FFIN

Forward-Looking Statements This Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project,” “could,” “may,” or “would” and similar expressions, as they relate to us or our management, identify forward-looking statements. These forward-looking statements are based on information currently available to our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including, but not limited, to those discussed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, under the heading “Risk Factors,” and the following: •general economic conditions, including the impact of government shutdowns, our local, state and national real estate markets, and employment trends; •the effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”); •effect of severe weather conditions, including hurricanes, tornadoes, flooding and droughts; •volatility and disruption in national and international financial and commodity markets; •government intervention in the U.S. financial system including the effects of recent legislative, tax, accounting, tariffs, and regulatory actions and reforms, including the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Jumpstart Our Business Startups Act, the Consumer Financial Protection Bureau (“CFPB”), the Inflation Reduction Act of 2022, the capital ratios of Basel III as adopted by the federal banking authorities and the Tax Cuts and Jobs Act, and the One Big Beautiful Bill Act ("OBBBA"); •political or social unrest and economic instability; •the ability of the federal government to address the national economy; •changes in our competitive environment from other financial institutions and financial service providers; •the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board (“PCAOB”), the Financial Accounting Standards Board (“FASB”) and other accounting standard setters; •effect of a pandemic, epidemic, or highly contagious disease, on our Company, the communities where we have our branches, the state of Texas and the United States, related to the economy and overall financial stability, including disruptions to supply channels and labor availability; •government and regulatory responses to a pandemic, epidemic, or highly contagious disease; •the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which we and our subsidiaries must comply; •the costs, effects and results of regulatory examinations, investigations or reviews and the ability to obtain required regulatory approvals; •changes in the demand for loans, including loans originated for sale in the secondary market; •fluctuations in the value of collateral securing our loan portfolio and in the level of the allowance for credit losses; •the accuracy of our estimates of future credit losses; •the accuracy of our estimates and assumptions regarding the performance of our securities portfolio, including securities with a current unrealized loss; •inflation, interest rate, market and monetary fluctuations; •soundness of other financial institutions with which we have transactions; •changes in consumer spending, borrowing and savings habits; •changes in commodity prices (e.g., oil and gas, cattle, and wind energy); •our ability to attract deposits, maintain and/or increase market share; •changes in our liquidity position, including a result of a reduction in the amount of sources of liquidity we currently have; •fluctuations in the market value and liquidity of the investment securities we have classified as available-for-sale ("AFS"), including the effects of changes in market interest rates; •changes in the reliability of our vendors, internal control system or information systems; •cyber-attacks on our technology information systems, including fraud from our customers and external third-party vendors; •our ability to attract and retain qualified employees; 31 •acquisitions and integration of acquired businesses; •the possible impairment of goodwill and other intangibles associated with our acquisitions; •consequences of continued bank mergers and acquisitions in our market area, resulting in fewer but much larger and stronger competitors; •expansion of operations, including branch openings, new product offerings and expansion into new markets; •changes in our compensation and benefit plans; •acts of God or of war or terrorism; •the impact of changes to the global climate and its effect on our operations and customers; •potential risk of environmental liability associated with lending activities; •the rise of Artificial Intelligence as a commonly used resource; and •our success at managing the risk involved in the foregoing items. In addition, financial markets and global supply chains may continue to be adversely affected by the current or anticipated impact of military conflict, including the current Ukraine and Middle East conflicts and other world events, terrorism or other geopolitical events. Such forward-looking statements reflect the current views of our management with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategies and liquidity. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this paragraph. We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise (except as required by law). Introduction As a financial holding company, we generate most of our revenue from interest on loans and investments, wealth management fees, gain on sale of mortgage loans and service charges and fees on deposit accounts. Our primary source of funding for our loans and investments are deposits held by our bank subsidiary, First Financial Bank. Our largest expenses are interest on deposits and salaries and related employee benefits. We measure our performance by calculating our return on average assets, return on average equity, regulatory capital ratios, net interest margin and efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax equivalent basis and noninterest income. The following discussion and analysis of operations and financial condition should be read in conjunction with the consolidated financial statements and accompanying footnotes included in Item 1 of this Form 10-Q as well as those included in the Company’s 2025 Annual Report on Form 10-K. Critical Accounting Policies We prepare consolidated financial statements based on generally accepted accounting principles (“GAAP”) and customary practices in the banking industry. These policies, in certain areas, require us to make significant estimates and assumptions. We deem a policy critical if (i) the accounting estimate requires us to make assumptions about matters that are highly uncertain at the time we make the accounting estimate; and (ii) different estimates that reasonably could have been used in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, would have a material impact on the financial statements. We deem our most critical accounting policies to be (i) our allowance for credit losses and our provision for credit losses and (ii) our valuation of financial instruments. We have other significant accounting policies and continue to evaluate the materiality of their impact on our consolidated financial statements, but we believe these other policies either do not generally require us to make estimates and judgments that are difficult or subjective, or it is less likely they would have a material impact on our reported results for a given period. A discussion of (i) our allowance for credit losses and our provision for credit losses and (ii) our valuation of financial instruments is included in Notes 1, 3, and 9 to our Consolidated Financial Statements. