First Financial Bankshares reports $74.31 million net income for Q3 2026

Cover page 4 changes

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For the quarterly period ended June September 30, 2026

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Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 Rule 12b-2 of the Act). Yes ☐ No ☒

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Outstanding at August 4, 2026

Outstanding at November 5, 2026

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Financial statements 41 changes

The consolidated balance sheets of First Financial Bankshares, Inc. and Subsidiaries (the "Company" or "we") at June September 30, 2026 (unaudited), and December 31, 2025, and the consolidated statements of earnings, comprehensive earnings (loss) and shareholders' equity for the three and six-months nine-months ended June September 30, 2026 and 2025 (unaudited), and the consolidated statements of cash flows for the six-months nine-months ended June September 30, 2026 and 2025 (unaudited), and notes to consolidated financial statements (unaudited), follow on pages 4 through 30.

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SECURITIES AVAILABLE-FOR-SALE, at fair value (amortized cost of these securities was $ 6,030,335 6,008,310 and $ 5,856,138 as of

June September 30, 2026 and December 31, 2025, respectively)

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Held-for-sale ($ 18,932 21,100 and $ 25,431 at fair value at

June September 30, 2026 and December 31, 2025, respectively)

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143,319,824 143,397,258 and 143,213,102 shares issued at

June September 30, 2026 and December 31, 2025, respectively

TREASURY STOCK (shares at cost: 943,775 946,478 and 936,268 at

June September 30, 2026 and December 31, 2025, respectively)

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Six-Months Ended June 30,

Three-Months Ended June September 30,

Nine-Months Ended September 30,

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Net loss on sale of available-for-sale securities

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Six-Months Ended June 30,

Three-Months Ended June September 30,

Nine-Months Ended September 30,

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Reclassification for realized losses through the sale of securities

Other comprehensive (loss) income on securities, before tax

Income tax benefit (expense) related to:

Change in unrealized loss on investment securities available-for-sale ( 17,245 ( 30,758

Reclassification adjustment for realized losses on investment securities included in net earnings ( 2 ( 2

Total income tax benefit (expense)

Total Other comprehensive income (loss), net of tax

TOTAL COMPREHENSIVE EARNINGS (LOSS)

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FIRST F IRST FINANCIAL BANKSHARES, INC. AND SUBSIDIARIES

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Balances at March 31, 2025

Balances at June 30, 2025

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Balances at March 31, 2026

Balances at June September 30, 2025

Balances at June 30, 2026

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Balances at June September 30, 2026

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Balances at June September 30, 2025

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Balances at June September 30, 2026

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Six-Months Ended June 30,

Nine-Months Ended September 30,

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Deferred federal income tax benefit expense

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Net proceeds (repayment) in repurchase agreements and other borrowings ( 9,151 ( 126,840

Net repayments of repurchase agreements and other borrowings ( 19,694 ( 124,417

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Proceeds from stock option exercises/stock unit conversions/restricted stock activity ( 54,473 86,038 ( 51,529 78,735

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NET DECREASE INCREASE IN CASH AND CASH EQUIVALENTS

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Investment securities purchased not settled

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Note 1: Summary of Significant Accounting Policies 11 changes

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First Financial Bankshares, Inc., a Texas corporation ("Bankshares," "Company," "we" or "us"), is a financial holding company which owns all of the capital stock of First Financial Bank, which had 79 80 locations located in Texas as of June September 30, 2026 . The Company's primary source of revenue is providing loans and banking services to consumers and commercial customers in the market area areas in which First Financial Bank is located. In addition, the Company also owns First Financial Trust & Asset Management Company dba First Financial Wealth Management, First Financial Insurance Agency, Inc. (inactive), First Technology Services, Inc., FFB Investment Paris Fund, LLC, and FFB Portfolio Management, Inc.

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In the opinion of management, all adjustments that were recurring in nature and considered necessary have been included for fair presentation of the Company's financial position and results of operations. Operating results for the three and six-months nine-months ended June September 30, 2026 are not necessarily indicative of results that may be expected for the full year ending December 31, 2026. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

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On July 28, 2026, the Company's Board of Directors renewed and increased the size of the authorization to repurchase up to 7,200,000 common shares through July 31, 2027.

On July 22, 2025, 28, 2026, the Company's Board of Directors extended renewed and increased the size of the authorization to repurchase up to 5,000,000 7,200,000 common shares through July 31, 2026. 2027. The prior authorization to repurchase up to 5,000,000 common shares had been in place since July 27, 2021. The stock repurchase plan authorizes management to repurchase and retire the stock at such time as repurchases and retirements are considered beneficial to the Company and shareholders. Any repurchase of stock will be made through the open market, block trades, or in privately negotiated transactions in accordance with applicable laws and regulations. Under the repurchase plan, there is no minimum number of shares that the Company is required to repurchase. There were no repurchases during 2025 or through June September 30, 2026.

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Net earnings per share ("EPS") are computed by dividing net earnings by the weighted average number of common shares outstanding during the period. The Company calculates dilutive EPS assuming all outstanding stock options to purchase common shares and unvested restricted stock shares and units have been exercised and/or vested at the beginning of the year (or the time of issuance, if later.) The dilutive effect of the outstanding options and restricted stock is determined by application of the treasury stock method, whereby the proceeds from the exercised options and unearned compensation for both restricted stock and stock options are assumed to be used to purchase common shares at the average market price during the respective period. There were 813,000 925,000 and 822,000 873,000 anti-dilutive shares for the three and six-months nine-months ended June September 30, 2026. There were 360,000 474,000 and 364,000 401,000 anti-dilutive shares for the three and six-months nine-months ended June September 30, 2025 respectively, that were excluded from the computation of EPS.

For the three-months ended June September 30, 2026:

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For the three-months ended June September 30, 2025:

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For the six-months ended June 30, 2026:

For the nine-months ended September 30, 2026:

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For the six-months ended June 30, 2025:

For the nine-months ended September 30, 2025:

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Note 2: Securities 7 changes

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The Company invests in mortgage-backed securities that have expected maturities that differ from their contractual maturities. These differences arise because borrowers may have the right to call or prepay obligations with or without a prepayment penalty. These securities include collateralized mortgage obligations (CMOs) and other asset backed securities. The expected maturities of these securities at June September 30, 2026, and December 31, 2025, were computed by using scheduled amortization of balances and historical prepayment rates.

The carrying value amortized cost and estimated fair value of available-for-sale securities at June September 30, 2026, by contractual and expected maturity, are shown below (dollars in thousands):

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The following tables disclose table discloses as of June September 30, 2026, and December 31, 2025 , the Company's investment securities that have been in a continuous unrealized-loss position for less than 12 months and for 12 or more months (dollars in thousands):

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During the three and six-months ended June 30, 2026 and 2025 , respectively, there were no sales of investment securities that were classified as available-for-sale. There were no gross realized security gains or losses from sales during the three and six-months ended June 30, 2026 and 2025.

