regulation – Incentive Compensation.” Dividends .
Only “well-capitalized” banks are permitted to accept, renew or roll over brokered deposits. The FDIC may, on a case-by-case basis, permit banks that are adequately capitalized to accept brokered deposits if the FDIC determines that acceptance of such deposits 12 Table of Contents would not constitute an unsafe or unsound banking practice with respect to the bank.
The FDIC may, on a case-by-case basis, permit banks that are adequately capitalized to accept brokered deposits if the FDIC determines that acceptance of such deposits would not constitute an unsafe or unsound banking practice with respect to the bank. Undercapitalized banks generally may not accept, renew or roll over brokered deposits.
Under the FDIA, the FDIC may terminate deposit insurance upon a finding that an institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC. Capital Adequacy. See Holding Company Regulation - Capital Adequacy .
Under the FDIA, the FDIC may terminate deposit insurance upon a finding that an institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order, or condition imposed by a bank’s federal regulatory agency.
Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock. Tier 2 capital consists of instruments disqualified from Tier 1 capital, including qualifying subordinated debt and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets, subject to certain eligibility criteria.
Tier 2 capital consists of instruments disqualified from Tier 1 capital, including qualifying subordinated debt and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets, subject to certain eligibility criteria.
Under the BHCA, a bank holding company meeting certain eligibility requirements may elect to become a “financial holding company.” A financial holding company and companies under its control may engage in activities that are “financial in nature,” as defined by the GLBA and Federal Reserve interpretations, and therefore may engage in a broader range of activities than those permitted for bank holding companies and their subsidiaries.
As a financial holding company, the Company and companies under its control may engage directly or indirectly in activities that are “financial in nature,” as defined by the GLBA and Federal Reserve interpretations, and therefore may engage in a broader range of activities than those permitted for bank holding companies and their subsidiaries under the BHCA.
CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock plus retained earnings less certain adjustments and deductions, including with respect to 8 Table of Contents goodwill, intangible assets, mortgage servicing assets, and deferred tax assets subject to temporary timing differences.
CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock plus retained earnings less certain adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets, and deferred tax assets subject to temporary timing differences. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock.
In addition, if a bank holding company enters into bankruptcy or becomes subject to the orderly liquidation process established by the Dodd-Frank Act, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank would be assumed by the bankruptcy trustee or the FDIC, as appropriate, and entitled to a priority of payment.
Capital loans from the Company to the Bank would be unsecured and subordinated to the Bank’s depositors and certain other debts of the Bank. 10 Table of Contents In addition, if a bank holding company enters into bankruptcy or becomes subject to the orderly liquidation process established by the Dodd-Frank Act, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank would be assumed by the bankruptcy trustee or the FDIC, as appropriate, and entitled to a priority of payment.
On October 25, 2023, the Federal Reserve proposed to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction. The proposal would also establish a regular process for updating the maximum amount every other year going forward. We continue to monitor the development of these proposed rule revisions. Anti-Bribery Laws .
On October 25, 2023, the Federal Reserve proposed to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction. The proposal would also establish a regular process for updating the maximum amount every other year going forward.
These descriptions do not purport to be complete and are qualified in their entirety by reference to the particular statutory or regulatory provisions. Holding Company Regulation As a bank holding company regulated under the BHCA, as amended, the Company is registered with and subject to regulation, supervision and examination by the Federal Reserve.
These descriptions do not purport to be complete and are qualified in their entirety by reference to the particular statutory or regulatory provisions. Holding Company Regulation The Company is registered as a bank holding company with the Federal Reserve under the BHCA and qualifies for and has elected to be treated as a financial holding company.
The Federal Deposit Insurance Corporation Improvement Act of 1991, among other things, requires the federal bank regulatory agencies to take “prompt corrective action” regarding depository institutions that do not meet minimum capital requirements.
The FDICIA, among other things, requires the federal bank regulatory agencies to take “prompt corrective action” regarding depository institutions that do not meet minimum capital requirements.
On November 16, 2023, the FDIC approved a final rule to implement a special assessment to recover the loss to the DIF associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank. The special assessment is targeted primarily at larger banks with significant uninsured deposit levels.
On November 16, 2023, the FDIC approved a final rule to implement a special assessment to recover the loss to the DIF associated with the 2023 bank failures. The special assessment is targeted primarily at larger banks with significant uninsured deposit levels.
Federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized.
Federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital.
However, on July 30, 2024, the FDIC approved a notice of proposed rulemaking relating to the agency’s brokered deposit rules which would inter alia rollback certain aspects and exceptions to the brokered deposit rules originally introduced by the 2020 rule. As of December 31, 2024, the notice of proposed rulemaking had not been finalized. Loans to One Borrower .
On July 30, 2024, the FDIC approved a notice of proposed rulemaking relating to the agency’s brokered deposit rules which would inter alia rollback certain aspects and exceptions to the brokered deposit rules originally introduced by the 2020 rule; however, this proposed rule was later withdrawn on March 3, 2025. Loans to One Borrower .
In addition, as discussed above, a bank holding company may not become a financial holding company unless each of its subsidiary banks has a CRA rating of at least “satisfactory.” As of September 30, 2024, the most recent exam date, the Bank has a CRA rating of “satisfactory.” On October 24, 2023, the federal banking agencies jointly issued a final rule modernizing and overhauling the prior CRA regulations.
In addition, as discussed above, a bank holding company may not become a financial holding company unless each of its subsidiary banks has a CRA rating of at least “satisfactory.” As of September 30, 2024, the most recent exam date, the Bank has a CRA rating of “satisfactory.” In 2023 the Federal Reserve, OCC, and FDIC issued a final rule to modernize their respective CRA regulations.
During 2024, we also opened loan production offices in Dallas, Texas and The Woodlands, Texas. THE BANKING INDUSTRY IN TEXAS The banking industry is affected by general economic conditions such as interest rates, inflation, recession, unemployment and other factors beyond our control.
THE BANKING INDUSTRY IN TEXAS The banking industry is affected by general economic conditions such as interest rates, inflation, recession, unemployment and other factors beyond our control.
The Bank also may be restricted in its ability to accept, renew or roll over brokered deposits, depending on its capital classification. Subject to certain exceptions, deposits are “brokered” if they are placed at a bank through the intervention of a third party in the business of facilitating the placement of deposits with FDIC-insured banks.
Subject to certain exceptions, deposits are “brokered” if they are placed at a bank through the intervention of a third party in the business of facilitating the placement of deposits with FDIC-insured banks. Only “well-capitalized” banks are permitted to accept, renew or roll over brokered deposits.
Federal law prohibits offering or giving a bank official or any third party (or for the bank official to solicit or receive for himself or a third party) “anything of value” other than what is given or offered to the bank itself.
We continue to monitor the development of these proposed rule revisions. 17 Table of Contents Anti-Bribery Laws . Federal law prohibits offering or giving a bank official or any third party (or for the bank official to solicit or receive for himself or a third party) “anything of value” other than what is given or offered to the bank itself.
Failure to meet minimum capital requirements could also result in restrictions on the Company’s or the 9 Table of Contents Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth.
Failure to meet minimum capital requirements could also result in restrictions on the Company’s or the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth. In 2025, the Company’s and the Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer.
At December 31, 2024, our total assets were $8.52 billion, total loans were $4.66 billion, total deposits were $6.65 billion and total equity was $811.9 million. For the years ended December 31, 2024 and 2023, our net income was $88.5 million and $86.7 million, respectively.
At December 31, 2025, our total assets were $8.51 billion, total loans were $4.82 billion, total deposits were $6.87 billion and total equity was $847.6 million. For the years ended December 31, 2025 and 2024, our net income was $69.2 million and $88.5 million, respectively.
For purposes of applying this limit, loans to one borrower may be combined with loans to another borrower (i) when proceeds of the loan are to be used for the direct benefit of the other borrower, to the extent of the proceeds so used, or (ii) when a “common enterprise” is deemed to exist between the borrowers. Insider Loans .
For purposes of applying this limit, loans to one borrower may be combined with loans to another borrower (i) when proceeds of the loan are to be used for the direct benefit of the other borrower, to the extent of the proceeds so used, (ii) when a “common enterprise” is deemed to exist between the borrowers, (iii) the expected source of repayment for each loan or extension of credit is the same for each person, or (iv) the Texas banking commissioner determines that a loan should be attributed to another person in accordance with state law.
Each of the federal banking agencies, including the Federal Reserve and the FDIC, has issued substantially similar risk-based and minimum leverage capital guidelines applicable to the banking organizations they supervise.
Each of the federal banking agencies, including the Federal Reserve and the FDIC, has issued substantially similar risk-based and minimum leverage capital guidelines applicable to the banking organizations they supervise. Under existing capital standards, the Company and the Bank are required to maintain certain capital levels based on ratios of capital to total assets and capital to risk-weighted assets.
Legislative changes also greatly affect the level of competition we face. Federal legislation allows credit unions to use their expanded membership capabilities, combined with tax-free status, to compete more openly for traditional bank business. The tax-free status granted to credit unions provides them with a significant competitive advantage.
Fintech, brokerage and insurance companies continue to become more competitive in the financial services arena and pose an ever-increasing challenge to banks. Legislative changes also greatly affect the level of competition we face. Federal legislation allows credit unions to use their expanded membership capabilities, combined with tax-free status, to compete more openly for traditional bank business.
The Bank is also subject to state and federal laws for notifying individuals and regulators in the event of a security breach affecting their personal information. Under federal law, customers must be notified when a financial institution becomes aware of unauthorized access of sensitive customer information and misuse has occurred or is reasonably possible.
Under federal law, customers must be notified when a financial institution becomes aware of unauthorized access of sensitive customer information and misuse has occurred or is reasonably possible.
In addition, federal and state banking agencies have prescribed standards for maintaining the security and confidentiality of consumer information, to which the Bank is subject. Pursuant to these standards, the Bank is required to have an information security program to safeguard the confidentiality and security of customer information and to ensure proper disposal.
Pursuant to these standards, the Bank is required to have an information security program to safeguard the confidentiality and security of customer information and to ensure proper disposal. The Bank is also subject to state and federal laws for notifying individuals and regulators in the event of a security breach affecting their personal information.
To be well-capitalized, the Bank must maintain at least the following capital ratios: • 6.5% CET1 to risk-weighted assets; • 8% Tier 1 capital to risk-weighted assets; • 10% Total capital to risk-weighted assets; and • 5% leverage ratio.
If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized. 9 Table of Contents To be well-capitalized, the Bank must maintain at least the following capital ratios: • 6.5% CET1 to risk-weighted assets; • 8% Tier 1 capital to risk-weighted assets; • 10% Total capital to risk-weighted assets; and • 5% leverage ratio.
Department of the Treasury, to be “financial in nature or incidental to” a financial activity or are determined by the Federal Reserve unilaterally to be “complementary” to financial activities. The Company has elected to become a financial holding company.
Financial holding companies and their subsidiaries also may engage in additional activities that are determined by the Federal Reserve, in consultation with the U.S. Department of the Treasury, to be “financial in nature or incidental to” a financial activity or are determined by the Federal Reserve unilaterally to be “complementary” to financial activities.
Subsequent amendments to the Volcker Rule exempt from coverage those banks with (i) total consolidated assets equal to $10 billion or less; and (ii) total trading assets and liabilities equal to 5 percent or less of total consolidated assets. Based on this amendment, the Bank is exempt from the Volcker Rule’s restrictions and prohibitions. Brokered Deposits .
The Volker Rule contains certain exemptions from the prohibition and permits the retention of certain ownership interests. Subsequent amendments to the Volcker Rule exempt from coverage those banks with (i) total consolidated assets equal to $10 billion or less; and (ii) total trading assets and liabilities equal to 5 percent or less of total consolidated assets.
The ability of the Company or the Bank to pay dividends, and the contents of their respective dividend policies, is subject to changes of law, as well as possible supervisory restrictions imposed by the TDB, FDIC or Federal Reserve. See also Bank Regulation - Dividends for additional information. Incentive Compensation .
The ability of the Company to pay dividends, and the contents of the Company’s dividend policy, is subject to changes of law, as well as possible supervisory restrictions imposed by the Federal Reserve.
A bank regulator conducting an examination has complete access to the books and records of the examined institution, and the results of the examination are confidential. The cost of examinations may be assessed against the examined organization as the agency deems necessary or appropriate.
A bank regulator conducting an examination has complete access to the books and records of the examined institution, and the results of the examination are confidential. Enforcement Authority .
In 2024, the Company’s and the Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer. Based on current estimates, we believe that the Company and the Bank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2025.
Based on current estimates, we believe that the Company and the Bank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2026. Certain regulatory capital ratios of the Company and Southside Bank, as of December 31, 2025, are shown in the following table. Capital Adequacy Ratios Southside Bancshares, Inc.
Financial institutions such as credit unions, fintech companies, consumer finance companies, insurance companies, brokerage companies and other financial institutions with varying degrees of regulatory restrictions compete vigorously for a share of the financial services market. Fintech, brokerage and insurance companies continue to become more competitive in the financial services arena and pose an ever-increasing challenge to banks.
Overall, however, the Texas markets we serve remain healthy. COMPETITION The activities we are engaged in are highly competitive. Financial institutions such as credit unions, fintech companies, consumer finance companies, insurance companies, brokerage companies and other financial institutions with varying degrees of regulatory restrictions compete vigorously for a share of the financial services market.
None of our employees are represented by any unions or similar groups. We consider the relationship with our employees to be good, which we believe to be reflected in the average tenure of our employees exceeding eight years, with the tenure of 33% of our employees exceeding 5 Table of Contents ten years.
We consider the relationship with our employees to be good, which we believe to be reflected in the average tenure of our employees exceeding eight years, with the tenure of 33% of our employees exceeding 5 Table of Contents ten years. As of December 31, 2025, women and ethnic minorities represented approximately 68% and 41% of our workforce, respectively.
Many of the largest banks operating in Texas, including some of the largest banks in the country, have offices in our market areas with capital resources, broader geographic markets and legal lending limits substantially in excess of those available to us. We face competition from institutions that offer products and services we do not or cannot currently offer.
The tax-free status granted to credit unions provides them with a significant competitive advantage. Many of the largest banks operating in Texas, including some of the largest banks in the country, have offices in our market areas with capital resources, broader geographic markets and legal lending limits substantially in excess of those available to us.
All dividends must be paid out of net profits then on hand, after deducting expenses, including losses and provisions for loan losses. The Bank’s general dividend policy is to pay dividends at levels consistent with maintaining liquidity and preserving applicable capital ratios and servicing obligations.
The Bank’s general dividend policy is to pay dividends at levels consistent with maintaining liquidity and preserving applicable capital ratios and servicing obligations.
Specifically, the assessment base for the special assessment is equal to a bank’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion. As of December 31, 2022, the Bank had less than $5 billion in estimated uninsured deposits.
As of December 31, 2022, the Bank had less than $5 billion in estimated uninsured deposits.
In addition, the CFPB could participate in examinations of the Bank (as described above) regarding the Bank’s offering of consumer financial products and services.
In addition, as discussed in more detail below, the Bank is subject to regulation and supervision by the CFPB which may participate in examinations of the Bank regarding the Bank’s offering of consumer financial products and services.
During the last 30 years the Texas economy has continued to diversify, decreasing the overall impact of fluctuations in oil and gas prices; however, the oil and gas industry is still a significant component of the Texas economy. The economic conditions and growth prospects for our markets continue to reflect a solid and positive overall outlook.
During the last 30 years the Texas economy has continued to diversify, decreasing the overall impact of fluctuations in oil and gas prices; however, the oil and gas industry is still a significant component of the Texas economy. Continued tariff announcements and ongoing tariff negotiations have caused some uncertainty related to inflation levels and its impact on the overall economy.
Customers can apply for loans, open deposit accounts, access account information and conduct various other transactions online from their smart phones or computers. RECENT DEVELOPMENTS During the year ended December 31, 2024, we closed a traditional branch location in Jasper due to close proximity to another Southside Bank branch, and a grocery store branch location in Kingwood.