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors and inputs are considered in estimating the ACL and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. A large driver to the ACL is the overall credit quality of the underlying credits. Deterioration or improvement in credit quality could have a significant impact on the overall level of ACL. 32 Stock Repurchase On July 22, 2025, the Company's Board of Directors extended the authorization to repurchase up to 5 million common shares through July 31, 2026. The prior authorization had been in place since July 27, 2021. The stock repurchase plan authorizes management to repurchase and retire the stock at such time as repurchases and retirements are considered beneficial to the Company and shareholders. Any repurchase of stock will be made through the open market, block trades, or in privately negotiated transactions in accordance with applicable laws and regulations. Under the repurchase plan, there is no minimum number of shares that the Company is required to repurchase. There have been no repurchases during 2025 or through June 30, 2026. On July 28, 2026, the Company's Board of Directors renewed and increased the size of the authorization to repurchase up to 7.2 million common shares through July 31, 2027. Results of Operations Performance Summary. Net earnings for the second quarter of 2026 were $71.9 million, an increase of 7.9% when compared to earnings of $66.7 million for the second quarter of 2025. Diluted earnings per share was $0.50 for the second quarter of 2026 and $0.47 for the second quarter of 2025. The return on average assets was 1.89% for both second quarters of 2026 and 2025, respectively. The return on average equity was 14.70% for the second quarter of 2026, as compared to 15.82% for the second quarter of 2025. Net earnings for the six-months ended June 30, 2026 were $143.4 million, an increase of 12.1% when compared to earnings of $128.0 million for the six-months ended June 30, 2025. Diluted earnings per share was $1.00 for the first six months of 2026 and $0.89 for the first six months of 2025. The return on average assets was 1.89% for the first six months of 2026, as compared to 1.83% for the first six months of 2025. The return on average equity was 14.76% for the first six months of 2026, as compared to 15.48% for the first six months of 2025. Net Interest Income. Net interest income is the difference between interest income on earning assets and interest expense on liabilities incurred to fund those assets. Our earning assets consist primarily of loans and investment securities. Our liabilities to fund those assets consist primarily of noninterest-bearing and interest-bearing deposits. Tax-equivalent net interest income was $140.7 million for the second quarter of 2026, as compared to $126.7 million for the same period last year. The increase in tax equivalent net interest income for the second quarter of 2026 compared to the same quarter in 2025 was largely attributable to the increases in average loans and the increase in average balance and the rate of return on taxable and tax-exempt investment securities. Average earning assets were $14.5 billion for the second quarter of 2026, as compared to $13.3 billion during the second quarter of 2025. The increase of $1.1 billion in average earning assets for the second quarter of 2026 when compared to the same period in 2025 was primarily a result of (i) an increase in loans of $272.5 million, (ii) an increase in taxable investment securities of $621.1 million and (iii) an increase in tax-exempt investment securities of $276.2 million. Average interest-bearing liabilities were $9.8 billion for the second quarter of 2026, as compared to $9.0 billion in the same period in 2025. The yield on earning assets decreased 2 basis points while the rate paid on interest-bearing liabilities decreased 18 basis points for the second quarter of 2026 when compared to the second quarter of 2025. Tax-equivalent net interest income was $279.3 million for the first six months of 2026, as compared to $248.1 million for the same period last year. The increase in tax equivalent net interest income for the first half of 2026 compared to the same period in 2025 was largely attributable to the increase in average balance and the rate of return on taxable and tax-exempt investment securities, and increases in average loans. Average earning assets were $14.5 billion for the six-months ended June 30, 2026, as compared to $13.2 billion during the six-months ended June 30, 2025. The increase of $1.3 billion in average earning assets for the six-months ended June 30, 2026 when compared to the same period in 2025 was primarily a result of (i) an increase in taxable investment securities of $596.0 million, (ii) an increase in tax-exempt investment securities of $297.6 million, and (iii) an increase in loans of $296.6 million. Average interest-bearing liabilities were $9.8 billion for the six-months ended June 30, 2026, as compared to $9.0 billion in the same period in 2025. The yield on earning assets decreased 2 basis points while the rate paid on interest-bearing liabilities decreased 19 basis points for the six-months ended June 30, 2026 when compared to the same period in 2025. 33 Table 1 allocates the change in tax-equivalent net interest income between the amount of change attributable to volume and to rate. Table 1 - Changes in Interest Income and Interest Expense (dollars in thousands): Three-Months Ended June 30, 2026 Compared to Three-Months Ended June 30, 2025 Six-Months Ended June 30, 2026 Compared to Six-Months Ended June 30, 2025 Change Attributable to Total Change Attributable to Total Volume Rate Change Volume Rate Change Short-term investments $ (565 ) $ (622 ) $ (1,187 ) $ 1,329 $ (1,531 ) $ (202 ) Taxable investment securities 4,518 3,906 8,424 8,591 7,081 15,672 Tax-exempt investment securities (1) 2,083 1,240 3,323 4,342 3,254 7,596 Loans (1) (2) 4,585 (1,122 ) 3,463 9,900 (2,016 ) 7,884 Interest income 10,621 3,402 14,023 24,162 6,788 30,950 Interest-bearing deposits 4,113 (4,146 ) (33 ) 9,162 (8,894 ) 268 Repurchase agreements 24 (22 ) 2 59 (37 ) 22 Borrowings 9 (12 ) (3 ) (343 ) (147 ) (490 ) Interest expense 4,146 (4,180 ) (34 ) 8,878 (9,078 ) (200 ) Net interest income $ 6,475 $ 7,582 $ 14,057 $ 15,284 $ 15,866 $ 31,150 (1)Computed on a tax-equivalent basis assuming a marginal tax rate of 21%. (2)Nonaccrual loans are included in loans. The net interest margin, on a tax equivalent basis, was 3.90% for the second quarter of 2026, an increase of 9 basis points from the same period in 2025. The net interest margin, on a tax equivalent basis, was 3.88% for the six-months ended June 30, 2026, an increase of 10 basis points from the same period in 2025. The net interest margin has expanded during the past year primarily due to (i) strong growth in deposits that has enabled the Company to deploy those funds into the higher yielding loans and securities portfolios, (ii) a reduction in cost of deposits, and (iii) investment of lower yielding securities cash flows into higher yielding bonds. The Federal Reserve began increasing interest rates in March 2022 and continuing into 2023 to a peak of 5.25% to 5.50%. Most recently, the Federal Reserve decreased interest rates by 100 basis points in 2024 and 25 basis points in September, October, and December 2025, respectively, resulting in a target rate of 3.50% to 3.75% at June 30, 2026. There are $1.5 billion of municipal and related deposits which are indexed to short-term treasury rates which have continued to fluctuate with the changes in the applicable rate index. The net interest margin, which measures tax-equivalent net interest income as a percentage of average earning assets, is illustrated in Table 2. 34 Table 2 - Average Balances and Average Yields and Rates (dollars in thousands, except percentages): Three-Months Ended June 30, 2026 2025 Average Balance Income/ Expense Yield/ Rate Average Balance Income/ Expense Yield/ Rate Assets Short-term investments (1) $ 338,001 $ 3,117 3.70 % $ 388,761 $ 4,304 4.44 % Taxable investment securities (2) 4,091,117 33,666 3.29 3,470,028 25,242 2.91 Tax-exempt investment securities (2)(3) 1,709,709 14,134 3.31 1,433,498 10,811 3.02 Loans (3)(4) 8,317,815 138,841 6.70 8,045,340 135,378 6.75 Total earning assets 14,456,642 $ 189,758 5.26 % 13,337,627 $ 175,735 5.28 % Cash and due from banks 255,534 218,015 Bank premises and equipment, net 152,356 149,321 Other assets 219,807 246,380 Goodwill and other intangible assets, net 313,587 313,865 Allowance for credit losses (108,016 ) (100,946 ) Total assets $ 15,289,910 $ 14,164,262 Liabilities and Shareholders’ Equity Interest-bearing deposits $ 9,676,860 $ 48,697 2.02 % $ 8,923,737 $ 48,730 2.19 % Repurchase agreements 60,403 223 1.48 54,482 221 1.63 Borrowings 28,459 125 1.76 26,557 128 1.93 Total interest-bearing liabilities 9,765,722 $ 49,045 2.01 % 9,004,776 $ 49,079 2.19 % Noninterest-bearing deposits 3,445,033 3,383,851 Other liabilities 116,944 85,745 Total liabilities 13,327,699 12,474,372 Shareholders’ equity 1,962,211 1,689,890 Total liabilities and shareholders’ equity $ 15,289,910 $ 14,164,262 Net interest income (tax equivalent) $ 140,713 $ 126,656 Rate Analysis: Interest income/earning assets 5.26 % 5.28 % Interest expense/earning assets (1.36 ) (1.47 ) Net interest margin 3.90 % 3.81 % (1)Short-term investments are comprised of federal funds sold, interest-bearing deposits in banks and interest-bearing time deposits in banks. (2)Average balances include unrealized gains and losses on available-for-sale securities. (3)Includes tax equivalent yield adjustment of approximately $3.8 million and $2.9 million in the second quarters of 2026 and 2025, respectively, using an effective tax rate of 21% for both periods. (4)Includes nonaccrual loans. 