The number of investments in an unrealized loss position totaled 699 885 at June September 30, 2026. As of June September 30, 2026 and December 31, 2025, no allowance for credit losses has been recognized on available-for-sale securities in an unrealized loss position as management does not believe any of the securities are impaired due to reasons of credit quality. This is based upon our analysis of the underlying risk characteristics, including credit ratings, and other qualitative factors related to our available-for-sale securities and in consideration of our historical credit loss experience and internal forecasts. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. In addition, a portion of our investments are guaranteed by the U.S. Government, Treasury, or municipalities. Management does not have the intent to sell securities classified as available-for-sale in the table above and believes that it is more likely than not that we will not have to sell such securities before a recovery of cost. The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. At June September 30, 2026, 72.5 70.0 % of our available-for-sale securities that are obligations of states and political subdivisions were issued within the State of Texas, of which 54.9 55.7 % are guaranteed by the Texas Permanent School Fund.

Securities, carried at approximately $ 3,242,345,000 3,058,894,000 on June September 30, 2026, were pledged as collateral for public or trust fund deposits, repurchase agreements, borrowings and for other purposes required or permitted by law.

During the three and nine-months ended September 30, 2026, the Company had sales of available-for-sale securities totaling $ 121,284,000 and recognized gross gains of $ 2,511,000 and gross losses of $ 2,520,000 on sales and calls. There were no sales of investment securities that were classified as available-for-sale during the three and nine-months ended September 30, 2025.

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Note 3: Loans Held-for-Investment and Allowance for Credit Losses 28 changes

For the periods ended June September 30, 2026 and December 31, 2025, the following tables outline the Company's loan portfolio by the ten portfolio segments where applicable.

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Outstanding loan balances at June September 30, 2026 and December 31, 2025, are net of unearned income, including net deferred loan fees.

Our subsidiary bank has established a line of credit with the Federal Home Loan Bank of Dallas ("FHLB") and the Federal Reserve Discount Window to provide liquidity and to secure certain uninsured municipal deposits. At June September 30, 2026, these available lines of credit were $ 2,250,612,000 2,277,461,000 and $ 1,628,678,000 , 1,764,497,000, respectively. At June September 30, 2026, there was $ 668,000,000 678,000,000 used on the FHLB line for undisbursed commitments (letters of credit) used to secure public funds. At June September 30, 2026 , there were no borrowings from the Federal Reserve Discount Window. At June September 30, 2026, $ 7,190,793,000 7,420,751,000 in loans held by our bank subsidiary were subject to blanket liens as security for these lines of credits.

The Company had $ 67,038,000 60,454,000 and $ 56,492,000 in nonaccrual, past due 90 days or more and still accruing, and foreclosed assets at June September 30, 2026 and December 31, 2025, respectively.

The following tables present the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing as of June September 30, 2026, and December 31, 2025:

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No significant additional funds are committed to be advanced in connection with nonaccrual loans as of June September 30, 2026.

At June September 30, 2026 and December 31, 2025, the Company's past due loans are as follows (dollars in thousands):

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A loan is considered to be collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. At June September 30, 2026 and December 31, 2025 , the Company had $ 86,000 2,240,000 and $ 110,000 in collateral-dependent commercial loans, collateralized by business assets, and $ 28,285,000 25,391,000 and $ 23,867,000 in collateral dependent commercial real estate loans, collateralized by real estate, respectively.

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The ACL on off-balance-sheet credit exposures is a liability account, calculated in accordance with ASC 326, representing expected credit losses over the contractual period for which we are exposed to credit risk resulting from a contractual obligation to extend credit. These obligations include unfunded lines of credit, commitments to extend credit and federal funds sold to correspondent banks and standby letters of credit. No allowance is recognized if we have the unconditional right to cancel the obligation. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on the commitments expected to fund. The estimate of commitments expected to fund is affected by historical analysis of utilization rates. The expected credit loss rates applied to the commitments expected to fund are affected by the general valuation allowance utilized for outstanding balances with the same underlying assumptions and drivers. The Company's reserve for unfunded commitments totaled $ 6,208,000 5,848,000 and $ 6,387,000 at June September 30, 2026 and December 31, 2025, respectively. The allowance is reported as a component of other liabilities in our consolidated balance sheets. Adjustments to the allowance are reported in our income statement as a component of the provision for credit loss expense. As of June September 30, 2026, the Company had $ 1,890,534,000 1,825,954,000 in off-balance sheet commitments.

Summary information on the allowance for credit losses for the three-months ended June September 30, 2026 and 2025, are outlined by portfolio segment in the following tables:

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Three-Months Ended June September 30, 2026

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Three-Months Ended June September 30, 2025

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(1) For the three-months ended June September 30, 2026 and 2025, the provision for credit losses of $ 4,183,000 2,034,000 and $ 3,132,000 24,435,000 , respectively, on the consolidated statements of earnings includes a provision for credit losses on loans of $ 3,915,000 2,394,000 and $ 2,432,000 25,506,000 , respectively, and a provision reversal for off-balance sheet unfunded commitments of $ 268,000 360,000 and $ 700,000 1,072,000 , respectively.

Summary information on the allowance for credit losses for the six-months nine-months ended June September 30, 2026 and 2025, are is outlined by portfolio segment in the following tables: table:

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Six-Months Ended June 30, 2026

Nine-Months Ended September 30, 2026

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Six-Months Ended June 30, 2025

Nine-Months Ended September 30, 2025

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(1) For the six-months nine-months ended June September 30, 2026 and 2025, the provision for credit losses of $ 6,474,000 8,508,000 and $ 6,660,000 31,095,000 , respectively, on the consolidated statements of earnings includes a provision for credit losses on loans of $ 6,653,000 9,047,000 and $ 5,423,000 30,929,000 , respectively, and a provision reversal for off-balance sheet unfunded commitments of $ 179,000 , 539,000 and provision for off-balance sheet unfunded commitments of $ 1,237,000 165,000 , respectively.

The Company's loans that are ind ividually evaluated for credit losses (both collateral and non-collateral dependent) and their related allowances as of June September 30, 2026 and December 31, 2025, are summarized in the following tables by loan segment (dollars in thousands):

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The Company's allowance for loans and recorded investment that are individually evaluated for credit losses and collectively evaluated for credit losses as of June September 30, 2026 and December 31, 2025, are summarized in the following table by loan segment (dollars in thousands). Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

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The following table summarizes the Company's loans held-for-investment by internal ratings, portfolio segments and vintage year at June September 30, 2026 (dollars in thousands):

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Six-Months Ended June 30, 2026

The following tables summarize the Company's gross charge-offs by origination year and loan class for the six-months nine-months ended June September 30, 2026 and 2025:

Nine-Months Ended September 30, 2026

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Six-Months Ended June 30, 2025

Nine-Months Ended September 30, 2025

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During the three and six-months nine-months ended June September 30, 2026 and 2025 , there were no significant loan modifications made to borrowers experiencing financial difficulty. was insignificant.

Note 4: Loans Held-for-Sale 1 change

Loans held-for-sale totaled $ 23,616,000 25,521,000 and $ 29,992,000 at June September 30, 2026 and December 31, 2025, respectively. At June September 30, 2026 and December 31, 2025, $ 4,684,000 4,421,000 and $ 4,561,000 , respectively, are valued at the lower of cost or fair value, and the remaining amounts are valued under the fair value option.

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Note 6: Borrowings and Repurchase Agreements 1 change

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The Company renewed its loan agreement, effective June 30, 2025 , with Frost Bank. Under the loan agreement, as renewed and amended, we are permitted to draw up to $ 50,000,000 on a revolving line of credit. There was no outstanding balance under the line of credit as of June September 30, 2026.