Customers can apply for loans, open deposit accounts, access account information and conduct various other transactions online from their smart phones or computers. RECENT DEVELOPMENTS We expect to open traditional branch locations at Bellwood Park in Tyler, Texas and The Woodlands in the first quarter of 2026.
On a periodic basis, the FDIC is charged with preparing a written evaluation of our record of meeting the credit needs of the entire community and assigning a rating - outstanding, satisfactory, needs to improve or substantial noncompliance. Banks are rated based on their actual performance in meeting community credit needs.
Under the CRA, the Bank has a continuing and affirmative obligation, consistent with safe and sound banking practices, to help meet the needs of our entire community, including low- and moderate-income neighborhoods. 14 Table of Contents On a periodic basis, the FDIC is charged with preparing a written evaluation of our record of meeting the credit needs of the entire community and assigning a rating - outstanding, satisfactory, needs to improve or substantial noncompliance.
The Company is required to file annual and other reports with, and furnish information to, the Federal Reserve, which makes periodic inspections of the Company. The Federal Reserve may also examine our nonbank subsidiaries. Permitted Activities .
As such, we are subject to comprehensive supervision and regulation by the Federal Reserve and are subject to its regulatory reporting requirements. The Company is required to file annual and other reports with, and furnish information to, the Federal Reserve, which makes periodic inspections of the Company.
Volcker Rule Section 619 of the Dodd-Frank Act prohibits insured depository institutions and their affiliates from proprietary trading and acquiring certain interests in hedge or private equity funds. The Volker Rule contains certain exemptions from the prohibition and permit the retention of certain ownership interests.
The TDB may permit a Texas state bank to engage in additional activities so long as the performance of the activity by the bank would not adversely affect the safety and soundness of the bank. 12 Table of Contents Volcker Rule Section 619 of the Dodd-Frank Act prohibits insured depository institutions and their affiliates from proprietary trading and acquiring certain interests in hedge or private equity funds.
As of December 31, 2024, women and ethnic minorities represented approximately 69% and 40% of our workforce, respectively. During 2024, Southside was awarded “Best Banks to Work For” by American Banker for the third consecutive year and “Best Companies to Work For in Fort Worth” for the second consecutive year.
During 2025, Southside was awarded “Best Banks to Work For” by American Banker for the fourth consecutive year, “Best Companies to Work For in Fort Worth” for the third consecutive year, and for the first time, received the distinction of “Best Place to Work in Texas” by the Best Companies Group.
Similarly, under Texas law, a state bank may engage in those activities permissible for national banks domiciled in Texas. The TDB may permit a Texas state bank to engage in additional activities so long as the performance of the activity by the bank would not adversely affect the safety and soundness of the bank.
Similarly, under Texas law, a state bank may engage in those activities permissible for national banks domiciled in Texas.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIncreased risk of unauthorized dissemination of confidential information, greater risk of privacy breach due to screen/voice/video conversation outside private office space, limited ability to restore the systems in the event of a system failure or interruption, greater risk of a security breach resulting in destruction or misuse of valuable information, and potential impairment of our ability to perform critical functions, including wiring funds, all of which could expose us to risks of data or financial loss, litigation and liability and could seriously disrupt our operations and the operations of any impacted customers. 21 Table of Contents Our systems and those of our customers and third-party service providers are under constant threat, and it is possible that we could experience a significant compromise, significant data loss or material financial losses related to cyber-attacks in the future.
Biggest changeOur systems and those of our customers and third-party service providers are under constant threat, and it is possible that we could experience a significant compromise, significant data loss or material financial losses related to cyber-attacks in the future.
Our stock price can fluctuate significantly in response to a variety of factors including, among other things: • actual or anticipated variations in our results of operations, financial condition or asset quality; • changes in recommendations by securities analysts; • operating and stock price performance of other companies that investors deem comparable to us; • news reports relating to trends, concerns and other issues in the financial services industry, including regulatory actions against other financial institutions; • perceptions in the marketplace regarding us and/or our competitors; • perceptions in the marketplace regarding the impact of changes in price per barrel of crude oil, real estate values and interest rates on the Texas economy; 30 Table of Contents • new technology used or services offered by competitors; • significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors; • failure to integrate acquisitions or realize anticipated benefits from acquisitions; • future issuances of our common stock or other securities; • additions or departures of key personnel; • changes in government regulations; and • geopolitical conditions such as acts or threats of terrorism or military conflicts, health emergencies, epidemics or pandemics.
Our stock price can fluctuate significantly in response to a variety of factors including, among other things: actual or anticipated variations in our results of operations, financial condition or asset quality; changes in recommendations by securities analysts; operating and stock price performance of other companies that investors deem comparable to us; news reports relating to trends, concerns and other issues in the financial services industry, including regulatory actions against other financial institutions; perceptions in the marketplace regarding us and/or our competitors; perceptions in the marketplace regarding the impact of changes in price per barrel of crude oil, real estate values and interest rates on the Texas economy; new technology used or services offered by competitors; significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors; failure to integrate acquisitions or realize anticipated benefits from acquisitions; future issuances of our common stock or other securities; additions or departures of key personnel; changes in government regulations; and geopolitical conditions such as acts or threats of terrorism or military conflicts, health emergencies, epidemics or pandemics.
Securities analyst might not continue coverage on our common stock, which could adversely affect the market for our common stock. The trading price of our common stock depends in part on the research and reports that securities analysts publish about us and our business.
Securities analysts might not continue coverage on our common stock, which could adversely affect the market for our common stock. The trading price of our common stock depends in part on the research and reports that securities analysts publish about us and our business.
Although our common stock is listed for trading on the NYSE, the trading volume for our common stock is low relative to other larger financial services companies, and you are not assured liquidity with respect to transactions in our common stock.
Although our common stock is listed for trading on the NYSE and NYSE Texas, the trading volume for our common stock is low relative to other larger financial services companies, and you are not assured liquidity with respect to transactions in our common stock.
Our ability to compete successfully depends on a number of factors, including: • the ability to develop, maintain and build upon long-term customer relationships based on top quality service, high ethical standards and safe, sound assets; • the ability to expand our market position; • the scope, relevance and pricing of products and services offered to meet customer needs and demands; • the rate at which we introduce new products and services relative to our competitors; • our ability to invest in or partner with technology providers offering banking solutions and delivery channels at a level equal to our competitors; • customer satisfaction with our level of service; and 25 Table of Contents • industry and general economic trends.
Our ability to compete successfully depends on a number of factors, including: • the ability to develop, maintain and build upon long-term customer relationships based on top quality service, high ethical standards and safe, sound assets; • the ability to expand our market position; • the scope, relevance and pricing of products and services offered to meet customer needs and demands; • the rate at which we introduce new products and services relative to our competitors; • our ability to invest in or partner with technology providers offering banking solutions and delivery channels at a level equal to our competitors; • customer satisfaction with our level of service; and • industry and general economic trends.
The state of the economy and various economic, social and political factors, including inflation, recession, pandemics, unemployment, social unrest/civil disorder, interest rates, declining oil prices and the level of U.S. debt, as well as governmental action and uncertainty resulting from U.S. and global political trends, including tariffs, trade policies, weakness in foreign sovereign debt and currencies, hostile actions of foreign governments may directly and indirectly have a destabilizing effect on our financial condition and results of operations.
The state of the economy and various economic, social and political factors, including inflation, recession, pandemics, unemployment, social unrest/civil disorder, interest rates, declining oil prices and the level of U.S. debt, as well as governmental action and uncertainty resulting from U.S. and global political trends, including tariffs, trade policies, weakness in foreign sovereign debt and currencies, hostile actions of foreign governments may directly and indirectly have a 22 Table of Contents destabilizing effect on our financial condition and results of operations.
A significant decline in general economic conditions, caused by inflation, recession, crude oil prices, acts of terrorism, pandemics, natural or man-made disasters, outbreak of hostilities or other international or domestic occurrences, unemployment, plant or business closings or downsizing, changes in securities markets or other factors could impact these local economic conditions and, in turn, have a material adverse effect on our business, financial condition and results of operations.
A significant decline in general economic conditions, caused by inflation, tariffs, trade wars, recession, crude oil prices, acts of terrorism, pandemics, natural or man-made disasters, outbreak of hostilities or other international or domestic occurrences, unemployment, plant or business closings or downsizing, changes in securities markets or other factors could impact these local economic conditions and, in turn, have a material adverse effect on our business, financial condition and results of operations.
The effects of inflation and recessionary concerns on economic activity could negatively affect the collateral values associated with our existing loans, our ability to liquidate the real estate collateral securing our residential and commercial real estate loans, our ability to maintain loan origination volume and to obtain additional financing, the future demand for or profitability of our lending and services, and the financial condition and credit risk of our customers.
The effects of inflation, tariffs, trade wars and recessionary concerns on economic activity could negatively affect the collateral values associated with our existing loans, our ability to liquidate the real estate collateral securing our residential and commercial real estate loans, our ability to maintain loan origination volume and to obtain additional financing, the future demand for or profitability of our lending and services, and the financial condition and credit risk of our customers.
If we were required to raise additional capital in the current environment, any such capital raise may be on unfavorable terms, thereby negatively impacting book value and profitability. While we have taken actions to increase our funding, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.
If we were required to raise additional capital in the current environment, any such capital raise may be on unfavorable terms, thereby 23 Table of Contents negatively impacting book value and profitability. While we have taken actions to increase our funding, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.
Further, in the event of delinquencies, regulatory changes and policies designed to protect 20 Table of Contents borrowers may slow or prevent us from making business decisions or delay us from taking certain remediation actions, such as foreclosure. If borrowers fail to repay their loans, our financial condition and results of operations would be adversely affected.
Further, in the event of delinquencies, regulatory changes and policies designed to protect borrowers may slow or prevent us from making business decisions or delay us from taking certain remediation actions, such as foreclosure. If borrowers fail to repay their loans, our financial condition and results of operations would be adversely affected.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services including those related to or involving artificial intelligence, machine learnings, blockchain and other distributed ledger technologies. The effective use of technology increases efficiency and enables financial institutions to better serve customers and reduce costs.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services including those related to or involving artificial intelligence, machine learnings, blockchain and other distributed ledger technologies. The effective use of technology increases efficiency and enables financial 24 Table of Contents institutions to better serve customers and reduce costs.
Certain investors and shareholder advocates are placing increasing emphasis on how corporations address ESG issues in their business strategy when making investment decisions and when developing their investment strategies and proxy recommendations. We may incur increased costs with respect to our ESG efforts and if such efforts are negatively perceived, our reputation and stock price may suffer.
Certain investors and shareholder advocates are placing increasing emphasis on how corporations address corporate responsibility issues in their business strategy when making investment decisions and when developing their investment strategies and proxy recommendations. We may incur increased costs with respect to our corporate responsibility efforts and if such efforts are negatively perceived, our reputation and stock price may suffer.
While we have policies and procedures designed to prevent or limit the effect of a failure, interruption or security breach of our information systems, there can be no assurance that we will adhere to such policies or procedures or that they can prevent any such failures, interruptions, cybersecurity breaches or other security breaches or, if they do occur, that they will be adequately addressed.
While we have policies and procedures designed to prevent or limit the effect of a failure, interruption or security breach of our information systems, there can be no assurance that we will adhere to such policies or procedures or that they can prevent any such failures, interruptions, cybersecurity breaches or other security breaches or, if they do occur, that they will be 20 Table of Contents adequately addressed.
See the section captioned “Net Interest Income” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report for further discussion related to our management of interest rate risk. We are subject to credit quality risks and our credit policies may not be sufficient to avoid losses.
See the section captioned “Net Interest Income” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report for further discussion related to our management of interest rate risk. 19 Table of Contents We are subject to credit quality risks and our credit policies may not be sufficient to avoid losses.
Any such losses or liabilities could have a material adverse effect on our business strategy, financial condition or results of operations and could expose us to reputation risk, the loss of customer business, increased operational costs, as well as additional regulatory scrutiny, possible litigation and related financial liability.
Any such losses or liabilities could have a material 21 Table of Contents adverse effect on our business strategy, financial condition or results of operations and could expose us to reputation risk, the loss of customer business, increased operational costs, as well as additional regulatory scrutiny, possible litigation and related financial liability.
These provisions may discourage potential acquisition proposals and could delay or prevent a change in control, including under circumstances in which our shareholders might otherwise receive a premium over the market price of our share. An investment in our common stock is not an insured deposit.
These provisions may 32 Table of Contents discourage potential acquisition proposals and could delay or prevent a change in control, including under circumstances in which our shareholders might otherwise receive a premium over the market price of our share. An investment in our common stock is not an insured deposit.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report for further discussion related to our balance sheet strategy. 26 Table of Contents Our process for managing risk may not be effective in mitigating risk or losses to us. The objective of our risk management process is to mitigate risk and loss to our organization.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report for further discussion related to our balance sheet strategy. Our process for managing risk may not be effective in mitigating risk or losses to us. The objective of our risk management process is to mitigate risk and loss to our organization.
A prolonged period of low oil prices could also have a 28 Table of Contents negative impact on the U.S. economy and, in particular, the economies of energy-dominant states such as Texas, which in turn could have a material adverse effect on our business, financial condition and results of operations.
A prolonged period of low oil prices could also have a negative impact on the U.S. economy and, in particular, the economies of energy-dominant states such as Texas, which in turn could have a material adverse effect on our business, financial condition and results of operations.
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations and financial condition. Acquisitions and potential acquisitions may disrupt our business and dilute shareholder value.
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations and financial condition. 27 Table of Contents Acquisitions and potential acquisitions may disrupt our business and dilute shareholder value.
Business - Supervision and Regulation - Regulatory Examination” in this report. 29 Table of Contents Financial services companies depend on the accuracy and completeness of information about customers and counterparties and inaccuracies in such information, including as a result of fraud, could adversely impact our business, financial condition and results of operations.
Business - Supervision and Regulation - Regulatory Examination” in this report. Financial services companies depend on the accuracy and completeness of information about customers and counterparties and inaccuracies in such information, including as a result of fraud, could adversely impact our business, financial condition and results of operations.
Although we have employment agreements with certain of our executive officers, there is no guarantee that these officers and other key personnel will remain employed with the Company. We operate in a highly competitive industry and market area.
Although we have employment agreements 25 Table of Contents with certain of our executive officers, there is no guarantee that these officers and other key personnel will remain employed with the Company. We operate in a highly competitive industry and market area.
If one or more of these analysts cease to cover us or fail to publish regular reports 31 Table of Contents on us, we could lose visibility in the financial markets, which could cause the price or trading volume of our common stock to decline.
If one or more of these analysts cease to cover us or fail to publish regular reports on us, we could lose visibility in the financial markets, which could cause the price or trading volume of our common stock to decline.
We have historically had access to a number of alternative sources of liquidity, but if there is an increase in volatility in the credit and liquidity markets similar to the Great Recession of 2008, there is no assurance that we will be able to obtain such liquidity on terms that are favorable to us, or at all.
We have historically had access to a number of alternative sources of liquidity, but if there is an increase in volatility in the credit and liquidity markets, there is no assurance that we will be able to obtain such liquidity on terms that are favorable to us, or at all.
As a result of inflationary pressures and elevated interest rates over the past two years, the fair value of our securities classified as available for sale and held-to-maturity has declined. This has resulted in unrealized losses on AFS securities embedded in other comprehensive income as a part of shareholders’ equity.
As a result of inflationary pressures and elevated interest rates in recent years, the fair value of our securities classified as available for sale and held-to-maturity has declined. This has resulted in unrealized losses on AFS securities embedded in other comprehensive income as a part of shareholders’ equity.
Further, ineffective internal controls could cause our investors to lose confidence in our financial information, which could affect the trading price of our common stock. The value of our goodwill and other intangible assets may decline in the future. As of December 31, 2024, we had $202.9 million of goodwill and other intangible assets.
Further, ineffective internal controls could cause our investors to lose confidence in our financial information, which could affect the trading price of our common stock. The value of our goodwill and other intangible assets may decline in the future. As of December 31, 2025, we had $202.1 million of goodwill and other intangible assets.
Our exposure and the exposure of our customers to fraud may increase our financial risk and reputation risk as it may result in unexpected loan losses that exceed those that have been provided for in our allowance for loan losses.