35 Six-Months Ended June 30, 2026 2025 Average Balance Income/ Expense Yield/ Rate Average Balance Income/ Expense Yield/ Rate Assets Short-term investments (1) $ 401,719 $ 7,366 3.70 % $ 341,461 $ 7,568 4.47 % Taxable investment securities (2) 4,083,944 65,949 3.23 3,487,932 50,277 2.88 Tax-exempt investment securities (2)(3) 1,718,190 28,319 3.30 1,420,541 20,723 2.92 Loans (3)(4) 8,296,026 274,861 6.68 7,999,398 266,977 6.73 Total earning assets 14,499,879 $ 376,495 5.24 % 13,249,332 $ 345,545 5.26 % Cash and due from banks 257,702 222,224 Bank premises and equipment, net 151,132 150,099 Other assets 211,938 241,767 Goodwill and other intangible assets, net 313,608 313,908 Allowance for credit losses (106,878 ) (99,662 ) Total assets $ 15,327,381 $ 14,077,668 Liabilities and Shareholders’ Equity Interest-bearing deposits $ 9,750,203 $ 96,548 2.00 % $ 8,903,004 $ 96,280 2.18 % Repurchase agreements 61,619 452 1.48 54,203 430 1.60 Borrowings 25,324 200 1.59 50,426 690 2.76 Total interest-bearing liabilities 9,837,146 $ 97,200 1.99 % 9,007,633 $ 97,400 2.18 % Noninterest-bearing deposits 3,423,184 3,325,170 Other liabilities 107,518 77,030 Total liabilities 13,367,848 12,409,833 Shareholders’ equity 1,959,533 1,667,835 Total liabilities and shareholders’ equity $ 15,327,381 $ 14,077,668 Net interest income (tax equivalent) $ 279,295 $ 248,145 Rate Analysis: Interest income/earning assets 5.24 % 5.26 % Interest expense/earning assets (1.36 ) (1.48 ) Net interest margin 3.88 % 3.78 % (1)Short-term investments are comprised of federal funds sold, interest-bearing deposits in banks and interest-bearing time deposits in banks. (2)Average balances include unrealized gains and losses on available-for-sale securities. (3)Includes tax equivalent yield adjustment of approximately $7.6 million and $5.6 million in the first half of 2026 and 2025, respectively, using an effective tax rate of 21% for both periods. (4)Includes nonaccrual loans. Noninterest Income. Noninterest income for the second quarter of 2026 was $35.8 million, an increase of $3.0 million, when compared to $32.9 million in the same quarter of 2025. Wealth Management fee income increased to $14.0 million for the second quarter of 2026 compared to $12.7 million for the second quarter of 2025, driven by growth in the assets under management. The market value of assets under management totaled $12.2 billion at June 30, 2026, compared to $11.5 billion at June 30, 2025. Service charges on deposits increased to $6.3 million for the second quarter of 2026 compared with $6.1 million for the second quarter of 2025, driven by increases in fees on deposit accounts and offset by a decrease in overdraft fees. Mortgage related income increased to $4.7 million for the second quarter of 2026 compared to $4.1 million in the second quarter of 2025. Mortgage income continues to benefit from the restructuring of the secondary mortgage department, new mortgage lenders and centralization of mortgage operations this past year and an increase in the volume of mortgage loans originated. Other noninterest income increased to $5.0 million for the second quarter of 2026 compared to $3.7 million for the second quarter of 2025. In the second quarter of 2026, within other noninterest income was an increase of $1.2 million over the second quarter of 2025 reflecting an increase in the fair market value of the assets held in the Company's supplemental executive retirement plan. The plan holds marketable securities, including shares of the Company stock. Deferred compensation of the same amount related to these changes in value is included in salaries and employee benefits expense. Also, during the second quarter of 2026, the Company received life insurance proceeds of approximately $200 thousand for the death of a former employee. Noninterest income for the six-months ended June 30, 2026 was $67.9 million, an increase of $4.8 million, when compared to $63.1 million in the same period in 2025. Wealth Management fee income increased to $27.3 million for the first six months of 2026 compared to $25.4 million for the first six months of 2025 driven by the increase in market value of trust assets managed. Mortgage related income increased to $9.0 million for the first six months of 2026 compared to $7.0 million for the same period in 2025 benefiting from the restructuring of the secondary mortgage department, new mortgage lenders and centralization of mortgage operations this past year and an increase in the volume of mortgage loans originated. Other noninterest income increased to $7.6 million for the first half of 2026 compared to $6.8 million for the first half of 2025. In the first half of 2026, included within other noninterest income was an increase of $899 thousand over the first half of 2025 reflecting an increase in the fair market value of the assets held in the Company's supplemental executive retirement plan as discussed above. Deferred compensation of the same amount related to these changes in value is included in salaries and employee benefits expense. 36 Table 3 - Noninterest Income (dollars in thousands): Three-Months Ended June 30, Six-Months Ended June 30, 2026 Increase (Decrease) 2025 2026 Increase (Decrease) 2025 Wealth Management fees $ 13,960 $ 1,214 $ 12,746 $ 27,323 $ 1,924 $ 25,399 Service charges on deposit accounts 6,263 137 6,126 12,340 38 12,302 Debit card fees 5,584 366 5,218 10,829 644 10,185 Credit card fees 734 27 707 1,385 101 1,284 Gain on sale and fees on mortgage loans 4,679 553 4,126 8,955 1,997 6,958 Net gain (loss) on sale of foreclosed assets (19 ) (219 ) 200 (75 ) (240 ) 165 Net gain on sale of assets (374 ) (380 ) 6 (374 ) (380 ) 6 Other: Check printing fees 29 (4 ) 33 32 (25 ) 57 Safe deposit rental fees 164 (6 ) 170 406 (16 ) 422 Credit life fees 266 (198 ) 464 483 (211 ) 694 Brokerage commissions 491 108 383 939 166 773 Wire transfer fees 493 34 459 962 87 875 Miscellaneous income 3,574 1,339 2,235 4,735 752 3,983 Total other 5,017 1,273 3,744 7,557 753 6,804 Total Noninterest Income $ 35,844 $ 2,971 $ 32,873 $ 67,940 $ 4,837 $ 63,103 Noninterest Expense. Total noninterest expense for the three-months ended June 30, 2026 was $81.1 million, compared to $71.7 million for the same period of 2025. An important measure in determining whether a financial institution effectively manages noninterest expense is the efficiency ratio, which is calculated by dividing noninterest expense by the sum of net interest income on a tax-equivalent basis and noninterest income. Lower ratios indicate better efficiency since more income is generated with a lower noninterest expense total. Our efficiency ratio was 45.94% for the second quarter of 2026 compared to 44.97% for the same quarter in 2025. Salaries, commissions and employee benefits increased to $49.7 million for the second quarter of 2026 compared to $42.6 million for the same period in 2025. The increase from prior year is primarily resulting from annual merit-based and market-driven pay increases that were effective March 1st and profit sharing and incentive accruals, which are up due to year-over-year earnings growth. Also, there was a change in deferred compensation expense of $1.2 million from the second quarter of the prior year due to the increase in the supplemental executive retirement plan deferred compensation liability as previously discussed, which was offset by an equal amount in other noninterest income. All other categories of noninterest expense for the second quarter of 2026 totaled $31.4 million, compared to $29.2 million in the same quarter a year ago. Noninterest expense, excluding salary related costs, for the three-months ended June 30, 2026 increased when compared to the same period in 2025 largely due to increases in software amortization and expense and professional and service fees and offset by decreases in equipment and debit card expenses. Total noninterest expense for the six-months ended June 30, 2026 was $157.9 million, compared to $142.1 million for the same period of 2025. Our efficiency ratio was 45.47% for the first six months of 2026 compared to 45.65% during the same period in 2025. Salaries, commissions and employee benefits for the six-months ended June 30, 2026 totaled $95.6 million, compared to $84.7 million for the same period in 2025.The increase from prior year is primarily resulting from annual merit-based and market-driven pay increases that were effective March 1st and profit sharing and incentive accruals, which are up due to year-over-year earnings growth. Mortgage incentives are also up due to higher loan volumes. Also, there was a change in deferred compensation expense of $899 thousand from the second quarter of the prior year due to the increase in the supplemental executive retirement plan deferred compensation liability as previously discussed, which was offset by an equal amount in other noninterest income. All other categories of noninterest expense for the six-months ended June 30, 2026 totaled $62.2 million, compared to $57.4 million in the same period a year ago. Noninterest expense, excluding salary related costs, for the six-months ended June 30, 2026 increased when compared to the same period in 2025 largely due to increases in software amortization and expense and professional and service fees partially offset by decreases in debit card and equipment expenses. 