BANCFIRST CORP /OK/

Previous wording

The increased time and effort related to ongoing and/or changed regulations from regulatory bodies could negatively impact noninterest expense.

Current wording

The increased time, effort and staffing needs related to ongoing and/or changed regulations from regulatory bodies could negatively impact noninterest expense.

Previous wording

Local, regional, national and international economic conditions and the impact they may have on the Company and its customers.

Current wording

Local, regional, national and international economic conditions, including the effect of a government shutdown, and the impact they may have on the Company and its customers.

Previous wording

Potential impacts of the adverse developments in the banking industry driven by high-profile bank failures, including impacts on customer confidence, demand deposit outflows and the regulatory response thereto.

Current wording

Potential impacts of adverse developments in the banking industry that could impact customer confidence.

Previous wording

The Company’s net income for 2024 was $216.4 million, or $6.44 per diluted share, compared to $212.5 million, or $6.34 per diluted share for 2023.

Current wording

The Company’s net income for 2025 was $240.6 million, or $7.11 per diluted share, compared to $216.4 million, or $6.44 per diluted share for 2024.

Previous wording

In 2024, net interest income increased to $446.9 million, compared to $424.5 million in 2023. The primary driver of the increase in net interest income was higher interest rates and loan volume. Higher interest rates and increasing loan volume were partially offset by the expense associated with the increase in rates on interest-bearing deposits. The Company’s net interest margin decreased to 3.73% for 2024, compared to 3.79% for 2023.

Current wording

In 2025, net interest income increased to $490.5 million, compared to $446.9 million in 2024. Higher loan volume and growth in other earning assets were the primary drivers of the change in net interest income. The Company’s net interest margin increased to 3.74% for 2025 compared to 3.73% for 2024.

Previous wording

The Company recorded a provision for credit losses of $9.0 million in 2024 compared to a provision for credit losses of $7.5 million in 2023. The Company's provision for credit losses increased in 2024 primarily due to loan growth.

Current wording

The Company recorded a provision for credit losses of $5.7 million in 2025 compared to $9.0 million in 2024. The Company's provision for credit losses decreased in 2025 primarily due to the lower loss rates experienced in more recent periods and the impact on the vintage loss analysis.

Previous wording

Total noninterest expense increased by $14.7 million, or 4.4% for 2024. Higher noninterest expenses in 2024 were primarily related to growth in salaries and employee benefits of $12.0 million related to annual merit increases and new hires. Data processing expense increased $2.4 million in 2024 compared to 2023. Net expense from other real estate owned decreased $2.9 million, which was due to a decrease of $1.2 million of write downs on other real estate owned, a $731,000 increase in the cost of holding other real estate owned, and a decrease in gain on the sales of other real estate owned of $924,000.

Current wording

Noninterest expense was $379.8 million in 2025 compared to $347.2 million in 2024. Higher noninterest expenses in 2025 were primarily related to growth in salaries and employee benefits of $14.0 million related to annual merit increases and new hires. Also contributing to noninterest expense was an increase in net expense from other real estate owned of $7.4 million, which largely consisted of an increase in write-downs of other real estate of $4.1 million, other real estate expense of $1.8 million and a decrease in loss on sales of $1.5 million. Data processing expense increased $1.1 million in 2025 compared to 2024.

Previous wording

The Company’s assets at year-end 2024 totaled $13.6 billion, an increase of $1.2 billion from December 31, 2023. Loans grew $373.0 million from December 31, 2023, totaling $8.0 billion at December 31, 2024. Deposits totaled $11.7 billion at December 31, 2024 an increase of $1.0 billion from December 31, 2023. Off-balance sheet sweep accounts totaled $5.2 billion at December 31, 2024, up $871.6 million from December 31, 2023. The Company’s total stockholders’ equity was $1.6 billion, an increase of $187.3 million from December 31, 2023.

Current wording

The Company’s assets at year-end 2025 totaled $14.8 billion, an increase of $1.3 billion from December 31, 2024. Loans grew $511.5 million from December 31, 2024, totaling $8.5 billion at December 31, 2025. Deposits totaled $12.7 billion at December 31, 2025 an increase of $951.8 million from December 31, 2024. Off-balance-sheet sweep accounts totaled $4.9 billion at December 31, 2025, down $262.6 million from December 31, 2024. The Company’s total stockholders’ equity totaled $1.9 billion at December 31, 2025.