Our exposure and the exposure of our customers to fraud may increase our financial risk and reputation risk as it may result in unexpected loan losses that exceed those that have been provided for in our allowance for loan 30 Table of Contents losses.
In addition to the importance of the financial strength and cash flow characteristics of the borrower, loans are also often secured with real estate collateral. As of December 31, 2024, approximately 82.8% of our loans have real estate as a primary or secondary component of collateral.
In addition to the importance of the financial strength and cash flow characteristics of the borrower, loans are also often secured with real estate collateral. As of December 31, 2025, approximately 82.7% of our loans have real estate as a primary or secondary component of collateral.
Decreased market oil prices compressed margins for many U.S. and Texas-based oil producers, as well as oilfield service providers, energy equipment manufacturers and transportation suppliers, among others. As of December 31, 2024, energy loans comprised approximately 2.51% of our loan portfolio. Energy production and related industries represent a significant part of the economies in our primary markets.
Decreased market oil prices compressed margins for many U.S. and Texas-based oil producers, as well as oilfield service providers, energy equipment manufacturers and transportation suppliers, among others. As of December 31, 2025, energy loans comprised approximately 1.47% of our loan portfolio. Energy production and related industries represent a significant part of the economies in our primary markets.
Since the beginning of 2023, the market price of a barrel of West Texas Intermediate crude oil fluctuated from a low of approximately $66 to a high of approximately $91. To partially mitigate this volatility, oil producers continue to find ways to control production costs.
Since the beginning of 2023, the market price of a barrel of West Texas Intermediate crude oil fluctuated from a low of approximately $56 to a high of approximately $93. To partially mitigate this volatility, oil producers continue to find ways to control production costs.
We rely heavily on communications and information systems to conduct our business. Our communications and information systems remain vulnerable to unexpected disruptions and failures. Any failure, interruption or breach in security of these systems could result in a material adverse effect on our customer relationships, general ledger, deposit, loan and other systems.
Our communications and information systems remain vulnerable to unexpected disruptions and failures. Any failure, interruption or breach in security of these systems could result in a material adverse effect on our customer relationships, general ledger, deposit, loan and other systems.
Other sources of liquidity include sales or securitizations of loans, our ability to acquire additional national market, noncore deposits, additional 27 Table of Contents collateralized borrowings such as FHLB advance agreements, the issuance and sale of debt securities and the issuance and sale of preferred or common securities in public or private transactions.
Other sources of liquidity include sales or securitizations of loans, our ability to acquire additional national market, noncore deposits, additional collateralized borrowings such as FHLB advance agreements, the issuance and sale of debt securities and the issuance and sale of preferred or common securities in public or private transactions. The Bank also can borrow from the FRDW.
If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values or to increase our allowance for loan losses, our profitability and financial condition could be adversely impacted. Our information systems may experience an interruption or breach in security.
If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values or to increase our allowance for loan losses, our profitability and financial condition could be adversely impacted.
Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations. Our accounting estimates and risk management processes rely on analytical and forecasting models.
Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations.
Third parties provide key components of our business infrastructure, such as banking services, core processing and internet connections and network access.
We rely on other companies to provide key components of our business infrastructure. Third parties provide key components of our business infrastructure, such as banking services, core processing and internet connections and network access.
In each of the third and fourth quarter of 2024, the Federal Reserve reduced the target federal funds rate by 50 basis points to 4.25% to 4.50%. The Federal Reserve held the target federal funds rate steady in January 2025.
In each of the third and fourth quarter of 2024, the Federal Reserve reduced the target federal funds rate by 50 basis points to 4.25% to 4.50%. In the third and fourth quarters of 2025, the Federal Reserve reduced the target federal funds rate by 25 basis points and 50 basis points, respectively, to 3.50% to 3.75%.
The inability to receive dividends from the Bank could have a material adverse effect on our business, financial condition and results of operations. See the section captioned “Supervision and Regulation” in “Item 1. Business” and “Note 13 – Shareholders’ Equity” to our consolidated financial statements included in this report. You may not receive dividends on our common stock.
See the section captioned “Supervision and Regulation” in “Item 1. Business” and “Note 13 – Shareholders’ Equity” to our consolidated financial statements included in this report. You may not receive dividends on our common stock.
General market fluctuations, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, inflation, interest rate changes or credit loss trends, could also cause our stock price to decrease regardless of operating results.
General market fluctuations, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, inflation, interest rate changes or credit loss trends, could also cause our stock price to decrease regardless of operating results. 31 Table of Contents The holders of our subordinated notes and junior subordinated debentures have rights that are senior to those of our common stock shareholders.
In our ordinary course of business, we rely on electronic communications and information systems to conduct our businesses and to collect and store sensitive data, including financial information regarding our customers and personally identifiable information of our customers and employees.
In our ordinary course of business, we rely on electronic communications and information systems to conduct our businesses and to collect and store sensitive data, including our proprietary business information and that of our clients, and personally identifiable information of our customers and employees. The secure processing, maintenance, and transmission of this information is critical to our operations.
In addition, the Trump administration may seek to implement a regulatory reform agenda that is different than that of the Biden administration, impacting the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies and potentially resulting in uncertainty.
In addition, the current administration is seeking to implement a regulatory reform agenda that will impact the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies and potentially result in uncertainty.
Although management has established disaster recovery policies and procedures, there can be no assurance of the effectiveness of such policies and procedures, and the occurrence of any such event could have a material adverse effect on our business, financial condition and results of operations.
Although management has established disaster recovery policies and procedures, there can be no assurance of the effectiveness of such policies and procedures, and the occurrence of any such event could have a material adverse effect on our business, financial condition and results of operations. 29 Table of Contents RISKS ASSOCIATED WITH THE BANKING INDUSTRY We are subject or may become subject to extensive government regulation and supervision.
The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks expected in the loan portfolio considering historical losses, current conditions and reasonable and supportable forecasts.
This allowance represents management’s best estimate of expected losses that may occur over the contractual life of our current loan portfolio. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and 26 Table of Contents risks expected in the loan portfolio considering historical losses, current conditions and reasonable and supportable forecasts.
If we fail to maintain an effective system of disclosure controls and procedures, including internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud, which could have a material adverse effect on our business, results of operations and financial condition.
If we are unable to access any of these funding sources when needed, we might be unable to meet customers’ needs, which could adversely impact our business, financial condition, results of operations, cash flows and liquidity and level of regulatory-qualifying capital. 28 Table of Contents If we fail to maintain an effective system of disclosure controls and procedures, including internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud, which could have a material adverse effect on our business, results of operations and financial condition.
Our prepayment assumptions take into account market consensus speeds, current trends and past experience. If actual prepayments exceed our projections, the amortization expense associated with these MBS will increase, thereby decreasing our net income. The increase in amortization expense and the corresponding decrease in net income could have a material adverse effect on our financial condition and results of operations.
We have purchased and may continue to purchase MBS at premiums. Our prepayment assumptions take into account market consensus speeds, current trends and past experience. If actual prepayments exceed our projections, the amortization expense associated with these MBS will increase, thereby decreasing our net income.
These risks also include possible business interruption, including the inability to access critical information and systems. The development and use of artificial intelligence presents risks and challenges that may adversely impact our business. The Company or its third-party (or fourth party) vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services, or products.
The Company or its third-party (or fourth party) vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services, or products. The development and use of AI presents a number of risks and challenges to the Company’s business.
While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs. We rely on other companies to provide key components of our business infrastructure.
While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs. Inflationary pressures and rising prices may affect our results of operations and financial condition.
The holders of our subordinated notes and junior subordinated debentures have rights that are senior to those of our common stock shareholders. On November 6, 2020, we issued $100.0 million of 3.875% fixed-to-floating rate subordinated notes, with an outstanding balance, net of unamortized debt issuance costs, of $92.0 million as of December 31, 2024, which mature in November 2030.
On November 6, 2020, we issued $100.0 million of 3.875% fixed-to-floating rate subordinated notes, with an outstanding balance, net of unamortized debt issuance costs, of $92.2 million as of December 31, 2025, which we redeemed on February 15, 2026.
New lines of business or new products and services may subject us to additional risks. From time to time, we may implement new delivery systems, or offer new products and services within existing lines of business. In developing and marketing new delivery systems and/or new products and services, we may invest significant time and resources.
New lines of business or new products and services may subject us to additional risks. From time to time, we evaluate our service offerings and may implement new delivery systems or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts.
We rely on dividends from our bank subsidiary for most of our revenue. Southside Bancshares, Inc. is a separate and distinct legal entity from its subsidiaries. We receive substantially all of our revenue from dividends from the Bank.
The increase in amortization expense and the corresponding decrease in net income could have a material adverse effect on our financial condition and results of operations. We rely on dividends from our bank subsidiary for most of our revenue. Southside Bancshares, Inc. is a separate and distinct legal entity from its subsidiaries.
Any financial liability or reputational damage resulting from claims and legal actions could have a material adverse effect on our business, financial condition and results of operations. GENERAL RISK FACTORS Our stock price can be volatile. Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive.
GENERAL RISK FACTORS Our stock price can be volatile. Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive.
As a result, the Bank could continue to face increased scrutiny or be viewed as higher risk by regulators and the investor community. 23 Table of Contents Elevated interest rates have decreased the value of a portion of the Company’s securities portfolio, and the Company would realize losses if it were required to sell such securities to meet liquidity needs.
Despite recent cuts, extended periods of elevated interest rates have decreased the value of a portion of the Company’s securities portfolio, and the Company would realize losses if it were required to sell such securities to meet liquidity needs.
In addition, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s 24 Table of Contents creditors. In the event the Bank is unable to pay dividends to us, we may not be able to service debt, pay obligations or pay dividends to our shareholders.
Various federal and/or state laws and regulations limit the amount of dividends that the Bank and certain of our nonbank subsidiaries may pay to us. In addition, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors.
We risk damage to our brand and reputation in certain sectors if we fail to act in response to ESG concerns, such as diversity, equity and inclusion, environmental stewardship, human capital management, support for our local communities, corporate governance and transparency, or fail to consider ESG factors in our business operations.
We risk damage to our brand and reputation if we fail to act responsibly or are perceived to act too aggressively in a number of areas, such as DEI, environmental stewardship (including with respect to climate change), human capital management, support for our local communities, corporate governance and transparency.
RISKS ASSOCIATED WITH THE BANKING INDUSTRY We are subject or may become subject to extensive government regulation and supervision. Southside Bancshares, Inc., primarily through the Bank, and certain of its nonbank subsidiaries, is subject to extensive federal and state regulation and supervision.
Southside Bancshares, Inc., primarily through the Bank, and certain of its nonbank subsidiaries, is subject to extensive federal and state regulation and supervision. Banking laws and regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not shareholders.
Our allowance for loan losses may be insufficient . We maintain an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense. This allowance represents management’s best estimate of expected losses that may occur over the contractual life of our current loan portfolio.
Our allowance for loan losses may be insufficient or we may be adversely affected by credit risk exposures . We maintain an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense.
These dividends are the principal source of funds to pay dividends on our common stock to our shareholders and interest and principal on our debt. Various federal and/or state laws and regulations limit the amount of dividends that the Bank and certain of our nonbank subsidiaries may pay to us.
We receive substantially all of our revenue from dividends from the Bank. These dividends are the principal source of funds to pay dividends on our common stock to our shareholders and interest and principal on our debt.
Banking laws and regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not shareholders. These laws and regulations affect our lending practices, capital structure, investment practices and dividend policy and growth, among other things.
These laws and regulations affect our lending practices, capital structure, investment practices and dividend policy and growth, among other things.
These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. The adoption of CECL in 2020 increased the complexity of these analytical and forecasting models. Even if these assumptions are adequate, the models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation.
These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances.
Failure to successfully keep pace with technological changes affecting the financial services industry could have a material adverse impact on our business, financial condition and results of operations. We are subject to the risk that our U.S. agency MBS could prepay faster than we have projected. We have purchased and may continue to purchase MBS at premiums.
Failure to successfully keep pace with technological changes affecting the financial services industry could have a material adverse impact on our business, financial condition and results of operations. Industry adoption of real-time payments networks could negatively impact financial performance through reductions in product profitability, increased liquidity reserves and the potential for increased fraud losses, among other risks.
Criminals are turning to new sources, including artificial intelligence, to steal personally identifiable information in order to impersonate our clients to commit fraud. We employ an in-depth, layered, defense approach that leverages people, processes and technology to manage and maintain cybersecurity controls.
Any failure, interruption, or compromise in security of these systems could result in significant disruption to our operations. We employ an in-depth, layered, defense approach that leverages people, processes and technology to manage and maintain cybersecurity controls.
Cybersecurity risks may also occur with our third-party service providers and may interfere with their ability to fulfill their contractual obligations to us, with potential for financial loss or liability that could have a material adverse effect on our business strategy, financial condition or results of operations.
In the event the Bank is unable to pay dividends to us, we may not be able to service debt, pay obligations or pay dividends to our shareholders. The inability to receive dividends from the Bank could have a material adverse effect on our business, financial condition and results of operations.
Removed
The integrity of information systems of financial institutions is under significant threat from cyber-attacks by third parties, including through coordinated attacks sponsored by foreign nations and criminal organizations to disrupt business operations and other compromises to data and systems for political or criminal purposes.
Added
We are currently operating in an environment in which the Federal Reserve has continued to reduce interest rates, although modestly, with six cuts implemented in 2024 and 2025.
Removed
Notwithstanding the strength of our defensive measures, the threat from cyber-attacks is severe as attacks are sophisticated, and attackers respond rapidly to changes in defensive measures.
Added
However, the inflationary outlook remains uncertain and if the Federal Reserve were to reverse course and rapidly increase the target federal funds rate, the increase in rates could continue to constrain our interest rate spread and may adversely affect our business forecasts.
Removed
We offer our customers the ability to bank remotely and provide other technology-based products and services, which services include the secure transmission of confidential information over the Internet and other remote channels.
Added
On the other hand, further rapid decreases in interest rates may result in a change in the mix of noninterest and interest-bearing accounts. New appointments to the Board of Governors at the Federal Reserve could result in a change in monetary policy and interest rates.
Removed
To the extent that our customers’ systems are not secure or are otherwise compromised, our network could be vulnerable to unauthorized access, malicious software, phishing schemes and other security breaches.
Added
We are unable to predict changes in interest rates, which are affected by factors beyond our control, including inflation, deflation, recession, unemployment, money supply, the impact of tariff and trade policies, increased levels of government debt, and other changes in financial markets.
Removed
To the extent that our activities or the activities of our customers or third-party service providers involve the storage and transmission of confidential information, security breaches and malicious software could expose us to claims, regulatory scrutiny, litigation and other possible liabilities. In addition, we permit a portion of our employees to work remotely from their homes.
Added
Unstable economic conditions may have serious adverse consequences on our business, financial condition, and operations. We are operating in an uncertain economic environment. Global trade tensions, AI impacts, and inflation risks continue to affect the global economic environment.
Removed
However, consumer technology in employees’ homes may not provide similar performance or security as commercial-grade technology in our offices. This, along with reliance on employees’ residential internet, could cause network, system, application, and communication limitations or instability, affecting customer experience for some departments. Remote work also introduces additional operational risk, including increased cybersecurity risk.
Added
The 2025 U.S. government shutdown has negatively impacted U.S. economic growth, and the suspension of government data collection and publication left policymakers without access to the latest data on employment, inflation, and economic growth, increasing the risk that a wrong decision will be made.
Removed
These cyber risks include greater phishing, malware, and other social engineering attacks targeted at employees working from home.
Added
An unpredictable or volatile political environment in the United States could negatively impact business and market conditions, economic growth, financial stability, and business, consumer, investor, and regulatory sentiments, any one or more of which could have a material adverse impact on our financial condition and results of operations.
Removed
The development and use of AI presents a number of risks and challenges to the Company’s business.
Added
Credit and financial markets have experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, persistently elevated rates of inflation, and uncertainty about economic stability.
Removed
Any of the foregoing could adversely affect our financial condition and results of operations. 22 Table of Contents Societal, legislative and regulatory responses to ESG concerns, "anti ESG" concerns, as well as DEI and anti-DEI concerns, could adversely affect our business and performance, including indirectly through impacts on our customers.
