Southside Bancshares : Annual Report of 2025 Annual Report

About this update from Southside Bancshares, Inc.

2025 ANNUAL REPORT T E X A S V I N G SOUTHSIDE BANCSHARES, INC. H T U O S S E R B E D I S YEARS ANNUAL REPORT 2025 | SOUTHSIDE BANCSHARES, INC. Table of Contents A Letter From Our CEO 4 Location Map 8 Financial Highlights 10 Board of Directors 11 Officers and Directors 12 Form 10-K 16 3 A Letter From Our CEO Keith M. Donahoe Honoring the Legacy of Leadership Dear Fellow Shareholders, It is an honor to write to you for the first time as Chief Executive Officer of Southside Bancshares, Inc. While my appointment as CEO became effective January 1, 2026, I have had the privilege of serving as President since May 2024 and working closely with our leadership team and Board during a meaningful period of transition and opportunity for our organization. As we reflect on 2025, I am proud of the strength, resilience, and commitment demonstrated by our team members across Southside. Their dedication to our customers, communities, and one another continues to define who we are and positions us well for the future. Before diving into this year's Annual Report, I'd like to give special recognition to former Southside CEO, Lee R. Gibson, who concluded more than 40 years of service to the Bank and celebrated retirement on December 31, 2025. Lee's impact on Southside cannot be overstated. Under his leadership, Southside experienced extraordinary growth, expanded its geographic footprint, strengthened its financial foundation, and cultivated a workplace culture rooted in integrity, collaboration, and service. Just as importantly, Lee built an organization where people matter - a culture that values relationships, empowers team members, and consistently puts customers first. On behalf of our Board, our team members, and our shareholders, I extend my sincere gratitude to Lee for his vision, leadership, and lasting contributions to Southside. We also recognize and thank Brian McCabe, who retired as Chief Operating Officer in November 2025 following a distinguished 40-plus-year career in banking. Brian's steady leadership, operational expertise, and commitment to excellence helped guide Southside through periods of growth and change, and his influence will be felt for years to come. Our appreciation also goes out to Michael Bosworth who has served on the Board of Directors 4 ANNUAL REPORT 2025 | SOUTHSIDE BANCSHARES, INC. since 2015 and who will be retiring in 2026. I have no doubt that Michael's extraordinary efforts, expertise, and guidance contributed to Southside's success since joining the board. On behalf of our customers, colleagues, and shareholders, I would like to thank Michael for his years of service to Southside. And lastly, we pay honor and tribute to William "Bill" Sheehy, Director Emeritus, who passed away in October 2025. Bill was a gentle but mighty force in the East Texas community and was respected by all who knew him. He was the kind of person who commanded respect without saying a word, and someone who others turned to for advice, counsel, and wisdom. More importantly, he was a family man who loved his wife and family fiercely. He was not only a trusted legal advisor and colleague, but he was a friend to many at Southside and we all dearly miss him. 2025 Financial Highlights Southside continued to deliver solid results in 2025, supported by disciplined execution and a focus on long-term value creation. Highlights for the year included: Net income of $69.2 million Earnings per common share of $2.29 Return on average tangible common equity of 11.22% Strong capital and liquidity levels During 2025, we restructured a portion of our available for sale securities to enhance future earnings by selling lower yielding securities and reinvesting into higher yielding assets, including loans and securities - this resulted in a pre- tax loss of approximately $32 million. These results reflect the strength of our balance sheet and the dedication of our team members to serving customers with consistency and care. Texas Economic Outlook Texas continues to demonstrate economic strength driven by population growth, business investment, and a diverse, resilient industry base. While the banking environment remains competitive, we enter 2026 with cautious optimism as economic fundamentals across our markets remain solid. Improving interest rate dynamics, continued loan demand, and improving employment trends support a constructive outlook for community and regional banks. We believe Southside is well positioned to navigate the evolving landscape, leveraging our strong capital position, disciplined and conservative risk management, and relationship-based approach to deliver sustainable growth and long-term value for our stakeholders. Commitment to Customers and Experience At Southside, relationships remain at the core of everything we do. Throughout 2025 - and even more intentionally in 2026 - we are enhancing the customer experience by focusing on hospitality, responsiveness, and personalized service across every channel. Whether in our branches, through our lenders and treasury teams, or via digital banking solutions, our goal is simple: to make banking with Southside easy, welcoming, and relationship-driven. We believe exceptional service builds trust, loyalty, and long-term partnerships with the customers we are proud to serve. 