ServisFirst Bancshares, Inc. (SFBS)

CIK: 0001430723. SIC: 6022 State Commercial Banks. Latest 10-K as of: 2026-02-27.

SIC breadcrumb: Finance, Insurance, And Real Estate > Depository Institutions > SIC 6022 State Commercial Banks

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1430723. Latest filing source: 0001171843-26-001150.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-27. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001430723.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-06. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001430723.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001171843-26-003069.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-05-06. Report date: 2026-03-31.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is designed to provide a better understanding of various factors relating to the results of operations and financial condition of ServisFirst Bancshares, Inc. (the “Company”) and its wholly owned subsidiary, ServisFirst Bank (the “Bank”). This discussion is intended to supplement and highlight information contained in the accompanying unaudited consolidated balance sheets as of March 31, 2026 and December 31, 2025 and consolidated statements of income for the three months ended March 31, 2026 and March 31, 2025.

24

Forward-Looking Statements

Statements in this document that are not historical facts, including, but not limited to, statements concerning future operations, results or performance, are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 27A of the Securities Act of 1933, as amended. The words “believe,” “expect,” “anticipate,” “project,” “plan,” “intend,” “will,” “could,” “would,” “might” and similar expressions often signify forward-looking statements. Such statements involve inherent risks and uncertainties. The Company cautions that such forward-looking statements, wherever they occur in this quarterly report or in other statements attributable to the Company, are necessarily estimates reflecting the judgment of the Company’s senior management and involve risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Such forward looking statements should, therefore, be considered in light of various factors that could affect the accuracy of such forward-looking statements, including, but not limited to: general economic conditions, especially in the credit markets and in the Southeast; the impact of tariffs, trade wars and other conflicts on general economic conditions, the performance of the capital markets; changes in interest rates, yield curves and interest rate spread relationships; changes in accounting and tax principles, policies or guidelines; changes in legislation or regulatory requirements; changes as a result of our reclassification as a large financial institution by the FDIC; changes in our loan portfolio and the deposit base; possible changes in laws and regulations and governmental monetary and fiscal policies, including, but not limited to, Federal Reserve policies in connection with continued or re-emerging inflationary pressures and the ability of the U.S. Congress to increase the U.S. statutory debt limit as needed; computer hacking or cyber-attacks resulting in unauthorized access to confidential or proprietary information; substantial, unexpected or prolonged changes in the level or cost of liquidity; the cost and other effects of legal and administrative cases and similar contingencies; possible changes in the creditworthiness of customers and the possible impairment of the collectability of loans and the value of collateral; the effect of natural disasters, such as hurricanes and tornados, in our geographic markets; and increased competition from both banks and nonbank financial institutions. The foregoing list of factors is not exhaustive. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “Cautionary Note Regarding Forward Looking Statements” and “Risk Factors” in our most recent Annual Report on Form 10-K and our other SEC filings. If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements. Accordingly, you should not place undue reliance on any forward-looking statements, which speak only as of the date made. The Company assumes no obligation to update or revise any forward-looking statements that are made from time to time.

Business

We are a bank holding company under the Bank Holding Company Act of 1956 and are headquartered in Birmingham, Alabama. Our wholly-owned subsidiary, ServisFirst Bank, an Alabama banking corporation, provides commercial banking services through full-service banking offices located in Alabama, Florida, Georgia, North and South Carolina, Tennessee, Texas, and Virginia. Through the Bank, we originate commercial, consumer and other loans and accept deposits, provide electronic banking services, such as online and mobile banking, including remote deposit capture, deliver treasury and cash management services and provide correspondent banking services to other financial institutions.

Our principal business is to accept deposits from the public and to make loans and other investments. Our principal sources of funds for loans and investments are demand, time, savings, and other deposits. Our principal sources of income are interest and fees collected on loans, interest and dividends collected on other investments and service charges. Our principal expenses are interest paid on savings and other deposits, interest paid on our other borrowings, employee compensation, office expenses and other overhead expenses.

First Quarter Highlights

●

Diluted earnings per common share of $1.52 for the first quarter, up 31.0% from the first quarter of 2025.

●

Deposits grew by $267 million, or 8% annualized, during the quarter.

●

Loans grew by $249 million, or 7% annualized, during the quarter.

●

Book value per share of $34.99, up 14.5% from the first quarter of 2025 and 13.4% annualized, from the fourth quarter of 2025.

●

Liquidity remains very strong with $1.84 billion in cash and cash equivalents, equaling 10% of our total assets, and no Federal Home Loan Bank advances or brokered deposits.

●

Consolidated common equity tier 1 capital to risk-weighted assets increased from 11.48% in the first quarter of 2025 to 11.86% in the first quarter of 2026.

●

Return on average common stockholder’s equity increased from 15.63% to 17.91% year-over-year.

25

Overview

As of March 31, 2026, we had consolidated total assets of $18.17 billion, an increase of $444.1 million, or 2.5%, from $17.73 billion at December 31, 2025. Total loans were $13.95 billion, an increase of $249.0 million, or 1.8%, from $13.70 billion at December 31, 2025. Total deposits were $14.49 billion, an increase of $267.3 million, or 1.9%, from $14.22 billion at December 31, 2025.

Net income and net income available to common stockholders was $83.0 million for the quarter ended March 31, 2026, compared to net income and net income available to common stockholders of $63.2 million for the first quarter of 2025. Basic and diluted earnings per common share were both $1.52 for the three months ended March 31, 2026 compared to $1.16 in the corresponding period in 2025. Changes in income and expenses are more fully explained in “Results of Operations” below.

Performance Ratios

The following table presents selected ratios of our results of operations for the three months ended March 31, 2026, and 2025:

Three Months Ended March 31,

2026

2025

Return on average assets

1.89

%

1.45

%

Return on average stockholders' equity

17.91

%

15.63

%

Dividend payout ratio

22.41

%

29.39

%

Net interest margin (1)

3.53

%

2.92

%

Efficiency ratio (2)

29.80

%

34.97

%

Average stockholders' equity to average total assets

10.57

%

9.27

%

(1)

Net interest margin is the net yield on interest earning assets and is the difference between the interest yield earned on interest-earning assets and interest rate paid on interest-bearing liabilities, divided by average earning assets.

(2)

Efficiency ratio is the result of noninterest expense divided by the sum of net interest income and noninterest income.

Financial Condition

Cash and Cash Equivalents

At March 31, 2026, we had $18.7 million in federal funds sold, compared to $6.1 million at December 31, 2025. We also maintain balances at the Federal Reserve Bank of Atlanta, which earn interest. At March 31, 2026, we had $1.21 billion in balances at the Federal Reserve, compared to $1.00 billion at December 31, 2025.

Investment Securities

Debt securities available-for-sale totaled $1.04 billion at March 31, 2026 and $1.07 billion at December 31, 2025. Debt securities held-to-maturity totaled $647.3 million at March 31, 2026 and $660.1 million at December 31, 2025. We had paydowns of $21.9 million on mortgage-backed securities, calls of $500,000 on corporate debt, and maturities of $50.0 million on U.S. Treasury securities during the three months ended March 31, 2026. We purchased $28.7 million in corporate debt securities during the first three months of 2026. For a tabular presentation of debt securities available-for-sale and held to maturity at March 31, 2026 and December 31, 2025, see “Note 4 – Securities” in our Notes to Consolidated Financial Statements.

The objective of our investment policy is to invest funds not otherwise needed to meet our loan demand to earn the maximum return, yet still maintain sufficient liquidity to meet fluctuations in our loan demand and deposit structure. In doing so, we seek to balance the market and credit risks against the potential investment return, make investments compatible with the pledge requirements of any deposits of public funds, maintain compliance with regulatory investment requirements, and assist certain public entities with their financial needs. The investment committee has full authority over the investment portfolio and makes decisions on purchases and sales of securities. The entire portfolio, along with all investment transactions occurring since the previous board of directors meeting, is reviewed by the board at each monthly meeting. The investment policy allows portfolio holdings to include short-term securities purchased to provide us with needed liquidity and longer-term securities purchased to generate level income for us over periods of interest rate fluctuations.

