ServisFirst Bancshares, Inc. 10-K

ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is listed on the New York Stock Exchange under the symbol “SFBS.” As of February 20, 2026, there were 435 holders of record of our common stock. 32 Dividends On December 15, 2025, our Board of Directors increased our quarterly cash dividend from $0.335 per share to $0.38 per share. Subject to the Board of Directors’ approval and applicable regulatory requirements, we expect to continue paying cash dividends on a quarterly basis. The principal source of our cash flow, including cash flow to pay dividends, comes from dividends that the Bank pays to us as its sole shareholder. Statutory and regulatory limitations apply to the Bank’s payment of dividends to us, as well as our payment of dividends to our stockholders. For a more complete discussion on the restrictions on dividends, see “Bank Supervision and Regulation - Payment of Dividends” in Item 1. Recent Sales of Unregistered Securities We had no sales of unregistered securities in 2025 other than those previously reported in our reports filed with the SEC. Purchases of Equity Securities by the Registrant and Affiliated Purchasers We made no repurchases of our equity securities, and no “affiliated purchasers” (as defined in Rule 10b-18(a)(3) under the Exchange Act) purchased any shares of our equity securities during the fourth quarter of the fiscal year ended December 31, 2025. Performance Graph The following graph shows a comparison of the five-year cumulative total stockholder return for the Company, the KBW Nasdaq Regional Banking Index (“KRX”), the Standard and Poor's 600 (“S&P 600”), and the Standard and Poor’s 600 Financials (“S&P 600 Financials”). The following performance graph does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates the performance graph by reference therein. 33 ITEM 6. [Reserved]. ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This section of the Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “ Management's Discussion and Analysis of Financial Condition and Results of Operations ” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the Company ’ s financial statements with a narrative from the perspective of management on the Company ’ s financial condition, results of operations, liquidity and certain other factors that may affect future results. In certain instances, parenthetical references are made to relevant sections of the Notes to Consolidated Financial Statements to direct the reader to a further detailed discussion. This section should be read in conjunction with the Consolidated Financial Statements included in this Form 10-K. Overview We are a bank holding company within the meaning of the BHC Act headquartered in Birmingham, Alabama. Through our wholly-owned subsidiary bank, we operate full service banking offices located in Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee and Virginia. We also operate a loan production office in Florida. Our principal business is to accept deposits from the public and to make loans and other investments. Our principal source of funds for loans and investments are demand, time, savings, and other deposits and the amortization and prepayment of loans and borrowings. Our principal sources of income are interest and fees collected on loans, interest and dividends collected on other investments and service charges. Our principal expenses are interest paid on savings and other deposits, interest paid on our other borrowings, employee compensation, office expenses, and other overhead expenses. Our business is conducted through a single reportable segment. For additional information regarding our segment reporting, refer to (Note 22) - “ Segment Reporting ” Notes to the Consolidated Financial Statements. 34 Results of Operations The following discussion and analysis presents the more significant factors that affected our financial condition as of December 31, 2025 and 2024 and results of operations for each of the years then ended. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on March 1, 2025 for a discussion and analysis of the more significant factors that affected periods prior to 2024. Net Income Available to Common Stockholders Net income available to common stockholders was $276.5 million for the year ended December 31, 2025, compared to $227.2 million for the year ended December 31, 2024. The increase in net income was primarily attributable to an increase in net interest income. Basic and diluted net income per common share were both $5.06 for the year ended December 31, 2025, compared to $4.17 and $4.16, respectively, for the year ended December 31, 2024. Return on average assets was 1.56% in 2025, compared to 1.39% in 2024, and return on average common stockholders’ equity was 16.05% in 2025, compared to 14.98% in 2024. The following tables present a summary of our statements of income, including the percent change in each category, for the years ended December 31, 2025 compared to 2024, and for the years ended December 31, 2024 compared to 2023, respectively: Year Ended December 31, 2025 2024 Change from the Prior Year (Dollars in Thousands) Interest income $ 990,427 $ 946,121 4.7 % Interest expense 455,218 499,462 (8.9 )% Net interest income 535,209 446,659 19.8 % Provision for credit losses 35,311 21,587 63.6 % Net interest income after provision for credit losses 499,898 425,072 17.6 % Noninterest income 27,222 35,056 (22.3 )% Noninterest expense 184,990 181,146 2.1 % Income before income taxes 342,130 278,982 22.6 % Income taxes 65,527 51,740 26.6 % Net income 276,603 227,242 21.7 % Dividends on preferred stock 62 62 - % Net income available to common stockholders $ 276,541 $ 227,180 21.7 % Year Ended December 31, 2024 2023 Change from the Prior Year (Dollars in Thousands) Interest income $ 946,121 $ 813,246 16.3 % Interest expense 499,462 402,309 24.1 % Net interest income 446,659 410,937 8.7 % Provision for credit losses 21,587 18,715 15.3 % Net interest income after provision for credit losses 425,072 392,222 8.4 % Noninterest income 35,056 30,417 15.3 % Noninterest expense 181,146 178,051 1.7 % Income before income taxes 278,982 244,588 14.1 % Income taxes 51,740 37,735 37.1 % Net income 227,242 206,853 9.9 % Dividends on preferred stock 62 62 - % Net income available to common stockholders $ 227,180 $ 206,791 9.9 % 35 Performance Ratios The following table presents selected ratios of our results of operations for the years ended December 31, 2025, 2024 and 2023: For the Years Ended December 31, 2025 2024 2023 Return on average assets 1.56 % 1.39 % 1.37 % Return on average stockholders' equity 16.05 % 14.98 % 15.13 % Dividend payout ratio 26.88 % 29.82 % 30.06 % Net interest margin (1) 3.12 % 2.82 % 2.81 % Efficiency ratio (2) 32.89 % 37.60 % 40.34 % Average stockholders' equity to average total assets 9.71 % 9.29 % 9.07 % (1) Net interest margin is the net yield on interest earning assets and is the difference between the interest yield earned on interest-earning assets and interest rate paid on interest-bearing liabilities, divided by average earning assets. (2) Efficiency ratio is the result of noninterest expense divided by the sum of net interest income and noninterest income. Net Interest Income Net interest income is the difference between the income earned on interest-earning assets and interest paid on interest-bearing liabilities used to support such assets. Net interest income is the single largest component of operating revenues. Management seeks to optimize this revenue while balancing interest rate, credit, and liquidity risks. The major factors that affect net interest income are changes in volumes, the yield on interest-earning assets and the cost of interest-bearing liabilities. Our management’s ability to respond to changes in interest rates by effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and the momentum of our primary source of earnings. Net interest income increased 19.8% for the year ended December 31, 2025 from the year ended December 31, 2024. Net interest income increased primarily due to a larger decline in