Added
With newly enacted and/or proposed domestic economic policies, we may experience additional volatility, including changes as a result of the level of government spending. While our management team continually monitors market conditions and economic factors throughout our footprint, we are unable to predict the duration or severity of such conditions or factors.
Removed
Our business faces increasing public, investor, activist, legislative and regulatory scrutiny related to ESG, “anti-ESG”, DEI and anti-DEI developments.
Added
If conditions were to worsen nationally, regionally, or locally, we could experience a sharp increase in our total net charge-offs and could also be required to significantly increase our allowance for credit losses. Economic instability could also result in decreased demand for loans and our other products and services.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeResults are presented to and approved by the Board. We are currently in the process of transitioning to the Cybersecurity Framework developed by the National Institute of Standards and Technology as the FFEIC Cybersecurity Assessment Toolkit will sunset on August 31, 2025; • Ransomware Assessment Toolkit (developed by the Bankers Electronic Crimes Task Force, state bank regulators and the U.S.
Biggest changeResults are presented to and approved by the Board; • Ransomware Assessment Toolkit (developed by the Bankers Electronic Crimes Task Force, state bank regulators and the U.S.
ITEM 1C. CYBERSECURITY Risk Management Strategy Given the increasing reliance on technology and potential of cyber threats, we have integrated a cybersecurity component into our risk management program, which is designed to identify, assess and mitigate risks across various aspects of the Company. We have a dedicated Information Security Department, which is led by our Chief Information Security Officer.
ITEM 1C. CYBERSECURITY Risk Management Strategy Given the increasing reliance on technology and the potential of cyber threats, we have integrated a cybersecurity component into our risk management program, which is designed to identify, assess and mitigate risks across various aspects of the Company. We have a dedicated Information Security Department, which is led by our Chief Information Security Officer.
Secret Service) is assessed biannually to capture any gaps and address any potential control deficiencies; • training and awareness programs for employees that include periodic and ongoing assessments to drive adoption and awareness of cybersecurity processes and controls; 32 Table of Contents • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls; • a cybersecurity incident response plan that includes procedures for responding to a cybersecurity incident; and defines escalations to senior management and the Board, as well as required notifications and timeframes to customers and regulatory authorities, • a third-party risk management process for service providers, suppliers, and vendors, including those external service providers we engage in our cybersecurity risk management processes.
Secret Service) is assessed biannually to capture any gaps and address any potential control deficiencies; • training and awareness programs for employees that include periodic and ongoing assessments to drive adoption and awareness of cybersecurity processes and controls; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls; • a cybersecurity incident response plan that includes procedures for responding to a cybersecurity incident; and defines escalations to senior management and the Board, as well as required notifications and timeframes to customers and regulatory authorities; and • a third-party risk management process for service providers, suppliers, and vendors, including those external service providers we engage in our cybersecurity risk management processes.
The Audit Committee receives, from the CISO, an annual report of the information security program and monthly reports of any security incident or on notable security events for the period. The Board Chairman and Vice Chairman are notified of any high criticality security incidents within 24 hours.
The Audit Committee receives, from the CISO, an annual report of the information security program and bimonthly reports of any security incident or on notable security events for the period. The Board Chairman and Vice Chairman are notified of any high criticality security incidents within 24 hours.
Risk Factors – Risks Related to Our Business” in this report for a discussion of risks related to cybersecurity. Governance Management’s Role Our CISO leads our Information Security Department, is responsible for the information security program, which includes cybersecurity, and reports to the Chief Risk Officer. Our CISO joined the Company in 2012.
Risk Factors – Risks Related to Our Business” in this report for a discussion of risks related to cybersecurity. 33 Table of Contents Governance Management’s Role Our CISO leads our Information Security Department, is responsible for the information security program, which includes cybersecurity, and reports to the Chief Risk Officer. Our CISO joined the Company in 2012.
Key elements of our cybersecurity risk management program include: • IT risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise information technology environment; • Information Security Department responsible for managing our cybersecurity risk assessment processes, our security controls, and our response to a cybersecurity incident; • Cybersecurity Assessment Toolkit (developed by the FFIEC) is assessed annually, tracks program maturity, changes in risk profile, and reviews security controls critical to reduce cybersecurity risk.
Key elements of our cybersecurity risk management program include: • IT risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise information technology environment; • Information Security Department responsible for managing our cybersecurity risk assessment processes, our security controls, and our response to a cybersecurity incident; • National Institute of Standards and Technology Cybersecurity Framework is assessed annually to track security program maturity and prioritize gaps in security controls.

Item 2. Properties

Properties — owned and leased real estate

4 edited+0 added−1 removed0 unchanged
Biggest changeIn addition to our branches, Southside also operates drive-thrus, wealth management 33 Table of Contents and trust services or other financial services offices which Southside owns. Southside also owns 72 ATMs/ITMs located throughout our market areas.
Biggest changeThese branches are located within the state of Texas in the Dallas/Fort Worth, East Texas, Southeast Texas, Austin and Houston regions. Of the 53 branches, 36 are owned and 17 are leased. In addition to our branches, Southside also operates drive-thrus, wealth management and trust services, LPOs or other financial services offices which Southside owns.
ITEM 2. PROPERTIES The primary executive offices of Southside are located at 1201 South Beckham Avenue, Tyler, Texas 75701. This site also houses a banking center, a technology center, back office support areas and wealth management and trust services.
ITEM 2. PROPERTIES The primary executive offices of Southside are located at 1201 South Beckham Avenue, Tyler, Texas 75701. This site also houses a banking center, a technology center, back office support areas and wealth management and trust services. An additional executive office is located at 1320 South University Drive, Fort Worth, Texas 76107 in University Center II.
For additional information concerning our properties, refer to “Note 6 – Premises and Equipment” and “Note 16 – Leases” to our consolidated financial statements included in this report.
Southside also owns 70 ATMs/ITMs located throughout our market areas. For additional information concerning our properties, refer to “Note 6 – Premises and Equipment” and “Note 16 – Leases” to our consolidated financial statements included in this report.
Additional executive offices are located at 1320 South University Drive, Fort Worth, Texas 76107 in University Center II and at 104 N. Temple, Diboll, Texas 75941. Additional wealth management and trust services are located at 2510 West Frank Street, Lufkin, Texas 75904. All of these locations are owned by Southside.
Additional wealth management and trust services are located at 2510 West Frank Street, Lufkin, Texas 75904. All of these locations are owned by Southside. As of December 31, 2025, Southside operated 53 branches, which includes traditional full service branches and full service branches within grocery stores.
Removed
As of December 31, 2024, Southside operated 53 branches, which includes traditional full service branches and full service branches within grocery stores. These branches are located within the state of Texas in the Dallas/Fort Worth, East Texas, Southeast Texas, Austin and Houston regions. Of the 53 branches, 35 are owned and 18 are leased.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+2 added−0 removed3 unchanged
Biggest changeRepurchases may be carried out in open market purchases, privately negotiated transactions or pursuant to any trading plan that might be adopted in accordance with Rule 10b5-1 of the Exchange Act, as amended. The Company has no obligation to repurchase any shares under the Stock Repurchase Plan and may modify, suspend or discontinue the plan at any time.
Biggest changeDuring 2025, we repurchased a total of 820,931 shares of our common stock at an average price per share of $28.52 pursuant to the Plan. Repurchases may be carried out in open market purchases, privately negotiated transactions or pursuant to any trading plan that might be adopted in accordance with Rule 10b5-1 of the Exchange Act, as amended.
SHAREHOLDERS There were approximat e ly 1,300 holders of record of our common stock, the only class of equity securities currently issued and outstanding, as of February 24, 2025. DIVIDENDS See the section captioned “Item 8.
There were approximately 1,300 holders of record of our common stock, the only class of equity securities currently issued and outstanding, as of February 24, 2026 . DIVIDENDS See the section captioned “Item 8.
The following table provides information with respect to purchases made by or on behalf of any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act), of our common stock during the three months ended December 31, 2024: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Number of Shares That May Yet Be Purchased Under the Stock Repurchase Plan at the End of the Period October 1, 2024 - October 31, 2024 — $ — — 583,066 November 1, 2024 - November 30, 2024 — — — 583,066 December 1, 2024 - December 31, 2024 — — — 583,066 Total — $ — — 34 Table of Contents We have not purchased any common stock pursuant to the Stock Repurchase Plan subsequent to December 31, 2024.
The following table provides information with respect to purchases of our common stock made by or on behalf of any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act), during the three months ended December 31, 2025: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Number of Shares That May Yet Be Purchased Under the Stock Repurchase Plan at the End of the Period October 1, 2025 - October 31, 2025 115,998 $ 28.62 115,998 1,015,941 November 1, 2025 - November 30, 2025 253,806 28.94 253,806 762,135 December 1, 2025 - December 31, 2025 — — — 762,135 Total 369,804 $ 28.84 369,804 We have not purchased any common stock pursuant to the Stock Repurchase Plan subsequent to December 31, 2025.
RECENT SALES OF UNREGISTERED SECURITIES There were no equity securities sold by us during the years ended December 31, 2024, 2023 or 2022 that were not registered under the Securities Act of 1933. 35 Table of Contents FINANCIAL PERFORMANCE The following performance graph compares the returns for the indexes indicated assuming that $100 was invested on December 31, 2019 and that all dividends are reinvested.
RECENT SALES OF UNREGISTERED SECURITIES We did not sell any equity securities during the years ended December 31, 2025, 2024 or 2023 that were not registered under the Securities Act of 1933. 35 Table of Contents FINANCIAL PERFORMANCE The following performance graph compares the returns for the indexes indicated, assuming that $100 was invested on December 31, 2020 and that all dividends were reinvested.
ISSUER SECURITY REPURCHASES On July 20, 2023, our board of directors approved a Stock Repurchase Plan authorizing the repurchase of up to 1.0 million shares of the Company’s outstanding common stock. During 2024, we repurchased a total of 57,966 shares at an average price per share of $25.96.
ISSUER SECURITY REPURCHASES On July 20, 2023, our board of directors approved a Stock Repurchase Plan authorizing the repurchase of up to 1.0 million shares of the Company’s outstanding common stock.
(TCBI) and Veritex Holdings, Inc. (VBTX). Source: S&P Global Market Intelligence © 2025 36 Table of Contents ITEM 6. [ RESERVED]
(STEL) and Texas Capital Bancshares, Inc. (TCBI). Source: S&P Global Market Intelligence © 2026 36 Table of Contents ITEM 6. [ RESERVED]
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION Our common stock trades on the NYSE under the symbol “SBSI.” On November 14, 2024, Southside voluntarily withdrew the listing of our common stock from NASDAQ and transferred the listing to NYSE.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION Our common stock trades on the NYSE under the symbol “SBSI.” On November 25, 2025, Southside also began trading on the NYSE Texas, Inc, a full electronic equities exchange headquartered in Dallas, Texas, under the symbol “SBSI.” Consequently, Southside is dual listed, with primary listing on the NYSE.
Period Ending Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 Southside Bancshares, Inc. 100.00 87.26 121.77 108.56 98.91 105.10 Russell 2000 Index 100.00 119.96 137.74 109.59 128.14 142.93 SBSI Peer Group* 100.00 100.23 128.78 119.21 111.63 131.64 *Peer group includes Cullen/Frost Bankers, Inc.(CFR), First Financial Bankshares, Inc.(FFIN), Hilltop Holdings (HTH), Prosperity Bancshares, Inc. (PB), Texas Capital Bancshares, Inc.
Period Ending Index 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 12/31/25 Southside Bancshares, Inc. 100.00 139.55 124.42 113.35 120.44 121.02 Russell 2000 Index 100.00 114.82 91.35 106.82 119.14 134.40 SBSI Peer Group* 100.00 126.54 119.20 112.32 131.33 130.14 *Peer group includes Cullen/Frost Bankers, Inc.(CFR), First Financial Bankshares, Inc. (FFIN), Hilltop Holdings (HTH), Prosperity Bancshares, Inc. (PB), Stellar Bancorp, Inc.
Added
On October 16, 2025, the Board of the Company increased its authorization under the Company’s current Plan by 1.0 million shares, for a total authorization to repurchase up to 2.0 million shares of the Company’s common stock from time to time.
Added
The Company has no obligation to repurchase any shares under the Plan and may modify, suspend or discontinue the plan at any time.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

154 edited+23 added−28 removed99 unchanged
Biggest changeOther factors that could cause actual results to differ materially from those indicated by forward-looking statements include, but are not limited to, the following: • general (i) political conditions, including, without limitation, governmental action and uncertainty resulting from U.S. and global political trends and (ii) economic conditions, either globally, nationally, in the State of Texas, or in the specific markets in which we operate, including, without limitation, the deterioration of the commercial real estate, residential real estate, construction and development, energy, oil and gas, credit or liquidity markets, which could cause an adverse change in our net interest margin, or a decline in the value of our assets, which could result in realized losses, as well as the risk of an economic slowdown or recession; • inflation and fluctuations in interest rates that reduce our margins and yields, the fair value of financial instruments, the level of loan originations or prepayments on loans we have made and make, and the cost we pay to retain and attract deposits and secure other types of funding; • current or future legislation, regulatory changes or changes in monetary or fiscal policy that adversely affect the businesses in which we or our customers or our borrowers are engaged, including the impact of the Dodd-Frank Act, the Federal Reserve’s actions to manage interest rates, the capital requirements promulgated by the Basel Committee, the CARES Act, the Economic Aid Act, tariffs, trade policies and other regulatory responses to economic conditions; • the impact of interest rate fluctuations on our financial projections, models and guidance; • acts of terrorism, war or other conflicts, natural disasters, such as hurricanes, freezes, flooding and other man-made disasters, such as oil spills or power outages, health emergencies, epidemics or pandemics, climate change or other catastrophic events that may affect general economic conditions or cause other disruptions and/or increase costs, including, but not limited to, property and casualty and other insurance costs; • potential impacts of the adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto; • technological changes, including potential cyber-security incidents and other disruptions, or innovations to the financial services industry, including as a result of the increased telework environment; 37 Table of Contents • our ability to identify and address cyber-security risks such as data security breaches, malware, “denial of service” attacks, “hacking” and identity theft, which may be exacerbated by developments in generative artificial intelligence and which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage of our systems, increased costs, significant losses, or adverse effects to our reputation; • changes in the interest rate yield curve such as flat, inverted or steep yield curves, or changes in the interest rate environment that impact net interest margins and may impact prepayments on our MBS portfolio; • the risk that our enterprise risk management framework, compliance program or our corporate governance and supervisory oversight functions may not identify or address risks adequately, which may result in unexpected losses; • the effect of compliance with legislation or regulatory changes; • the potential implementation under the new presidential administration of a regulatory reform agenda that is different than that of the prior administration, impacting the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies; • credit risks of borrowers, including any increase in those risks due to changing economic conditions; • increases in our nonperforming assets; • risks related to environmental liability as a result of certain lending activity; • our ability to maintain adequate liquidity to fund operations and growth; • our ability to control interest rate risk; • any applicable regulatory limits or other restrictions on the Bank and its ability to pay dividends to us; • the failure of our assumptions underlying our allowance for credit losses and other estimates; • the failure to maintain an effective system of controls and procedures, including internal control over financial reporting; • the effectiveness of our derivative financial instruments and hedging activities to manage risk; • unexpected outcomes of, and the costs associated with, existing or new litigation involving us; • potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions; • changes impacting our balance sheet strategy; • risks related to actual mortgage prepayments diverging from projections; • risks related to fluctuations in the price per barrel of crude oil; • significant increases in competition in the banking and financial services industry; • changes in consumer spending, borrowing and saving habits, including as a result of inflation, fluctuating interest rates and recessionary concerns; • execution of future acquisitions, reorganization or disposition transactions, including the risk that the anticipated benefits of such transactions are not realized; • our ability to increase market share and control expenses; • our ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by our customers; • the effect of changes in federal or state tax laws; • the effect of changes in accounting policies and practices; • adverse changes in the status or financial condition of the GSEs which impact the GSEs’ guarantees or ability to pay or issue debt; • adverse changes in the credit portfolios of other U.S. financial institutions relative to the performance of certain of our investment securities; • risks related to actual U.S. agency MBS prepayments exceeding projected prepayment levels; • risks related to U.S. agency MBS prepayments increasing due to U.S. government programs designed to assist homeowners to refinance their mortgage that might not otherwise have qualified; • risks related to loans secured by real estate, including the risk that the value and marketability of collateral could decline; 38 Table of Contents • risks associated with our common stock and our other securities, including fluctuations in our stock price and general volatility in the stock market; and • the risks identified in “Part I - Item 1A.