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Note 7: Income Taxes 3 changes

Income tax expense was $ 15,575,000 16,748,000 for the second third quarter of 2026 as compared to $ 15,078,000 10,897,000 for the same period in 2025. The Company's effective tax rates on pretax income were 17.8 18.4 % and 18.4 17.3 % for the second third quarters of 2026 and 2025, respectively. Income tax expense was $ 31,860,000 48,608,000 for the first half nine months of 2026 as compared to $ 28,888,000 39,785,000 for the same period in 2025. The Company's effective tax rates on pretax income were 18.2 % and 18.4 18.1 % for the first half nine months of 2026 and 2025, respectively. The effective tax rates differ from the statutory federal tax rate of 21 % primarily due to tax exempt interest income earned on certain investment securities and loans, the deductibility of dividends paid to our employee stock ownership plan, excess tax benefits for distributions under our deferred compensation plan and vesting of equity awards, New Market Tax Credits, Low Income Housing Tax Credits and the donation of a former branch facility.

Low Income Housing Tax Credit Investments - The Company has investments in an affordable housing fund that will invest in real estate projects that qualify for the federal low-income housing tax credit ("LIHTC") program designed to promote private development of low income housing. The investments made by the fund will generate a return to the Company primarily through the realization of LIHTCs, and also through federal tax deductions generated from the ongoing operating losses from the investees of the fund. The Company's investment in the fund will be amortized through income tax expense using the proportional amortization method as related tax credits are utilized by the Company. The carrying values of investments in LIHTC's were $ 35,255,000 34,836,000 and $ 27,500,000 as of June September 30, 2026 and December 31, 2025, respectively, and is included as a component of other assets on the consolidated balance sheets. Total unfunded contingent commitments related to the LIHTC investments totaled $ 30,360,000 29,321,000 and $ 21,114,000 at June September 30, 2026 and December 31, 2025, respectively, a component of other liabilities on the consolidated balance sheets. The Company expects the remaining commitments to be funded by 2043. There were no impairment losses on the LIHTC investments during the three and six-months nine-months ended June September 30, 2026 and 2025.

New Market Tax Credit Investments - During 2021, the Company began investing in qualifying CDEs under the federal NMTC program. NMTC investments are made through the third-party CDEs which are qualified through the U.S. Department of Treasury and receive periodic allocation of amounts under the NMTC program. NMTCs are generated from qualified investments by the CDEs utilizing equity investments made by a taxpayer, like the Company. Through these equity investments, the Company will receive the tax benefits from the NMTCs equal to 39 % of the qualified investment from the CDE to qualifying eligible projects over a seven year period. The Company's equity investments in the CDEs is amortized using the proportional amortization method and related tax credits are allocated to the Company. At June September 30, 2026 and December 31, 2025, the consolidated balance sheet of the Company included an $ 18,000,000 loan to the investee in loans and the $ 21,053,000 leveraged loan from the investee within other borrowings (see Note 6). At June September 30, 2026 and December 31, 2025, the consolidated balance sheet of the Company included CDE investments in other assets of $ 22,475,000 22,149,000 and $ 23,128,000 , respectively.

Note 8: Stock Based Compensation 21 changes

On April 27, 2021, the Company's shareholders approved the 2021 Omnibus Stock and Incentive Plan ("2021 Plan") and reserved 2,500,000 shares of the Company's common stock for issuance under this plan. At June September 30, 2026, the Company had 935,333 605,607 shares of stock remaining for issuance under the plan. The 2021 Plan supersedes all prior stock option and restricted stock plans with shares previously reserved for issuance under such plans cancelled.

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For the Six-Months Ended June 30,

Under the 2021 Plan, the Company grants restricted stock units under compensation arrangements for the benefit of employees and senior and executive officers. Restricted stock unit grants are subject to time-based vesting. The total number of restricted stock units granted represents the maximum number of restricted stock units eligible to vest based upon the service conditions set forth in the grant agreements. The following table summarizes information about the changes in restricted stock units for the six-months nine-months ended June September 30, 2026 and 2025.

For the Nine-Months Ended September 30,

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For the Six-Months Ended June 30,

Also under the 2021 Plan, the Company awards performance-based restricted stock units ("PSUs") to employees and senior and executive officers. Under the terms of the award, the number of units that will vest and convert to shares of common stock will be based on the extent to which the Company achieves specific performance criteria during the fixed three-year performance period. The number of shares issued upon vesting will range from 0 % to 200 % of the PSUs granted. The PSUs vest at the end of a three-year period based on either 50 % each on average adjusted earnings per share growth and return on average assets, or 100 % return on average assets, or 50 % each on return on average assets and relative total shareholder return, as reported, adjusted for unusual gains/losses, merger expenses, and other items as approved by the compensation committee of the Company's board of directors. Performance for each period is measured relative to other U.S. publicly traded banks with $ 10 billion to $ 50 billion in assets. Compensation expense for the PSUs that do not contain market-based conditions will be estimated each period based on the fair value of the stock at the grant date and the most probable outcome of the performance condition, adjusted for the passage of time within the vesting period of the awards. The value of PSUs that include a market-based condition is estimated on the grant date using a Monte Carlo simulation model.

The following table summarizes information about the changes in PSUs as of and for the six-months nine-months ended June September 30, 2026 and 2025.

For the Nine-Months Ended September 30,

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For the Six-Months Ended June 30,

For the Nine-Months Ended September 30,

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The total fair value of restricted stock unit, performance stock unit, and restricted stock awards vested for the six-months nine-months ended June September 30, 2026 and 2025, was $ 2,094,000 3,424,000 and $ 1,670,000 2,808,000 , respectively.

The Company recorded restricted stock unit and performance-based restricted stock unit expense for employees of $ 1,033,000 1,099,000 and $ 658,000 751,000 for the three-months ended June September 30, 2026 and 2025, respectively. The Company recorded restricted stock unit and performance-based restricted stock unit expense for employees of $ 1,972,000 3,071,000 and $ 1,723,000 2,474,000 for the six-months nine-months ended June September 30, 2026 and 2025, respectively. The Company recorded director expense related to these restricted stock awards of $ 210,000 and $ 204,000 210,000 , for the three-months ended June September 30, 2026 and 2025, respectively. The Company recorded director expense related to these restricted stock awards of $ 420,000 630,000 and $ 397,000 607,000 , for the six-months nine-months ended June September 30, 2026 and 2025, respectively.

As of June September 30, 2026 there was $ 4,492,000 6,660,000 of total unrecognized compensation cost related to unvested restricted stock units, performance-based restricted stock units, and restricted stock awards, which is expected to be recognized over a weighted-average period of 0.98 1.40 years. At June September 30, 2026 and December 31, 2025, there was $ 202,000 204,000 and $ 199,000 , respectively, accrued in other liabilities related to dividends declared to be paid upon vesting.

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An analysis of stock option activity for the six-months nine-months ended June September 30, 2026 is presented in the table and narrative below:

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Outstanding, June 30, 2026

Exercisable, June 30, 2026

Outstanding, September 30, 2026

Exercisable, September 30, 2026

The options outstanding at June September 30, 2026 had exercise prices ranging between $ 21.18 and $ 48.91 . Stock options have been adjusted retroactively for the effects of stock dividends and splits.