the average rate paid on interest-bearing liabilities than the decline in the average yield on interest-earning assets, resulting in a wider net interest spread. Average earning assets increased 8.2% in 2025 from 2024, which was primarily driven by an increase of 7.9% in average loans. A majority of our regional markets grew loans during 2025. Average interest-bearing liabilities increased 9.3% in 2025 from 2024. The increase in interest-bearing deposits was mostly attributable to the organic growth of our deposit base. Net Interest Margin Analysis The banking industry uses two key ratios to measure relative profitability of net interest revenue, which are the net interest spread and the net interest margin. The net interest spread measures the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities. The net interest spread eliminates the effect of noninterest-earning assets as well as noninterest-bearing deposits and other noninterest-bearing funding sources and gives a direct perspective on the effect of market interest rate movements. The net interest margin is an indication of the profitability of a company’s balance sheet and is defined as net interest income as a percentage of total average interest-earning assets, which includes the positive effect of funding a portion of interest-earning assets with noninterest-bearing deposits and stockholders’ equity. The net interest margin is impacted by the average volumes of interest-sensitive assets and interest-sensitive liabilities and by the difference between the yield on interest-sensitive assets and the cost of interest-sensitive liabilities (spread). Loan fees collected at origination represent an additional adjustment to the yield on loans. Net interest spread can be affected by economic conditions, the competitive environment, loan demand, and deposit flows. The net yield on earning assets is an indicator of effectiveness of our ability to manage the net interest margin by managing the overall yield on assets and cost of funding those assets. The following table shows, for the years ended December 31, 2025, 2024 and 2023, the average balances of each principal category of our assets, liabilities and stockholders’ equity, and an analysis of net interest income, and the change in interest income and interest expense segregated into amounts attributable to changes in volume and changes in rates. This table is presented on a taxable equivalent basis, if applicable. 36 Average Balance Sheets and Net Interest Analysis On a Fully Taxable-Equivalent Basis For the Year Ended December 31, (In thousands, except Average Yields and Rates) 2025 2024 2023 Average Balance Interest Earned / Paid Average Yield / Rate Average Balance Interest Earned / Paid Average Yield / Rate Average Balance Interest Earned / Paid Average Yield / Rate Assets: Interest-earning assets: Loans, net of unearned income (1)(2): Taxable $ 13,080,536 $ 826,976 6.32 % $ 12,134,929 $ 787,361 6.49 % $ 11,584,541 $ 698,177 6.03 % Tax-exempt (3) 29,153 1,567 5.38 15,896 434 2.73 18,271 834 4.56 Total loans, net of unearned income 13,109,689 828,543 6.32 12,150,825 787,795 6.48 11,602,812 699,011 6.02 Mortgage loans held for sale 9,940 482 4.85 7,974 401 5.03 4,293 259 6.03 Debt securities: Taxable 1,912,880 67,122 3.51 1,959,488 66,535 3.40 1,881,074 53,499 2.84 Tax-exempt (3) 492 26 5.28 980 39 3.98 2,716 81 2.98 Total debt securities (4) 1,913,372 67,148 3.51 1,960,468 66,574 3.40 1,883,790 53,580 2.84 Federal funds sold and securities purchased with agreement to resell 241,838 12,007 4.96 19,770 1,128 5.71 53,376 2,844 5.33 Restricted equity securities 11,994 808 6.74 11,073 800 7.22 9,359 673 7.19 Interest-bearing balances with banks 1,866,211 81,773 4.38 1,698,962 89,522 5.27 1,066,159 57,063 5.35 Total interest-earning assets $ 17,153,044 $ 990,761 5.78 % $ 15,849,072 $ 946,220 5.97 % $ 14,619,789 $ 813,430 5.56 % Non-interest-earning assets: Cash and due from banks 105,871 100,639 105,140 Net premises and equipment 60,304 60,276 60,335 Allowance for loan losses, accrued interest and other assets 426,849 323,396 281,946 Total assets $ 17,746,068 $ 16,333,383 $ 15,067,210 Interest-bearing liabilities: Interest-bearing deposits: Interest-bearing demand deposits $ 2,219,996 $ 45,043 2.03 % $ 2,282,599 $ 64,151 2.81 % $ 1,928,133 $ 43,265 2.24 % Savings 103,444 1,657 1.60 104,581 1,763 1.69 119,049 1,656 1.39 Money market 7,682,961 272,644 3.55 7,005,057 301,211 4.30 6,347,456 250,675 3.95 Time deposits (5) 1,355,048 54,544 4.03 1,201,756 53,525 4.45 1,010,683 36,144 3.58 Total interest-bearing deposits 11,361,449 373,888 3.29 10,593,993 420,650 3.97 9,405,321 331,740 3.53 Federal funds purchased and securities purchased with agreement to resell 1,799,637 78,640 4.37 1,444,463 76,064 5.27 1,288,877 66,730 5.18 Other borrowings 63,356 2,690 4.25 64,737 2,748 4.24 86,102 3,839 4.46 Total interest-bearing liabilities $ 13,224,442 $ 455,218 3.44 % $ 12,103,193 $ 499,462 4.13 % $ 10,780,300 $ 402,309 3.73 % Non-interest-bearing liabilities: Non-interest-bearing checking 2,654,480 2,609,137 2,857,831 Other liabilities 144,217 104,198 62,369 Stockholders' equity 1,741,120 1,559,213 1,418,189 Unrealized gains on securities (18,191 ) (42,358 ) (51,479 ) Total liabilities and stockholders' equity $ 17,746,068 $ 16,333,383 $ 15,067,210 Net interest income $ 535,543 $ 446,758 $ 411,121 Net interest spread 2.34 % 1.84 % 1.83 % Net interest margin (5) 3.12 % 2.82 % 2.81 % (1) Non-accrual loans are included in average loan balances in all periods. Loan fees of $19,761, $15,381 and $13,752 are included in interest income in 2025, 2024, and 2023, respectively. (2) Amortization of acquired loan premiums of $200, $186 and $197 is included in interest income in 2025, 2024 and 2023, respectively. (3) Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%. (4) Unrealized losses of $(26,700), $(60,030) and $(74,519) are excluded from the yield calculation in 2025, 2024, and 2023, respectively. (5) Net interest margin is net interest income divided by total interest-earning assets. 37 The following table reflects changes in our net interest margin as a result of changes in the volume and rate of our interest-bearing assets and liabilities: For the Year Ended December 31, 2025 Compared to 2024 Increase (Decrease) in Interest Income and Expense Due to Changes in: 2024 Compared to 2023 Increase (Decrease) in Interest Income and Expense Due to Changes in: Volume Rate Total Volume Rate Total Interest-earning assets: Loans, net of unearned income: Taxable $ 60,172 $ (20,557 ) $ 39,615 $ 34,143 $ 55,041 $ 89,184 Tax-exempt 524 609 1,133 (98 ) (302 ) (400 ) Total loans, net of unearned income 60,696 (19,948 ) 40,748 34,045 54,739 88,784 Mortgage loans held for sale 95 (14 ) 81 191 (49 ) 142 Debt securities: Taxable (1,605 ) 2,192 587 2,307 10,729 13,036 Tax-exempt (23 ) 10 (13 ) (63 ) 21 (42 ) Total debt securities (1,628 ) 2,202 574 2,244 10,750 12,994 Federal funds sold and securities purchased with agreement to resell 11,044 (165 ) 10,879 (1,903 ) 188 (1,715 ) Restricted equity securities 1 7 8 20 107 127 Interest-bearing balances with banks 8,265 (16,014 ) (7,749 ) 33,357 (898 ) 32,459 Total interest-earning assets 78,473 (33,932 ) 44,541 67,954 64,837 132,791 Interest-bearing liabilities: Interest-bearing demand deposits (1,715 ) (17,393 ) (19,108 ) 8,800 12,086 20,886 Savings (19 ) (87 ) (106 ) (217 ) 324 107 Money market 27,334 (55,901 ) (28,567 ) 27,212 23,324 50,536 Time deposits 6,453 (5,434 ) 1,019 7,563 9,818 17,381 Total interest-bearing deposits 32,053 (78,815 ) (46,762 ) 43,358 45,552 88,910 Federal funds purchased and securities purchased with agreement to resell 16,822 (14,246 ) 2,576 8,176 1,158 9,334 Other borrowed funds (59 ) 1 (58 ) (914 ) (177 ) (1,091 ) Total interest-bearing liabilities 48,816 (93,060 ) (44,244 ) 50,620 46,533 97,153 Increase (decrease) in net interest income $ 29,657 $ 59,128 $ 88,785 $ 17,334 $ 18,304 $ 35,638 * The rate/volume variance is allocated on a pro rata basis between the volume variance and the rate variance in the table above. In the table above, changes in