All investment securities in an unrealized loss position as of March 31, 2026 continue to perform as scheduled. We have evaluated the securities and have determined that the decline in fair value, relative to its amortized cost, is not due to credit-related factors. In addition, we have the ability to hold these securities within the portfolio until maturity or until the value recovers, and we believe that it is not likely that we will be required to sell these securities prior to recovery. We continue to monitor all of our securities with a high degree of scrutiny. There can be no assurance that we will not conclude in future periods that conditions existing at that time indicate some or all of its securities may be sold or would require a charge to earnings as a provision for credit losses in such periods.

The Company does not invest in collateralized debt obligations. As of March 31, 2026, we had $432.5 million of bank holding company subordinated notes. If rated, all such bonds were rated BBB or better by Kroll Bond Rating Agency at the time of our initial investment. All other corporate bonds had a Standard and Poor’s or Moody’s rating of A-1 or better when purchased. The total investment portfolio has a combined average credit rating of AA as of March 31, 2026.

26

The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $1.20 billion and $1.23 billion as of March 31, 2026 and December 31, 2025, respectively.

Loans

We had total loans of $13.95 billion at March 31, 2026, an increase of $249.0 million, or 1.8% from $13.70 billion at December 31, 2025. Non-owner occupied commercial loans increased $136.3 million and Real estate – construction loans increased $73.4 million during the quarter, making

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-27. Report date: 2025-12-31.

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This section of the Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the Company’s financial statements with a narrative from the perspective of management on the Company’s financial condition, results of operations, liquidity and certain other factors that may affect future results. In certain instances, parenthetical references are made to relevant sections of the Notes to Consolidated Financial Statements to direct the reader to a further detailed discussion. This section should be read in conjunction with the Consolidated Financial Statements included in this Form 10-K.

Overview

We are a bank holding company within the meaning of the BHC Act headquartered in Birmingham, Alabama. Through our wholly-owned subsidiary bank, we operate full service banking offices located in Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee and Virginia.  We also operate a loan production office in Florida. Our principal business is to accept deposits from the public and to make loans and other investments. Our principal source of funds for loans and investments are demand, time, savings, and other deposits and the amortization and prepayment of loans and borrowings. Our principal sources of income are interest and fees collected on loans, interest and dividends collected on other investments and service charges. Our principal expenses are interest paid on savings and other deposits, interest paid on our other borrowings, employee compensation, office expenses, and other overhead expenses. Our business is conducted through a single reportable segment. For additional information regarding our segment reporting, refer to (Note 22) - “Segment Reporting” Notes to the Consolidated Financial Statements.

34

Results of Operations

The following discussion and analysis presents the more significant factors that affected our financial condition as of December 31, 2025 and 2024 and results of operations for each of the years then ended. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on March 1, 2025 for a discussion and analysis of the more significant factors that affected periods prior to 2024.

Net Income Available to Common Stockholders

Net income available to common stockholders was $276.5 million for the year ended December 31, 2025, compared to $227.2 million for the year ended December 31, 2024. The increase in net income was primarily attributable to an increase in net interest income. Basic and diluted net income per common share were both $5.06 for the year ended December 31, 2025, compared to $4.17 and $4.16, respectively, for the year ended December 31, 2024. Return on average assets was 1.56% in 2025, compared to 1.39% in 2024, and return on average common stockholders’ equity was 16.05% in 2025, compared to 14.98% in 2024.

The following tables present a summary of our statements of income, including the percent change in each category, for the years ended December 31, 2025 compared to 2024, and for the years ended December 31, 2024 compared to 2023, respectively:

Year Ended December 31,

2025

2024

Change from the Prior Year

(Dollars in Thousands)

Interest income

$

990,427

$

946,121

4.7

%

Interest expense

455,218

499,462

(8.9

)%

Net interest income

535,209

446,659

19.8

%

Provision for credit losses

35,311

21,587

63.6

%

Net interest income after provision for credit losses

499,898

425,072

17.6

%

Noninterest income

27,222

35,056

(22.3

)%

Noninterest expense

184,990

181,146

2.1

%

Income before income taxes

342,130

278,982

22.6

%

Income taxes

65,527

51,740

26.6

%

Net income

276,603

227,242

21.7

%

Dividends on preferred stock

62

62

-

%

Net income available to common stockholders

$

276,541

$

227,180

21.7

%

Year Ended December 31,

2024

2023

Change from the Prior Year

(Dollars in Thousands)

Interest income

$

946,121

$

813,246

16.3

%

Interest expense

499,462

402,309

24.1

%

Net interest income

446,659

410,937

8.7

%

Provision for credit losses

21,587

18,715

15.3

%

Net interest income after provision for credit losses

425,072

392,222

8.4

%

Noninterest income

35,056

30,417

15.3

%

Noninterest expense

181,146

178,051

1.7

%

Income before income taxes

278,982

244,588

14.1

%

Income taxes

51,740

37,735

37.1

%

Net income

227,242

206,853

9.9

%

Dividends on preferred stock

62

62

-

%

Net income available to common stockholders

$

227,180

$

206,791

9.9

%

35

Performance Ratios

The following table presents selected ratios of our results of operations for the years ended December 31, 2025, 2024 and 2023:

For the Years Ended December 31,

2025

2024

2023

Return on average assets

1.56

%

1.39

%

1.37

%

Return on average stockholders' equity

16.05

%

14.98

%

15.13

%

Dividend payout ratio

26.88

%

29.82

%

30.06

%

Net interest margin (1)

3.12

%

2.82

%

2.81

%

Efficiency ratio (2)

32.89

%

37.60

%

40.34

%

Average stockholders' equity to average total assets

9.71

%

9.29

%

9.07

%

(1) Net interest margin is the net yield on interest earning assets and is the difference between the interest yield earned on  interest-earning assets and interest rate paid on interest-bearing liabilities, divided by average earning assets.

(2) Efficiency ratio is the result of noninterest expense divided by the sum of net interest income and noninterest income.

Net Interest Income

Net interest income is the difference between the income earned on interest-earning assets and interest paid on interest-bearing liabilities used to support such assets. Net interest income is the single largest component of operating revenues. Management seeks to optimize this revenue while balancing interest rate, credit, and liquidity risks. The major factors that affect net interest income are changes in volumes, the yield on interest-earning assets and the cost of interest-bearing liabilities. Our management’s ability to respond to changes in interest rates by effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and the momentum of our primary source of earnings.

Net interest income increased 19.8% for the year ended December 31, 2025 from the year ended December 31, 2024. Net interest income increased primarily due to a larger decline in the average rate paid on interest-bearing liabilities than the decline in the average yield on interest-earning assets, resulting in a wider net interest spread.

Average earning assets increased 8.2% in 2025 from 2024, which was primarily driven by an increase of 7.9% in average loans. A majority of our regional markets grew loans during 2025.

Average interest-bearing liabilities increased 9.3% in 2025 from 2024. The increase in interest-bearing deposits was mostly attributable to the organic growth of our deposit base.

Net Interest Margin Analysis

The banking industry uses two key ratios to measure relative profitability of net interest revenue, which are the net interest spread and the net interest margin. The net interest spread measures the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities. The net interest spread eliminates the effect of noninterest-earning assets as well as noninterest-bearing deposits and other noninterest-bearing funding sources and gives a direct perspective on the effect of market interest rate movements. The net interest margin is an indication of the profitability of a company’s balance sheet and is defined as net interest income as a percentage of total average interest-earning assets, which includes the positive effect of funding a portion of interest-earning assets with noninterest-bearing deposits and stockholders’ equity.

The net interest margin is impacted by the average volumes of interest-sensitive assets and interest-sensitive liabilities and by the difference between the yield on interest-sensitive assets and the cost of interest-sensitive liabilities (spread). Loan fees collected at origination represent an additional adjustment to the yield on loans. Net interest spread can be affected by economic conditions, the competitive environment, loan demand, and deposit flows. The net yield on earning assets is an indicator of effectiveness of our ability to manage the net interest margin by managing the overall yield on assets and cost of funding those assets.

The following table shows, for the years ended December 31, 2025, 2024 and 2023, the average balances of each principal category of our assets, liabilities and stockholders’ equity, and an analysis of net interest income, and the change in interest income and interest expense segregated into amounts attributable to changes in volume and changes in rates. This table is presented on a taxable equivalent basis, if applicable.