Biggest changeOther factors that could cause actual results to differ materially from those indicated by forward-looking statements include, but are not limited to, the following: • general (i) political conditions, including, without limitation, governmental action and uncertainty resulting from U.S. and global political trends and (ii) economic conditions, either globally, nationally, in the State of Texas, or in the specific markets in which we operate, including, without limitation, the deterioration of the commercial real estate, residential real estate, construction and development, energy, oil and gas, credit or liquidity markets, which could cause an adverse change in our net interest margin, or a decline in the value of our assets, which could result in realized losses, as well as the risks of an economic slowdown or recession and the effects of inflationary pressures, changes in interest rates, tariffs or trade wars (including reduced consumer spending, supply chain issues and adverse impacts to credit quality) and the related financial stress on borrowers and changes to customer behavior and credit risk as a result of the foregoing; • changes in trade, monetary, and fiscal policies and laws, including actual changes in interest rates and the Fed Funds rate and changes in international trade policies, tariffs and treaties affecting imports and exports, and their related impacts on macroeconomic conditions, customer behavior, funding costs and loan and securities portfolios; • inflation and fluctuations in interest rates that reduce our margins and yields, the fair value of financial instruments, the level of loan originations or prepayments on loans we have made and make, and the cost we pay to retain and attract deposits and secure other types of funding; • current or future legislation, regulatory changes or changes in monetary or fiscal policy that adversely affect the businesses in which we or our customers or our borrowers are engaged, including the Federal Reserve’s actions to manage interest rates, tariffs, trade policies, supply chain disruptions, immigration policies and/or disputes and other regulatory responses to economic conditions; 37 Table of Contents • the impact of interest rate fluctuations on our financial projections, models and guidance; • legislative, tax and regulatory changes, including those that impact the money supply, trade, immigration and inflation; • acts of terrorism, war or other conflicts, natural disasters, such as hurricanes, freezes, flooding and other man-made disasters, such as oil spills or power outages, health emergencies, epidemics or pandemics, climate change or other catastrophic events that may affect general economic conditions or cause other disruptions and/or increase costs, including, but not limited to, property and casualty and other insurance costs; • potential impacts of the adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto (including increases in the cost of our deposit insurance assessments); • technological changes, including potential cyber-security incidents and other disruptions, developments in AI, or innovations to the financial services industry, including as a result of the increased telework environment; • our ability to identify and address cyber-security risks such as data security breaches, malware, “denial of service” attacks, “hacking” and identity theft, which may be exacerbated by developments in generative artificial intelligence and which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage of our systems, increased costs, significant losses, or adverse effects to our reputation; • changes in the interest rate yield curve such as flat, inverted or steep yield curves, or changes in the interest rate environment that impact net interest margins and may impact prepayments on our MBS portfolio; • the risk that our enterprise risk management framework, compliance program or our corporate governance and supervisory oversight functions may not identify or address risks adequately, which may result in unexpected losses; • the effect of compliance with legislation or regulatory changes; • the implementation under the presidential administration of a regulatory reform agenda that is different than that of the prior administration, impacting the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies; • credit risks of borrowers, including any increase in those risks due to changing economic conditions, including inflation, tariffs and immigration policies; • increases in our nonperforming assets; • risks related to environmental liability as a result of certain lending activity; • our ability to maintain adequate liquidity to fund operations and growth; • our ability to control interest rate risk; • any applicable regulatory limits or other restrictions on the Bank and its ability to pay dividends to us; • the failure of our assumptions underlying our allowance for credit losses and other estimates; • the failure to maintain an effective system of controls and procedures, including internal control over financial reporting; • the effectiveness of our derivative financial instruments and hedging activities to manage risk; • unexpected outcomes of, and the costs associated with, existing or new litigation involving us; • potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions; • changes impacting our balance sheet strategy; • risks related to actual mortgage prepayments diverging from projections; • risks related to fluctuations in the price per barrel of crude oil; • significant increases in competition in the banking and financial services industry; • changes in consumer spending, borrowing and saving habits, including as a result of inflation, tariffs, supply chain disruptions, fluctuating interest rates and recessionary concerns; • execution of future acquisitions, reorganization or disposition transactions, including the risk that the anticipated benefits of such transactions are not realized; • our ability to increase market share and control expenses; • our ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by our customers; 38 Table of Contents • the effect of changes in accounting policies and practices; • adverse changes in the status or financial condition of the GSEs which impact the GSEs’ guarantees or ability to pay or issue debt; • adverse changes in the credit portfolios of other U.S. financial institutions relative to the performance of certain of our investment securities; • risks related to actual U.S. agency MBS prepayments exceeding projected prepayment levels; • risks related to U.S. agency MBS prepayments increasing due to U.S. government programs designed to assist homeowners to refinance their mortgage that might not otherwise have qualified; • risks related to loans secured by real estate, including the risk that the value and marketability of collateral could decline; • risks associated with our common stock and our other securities, including fluctuations in our stock price and general volatility in the stock market; and • the risks identified in “Part I - Item 1A.
The underwriting standards we employ for consumer loans include an application, a determination of the applicant’s payment history on other debts, with the greatest weight being given to payment history with us and an assessment of the borrower’s ability to meet existing obligations and payments on the proposed loan.
The underwriting standards we employ for consumer loans include an application and a determination of the applicant’s payment history on other debts, with the greatest weight being given to payment history with us and an assessment of the borrower’s ability to meet existing obligations and payments on the proposed loan.
These include payments related to (i) borrowings presented in “Note 8 - Borrowing Arrangements” and “Note 9 – Long-Term Debt,” (ii) operating leases presented in “Note 16 - Leases,” (iii) time deposits with stated maturity dates presented in “Note 7 – Deposits” and (iv) commitments to extend credit and standby letters of credit as presented in “Note 17 - Off-Balance-Sheet Arrangements, Commitments and Contingencies.” 66 Table of Contents Management continually evaluates our liquidity position and currently believes the Company has adequate funding to meet our financial needs.
These include payments related to (i) borrowings presented in “Note 8 - Borrowing Arrangements” and “Note 9 – Long-Term Debt,” (ii) operating leases presented in “Note 16 - Leases,” (iii) time deposits with stated maturity dates presented in “Note 7 – Deposits” and (iv) commitments to extend credit and standby letters of credit as presented in “Note 17 - Off-Balance-Sheet Arrangements, Commitments and Contingencies.” Management continually evaluates our liquidity position and currently believes the Company has adequate funding to meet our financial needs. 66 Table of Contents
No valuation allowance was recorded at December 31, 2024 or December 31, 2023, as management believes it is more likely than not that all of the deferred tax asset items will be realized in future years. LENDING ACTIVITIES One of our main objectives is to seek attractive lending opportunities in Texas, primarily in the market areas in which we operate.
No valuation allowance was recorded at December 31, 2025 or December 31, 2024, as management believes it is more likely than not that all of the deferred tax asset items will be realized in future years. LENDING ACTIVITIES One of our main objectives is to seek attractive lending opportunities in Texas, primarily in the market areas in which we operate.
(5) The interest rate on FHLB borrowings includes the effect of interest rate swaps. Other borrowings may include federal funds purchased, repurchase agreements and borrowings from the Federal Reserve through the FRDW and BTFP.
(5) The interest rate on FHLB borrowings includes the effect of interest rate swaps. Other borrowings may include federal funds purchased, repurchase agreements and borrowings from the Federal Reserve through the FRDW.
Historically, the amount of losses suffered on this type of loan has been significantly less than those on other properties. Prior to funding any real estate loan, our loan policy requires an appraisal or evaluation of the property and also outlines the requirements for appraisals on renewals based on the size and complexity of the transaction.
Historically, the amount of losses realized on this type of loan has been significantly less than those on other properties. Prior to funding any real estate loan, our loan policy requires an appraisal or evaluation of the property and also outlines the requirements for appraisals on renewals based on the size and complexity of the transaction.
Potential higher interest expense and lack of customer loyalty are risks associated with the use of brokered deposits. 47 Table of Contents AVERAGE BALANCES WITH AVERAGE YIELDS AND RATES The following table presents average earning assets and interest bearing liabilities together with the average yield on the earning assets and the average rate of the interest bearing liabilities for the years ended December 31, 2024, 2023 and 2022.
Potential higher interest expense and lack of customer loyalty are risks associated with the use of brokered deposits. 47 Table of Contents AVERAGE BALANCES WITH AVERAGE YIELDS AND RATES The following table presents average earning assets and interest bearing liabilities together with the average yield on the earning assets and the average rate of the interest bearing liabilities for the years ended December 31, 2025, 2024 and 2023.
Securities transferred with losses included in AOCI continue to be included in management’s assessment for impairment for each individual security. During the years ended December 31, 2024 and 2023, we did not transfer any securities from AFS to HTM. There were no sales from the HTM portfolio during the years ended December 31, 2024 or 2023.
Securities transferred with losses included in AOCI continue to be included in management’s assessment for impairment for each individual security. During the years ended December 31, 2025 and 2024, we did not transfer any securities from AFS to HTM. There were no sales from the HTM portfolio during the years ended December 31, 2025 or 2024.
This discussion should be read in conjunction with the financial statements and related notes included elsewhere in this report. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2023 Form 10-K for a discussion and analysis of the more significant factors that affected periods prior to 2023.
This discussion should be read in conjunction with the financial statements and related notes included elsewhere in this report. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2024 Form 10-K for a discussion and analysis of the more significant factors that affected periods prior to 2024.
Southside Bank has three unsecured lines of credit for the purchase of overnight federal funds at prevailing rates with Frost Bank, Amegy Bank, TIB – The Independent Bankers Bank for $40.0 million, $25.0 million and $15.0 million, respectively. There were no federal funds purchased at December 31, 2024 or 2023.
Southside Bank has three unsecured lines of credit for the purchase of overnight federal funds at prevailing rates with Frost Bank, Amegy Bank and TIB – The Independent Bankers Bank for $40.0 million, $25.0 million and $15.0 million, respectively. There were no federal funds purchased at December 31, 2025 or 2024.
Future changes in applicable law, regulations or government policies may also have a material impact on us. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2023 Form 10-K for a discussion and analysis of the periods prior to 2023.
Future changes in applicable law, regulations or government policies may also have a material impact on us. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2024 Form 10-K for a discussion and analysis of the periods prior to 2024.
The Bank has three unsecured lines of credit for the purchase of overnight federal funds at prevailing rates with Frost Bank, Amegy Bank and TIB – The Independent Bankers Bank for $40.0 million, $25.0 million and $15.0 million, respectively. There were no federal funds purchased at December 31, 2024 or 2023.
The Bank has three unsecured lines of credit for the purchase of overnight federal funds at prevailing rates with Frost Bank, Amegy Bank and TIB – The Independent Bankers Bank for $40.0 million, $25.0 million and $15.0 million, respectively. There were no federal funds purchased at December 31, 2025 or 2024.
Amortization of intangibles decreased for the year ended December 31, 2024, compared to the same period in 2023, due primarily to a decrease in core deposit intangible amortization which is recognized on an accelerated method resulting in a decline in expense over the amortization period.
Amortization of intangibles decreased for the year ended December 31, 2025, compared to the same period in 2024, due primarily to a decrease in core deposit intangible amortization which is recognized on an accelerated method resulting in a decline in expense over the amortization period.
MUNICIPAL LOANS We have made loans to municipalities and school districts primarily throughout the state of Texas, with a small percentage originating outside of the state. The majority of the loans to municipalities and school districts have tax or revenue pledges and in some cases are additionally supported by collateral.
MUNICIPAL LOANS We make loans to municipalities and school districts primarily throughout the state of Texas, with a small percentage originating outside of the state. The majority of the loans to municipalities and school districts have tax or revenue pledges and in some cases are additionally supported by collateral.
The amounts of these loans outstanding at December 31, 2024, which, based on maturity, are due in (1) one year or less, (2) after one but within five years, (3) after five years but within 15 years, and (4) after 15 years, are shown in the following table.
The amounts of these loans outstanding at December 31, 2025, which, based on maturity, are due in (1) one year or less, (2) after one but within five years, (3) after five years but within 15 years, and (4) after 15 years, are shown in the following table.
For example, benefits of the Share Repurchase Plan, trends in asset quality, capital, liquidity, our ability to sell nonperforming assets, expense reductions, planned operational efficiencies and earnings from growth and certain market risk disclosures, including the impact of interest rates and our expectations regarding rate changes, tax reform, inflation, the impacts related to or resulting from other economic factors are based upon information presently available to management and are dependent on choices about key model characteristics and assumptions and are subject to various limitations.
For example, trends in asset quality, capital, liquidity, our ability to sell nonperforming assets, expense reductions, planned operational efficiencies and earnings from growth and certain market risk disclosures, including the impact of interest rates and our expectations regarding rate changes, tax reform, inflation, the impacts related to or resulting from other economic factors are based upon information presently available to management and are dependent on choices about key model characteristics and assumptions and are subject to various limitations.
As of December 31, 2024, Southside Bancshares and Southside Bank met all capital adequacy requirements under the Basel III Capital Rules that became fully phased-in as of January 1, 2019. See the section captioned “Supervision and Regulation” in “Item 1.
As of December 31, 2025, Southside Bancshares and Southside Bank met all capital adequacy requirements under the Basel III Capital Rules that became fully phased-in as of January 1, 2019. See the section captioned “Supervision and Regulation” in “Item 1.
Restructured loans represent loans that have been modified due to the borrower experiencing financial difficulty to provide interest rate reductions or below market interest rates, restructuring amortization schedules and other actions intended to minimize potential losses. Categorization of a loan as nonperforming is not in itself a reliable indicator of potential loan loss.
Restructured loans represent loans that have been modified due to the borrower experiencing financial difficulty by providing interest rate reductions or below market interest rates, restructuring amortization schedules and other actions intended to minimize potential losses. Categorization of a loan as nonperforming is not in itself a reliable indicator of potential loan loss.
Municipal loans made without a direct pledge of taxes or revenues are usually made based on some type of collateral that represents an essential service. These loans allow us to earn a higher yield than we could if we purchased municipal securities for similar durations.
Municipal loans made without a direct pledge of taxes or revenues are usually made based on some type of collateral that represents an essential service. These loans allow us to earn a higher yield 53 Table of Contents than we could if we purchased municipal securities for similar durations.
In addition, a list of specifically reserved loans or loan relationships of $150,000 or more is updated on a quarterly basis in order to properly determine necessary allowances and keep management informed on the status of attempts to correct the deficiencies noted with respect to the loans.
In addition, a list of specifically reserved loans or loan relationships of $150,000 or more is updated on a 57 Table of Contents quarterly basis in order to properly determine necessary allowances and keep management informed on the status of attempts to correct the deficiencies noted with respect to the loans.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provides a comparison of our results of operations for the years ended December 31, 2024 and 2023 and financial condition as of December 31, 2024 and 2023.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provides a comparison of our results of operations for the years ended December 31, 2025 and 2024 and financial condition as of December 31, 2025 and 2024.
The decrease in gain on sale of loans for the year ended December 31, 2024, was primarily due to the $412,000 net loss on the sale of a commercial real estate loan relationship during the first quarter of 2024.
The increase in gain on sale of loans for the year ended December 31, 2025, was primarily due to the $412,000 net loss on the sale of a commercial real estate loan relationship during the first quarter of 2024.
Please refer to the accompanying notes to these consolidated financial statements for the expected timing of such cash payments as of December 31, 2024.
Please refer to the accompanying notes to these consolidated financial statements for the expected timing of such cash payments as of December 31, 2025.