net interest income are attributable to (a) changes in average balances (volume variance), (b) changes in rates (rate variance), or (c) changes in rate and average balances (rate/volume variance). The volume variance is calculated as the change in average balances multiplied by the previous period average balance. The rate variance is calculated as the change in rates multiplied by the previous period average balance. The rate/volume variance is calculated as the change in rates multiplied by the change in average balances. From 2024 to 2025, both the volume and rate components were favorable, as average asset and liability balances increased while rates on both assets and liabilities declined, driven primarily by three reductions in the Federal Reserve’s target rate during 2025. The rate component benefited from a greater decrease in the cost of funds, as interest-bearing liabilities repriced downward more quickly than earning asset yields. As a result, our net interest margin expanded. Average rates paid on interest-bearing liabilities decreased 69 basis points over this period, while yields on average earning assets decreased 19 basis points. The two primary factors that make up the spread are the interest rates received on loans and the interest rates paid on deposits. Our net interest spread and net interest margin were 2.34% and 3.12%, respectively, for the year ended December 31, 2025, compared to 1.84% and 2.82%, respectively, for the year ended December 31, 2024. The increase in net interest spread and net interest margin was primarily attributable to increases in the average balance and the interest earned from loans, which increased $958.9 million and $40.7 million, respectively, in 2025. Our average interest-earning assets for the year ended December 31, 2025 increased $1.30 billion, or 8.2%, to $17.15 billion from $15.85 billion for the year ended December 31, 2024. Average loans grew $958.9 million, or 7.9%, average debt securities decreased $47.1 million, or 2.4%, and average federal funds sold, interest-bearing balances with banks, and securities purchased with agreement to resell increased $389.3 million, or 22.7%. Our average interest-bearing liabilities increased $1.12 billion, or 9.3%, to $13.22 billion for the year ended December 31, 2025 from $12.10 billion for the year ended December 31, 2024. The ratio of our average interest-earning assets to average interest-bearing liabilities decreased from 130.9% for the year ended December 31, 2024 to 129.7% for the year ended December 31, 2025, as average noninterest-bearing deposits and stockholders’ equity increased by a combined $227.3 million, or 5.45%, from 2024 to 2025. Our average interest-earning assets produced a taxable equivalent yield of 5.78% for the year ended December 31, 2025, compared to 5.97% for the year ended December 31, 2024. The average rate paid on interest-bearing liabilities was 3.44% for the year ended December 31, 2025, compared to 4.13% for the year ended December 31, 2024. 38 Provision for Credit Losses The provision for credit losses represents the amount determined by management to be necessary to maintain the allowance for credit losses (“ACL”) at a level capable of absorbing expected credit losses over the contractual life of loans in the loan portfolio. See the section captioned “Allowance for Credit Losses” located elsewhere in this item for additional discussion related to provision for credit losses. The provision expense for credit losses for the year ended December 31, 2025 increased compared to the year-ended December 31, 2024. The increase in provision expense was primarily the result of loan growth during 2025 compared to 2024. Nonperforming loans increased to $168.8 million, or 1.23% of total loans, at December 31, 2025 from $42.5 million, or 0.34% of total loans, at December 31, 2024. The year-over-year increase was attributable to a large, real-estate secured relationship. During 2025, we had net charged-off loans totaling $28.1 million, compared to net charged-off loans of $10.4 million for 2024. The ratio of net charged-off loans to average loans was 0.21% for 2025 compared to 0.09% for 2024. The ACL for December 31, 2025 totaled $171.7 million, or 1.25% of loans, net of unearned income. The ACL totaled $164.5 million, or 1.30% of loans, net of unearned income, at December 31, 2024. Noninterest Income Noninterest income for the years ended December 31, 2025 and 2024 was as follows: 2025 2024 Change Percentage Change Service charges on deposit accounts $ 11,884 $ 9,434 $ 2,450 26.0 % Mortgage banking 5,464 4,922 542 11.0 % Credit card income 8,327 8,280 47 0.6 % Securities losses (16,375 ) - (16,375 ) N/M Bank-owned life insurance income 14,817 9,533 5,284 55.4 % Other operating income 3,105 2,887 218 7.6 % Total noninterest income $ 27,222 $ 35,056 $ (7,834 ) (22.3 )% Noninterest income decreased $7.8 million, or 22.3%, to $27.2 million for the year ended December 31, 2025 compared to $35.1 million for the same period in 2024. Service charges on deposit accounts increased $2.5 million, or 26.0%, to $11.9 million for the year ended December 31, 2025 compared to $9.4 million for the same period in 2024. Credit card income remained flat at $8.3 million during 2025 compared to 2024. Mortgage banking income increased $542,000, or 11.0%, to $5.5 million for the year ended December 31, 2025 compared to $4.9 million for the same period in 2024. Bank-owned life insurance income increased $5.3 million, or 55.4%, to $14.8 million for the year ended December 31, 2025 compared to $9.5 million for the same period in 2024. The cash surrender value increased $1.0 million and we recognized $4.3 million of income attributed to a BOLI policy during 2025 compared to 2024. Other operating income increased $218,000, or 7.6%, to $3.1 million for the year ended December 31, 2025 compared to $2.9 million for the same period in 2024. Merchant service revenue increased $59,000, or 2.6%, to $2.3 million for the year ended December 31, 2025 compared to $2.3 million for the same period in 2024. Noninterest Expense Noninterest expense for the years ended December 31, 2025 and 2024 was as follows: 2025 2024 Change Percentage Change Salaries and employee benefits $ 94,815 $ 96,318 $ (1,503 ) (1.6 )% Equipment and occupancy expense 14,597 14,519 78 0.5 % Third party processing and other services 31,617 31,181 436 1.4 % Professional services 7,175 6,901 274 4.0 % FDIC and other regulatory assessments 10,990 10,687 303 2.8 % Other real estate owned expense 155 199 (44 ) (22.1 )% Other operating expenses 25,641 21,341 4,300 20.1 % Total noninterest expenses $ 184,990 $ 181,146 $ 3,844 2.1 % 39 Noninterest expenses increased $3.8 million, or 2.1%, to $185.0 million for the year ended December 31, 2025 compared to $181.1 million for the same period in 2024. Salary and employee benefits expenses decreased $1.5 million, or 1.6%, to $94.8 million for the year ended December 31, 2025 compared to $96.3 million for the same period in 2024, mainly due to a $3 million credit adjustment to our annual Incentive Plan expense during the second quarter of 2025. We had 666 full-time equivalent employees as of December 31, 2025 compared to 630 as of December 31, 2024. Equipment and occupancy expense increased $78,000, or .5%, to $14.6 million for the year ended December 31, 2025 compared to $14.5 million for the same period in 2024. Third party processing and other services increased $436,000, or 1.4%, to $31.6 million for the year ended December 31, 2025 compared to $31.2 million for the same period in 2024. Professional services expense increased $274,000, or 4.0%, to $7.2 million for the year ended December 31, 2025 compared to $6.9 million for the same period in 2024. FDIC assessments increased $303,000, or 2.8%, to $11.0 million for the year ended December 31, 2025 compared to $10.7 million for the same period in 2024. The FDIC implemented a special assessment to recapitalize the Deposit Insurance Fund resulting in an additional $1.8 million during 2024. Other operating expenses increased $4.3 million, or 20.1%, to $25.6 million for