36

Average Balance Sheets and Net Interest Analysis

On a Fully Taxable-Equivalent Basis

For the Year Ended December 31,

(In thousands, except Average Yields and Rates)

2025

2024

2023

Average Balance

Interest Earned / Paid

Average Yield / Rate

Average Balance

Interest Earned / Paid

Average Yield / Rate

Average Balance

Interest Earned / Paid

Average Yield / Rate

Assets:

Interest-earning assets:

Loans, net of unearned income (1)(2):

Taxable

$

13,080,536

$

826,976

6.32

%

$

12,134,929

$

787,361

6.49

%

$

11,584,541

$

698,177

6.03

%

Tax-exempt (3)

29,153

1,567

5.38

15,896

434

2.73

18,271

834

4.56

Total loans, net of unearned income

13,109,689

828,543

6.32

12,150,825

787,795

6.48

11,602,812

699,011

6.02

Mortgage loans held for sale

9,940

482

4.85

7,974

401

5.03

4,293

259

6.03

Debt securities:

Taxable

1,912,880

67,122

3.51

1,959,488

66,535

3.40

1,881,074

53,499

2.84

Tax-exempt (3)

492

26

5.28

980

39

3.98

2,716

81

2.98

Total debt securities (4)

1,913,372

67,148

3.51

1,960,468

66,574

3.40

1,883,790

53,580

2.84

Federal funds sold and securities purchased with agreement to resell

241,838

12,007

4.96

19,770

1,128

5.71

53,376

2,844

5.33

Restricted equity securities

11,994

808

6.74

11,073

800

7.22

9,359

673

7.19

Interest-bearing balances with banks

1,866,211

81,773

4.38

1,698,962

89,522

5.27

1,066,159

57,063

5.35

Total interest-earning assets

$

17,153,044

$

990,761

5.78

%

$

15,849,072

$

946,220

5.97

%

$

14,619,789

$

813,430

5.56

%

Non-interest-earning assets:

Cash and due from banks

105,871

100,639

105,140

Net premises and equipment

60,304

60,276

60,335

Allowance for loan losses, accrued interest and other assets

426,849

323,396

281,946

Total assets

$

17,746,068

$

16,333,383

$

15,067,210

Interest-bearing liabilities:

Interest-bearing deposits:

Interest-bearing demand deposits

$

2,219,996

$

45,043

2.03

%

$

2,282,599

$

64,151

2.81

%

$

1,928,133

$

43,265

2.24

%

Savings

103,444

1,657

1.60

104,581

1,763

1.69

119,049

1,656

1.39

Money market

7,682,961

272,644

3.55

7,005,057

301,211

4.30

6,347,456

250,675

3.95

Time deposits (5)

1,355,048

54,544

4.03

1,201,756

53,525

4.45

1,010,683

36,144

3.58

Total interest-bearing deposits

11,361,449

373,888

3.29

10,593,993

420,650

3.97

9,405,321

331,740

3.53

Federal funds purchased and securities purchased with agreement to resell

1,799,637

78,640

4.37

1,444,463

76,064

5.27

1,288,877

66,730

5.18

Other borrowings

63,356

2,690

4.25

64,737

2,748

4.24

86,102

3,839

4.46

Total interest-bearing liabilities

$

13,224,442

$

455,218

3.44

%

$

12,103,193

$

499,462

4.13

%

$

10,780,300

$

402,309

3.73

%

Non-interest-bearing liabilities:

Non-interest-bearing checking

2,654,480

2,609,137

2,857,831

Other liabilities

144,217

104,198

62,369

Stockholders' equity

1,741,120

1,559,213

1,418,189

Unrealized gains on securities

(18,191

)

(42,358

)

(51,479

)

Total liabilities and stockholders' equity

$

17,746,068

$

16,333,383

$

15,067,210

Net interest income

$

535,543

$

446,758

$

411,121

Net interest spread

2.34

%

1.84

%

1.83

%

Net interest margin (5)

3.12

%

2.82

%

2.81

%

(1)

Non-accrual loans are included in average loan balances in all periods. Loan fees of $19,761, $15,381 and $13,752 are included in interest income in 2025, 2024, and 2023, respectively.

(2)

Amortization of acquired loan premiums of $200, $186 and $197 is included in interest income in 2025, 2024 and 2023, respectively.

(3)

Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%.

(4)

Unrealized losses of $(26,700), $(60,030) and $(74,519) are excluded from the yield calculation in 2025, 2024, and 2023, respectively.

(5)

Net interest margin is net interest income divided by total interest-earning assets.

37

The following table reflects changes in our net interest margin as a result of changes in the volume and rate of our interest-bearing assets and liabilities:

For the Year Ended December 31,

2025 Compared to 2024 Increase (Decrease) in Interest Income and Expense Due to Changes in:

2024 Compared to 2023 Increase (Decrease) in Interest Income and Expense Due to Changes in:

Volume

Rate

Total

Volume

Rate

Total

Interest-earning assets:

Loans, net of unearned income:

Taxable

$

60,172

$

(20,557

)

$

39,615

$

34,143

$

55,041

$

89,184

Tax-exempt

524

609

1,133

(98

)

(302

)

(400

)

Total loans, net of unearned income

60,696

(19,948

)

40,748

34,045

54,739

88,784

Mortgage loans held for sale

95

(14

)

81

191

(49

)

142

Debt securities:

Taxable

(1,605

)

2,192

587

2,307

10,729

13,036

Tax-exempt

(23

)

10

(13

)

(63

)

21

(42

)

Total debt securities

(1,628

)

2,202

574

2,244

10,750

12,994

Federal funds sold and securities purchased with agreement to resell

11,044

(165

)

10,879

(1,903

)

188

(1,715

)

Restricted equity securities

1

7

8

20

107

127

Interest-bearing balances with banks

8,265

(16,014

)

(7,749

)

33,357

(898

)

32,459

Total interest-earning assets

78,473

(33,932

)

44,541

67,954

64,837

132,791

Interest-bearing liabilities:

Interest-bearing demand deposits

(1,715

)

(17,393

)

(19,108

)

8,800

12,086

20,886

Savings

(19

)

(87

)

(106

)

(217

)

324

107

Money market

27,334

(55,901

)

(28,567

)

27,212

23,324

50,536

Time deposits

6,453

(5,434

)

1,019

7,563

9,818

17,381

Total interest-bearing deposits

32,053

(78,815

)

(46,762

)

43,358

45,552

88,910

Federal funds purchased and securities purchased with agreement to resell

16,822

(14,246

)

2,576

8,176

1,158

9,334

Other borrowed funds

(59

)

1

(58

)

(914

)

(177

)

(1,091

)

Total interest-bearing liabilities

48,816

(93,060

)

(44,244

)

50,620

46,533

97,153

Increase (decrease) in net interest income

$

29,657

$

59,128

$

88,785

$

17,334

$

18,304

$

35,638

* The rate/volume variance is allocated on a pro rata basis between the volume variance and the rate variance in the table above.

In the table above, changes in net interest income are attributable to (a) changes in average balances (volume variance), (b) changes in rates (rate variance), or (c) changes in rate and average balances (rate/volume variance). The volume variance is calculated as the change in average balances multiplied by the previous period average balance. The rate variance is calculated as the change in rates multiplied by the previous period average balance. The rate/volume variance is calculated as the change in rates multiplied by the change in average balances.

From 2024 to 2025, both the volume and rate components were favorable, as average asset and liability balances increased while rates on both assets and liabilities declined, driven primarily by three reductions in the Federal Reserve’s target rate during 2025. The rate component benefited from a greater decrease in the cost of funds, as interest-bearing liabilities repriced downward more quickly than earning asset yields. As a result, our net interest margin expanded. Average rates paid on interest-bearing liabilities decreased 69 basis points over this period, while yields on average earning assets decreased 19 basis points.

The two primary factors that make up the spread are the interest rates received on loans and the interest rates paid on deposits. Our net interest spread and net interest margin were 2.34% and 3.12%, respectively, for the year ended December 31, 2025, compared to 1.84% and 2.82%, respectively, for the year ended December 31, 2024. The increase in net interest spread and net interest margin was primarily attributable to increases in the average balance and the interest earned from loans, which increased $958.9 million and $40.7 million, respectively, in 2025.

Our average interest-earning assets for the year ended December 31, 2025 increased $1.30 billion, or 8.2%, to $17.15 billion from $15.85 billion for the year ended December 31, 2024. Average loans grew $958.9 million, or 7.9%, average debt securities decreased $47.1 million, or 2.4%, and average federal funds sold, interest-bearing balances with banks, and securities purchased with agreement to resell increased $389.3 million, or 22.7%.