Previous wording

Nonaccrual loans totaled $58.0 million, representing 0.72% of total loans at December 31, 2024 compared to $24.6 million or 0.32% of total loans at December 31, 2023. The allowance for credit losses to total loans stood at 1.24% at December 31, 2024, compared to 1.26% at December 31, 2023. Net charge-offs were $6.3 million for the year or 0.08% of average loans, compared to $3.4 million or 0.05% of average loans for the year ended December 31, 2023.

Current wording

Asset quality was strong through the year. Nonaccrual loans of $61.1 million representing 0.72% of total loans at December 31, 2025 relatively unchanged from $58.0 million or 0.72% of total loans at December 31, 2024. The allowance for credit losses to total loans was 1.22% at December 31, 2025, down slightly from 1.24% at December 31, 2024. Net charge-offs were $8.5 million for the year, compared to $6.3 million for the year ended December 31, 2024.

Previous wording

To estimate expected losses using historical loss information, the Company elected to utilize a methodology known as vintage loss analysis for BancFirst, Pegasus, and Worthington. Vintage loss analysis measures impairment based on the age of the accounts and the historical performance of assets with similar risk characteristics. Vintage loss analysis determines expected losses by allowing the Company to calculate the cumulative loss rates of a given loan pool and, in so doing, determine the loan pool’s lifetime expected loss experience relative to the appropriate type of financial assets that share similar risk characteristics. Vintage loss analysis uses different “vintages” analyzed by year of origination through the weighted average maturity of each loan pool. The key quantitative inputs used in the Company’s estimate of the allowance for credit losses include 1) all available loan data tracked by year of origination, 2) total charge-offs for each specific loan pool recorded since year of origination, 3) recovery rate calculated by the average recovery over the previous seven years across all loan pools, and 4) a weighting factor biased to more recent loss experience. The quantitative expected credit loss is calculated by dividing each year’s net charge-offs by the original balance. The respective vintage’s original balance remains the denominator in each annual calculation, as it references the specific vintage’s initial balance. The loss experience of this original balance is tracked annually and summed over the life of the loan for each separate loan pool, leaving a cumulative life of credit loss rate based on historic averages weighted towards more recent loss experience. These key quantitative inputs change from period to period as new loans are originated, and charge-offs and recoveries are recognized. The recovery rate is revised on an annual basis, taking into consideration the most recent seven years. The weighting factor percentages remain static, however, the most recent year receives the highest weighting percentage.

Current wording

To estimate expected losses using historical loss information, the Company elected to utilize a methodology known as vintage loss analysis. Vintage loss analysis measures impairment based on the age of the accounts and the historical performance of assets with similar risk characteristics. Vintage loss analysis determines expected losses by allowing the Company to calculate the cumulative loss rates of a given loan pool and, in so doing, determine the loan pool’s lifetime expected loss experience relative to the appropriate type of financial assets that share similar risk characteristics. Vintage loss analysis uses different “vintages” analyzed by year of origination through the weighted average maturity of each loan pool. The key quantitative inputs used in the Company’s estimate of the allowance for credit losses include 1) all available loan data tracked by year of origination, 2) total charge-offs for each specific loan pool recorded since year of origination, 3) recovery rate calculated by the average recovery over the previous seven years across all loan pools and 4) a weighting factor biased to more recent loss experience. The quantitative expected credit loss is calculated by dividing each year’s net charge-offs by the original balance. The respective vintage’s original balance remains the denominator in each annual calculation, as it references the specific vintage’s initial balance. The loss experience of this original balance is tracked annually and summed over the life of the loan for each separate loan pool, leaving a cumulative life of credit loss rate based on historic averages weighted towards more recent loss experience. These key quantitative inputs change from period to period as new loans are originated and charge-offs and recoveries are recognized. The recovery rate is revised on an annual basis, taking into consideration the most recent seven years. The weighting factor percentages remain static; however, the most recent year receives the highest weighting percentage.

Previous wording

The Senior Loan Committee (“the SLC”) sets qualitative adjustments for each loan pool. In setting the qualitative adjustments, they consider several factors, including external economic information, peer bank comparisons and experience with the loan portfolio, among others. The SLC also considers other current conditions adjustments and reasonable and supportable forecasts derived from third party information, primarily Moody’s Analytics economic scenarios. To determine the appropriateness of the economic scenarios, the Company uses judgment and statistical analysis which correlates charge-off history to the economic scenarios. The Company then forecasts future loss expectations based on the selected economic scenarios over the next 12-24 months, which is driven by management’s judgment of a reasonable and supportable forecast period, to arrive at an estimated qualitative adjustment attributable to economic forecasts. For periods beyond which the Company is able to make or obtain reasonable and supportable forecasts of expected credit losses, the Company reverts to historical loss information.