The balance of the allowance for off-balance-sheet credit exposures at December 31, 2024 and 2023, was $3.1 million and $3.9 million, respectively, and is included in other liabilities. See the section captioned “Allowance for Credit Losses - Off-Balance-Sheet Credit Exposures” elsewhere in this discussion for further analysis of the provision for credit losses for off-balance-sheet credit exposures.
The balance of the allowance for off-balance-sheet credit exposures at December 31, 2025 and 2024, was $3.2 million and $3.1 million, respectively, and is included in other liabilities. See the section captioned “Allowance for Credit Losses - Off-Balance-Sheet Credit Exposures” elsewhere in this discussion for further analysis of the provision for credit losses for off-balance-sheet credit exposures.
The Bank did not have any additional Tier 1 capital beyond Common Equity Tier 1 at December 31, 2024. Total capital includes Tier 1 capital and Tier 2 capital. Tier 2 capital for both the Company and the Bank includes a permissible portion of the allowance for credit losses on loans and off-balance sheet exposures.
The Bank did not have any additional Tier 1 capital beyond Common Equity Tier 1 at December 31, 2025. Total capital includes Tier 1 capital and Tier 2 capital. Tier 2 capital for both the Company and the Bank includes a permissible portion of the allowance for credit losses on loans, off-balance sheet exposures and HTM securities.
The internal loan review department maintains a list of all loans or loan relationships that are graded as having more than the normal degree of risk 57 Table of Contents associated with them.
The internal loan review department maintains a list of all loans or loan relationships that are graded as having more than the normal degree of risk associated with them.
Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate. 48 Table of Contents PROVISION FOR CREDIT LOSSES For the year ended December 31, 2024, there was a provision for credit losses of $3.3 million, compared to $9.2 million for the year ended December 31, 2023.
Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate. 48 Table of Contents PROVISION FOR CREDIT LOSSES For the year ended December 31, 2025, there was a provision for credit losses of $3.1 million, compared to $3.3 million for the year ended December 31, 2024.
We also make home equity loans, which are included as part of the 1-4 family residential loans, and at December 31, 2024, these loans totaled $95.1 million. Under Texas law, these loans, when combined with all other mortgage indebtedness for the property, are capped at 80% of appraised value.
We also make home equity loans, which are included as part of the 1-4 family residential loans, and at December 31, 2025, these loans totaled $97.2 million. Under Texas law, these loans, when combined with all other mortgage indebtedness for the property, are capped at 80% of appraised value.
(2) For the purpose of calculating the average yield, the average balance of securities do not include unrealized gains and losses on AFS securities. (3) Yield/rate includes the impact of applicable derivatives. Note: As of December 31, 2024, 2023 and 2022, loans totaling $3.2 million, $3.9 million and $2.8 million, respectively, were on nonaccrual status.
(2) For the purpose of calculating the average yield, the average balance of securities do not include unrealized gains and losses on AFS securities. (3) Yield/rate includes the impact of applicable derivatives. Note: As of December 31, 2025, 2024 and 2023, loans totaling $10.5 million, $3.2 million and $3.9 million, respectively, were on nonaccrual status.
During 2024, we sold AFS municipal securities that resulted in an overall loss of $2.5 million, which included a net gain of $3.5 million recorded on the unwind of fair value municipal security hedges in the AFS securities portfolio.
During 2024, the sale of AFS municipal securities resulted in an overall net loss of $2.5 million, which included a net gain of $3.5 million recorded on the unwind of fair value municipal security hedges in the AFS securities portfolio.
See “Note 5 – Loans and Allowance for Loan Losses” in our consolidated financial statements included in this report. 58 Table of Contents ALLOWANCE FOR CREDIT LOSSES – OFF-BALANCE-SHEET CREDIT EXPOSURES Allowance for off-balance-sheet credit exposures were as follows (in thousands): Years Ended December 31, 2024 2023 2022 Balance at beginning of period $ 3,932 $ 3,687 $ 2,384 Provision for (reversal of) off-balance-sheet credit exposures (791) 245 1,303 Balance at end of period $ 3,141 $ 3,932 $ 3,687 Our off-balance-sheet credit exposures include contractual commitments to extend credit and standby letters of credit.
See “Note 5 – Loans and Allowance for Loan Losses” in our consolidated financial statements included in this report. 58 Table of Contents ALLOWANCE FOR CREDIT LOSSES – OFF-BALANCE-SHEET CREDIT EXPOSURES Allowance for off-balance-sheet credit exposures were as follows (in thousands): Years Ended December 31, 2025 2024 2023 Balance at beginning of period $ 3,141 $ 3,932 $ 3,687 Provision for (reversal of) off-balance-sheet credit exposures 25 (791) 245 Balance at end of period $ 3,166 $ 3,141 $ 3,932 Our off-balance-sheet credit exposures include contractual commitments to extend credit and standby letters of credit.
By utilizing this technology, we can determine changes that need to be made to the asset and liability mix to minimize the change in net interest income under these various interest rate scenarios. In the ordinary course of business we have entered into contractual obligations and have made certain other commitments to make future cash payments.
By utilizing this methodology, we can determine potential changes to make to the asset and liability mix to minimize the change in net interest income under these various interest rate scenarios. In the ordinary course of business we have entered into contractual obligations and have made certain other commitments to make future cash payments.
As of December 31, 2024, and 2023, our reviews of the loan portfolio indicated that loan loss allowances of $44.9 million and $42.7 million, respectively, were appropriate to cover expected credit losses in the portfolio. See the section captioned “Allowance for Credit Losses - Loans” elsewhere in this discussion for further analysis of the provision for credit losses for loans.
As of December 31, 2025, and 2024, our reviews of the loan portfolio indicated that loan loss allowances of $45.1 million and $44.9 million, respectively, were appropriate to cover expected credit losses in the portfolio. See the section captioned “Allowance for Credit Losses - Loans” elsewhere in this discussion for further analysis of the provision for credit losses for loans.
At December 31, 2024, the majority of the securities portfolio was funded by non-maturity deposits, some of which are included in wholesale funding that accounts for approximately 51% of the funding source, of which approximately 54% is swapped at a fixed rate, providing protection from rising interest rates.
At December 31, 2025, the majority of the securities portfolio was funded by non-maturity deposits, some of which are included in wholesale funding that accounts for approximately 37% of the funding source, of which approximately 87% is swapped at a fixed rate, providing protection from rising interest rates.
For the year ended December 31, 2024, we recorded a reversal of provision for credit losses for off-balance-sheet exposures of $791,000, compared to a provision for credit losses on off-balance-sheet exposures of $245,000 for the year ended December 31, 2023.
For the year ended December 31, 2025, we recorded a provision for credit losses for off-balance-sheet exposures of $25,000, compared to a reversal of provision for credit losses on off-balance-sheet exposures of $791,000 for the year ended December 31, 2024.
The increase in income tax expense is due to the higher ETR and higher pre-tax income for the year ended December 31, 2024 compared to the same period in 2023. The ETR differs from the statutory rate of 21% primarily due to the effect of tax-exempt income from municipal loans and securities, as well as BOLI.
The decrease in income tax expense is due to the lower ETR and lower pre-tax income for the year ended December 31, 2025 compared to the same period in 2024. The ETR differs from the statutory rate of 21% primarily due to the effect of tax-exempt income from municipal loans and securities, as well as BOLI.
We utilize Moody’s Analytics economic forecast scenarios and assign probability weighting to those scenarios which best reflect management’s views on the economic forecast. The probability weighting and scenarios utilized for the estimate of the allowance were generally reflective of continued economic and repricing uncertainty forecasted in our CECL model as of December 31, 2024.
We utilize Moody’s Analytics economic forecast scenarios and assign probability weighting to those scenarios which best reflect management’s views on the economic forecast. The probability weighting and scenarios utilized for the estimate of the allowance were generally reflective of the economic forecast in our CECL model as of December 31, 2025.
As of December 31, 2024, our review of the loan portfolio indicated that an allowance for loan losses of $44.9 million was appropriate to cover expected losses in the portfolio. Changes in economic and other conditions, including the application of the CECL model, may require future adjustments to the allowance for loan losses.
As of December 31, 2025, our review of the loan portfolio indicated that an allowance for loan losses of $45.1 million was appropriate to cover expected losses in the portfolio. Changes in economic and other conditions, including the application of the CECL model, may require future adjustments to the allowance for loan losses.
Tier 2 capital for the Company also includes $92.0 million of qualified subordinated debt as of December 31, 2024. The permissible portion of qualified subordinated notes decreases 20% per year during the final five years of the term of the notes.
Tier 2 capital for the Company also includes $221.2 million of qualified subordinated debt as of December 31, 2025. The permissible portion of qualified subordinated notes decreases 20% per year during the final five years of the term of the notes.
These loans totaled $12.1 million and $13.7 million and represented 1.5% and 1.8% of shareholders’ equity as of December 31, 2024 and 2023, respectively. NONPERFORMING ASSETS Nonperforming assets consist of delinquent loans 90 days or more past due, nonaccrual loans, OREO, repossessed assets and restructured loans.
These loans totaled $9.8 million and $12.1 million and represented 1.2% and 1.5% of shareholders’ equity as of December 31, 2025 and 2024, respectively. NONPERFORMING ASSETS Nonperforming assets consist of delinquent loans 90 days or more past due, nonaccrual loans, OREO, repossessed assets and restructured loans.
Our brokered non-maturity deposits decreased to 9.4% of deposits at December 31, 2024, compared to 12.6% of deposits at December 31, 2023. Our wholesale funding policy currently allows for maximum brokered deposits of the lesser of $1.05 billion, or 12% of total assets.
Our brokered non-maturity deposits increased to 9.5% of deposits at December 31, 2025, compared to 9.4% of deposits at December 31, 2024. Our wholesale funding policy currently allows for maximum brokered deposits of the lesser of $1.05 billion, or 12% of total assets.
Business” included in this report. 65 Table of Contents The table below summarizes our key equity ratios: Years Ended December 31, 2024 2023 2022 Return on average assets 1.06 % 1.11 % 1.43 % Return on average shareholders’ equity 11.03 % 11.50 % 13.42 % Dividend payout ratio – Basic 49.32 % 50.35 % 42.81 % Dividend payout ratio – Diluted 49.48 % 50.35 % 42.94 % Average shareholders’ equity to average total assets 9.58 % 9.63 % 10.65 % EFFECTS OF INFLATION Our consolidated financial statements and their related notes have been prepared in accordance with GAAP which requires the measurement of financial position and operating results in terms of historical dollars, without considering the change in the relative purchasing power of money over time and due to inflation.
Business” included in this report. 65 Table of Contents The table below summarizes our key equity ratios: Years Ended December 31, 2025 2024 2023 Return on average assets 0.83 % 1.06 % 1.11 % Return on average shareholders’ equity 8.40 % 11.03 % 11.50 % Dividend payout ratio – Basic 62.61 % 49.32 % 50.35 % Dividend payout ratio – Diluted 62.88 % 49.48 % 50.35 % Average shareholders’ equity to average total assets 9.85 % 9.58 % 9.63 % EFFECTS OF INFLATION Our consolidated financial statements and their related notes have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars, without considering the change in the relative purchasing power of money over time and due to inflation.
Earnings per diluted common share increased $0.09, or 3.2%, to $2.91 for the year ended December 31, 2024, compared to $2.82 for the same period in 2023. 41 Table of Contents The following table sets forth selected financial data regarding our results of operations and financial position for, and as of the end of, each of the fiscal years in the three-year period ended December 31, 2024.
Earnings per diluted common share decreased $0.62, or 21.3%, to $2.29 for the year ended December 31, 2025, compared to $2.91 for the same period in 2024. 41 Table of Contents The following table sets forth selected financial data regarding our results of operations and financial position for, and as of the end of, each of the fiscal years in the three-year period ended December 31, 2025.
The majority of our loan originations are made to borrowers who live in and/or conduct business in the market areas of Texas in which we operate or adjoin. Total loans as of December 31, 2024 increased $137.1 million, or 3.0%, and the average loan balance outstanding for the year increased $293.1 million, or 6.8%, compared to 2023.
The majority of our loan originations are made to borrowers who live in and/or conduct business in the market areas of Texas in which we operate or adjoin. Total loans as of December 31, 2025 increased $156.4 million, or 3.4%, and the average loan balance outstanding for the year increased $50.8 million, or 1.1%, compared to 2024.
We had $650,000 of loans on nonaccrual for which there was no related allowance for credit losses as of December 31, 2024. 56 Table of Contents ALLOWANCE FOR CREDIT LOSSES – LOANS The following table presents information regarding changes in the allowance for loan losses for the periods presented (in thousands): Years Ended December 31, 2024 2023 2022 Balance of allowance for loan losses at beginning of period $ 42,674 $ 36,515 $ 35,273 Total loan charge-offs (3,360) (4,204) (2,584) Total recovery of loans previously charged-off 1,433 1,454 1,888 Net loan charge-offs (1,927) (2,750) (696) Provision for (reversal of) loan losses 4,137 8,909 1,938 Allowance for loan losses at end of period $ 44,884 $ 42,674 $ 36,515 Our allowance for loan losses was $44.9 million at December 31, 2024, or 0.96% of loans, an increase of $2.2 million, or 5.2%, compared to $42.7 million at December 31, 2023.
We had $2.7 million of loans on nonaccrual for which there was no related allowance for credit losses as of December 31, 2025. 56 Table of Contents ALLOWANCE FOR CREDIT LOSSES – LOANS The following table presents information regarding changes in the allowance for loan losses for the periods presented (in thousands): Years Ended December 31, 2025 2024 2023 Balance of allowance for loan losses at beginning of period $ 44,884 $ 42,674 $ 36,515 Total loan charge-offs (4,257) (3,360) (4,204) Total recovery of loans previously charged-off 1,470 1,433 1,454 Net loan charge-offs (2,787) (1,927) (2,750) Provision for (reversal of) loan losses 3,003 4,137 8,909 Allowance for loan losses at end of period $ 45,100 $ 44,884 $ 42,674 Our allowance for loan losses was $45.1 million at December 31, 2025, or 0.94% of loans, an increase of $216,000, or 0.5%, compared to $44.9 million at December 31, 2024.
The increase in shareholders’ equity was the result of net income of $88.5 million, stock compensation expense of $3.5 million, net issuance of common stock under employee stock plans of $2.0 million and common stock issued under our dividend reinvestment plan of $1.2 million, partially offset by cash dividends paid of $43.6 million, other comprehensive loss of $11.4 million and repurchases of $1.5 million of our common stock pursuant to our Stock Repurchase Plan.
The increase in shareholders’ equity was the result of net income of $69.2 million, other comprehensive income of $29.3 million, stock compensation expense of $3.0 million and common stock issued under our dividend reinvestment plan of $1.0 million, partially offset by cash dividends paid of $43.4 million, repurchases of $23.4 million of our common stock pursuant to our Stock Repurchase Plan and net issuance of common stock under employee stock plans of $91,000.
At December 31, 2024, the majority of our real estate loans were collateralized by properties located in our market areas. Of the $3.86 billion in real estate loans, $740.4 million, or 19.2%, represent loans collateralized by residential dwellings that are primarily owner occupied.
At December 31, 2025, the majority of our real estate loans were collateralized by properties located in our market areas. Of the $3.99 billion in real estate loans, $724.4 million, or 18.2%, represent loans collateralized by residential dwellings that are primarily owner occupied.
The net deferred tax asset totaled $34.5 million at December 31, 2024, as compared to $30.4 million in 2023. The increase in the net deferred tax asset is primarily the result of an increase in unrealized losses in the AFS securities portfolio. See “Note 15 – Income Taxes” to our consolidated financial statements included in this report.
The net deferred tax asset totaled $27.1 million at December 31, 2025, as compared to $34.5 million in 2024. The decrease in the net deferred tax asset is primarily the result of a decrease in unrealized losses in the AFS securities portfolio. See “Note 15 – Income Taxes” to our consolidated financial statements included in this report.
At December 31, 2024, loans collateralized by titled equipment, which are primarily automobiles, accounted for approximately $25.5 million, or 51.6%, of total loans to individuals. Home equity loans, which are included in 1-4 family residential loans, have replaced some of the traditional loans to individuals.