Our average interest-bearing liabilities increased $1.12 billion, or 9.3%, to $13.22 billion for the year ended December 31, 2025 from $12.10 billion for the year ended December 31, 2024. The ratio of our average interest-earning assets to average interest-bearing liabilities decreased from 130.9% for the year ended December 31, 2024 to 129.7% for the year ended December 31, 2025, as average noninterest-bearing deposits and stockholders’ equity increased by a combined $227.3 million, or 5.45%, from 2024 to 2025.

Our average interest-earning assets produced a taxable equivalent yield of 5.78% for the year ended December 31, 2025, compared to 5.97% for the year ended December 31, 2024. The average rate paid on interest-bearing liabilities was 3.44% for the year ended December 31, 2025, compared to 4.13% for the year ended December 31, 2024.

38

Provision for Credit Losses

The provision for credit losses represents the amount determined by management to be necessary to maintain the allowance for credit losses (“ACL”) at a level capable of absorbing expected credit losses over the contractual life of loans in the loan portfolio. See the section captioned “Allowance for Credit Losses” located elsewhere in this item for additional discussion related to provision for credit losses.

The provision expense for credit losses for the year ended December 31, 2025 increased compared to the year-ended December 31, 2024. The increase in provision expense was primarily the result of loan growth during 2025 compared to 2024. Nonperforming loans increased to $168.8 million, or 1.23% of total loans, at December 31, 2025 from $42.5 million, or 0.34% of total loans, at December 31, 2024. The year-over-year increase was attributable to a large, real-estate secured relationship. During 2025, we had net charged-off loans totaling $28.1 million, compared to net charged-off loans of $10.4 million for 2024. The ratio of net charged-off loans to average loans was 0.21% for 2025 compared to 0.09% for 2024. The ACL for December 31, 2025 totaled $171.7 million, or 1.25% of loans, net of unearned income. The ACL totaled $164.5 million, or 1.30% of loans, net of unearned income, at December 31, 2024.

Noninterest Income

Noninterest income for the years ended December 31, 2025 and 2024 was as follows:

2025

2024

Change

Percentage Change

Service charges on deposit accounts

$

11,884

$

9,434

$

2,450

26.0

%

Mortgage banking

5,464

4,922

542

11.0

%

Credit card income

8,327

8,280

47

0.6

%

Securities losses

(16,375

)

-

(16,375

)

N/M

Bank-owned life insurance income

14,817

9,533

5,284

55.4

%

Other operating income

3,105

2,887

218

7.6

%

Total noninterest income

$

27,222

$

35,056

$

(7,834

)

(22.3

)%

Noninterest income decreased $7.8 million, or 22.3%, to $27.2 million for the year ended December 31, 2025 compared to $35.1 million for the same period in 2024. Service charges on deposit accounts increased $2.5 million, or 26.0%, to $11.9 million for the year ended December 31, 2025 compared to $9.4 million for the same period in 2024. Credit card income remained flat at $8.3 million during 2025 compared to 2024. Mortgage banking income increased $542,000, or 11.0%, to $5.5 million for the year ended December 31, 2025 compared to $4.9 million for the same period in 2024. Bank-owned life insurance income increased $5.3 million, or 55.4%, to $14.8 million for the year ended December 31, 2025 compared to $9.5 million for the same period in 2024. The cash surrender value increased $1.0 million and we recognized $4.3 million of income attributed to a BOLI policy during 2025 compared to 2024. Other operating income increased $218,000, or 7.6%, to $3.1 million for the year ended December 31, 2025 compared to $2.9 million for the same period in 2024. Merchant service revenue increased $59,000, or 2.6%, to $2.3 million for the year ended December 31, 2025 compared to $2.3 million for the same period in 2024.

Noninterest Expense

Noninterest expense for the years ended December 31, 2025 and 2024 was as follows:

2025

2024

Change

Percentage Change

Salaries and employee benefits

$

94,815

$

96,318

$

(1,503

)

(1.6

)%

Equipment and occupancy expense

14,597

14,519

78

0.5

%

Third party processing and other services

31,617

31,181

436

1.4

%

Professional services

7,175

6,901

274

4.0

%

FDIC and other regulatory assessments

10,990

10,687

303

2.8

%

Other real estate owned expense

155

199

(44

)

(22.1

)%

Other operating expenses

25,641

21,341

4,300

20.1

%

Total noninterest expenses

$

184,990

$

181,146

$

3,844

2.1

%

39

Noninterest expenses increased $3.8 million, or 2.1%, to $185.0 million for the year ended December 31, 2025 compared to $181.1 million for the same period in 2024. Salary and employee benefits expenses decreased $1.5 million, or 1.6%, to $94.8 million for the year ended December 31, 2025 compared to $96.3 million for the same period in 2024, mainly due to a $3 million credit adjustment to our annual Incentive Plan expense during the second quarter of 2025. We had 666 full-time equivalent employees as of December 31, 2025 compared to 630 as of December 31, 2024. Equipment and occupancy expense increased $78,000, or .5%, to $14.6 million for the year ended December 31, 2025 compared to $14.5 million for the same period in 2024. Third party processing and other services increased $436,000, or 1.4%, to $31.6 million for the year ended December 31, 2025 compared to $31.2 million for the same period in 2024. Professional services expense increased $274,000, or 4.0%, to $7.2 million for the year ended December 31, 2025 compared to $6.9 million for the same period in 2024. FDIC assessments increased $303,000, or 2.8%, to $11.0 million for the year ended December 31, 2025 compared to $10.7 million for the same period in 2024. The FDIC implemented a special assessment to recapitalize the Deposit Insurance Fund resulting in an additional $1.8 million during 2024. Other operating expenses increased $4.3 million, or 20.1%, to $25.6 million for the year ended December 31, 2025 compared to $21.3 million for the same period in 2024. The increase was mainly due to an operational loss and an increase in loan credit expenses. We adopted the proportional amortization method of accounting for investments in certain tax credit partnerships during 2024. The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the consolidated income statement as a component of income tax expense. Previously the amortization of the investment was included in other non-interest expenses. Changes in other operating expenses from 2024 to 2025 are detailed in Note 14 - “Other Operating Income and Expenses,” to the Consolidated Financial Statements.

Income Tax Expense

Income tax expense was $65.5 million for the year ended December 31, 2025 compared to $51.7 million in 2024. Our effective tax rates for 2025 and 2024 were 19.15% and 18.61%, respectively. The increase in our effective tax rates reflect the proportional amortization of accounting for investment tax credits. We recognized $44.5 million in credits during 2025 and $15.4 million during 2024, related to new investments in Federal New Market Tax Credits. We also recognized excess tax benefits as an income tax credit to our income tax expense from the exercise and vesting of stock options and restricted stock during 2025 of $798,000, compared to $1.3 million during 2024. Our primary permanent differences are related to tax exempt income on debt securities, state income tax benefit on real estate investment trust dividends, various qualifying tax credits and change in cash surrender value of bank-owned life insurance.

We have invested $435.3 million in bank-owned life insurance for certain officers of the Bank. The periodic increases in cash surrender value of those policies are tax exempt and therefore contribute to a larger permanent difference between book income and taxable income.

We own real estate investment trusts for the purpose of holding and managing participations in residential mortgages and commercial real estate loans originated by the Bank. The trusts are majority-owned subsidiaries of a trust holding company, which in turn is an indirect, wholly-owned subsidiary of the Bank. The trusts earn interest income on the loans they hold and incur operating expenses related to their activities. They pay their net earnings, in the form of dividends, to the Bank, which receives a deduction for state income taxes.

Financial Condition

Assets

Total assets as of December 31, 2025, were $17.73 billion, an increase of $375.5 million, or 2.2%, from total assets of $17.35 billion as of December 31, 2024. Average assets for the year ended December 31, 2025 were $17.75 billion, an increase of $1.41 billion, or 8.65%, over average assets of $16.33 billion for the year ended December 31, 2024. Growth in loans and interest-bearing balances with banks were the primary reasons for the increase in ending and average total assets. Year-end 2025 total loans were $13.70 billion, an increase of $1.09 billion, or 8.7%, over year-end 2024 total loans of $12.61 billion.