37 Table 4 - Noninterest Expense (dollars in thousands): Three-Months Ended June 30, Six-Months Ended June 30, 2026 Increase (Decrease) 2025 2026 Increase (Decrease) 2025 Salaries, commissions and incentives (excluding mortgage) $ 34,488 $ 4,786 $ 29,702 $ 65,466 $ 7,103 $ 58,363 Mortgage salaries and incentives 3,126 348 2,778 5,703 1,063 4,640 Medical 3,223 387 2,836 6,745 731 6,014 Profit sharing 3,444 703 2,741 6,467 741 5,726 401(k) match expense 1,254 148 1,106 2,546 299 2,247 Payroll taxes 2,339 254 2,085 5,236 570 4,666 Stock based compensation 1,786 459 1,327 3,479 418 3,061 Total salaries and employee benefits 49,660 7,085 42,575 95,642 10,925 84,717 Net occupancy expense 3,728 128 3,600 7,359 39 7,320 Equipment expense 2,169 (309 ) 2,478 4,328 (471 ) 4,799 FDIC insurance premiums 1,767 182 1,585 3,326 166 3,160 Debit card expense 3,043 (265 ) 3,308 6,151 (529 ) 6,680 Professional and service fees 3,664 934 2,730 7,067 1,686 5,381 Printing, stationery and supplies 292 (181 ) 473 915 (40 ) 955 Operational and other losses 801 81 720 1,801 541 1,260 Software amortization and expense 5,053 1,033 4,020 9,646 1,893 7,753 Amortization of intangible assets 43 (43 ) 86 86 (95 ) 181 Other: Data processing fees 708 41 667 1,424 77 1,347 Postage 380 (2 ) 382 825 (70 ) 895 Advertising 926 156 770 1,679 133 1,546 Correspondent bank service charges 238 (45 ) 283 497 (79 ) 576 Telephone 716 72 644 1,439 160 1,279 Public relations and business development 923 40 883 1,871 85 1,786 Directors’ fees 889 25 864 1,814 76 1,738 Audit and accounting fees 535 (16 ) 551 1,087 — 1,087 Legal fees and other related costs 401 76 325 735 82 653 Regulatory exam fees 290 54 236 558 85 473 Travel 679 39 640 1,175 120 1,055 Courier expense 423 88 335 822 154 668 Other real estate owned 9 (22 ) 31 (29 ) (57 ) 28 Other miscellaneous expense 3,769 220 3,549 7,656 923 6,733 Total other 10,886 726 10,160 21,553 1,689 19,864 Total Noninterest Expense $ 81,106 $ 9,371 $ 71,735 $ 157,874 $ 15,804 $ 142,070 Balance Sheet Review Loans. The portfolio is comprised of loans made to businesses, professionals, municipalities, individuals, and farm and ranch operations primarily in the trade areas served by our subsidiary bank. As of June 30, 2026, total loans held-for-investment were $8.3 billion, an increase of $188.7 million, as compared to December 31, 2025 balances. As compared to year-end 2025 balances, total real estate loans increased $108.8 million, total commercial loans increased $47.8 million, total consumer loans increased $46.0 million, and agricultural loans decreased $14.0 million. Loans averaged $8.3 billion for the second quarter of 2026, an increase of $272.5 million over the prior year second quarter average balances. Loans averaged $8.3 billion for the first six months of 2026, an increase of $296.6 million from the average balance during the first six months of 2025. Loan portfolio segments include Commercial & Industrial, Municipal, Agricultural, Construction and Development, Farm, Non-Owner Occupied and Owner Occupied CRE, Residential, Consumer Auto and Consumer Non-Auto. This segmentation allows for a more precise pooling of loans with similar credit risk characteristics and credit monitor procedures for the Company’s calculation of its allowance for credit losses. 38 Table 5 outlines the composition of the Company’s held-for-investment loans by portfolio segment. Table 5 - Composition of Loans Held-for-Investment (dollars in thousands): June 30, December 31, 2026 2025 Commercial: Commercial & Industrial $ 1,087,656 $ 1,116,461 Municipal 419,070 342,501 Total Commercial 1,506,726 1,458,962 Agricultural 81,786 95,776 Real Estate: Construction & Development 1,191,082 1,157,865 Farm 344,483 327,625 Non-Owner Occupied CRE 831,929 832,816 Owner Occupied CRE 1,144,093 1,120,608 Residential 2,322,000 2,285,830 Total Real Estate 5,833,587 5,724,744 Consumer: Auto 776,433 732,351 Non-Auto 148,399 146,443 Total Consumer 924,832 878,794 Total $ 8,346,931 $ 8,158,276 Loans held-for-sale, consisting of secondary market mortgage loans, totaled $23.6 million and $30.0 million at June 30, 2026 and December 31, 2025, respectively. At June 30, 2026 and December 31, 2025, $4.7 million and $4.6 million, respectively, are valued using the lower of cost or fair value, and the remaining amounts are valued under the fair value option. Commercial real estate loans (owner and non-owner occupied CRE) represent 23.7% of the Company's total loan portfolio as of June 30, 2026. Non-owner occupied CRE represents $831.9 million, or 10.0%, of the Company's total loan portfolio as of June 30, 2026. The properties securing this portfolio are diverse as to geographic location in Texas as well as industry type. Collateral for CRE loans is located throughout the Company’s markets in central west Texas, the Dallas-Fort Worth metroplex and southeast Texas with less than 1% of properties located outside of the state. The largest concentrations in the CRE portfolio as to type are industrial/manufacturing at approximately 18.5% and multi-tenant retail at approximately 7.9% as of June 30, 2026. All additional property CRE portfolio property type categories are below the identified concentration levels. Credit underwriting standards are periodically reviewed and adjusted based upon observations from our ongoing monitoring of economic conditions in our lending areas. In response to the current interest rate environment, the Company has enhanced stress testing and loan review activities to mitigate interest rate reprice risk with a specific emphasis on borrowers’ abilities to absorb the impact of higher interest rates as loans that were made in a much lower rate environment renew. 39 The following tables summarize maturity information of our loan portfolio as of June 30, 2026. The tables also present the portion of loans that have fixed interest rates or variable interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index. Maturity Distribution and Interest Sensitivity of Loans at June 30, 2026 (dollars in thousands): Total Loans Held-for-Investment: Due in One Year or Less After One but Within Five Years After Five but Within Fifteen Years After Fifteen Years Total Commercial: Commercial & Industrial $ 429,999 $ 557,621 $ 91,687 $ 8,349 $ 1,087,656 Municipal 118,403 73,785 151,708 75,174 419,070 Total Commercial 548,402 631,406 243,395 83,523 1,506,726 Agricultural 63,667 16,582 1,537 — 81,786 Real Estate: Construction & Development 566,157 235,987 246,535 142,403 1,191,082 Farm 13,085 66,166 144,354 120,878 344,483 Non-Owner Occupied CRE 104,028 324,642 315,725 87,534 831,929 Owner Occupied CRE 86,600 360,374 531,184 165,935 1,144,093 Residential 153,665 155,081 828,488 1,184,766 2,322,000 Total Real Estate 923,535 1,142,250 2,066,286 1,701,516 5,833,587 Consumer: Auto 7,634 741,143 27,656 — 776,433 Non-Auto 32,115 85,076 28,178 3,030 148,399 Total Consumer 39,749 826,219 55,834 3,030 924,832 Total $ 1,575,353 $ 2,616,457 $ 2,367,052 $ 1,788,069 $ 8,346,931 % of Total Loans 18.9 % 31.3 % 28.4 % 21.4 % 100.0 % Loans with fixed interest rates: Due in One Year or Less After One but Within Five Years After Five but Within Fifteen Years After Fifteen Years Total Commercial: Commercial & Industrial $ 95,871 $ 302,720 $ 3,832 $ — $ 402,423 Municipal 11,180 73,785 92,272 31,385 208,622 Total Commercial 107,051 376,505 96,104 