the year ended December 31, 2025 compared to $21.3 million for the same period in 2024. The increase was mainly due to an operational loss and an increase in loan credit expenses. We adopted the proportional amortization method of accounting for investments in certain tax credit partnerships during 2024. The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the consolidated income statement as a component of income tax expense. Previously the amortization of the investment was included in other non-interest expenses. Changes in other operating expenses from 2024 to 2025 are detailed in Note 14 - “ Other Operating Income and Expenses, ” to the Consolidated Financial Statements. Income Tax Expense Income tax expense was $65.5 million for the year ended December 31, 2025 compared to $51.7 million in 2024. Our effective tax rates for 2025 and 2024 were 19.15% and 18.61%, respectively. The increase in our effective tax rates reflect the proportional amortization of accounting for investment tax credits. We recognized $44.5 million in credits during 2025 and $15.4 million during 2024, related to new investments in Federal New Market Tax Credits. We also recognized excess tax benefits as an income tax credit to our income tax expense from the exercise and vesting of stock options and restricted stock during 2025 of $798,000, compared to $1.3 million during 2024. Our primary permanent differences are related to tax exempt income on debt securities, state income tax benefit on real estate investment trust dividends, various qualifying tax credits and change in cash surrender value of bank-owned life insurance. We have invested $435.3 million in bank-owned life insurance for certain officers of the Bank. The periodic increases in cash surrender value of those policies are tax exempt and therefore contribute to a larger permanent difference between book income and taxable income. We own real estate investment trusts for the purpose of holding and managing participations in residential mortgages and commercial real estate loans originated by the Bank. The trusts are majority-owned subsidiaries of a trust holding company, which in turn is an indirect, wholly-owned subsidiary of the Bank. The trusts earn interest income on the loans they hold and incur operating expenses related to their activities. They pay their net earnings, in the form of dividends, to the Bank, which receives a deduction for state income taxes. Financial Condition Assets Total assets as of December 31, 2025, were $17.73 billion, an increase of $375.5 million, or 2.2%, from total assets of $17.35 billion as of December 31, 2024. Average assets for the year ended December 31, 2025 were $17.75 billion, an increase of $1.41 billion, or 8.65%, over average assets of $16.33 billion for the year ended December 31, 2024. Growth in loans and interest-bearing balances with banks were the primary reasons for the increase in ending and average total assets. Year-end 2025 total loans were $13.70 billion, an increase of $1.09 billion, or 8.7%, over year-end 2024 total loans of $12.61 billion. Earning assets include loans, securities, short-term investments and bank-owned life insurance contracts. We maintain a higher level of earning assets in our business model than our peers because we allocate fewer of our resources to brick and mortar facilities, ATMs, and cash and due-from-bank accounts used for transaction processing. Earning assets as of December 31, 2025 were $16.91 billion, or 95.37% of total assets of $17.73 billion. Earning assets as of December 31, 2024 were $17.05 billion, or 98.27% of total assets of $17.35 billion. We believe this ratio is expected to generally continue at these levels, although it may be affected by economic factors beyond our control. 40 Investment Portfolio We view the investment portfolio as a source of income and liquidity. Our investment strategy is to accept a lower immediate yield in the investment portfolio by targeting shorter term investments. At December 31, 2025, mortgage-backed securities represented 29.8% of the investment portfolio, corporate debt represented 23.9% of the investment portfolio, state and municipal securities represented 1.1% of the investment portfolio, and U.S. Treasury securities represented 45.3% of the investment portfolio. All of our investments in mortgage-backed securities are pass-through mortgage-backed securities. We generally do not hold, and did not have at December 31, 2025, any structured investment vehicles or any private-label mortgage-backed securities. The amortized cost of securities in our portfolio totaled $1.73 billion at December 31, 2025, compared to $1.92 billion at December 31, 2024. The following table presents the amortized cost and weighted average yield of our securities as of December 31, 2025 by their stated maturities (this maturity schedule excludes security prepayment and call features): Maturity of Debt Securities - Weighted Average Yield One Year or Less After One Year through Five Years After Five Years through Ten Years More Than Ten Years Total At December 31, 2025: (In Thousands) Securities Available for Sale: U.S. Treasury securities $ 440,117 $ 79,983 $ - $ - $ 520,100 Mortgage-backed securities 39 12,847 8,635 111,604 133,125 State and municipal securities 1,502 7,613 1,248 - 10,363 Corporate debt - 59,880 331,188 18,657 409,725 Total $ 441,658 $ 160,323 $ 341,071 $ 130,261 $ 1,073,313 Tax-equivalent Yield (1) U.S. Treasury securities 4.20 % 4.27 % - % - % 4.21 % Mortgage-backed securities 2.64 2.56 2.52 4.70 4.35 State and municipal securities 1.70 1.89 2.19 - 1.90 Corporate debt - 6.45 5.42 6.49 5.62 Total weighted average yield (2) 4.19 % 4.83 % 5.34 % 4.96 % 4.75 % Securities Held to Maturity: U.S. Treasury Securities $ 49,944 $ 199,677 $ - $ - $ 249,621 Mortgage-backed securities - 1,970 12,869 387,258 402,097 State and municipal securities 3,842 4,516 - - 8,358 Total $ 53,786 $ 206,163 $ 12,869 $ 387,258 $ 660,076 Tax-equivalent Yield (1) U.S. Treasury Securities 1.15 % 1.44 % - % - % 1.38 % Mortgage-backed securities - 2.31 2.19 2.78 2.75 State and municipal securities 2.07 1.99 - - 2.03 Total weighted average yield (2) 1.21 % 1.46 % 2.19 % 2.78 % 2.22 % (1) Yields on tax-exempt securities are computed on a fully tax-equivalent basis using a tax rate of 21% and are net of the effects of certain disallowed interest deductions. (2) Weighted average yield is calculated by taking the sum of each category of securities multiplied by the respective tax-equivalent yield for a given maturity, and dividing by the sum of the securities for the same maturity. As of December 31, 2025, we had $6.1 million in federal funds sold, compared with $1.0 million at December 31, 2024. At year-end 2025, there were no holdings of securities of any issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity. The objective of our investment policy is to invest funds not otherwise needed to meet our loan demand to earn the maximum return, yet still maintain sufficient liquidity to meet fluctuations in our loan demand and deposit structure. In doing so, we balance the market and credit risks against the potential investment return, make investments compatible with the pledge requirements of any deposits of public funds, maintain compliance with regulatory investment requirements, and assist certain public entities with their financial needs. The investment committee has full authority over the investment portfolio and makes decisions on purchases and sales of securities. The entire portfolio, along with all investment transactions occurring since the previous Board of Directors meeting, is reviewed by the board at each monthly meeting. The investment policy allows portfolio holdings to include short-term securities purchased to provide us with needed liquidity and longer-term securities purchased to generate level income for us over periods of interest rate fluctuations. 