Current wording

The Senior Loan Committee (“the SLC”) approves qualitative adjustments for each loan pool. In approving the qualitative adjustments, they consider several factors, including external economic information, peer bank comparisons and experience with the loan portfolio, among others. The SLC also considers other current conditions adjustments and reasonable and supportable forecasts derived from third party information, primarily Moody’s Analytics economic scenarios. To determine the appropriateness of the economic scenarios, the Company uses judgment and statistical analysis which correlates charge-off history to the economic scenarios. The Company then forecasts future loss expectations based on the selected economic scenarios over the next 12 months, which is driven by management’s judgment of a reasonable and supportable forecast period, to arrive at an estimated qualitative adjustment attributable to economic forecasts. For periods beyond which the Company is able to make or obtain reasonable and supportable forecasts of expected credit losses, the Company reverts to historical loss information.

Previous wording

Each quarter the SLC reviews the aggregate allowance and adjusts the appropriateness of the allowance. In addition, annually or more frequently as needed, the SLC evaluates the qualitative adjustments used in the allowance based on the information described above. To facilitate the SLC’s evaluation, the Asset Quality Department performs periodic reviews of business units and reports on the adequacy of management’s identification of collateral-dependent and adversely classified loans and their adherence to loan policies and procedures.

Current wording

Each quarter the SLC reviews the aggregate allowance. In addition, annually or more frequently as needed, the SLC evaluates the qualitative adjustments used in the allowance based on the information described above. To facilitate the SLC’s evaluation, the Asset Quality Department performs periodic reviews of business units and reports on the adequacy of management’s identification of collateral-dependent and adversely classified loans and their adherence to loan policies and procedures.

Previous wording

The amount of accrued current and deferred income taxes is based on estimates of taxes due or receivable from taxing authorities either currently or in the future. Changes in these accruals are reported as tax expense or benefits, and involve estimates of the various components included in determining taxable income, tax credits, other taxes and temporary differences. Changes periodically occur in the estimates due to changes in tax rates, tax laws and regulations and implementation of new tax planning strategies. The process of determining the accruals for income taxes necessarily involves the exercise of considerable judgment and consideration of numerous subjective factors.

Current wording

The amount of accrued current and deferred income taxes is based on estimates of taxes due or receivable from taxing authorities either currently or in the future. Changes in these accruals are reported as income tax expense or benefits, and involve estimates of the various components included in determining taxable income, tax credits, other taxes and temporary differences. Changes periodically occur in the estimates due to changes in tax rates, tax laws and regulations and implementation of new tax planning strategies. The process of determining the accruals for income taxes necessarily involves the exercise of considerable judgment and consideration of numerous subjective factors.

Previous wording

The Company reviews its portfolio of debt securities in an unrealized loss position at least quarterly. The Company first assesses whether it intends to sell, or it is more-likely-than-not that it will be required to sell, the securities before recovery of the amortized cost basis. If either of these criteria is met, the securities amortized cost basis is written down to fair value as a current period expense. If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors. In making this assessment, the Company considers, among other things, the performance of any underlying collateral and adverse conditions specifically related to the security. At December 31, 2024 and December 31, 2023, 99% of the available for sale debt securities held by the Company were issued by the U.S. Treasury, or U.S. government-sponsored entities and agencies. The Company does not consider the unrealized position of these securities to be the result of credit factors, because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery. Therefore, the Company has not recorded an allowance for credit losses against its debt securities portfolio, as the credit risk is not material.

Current wording

The Company reviews its portfolio of debt securities in an unrealized loss position at least quarterly. The Company first assesses whether it intends to sell, or it is more-likely-than-not that it will be required to sell, the securities before recovery of the amortized cost basis. If either of these criteria is met, the security's amortized cost basis is written down to fair value as a current period expense. If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors. In making this assessment, the Company considers, among other things, the performance of any underlying collateral and adverse conditions specifically related to the security. At December 31, 2025 97.2% of the available for sale debt securities held by the Company were issued by the U.S. Treasury, or U.S. government-sponsored entities and agencies. The Company does not consider the unrealized position of these securities to be the result of credit factors, because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and the Company does not have the intent to sell these securities and it is unlikely that it will be required to sell the securities before their anticipated recovery. Therefore, the Company has not recorded an allowance for credit losses against its debt securities portfolio, as the credit risk is not material.