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The Company recorded stock option expense totaling $ 753,000 702,000 and $ 669,000 639,000 for the three-months ended June September 30, 2026 and 2025, respectively. The Company recorded stock option expense totaling $ 1,507,000 2,209,000 and $ 1,338,000 1,976,000 for the six-months nine-months ended June September 30, 2026 and 2025, respectively.

As of June September 30, 2026, there was $ 3,194,000 4,018,000 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the plans. That cost is expected to be recognized over a weighted-average period of 0.93 1.13 years. The total fair value of shares vested during the six-months nine-months ended June September 30, 2026 and 2025 was $ 10,000 3,022,000 and $ 416,000, 2,791,000, respectively.

Note 9: Fair Value Disclosures 6 changes

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There were no transfers between Level 2 and Level 3 during the three and six-months nine-months ended June September 30, 2026 and 2025.

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The following table summarizes the Company's gains on sale and fees of mortgage loans for the three and six-months nine-months ended June September 30, 2026 and 2025 (dollars in thousands):

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No residential mortgage loans held-for-sale were 90 days or more past due or considered nonaccrual as of June September 30, 2026 or December 31, 2025 . No significant credit losses were recognized on mortgage loans held-for-sale for the three and six-months nine-months ended June September 30, 2026 and 2025.

Non-Financial Assets and Non-Financial Liabilities : We do not have any non-financial assets or non-financial liabilities measured at fair value on a recurring basis. From time to time, non-financial assets measured at fair value on a non-recurring basis may include certain foreclosed assets, which, upon initial recognition, were remeasured and reported at fair value through a charge-off to the allowance for credit losses on loans, and certain foreclosed assets which, subsequent to their initial recognition, were remeasured at fair value through a write-down included in other non-interest expense. During the reported periods, all fair value measurements for foreclosed assets utilized Level 2 inputs based on observable market data, generally third-party appraisals, or Level 3 inputs based on customized discounting criteria. These appraisals are evaluated individually and discounted as necessary due to the age of the appraisal, lack of comparable sales, expected holding periods of property or special use type of the property. Such discounts vary by appraisal based on the above factors but generally range from 5 % to 25 % of the appraised value. Re-evaluation of other real estate owned is performed at least annually as required by regulatory guidelines or more often if particular circumstances arise. There were no significant other real estate owned properties that were re-measured subsequent to their initial transfer to other real estate owned during the three and six-months nine-months ended June September 30, 2026 and 2025.

At June September 30, 2026 and December 31, 2025, other real estate owned totaled $ 2,763,000 3,198,000 and $ 280,000 , respectively.

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Financial instruments with stated maturities have been valued using a present value discounted cash flow with a discount rate approximating current market for similar assets and liabilities and are considered Levels 2 and 3 of the fair value hierarchy. Financial instrument liabilities with no stated maturities have an estimated fair value equal to both the amount payable on demand and the carrying value and are considered Level 1 of the fair value hierarchy. The carrying value and the estimated fair value of the Company's contractual off-balance-sheet unfunded lines of credit, loan commitments and letters of credit, which are generally priced at market at the time of funding.

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Forward-looking statements 85 changes

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• the effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") and the implementation of tariffs and other protectionist trade policies;

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As a financial holding company, we generate most of our revenue from interest on loans and investments, wealth management fees, gain on sale of mortgage loans and service charges, interchange income and fees on deposit accounts. Our primary source of funding for our loans and investments are deposits held by our bank subsidiary, First Financial Bank. Our largest expenses are interest on deposits and salaries and related employee benefits. We measure our performance by calculating our return on average assets, return on average equity, regulatory capital ratios, net interest margin and efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax equivalent basis and noninterest income.

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On July 22, 2025, the Company's Board of Directors extended the authorization to repurchase up to 5 million common shares through July 31, 2026.

On July 28, 2026, the Company's Board of Directors renewed and increased the size of the authorization to repurchase up to 7.2 million common shares through July 31, 2027.

On July 28, 2026, the Company's Board of Directors renewed and increased the size of the authorization to repurchase up to 7.2 million common shares through July 31, 2027. The prior authorization to repurchase up to 5 million common shares had been in place since July 27, 2021. The stock repurchase plan authorizes management to repurchase and retire the stock at such time as repurchases and retirements are considered beneficial to the Company and shareholders. Any repurchase of stock will be made through the open market, block trades, or in privately negotiated transactions in accordance with applicable laws and regulations. Under the repurchase plan, there is no minimum number of shares that the Company is required to repurchase. There have been no repurchases during 2025 or through June September 30, 2026.

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Performance Summary . Net earnings for the second third quarter of 2026 were $71.9 $74.3 million, an increase of 7.9% 42.2% when compared to earnings of $66.7 $52.3 million for the second third quarter of 2025. Diluted earnings per share was $0.50 $0.52 for the second third quarter of 2026 and $0.47 $0.36 for the second third quarter of 2025.

The return on average assets was 1.89% 1.93% for both second quarters the third quarter of 2026, and as compared to 1.44% for the third quarter of 2025, respectively. The return on average equity was 14.70% 15.02% for the second third quarter of 2026, as compared to 15.82% 11.85% for the second third quarter of 2025.

Net earnings for the six-months nine-months ended June September 30, 2026 were $143.4 $217.7 million, an increase of 12.1% 20.8% when compared to earnings of $128.0 $180.3 million for the six-months nine-months ended June September 30, 2025. Diluted earnings per share was $1.00 $1.51 for the first six nine months of 2026 and $0.89 $1.26 for the first six nine months of 2025.

The return on average assets was 1.89% 1.90% for the first six nine months of 2026, as compared to 1.83% 1.70% for the first six nine months of 2025. The return on average equity was 14.76% 14.85% for the first six nine months of 2026, as compared to 15.48% 14.22% for the first six nine months of 2025.

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Tax-equivalent net interest income was $140.7 $142.1 million for the second third quarter of 2026, as compared to $126.7 $130.4 million for the same period last year. The increase in tax equivalent net interest income for the second third quarter of 2026 compared to the same quarter in 2025 was largely attributable to the increases in average loans and the increase in average balance and the rate of return on taxable and tax-exempt investment securities. Average earning assets were $14.5 $14.4 billion for the second third quarter of 2026, as compared to $13.3 $13.6 billion during the second third quarter of 2025. The increase of $1.1 billion $828.3 million in average earning assets for the second third quarter of 2026 when compared to the same period in 2025 was primarily a result of (i) an increase in loans of $272.5 million, (ii) an increase in taxable investment securities of $621.1 $544.1 million, and (iii) (ii) an increase in tax-exempt investment securities loans of $276.2 $219.6 million. Average interest-bearing liabilities were $9.8 $9.7 billion for the second third quarter of 2026, as compared to $9.0 $9.2 billion in the same period in 2025. The yield on earning assets decreased 2 4 basis points while the rate paid on interest-bearing liabilities decreased 18 22 basis points for the second third quarter of 2026 when compared to the second third quarter of 2025.