41 Loan Portfolio The following is a condensed overview of changes in our loan portfolio. Please see Note 3 - “ Loans ” in the Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data elsewhere in this report for a more detailed analysis of our loan portfolio by type of loan. We had total loans of approximately $13.70 billion at December 31, 2025. A large majority of our loan customers are located within our market areas, as is the collateral for their loans. With our loan portfolio concentrated in a limited number of markets, there is a risk that our borrowers’ ability to repay their loans from us could be affected by changes in local and regional economic conditions. The following table details our loans at December 31, 2025, 2024 and 2023: 2025 2024 2023 (Dollars in Thousands) Commercial, financial and agricultural $ 3,146,736 $ 2,869,894 $ 2,823,986 Real estate - construction 1,457,628 1,489,306 1,519,619 Real estate - mortgage: Owner-occupied commercial 2,739,823 2,547,143 2,257,163 1-4 family mortgage 1,671,713 1,444,623 1,249,938 Non-owner occupied commercial 4,603,389 4,181,243 3,744,346 Total real estate - mortgage 9,014,925 8,173,009 7,251,447 Consumer 77,623 73,627 63,777 Total Loans 13,696,912 12,605,836 11,658,829 Less: Allowance for credit losses (171,683 ) (164,458 ) (153,317 ) Net Loans $ 13,525,229 $ 12,441,378 $ 11,505,512 The following table details the percentage composition of our loan portfolio by type at December 31, 2025, 2024 and 2023: 2025 2024 2023 Commercial, financial and agricultural 22.97 % 22.77 % 24.22 % Real estate - construction 10.64 11.81 13.03 Real estate - mortgage Owner-occupied commercial 20.00 20.21 19.36 1-4 family mortgage 12.21 11.46 10.72 Non-owner occupied commercial 33.61 33.17 32.12 Subtotal: Real estate mortgage 65.82 64.84 62.20 Consumer 0.57 0.58 0.55 Total Loans 100.00 % 100.00 % 100.00 % The table below summarizes the Company’s commercial real estate portfolio at December 31, 2025 as segregated by industry concentrations based on North American Industry Classification System: 2025 Balance Percent of Total (Dollars in Thousands) Owner Occupied Real Estate Retail Trade $ 569,658 7.8 % Other Services (except Public Administration) 315,795 4.3 Health Care and Social Assistance 301,651 4.1 Accommodation and Food Services 270,733 3.7 Manufacturing 200,048 2.7 Professional, Scientific, and Technical Services 189,979 2.6 Real Estate and Rental and Leasing 154,081 2.1 Wholesale Trade 163,286 2.2 All Other Owner Occupied Real Estate 574,592 7.8 Total Owner Occupied Real Estate $ 2,739,823 37.3 % Non-Owner Occupied Real Estate Multifamily Permanent $ 1,347,177 18.3 % Shopping or Retail Center 678,426 9.2 Hotel or Motel 601,871 8.2 Office Building 471,312 6.4 Nursing Home or Assisted Living Facility 378,999 5.2 Office Warehouse 228,238 3.1 Warehouse 152,871 2.1 Self-Storage Facility 195,744 2.7 Gas Station or Convenience Store 107,975 1.5 Restaurant 74,420 1.0 All Other Income Property 366,356 5.0 Total Non-Owner Occupied Real Estate $ 4,603,389 62.7 % Total Commercial Real Estate $ 7,343,212 100.0 % 42 The table below summarizes the Company’s commercial real estate portfolio at December 31, 2025 as segregated by geographic region in which the property is located: 2025 Balance Percent of Total (Dollars in Thousands) State: Alabama $ 2,255,037 30.8 % Florida 1,956,500 26.7 Georgia 910,679 12.4 North Carolina 275,225 3.7 South Carolina 311,050 4.2 Tennessee 654,940 8.9 Virginia 147,667 2.0 Other 832,114 11.3 Total commercial real estate loans $ 7,343,212 100.0 % The following table details maturities and sensitivity to interest rate changes for our loan portfolio at December 31, 2025: Due in One After One Year After Five Years After Year or Less to Five Years to 15 Years 15 Years Total (in Thousands) Commercial, financial and agricultural $ 1,383,001 $ 1,516,476 $ 247,259 $ - $ 3,146,736 Real estate - construction 493,510 793,507 105,149 65,462 1,457,628 Real estate - mortgage: Owner-occupied commercial 376,925 1,727,970 631,270 3,658 2,739,823 1-4 family mortgage 211,947 351,928 321,972 785,866 1,671,713 Other mortgage 1,129,537 2,965,538 480,678 27,636 4,603,389 Total real estate - mortgage 1,718,409 5,045,436 1,433,920 817,160 9,014,925 Consumer 47,013 24,708 5,902 - 77,623 Total Loans $ 3,641,933 $ 7,380,127 $ 1,792,230 $ 882,622 $ 13,696,912 Less: Allowance for loan losses (171,683 ) Net Loans $ 13,525,229 Amount due after one year at fixed interest rates: Commercial, financial and agricultural $ 757,799 Real estate - construction 194,231 Real estate - mortgage: Owner-occupied commercial 1,344,440 1-4 family mortgage 998,988 Other mortgage 1,805,917 Total real estate - mortgage 4,149,345 Consumer 6,816 Total loans $ 5,108,191 Amount due after one year at variable interest rates: Commercial, financial and agricultural $ 1,005,936 Real estate - construction 769,887 Real estate - mortgage: Owner-occupied commercial 1,018,458 1-4 family mortgage 460,778 Other mortgage 1,667,935 Total real estate - mortgage 3,147,171 Consumer 23,794 Total loans $ 4,946,788 43 Asset Quality The following table presents a summary of the allowance for credit losses, net charge-offs and certain credit ratios for the years ended December 31, 2025, 2024 and 2023: As of and for the Years Ended December 31, 2025 2024 2023 (Dollars in Thousands) Allowance for credit losses to total loans outstanding 1.25 % 1.30 % 1.32 % Allowance for credit losses $ 171,683 $ 164,458 $ 153,317 Total loans outstanding $ 13,696,912 $ 12,605,836 $ 11,658,829 Nonaccrual loans to total loans outstanding 1.23 % 0.31 % 0.17 % Nonaccrual loans $ 168,351 $ 39,501 $ 19,349 Total loans outstanding $ 13,696,912 $ 12,605,836 $ 11,658,829 Allowance for credit losses to nonaccrual loans 101.98 % 416.34 % 792.38 % Allowance for credit losses $ 171,683 $ 164,458 $ 153,317 Nonaccrual loans $ 168,351 $ 39,501 $ 19,349 Net charge-offs during the period to average loans outstanding: Commercial, financial and agricultural 0.74 % 0.32 % 0.35 % Net charge-offs during the period $ 22,004 $ 9,094 $ 10,429 Average amount outstanding $ 2,956,886 $ 2,825,914 $ 2,937,913 Real estate - construction - % - % 0.01 % Net charge-offs (recoveries) during the period $ 16 $ (8 ) $ 105 Average amount outstanding $ 1,560,632 $ 1,479,583 $ 1,470,330 Real estate - mortgage: Owner-occupied commercial 0.16 % 0.01 % 0.01 % Net charge-offs during the period $ 4,037 $ 208 $ 117 Average amount outstanding $ 2,596,175 $ 2,414,327 $ 2,273,834 1-4 family mortgage 0.02 % 0.06 % - % Net charge-offs during the period $ 303 $ 759 $ 54 Average amount outstanding $ 1,567,733 $ 1,357,272 $ 1,178,347 Non-owner occupied commercial 0.03 % - % - % Net charge-offs during the period $ 1,168 $ - $ - Average amount outstanding $ 4,355,257 $ 4,009,407 $ 3,673,667 Total real estate - mortgage 0.06 % 0.01 % - % Net charge-offs during the period $ 5,508 $ 967 $ 171 Average amount outstanding $ 8,519,165 $ 7,781,006 $ 7,125,848 Consumer 0.81 % 0.56 % 1.44 % Net charge-offs during the period $ 592 $ 359 $ 990 Average amount outstanding $ 73,006 $ 64,323 $ 68,721 Total loans 0.22 % 0.09 % 0.10 % Net charge-offs during the period $ 28,120 $ 10,412 $ 11,695 Average amount outstanding $ 13,109,689 $ 12,150,825 $ 11,602,812 44 The allowance for credit losses (“ACL”) for December 31, 2025 and 2024 was calculated under the CECL methodology and totaled $171.7 million and $164.5 million, or 1.25% and 1.30% of loans, net of unearned income, respectively. The decrease in the ACL as a percentage of total loans from December 31, 2024, to December 31, 2025, was primarily driven by higher net credit charge-offs during 2025 and the release of a special reserve that had been included in the 2024 balance, as well as updates to loss drivers and qualitative factors within our CECL model. Net credit charge-offs to average loans were 0.21% for the year ended December 31, 2025, compared to 0.09% and 0.10% for the years ended December 31, 2024 and 2023, respectively. Nonaccrual loans increased to $168.4 million, or 1.23% of total loans, at December 31, 2025 from $39.5 million, or 0.31% of total loans, at December 31, 2024, and were $19.3 million, or 0.17% of total loans, at December 31, 2023. The year-over-year nonaccrual increase from the year ended December 31, 2024 to the year