Previous wording

The following tables present certain information related to the Company's consolidated average balance sheet, average yields on assets and average costs of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities. For these computations: (i) average balances are derived from daily averages, (ii) information is shown on a taxable-equivalent basis assuming a 21% tax rate, and (iii) nonaccrual loans are included in the average loan balances and any interest on such nonaccrual loans is recognized on a cash basis. Loan fees included in interest income were $20.8 million for the year ended December 31, 2024 compared to $21.9 million for the year ended December 31, 2023 and $24.1 million for the year ended December 31, 2022.

Current wording

The following tables present certain information related to the Company's consolidated average balance sheet, average yields on assets and average costs of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities. For these computations: (i) average balances are derived from daily averages, (ii) information is shown on a taxable-equivalent basis assuming a 21% tax rate and (iii) nonaccrual loans are included in the average loan balances and any interest on such nonaccrual loans is recognized on a cash basis. Loan fees included in interest income were $20.9 million for the year ended December 31, 2025 compared to $20.8 million for the year ended December 31, 2024 and $21.9 million for the year ended December 31, 2023.

Previous wording

Net interest income, which is the Company’s principal source of operating revenue, increased $22.4 million in 2024. The primary driver of the increase in net interest income was higher interest rates and loan volume. Higher interest rates and increasing loan volume were partially offset by the expense associated with the increase in rates on interest-bearing deposits.

Current wording

Net interest income, which is the Company’s principal source of operating revenue, increased $43.6 million in 2025. The primary driver of the increase in net interest income was higher loan volume and growth in other earning assets.

Previous wording

The Company's provision for credit losses increased in 2024 primarily due to loan growth. The Company establishes an allowance as an estimate of the current expected credit losses in the loan portfolio at the balance sheet date. Management believes the allowance for credit losses is appropriate based upon management’s best estimate of expected losses within the existing loan portfolio. Should any of the factors considered by management in evaluating the appropriate level of the allowance for credit losses change, the Company’s estimate of expected credit losses could also change which could affect the amount of future provisions for credit losses.

Current wording

The Company's provision for credit losses decreased in 2025 primarily due to the lower loss rates observed in more recent periods and the impact on the vintage loss analysis. The Company establishes an allowance as an estimate of the current expected credit losses in the loan portfolio at the balance sheet date. Management believes the allowance for credit losses is appropriate based upon management’s best estimate of expected losses within the existing loan portfolio. Should any of the factors considered by management in evaluating the appropriate level of the allowance for credit losses change, the Company’s estimate of expected credit losses could also change which could affect the amount of future provisions for credit losses.

Previous wording

Net loan charge-offs were $6.3 million for 2024 compared to $3.4 million for 2023 and $1.4 million for 2022. The net charge-offs equated to 0.08%, 0.05% and 0.02% of average loans for 2024, 2023 and 2022, respectively. The rate of net charge-offs to average total loans continues to be at a low level. A more detailed discussion of the allowance for credit losses is provided under “Loans.”

Current wording

Net loan charge-offs were $8.5 million for 2025 compared to $6.3 million for 2024. The net charge-offs equated to 0.10% and 0.08% of average loans for 2025 and 2024, respectively. The rate of net charge-offs to average total loans continues to be at a low level. A more detailed discussion of the allowance for credit losses is provided under “Loans.”

Previous wording

The Company earned $2.7 million on the sale of loans in 2024 compared $2.6 million in 2023 and $4.5 million in 2022. The income from sales of loans in 2024 and 2023 were lower compared to 2022, due to higher mortgage rates resulting in a decrease of originations.

Current wording

The Company earned $3.2 million on the sale of loans in 2025 compared to $2.7 million in 2024.

Previous wording

Noninterest income included NSF and overdraft fees totaling $31.1 million, $27.9 million and $26.0 million in 2024, 2023 and 2022, respectively. This represents 16.8%, 15.1%, and 14.2% of the Company’s noninterest income for the years 2024, 2023 and 2022, respectively. In addition, the Company had debit card usage and interchange fees totaling $26.8 million, $37.6 million and $48.9 million for the years 2024, 2023 and 2022, respectively. This represents 14.5%, 20.3% and 26.6% of the Company’s noninterest income for the years 2024, 2023 and 2022, respectively. The decrease in interchange fees in 2024 and 2023 was due to the impact of the Durbin Amendments with took effect for the Company on July 1, 2023.

Current wording

Noninterest income included NSF and overdraft fees totaling $31.6 million and $31.1 million in 2025 and 2024, respectively. This represents 15.8% and 16.8% of the Company’s noninterest income for the years 2025 and 2024, respectively. In addition, the Company had debit card usage and interchange fees totaling $27.2 million and $26.8 million for the years 2025 and 2024, respectively. This represents 13.6% and 14.5% of the Company’s noninterest income for the years 2025 and 2024, respectively.