At December 31, 2025, loans collateralized by titled equipment, which are primarily automobiles, accounted for approximately $19.3 million, or 47.3%, of total loans to individuals. Home equity loans, which are included in 1-4 family residential loans, have replaced some of the traditional loans to individuals.
We reversed $72,000 of interest income on nonaccrual loans during the year ended December 31, 2024.
We reversed $83,000 of interest income on nonaccrual loans during the year ended December 31, 2025.
There were $1.28 billion and $1.31 billion of securities classified as HTM at December 31, 2024 and 2023, respectively. 60 Table of Contents The maturities classified according to the sensitivity to changes in interest rates of the December 31, 2024 AFS and HTM investment securities and MBS portfolio and the weighted yields are presented below (dollars in thousands).
There were $1.25 billion and $1.28 billion of securities classified as HTM at December 31, 2025 and 2024, respectively. 60 Table of Contents The maturities of AFS and HTM investment securities and MBS portfolio and the weighted yields are presented below (dollars in thousands) as of December 31, 2025.
The total net unamortized premium for our MBS decreased to $5.9 million at December 31, 2024 compared to $9.5 million at December 31, 2023. Our investment securities consist primarily of state and political subdivision (municipal bonds) and to a lesser extent, U.S. Treasury Bills and corporate bonds.
The total net unamortized premium for our MBS increased to $9.3 million at December 31, 2025, compared to $5.9 million at December 31, 2024. Our investment securities consist primarily of state and political subdivision (municipal bonds) and to a lesser extent, corporate bonds.
At December 31, 2024, the combined investment securities, MBS, FHLB stock and other investments as a percentage of total assets was 33.5% compared to loans, which were 54.8% of total assets. For a discussion of our strategy in relation to the securities portfolio, see “Item 7.
At December 31, 2025, the combined investment securities, MBS, FHLB stock and other investments as a percentage of total assets was 32.0%, compared to loans, which were 56.6% of total assets. For a discussion of our strategy in relation to the securities portfolio, see “Item 7.
The Bank has a $5.0 million line of credit with Frost Bank to be used to issue letters of credit, and at December 31, 2024, the line had one outstanding letter of credit for $155,000. The Bank currently has one outstanding letter of credit from FHLB held as collateral for a loan for $6.1 million.
The Bank has a $5.0 million line of credit with Frost Bank to be used to issue letters of credit, and at December 31, 2025, the line had oneoutstanding letter of credit for $155,000. The Bank currently has two outstanding letters of credit from FHLB held as collateral for loans totaling $6.2 million.
To provide more liquidity in response to economic conditions in recent years, the Federal Reserve has encouraged broader use of the discount window. At December 31, 2024, the amount of additional funding the Bank could obtain from the FRDW, collateralized by securities, was approximately $431.7 million.
To provide more liquidity in response to economic conditions in recent years, the Federal Reserve has encouraged broader use of the discount window. At December 31, 2025, the amount of additional funding the Bank could obtain from the FRDW, collateralized by securities, was approximately $241.8 million. There were $110.0 million in borrowings from the FRDW at December 31, 2025.
To provide more liquidity in response to economic conditions in recent years, the Federal Reserve has encouraged broader use of the discount window. At December 31, 2024, the amount of additional funding the Bank could obtain from the FRDW, collateralized by securities, was approximately $431.7 million.
To provide more liquidity in response to economic conditions in recent years, the Federal Reserve has encouraged broader use of the discount window. At December 31, 2025, the amount of additional funding the Bank could obtain from the FRDW, collateralized by securities, was approximately $241.8 million. There were $110.0 million in borrowings from the FRDW at December 31, 2025.
The increase in net interest income for the year ended December 31, 2024 was due to increases in the average balance and the average yield of interest earning assets, partially offset by increases in the average rate paid on our interest bearing liabilities and average balance of our interest bearing liabilities.
The increase in net interest income for the year ended December 31, 2025 was due to decreases in the average rate paid on our interest bearing liabilities and a change in the mix of our interest earning assets and interest bearing liabilities, partially offset by the decrease in the average yield of interest earning assets.
Most of our fixed rate commercial real estate loans adjust at least every five years. At December 31, 2024, commercial real estate loans consisted of $1.85 billion of owner and non-owner occupied real estate loans, $697.3 million of loans secured by multi-family properties and $31.4 million of loans secured by farmland.
Most of our fixed rate commercial real estate loans adjust at least every five years. At December 31, 2025, commercial real estate loans consisted of $1.94 billion of owner and non-owner occupied real estate loans, $742.7 million of loans secured by multi-family properties and $32.7 million of loans secured by farmland.
The increase in shareholders’ equity was the result of net income of $88.5 million, stock compensation expense of $3.5 million, net issuance of common stock under employee stock plans of $2.0 million and common stock issued under our dividend reinvestment plan of $1.2 million, partially offset by cash dividends paid of $43.6 million, other comprehensive loss of $11.4 million and repurchases of $1.5 million of our common stock.
The increase in shareholders’ equity was the result of net income of $69.2 million, other comprehensive income of $29.3 million, stock compensation expense of $3.0 million, and common stock issued under our dividend reinvestment plan of $1.0 million, partially offset by cash dividends paid of $43.4 million, repurchases of $23.4 million of our common stock pursuant to our Stock Repurchase Plan and the net issuance of common stock under employee stock plans of $91,000.
Borrowing arrangements are summarized as follows (dollars in thousands): Years Ended December 31, 2024 2023 2022 Other borrowings: Balance at end of period $ 76,443 $ 509,820 $ 221,153 Average amount outstanding during the period (1) 205,743 436,676 77,845 Maximum amount outstanding during the period (2) 597,765 1,030,421 316,563 Weighted average interest rate during the period (3) 5.7 % 4.9 % 2.4 % Interest rate at end of period (4) 3.6 % 5.0 % 4.1 % FHLB borrowings: Balance at end of period $ 731,909 $ 212,648 $ 153,358 Average amount outstanding during the period (1) 601,366 276,584 135,926 Maximum amount outstanding during the period (2) 760,046 533,242 423,645 Weighted average interest rate during the period (3) 4.1 % 2.5 % 2.4 % Interest rate at end of period (5) 3.7 % 1.2 % 0.7 % (1) The average amount outstanding during the period was computed by dividing the total daily outstanding principal balances by the number of days in the period.
Borrowing arrangements are summarized as follows (dollars in thousands): Years Ended December 31, 2025 2024 2023 Other borrowings: Balance at end of period $ 208,657 $ 76,443 $ 509,820 Average amount outstanding during the period (1) 107,989 205,743 436,676 Maximum amount outstanding during the period (2) 297,359 597,765 1,030,421 Weighted average interest rate during the period (3) 4.5 % 5.7 % 4.9 % Interest rate at end of period (4) 3.6 % 3.6 % 5.0 % FHLB borrowings: Balance at end of period $ 211,136 $ 731,909 $ 212,648 Average amount outstanding during the period (1) 372,342 601,366 276,584 Maximum amount outstanding during the period (2) 651,782 760,046 533,242 Weighted average interest rate during the period (3) 3.7 % 4.1 % 2.5 % Interest rate at end of period (5) 2.9 % 3.7 % 1.2 % (1) The average amount outstanding during the period was computed by dividing the total daily outstanding principal balances by the number of days in the period.
Fluctuations in interest rates or interest rate yield curves, as well as repricing characteristics and volume and changes in the mix of interest earning assets and interest bearing liabilities, materially impact net interest income. During the year ended December 31, 2023, the Federal Reserve increased the target federal funds rate by 100 basis points to 5.25% to 5.50%.
Fluctuations in interest rates or interest rate yield curves, as well as repricing characteristics and volume and changes in the mix of interest earning assets and interest bearing liabilities, materially impact net interest income. During the last four months of 2024, the Federal Reserve reduced target federal funds rate by 100 basis points to 4.25% to 4.50%.
Our brokered non-maturity deposits decreased to $627.1 million at December 31, 2024, of which $480.0 million are related to our cash flow hedges, from $828.0 million at December 31, 2023, with a weighted average cost of 321 and 323 basis points, respectively.
Our brokered non-maturity deposits increased to $652.4 million at December 31, 2025, of which $650.0 million are related to our cash flow hedges, from $627.1 million at December 31, 2024, with a weighted average cost of 359 and 321 basis points, respectively.
The following table presents net interest income for the periods presented (in thousands): Years Ended December 31, 2024 2023 2022 Interest income: Loans $ 279,371 $ 244,803 $ 170,410 Taxable investment securities 28,075 31,186 18,940 Tax-exempt investment securities 40,469 54,629 45,001 MBS 45,222 19,450 16,639 FHLB stock and equity investments 2,079 1,185 503 Other interest earning assets 19,120 8,488 1,488 Total interest income 414,336 359,741 252,981 Interest expense: Deposits 153,657 108,157 29,075 FHLB borrowings 24,450 6,777 3,291 Subordinated notes 3,774 3,920 4,015 Trust preferred subordinated debentures 4,621 4,504 2,397 Repurchase agreements 3,603 3,431 199 Other borrowings 8,104 17,925 1,663 Total interest expense 198,209 144,714 40,640 Net interest income $ 216,127 $ 215,027 $ 212,341 NET INTEREST INCOME Net interest income is one of the principal sources of a financial institution’s earnings stream and represents the difference or spread between interest and fee income generated from interest earning assets and the interest expense paid on interest bearing liabilities.
The following table presents net interest income for the periods presented (in thousands): Years Ended December 31, 2025 2024 2023 Interest income: Loans $ 275,621 $ 279,371 $ 244,803 Taxable investment securities 22,981 28,075 31,186 Tax-exempt investment securities 31,597 40,469 54,629 MBS 57,230 45,222 19,450 FHLB stock and equity investments 1,822 2,079 1,185 Other interest earning assets 13,823 19,120 8,488 Total interest income 403,074 414,336 359,741 Interest expense: Deposits 151,177 153,657 108,157 FHLB borrowings 13,679 24,450 6,777 Subordinated notes 8,208 3,774 3,920 Trust preferred subordinated debentures 4,034 4,621 4,504 Repurchase agreements 2,828 3,603 3,431 Other borrowings 2,064 8,104 17,925 Total interest expense 181,990 198,209 144,714 Net interest income $ 221,084 $ 216,127 $ 215,027 NET INTEREST INCOME Net interest income is one of the principal sources of a financial institution’s earnings stream and represents the difference or spread between interest and fee income generated from interest earning assets and the interest expense paid on interest bearing liabilities.
As of December 31, 2024, $134.0 million in hedging instruments were used to hedge a layer of the closed portfolio of AFS MBS with a carrying value of $557.8 million, or 60% of the AFS MBS portfolio, and $155.0 million in hedging instruments were used to hedge a layer of the closed portfolio of municipal loans.
As of December 31, 2025, $301.0 million in hedging instruments were used to hedge a layer of the closed portfolio of AFS MBS with a carrying value of $1.08 billion, or 85.8% of the AFS MBS portfolio, and $155.0 million in hedging instruments were used to hedge a layer of the closed portfolio of municipal loans.
Most of our municipal bonds were issued by the State of Texas or political subdivisions or agencies within the State of Texas and are highly rated. Our corporate bonds consist of investment grade bonds, private placement bonds and two bonds totaling approximately $6.8 million, rated one grade below investment grade.
Most of our municipal bonds were issued by the State of Texas or political subdivisions or agencies within the State of Texas and are highly rated. Our corporate bonds consist of investment grade bonds, private placement bonds and one bond rated below investment grade in the amount of $4.0 million.
In connection with $790.0 million and $1.01 billion of the agreements outstanding at December 31, 2024 and December 31, 2023, respectively, the Bank also entered into various interest rate swap contracts that are treated as cash flow hedges under ASC Topic 815, “Derivatives and Hedging” that are expected to be effective in hedging the variability in future cash flows at 2.63% with a remaining average weighted maturity of 1.6 years at December 31, 2024.
In connection with this $860.0 million of funding at December 31, 2025, the Bank also entered into various interest rate swap contracts that are treated as cash flow hedges under ASC Topic 815, “Derivatives and Hedging” that are expected to be effective in hedging the variability in future cash flows at 3.42% with a remaining average weighted maturity of 1.3 years at December 31, 2025.
At December 31, 2024, securities as a percentage of assets totaled 33.0%, compared to 31.4% at December 31, 2023, due to a $209.8 million, or 8.1%, increase in securities, while cash and cash equivalents decreased to 5.0% of total assets at December 31, 2024, compared to 6.8% at December 31, 2023.
At December 31, 2025, securities as a percentage of assets totaled 31.8%, compared to 33.0% at December 31, 2024, due to a $109.4 million, or 3.9%, decrease in securities. Cash and cash equivalents decreased to 4.6% of total assets at December 31, 2025, compared to 5.0% at December 31, 2024.
The following table details the provision for (reversal of) loan losses and provision for (reversal of) off-balance-sheet credit exposures for the years ended December 31, 2024, 2023 and 2022 (dollars in thousands): 2024 Increase (Decrease) 2023 Increase (Decrease) 2022 Provision for loan losses $ 4,137 $ (4,772) (53.6) % $ 8,909 $ 6,971 359.7 % $ 1,938 Provision for (reversal of) off-balance-sheet credit exposures (791) (1,036) (422.9) % 245 (1,058) (81.2) % 1,303 Total provision for credit losses $ 3,346 $ (5,808) (63.4) % $ 9,154 $ 5,913 182.4 % $ 3,241 49 Table of Contents NONINTEREST INCOME Noninterest income consists of revenue generated from a broad range of financial services and activities and other fee generating services that we either provide or in which we participate.
The following table details the provision for (reversal of) loan losses, provision for (reversal of) off-balance-sheet credit exposures and provision for (reversal of) securities held to maturity for the years ended December 31, 2025, 2024 and 2023 (dollars in thousands): 2025 Increase (Decrease) 2024 Increase (Decrease) 2023 Provision for (reversal of) loan losses $ 3,003 $ (1,134) (27.4) % $ 4,137 $ (4,772) (53.6) % $ 8,909 Provision for (reversal of) off-balance-sheet credit exposures 25 816 103.2 % (791) (1,036) (422.9) % 245 Provision for (reversal of) securities held to maturity 25 25 100.0 % — — — — Total provision for credit losses $ 3,053 $ (293) (8.8) % $ 3,346 $ (5,808) (63.4) % $ 9,154 49 Table of Contents NONINTEREST INCOME Noninterest income consists of revenue generated from a broad range of financial services and activities and other fee generating services that we either provide or in which we participate.
Brokered deposits may consist of CDs and non-maturity deposits. At December 31, 2024, we had $115.7 million in brokered CDs. Brokered non-maturity deposits were $627.1 million at December 31, 2024 with a weighted average cost of 321 basis points. As of December 31, 2023, we had no brokered CDs and $828.0 million in brokered non-maturity deposits.
Brokered deposits may consist of CDs and non-maturity deposits. At December 31, 2025, we had $19.8 million in brokered CDs. Brokered non-maturity deposits were $652.4 million at December 31, 2025 with a weighted average cost of 359 basis points. As of December 31, 2024, we had $115.7 million in brokered CDs and $627.1 million in brokered non-maturity deposits.
The decrease in BOLI income for the year ended December 31, 2024, when compared to the same period in 2023, was primarily due to death benefits of $3.0 million realized during the year ended December 31, 2023 for former covered officers, partially offset by a death benefit of $962,000 realized during the year ended December 31, 2024 for a former covered officer.
The decrease in BOLI income for the year ended December 31, 2025, when compared to the same period in 2024, was due to a death benefit of $962,000 realized in the second quarter of 2024 for a former covered officer, partially offset by a death benefit of $255,000 realized during the fourth quarter of 2025 for a former covered officer.
The fair value of the AFS securities portfolio at December 31, 2024 was $1.53 billion, which included a net unrealized loss of $53.5 million. The net unrealized loss was comprised of $54.7 million of unrealized losses and $1.2 million of unrealized gains. The majority of the $54.7 million of unrealized losses is reflected in our state and political subdivisions.