31,385 611,045 Agricultural 4,818 9,632 — — 14,450 Real Estate: Construction & Development 262,497 76,089 42,797 14,607 395,990 Farm 7,840 43,556 64,223 13,152 128,771 Non-Owner Occupied CRE 83,379 166,771 23,245 3,806 277,201 Owner Occupied CRE 52,085 179,709 10,507 150 242,451 Residential 121,074 121,765 464,837 244,743 952,419 Total Real Estate 526,875 587,890 605,609 276,458 1,996,832 Consumer: Auto 7,634 741,143 27,656 — 776,433 Non-Auto 32,091 84,766 27,776 462 145,095 Total Consumer 39,725 825,909 55,432 462 921,528 Total $ 678,469 $ 1,799,936 $ 757,145 $ 308,305 $ 3,543,855 % of Total Loans 8.1 % 21.5 % 9.1 % 3.7 % 42.5 % 40 Loans with variable interest rates: Due in One Year or Less After One but Within Five Years After Five but Within Fifteen Years After Fifteen Years Total Commercial: Commercial & Industrial $ 334,128 $ 254,901 $ 87,855 $ 8,349 $ 685,233 Municipal 107,223 — 59,436 43,789 210,448 Total Commercial 441,351 254,901 147,291 52,138 895,681 Agricultural 58,849 6,950 1,537 — 67,336 Real Estate: Construction & Development 303,660 159,898 203,738 127,796 795,092 Farm 5,245 22,610 80,131 107,726 215,712 Non-Owner Occupied CRE 20,649 157,871 292,480 83,728 554,728 Owner Occupied CRE 34,515 180,665 520,677 165,785 901,642 Residential 32,591 33,316 363,651 940,023 1,369,581 Total Real Estate 396,660 554,360 1,460,677 1,425,058 3,836,755 Consumer: Auto — — — — — Non-Auto 24 310 402 2,568 3,304 Total Consumer 24 310 402 2,568 3,304 Total $ 896,884 $ 816,521 $ 1,609,907 $ 1,479,764 $ 4,803,076 % of Total Loans 10.8 % 9.8 % 19.3 % 17.7 % 57.5 % Of the $4.8 billion of variable interest rate loans shown above, loans totaling $2.4 billion mature or reprice over the next twelve months. Of this amount, approximately $1.8 billion will reprice immediately upon changes in the underlying index rate (primarily U.S. prime rate) with the remaining $598.4 million being subject to floors above or ceilings below the current index. Asset Quality. Our loan portfolio is subject to periodic reviews by our centralized independent loan review group, engaged third-parties, as well as periodic examinations by bank regulatory agencies. Loans are placed on nonaccrual status when, in the judgment of management, the collectability of principal or interest under the original terms becomes doubtful. Nonaccrual, past due 90 days or more and still accruing, and foreclosed assets were $67.0 million at June 30, 2026, as compared to $56.5 million at December 31, 2025. As a percent of loans held-for-investment and foreclosed assets, these assets were 0.80% at June 30, 2026 and 0.69% at December 31, 2025. As a percent of total assets, these assets were 0.44% at June 30, 2026, as compared to 0.37% at December 31, 2025, respectively. We believe the level of these assets to be manageable and are not aware of any material classified credits not properly disclosed as nonperforming at June 30, 2026. Table 6 – Nonaccrual, Past Due 90 Days or More and Still Accruing, and Foreclosed Assets (dollars in thousands, except percentages): June 30, December 31, 2026 2025 Nonaccrual loans $ 63,310 $ 55,121 Loans still accruing and past due 90 days or more 958 892 Total nonperforming loans 64,268 56,013 Foreclosed assets 2,770 479 Total nonperforming assets $ 67,038 $ 56,492 As a % of loans held-for-investment and foreclosed assets 0.80 % 0.69 % As a % of total assets 0.44 0.37 We record interest payments received on nonaccrual loans as reductions of principal. Prior to the loans being placed on nonaccrual, we recognized interest income on loans of approximately $795 thousand for the year ended December 31, 2025. Such amounts for the 2026 and 2025 interim periods were not significant. If interest on all nonaccrual loans had been recognized on a full accrual basis during the year ended December 31, 2025, such income would have been approximately $5.7 million. Allowance for Credit Losses. The allowance for credit losses is the amount we determine as of a specific date to be appropriate to absorb current expected credit losses on existing loans. For a discussion of our methodology, see Note 3 to the Consolidated Financial Statements (unaudited). The provision for loan losses of $3.9 million for the three-months ended June 30, 2026 is combined with the provision for unfunded commitments of $268 thousand and reported in the net aggregate of $4.2 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended June 30, 2026. The provision for loan losses of $6.7 million for the six-months ended June 30, 2026 is combined with the provision reversal for unfunded commitments of $179 thousand and reported in the net aggregate of $6.5 million under the provision for credit losses in the consolidated statements of earnings for the six-months ended June 30, 2026. 41 The provision for loan losses of $2.4 million for the three-months ended June 30, 2025 is combined with the provision for unfunded commitments of $700 thousand and reported in the net aggregate of $3.1 million under the provision for credit losses in the consolidated statements of earnings for the three-months ended June 30, 2025. The provision for loan losses of $5.4 million for the six-months ended June 30, 2025 is combined with the provision for unfunded commitments of $1.2 million and reported in the net aggregate of $6.7 million under the provision for credit losses in the consolidated statements of earnings for the six-months ended June 30, 2025. As a percent of average loans, annualized net recoveries were 0.03% for the three-months ended June 30, 2026, as compared to annualized net charge-offs of 0.04% for the three-months ended June 30, 2025. For the six-months ended June 30, 2026 and 2025, annualized net recoveries were 0.01% and annualized net charge-offs of 0.02%, respectively. The allowance for credit losses as a percent of loans held-for-investment was 1.35% as of June 30, 2026, as compared to 1.29% for December 31, 2025. Table 7 - Loan Loss Experience and Allowance for Credit Losses (dollars in thousands, except percentages): Three-Months Ended June 30, Six-Months Ended June 30, 2026 2025 2026 2025 Allowance for credit losses at period-end $ 112,433 $ 102,792 $ 112,433 $ 102,792 Loans held-for-investment at period-end 8,346,931 8,074,944 8,346,931 8,074,944 Average loans for period 8,317,815 8,045,340 8,296,026 7,999,398 Net charge-offs (recoveries)/average loans (annualized) -0.03 % 0.04 % -0.01 % 0.02 % Allowance for loan losses/period-end loans held-for-investment 1.35 % 1.27 % 1.35 % 1.27 % Allowance for loan losses/nonaccrual loans, past due 90 days still accruing and restructured loans 174.94 % 162.60 % 174.94 % 162.60 % Interest-Bearing Demand Deposits in Banks. The Company had interest-bearing deposits in banks of $287.0 million at June 30, 2026 compared to $826.9 million at December 31, 2025. At June 30, 2026, interest-bearing deposits in banks included $273.7 million maintained at the Federal Reserve Bank of Dallas and $13.2 million on deposit with the FHLB. Available-for-Sale Securities. At June 30, 2026, securities with a fair value of $5.7 billion were classified as securities available-for-sale. As compared to December 31, 2025, the available-for-sale portfolio at June 30, 2026 reflected (i) an increase of $229.4 million in mortgage-backed securities, (ii) an increase of $2.5 million in obligations of states and political subdivisions, (iii) a decrease of $60.8 million in U.S. Treasury securities, and (iv) a decrease of $9.3 million in corporate bonds and other securities. Fluctuations in the available-for-sale securities portfolio balances were primarily driven by purchases and calls or maturities, and changes in unrealized losses during the first six-months of 2026. Our mortgage related securities are backed by GNMA, FNMA or FHLMC, or are collateralized by securities backed by these agencies. See the below table and Note 2 to the Consolidated Financial Statements (unaudited) for additional disclosures relating to the maturities and fair values of the investment portfolio at June 30, 2026 and December 31, 2025. Table 8 - Maturities and Yields of Available-for-Sale Securities Held at June 30, 2026 (dollars in thousands, except percentages): Maturing by Contractual Maturity One Year or Less After One Year Through Five Years After Five Years Through Ten Years After Ten Years Total Available-for-Sale: Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Obligations of states and political subdivisions $ 79,562 3.81 % $ 794,572 2.58 % $ 469,565 4.69 % $ 410,194 2.79 % $ 1,753,893 3.25 % Corporate bonds and other securities 48,379 3.20 43,595 2.00 — — — — 91,974 2.63 Mortgage-backed securities 86,544 3.13 2,018,145 3.32 1,193,884 3.42 531,517 2.45 3,830,090 3.23 Total $ 214,485 3.40 % $ 2,856,312 3.09 % $ 1,663,449 3.78 % $ 941,711 2.60 % $ 5,675,957 3.22 % All yields are computed on a tax-equivalent basis assuming a marginal tax rate of 21%. Yields on available-for-sale securities are based on amortized cost. Maturities of mortgage-backed securities are based on contractual maturities and could differ due to prepayments of underlying mortgages. The expected maturities of these securities were computed by using scheduled amortization of balances and historical prepayment rates. Maturities of other securities are reported at the earlier of maturity date or call date. As of June 30, 2026, the investment portfolio had an overall tax equivalent yield of 3.22%, a weighted average life of 6.3 years and modified duration of 5.3 years. 