Previous wording

Noninterest expense included deposit insurance expense, which totaled $6.4 million for the year ended December 31, 2024, compared to $5.8 million for the year ended December 31, 2023 and $4.7 million for the year ended December 31, 2022.

Current wording

Noninterest expense included deposit insurance expense, which totaled $6.8 million for the year ended December 31, 2025, compared to $6.4 million for the year ended December 31, 2024.

Previous wording

Income tax expense totaled $58.9 million in 2024, compared to $57.5 million in 2023 and $44.3 million in 2022. The effective tax rates for 2024, 2023 and 2022 were 21.4%, 21.3% and 18.7% respectively. The Company's adoption of ASU 2023-02 in the first quarter of 2023 increased income tax expense due to the amortization of $6.0 million of New Markets Tax Credits ("NMTC") and other tax credits to income tax expense during the period that would have previously been recorded to other expense, which increased the effective tax rate by 2.22%.

Current wording

Income tax expense totaled $64.5 million in 2025, compared to $58.9 million in 2024. The effective tax rates for 2025 and 2024 were 21.1% and 21.4% respectively.

Previous wording

Cash consists of cash and cash items on hand, noninterest-bearing deposits and amounts due from other banks, reserves deposited with the Federal Reserve Bank, and interest-bearing deposits with other banks. Federal funds sold consist of overnight investments of excess funds with other financial institutions. The Company has continued to maintain the majority of its excess funds with the Federal Reserve Bank. The Federal Reserve Bank pays interest on these funds based upon the lowest target rate for the maintenance period, which decreased during the last four months of 2024 from 5.40% to 4.40%. The rate increased from 4.50% to 5.50% during 2023.

Current wording

Cash consists of cash and cash items on hand, noninterest-bearing deposits and amounts due from other banks, reserves deposited with the Federal Reserve Bank, and interest-bearing deposits with other banks. Federal funds sold consist of overnight investments of excess funds with other financial institutions. The Company has continued to maintain the majority of its excess funds with the Federal Reserve Bank. The Federal Reserve Bank pays interest on these funds based upon the lowest target rate for the maintenance period, which decreased during the last four months of 2025 from 4.40% to 3.65%. The rate decreased from 5.40% to 4.40% during the last four months of 2024.

Previous wording

The amount of cash, federal funds sold and interest-bearing deposits with the Federal Reserve Bank carried by the Company is a function of the availability of funds presented to other institutions for clearing and the Company’s liquidity and interest rate sensitivity management. Balances of these items can fluctuate widely based on these various factors. The aggregate of cash and due from banks, federal funds sold and interest-bearing deposits with banks increased by $1.2 billion, or 48.2%, to $3.6 billion, from December 31, 2023 to December 31, 2024. The increase was related to an increase of interest-bearing deposits in addition to maturing securities.

Current wording

The amount of cash, federal funds sold and interest-bearing deposits with the Federal Reserve Bank carried by the Company is a function of the availability of funds presented to other institutions for clearing and the Company’s liquidity and interest rate sensitivity management. Balances of these items can fluctuate widely based on these various factors. The aggregate of cash and due from banks, federal funds sold and interest-bearing deposits with banks increased by $941.6 million, or 26.5%, to $4.5 billion, from December 31, 2024 to December 31, 2025. The increase was related to an increase of interest-bearing deposits in addition to maturing securities.

Previous wording

For the year ended December 31, 2024, total debt securities decreased $343.3 million. Debt securities available for sale represented 99.9% of the total debt securities portfolio at both December 31, 2024 and December 31, 2023. Debt securities available for sale had a net unrealized loss, before taxes, of $43.1 million at December 31, 2024, compared to $65.5 million at December 31, 2023. These unrealized losses, net of income taxes, of $32.9 million at December 31, 2024 and $50.0 million at December 31, 2023 are included in the Company’s stockholders’ equity as accumulated other comprehensive loss. The Company did not recognize a gain or loss on debt securities during the years ended December 31, 2024 or 2023. The Company purchased a total of $375.4 million of debt securities in 2024 compared to $454.0 million of debt securities in 2023. In addition, the Company had maturities and paydowns of debt securities totaling $742.3 million in 2024 and $469.0 million in 2023.