The fair value of the AFS securities portfolio at December 31, 2025 was $1.46 billion, which included a net unrealized loss of $767,000. The net unrealized loss was comprised of $17.9 million of unrealized losses and $17.1 million of unrealized gains. The majority of the $17.9 million of unrealized losses is reflected in our state and political subdivisions.
Advertising, travel and entertainment expense decreased during the year ended December 31, 2024, compared to the same period in 2023, due to decreases in travel related expenses, advertising and donations.
Advertising, travel and entertainment expense increased during the year ended December 31, 2025, compared to the same period in 2024, due to increases in media advertising, meals and entertainment and travel related expenses and donations.
The information should be reviewed in conjunction with the consolidated financial statements for the same years then ended (dollars in thousands): Average Balances with Average Yields and Rates Year ended December 31, 2024 December 31, 2023 December 31, 2022 Average Balance Interest Avg Yield/Rate (3) Average Balance Interest Avg Yield/Rate (3) Average Balance Interest Avg Yield/Rate (3) ASSETS Loans (1) $ 4,593,280 $ 281,790 6.13 % $ 4,300,138 $ 247,431 5.75 % $ 3,918,249 $ 173,355 4.42 % Loans held for sale 3,179 76 2.39 % 1,681 96 5.71 % 1,098 48 4.37 % Securities: Taxable investment securities (2) 785,145 28,075 3.58 % 845,907 31,186 3.69 % 627,546 18,940 3.02 % Tax-exempt investment securities (2) 1,212,844 48,547 4.00 % 1,554,519 64,568 4.15 % 1,675,227 56,389 3.37 % Mortgage-backed and related securities (2) 878,623 45,222 5.15 % 470,692 19,450 4.13 % 496,940 16,639 3.35 % Total securities 2,876,612 121,844 4.24 % 2,871,118 115,204 4.01 % 2,799,713 91,968 3.28 % FHLB stock, at cost, and equity investments 39,688 2,079 5.24 % 24,971 1,185 4.75 % 21,255 503 2.37 % Interest earning deposits 308,628 16,265 5.27 % 83,343 4,364 5.24 % 37,898 362 0.96 % Federal funds sold 53,709 2,855 5.32 % 79,948 4,124 5.16 % 44,454 1,126 2.53 % Total earning assets 7,875,096 424,909 5.40 % 7,361,199 372,404 5.06 % 6,822,667 267,362 3.92 % Cash and due from banks 106,965 107,018 104,602 Accrued interest and other assets 443,733 397,860 457,782 Less: Allowance for loan losses (43,428) (37,890) (35,962) Total assets $ 8,382,366 $ 7,828,187 $ 7,349,089 LIABILITIES AND SHAREHOLDERS’ EQUITY Savings accounts $ 600,375 5,824 0.97 % $ 636,603 5,633 0.88 % $ 671,402 1,838 0.27 % CDs 1,059,793 48,155 4.54 % 862,211 30,906 3.58 % 579,223 5,659 0.98 % Interest bearing demand accounts 3,503,878 99,678 2.84 % 3,122,319 71,618 2.29 % 3,139,628 21,578 0.69 % Total interest bearing deposits 5,164,046 153,657 2.98 % 4,621,133 108,157 2.34 % 4,390,253 29,075 0.66 % FHLB borrowings 601,366 24,450 4.07 % 276,584 6,777 2.45 % 135,926 3,291 2.42 % Subordinated notes, net of unamortized debt issuance costs 92,478 3,774 4.08 % 96,024 3,920 4.08 % 98,604 4,015 4.07 % Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,272 4,621 7.67 % 60,267 4,504 7.47 % 60,262 2,397 3.98 % Repurchase agreements 86,071 3,603 4.19 % 91,132 3,431 3.76 % 29,919 199 0.67 % Other borrowings 119,672 8,104 6.77 % 345,544 17,925 5.19 % 47,926 1,663 3.47 % Total interest bearing liabilities 6,123,905 198,209 3.24 % 5,490,684 144,714 2.64 % 4,762,890 40,640 0.85 % Noninterest bearing deposits 1,353,065 1,485,896 1,712,849 Accrued expenses and other liabilities 102,778 97,509 90,988 Total liabilities 7,579,748 7,074,089 6,566,727 Shareholders’ equity 802,618 754,098 782,362 Total liabilities and shareholders’ equity $ 8,382,366 $ 7,828,187 $ 7,349,089 Net interest income (FTE) $ 226,700 $ 227,690 $ 226,722 Net interest margin (FTE) 2.88 % 3.09 % 3.32 % Net interest spread (FTE) 2.16 % 2.42 % 3.07 % (1) Interest on loans includes net fees on loans that are not material in amount.
The information should be reviewed in conjunction with the consolidated financial statements for the same years then ended (dollars in thousands): Average Balances with Average Yields and Rates Year ended December 31, 2025 December 31, 2024 December 31, 2023 Average Balance Interest Avg Yield/Rate (3) Average Balance Interest Avg Yield/Rate (3) Average Balance Interest Avg Yield/Rate (3) ASSETS Loans (1) $ 4,644,030 $ 277,814 5.98 % $ 4,593,280 $ 281,790 6.13 % $ 4,300,138 $ 247,431 5.75 % Loans held for sale 827 51 6.17 % 3,179 76 2.39 % 1,681 96 5.71 % Securities: Taxable investment securities (2) 686,508 22,981 3.35 % 785,145 28,075 3.58 % 845,907 31,186 3.69 % Tax-exempt investment securities (2) 1,062,889 38,640 3.64 % 1,212,844 48,547 4.00 % 1,554,519 64,568 4.15 % Mortgage-backed and related securities (2) 1,097,523 57,230 5.21 % 878,623 45,222 5.15 % 470,692 19,450 4.13 % Total securities 2,846,920 118,851 4.17 % 2,876,612 121,844 4.24 % 2,871,118 115,204 4.01 % FHLB stock, at cost, and equity investments 33,876 1,822 5.38 % 39,688 2,079 5.24 % 24,971 1,185 4.75 % Interest earning deposits 307,019 12,773 4.16 % 308,628 16,265 5.27 % 83,343 4,364 5.24 % Federal funds sold 23,892 1,050 4.39 % 53,709 2,855 5.32 % 79,948 4,124 5.16 % Total earning assets 7,856,564 412,361 5.25 % 7,875,096 424,909 5.40 % 7,361,199 372,404 5.06 % Cash and due from banks 86,116 106,965 107,018 Accrued interest and other assets 468,556 443,733 397,860 Less: Allowance for loan losses (44,972) (43,428) (37,890) Total assets $ 8,366,264 $ 8,382,366 $ 7,828,187 LIABILITIES AND SHAREHOLDERS’ EQUITY Savings accounts $ 613,950 6,713 1.09 % $ 600,375 5,824 0.97 % $ 636,603 5,633 0.88 % CDs 1,405,873 58,920 4.19 % 1,059,793 48,155 4.54 % 862,211 30,906 3.58 % Interest bearing demand accounts 3,378,309 85,544 2.53 % 3,503,878 99,678 2.84 % 3,122,319 71,618 2.29 % Total interest bearing deposits 5,398,132 151,177 2.80 % 5,164,046 153,657 2.98 % 4,621,133 108,157 2.34 % FHLB borrowings 372,342 13,679 3.67 % 601,366 24,450 4.07 % 276,584 6,777 2.45 % Subordinated notes, net of unamortized debt issuance costs 148,712 8,208 5.52 % 92,478 3,774 4.08 % 96,024 3,920 4.08 % Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,277 4,034 6.69 % 60,272 4,621 7.67 % 60,267 4,504 7.47 % Repurchase agreements 80,155 2,828 3.53 % 86,071 3,603 4.19 % 91,132 3,431 3.76 % Other borrowings 27,834 2,064 7.42 % 119,672 8,104 6.77 % 345,544 17,925 5.19 % Total interest bearing liabilities 6,087,452 181,990 2.99 % 6,123,905 198,209 3.24 % 5,490,684 144,714 2.64 % Noninterest bearing deposits 1,368,466 1,353,065 1,485,896 Accrued expenses and other liabilities 85,881 102,778 97,509 Total liabilities 7,541,799 7,579,748 7,074,089 Shareholders’ equity 824,465 802,618 754,098 Total liabilities and shareholders’ equity $ 8,366,264 $ 8,382,366 $ 7,828,187 Net interest income (FTE) $ 230,371 $ 226,700 $ 227,690 Net interest margin (FTE) 2.93 % 2.88 % 3.09 % Net interest spread (FTE) 2.26 % 2.16 % 2.42 % (1) Interest on loans includes net fees on loans that are not material in amount.
Interest bearing demand, savings and noninterest bearing demand deposits are considered the lowest cost deposits and decreased to 83.7% of total average deposits for the year ended December 31, 2024, from 85.9% for the year ended December 31, 2023. At December 31, 2024, brokered CDs were 1.7% of deposits. We had no brokered CDs at December 31, 2023.
Interest bearing demand, savings and noninterest bearing demand deposits are considered the lowest cost deposits and decreased to 79.2% of total average deposits for the year ended December 31, 2025, from 83.7% for the year ended December 31, 2024. At December 31, 2025, brokered CDs were 0.3% of deposits, compared to 1.7% of deposits at December 31, 2024.
In our commercial loan underwriting, we assess the creditworthiness, ability to repay and the value and liquidity of the collateral being offered. Terms of commercial loans are generally commensurate with the useful life of the collateral offered. Commercial loans decreased $3.7 million, or 1.0%, to $363.2 million as of December 31, 2024, when compared to 2023.
In our commercial loan underwriting, we assess the creditworthiness, ability to repay and the value and liquidity of the collateral being offered. Terms of commercial loans are generally commensurate with the useful life of the collateral offered. Commercial loans increased $81.6 million, or 22.5%, to $444.7 million as of December 31, 2025, when compared to 2024.
At December 31, 2024, the amount of additional funding Southside Bank could obtain from FHLB, collateralized by securities, FHLB stock and nonspecified loans and securities, was approximately $1.72 billion, net of FHLB stock purchases required.
There were no borrowings from the FRDW at December 31, 2024. At December 31, 2025, the amount of additional funding Southside Bank could obtain from FHLB, collateralized by FHLB stock, nonspecified loans and/or securities, was approximately $2.45 billion, net of FHLB stock purchases required.
Health and life insurance expense, included in salaries and employee benefits, increased $840,000, or 10.2%, for the year ended December 31, 2024, compared to the same period in 2023, due to an increase in health claims expense. We have a self-insured health plan which is supplemented with a stop loss policy.
Health and life insurance expense, included in salaries and employee benefits, decreased $272,000, or 3.0%, for the year ended December 31, 2025, compared to the same period in 2024, due to decreases in health claims expense and plan administration cost. We have a self-insured health plan which is supplemented with a stop loss policy.
Years Ended December 31, 2024 2023 2022 Net interest income (GAAP) $ 216,127 $ 215,027 $ 212,341 Tax-equivalent adjustments: Loans 2,495 2,724 2,993 Tax-exempt investment securities 8,078 9,939 11,388 Net interest income (FTE) (1) $ 226,700 $ 227,690 $ 226,722 Average earning assets $ 7,875,096 $ 7,361,199 $ 6,822,667 Net interest margin 2.74 % 2.92 % 3.11 % Net interest margin (FTE) (1) 2.88 % 3.09 % 3.32 % Net interest spread 2.02 % 2.25 % 2.86 % Net interest spread (FTE) (1) 2.16 % 2.42 % 3.07 % (1) These amounts are presented on a fully taxable-equivalent basis and are non-GAAP measures.
Years Ended December 31, 2025 2024 2023 Net interest income (GAAP) $ 221,084 $ 216,127 $ 215,027 Tax-equivalent adjustments: Loans 2,244 2,495 2,724 Tax-exempt investment securities 7,043 8,078 9,939 Net interest income (FTE) (1) $ 230,371 $ 226,700 $ 227,690 Average earning assets $ 7,856,564 $ 7,875,096 $ 7,361,199 Net interest margin 2.81 % 2.74 % 2.92 % Net interest margin (FTE) (1) 2.93 % 2.88 % 3.09 % Net interest spread 2.14 % 2.02 % 2.25 % Net interest spread (FTE) (1) 2.26 % 2.16 % 2.42 % (1) These amounts are presented on a fully taxable-equivalent basis and are non-GAAP measures.
We ended the fourth quarter of 2024 with approximately $431.7 million in available liquidity from the FRDW, in addition to the approximately $1.72 billion available from the credit line with FHLB due primarily to the blanket lien on our loan portfolio and to a lesser extent, securities available as collateral.
We ended 2025 with approximately $241.8 million in available liquidity from the FRDW, in addition to the approximately $2.45 billion available from the credit line with FHLB due primarily to the blanket lien on our loan portfolio and to a lesser extent, securities available as collateral.
The ETR as a percentage of pre-tax income was 51 Table of Contents 17.6% in 2024 and 14.3% in 2023. The increase in the ETR for the year ended December 31, 2024, compared to the same period in 2023, was primarily a result of a decrease in net tax-exempt income as a percentage of pre-tax income.
The decrease in the ETR for the year ended December 31, 2025, compared to the same period in 2024, was primarily a result of an increase in net tax-exempt income as a percentage of pre-tax income.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAssumptions are based on management’s best estimates but may not accurately reflect actual results under certain changes in interest rates. Economic conditions and growth prospects are currently impacted by high inflation, elevated interest rates and potential recessionary concerns. Furthermore, worker shortages and inflationary conditions have had some impact on the level of economic growth in our market areas.
Biggest changeAssumptions are based on management’s best estimates but may not accurately reflect actual results under certain changes in interest rates. Continued tariff announcements and ongoing tariff negotiations have caused some uncertainty related to inflation levels and its impact on interest rates and the overall economy.
Federal Reserve monetary control efforts, the effects of deregulation, economic uncertainty and legislative changes have been significant factors affecting the task of managing interest rate sensitivity positions in recent years. In an attempt to manage our exposure to changes in interest rates, management closely monitors our exposure to interest rate risk through our ALCO.
Federal Reserve monetary control efforts, the effects of deregulation, inflation, economic uncertainty and legislative changes have been significant factors affecting the task of managing interest rate sensitivity positions in recent years. In an attempt to manage our exposure to changes in interest rates, management closely monitors our exposure to interest rate risk through our ALCO.
We continue to monitor interest rates and anticipate rate changes during 2025. The following table reflects the noted increases and decreases in interest rates under the model simulations and the anticipated impact on net interest income relative to the base case over the next 12 months for the periods presented.
We continue to monitor interest rates and anticipate rate changes during 2026. The following table reflects the noted increases and decreases in interest rates under the model simulations and the anticipated impact on net interest income relative to the base case over the next 12 months for the periods presented.
Anticipated impact over the next 12 months December 31, Rate projections: 2024 2023 Increase: 100 basis points 1.93 % 2.49 % 200 basis points 3.85 % 5.49 % Decrease: 50 basis points (1.18) % (0.80) % 100 basis points (1.55) % (1.82) % 200 basis points (1.80) % (3.85) % As part of the overall assumptions, certain assets and liabilities are given reasonable floors.
Anticipated impact over the next 12 months December 31, Rate projections: 2025 2024 Increase: 100 basis points 3.11 % 1.93 % 200 basis points 6.03 % 3.85 % Decrease: 50 basis points (1.58) % (1.18) % 100 basis points (2.66) % (1.55) % 200 basis points (5.01) % (1.80) % As part of the overall assumptions, certain assets and liabilities are given reasonable floors.
Management continually evaluates the condition of the economy, the pattern of market interest rates and other economic data to determine the types of investments that should be made and at what maturities.
The ALCO monitors various liquidity ratios to ensure a satisfactory liquidity position. Management continually evaluates the condition of the economy, the pattern of market interest rates and other economic data to determine the types of investments that should be made and at what maturities.
Removed
Higher inflation levels and elevated interest rates could have a negative impact on the financial condition of both our consumer and commercial borrowers. The ALCO monitors various liquidity ratios to ensure a satisfactory liquidity position.
Added
While it is too early to discern the likely outcome of these tariff announcements and negotiations, the current economic conditions and growth prospects for our markets continue to reflect a solid and overall positive outlook. Higher inflation levels and interest rate fluctuations could have a negative impact on both our consumer and commercial borrowers in the future.

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