42 Deposits. Deposits held by our subsidiary bank represent our primary source of funding. Total deposits were $13.1 billion as of June 30, 2026, as compared to $13.3 billion as of December 31, 2025. Table 9 provides a breakdown of average deposits and rates paid over the three and six-months ended June 30, 2026 and 2025 respectively. Table 9 - Composition of Average Deposits (dollars in thousands, except percentages): For the Three-Months Ended June 30, 2026 2025 Average Balance Average Rate Average Balance Average Rate Noninterest-bearing deposits $ 3,445,033 —% $ 3,383,851 —% Interest-bearing deposits: Interest-bearing checking 4,831,368 1.92 4,558,476 2.15 Savings and money market accounts 3,959,519 1.97 3,468,149 1.99 Time deposits under $250,000 558,933 2.71 557,080 3.06 Time deposits of $250,000 or more 327,040 2.99 340,032 3.35 Total interest-bearing deposits 9,676,860 2.02 % 8,923,737 2.19 % Total average deposits $ 13,121,893 $ 12,307,588 Total cost of deposits 1.49 % 1.59 % For the Six-Months Ended June 30, 2026 2025 Average Balance Average Rate Average Balance Average Rate Noninterest-bearing deposits $ 3,423,184 —% $ 3,325,170 —% Interest-bearing deposits: Interest-bearing checking 4,905,412 1.86 4,589,915 2.13 Savings and money market accounts 3,950,864 1.98 3,408,133 1.98 Time deposits under $250,000 559,107 2.75 561,345 3.12 Time deposits of $250,000 or more 334,820 2.97 343,611 3.37 Total interest-bearing deposits 9,750,203 2.00 % 8,903,004 2.18 % Total average deposits $ 13,173,387 $ 12,228,174 Total cost of deposits 1.48 % 1.59 % The estimated amount of uninsured and uncollateralized deposits including related accrued and unpaid interest is approximately $4.0 billion, or 30.5% of total deposits, as of June 30, 2026. Borrowings. Included in borrowings were federal funds purchased, advances from the FHLB and other borrowings of $21.8 million and $21.7 million at June 30, 2026 and December 31, 2025, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $28.5 million and $26.6 million in the second quarters of 2026 and 2025, respectively. The weighted average interest rates paid on these borrowings were 1.76% and 1.93% for the second quarters of 2026 and 2025, respectively. The average balance of federal funds purchased, advances from the FHLB and other borrowings were $25.3 million and $50.4 million in the first half of 2026 and 2025, respectively. The weighted average interest rates paid on these borrowings were 1.59% and 2.76% for the first half of 2026 and 2025, respectively. Repurchase Agreements. Securities sold under repurchase agreements of $53.7 million and $63.0 million at June 30, 2026, and December 31, 2025, respectively. Securities sold under repurchase agreements are generally with significant customers of the Company that require short-term liquidity for their funds for which we pledge certain securities that have a fair value equal to at least the amount of the short-term borrowings. The average balances of securities sold under repurchase agreements were $60.4 million and $54.5 million for the second quarters of 2026 and 2025, respectively. The average rates paid on securities sold under repurchase agreements were 1.48% and 1.63% for the second quarters of 2026 and 2025, respectively. The average balances of securities sold under repurchase agreements were $61.6 million and $54.2 million for the first half of 2026 and 2025, respectively. The average rates paid on securities sold under repurchase agreements were 1.48% and 1.60% for the first half of 2026 and 2025, respectively Interest Rate Risk Interest rate risk results when the maturity or repricing intervals of interest-earning assets and interest-bearing liabilities are different. Our exposure to interest rate risk is managed primarily through our strategy of selecting the types and terms of interest-earning assets and interest-bearing liabilities that generate favorable earnings while limiting the potential negative effects of changes in market interest rates. We use no off-balance-sheet financial instruments to manage interest rate risk. Our subsidiary bank has an asset liability management committee that monitors interest rate risk and compliance with investment policies. The subsidiary bank utilizes an earnings simulation model as the primary quantitative tool in measuring the amount of interest rate risk associated with changing market rates. The model quantifies the effects of various interest rate scenarios on projected net interest income and net income over the next 43 twelve months. The model measures the impact on net interest income relative to a base case scenario of hypothetical fluctuations in interest rates over the next twelve months. These simulations incorporate assumptions regarding balance sheet growth and mix, pricing and the re-pricing and maturity characteristics of the existing and projected balance sheet. The following analysis depicts the estimated impact on net interest income of immediate changes in interest rates at the specified levels for the periods presented. Percentage change in net interest income: Change in interest rates: June 30, December 31, (in basis points) 2026 2025 +200 1.49% 3.45% +100 0.71% 1.83% -100 (1.30)% (1.44)% -200 (2.65)% (2.86)% The results for the net interest income simulations as of June 30, 2026 and December 31, 2025 resulted in an asset sensitive position. These are good faith estimates and assume that the composition of our interest sensitive assets and liabilities existing at each year-end will remain constant over the relevant twelve-month measurement period and that changes in market interest rates are instantaneous and sustained across the yield curve regardless of duration of pricing characteristics on specific assets or liabilities. Also, this analysis does not contemplate any actions that we might undertake in response to changes in market interest rates. We believe these estimates are not necessarily indicative of what actually could occur in the event of immediate interest rate increases or decreases of this magnitude. As interest-bearing assets and liabilities reprice in different time frames and proportions to market interest rate movements, various assumptions must be made based on historical relationships of these variables in reaching any conclusion. Since these correlations are based on competitive and market conditions, we anticipate that our future results will likely be different from the foregoing estimates, and such differences could be material. Should we be unable to maintain a reasonable balance of maturities and repricing of our interest-earning assets and our interest-bearing liabilities, we could be required to dispose of our assets in an unfavorable manner or pay a higher than market rate to fund our activities. Our asset liability management committee oversees and monitors this risk. The fair value of our investment securities classified as available-for-sale totaled $5.7 billion at June 30, 2026. During the six months ended June 30, 2026, the corresponding unrealized loss before taxes of $342.0 million at December 31, 2025, changed to an unrealized loss before taxes of $354.4 million at June 30, 2026, which is recorded net of taxes in accumulated other comprehensive earnings (loss) in shareholders' equity. The unrealized gains or losses, net of taxes, on the portfolio are excluded from the calculation of all regulatory capital ratios. The changes in the fair value were driven by changes in interest rates based on expected actions by the Federal Reserve Board and other