Current wording

For the year ended December 31, 2025, total debt securities decreased $286.8 million. Debt securities available for sale represented 99.9% of the total debt securities portfolio at both December 31, 2025 and December 31, 2024. Debt securities available for sale had a net unrealized loss, before taxes, of $10.8 million at December 31, 2025, compared to $43.1 million at December 31, 2024. These unrealized losses, net of income taxes, of $8.3 million at December 31, 2025 and $32.9 million at December 31, 2024 are included in the Company’s stockholders’ equity as accumulated other comprehensive loss. The Company did not recognize a gain or loss on debt securities during the years ended December 31, 2025 or 2024. The Company purchased a total of $371.3 million of debt securities in 2025 compared to $375.4 million of debt securities in 2024. In addition, the Company had maturities and paydowns of debt securities totaling $709.2 million in 2025 and $742.3 million in 2024.

Previous wording

The Company has historically generated loan growth from both internal originations and bank acquisitions. Total loans held for investment increased $368.5 million, or 4.8% in 2024, as a result of internal loan growth. Of the total increase in loans, residential real estate loans made up the largest increase with $203.3 million, or 55.2% of the increase, construction and development loans increased $114.0 million, or 30.9%, and commercial non-real estate loans increasing $74.0 million, or 20.1%. Oil and gas loans decreased $76.8 million or 20.8% in 2024. The preponderance of internal loan growth was from the Company's Oklahoma subsidiary BancFirst.

Current wording

The Company has historically generated loan growth from both internal originations and bank acquisitions. Total loans held for investment increased $507.7 million, or 6.3% in 2025, as a result of internal loan growth and its acquisition of ABOK. The acquisition of ABOK added $243.1 million of the increase in loans held for investment. In addition, of the total increase in loans, commercial real estate loans made up the largest increase with $242.0 million, or 47.7%, residential real estate loans increased $204.8 million, or 40.3% and consumer non-real estate loans increased $54.8 million, or 10.8%. Construction and development loans decreased $99.4 million, or 19.6% in 2025. The preponderance of internal loan growth was from the Company's Oklahoma subsidiary BancFirst.

Previous wording

The following table presents the maturity distribution of loans held for investment at December 31, 2024. Many of the loans with maturities of one year or less are renewed at existing or similar terms after scheduled principal reductions. Also, approximately 61% of loans had adjustable interest rates at December 31, 2024.

Current wording

The following table presents the maturity distribution of loans held for investment at December 31, 2025. Many of the loans with maturities of one year or less are renewed at existing or similar terms after scheduled principal reductions. Also, approximately 64% of loans had adjustable interest rates at December 31, 2025.

Previous wording

Nonaccrual loans increased during 2024, primarily nonaccrual construction and development loans with an approximate 58% increase and nonaccrual commercial real estate loans with an approximate 42% increase. Although nonaccrual loans increased during 2024, they represent only 0.72% of loans at December 31, 2024. Nonaccrual loans negatively impact the Company’s net interest margin. A loan is placed on nonaccrual status when, in the opinion of management, the future collectability of both interest and principal is in serious doubt. Interest income is not recognized until the principal balance is fully collected. However, if the full collection of the remaining principal balance is not in doubt, interest income is recognized on certain of these loans on a cash basis. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of $3.5 million for 2024, $1.6 million for 2023 and $1.3 million for 2022. Only a small amount of this interest is expected to be ultimately collected.

Current wording

Nonaccrual loans increased $3.1 million during 2025. Although nonaccrual loans increased during 2025, they represent only 0.72% of loans at December 31, 2025. Nonaccrual loans negatively impact the Company’s net interest margin. A loan is placed on nonaccrual status when, in the opinion of management, the future collectability of both interest and principal is in serious doubt. Interest income is not recognized until the principal balance is fully collected. However, if the full collection of the remaining principal balance is not in doubt, interest income is recognized on certain of these loans on a cash basis. Had nonaccrual loans performed in accordance with their original contractual terms, the Company would have recognized additional interest income of $4.9 million for 2025 and $3.5 million for 2024. Only a small amount of this interest is expected to be ultimately collected.

Previous wording

The classification of a loan as nonaccrual does not necessarily indicate that loan principal and interest will ultimately be uncollectible; although, in an economic downturn, the Company’s experience has been that the level of collections decline. The above normal risk associated with nonaccrual loans has been considered in the determination of the allowance for credit losses. The level of nonaccrual loans and credit losses could rise over time as a result of adverse economic conditions. At December 31, 2024, the allowance for credit losses as a percentage of nonaccrual loans was 171.6%, compared to 393.9%, at the end of 2023.