ended December 31, 2025 was attributable to a large, real-estate secured relationship. We maintain an ACL on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a similar methodology to the one used to determine the ACL, modified to account for the probability of a drawdown on the commitment. The ACL on unfunded loan commitments is classified as a liability account on the balance sheet within other liabilities, while the corresponding provision for these credit losses is recorded as a component of provision of credit loss. The allowance for credit losses on unfunded commitments was $572,000 as of December 31, 2025 and $608,000 as of December 31, 2024. The following table presents the allocation of the allowance for credit losses for each respective loan category with the corresponding percent of loans in each category to total loans: For the Years Ended December 31, 2025 2024 2023 Percentage Percentage Percentage of Loans in of Loans in of Loans in Each Each Each Category to Category to Category to Amount Total Loans Amount Total Loans Amount Total Loans (Dollars in Thousands) Commercial, financial and agricultural $ 63,620 22.97 % $ 55,330 22.77 % $ 52,121 24.22 % Real estate - construction 22,432 10.64 38,597 11.81 44,658 13.03 Owner-occupied commercial 18,833 20.00 22,302 20.21 17,702 19.36 1-4 family mortgage 24,739 12.21 14,096 11.46 12,029 10.72 Non-owner occupied commercial 38,971 33.61 31,328 33.17 25,395 32.12 Consumer 3,088 0.57 2,805 0.58 1,412 0.55 Total $ 171,683 100.00 % $ 164,458 100.00 % $ 153,317 100.00 % 45 The Company assesses the adequacy of its ACL at the end of each calendar quarter. The level of ACL is based on the Company’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio and other relevant factors. The ACL is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recoveries. The ACL is believed adequate to absorb all expected future losses to be recognized over the contractual life of the loans in the portfolio. At December 31, 2025, we forecasted a moderately higher national GDP and national unemployment rate unchanged compared to December 31, 2024. At December 31, 2024, we forecasted a slightly lower national unemployment rate and moderately higher national GDP compared to December 31, 2023. Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method. For all loans utilizing the DCF method, the historical loss experience estimate by pool is then adjusted by forecast factors that are quantitatively related to the Company’s historical credit loss experience, such as national unemployment rates and gross domestic product. Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. The reasonable and supportable period and reversion period are re-evaluated each quarter by the Company and are dependent on the current economic environment among other factors. The expected credit losses for each loan pool are then adjusted for changes in qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation. The Company considers factors that are relevant within the qualitative framework, which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions. Expected credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis. Individual evaluations are performed for nonaccrual loans, loans rated substandard, and certain modified loans. Specific allocations of the ACL are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows. The Bank has procedures and processes in place intended to ensure that losses do not exceed the potential amounts documented in the Bank’s analysis of loans individually evaluated and reduce potential losses in the remaining performing loans within our real estate construction portfolio. These include the following: ● We closely monitor the past due and overdraft reports on a weekly basis to identify deterioration as early as possible and the placement of identified loans on the watch list. ● We perform extensive quarterly credit reviews for all watch list/classified loans, including formulation of aggressive workout or action plans. When a workout is not achievable, we move to collection/foreclosure proceedings to obtain control of the underlying collateral as rapidly as possible to minimize the deterioration of collateral and/or the loss of its value. ● We require updated financial information, global inventory aging and interest carry analysis for existing customers to help identify potential future loan payment problems. ● We generally limit loans for new construction to established builders and developers that have an established record of turning their inventories, and we restrict our funding of undeveloped lots and land. 46 Nonperforming Assets The table below summarizes our nonperforming assets at December 31, 2025, 2024 and 2023: 2025 2024 2023 Number Number Number Balance of Loans Balance of Loans Balance of Loans (Dollars in Thousands) Nonaccrual loans: Commercial, financial and agricultural $ 26,756 55 $ 25,692 54 $ 7,217 35 Real estate - construction 35,885 8 - - 111 1 Real estate - mortgage: Owner-occupied commercial 13,578 17 8,744 14 7,089 14 1-4 family mortgage 9,440 34 3,051 24 4,426 41 Non-owner occupied commercial 81,977 13 1,259 2 506 2 Total real estate - mortgage 104,995 64 13,054 40 12,021 57 Consumer 715 2 755 1 - - Total nonaccrual loans $ 168,351 129 $ 39,501 95 $ 19,349 93 90+ days past due and accruing: Commercial, financial and agricultural $ 101 10 $ 38 4 $ 170 8 Real estate - construction - - 661 2 - - Real estate - mortgage: Owner-occupied commercial - - - - - - 1-4 family mortgage 323 2 2,240 7 1,909 9 Non-owner occupied commercial - - - - - - Total real estate - mortgage 323 2 2,240 7 1,909 9 Consumer 54 28 26 21 105 16 Total 90+ days past due and accruing $ 478 40 $ 2,965 34 $ 2,184 33 Total nonperforming loans $ 168,829 169 $ 42,466 129 $ 21,533 126 Plus: Other real estate owned and repossessions 2,583 9 2,531 8 995 7 Total nonperforming assets $ 171,412 178 $ 44,997 137 $ 22,528 133 Ratios: Nonperforming loans to total loans 1.23 % 0.34 % 0.18 % Nonperforming assets to total loans plus other real estate owned and repossessions 1.25 % 0.36 % 0.19 % Nonperforming assets and restructured accruing loans to total loans plus other real estate owned and repossessions 1.25 % 0.36 % 0.19 % The accrual of interest on loans is discontinued when there is a significant deterioration in the financial condition of the borrower and full repayment of principal and interest is not expected or the principal or interest is more than 90 days past due, unless the loan is both well-collateralized and in the process of collection. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. Interest income on nonaccrual loans is recognized only as received. If we believe that a loan will not be collected in full, we will increase the ACL to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal. There are not any loans, outside of those included in the table above, that cause management to have serious doubts as to the ability of borrowers to comply with present repayment terms. Deposits We rely on increasing our deposit base to fund loan and other asset growth. Each of our markets is highly competitive. We compete for local deposits by offering attractive products with competitive rates. We expect to have a higher average cost of funds for local deposits than competitor banks due to our lack of an extensive branch network. Our management’s strategy is to offset the higher cost of funding with a lower level of operating expense and firm pricing discipline for loan products. We have promoted electronic banking services by providing them without charge and by offering in-bank customer training. The following table presents the average balance and average rate paid on each of the following deposit categories at the bank level for years ended December 31, 2025, 2024 and 2023: For Year Ended December 31, 2025 2024 2023 Average Balance Yields/Rates Average Balance Yields/Rates Average Balance Yields/Rates Types of Deposits: (Dollars in Thousands) Non-interest-bearing demand deposits $ 2,654,480 - % $ 2,609,137 - % $ 2,857,831 - % Interest-bearing demand deposits 2,219,996 2.03 % 2,282,599 2.81 % 1,928,133 2.24 % Money market accounts 7,682,961 3.55 % 7,005,057 4.30 % 6,347,456 3.95 % Savings accounts 103,444 1.60 % 104,581 1.69 % 119,049 1.39 % Time deposits 1,355,048 4.03 % 1,201,756 4.45 % 1,010,683 3.58 % Total deposits $ 14,015,929 $ 13,203,130 $ 12,263,152 At December 31, 2025, 2024, and 2023 we estimate that we had approximately $9.69 billion, $9.03 billion and $8.76 billion, respectively, in total uninsured deposits. The uninsured deposit data for 2025 and 2024 reflects the deposit insurance impact of “combined ownership segregation” of escrow and other accounts at an aggregate level but does not reflect an evaluation of all of the account styling distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations. 