Tax-equivalent net interest income was $279.3 $421.4 million for the first six nine months of 2026, as compared to $248.1 $378.6 million for the same period last year. The increase in tax equivalent net interest income for the first half nine months of 2026 compared to the same period in 2025 was largely attributable to the increase in average balance and the rate of return on taxable and tax-exempt investment securities, and increases in average loans. Average earning assets were $14.5 billion for the six-months nine-months ended June September 30, 2026, as compared to $13.2 $13.4 billion during the six-months nine-months ended June September 30, 2025. The increase of $1.3 $1.1 billion in average earning assets for the six-months nine-months ended June September 30, 2026 when compared to the same period in 2025 was primarily a result of (i) an increase in taxable investment securities of $596.0 $578.6 million, (ii) an increase in tax-exempt investment securities loans of $297.6 $270.6 million and (iii) an increase in loans tax-exempt investment securities of $296.6 $198.6 million. Average interest-bearing liabilities were $9.8 billion for the six-months nine-months ended June September 30, 2026, as compared to $9.0 $9.1 billion in the same period in 2025. The yield on earning assets decreased 2 3 basis points while the rate paid on interest-bearing liabilities decreased 19 20 basis points for the six-months nine-months ended June September 30, 2026 when compared to the same period in 2025.

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Six-Months Ended June 30, 2026

Compared to Six-Months Ended June 30, 2025

Three-Months Ended June September 30, 2026

Compared to Three-Months Ended June September 30, 2025

Nine-Months Ended September 30, 2026

Compared to Nine-Months Ended September 30, 2025

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There are $1.5 billion of municipal and related deposits which are indexed to short-term treasury rates which have continued to fluctuate with the changes in the applicable rate index.

The net interest margin, on a tax equivalent basis, was 3.90% 3.91% for the second third quarter of 2026, an increase of 9 11 basis points from the same period in 2025. The net interest margin, on a tax equivalent basis, was 3.88% 3.89% for the six-months nine-months ended June September 30, 2026, an increase of 10 basis points from the same period in 2025. The net interest margin has expanded during the past year primarily due to (i) strong growth in deposits that has enabled the Company to deploy those funds into the higher yielding loans and securities portfolios, (ii) a reduction in cost of deposits, and (iii) investment of lower yielding securities cash flows into higher yielding bonds. The Federal Reserve began increasing interest rates in March 2022 and continuing into 2023 to a peak of 5.25% to 5.50%. Most recently, the Federal Reserve decreased interest rates by 100 basis points in 2024 and 25 basis points in September, October, and December 2025, respectively. Most recently, the Federal Reserve increased interest rates by 25 basis points in September 2026, resulting in a target rate of 3.50% to 3.75% to 4.00% at June September 30, 2026.

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Three-Months Ended June September 30,

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(3) Includes tax equivalent yield adjustment of approximately $3.8 $3.6 million and $2.9 $3.4 million in the second third quarters of 2026 and 2025, respectively, using an effective tax rate of 21% for both periods.

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Six-Months Ended June 30,

Nine-Months Ended September 30,

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(3) Includes tax equivalent yield adjustment of approximately $7.6 $11.2 million and $5.6 $9.0 million in the first half nine months of 2026 and 2025, respectively, using an effective tax rate of 21% for both periods.

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Noninterest Income . Noninterest income for the second quarter of 2026 was $35.8 million, an increase of $3.0 million, when compared to $32.9 million in the same quarter of 2025. Wealth Management fee income increased to $14.0 million for the second quarter of 2026 compared to $12.7 million for the second quarter of 2025, driven by growth in the assets under management. The market value of assets under management totaled $12.2 billion at June 30, 2026, compared to $11.5 billion at June 30, 2025. Service charges on deposits increased to $6.3 million for the second quarter of 2026 compared with $6.1 million for the second quarter of 2025, driven by increases in fees on deposit accounts and offset by a decrease in overdraft fees. Mortgage related income increased to $4.7 million for the second quarter of 2026 compared to $4.1 million in the second quarter of 2025. Mortgage income continues to benefit from the restructuring of the secondary mortgage department, new mortgage lenders and centralization of mortgage operations this past year and an increase in the volume of mortgage loans originated. Other noninterest income increased to $5.0 million for the second quarter of 2026 compared to $3.7 million for the second quarter of 2025. In the second quarter of 2026, within other noninterest income was an increase of $1.2 million over the second quarter of 2025 reflecting an increase in the fair market value of the assets held in the Company's supplemental executive retirement plan. The plan holds marketable securities, including shares of the Company stock. Deferred compensation of the same amount related to these changes in value is included in salaries and employee benefits expense. Also, during the second quarter of 2026, the Company received life insurance proceeds of approximately $200 thousand for the death of a former employee.

Noninterest Income . Noninterest income for the third quarter of 2026 was $35.6 million, an increase of $1.4 million, when compared to $34.3 million in the same quarter of 2025. Wealth management fee income increased to $14.5 million for the third quarter of 2026 compared to $13.0 million for the third quarter of 2025. Increases are related to new account growth and increased mineral fee income due to oil and gas prices. The market value of assets under management totaled $12.4 billion at September 30, 2026, compared to $12.1 billion at September 30, 2025. Service charges on deposits increased to $6.7 million for the third quarter of 2026 compared with $6.5 million for the third quarter of 2025, primarily driven by increases in net new accounts. Mortgage related income decreased to $4.2 million for the third quarter of 2026 compared to $4.4 million in the third quarter of 2025. Mortgage volume and margins were impacted by the spike in long term rates during the third quarter of 2026.

Noninterest income for the six-months nine-months ended June September 30, 2026 was $67.9 $103.6 million, an increase of $4.8 $6.2 million, when compared to $63.1 $97.4 million in the same period in 2025. Wealth Management fee income increased to $27.3 $41.8 million for the first six nine months of 2026 compared to $25.4 $38.3 million for the first six nine months of 2025 mostly driven by the increase in market value of trust assets managed. Mortgage related income increased to $9.0 $13.1 million for the first six nine months of 2026 compared to $7.0 $11.3 million for the same period in 2025 benefiting from the restructuring of the secondary mortgage department, new mortgage lenders and centralization of mortgage operations this past year and an increase in the volume of mortgage loans originated. Other noninterest income increased to $7.6 million for the first half of 2026 compared to $6.8 million for the first half of 2025. In the first half of 2026, included within other noninterest income was an increase of $899 thousand over the first half of 2025 reflecting an increase in the fair market value of the assets held in the Company's supplemental executive retirement plan as discussed above. Deferred compensation of the same amount related to these changes in value is included in salaries and employee benefits expense.

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Six-Months Ended June 30,

Three-Months Ended June September 30,

Nine-Months Ended September 30,

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Net loss on sale of available-for-sale securities

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SERP market adjustment

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Salaries, commissions and employee benefits for the six-months ended June 30, 2026 totaled $95.6 million, compared to $84.7 million for the same period in 2025.The increase from prior year is primarily resulting from annual merit-based and market-driven pay increases that were effective March 1st and profit sharing and incentive accruals, which are up due to year-over-year earnings growth. Mortgage incentives are also up due to higher loan volumes. Also, there was a change in deferred compensation expense of $899 thousand from the second quarter of the prior year due to the increase in the supplemental executive retirement plan deferred compensation liability as previously discussed, which was offset by an equal amount in other noninterest income.