Earning assets include loans, securities, short-term investments and bank-owned life insurance contracts. We maintain a higher level of earning assets in our business model than our peers because we allocate fewer of our resources to brick and mortar facilities, ATMs, and cash and due-from-bank accounts used for transaction processing. Earning assets as of December 31, 2025 were $16.91 billion, or 95.37% of total assets of $17.73 billion. Earning assets as of December 31, 2024 were $17.05 billion, or 98.27% of total assets of $17.35 billion. We believe this ratio is expected to generally continue at these levels, although it may be affected by economic factors beyond our control.

40

Investment Portfolio

We view the investment portfolio as a source of income and liquidity. Our investment strategy is to accept a lower immediate yield in the investment portfolio by targeting shorter term investments. At December 31, 2025, mortgage-backed securities represented 29.8% of the investment portfolio, corporate debt represented 23.9% of the investment portfolio, state and municipal securities represented 1.1% of the investment portfolio, and U.S. Treasury securities represented 45.3% of the investment portfolio.

All of our investments in mortgage-backed securities are pass-through mortgage-backed securities. We generally do not hold, and did not have at December 31, 2025, any structured investment vehicles or any private-label mortgage-backed securities. The amortized cost of securities in our portfolio totaled $1.73 billion at December 31, 2025, compared to $1.92 billion at December 31, 2024.

The following table presents the amortized cost and weighted average yield of our securities as of December 31, 2025 by their stated maturities (this maturity schedule excludes security prepayment and call features):

Maturity of Debt Securities - Weighted Average Yield

One Year or Less

After One Year through Five Years

After Five Years through Ten Years

More Than Ten Years

Total

At December 31, 2025:

(In Thousands)

Securities Available for Sale:

U.S. Treasury securities

$

440,117

$

79,983

$

-

$

-

$

520,100

Mortgage-backed securities

39

12,847

8,635

111,604

133,125

State and municipal securities

1,502

7,613

1,248

-

10,363

Corporate debt

-

59,880

331,188

18,657

409,725

Total

$

441,658

$

160,323

$

341,071

$

130,261

$

1,073,313

Tax-equivalent Yield (1)

U.S. Treasury securities

4.20

%

4.27

%

-

%

-

%

4.21

%

Mortgage-backed securities

2.64

2.56

2.52

4.70

4.35

State and municipal securities

1.70

1.89

2.19

-

1.90

Corporate debt

-

6.45

5.42

6.49

5.62

Total weighted average yield (2)

4.19

%

4.83

%

5.34

%

4.96

%

4.75

%

Securities Held to Maturity:

U.S. Treasury Securities

$

49,944

$

199,677

$

-

$

-

$

249,621

Mortgage-backed securities

-

1,970

12,869

387,258

402,097

State and municipal securities

3,842

4,516

-

-

8,358

Total

$

53,786

$

206,163

$

12,869

$

387,258

$

660,076

Tax-equivalent Yield (1)

U.S. Treasury Securities

1.15

%

1.44

%

-

%

-

%

1.38

%

Mortgage-backed securities

-

2.31

2.19

2.78

2.75

State and municipal securities

2.07

1.99

-

-

2.03

Total weighted average yield (2)

1.21

%

1.46

%

2.19

%

2.78

%

2.22

%

(1) Yields on tax-exempt securities are computed on a fully tax-equivalent basis using a tax rate of 21% and are net of the effects of certain disallowed interest deductions.

(2) Weighted average yield is calculated by taking the sum of each category of securities multiplied by the respective tax-equivalent yield for a given maturity, and dividing by the sum of the securities for the same maturity.

As of December 31, 2025, we had $6.1 million in federal funds sold, compared with $1.0 million at December 31, 2024. At year-end 2025, there were no holdings of securities of any issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.

The objective of our investment policy is to invest funds not otherwise needed to meet our loan demand to earn the maximum return, yet still maintain sufficient liquidity to meet fluctuations in our loan demand and deposit structure. In doing so, we balance the market and credit risks against the potential investment return, make investments compatible with the pledge requirements of any deposits of public funds, maintain compliance with regulatory investment requirements, and assist certain public entities with their financial needs. The investment committee has full authority over the investment portfolio and makes decisions on purchases and sales of securities. The entire portfolio, along with all investment transactions occurring since the previous Board of Directors meeting, is reviewed by the board at each monthly meeting. The investment policy allows portfolio holdings to include short-term securities purchased to provide us with needed liquidity and longer-term securities purchased to generate level income for us over periods of interest rate fluctuations.

41

Loan Portfolio

The following is a condensed overview of changes in our loan portfolio. Please see Note 3 - “Loans” in the Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data elsewhere in this report for a more detailed analysis of our loan portfolio by type of loan.

We had total loans of approximately $13.70 billion at December 31, 2025. A large majority of our loan customers are located within our market areas, as is the collateral for their loans. With our loan portfolio concentrated in a limited number of markets, there is a risk that our borrowers’ ability to repay their loans from us could be affected by changes in local and regional economic conditions.

The following table details our loans at December 31, 2025, 2024 and 2023:

2025

2024

2023

(Dollars in Thousands)

Commercial, financial and agricultural

$

3,146,736

$

2,869,894

$

2,823,986

Real estate - construction

1,457,628

1,489,306

1,519,619

Real estate - mortgage:

Owner-occupied commercial

2,739,823

2,547,143

2,257,163

1-4 family mortgage

1,671,713

1,444,623

1,249,938

Non-owner occupied commercial

4,603,389

4,181,243

3,744,346

Total real estate - mortgage

9,014,925

8,173,009

7,251,447

Consumer

77,623

73,627

63,777

Total Loans

13,696,912

12,605,836

11,658,829

Less: Allowance for credit losses

(171,683

)

(164,458

)

(153,317

)

Net Loans

$

13,525,229

$

12,441,378

$

11,505,512

The following table details the percentage composition of our loan portfolio by type at December 31, 2025, 2024 and 2023:

2025

2024

2023

Commercial, financial and agricultural

22.97

%

22.77

%

24.22

%

Real estate - construction

10.64

11.81

13.03

Real estate - mortgage

Owner-occupied commercial

20.00

20.21

19.36

1-4 family mortgage

12.21

11.46

10.72

Non-owner occupied commercial

33.61

33.17

32.12

Subtotal: Real estate mortgage

65.82

64.84

62.20

Consumer

0.57

0.58

0.55

Total Loans

100.00

%

100.00

%

100.00

%

The table below summarizes the Company’s commercial real estate portfolio at December 31, 2025 as segregated by industry concentrations based on North American Industry Classification System:

2025

Balance

Percent of Total

(Dollars in Thousands)

Owner Occupied Real Estate

Retail Trade

$

569,658

7.8

%

Other Services (except Public Administration)

315,795

4.3

Health Care and Social Assistance

301,651

4.1

Accommodation and Food Services

270,733

3.7

Manufacturing

200,048

2.7

Professional, Scientific, and Technical Services

189,979

2.6

Real Estate and Rental and Leasing

154,081

2.1

Wholesale Trade

163,286

2.2

All Other Owner Occupied Real Estate

574,592

7.8

Total Owner Occupied Real Estate

$

2,739,823

37.3

%

Non-Owner Occupied Real Estate

Multifamily Permanent

$

1,347,177

18.3

%

Shopping or Retail Center

678,426

9.2

Hotel or Motel

601,871

8.2

Office Building

471,312

6.4

Nursing Home or Assisted Living Facility

378,999

5.2

Office Warehouse

228,238

3.1

Warehouse

152,871

2.1

Self-Storage Facility

195,744

2.7

Gas Station or Convenience Store

107,975

1.5

Restaurant

74,420

1.0

All Other Income Property

366,356

5.0

Total Non-Owner Occupied Real Estate

$

4,603,389

62.7

%

Total Commercial Real Estate

$

7,343,212

100.0

%

42

The table below summarizes the Company’s commercial real estate portfolio at December 31, 2025 as segregated by geographic region in which the property is located:

2025

Balance

Percent of Total

(Dollars in Thousands)

State:

Alabama

$

2,255,037

30.8

%

Florida

1,956,500

26.7

Georgia

910,679

12.4

North Carolina

275,225

3.7

South Carolina

311,050

4.2

Tennessee

654,940

8.9

Virginia

147,667

2.0

Other

832,114

11.3

Total commercial real estate loans

$

7,343,212

100.0

%

The following table details maturities and sensitivity to interest rate changes for our loan portfolio at December 31, 2025:

Due in One

After One Year

After Five Years

After

Year or Less

to Five Years

to 15 Years

15 Years

Total

(in Thousands)