47 The following table presents the portion of our time deposits in excess of insurance limit as of December 31, 2025. Portion of Time Deposits in Excess of Insurance Limit December 31, 2025 Time Deposits Otherwise Uninsured With a Maturity of: (In Thousands) 3 months or less $ 222,214 Over 3 months through 6 months 55,734 Over 6 months through 12 months 68,702 Over 12 months 97,958 Total $ 444,608 Borrowed Funds We had $372.0 million in unused and available federal funds lines of credit with regional banks as of December 31, 2025, compared to $457.0 million as of December 31, 2024. These lines are subject to certain restrictions. Federal funds purchased from correspondent banks averaged $1.80 billion, $1.44 billion, and $1.29 billion for 2025, 2024 and 2023, respectively. We paid average interest rates on these funds of 4.37%, 5.27%, and 5.18% for the same three years, respectively. The maximum amount outstanding at a month-end during 2025 and 2024 was $2.36 billion and $1.99 billion, respectively. Stockholders ’ Equity Stockholders’ equity increased $233.6 million during 2025, to $1.85 billion as of December 31, 2025 from $1.62 billion as of December 31, 2024. The increase in stockholders’ equity resulted primarily from net income of $276.5 million during the year ended December 31, 2025, less dividends paid or declared on our common stock of $75.6 million during the year ended December 31, 2025. Off-Balance Sheet Arrangements In the normal course of business, we are a party to financial credit arrangements with off-balance sheet risk to meet the financing needs of our customers. These financial credit arrangements include commitments to extend credit beyond current fundings, credit card arrangements, standby letters of credit and financial guarantees. Those credit arrangements involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement we have in those particular financial credit arrangements. All such credit arrangements bear interest at variable rates and we have no such credit arrangements which bear interest at fixed rates. Our exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, credit card arrangements and standby letters of credit is represented by the contractual or notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. The following table sets forth our credit arrangements and financial instruments whose contract amounts represent credit risk as of December 31, 2025, 2024 and 2023: 2025 2024 2023 (In Thousands) Commitments to extend credit $ 3,779,178 $ 3,552,958 $ 3,410,283 Credit card arrangements 395,780 366,843 381,524 Standby letters of credit and financial guarantees 117,371 125,147 86,065 Total $ 4,292,329 $ 4,044,948 $ 3,877,872 48 Commitments to extend credit beyond current fundings are agreements to lend to a customer if there is no violation of any condition established in the contract. Such commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by us upon extension of credit is based on our management’s credit evaluation. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties. Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. All letters of credit are due within one year or less of the original commitment date. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Derivatives The Bank has entered into agreements with secondary market investors to deliver loans on a “best efforts delivery” basis. When a rate is committed to a borrower, it is based on the best price that day and locked with our investor for that loan for a 30-day period. In the event the loan is not delivered to the investor, the Bank has no risk or exposure with the investor. The interest rate lock commitments to customers related to loans that are originated for later sale are classified as derivatives. The fair values of our agreements with investors and rate lock commitments to customers as of December 31, 2025 and 2024 were not material. Asset and Liability Management The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive” and by monitoring an institution’s interest rate sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the dollar amount of rate-sensitive assets repricing during a period and the volume of rate-sensitive liabilities repricing during the same period. A gap is considered positive when the amount of interest rate-sensitive assets exceeds the amount of interest rate-sensitive liabilities. A gap is considered negative when the amount of interest rate-sensitive liabilities exceeds the amount of interest rate-sensitive assets. During a period of rising interest rates, a negative gap would tend to adversely affect net interest income while a positive gap would tend to result in an increase in net interest income. During a period of falling interest rates, a negative gap would tend to result in an increase in net interest income while a positive gap would tend to adversely affect net interest income. Our asset liability committee is charged with monitoring our liquidity and funds position. The committee regularly reviews the rate sensitivity position on a three-month, six-month and one-year time horizon; loans-to-deposits ratios; and average maturities for certain categories of liabilities. The asset liability committee uses a model to analyze the maturities of rate-sensitive assets and liabilities. The model measures the “gap” which is defined as the difference between the dollar amount of rate-sensitive assets repricing during a period and the volume of rate-sensitive liabilities repricing during the same period. Gap is also expressed as the ratio of rate-sensitive assets divided by rate-sensitive liabilities. If the ratio is greater than “one,” then the dollar value of assets exceeds the dollar value of liabilities and the balance sheet is “asset sensitive.” Conversely, if the value of liabilities exceeds the dollar value of assets, then the ratio is less than one and the balance sheet is “liability sensitive.” Our internal policy requires our management to maintain the gap such that net interest margins will not change more than 10% if interest rates change by 100 basis points or more than 15% if interest rates change by 200 basis points. As of December 31, 2025, our gap was within such ranges. See “—Quantitative and Qualitative Analysis of Market Risk” below in Item 7A for additional information. Liquidity and Capital Adequacy Sources and Uses of Funds The following table illustrates, during the years presented, the mix of our funding sources and the assets in which those funds are invested as a percentage of our average total assets for the period indicated. Average assets totaled $17.75 billion in 2025, compared to $16.33 billion in 2024, and to $15.07 billion in 2023: 49 For the Year Ended 2025 2024 2023 Sources of Funds: Deposits: Non-interest-bearing 14.9 % 15.9 % 18.9 % Interest-bearing 64.0 64.8 62.2 Federal funds purchased 10.1 8.8 8.5 Long term debt and other borrowings 0.4 0.4 0.6 Other liabilities 0.8 0.6 0.4 Equity capital 9.8 9.5 9.4 Total sources 100.0 % 100.0 % 100.0 % Uses of Funds: Loans 74.0 % 74.5 % 77.0 % Securities 10.8 12.0 12.5 Interest-bearing balances with banks 10.5 10.4 7.1 Federal funds sold 1.4 0.1 0.4 Other assets 3.3 3.0 3.0 Total uses 100.0 % 100.0 % 100.0 % Liquidity Liquidity is defined as our ability to generate sufficient cash to fund current loan demand, deposit withdrawals, or