Noninterest Expense . Total noninterest expense for the three-months ended June September 30, 2026 was $81.1 million, compared to $71.7 $73.7 million for the same period of 2025. An important measure in determining whether a financial institution effectively manages noninterest expense is the efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax-equivalent basis and noninterest income. Lower ratios indicate better efficiency since more income is generated with a lower noninterest expense total. Our efficiency ratio was 45.94% 45.59% for the second third quarter of 2026 compared to 44.97% 44.74% for the same quarter in 2025.

Salaries, commissions and employee benefits increased to $49.7 $47.8 million for the second third quarter of 2026 compared to $42.6 million for the same period in 2025. The increase from prior year is primarily resulting from annual merit-based and market-driven pay increases that were effective March 1st and profit sharing and incentive accruals, which are up due to year-over-year earnings growth. Also, there was a change in deferred compensation expense of $1.2 million from the second quarter of the prior current year due as well as additions to the increase in staff over the supplemental executive retirement plan deferred compensation liability as previously discussed, which was offset by an equal amount in other noninterest income. past year.

All other categories of noninterest expense for the second third quarter of 2026 totaled $31.4 $33.2 million, compared to $29.2 $31.1 million in the same quarter a year ago. Noninterest expense, excluding salary related costs, for the three-months ended June September 30, 2026 increased when compared to the same period in 2025 largely due to increases in professional fees, and software amortization and expense and professional and service fees and offset by decreases in equipment operational and other losses and debit card expenses.

Total noninterest expense for the six-months nine-months ended June September 30, 2026 was $157.9 $238.9 million, compared to $142.1 $215.7 million for the same period of 2025. Our efficiency ratio was 45.47% 45.51% for the first six nine months of 2026 compared to 45.65% 45.33% during the same period in 2025.

Salaries, commissions and employee benefits for the nine-months ended September 30, 2026 totaled $143.5 million, compared to $127.3 million for the same period in 2025. The increase from prior year is primarily resulting from annual merit-based and market-driven pay increases that were effective March 1st in the current year as well as additions to staff over the past year.

All other categories of noninterest expense for the six-months nine-months ended June September 30, 2026 totaled $62.2 $95.5 million, compared to $57.4 $88.4 million in the same period a year ago. Noninterest expense, excluding salary related costs, for the six-months nine-months ended June September 30, 2026 increased when compared to the same period in 2025 largely due to increases in software amortization and expense and professional and service fees partially offset by decreases in debit card and equipment expenses.

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Six-Months Ended June 30,

Three-Months Ended June September 30,

Nine-Months Ended September 30,

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SERP market adjustment

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Loans . The portfolio is comprised of loans made to businesses, professionals, municipalities, individuals, and farm and ranch operations primarily in the trade areas served by our subsidiary bank. As of June September 30, 2026, total loans held-for-investment were $8.3 $8.5 billion, an increase of $188.7 $380.5 million, as compared to December 31, 2025 balances.

As compared to year-end 2025 balances, total real estate loans increased $108.8 $153.8 million, total commercial loans increased $47.8 $150.0 million, total consumer loans increased $46.0 $92.8 million, and agricultural loans decreased $14.0 $16.0 million. Loans averaged $8.3 $8.5 billion for the second third quarter of 2026, an increase of $272.5 $219.6 million over the prior year second third quarter average balances. Loans averaged $8.3 $8.4 billion for the first six nine months of 2026, an increase of $296.6 $270.6 million from the average balance during the first six nine months of 2025.

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Loans held-for-sale, consisting of secondary market mortgage loans, totaled $23.6 $25.5 million and $30.0 million at June September 30, 2026 and December 31, 2025, respectively. At June September 30, 2026 and December 31, 2025, $4.7 $4.4 million and $4.6 million, respectively, are valued using the lower of cost or fair value, and the remaining amounts are valued under the fair value option.

Commercial real estate loans (owner and non-owner occupied CRE) represent 23.7% 24.4% of the Company's total loan portfolio as of June September 30, 2026. Non-owner occupied CRE represents $831.9 $919.8 million, or 10.0%, 10.8%, of the Company's total loan portfolio as of June September 30, 2026. The properties securing this portfolio are diverse as to geographic location in Texas as well as industry type. Collateral for CRE loans is located throughout the Company's markets in central west Texas, the Dallas-Fort Worth metroplex and southeast Texas with less than 1% of properties located outside of the state. The largest concentrations in the CRE portfolio as to type are industrial/manufacturing at approximately 18.5% 18.1% and multi-tenant retail at approximately 7.9% 7.7% as of June September 30, 2026. All additional property CRE portfolio property type categories are below the identified concentration levels. Credit underwriting standards are periodically reviewed and adjusted based upon observations from our ongoing monitoring of economic conditions in our lending areas. In response to the current interest rate environment, the Company has enhanced stress testing and loan review activities to mitigate interest rate reprice risk with a specific emphasis on borrowers' abilities to absorb the impact of higher interest rates as loans that were made in a much lower rate environment renew.

The following tables summarize maturity information of our loan portfolio as of June September 30, 2026. The tables also present the portion of loans that have fixed interest rates or variable interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index.

Maturity Distribution and Interest Sensitivity of Loans at June September 30, 2026 (dollars in thousands):

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Of the $4.8 $4.9 billion of variable interest rate loans shown above, loans totaling $2.4 $2.5 billion mature or reprice over the next twelve months. Of this amount, approximately $1.8 billion will reprice immediately upon changes in the underlying index rate (primarily U.S. prime rate) with the remaining $598.4 million being subject to floors above or ceilings below the current index.

Asset Quality . Our loan portfolio is subject to periodic reviews by our centralized independent loan review group, engaged third-parties, as well as periodic examinations by bank regulatory agencies. Loans are placed on nonaccrual status when, in the judgment of management, the collectability of principal or interest under the original terms becomes doubtful. Nonaccrual, past due 90 days or more and still accruing, and foreclosed assets were $67.0 $60.5 million at June September 30, 2026, as compared to $56.5 million at December 31, 2025. As a percent of loans held-for-investment and foreclosed assets, these assets were 0.80% 0.71% at June September 30, 2026 and 0.69% at December 31, 2025. As a percent of total assets, these assets were 0.44% 0.40% at June September 30, 2026, as compared to 0.37% at December 31, 2025, respectively. We believe the level of these assets to be manageable and are not aware of any material classified credits not properly disclosed as nonperforming at June September 30, 2026.

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The provision for loan losses of $3.9 $2.4 million for the three-months ended June September 30, 2026 is combined with the provision reversal for unfunded commitments of $268 $360 thousand and reported in the net aggregate of $4.2 $2.0 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended June September 30, 2026. The provision for loan losses of $6.7 $9.0 million for the six-months nine-months ended June September 30, 2026 is combined with the provision reversal for unfunded commitments of $179 $539 thousand and reported in the net aggregate of $6.5 $8.5 million under the provision for credit losses in the consolidated statements of earnings for the six-months nine-months ended June September 30, 2026.

The provision for loan losses of $2.4 $25.5 million for the three-months ended June September 30, 2025 is combined with the provision reversal for unfunded commitments of $700 thousand $1.1 million and reported in the net aggregate of $3.1 $24.4 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended June September 30, 2025. The provision for loan losses of $5.4 $30.9 million for the six-months nine-months ended June September 30, 2025 is combined with the provision for unfunded commitments of $1.2 million $165 thousand and reported in the net aggregate of $6.7 $31.1 million under the provision for credit losses in the consolidated statements of earnings for the six-months nine-months ended June September 30, 2025.