Commercial, financial and agricultural

$

1,383,001

$

1,516,476

$

247,259

$

-

$

3,146,736

Real estate - construction

493,510

793,507

105,149

65,462

1,457,628

Real estate - mortgage:

Owner-occupied commercial

376,925

1,727,970

631,270

3,658

2,739,823

1-4 family mortgage

211,947

351,928

321,972

785,866

1,671,713

Other mortgage

1,129,537

2,965,538

480,678

27,636

4,603,389

Total real estate - mortgage

1,718,409

5,045,436

1,433,920

817,160

9,014,925

Consumer

47,013

24,708

5,902

-

77,623

Total Loans

$

3,641,933

$

7,380,127

$

1,792,230

$

882,622

$

13,696,912

Less: Allowance for loan losses

(171,683

)

Net Loans

$

13,525,229

Amount due after one year at fixed interest rates:

Commercial, financial and agricultural

$

757,799

Real estate - construction

194,231

Real estate - mortgage:

Owner-occupied commercial

1,344,440

1-4 family mortgage

998,988

Other mortgage

1,805,917

Total real estate - mortgage

4,149,345

Consumer

6,816

Total loans

$

5,108,191

Amount due after one year at variable interest rates:

Commercial, financial and agricultural

$

1,005,936

Real estate - construction

769,887

Real estate - mortgage:

Owner-occupied commercial

1,018,458

1-4 family mortgage

460,778

Other mortgage

1,667,935

Total real estate - mortgage

3,147,171

Consumer

23,794

Total loans

$

4,946,788

43

Asset Quality

The following table presents a summary of the allowance for credit losses, net charge-offs and certain credit ratios for the years ended December 31, 2025, 2024 and 2023:

As of and for the Years Ended December 31,

2025

2024

2023

(Dollars in Thousands)

Allowance for credit losses to total loans outstanding

1.25

%

1.30

%

1.32

%

Allowance for credit losses

$

171,683

$

164,458

$

153,317

Total loans outstanding

$

13,696,912

$

12,605,836

$

11,658,829

Nonaccrual loans to total loans outstanding

1.23

%

0.31

%

0.17

%

Nonaccrual loans

$

168,351

$

39,501

$

19,349

Total loans outstanding

$

13,696,912

$

12,605,836

$

11,658,829

Allowance for credit losses to nonaccrual loans

101.98

%

416.34

%

792.38

%

Allowance for credit losses

$

171,683

$

164,458

$

153,317

Nonaccrual loans

$

168,351

$

39,501

$

19,349

Net charge-offs during the period to average loans outstanding:

Commercial, financial and agricultural

0.74

%

0.32

%

0.35

%

Net charge-offs during the period

$

22,004

$

9,094

$

10,429

Average amount outstanding

$

2,956,886

$

2,825,914

$

2,937,913

Real estate - construction

-

%

-

%

0.01

%

Net charge-offs (recoveries) during the period

$

16

$

(8

)

$

105

Average amount outstanding

$

1,560,632

$

1,479,583

$

1,470,330

Real estate - mortgage:

Owner-occupied commercial

0.16

%

0.01

%

0.01

%

Net charge-offs during the period

$

4,037

$

208

$

117

Average amount outstanding

$

2,596,175

$

2,414,327

$

2,273,834

1-4 family mortgage

0.02

%

0.06

%

-

%

Net charge-offs during the period

$

303

$

759

$

54

Average amount outstanding

$

1,567,733

$

1,357,272

$

1,178,347

Non-owner occupied commercial

0.03

%

-

%

-

%

Net charge-offs during the period

$

1,168

$

-

$

-

Average amount outstanding

$

4,355,257

$

4,009,407

$

3,673,667

Total real estate - mortgage

0.06

%

0.01

%

-

%

Net charge-offs during the period

$

5,508

$

967

$

171

Average amount outstanding

$

8,519,165

$

7,781,006

$

7,125,848

Consumer

0.81

%

0.56

%

1.44

%

Net charge-offs during the period

$

592

$

359

$

990

Average amount outstanding

$

73,006

$

64,323

$

68,721

Total loans

0.22

%

0.09

%

0.10

%

Net charge-offs during the period

$

28,120

$

10,412

$

11,695

Average amount outstanding

$

13,109,689

$

12,150,825

$

11,602,812

44

The allowance for credit losses (“ACL”) for December 31, 2025 and 2024 was calculated under the CECL methodology and totaled $171.7 million and $164.5 million, or 1.25% and 1.30% of loans, net of unearned income, respectively. The decrease in the ACL as a percentage of total loans from December 31, 2024, to December 31, 2025, was primarily driven by higher net credit charge-offs during 2025 and the release of a special reserve that had been included in the 2024 balance, as well as updates to loss drivers and qualitative factors within our CECL model. Net credit charge-offs to average loans were 0.21% for the year ended December 31, 2025, compared to  0.09% and 0.10% for the years ended December 31, 2024 and 2023, respectively. Nonaccrual loans increased to $168.4 million, or 1.23% of total loans, at December 31, 2025 from $39.5 million, or 0.31% of total loans, at December 31, 2024, and were $19.3 million, or 0.17% of total loans, at December 31, 2023. The year-over-year nonaccrual increase from the year ended December 31, 2024 to the year ended December 31, 2025 was attributable to a large, real-estate secured relationship.

We maintain an ACL on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a similar methodology to the one used to determine the ACL, modified to account for the probability of a drawdown on the commitment. The ACL on unfunded loan commitments is classified as a liability account on the balance sheet within other liabilities, while the corresponding provision for these credit losses is recorded as a component of provision of credit loss. The allowance for credit losses on unfunded commitments was $572,000 as of December 31, 2025 and $608,000 as of December 31, 2024.

The following table presents the allocation of the allowance for credit losses for each respective loan category with the corresponding percent of loans in each category to total loans:

For the Years Ended December 31,

2025

2024

2023

Percentage

Percentage

Percentage

of Loans in

of Loans in

of Loans in

Each

Each

Each

Category to

Category to

Category to

Amount

Total Loans

Amount

Total Loans

Amount

Total Loans

(Dollars in Thousands)

Commercial, financial and agricultural

$

63,620

22.97

%

$

55,330

22.77

%

$

52,121

24.22

%

Real estate - construction

22,432

10.64

38,597

11.81

44,658

13.03

Owner-occupied commercial

18,833

20.00

22,302

20.21

17,702

19.36

1-4 family mortgage

24,739

12.21

14,096

11.46

12,029

10.72

Non-owner occupied commercial

38,971

33.61

31,328

33.17

25,395

32.12

Consumer

3,088

0.57

2,805

0.58

1,412

0.55

Total

$

171,683

100.00

%

$

164,458

100.00

%

$

153,317

100.00

%

45

The Company assesses the adequacy of its ACL at the end of each calendar quarter. The level of ACL is based on the Company’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio and other relevant factors. The ACL is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recoveries. The ACL is believed adequate to absorb all expected future losses to be recognized over the contractual life of the loans in the portfolio. At December 31, 2025, we forecasted a moderately higher national GDP and national unemployment rate unchanged compared to December 31, 2024. At December 31, 2024, we forecasted a slightly lower national unemployment rate and moderately higher national GDP compared to December 31, 2023.

Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method. For all loans utilizing the DCF method, the historical loss experience estimate by pool is then adjusted by forecast factors that are quantitatively related to the Company’s historical credit loss experience, such as national unemployment rates and gross domestic product. Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. The reasonable and supportable period and reversion period are re-evaluated each quarter by the Company and are dependent on the current economic environment among other factors.

The expected credit losses for each loan pool are then adjusted for changes in qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation. The Company considers factors that are relevant within the qualitative framework, which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.

Expected credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis. Individual evaluations are performed for nonaccrual loans, loans rated substandard, and certain modified loans. Specific allocations of the ACL are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.

The Bank has procedures and processes in place intended to ensure that losses do not exceed the potential amounts documented in the Bank’s analysis of loans individually evaluated and reduce potential losses in the remaining performing loans within our real estate construction portfolio. These include the following:

●

We closely monitor the past due and overdraft reports on a weekly basis to identify deterioration as early as possible and the placement of identified loans on the watch list.