other cash demands and disbursement needs, and otherwise to operate on an ongoing basis. Liquidity is managed at two levels. The first is the liquidity of the Company. The second is the liquidity of the Bank. The management of liquidity at both levels is critical because the Company and the Bank have different funding needs and sources, and each are subject to regulatory guidelines and requirements. We are subject to general FDIC guidelines that require a minimum level of liquidity. Management believes our liquidity ratios meet or exceed these guidelines. Our management is not currently aware of any trends or demands that are reasonably likely to result in liquidity increasing or decreasing in any material manner. The Bank’s main source of liquidity is customer interest-bearing and noninterest bearing deposit accounts. Our regular sources of funding are from the growth of our deposit base, repayment of principal and interest on loans, the sale of loans and the renewal of time deposits. Liquidity is also available from funding sources consisting primarily of federal funds purchased, Federal Home Loan Bank (“FHLB”) loan advances and available-for-sale securities. The retention of existing deposits and attraction of new deposit sources through new and existing customers is critical to our liquidity position. In the event of compression in liquidity due to a run-off in deposits, we have a liquidity policy and procedure that provides for certain actions under varying liquidity conditions. These actions include borrowing from existing correspondent banks, selling or participating loans and the curtailment of loan commitments and funding. As of December 31, 2025, our liquid assets, represented by cash and due from banks, federal funds sold and unpledged available-for-sale securities, totaled $2.12 billion. The Bank had loans pledged to both the FHLB and the Federal Reserve Bank of Atlanta, which provided approximately $3.20 billion and $2.30 billion, respectively, in available funding. The Bank’s policy limits on brokered deposits would allow for up to $4.43 billion in available funding for brokered deposits. Additionally, we had available to us approximately $472 million in federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements, to meet short term funding needs. As a separate entity from the bank, we also have separate liquidity obligations. We are responsible for the payment of dividends to our stockholders and interest and principal on our outstanding indebtedness. As a source of internal liquidity, we have access to the capital markets. We also may continue periodic offerings of debt and equity securities. However, our ultimate source of liquidity consists of dividends from the Bank, which are limited by applicable law and regulations. In 2025 and 2024, the Bank paid dividends of $78.9 million and $71.9 million, respectively, to us. For a detailed discussion on the regulatory limitation on Bank dividends, see “Supervision and Regulation - Payment of Dividends” in Item 1. We believe these sources of funding are adequate to meet both our immediate (within the next 12 months) and our longer term anticipated funding needs. Our management meets on a weekly basis to review sources and uses of funding to determine the appropriate strategy to ensure an appropriate level of liquidity, and we have increased our focus on the generation of core deposit funding to supplement our liquidity position. At the current time, our long-term liquidity needs primarily relate to funds required to support loan originations and commitments and deposit withdrawals. Capital Adequacy As of December 31, 2025, our most recent notification from the FDIC categorized us as well-capitalized under the regulatory framework for prompt corrective action. To remain categorized as well-capitalized, we must maintain minimum Common Equity Tier 1 risk-based, Tier 1 risk-based, total risk-based, and Tier 1 leverage ratios as disclosed in the table below. Our management believes that we are well-capitalized under the prompt corrective action provisions as of December 31, 2025. In addition, the Alabama Banking Department has required that the Bank maintain a leverage ratio of at least 8.00%. 50 The following table sets forth (i) the capital ratios of the Bank required by the FDIC to maintain “well-capitalized” status and (ii) our actual ratios of capital to total regulatory or risk-weighted assets, as of December 31, 2025: Well-Capitalized Actual at December 31, 2025 CET 1 Capital Ratio 6.50 % 11.65 % Tier 1 Capital Ratio 8.00 % 11.66 % Total Capital Ratio 10.00 % 12.93 % Leverage ratio 5.00 % 10.26 % For a description of capital ratios see Note 13 - “ Regulatory Matters ” to the Consolidated Financial Statements. Critical Accounting Estimates Our consolidated financial statements are prepared based on the application of certain accounting policies, the most significant of which are described in the Notes to the Consolidated Financial Statements. Certain of these policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variation and may significantly affect our reported results and financial position for the current period or in future periods. Changes in underlying factors, assumptions or estimates in any of these areas could have a material impact on our future financial condition and results of operations. We consider accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our financial statements. The accounting estimate related to the Company’s ACL is considered to be a critical accounting estimate because considerable judgment and estimation is applied by management. Allowance for Credit Losses The Company assesses the adequacy of its allowance for credit losses at the end of each calendar quarter. The level of allowance is based on the Company’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio and other relevant factors. The allowance is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recoveries. The allowance for credit losses is believed adequate to absorb all expected future losses to be recognized over the contractual life of the loans in the portfolio. If our assumptions regarding the adequacy of our allowance for credit losses are not accurate, we may incur credit losses in excess of our current allowance for credit losses and be required to make material additions to our allowance. Such additional provision for credit losses could have a material adverse effect on our business and results of operations. Our regulators may disagree with our assumptions and could require us to materially increase our allowance for credit losses. Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a DCF, PD/LGD, or remaining life method. The historical loss experience estimate by pool is then adjusted by forecast factors that are quantitatively related to the Company’s historical credit loss experience, such as national unemployment rates and gross domestic product. Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. The reasonable and supportable period and reversion period are re-evaluated each quarter by the Company and are dependent on the current economic environment among other factors. See Note 1 – “ Summary of Significant Accounting Policies ” in the Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data elsewhere in this report. The expected credit losses for each loan pool are then adjusted for changes in qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation. The Company considers factors that are relevant within the qualitative framework which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions. 51 Expected credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis. Individual evaluations are performed for nonaccrual loans, loans rated substandard, and modified loans classified as troubled debt restructurings. Specific allocations of the allowance for credit losses are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows. Adoption of Recent Accounting Pronouncements New accounting standards are discussed in Note 1, “ Summary of Significant Accounting Policies ” to the Consolidated Financial Statements.