Current wording

The classification of a loan as nonaccrual does not necessarily indicate that loan principal and interest will ultimately be uncollectible; although, in an economic downturn, the Company’s experience has been that the level of collections decline. The above normal risk associated with nonaccrual loans has been considered in the determination of the allowance for credit losses. The level of nonaccrual loans and credit losses could rise over time as a result of adverse economic conditions. At December 31, 2025, the allowance for credit losses as a percentage of nonaccrual loans was 170.6%, compared to 171.6%, at the end of 2024.

Previous wording

As of January 1, 2023, the Company adopted ASU No. 2022-02, which eliminates the Troubled Debt Restructurings (“TDR”) recognition and measurement guidance and, instead, requires that the Company evaluate, based on the accounting for loan modifications, whether the modification represents a new loan or a continuation of an existing loan when a borrower is experiencing financial difficulty. The current and future financial effects of the recorded balance of loans considered to be modified during the period were not considered to be material. The recorded balance of loans modified during the year ended December 31, 2024 was approximately $14.8 million. The recorded balance of loans modified during the year ended December 31, 2023 was approximately $5.3 million.

Current wording

The Company evaluates, based on the accounting for loan modifications, whether the modification represents a new loan or a continuation of an existing loan when a borrower is experiencing financial difficulty. The current and future financial effects of the recorded balance of loans considered to be modified during the period were not considered to be material. The recorded balance of loans modified during the year ended December 31, 2025 was approximately $6.4 million. The recorded balance of loans modified during the year ended December 31, 2024 was approximately $14.8 million.

Previous wording

Other real estate owned ("OREO") and repossessed assets decreased $535,000 in 2024. OREO consists of properties acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure and premises held for sale. These properties are carried at the lower of the book values of the related loans or fair values based upon appraisals of the properties, less estimated costs to sell. Write-downs arising at the time of reclassification of such properties from loans to OREO are charged directly to the allowance for credit losses. Any losses on bank premises designated to be sold are charged to operating expense at the time of transfer from premises to OREO. Decreases in values of properties subsequent to their classification as OREO are charged to operating expense. The Company's write-downs in OREO totaled $4.0 million for 2024, $5.2 million for 2023 and $3.7 million for 2022.

Current wording

Other real estate owned ("OREO") and repossessed assets increased $15.5 million in 2025. OREO consists of properties acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure and premises held for sale. These properties are carried at the lower of the book values of the related loans or fair values based upon appraisals of the properties, less estimated costs to sell. Write-downs arising at the time of reclassification of such properties from loans to OREO are charged directly to the allowance for credit losses. Any losses on bank premises designated to be sold are charged to operating expense at the time of transfer from premises to OREO. Decreases in values of properties subsequent to their classification as OREO are charged to operating expense. The Company's write-downs in OREO totaled $8.2 million for 2025 and $4.0 million for 2024.

Previous wording

OREO included a larger commercial real estate property recorded at $28.1 million at December 31, 2024 and $29.4 million at December 31, 2023. Rental income for this property is included in other noninterest income on the consolidated statements of comprehensive income. Operating expense for this property is included in net expense from OREO in other noninterest expense on the consolidated statements of comprehensive income.

Current wording

Rental income for OREO properties is included in other noninterest income on the consolidated statements of comprehensive income. Operating expense for OREO properties is included in net expense from OREO in other noninterest expense on the consolidated statements of comprehensive income.

Previous wording

The Company determines its provision for credit losses and allowance for credit losses using the expected loss methodology that is referred to as the CECL model. The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. At December 31, 2024, the allowance for credit losses to total loans stood at 1.24% of total loans, compared to 1.26% at December 31, 2023.

Current wording

The Company determines its provision for credit losses and allowance for credit losses using the expected loss methodology that is referred to as the CECL model. The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. At December 31, 2025, the allowance for credit losses to total loans stood at 1.22% of total loans, compared to 1.24% at December 31, 2024.

Previous wording

The overall credit quality of the Company’s loan portfolio has remained strong. Net charge-offs were $6.3 million and $3.4 million for the years ended 2024 and 2023, respectively. The amount of net loan charge-offs is relatively low, equating to 0.08% and 0.05% of average total loans for the years ended December 31, 2024 and 2023, respectively. If unforeseen adverse changes occur in the national or local economy, or in the credit markets, it would be reasonable to expect that the allowance for credit losses would increase in future periods.

Current wording

The overall credit quality of the Company’s loan portfolio has remained strong. Net charge-offs were $8.5 million and $6.3 million for the years ended 2025 and 2024, respectively. The amount of net loan charge-offs is relatively low, equating to 0.10% and 0.08% of average total loans for the years ended December 31, 2025 and 2024, respectively. If unforeseen adverse changes occur in the national or local economy, or in the credit markets, it would be reasonable to expect that the allowance for credit losses would increase in future periods.