market conditions. The overall valuation of the portfolio is most correlated to the 5-year U.S. Treasury rates based on the composition and duration of the portfolio. At June 30, 2026, the 5-year U.S. Treasury rate was 4.19% compared to 3.72% at December 31, 2025, representing a 47 basis point increase during the first six months of 2026. As of June 30, 2026, an increase of 100 basis points in the 5-year U.S. Treasury rate would result in an increase to unrealized losses by approximately $260 million before taxes, while a 100 basis point decrease in the same rate would result in a decrease to unrealized losses by approximately $220 million before taxes. Management does not have the intent to sell impaired available-for-sale securities before fair value recovers to the current amortized cost, and it is more-likely-than-not that the Company will not be required to sell impaired securities before the fair value recovers, which may be maturity. Capital and Liquidity Capital. We evaluate capital resources by our ability to maintain adequate regulatory capital ratios to do business in the banking industry. Issues related to capital resources arise primarily when we are growing at an accelerated rate but not retaining a significant amount of our profits or when we experience significant asset quality deterioration. Total shareholders’ equity was $2.0 billion, or 13.0% of total assets at June 30, 2026, as compared to $1.9 billion, or 12.4% of total assets at December 31, 2025. Included in shareholders' equity at June 30, 2026 and December 31, 2025 were $279.7 million and $269.9 million, respectively, in unrealized losses on investment securities available-for-sale, net of related income taxes, although such amount is excluded from and does not impact regulatory capital. For the second quarter of 2026, total shareholders' equity averaged $2.0 billion, or 12.8% of average assets, as compared to $1.7 billion, or 11.9% of average assets, during the same period in 2025. For the first six months of 2026, total shareholders' equity averaged $2.0 billion, or 12.8% of average assets, as compared to $1.7 billion or 11.8% of average assets, during the same period in 2025. Banking regulators measure capital adequacy by means of the risk-based capital ratios and the leverage ratio under the Basel III rules and prompt corrective action regulations. The risk-based capital rules provide for the weighting of assets and off-balance-sheet commitments and contingencies according to prescribed risk categories. Regulatory capital is then divided by risk-weighted assets to determine the risk-adjusted capital ratios. The leverage ratio is computed by dividing shareholders’ equity less intangible assets by quarter-to-date average assets less intangible assets. Beginning in January 2015, under the Basel III rules, the implementation of the capital conservation buffer was effective for the Company starting at the 0.625% level and increasing 0.625% each year thereafter, until it reached 2.50% on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress and requires increased capital levels for the purpose of capital distributions and other payments. Failure to meet the amount of the buffer will result in restrictions on the Company’s ability to make capital distributions, including dividend payments and stock repurchases, and to pay discretionary bonuses to executive officers. 44 As of June 30, 2026 and December 31, 2025, we had a total risk-based capital ratio of 21.62% and 21.17%, a Tier 1 capital to risk-weighted assets ratio of 20.40% and 19.99%, and a common equity Tier 1 to risk-weighted assets ratio of 20.40% and 19.99%, and a Tier 1 leverage ratio of 12.88% and 12.55%, respectively. The regulatory capital ratios as of June 30, 2026 and December 31, 2025 were calculated under Basel III rules. The regulatory capital ratios of the Company and Bank under the Basel III regulatory capital framework are as follows: Actual Minimum Capital Required-Basel III Required to be Considered Well- Capitalized As of June 30, 2026: Amount Ratio Amount Ratio Amount Ratio First Financial Bankshares, Inc. (Consolidated) Total Capital to Risk-Weighted Assets: $ 2,096,534 21.62 % $ 1,018,127 10.50 % $ 969,645 10.00 % Tier 1 Capital to Risk-Weighted Assets: $ 1,977,892 20.40 % $ 824,198 8.50 % $ 581,787 6.00 % Common Equity Tier 1 Capital to Risk-Weighted Assets: $ 1,977,892 20.40 % $ 678,751 7.00 % $ — N/A Leverage Ratio: $ 1,977,892 12.88 % $ 387,858 4.00 % $ — N/A First Financial Bank Total Capital to Risk-Weighted Assets: $ 1,892,486 19.59 % $ 1,014,436 10.50 % $ 966,130 10.00 % Tier 1 Capital to Risk-Weighted Assets: $ 1,773,845 18.36 % $ 821,210 8.50 % $ 772,904 8.00 % Common Equity Tier 1 Capital to Risk-Weighted Assets: $ 1,773,845 18.36 % $ 676,291 7.00 % $ 627,984 6.50 % Leverage Ratio: $ 1,773,845 11.61 % $ 386,452 4.00 % $ 483,065 5.00 % Actual Minimum Capital Required Basel III Required to be Considered Well- Capitalized As of December 31, 2025: Amount Ratio Amount Ratio Amount Ratio First Financial Bankshares, Inc. (Consolidated) Total Capital to Risk-Weighted Assets: $ 2,000,262 21.17 % $ 991,973 10.50 % $ 944,736 10.00 % Tier 1 Capital to Risk-Weighted Assets: $ 1,888,339 19.99 % $ 803,026 8.50 % $ 566,842 6.00 % Common Equity Tier 1 Capital to Risk-Weighted Assets: $ 1,888,339 19.99 % $ 661,315 7.00 % $ — N/A Leverage Ratio: $ 1,888,339 12.55 % $ 377,894 4.00 % $ — N/A First Financial Bank Total Capital to Risk-Weighted Assets: $ 1,823,770 19.36 % $ 989,005 10.50 % $ 941,909 10.00 % Tier 1 Capital to Risk-Weighted Assets: $ 1,711,847 18.17 % $ 800,623 8.50 % $ 753,527 8.00 % Common Equity Tier 1 Capital to Risk-Weighted Assets: $ 1,711,847 18.17 % $ 659,336 7.00 % $ 612,241 6.50 % Leverage Ratio: $ 1,711,847 11.43 % $ 376,764 4.00 % $ 470,955 5.00 % In connection with the adoption of the Basel III regulatory capital framework, our subsidiary bank made the election to continue to exclude accumulated other comprehensive income from available-for-sale securities (“AOCI”) from capital in connection with its quarterly financial filing and, in effect, to retain the AOCI treatment under the prior capital rules. Liquidity. Liquidity management involves our ability to convert assets to cash to meet our current and future obligations to customers at any time. Such needs can develop from loan demand, deposit withdrawals or acquisition opportunities. Potential obligations resulting from the issuance of standby letters of credit and commitments to fund future borrowings to our loan customers are other factors affecting our liquidity needs. Many of these obligations and commitments are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements affecting our liquidity position. The potential need for liquidity arising from these types of financial instruments is represented by the contractual notional amount of the instrument. Asset liquidity is provided by cash and assets which are readily marketable, or which will mature in the near future. Liquid assets include cash, federal funds sold, and short-term investments in time deposits in banks. Liquidity is also provided by access to funding sources, which include core depositors and correspondent banks that maintain accounts with and sell federal funds to our subsidiary bank. Other sources of funds include our ability to borrow from short-term sources, such as purchasing federal funds from correspondent banks, sales of securities under agreements to repurchase and other borrowings (see below) and an unfunded $50 million revolving line of credit established with Frost Bank, a nonaffiliated bank, which matures on June 30, 2027 (see next paragraph). Our subsidiary bank also has federal funds purchased lines of credit with two non-affiliated banks totaling $175 million. At June 30, 2026, there were no amounts drawn on these lines of credit. Our subsidiary bank also has (i) an available line of credit with the FHLB totaling $2.3 billion at June 30, 2026, secured by portions of our loan portfolio and certain investment securities, and (ii) access to approximately $1.6 billion at the Federal Reserve Bank of Dallas Discount Window lending program secured by portions of certain investment securities and portions of our loan portfolio. At June 30, 2026, there was $668.0 million used on the FHLB line advance for undisbursed commitments (letters of credit) used to secure public funds. The Company renewed and amended its loan agreement, effective June 30, 2025, with Frost Bank. Under the loan agreement, as renewed