●

We perform extensive quarterly credit reviews for all watch list/classified loans, including formulation of aggressive workout or action plans. When a workout is not achievable, we move to collection/foreclosure proceedings to obtain control of the underlying collateral as rapidly as possible to minimize the deterioration of collateral and/or the loss of its value.

●

We require updated financial information, global inventory aging and interest carry analysis for existing customers to help identify potential future loan payment problems.

●

We generally limit loans for new construction to established builders and developers that have an established record of turning their inventories, and we restrict our funding of undeveloped lots and land.

46

Nonperforming Assets

The table below summarizes our nonperforming assets at December 31, 2025, 2024 and 2023:

2025

2024

2023

Number

Number

Number

Balance

of Loans

Balance

of Loans

Balance

of Loans

(Dollars in Thousands)

Nonaccrual loans:

Commercial, financial and agricultural

$

26,756

55

$

25,692

54

$

7,217

35

Real estate - construction

35,885

8

-

-

111

1

Real estate - mortgage:

Owner-occupied commercial

13,578

17

8,744

14

7,089

14

1-4 family mortgage

9,440

34

3,051

24

4,426

41

Non-owner occupied commercial

81,977

13

1,259

2

506

2

Total real estate - mortgage

104,995

64

13,054

40

12,021

57

Consumer

715

2

755

1

-

-

Total nonaccrual loans

$

168,351

129

$

39,501

95

$

19,349

93

90+ days past due and accruing:

Commercial, financial and agricultural

$

101

10

$

38

4

$

170

8

Real estate - construction

-

-

661

2

-

-

Real estate - mortgage:

Owner-occupied commercial

-

-

-

-

-

-

1-4 family mortgage

323

2

2,240

7

1,909

9

Non-owner occupied commercial

-

-

-

-

-

-

Total real estate - mortgage

323

2

2,240

7

1,909

9

Consumer

54

28

26

21

105

16

Total 90+ days past due and accruing

$

478

40

$

2,965

34

$

2,184

33

Total nonperforming loans

$

168,829

169

$

42,466

129

$

21,533

126

Plus: Other real estate owned and repossessions

2,583

9

2,531

8

995

7

Total nonperforming assets

$

171,412

178

$

44,997

137

$

22,528

133

Ratios:

Nonperforming loans to total loans

1.23

%

0.34

%

0.18

%

Nonperforming assets to total loans plus other real estate owned and repossessions

1.25

%

0.36

%

0.19

%

Nonperforming assets and restructured accruing loans to total loans plus other real estate owned and repossessions

1.25

%

0.36

%

0.19

%

The accrual of interest on loans is discontinued when there is a significant deterioration in the financial condition of the borrower and full repayment of principal and interest is not expected or the principal or interest is more than 90 days past due, unless the loan is both well-collateralized and in the process of collection. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. Interest income on nonaccrual loans is recognized only as received. If we believe that a loan will not be collected in full, we will increase the ACL to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal. There are not any loans, outside of those included in the table above, that cause management to have serious doubts as to the ability of borrowers to comply with present repayment terms.

Deposits

We rely on increasing our deposit base to fund loan and other asset growth. Each of our markets is highly competitive. We compete for local deposits by offering attractive products with competitive rates.  We expect to have a higher average cost of funds for local deposits than competitor banks due to our lack of an extensive branch network.  Our management’s strategy is to offset the higher cost of funding with a lower level of operating expense and firm pricing discipline for loan products.  We have promoted electronic banking services by providing them without charge and by offering in-bank customer training. The following table presents the average balance and average rate paid on each of the following deposit categories at the bank level for years ended December 31, 2025, 2024 and 2023:

For Year Ended December 31,

2025

2024

2023

Average Balance

Yields/Rates

Average Balance

Yields/Rates

Average Balance

Yields/Rates

Types of Deposits:

(Dollars in Thousands)

Non-interest-bearing demand deposits

$

2,654,480

-

%

$

2,609,137

-

%

$

2,857,831

-

%

Interest-bearing demand deposits

2,219,996

2.03

%

2,282,599

2.81

%

1,928,133

2.24

%

Money market accounts

7,682,961

3.55

%

7,005,057

4.30

%

6,347,456

3.95

%

Savings accounts

103,444

1.60

%

104,581

1.69

%

119,049

1.39

%

Time deposits

1,355,048

4.03

%

1,201,756

4.45

%

1,010,683

3.58

%

Total deposits

$

14,015,929

$

13,203,130

$

12,263,152

At December 31, 2025, 2024, and 2023 we estimate that we had approximately $9.69 billion, $9.03 billion and $8.76 billion, respectively, in total uninsured deposits. The uninsured deposit data for 2025 and 2024 reflects the deposit insurance impact of “combined ownership segregation” of escrow and other accounts at an aggregate level but does not reflect an evaluation of all of the account styling distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.

47

The following table presents the portion of our time deposits in excess of insurance limit as of December 31, 2025.

Portion of Time Deposits in Excess of Insurance Limit

December 31, 2025

Time Deposits Otherwise Uninsured With a Maturity of:

(In Thousands)

3 months or less

$

222,214

Over 3 months through 6 months

55,734

Over 6 months through 12 months

68,702

Over 12 months

97,958

Total

$

444,608

Borrowed Funds

We had $372.0 million in unused and available federal funds lines of credit with regional banks as of December 31, 2025, compared to $457.0 million as of December 31, 2024. These lines are subject to certain restrictions.

Federal funds purchased from correspondent banks averaged $1.80 billion, $1.44 billion, and $1.29 billion for 2025, 2024 and 2023, respectively. We paid average interest rates on these funds of 4.37%, 5.27%, and 5.18% for the same three years, respectively. The maximum amount outstanding at a month-end during 2025 and 2024 was $2.36 billion and $1.99 billion, respectively.

Stockholders’ Equity

Stockholders’ equity increased $233.6 million during 2025, to $1.85 billion as of December 31, 2025 from $1.62 billion as of December 31, 2024. The increase in stockholders’ equity resulted primarily from net income of $276.5 million during the year ended December 31, 2025, less dividends paid or declared on our common stock of $75.6 million during the year ended December 31, 2025.

Off-Balance Sheet Arrangements

In the normal course of business, we are a party to financial credit arrangements with off-balance sheet risk to meet the financing needs of our customers. These financial credit arrangements include commitments to extend credit beyond current fundings, credit card arrangements, standby letters of credit and financial guarantees. Those credit arrangements involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet.  The contract or notional amounts of those instruments reflect the extent of involvement we have in those particular financial credit arrangements. All such credit arrangements bear interest at variable rates and we have no such credit arrangements which bear interest at fixed rates.

Our exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, credit card arrangements and standby letters of credit is represented by the contractual or notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments.

The following table sets forth our credit arrangements and financial instruments whose contract amounts represent credit risk as of December 31, 2025, 2024 and 2023:

2025

2024

2023

(In Thousands)

Commitments to extend credit

$

3,779,178

$

3,552,958

$

3,410,283

Credit card arrangements

395,780

366,843

381,524

Standby letters of credit and financial guarantees

117,371

125,147

86,065

Total

$

4,292,329

$

4,044,948

$

3,877,872

48

Commitments to extend credit beyond current fundings are agreements to lend to a customer if there is no violation of any condition established in the contract.  Such commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  We evaluate each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained if deemed necessary by us upon extension of credit is based on our management’s credit evaluation. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party.  Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions.  All letters of credit are due within one year or less of the original commitment date.  The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Derivatives

The Bank has entered into agreements with secondary market investors to deliver loans on a “best efforts delivery” basis. When a rate is committed to a borrower, it is based on the best price that day and locked with our investor for that loan for a 30-day period. In the event the loan is not delivered to the investor, the Bank has no risk or exposure with the investor. The interest rate lock commitments to customers related to loans that are originated for later sale are classified as derivatives. The fair values of our agreements with investors and rate lock commitments to customers as of December 31, 2025 and 2024 were not material.

Asset and Liability Management

The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive” and by monitoring an institution’s interest rate sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the dollar amount of rate-sensitive assets repricing during a period and the volume of rate-sensitive liabilities repricing during the same period. A gap is considered positive when the amount of interest rate-sensitive assets exceeds the amount of interest rate-sensitive liabilities. A gap is considered negative when the amount of interest rate-sensitive liabilities exceeds the amount of interest rate-sensitive assets. During a period of rising interest rates, a negative gap would tend to adversely affect net interest income while a positive gap would tend to result in an increase in net interest income. During a period of falling interest rates, a negative gap would tend to result in an increase in net interest income while a positive gap would tend to adversely affect net interest income.