Previous wording

The fair value adjustment on acquired loans can consist of a credit component and a rate component to adjust for estimated credit exposures in the acquired loans. The credit component of the adjustment was a $1.1 million discount at December 31, 2024 and a $1.6 million discount at December 31, 2023. The rate component was $472,000 at December 31, 2024 and $568,000 at December 31, 2023. These fair value adjustments will be accreted to income over the remaining life of the loans. The acquired loans outstanding were $262.2 million and $262.7 million, at December 31, 2024 and 2023, respectively.

Current wording

The fair value adjustment on acquired loans can consist of a credit component and a rate component to adjust for estimated credit exposures in the acquired loans. The credit component of the adjustment was a $841,000 discount at December 31, 2025 and a $1.1 million discount at December 31, 2024. The rate component was $417,000 at December 31, 2025 and $472,000 at December 31, 2024. These fair value adjustments will be accreted to income over the remaining life of the loans. The acquired loans outstanding were $504.0 million and $262.2 million, at December 31, 2025 and 2024, respectively.

Previous wording

Other assets include the cash surrender value of key-man life insurance policies totaling $84.4 million at December 31, 2024 and December 31, 2023.

Current wording

Other assets include the cash surrender value of key-man life insurance policies totaling $94.2 million at December 31, 2025 and $84.4 million at December 31, 2024.

Previous wording

Equity securities are reported in other assets on the balance sheet. The Company invests in equity securities without readily determinable fair values. The realized and unrealized gains and losses are reported as securities transactions in the noninterest income section of the consolidated statements of comprehensive income. The balance of equity securities was $13.4 million at December 31, 2024 and $13.1 million at December 31, 2023. The Company reviews its portfolio of equity securities for impairment at least quarterly.

Current wording

Equity securities are reported in other assets on the balance sheet. The Company invests in equity securities without readily determinable fair values. The realized and unrealized gains and losses are reported as securities transactions in the noninterest income section of the consolidated statements of comprehensive income. The balance of equity securities was $9.3 million at December 31, 2025 and $13.4 million at December 31, 2024. The decrease in equity securities was due to a disposition of certain equity investments no longer permissible under the Volcker Rule, which prohibits banks with more than $10 billion in assets from holding certain private equity investments. The Company reviews its portfolio of equity securities for impairment at least quarterly.

Previous wording

The Company invests in affordable housing projects that qualify for the low-income housing tax credit (LIHTC), which is designed to promote private development of low-income housing. The Company’s LIHTC investments were $58.6 million and $46.4 million at December 31, 2024 and 2023, respectively and are included in other assets on the consolidated balance sheet. Unfunded commitments to these investments as of December 31, 2024 totaled $34.5 million.

Current wording

The Company invests in affordable housing projects that qualify for the low-income housing tax credit (LIHTC), which is designed to promote private development of low-income housing. The Company’s LIHTC investments were $94.9 million and $58.6 million at December 31, 2025 and 2024, respectively and are included in other assets on the consolidated balance sheet. Unfunded commitments to these investments as of December 31, 2025 totaled $63.5 million.

Previous wording

The Company invests in active low-income community businesses that qualify for New Market Tax Credits. New Market Tax Credit investments are made through Community Development Entities and such entities are qualified through the US Department of the Treasury. The Company’s NMTC investments were $7.5 million and $12.1 million at December 31, 2024 and 2023, respectively and are included in other assets on the consolidated balance sheet. There are no unfunded commitments.

Current wording

The Company invests in active low-income community businesses that qualify for New Market Tax Credits. New Market Tax Credit investments are made through Community Development Entities and such entities are qualified through the US Department of the Treasury. The Company’s NMTC investments were $8.9 million and $7.5 million at December 31, 2025 and 2024, respectively and are included in other assets on the consolidated balance sheet. There are no unfunded commitments.

Previous wording

The Company invests in rehabilitation projects that qualify for Historic Tax Credits. Total Historic Tax Credit investments were $6.3 million and zero at December 31, 2024 and 2023, respectively, and are included in other assets on the consolidated balance sheet. Unfunded commitments to these investments as of December 31, 2024 totaled $5.1 million.

Current wording

The Company invests in rehabilitation projects that qualify for Historic Tax Credits. Total Historic Tax Credit investments were $8.6 million and $6.3 million at December 31, 2025 and 2024, respectively, and are included in other assets on the consolidated balance sheet. Unfunded commitments to these investments as of December 31, 2025 totaled $2.6 million.