As a percent of average loans, annualized net recoveries charge-offs were 0.03% 0.04% for the three-months ended June September 30, 2026, as compared to annualized net charge-offs of 0.04% 1.07% for the three-months ended June September 30, 2025. For the six-months nine-months ended June September 30, 2026 and 2025, annualized net recoveries charge-offs were 0.01% and annualized net charge-offs of 0.02%, 0.39%, respectively. The third quarter of 2025 was impacted by a $21.6 million credit loss due to borrower fraud. The allowance for credit losses as a percent of loans held-for-investment was 1.35% 1.33% as of June September 30, 2026, as compared to 1.29% for December 31, 2025.

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and restructured loans

Interest-Bearing Demand Deposits in Banks. The Company had interest-bearing deposits in banks of $287.0 $292.8 million at June September 30, 2026 compared to $826.9 million at December 31, 2025. At June September 30, 2026, interest-bearing deposits in banks included $273.7 $231.9 million maintained at the Federal Reserve Bank of Dallas and $13.2 $60.9 million on deposit with the FHLB.

Available-for-Sale Securities . At June September 30, 2026, securities with a fair value of $5.7 $5.4 billion were classified as securities available-for-sale. As compared to December 31, 2025, the available-for-sale portfolio at June September 30, 2026 reflected (i) an increase of $229.4 $211.7 million in mortgage-backed securities, (ii) an increase a decrease of $2.5 $277.2 million in obligations of states and political subdivisions, (iii) a decrease of $60.8 million in U.S. Treasury securities, and (iv) a decrease an increase of $9.3 million $197 thousand in corporate bonds and other securities. Fluctuations in the available-for-sale securities portfolio balances were primarily driven by purchases and sales, calls or maturities, and changes in unrealized losses during the first six-months nine-months of 2026. Our mortgage related securities are backed by GNMA, FNMA or FHLMC, or are collateralized by securities backed by these agencies.

See the below table and Note 2 to the Consolidated Financial Statements (unaudited) for additional disclosures relating to the maturities and fair values of the investment portfolio at June September 30, 2026 and December 31, 2025.

Table 8 - Maturities and Yields of Available-for-Sale Securities Held at June September 30, 2026 (dollars in thousands, except percentages):

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As of June September 30, 2026, the investment portfolio had an overall tax equivalent yield of 3.22%, 3.27%, a weighted average life of 6.3 7.5 years and modified duration of 5.3 5.9 years.

Deposits . Deposits held by our subsidiary bank represent our primary source of funding. Total deposits were $13.1 billion as of June September 30, 2026, as compared to $13.3 billion as of December 31, 2025.

Table 9 provides a breakdown of average deposits and rates paid over the three and six-months nine-months ended June September 30, 2026 and 2025 respectively.

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For the Three-Months Ended June September 30,

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For the Six-Months Ended June 30,

For the Nine-Months Ended September 30,

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The estimated amount of uninsured and uncollateralized deposits including related accrued and unpaid interest is approximately $4.0 $4.3 billion, or 30.5% 32.9% of total deposits, as of June September 30, 2026.

Borrowings. Included in borrowings were federal funds purchased, advances from the FHLB and other borrowings of $21.8 $21.9 million and $21.7 million at June September 30, 2026 and December 31, 2025, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $28.5 $22.7 million and $26.6 $56.2 million in the second third quarters of 2026 and 2025, respectively. The weighted average interest rates paid on these borrowings were 1.76% 1.42% and 1.93% 3.33% for the second third quarters of 2026 and 2025, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $25.3 $24.4 million and $50.4 $52.4 million in the first half nine months of 2026 and 2025, respectively. The weighted average interest rates paid on these borrowings were 1.59% 1.53% and 2.76% 2.96% for the first half nine months of 2026 and 2025, respectively.

Repurchase Agreements. Securities sold under repurchase agreements of $53.7 $43.1 million and $63.0 million at June September 30, 2026, and December 31, 2025, respectively. Securities sold under repurchase agreements are generally with significant customers of the Company that require short-term liquidity for their funds for which we pledge certain securities that have a fair value equal to at least the amount of the short-term borrowings. The average balances of securities sold under repurchase agreements were $60.4 $57.9 million and $54.5 $50.1 million for the second third quarters of 2026 and 2025, respectively. The average rates paid on securities sold under repurchase agreements were 1.48% 1.41% and 1.63% 1.66% for the second third quarters of 2026 and 2025, respectively. The average balances of securities sold under repurchase agreements were $61.6 $60.4 million and $54.2 $52.8 million for the first half nine months of 2026 and 2025, respectively. The average rates paid on securities sold under repurchase agreements were 1.48% 1.46% and 1.60% 1.62% for the first half nine months of 2026 and 2025, respectively.

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The results for the net interest income simulations as of June September 30, 2026 and December 31, 2025 resulted in an asset sensitive position. These are good faith estimates and assume that the composition of our interest sensitive assets and liabilities existing at each year-end will remain constant over the relevant twelve-month measurement period and that changes in market interest rates are instantaneous and sustained across the yield curve regardless of duration of pricing characteristics on specific assets or liabilities. Also, this analysis does not contemplate any actions that we might undertake in response to changes in market interest rates. We believe these estimates are not necessarily indicative of what actually could occur in the event of immediate interest rate increases or decreases of this magnitude. As interest-bearing assets and liabilities reprice in different time frames and proportions to market interest rate movements, various assumptions must be made based on historical relationships of these variables in reaching any conclusion. Since these correlations are based on competitive and market conditions, we anticipate that our future results will likely be different from the foregoing estimates, and such differences could be material.

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The fair value of our investment securities classified as available-for-sale totaled $5.7 $5.4 billion at June September 30, 2026. During the six nine months ended June September 30, 2026, the corresponding net unrealized loss before taxes of $342.0 million at December 31, 2025, changed to an a net unrealized loss before taxes of $354.4 $620.2 million at June September 30, 2026, which is recorded net of taxes in accumulated other comprehensive earnings (loss) in shareholders' equity. The unrealized gains or losses, net of taxes, on the portfolio are excluded from the calculation of all regulatory capital ratios. The changes in the fair value were driven by changes in interest rates based on expected actions by the Federal Reserve Board and other market conditions. The overall valuation of the portfolio is most correlated to the 5-year U.S. Treasury rates based on the composition and duration of the portfolio. At June September 30, 2026, the 5-year U.S. Treasury rate was 4.19% 5.09% compared to 3.72% at December 31, 2025, representing a 47 137 basis point increase during the first six nine months of 2026. As of June September 30, 2026, an increase of 100 basis points in the 5-year U.S. Treasury rate would result in an increase to unrealized losses by approximately $260 $284 million before taxes, while a 100 basis point decrease in the same rate would result in a decrease to unrealized losses by approximately $220 $262 million before taxes. Management does not have the intent to sell impaired available-for-sale securities before fair value recovers to the current amortized cost, and it is more-likely-than-not that the Company will not be required to sell impaired securities before the fair value recovers, which may be maturity.