Our asset liability committee is charged with monitoring our liquidity and funds position. The committee regularly reviews the rate sensitivity position on a three-month, six-month and one-year time horizon; loans-to-deposits ratios; and average maturities for certain categories of liabilities. The asset liability committee uses a model to analyze the maturities of rate-sensitive assets and liabilities. The model measures the “gap” which is defined as the difference between the dollar amount of rate-sensitive assets repricing during a period and the volume of rate-sensitive liabilities repricing during the same period. Gap is also expressed as the ratio of rate-sensitive assets divided by rate-sensitive liabilities. If the ratio is greater than “one,” then the dollar value of assets exceeds the dollar value of liabilities and the balance sheet is “asset sensitive.” Conversely, if the value of liabilities exceeds the dollar value of assets, then the ratio is less than one and the balance sheet is “liability sensitive.” Our internal policy requires our management to maintain the gap such that net interest margins will not change more than 10% if interest rates change by 100 basis points or more than 15% if interest rates change by 200 basis points. As of December 31, 2025, our gap was within such ranges. See “—Quantitative and Qualitative Analysis of Market Risk” below in Item 7A for additional information.

Liquidity and Capital Adequacy

Sources and Uses of Funds

The following table illustrates, during the years presented, the mix of our funding sources and the assets in which those funds are invested as a percentage of our average total assets for the period indicated. Average assets totaled $17.75 billion in 2025, compared to $16.33 billion in 2024, and to $15.07 billion in 2023:

49

For the Year Ended

2025

2024

2023

Sources of Funds:

Deposits:

Non-interest-bearing

14.9

%

15.9

%

18.9

%

Interest-bearing

64.0

64.8

62.2

Federal funds purchased

10.1

8.8

8.5

Long term debt and other borrowings

0.4

0.4

0.6

Other liabilities

0.8

0.6

0.4

Equity capital

9.8

9.5

9.4

Total sources

100.0

%

100.0

%

100.0

%

Uses of Funds:

Loans

74.0

%

74.5

%

77.0

%

Securities

10.8

12.0

12.5

Interest-bearing balances with banks

10.5

10.4

7.1

Federal funds sold

1.4

0.1

0.4

Other assets

3.3

3.0

3.0

Total uses

100.0

%

100.0

%

100.0

%

Liquidity

Liquidity is defined as our ability to generate sufficient cash to fund current loan demand, deposit withdrawals, or other cash demands and disbursement needs, and otherwise to operate on an ongoing basis.

Liquidity is managed at two levels. The first is the liquidity of the Company. The second is the liquidity of the Bank. The management of liquidity at both levels is critical because the Company and the Bank have different funding needs and sources, and each are subject to regulatory guidelines and requirements. We are subject to general FDIC guidelines that require a minimum level of liquidity. Management believes our liquidity ratios meet or exceed these guidelines. Our management is not currently aware of any trends or demands that are reasonably likely to result in liquidity increasing or decreasing in any material manner.

The Bank’s main source of liquidity is customer interest-bearing and noninterest bearing deposit accounts. Our regular sources of funding are from the growth of our deposit base, repayment of principal and interest on loans, the sale of loans and the renewal of time deposits. Liquidity is also available from funding sources consisting primarily of federal funds purchased, Federal Home Loan Bank (“FHLB”) loan advances and available-for-sale securities. The retention of existing deposits and attraction of new deposit sources through new and existing customers is critical to our liquidity position. In the event of compression in liquidity due to a run-off in deposits, we have a liquidity policy and procedure that provides for certain actions under varying liquidity conditions. These actions include borrowing from existing correspondent banks, selling or participating loans and the curtailment of loan commitments and funding. As of December 31, 2025, our liquid assets, represented by cash and due from banks, federal funds sold and unpledged available-for-sale securities, totaled $2.12 billion. The Bank had loans pledged to both the FHLB and the Federal Reserve Bank of Atlanta, which provided approximately $3.20 billion and $2.30 billion, respectively, in available funding. The Bank’s policy limits on brokered deposits would allow for up to $4.43 billion in available funding for brokered deposits. Additionally, we had available to us approximately $472 million in federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements, to meet short term funding needs.

As a separate entity from the bank, we also have separate liquidity obligations. We are responsible for the payment of dividends to our stockholders and interest and principal on our outstanding indebtedness. As a source of internal liquidity, we have access to the capital markets. We also may continue periodic offerings of debt and equity securities. However, our ultimate source of liquidity consists of dividends from the Bank, which are limited by applicable law and regulations. In 2025 and 2024, the Bank paid dividends of $78.9 million and $71.9 million, respectively, to us. For a detailed discussion on the regulatory limitation on Bank dividends, see “Supervision and Regulation - Payment of Dividends” in Item 1.

We believe these sources of funding are adequate to meet both our immediate (within the next 12 months) and our longer term anticipated funding needs. Our management meets on a weekly basis to review sources and uses of funding to determine the appropriate strategy to ensure an appropriate level of liquidity, and we have increased our focus on the generation of core deposit funding to supplement our liquidity position. At the current time, our long-term liquidity needs primarily relate to funds required to support loan originations and commitments and deposit withdrawals.

Capital Adequacy

As of December 31, 2025, our most recent notification from the FDIC categorized us as well-capitalized under the regulatory framework for prompt corrective action. To remain categorized as well-capitalized, we must maintain minimum Common Equity Tier 1 risk-based, Tier 1 risk-based, total risk-based, and Tier 1 leverage ratios as disclosed in the table below. Our management believes that we are well-capitalized under the prompt corrective action provisions as of December 31, 2025. In addition, the Alabama Banking Department has required that the Bank maintain a leverage ratio of at least 8.00%.

50

The following table sets forth (i) the capital ratios of the Bank required by the FDIC to maintain “well-capitalized” status and (ii) our actual ratios of capital to total regulatory or risk-weighted assets, as of December 31, 2025:

Well-Capitalized

Actual at December 31, 2025

CET 1 Capital Ratio

6.50

%

11.65

%

Tier 1 Capital Ratio

8.00

%

11.66

%

Total Capital Ratio

10.00

%

12.93

%

Leverage ratio

5.00

%

10.26

%

For a description of capital ratios see Note 13 - “Regulatory Matters” to the Consolidated Financial Statements.

Critical Accounting Estimates

Our consolidated financial statements are prepared based on the application of certain accounting policies, the most significant of which are described in the Notes to the Consolidated Financial Statements. Certain of these policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variation and may significantly affect our reported results and financial position for the current period or in future periods. Changes in underlying factors, assumptions or estimates in any of these areas could have a material impact on our future financial condition and results of operations.

We consider accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our financial statements. The accounting estimate related to the Company’s ACL is considered to be a critical accounting estimate because considerable judgment and estimation is applied by management.

Allowance for Credit Losses

The Company assesses the adequacy of its allowance for credit losses at the end of each calendar quarter. The level of allowance is based on the Company’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio and other relevant factors. The allowance is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recoveries. The allowance for credit losses is believed adequate to absorb all expected future losses to be recognized over the contractual life of the loans in the portfolio. If our assumptions regarding the adequacy of our allowance for credit losses are not accurate, we may incur credit losses in excess of our current allowance for credit losses and be required to make material additions to our allowance. Such additional provision for credit losses could have a material adverse effect on our business and results of operations. Our regulators may disagree with our assumptions and could require us to materially increase our allowance for credit losses.

Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a DCF, PD/LGD, or remaining life method. The historical loss experience estimate by pool is then adjusted by forecast factors that are quantitatively related to the Company’s historical credit loss experience, such as national unemployment rates and gross domestic product. Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. The reasonable and supportable period and reversion period are re-evaluated each quarter by the Company and are dependent on the current economic environment among other factors. See Note 1 – “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data elsewhere in this report.

The expected credit losses for each loan pool are then adjusted for changes in qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation. The Company considers factors that are relevant within the qualitative framework which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.

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Expected credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis. Individual evaluations are performed for nonaccrual loans, loans rated substandard, and modified loans classified as troubled debt restructurings. Specific allocations of the allowance for credit losses are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.

Adoption of Recent Accounting Pronouncements

New accounting standards are discussed in Note 1, “Summary of Significant Accounting Policies” to the Consolidated Financial Statements.