and amended, we are permitted to draw up to $50 million on a revolving line of credit. Prior to June 30, 2027, interest is paid quarterly at the U.S. prime rate as quoted in the Money Rates section of The Wall Street Journal, and the line of credit matures June 30, 2027. If a balance exists at July 1, 2027, the principal balance converts to a term facility payable quarterly over five years and interest is paid quarterly at the U.S. prime rate as quoted in the Money Rates section of The Wall Street Journal. The line of credit is unsecured. Among other provisions in the Loan Agreement, the Company must satisfy certain financial covenants during the term of the Loan Agreement, including without limitation, covenants that require the Company to maintain certain capital, profitability, loan loss reserve, non-performing asset and debt service coverage ratios. In addition, the credit agreement contains certain operational covenants, which among others, restricts the payment of dividends above 55% of consolidated net income, limits the incurrence of debt (excluding any amounts acquired in an acquisition) and prohibits the disposal of assets except in the ordinary course of business. Since 1995, we have historically declared dividends as 45 a percentage of our consolidated net income in a range of 36% (low) in 2021 and 2020 to 53% (high) in 2003 and 2006. The Company was in compliance with the financial and operational covenants at June 30, 2026. There was no outstanding balance under the line of credit as of June 30, 2026. In addition, we anticipate that future acquisitions of financial institutions, expansion of branch locations or offerings of new products could also place a demand on our cash resources. Available cash and cash equivalents at our parent company which totaled $162.7 million at June 30, 2026, investment securities which totaled $1.1 million at June 30, 2026 and mature over 4 to 5 years, available dividends from our subsidiaries which totaled $360.0 million at June 30, 2026, utilization of available lines of credit, and future debt or equity offerings are expected to be the source of funding for these potential acquisitions or expansions. Our liquidity position is continuously monitored and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Liquidity risk management is an important element in our asset/liability management process. We regularly model liquidity stress scenarios to assess potential liquidity outflows or funding problems resulting from economic disruptions, volatility in the financial markets, unexpected credit events or other significant occurrences deemed potentially problematic by management. These scenarios are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity needs. As of June 30, 2026, management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. We are monitoring closely the impact to the financial system due to the past failures of several banks. Given the diversified core deposit base and relatively low loan to deposit ratios maintained at our subsidiary bank, we consider our current liquidity position to be adequate to meet our short-term and long-term liquidity needs. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on us. Off-Balance Sheet (“OBS”)/Reserve for Unfunded Commitments. We are a party to financial instruments with OBS risk in the normal course of business to meet the financing needs of our customers. These financial instruments include unfunded lines of credit, commitments to extend credit and federal funds sold to correspondent banks and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in our consolidated balance sheets. At June 30, 2026, the Company’s reserve for unfunded commitments totaled $6.2 million which is recorded in other liabilities. Our exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for unfunded lines of credit, commitments to extend credit and standby letters of credit is represented by the contractual notional amount of these instruments. We generally use the same credit policies in making commitments and conditional obligations as we do for on-balance-sheet instruments. Unfunded lines of credit and commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. These 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, as we deem necessary upon extension of credit, is based on our credit evaluation of the counterparty. 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 we issue to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The average collateral value held on letters of credit usually exceeds the contract amount. Table 10 – Commitments as of June 30, 2026 and December 31, 2025 (dollars in thousands): Total Notional Amounts Committed June 30, December 31, 2026 2025 Unfunded lines of credit $ 1,185,290 $ 1,099,205 Unfunded commitments to extend credit 633,472 638,136 Standby letters of credit 71,772 54,760 Total commercial commitments $ 1,890,534 $ 1,792,101 We believe we have no other OBS arrangements or transactions with unconsolidated, special purpose entities that would expose us to liability that is not reflected in the financial statements. The above table does not include balances related to the Company’s forward mortgage-backed security trades. At June 30, 2026 and December 31, 2025, these credit exposures for mortgage loans sold with recourse approximated $29.8 million and $25.5 million, respectively. Total commercial commitments were $1.9 billion at June 30, 2026, compared to $1.8 billion at December 31, 2025. Parent Company Funding. Our ability to fund various operating expenses, dividends, and cash acquisitions is generally dependent on our own earnings (without giving effect to our subsidiaries), cash reserves and funds derived from our subsidiaries. These funds historically have been produced by intercompany dividends and management fees that are limited to reimbursement of actual expenses. We anticipate that our recurring cash sources will continue to include dividends and management fees from our subsidiaries. At June 30, 2026, $360.0 million was available for the payment of intercompany dividends by our subsidiaries without the prior approval of regulatory agencies. Our subsidiaries paid aggregate dividends of $84.5 million and $52.5 million for the six-months ended June 30, 2026 and 2025, respectively. 46 Dividends. Our long-term dividend policy is to pay cash dividends to our shareholders of approximately 40% to 50% of annual net earnings while maintaining adequate capital to support growth. We are also restricted by a loan covenant within our line of credit agreement with Frost Bank to dividend no greater than 55% of net income, as defined in such loan agreement. The cash dividend payout ratios have amounted to 41.00% and 41.39% of net earnings for the first six months of 2026 and 2025, respectively. Given our current capital position, projected earnings and asset growth rates, we do not anticipate any significant change in our current dividend policy. To pay dividends, we and our subsidiary bank must maintain adequate capital above regulatory guidelines and comply with the general requirements applicable to a Texas corporation. Generally, a Texas corporation may not pay a dividend to its shareholders if (i) after giving effect to the dividend, the corporation would be insolvent, or (ii) the amount of the dividend would exceed the surplus of the corporation. In addition, if the applicable regulatory authority believes that a bank under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice (which, depending on the financial condition of the bank, could include the payment of dividends), the authority may require, after notice and hearing, that such bank cease and desist from the unsafe practice. As a member bank, First Financial Bank may not declare or pay a dividend if the total of all dividends declared during the calendar year, including the proposed dividend, exceeds the sum of the bank's net income (as reportable in its Reports of Condition and Income) during the current calendar year and the retained net income of the prior two calendar years, unless the dividend has been approved by the Federal Reserve Board. The Federal Reserve Board, the FDIC, and the Texas Department of Banking have each indicated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsafe and unsound banking practice. The Federal Reserve Board, the Texas Department of Banking, and the FDIC expect that bank holding companies and insured banks should generally only pay dividends out of current operating earnings.