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Total shareholders' equity was $2.0 $1.8 billion, or 13.0% 12.1% of total assets at June September 30, 2026, as compared to $1.9 billion, or 12.4% of total assets at December 31, 2025. Included in shareholders' equity at June September 30, 2026 and December 31, 2025 were $279.7 $489.6 million and $269.9 million, respectively, in unrealized losses on investment securities available-for-sale, net of related income taxes, although such amount is excluded from and does not impact regulatory capital. For the second third quarter of 2026, total shareholders' equity averaged $2.0 billion, or 12.8% of average assets, as compared to $1.7 billion, or 11.9% 12.1% of average assets, during the same period in 2025. For the first six nine months of 2026, total shareholders' equity averaged $2.0 billion, or 12.8% of average assets, as compared to $1.7 billion or 11.8% 11.9% of average assets, during the same period in 2025.

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Beginning in January 2015, Under the Basel III rules, the implementation of the Company must maintain a capital conservation buffer was effective for the Company starting at the 0.625% level and increasing 0.625% each year thereafter, until it reached of 2.50%. on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress and requires increased capital levels for the purpose of capital distributions and other payments. Failure to meet the amount of the buffer will result in restrictions on the Company's ability to make capital distributions, including dividend payments and stock repurchases, and to pay discretionary bonuses to executive officers.

As of June September 30, 2026 and December 31, 2025, we had a total risk-based capital ratio of 21.62% 21.66% and 21.17%, a Tier 1 capital to risk-weighted assets ratio of 20.40% 20.45% and 19.99%, and a common equity Tier 1 to risk-weighted assets ratio of 20.40% 20.45% and 19.99%, and a Tier 1 leverage ratio of 12.88% 13.12% and 12.55%, respectively. The regulatory capital ratios as of June September 30, 2026 and December 31, 2025 were calculated under Basel III rules.

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As of June September 30, 2026:

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The Company renewed and amended its loan agreement, effective June 30, 2025, with Frost Bank. Under the loan agreement, as renewed and amended, we are permitted to draw up to $50 million on a revolving line of credit. Prior to June 30, 2027, interest is paid quarterly at the U.S. prime rate as quoted in the Money Rates section of The Wall Street Journal , and the line of credit matures

Liquidity. Liquidity management involves our ability to convert assets to cash to meet our current and future obligations to customers at any time. Such needs can develop from loan demand, deposit withdrawals or acquisition opportunities. Potential obligations resulting from the issuance of standby letters of credit and commitments to fund future borrowings to our loan customers are other factors affecting our liquidity needs. Many of these obligations and commitments are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements affecting our liquidity position. The potential need for liquidity arising from these types of financial instruments is represented by the contractual notional amount of the instrument. Asset liquidity is provided by cash and assets which are readily marketable, or which will mature in the near future. Liquid assets include cash, federal funds sold, and short-term investments in time deposits in banks. Liquidity is also provided by access to funding sources, which include core depositors and correspondent banks that maintain accounts with and sell federal funds to our subsidiary bank. Other sources of funds include our ability to borrow from short-term sources, such as purchasing federal funds from correspondent banks, sales of securities under agreements to repurchase and other borrowings (see below) and an unfunded $50 million revolving line of credit established with Frost Bank, a nonaffiliated bank, which matures on June 30, 2027 (see next paragraph). Our subsidiary bank also has federal funds purchased lines of credit with two non-affiliated banks totaling $175 million. At June September 30, 2026, there were no amounts drawn on these lines of credit. Our subsidiary bank also has (i) an available line of credit with the FHLB totaling $2.3 billion at June September 30, 2026, secured by portions of our loan portfolio and certain investment securities, and (ii) access to approximately $1.6 $1.8 billion at the Federal Reserve Bank of Dallas Discount Window lending program secured by portions of certain investment securities and portions of our loan portfolio. At June September 30, 2026, there was $668.0 $678.0 million used on the FHLB line advance for undisbursed commitments (letters of credit) used to secure public funds.

The Company renewed and amended its loan agreement, effective June 30, 2025, with Frost Bank. Under the loan agreement, as renewed and amended, we are permitted to draw up to $50 million on a revolving line of credit. Prior to June 30, 2027, interest is paid quarterly at the U.S. prime rate as quoted in the Money Rates section of The Wall Street Journal, and the line of credit matures June 30, 2027. If a balance exists at July 1, 2027, the principal balance converts to a term facility payable quarterly over five years and interest is paid quarterly at the U.S. prime rate as quoted in the Money Rates section of The Wall Street Journal. . The line of credit is unsecured. Among other provisions in the Loan Agreement, the Company must satisfy certain financial covenants during the term of the Loan Agreement, including without limitation, covenants that require the Company to maintain certain capital, profitability, loan loss reserve, non-performing asset and debt service coverage ratios. In addition, the credit agreement contains certain operational covenants, which among others, restricts the payment of dividends above 55% of consolidated net income, limits the incurrence of debt (excluding any amounts acquired in an acquisition) and prohibits the disposal of assets except in the ordinary course of business. Since 1995, we have historically declared dividends as a percentage of our consolidated net income in a range of 36% (low) in 2021 and 2020 to 53% (high) in 2003 and 2006. The Company was in compliance with the financial and operational covenants at June 30, 2026. There was no outstanding balance under the line of credit as of June 30, 2026.

2006. The Company was in compliance with the financial and operational covenants at September 30, 2026. There was no outstanding balance under the line of credit as of September 30, 2026.

In addition, we anticipate that future acquisitions of financial institutions, expansion of branch locations or offerings of new products could also place a demand on our cash resources. Available cash and cash equivalents at our parent company which totaled $162.7 $171.4 million at June September 30, 2026, investment securities which totaled $1.1 million at June September 30, 2026 and mature over 4 3 to 5 4 years, available dividends from our subsidiaries which totaled $360.0 $395.7 million at June September 30, 2026, utilization of available lines of credit, and future debt or equity offerings are expected to be the source of funding for these potential acquisitions or expansions.

Our liquidity position is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Liquidity risk management is an important element in our asset/liability management process. We regularly model liquidity stress scenarios to assess potential liquidity outflows or funding problems resulting from economic disruptions, volatility in the financial markets, unexpected credit events or other significant occurrences deemed potentially problematic by management. These scenarios are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity needs. As of June September 30, 2026, management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. We are monitoring closely the impact to the financial system due to the past failures of several banks. Given the diversified core deposit base and relatively low loan to deposit ratios maintained at our subsidiary bank, we consider our current liquidity position to be adequate to meet our short-term and long-term liquidity needs. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on us.

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Controls and procedures 3 changes

As of June September 30, 2026, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934). Our management, which includes our principal executive officer and our principal financial officer, does not expect that our disclosure controls and procedures will prevent all errors and all fraud.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Our principal executive officer and principal financial officer have concluded, based on our evaluation of our disclosure controls and procedures, that our disclosure controls and procedures were effective at the reasonable assurance level as of June September 30, 2026.

Subsequent to our evaluation, There were no significant changes in the Company's internal controls control over financial reporting or other factors that have occurred during the quarter ended September 30, 2026, that materially affected, or are reasonably likely to materially affect, our the Company's internal control over financial reporting.

Exhibits 4 changes

24 unchanged paragraphs

Date: August 4, 2026

Date: November 5, 2026

1 unchanged paragraph

Date: August 4, 2026

Date: November 5, 2026

2 unchanged paragraphs