5 Strategic Growth and Investment Looking ahead into 2026, we remain focused on thoughtful, strategic growth in markets where we see long-term opportunity. Key initiatives include: Continued expansion in the Dallas/Fort Worth metroplex, supported by experienced bankers and growing customer demand A new branch opening in the The Woodlands, strengthening our presence in the greater Houston market Opening the new Tyler Bellwood branch, enhancing convenience and visibility in our home market These investments position us to better serve our customers today while preparing Southside for continued growth in the years ahead. Our Culture and Team Members Southside's success begins with our people. We are proud of our strong, relationship-based culture and the exceptional team members who bring it to life every day. Their professionalism, compassion, and commitment to one another create an environment where people can grow, serve, and succeed together. When our team members feel supported and valued, they are empowered to deliver meaningful 6 experiences for customers and make a positive impact in the communities we serve. Recognition and Awards In 2025, Southside was honored to receive several prestigious awards that reflect both our culture and our commitment to excellence, including: Cornerstone Award, presented by Texas Bankers Association Best Bank to Work For, presented by American Banker Best Places to Work in Texas, presented by Best Companies Group Best Companies to Work For in Fort Worth, presented by Fort Worth Inc. These recognitions belong to our team members, whose dedication and shared values continue to set Southside apart. Commitment to Our Communities Community involvement has long been a defining characteristic of Southside. Through volunteerism, financial education, nonprofit partnerships, and local engagement, our team members are deeply invested in the places we call home. We believe strong communities create strong families, businesses, and relationships - everything that makes a community great - so, we remain committed to giving back in meaningful and lasting ways. ANNUAL REPORT 2025 | SOUTHSIDE BANCSHARES, INC. In 2025, Southside team members contributed well over 7,000 hours to their local communities and the Bank donated over $1.1 million to non-profit and civic organizations in our local markets. Being a community bank isn't just a saying…we mean it. Looking Ahead As we move forward, I am optimistic about Southside's future and confident in our ability to build on the strong foundation established over the past six decades. We will continue to invest in our people, enhance the customer experience, innovate, grow strategically, and uphold the values that have defined Southside for generations. Thank you for your continued trust and support. I look forward to leading Southside into its next chapter. Sincerely, Keith M. Donahoe President and Chief Executive Officer Southside Bank and Southside Bancshares, Inc. New York Stock Exchange Recognition of our 65th Year In July, Southside was honored to ring the opening bell at the New York Stock Exchange to commemorate Southside's 65th Anniversary. As a Texas-based bank deeply rooted in Texas communities, we were pleased to announce our dual listing on the NYSE Texas in November 2025. Our Texas footprint includes some of the strongest and fastest growing markets in the country. We are proud to support the continued growth and development of our great state, while also enhancing shareholder value. Images courtesy of NYSE Group. NYSE does not recommend or endorse any investments, investment strategies, companies, products or services. @NYSE @NYSE 7 We are proud to call Texas home. Southside currently operates 54 branches, one loan production office, and a network of 71 ATMs/ITMs throughout East Texas, Southeast Texas, and the greater Dallas/ Fort Worth, Austin, and Houston areas. Additionally, Southside is affiliated with over 60,000 ATMs across the nation. Serving customers since 1960, Southside Bank is a community-focused financial institution that offers a full range of financial products and services to individuals and businesses. 8 8 ANNUAL REPORT 2025 | SOUTHSIDE BANCSHARES, INC. 35W OKLAHOMA ARKANSAS 820 Fort Worth 30 Lindale 20 20 20 35W Tyler Fort Worth Dallas 69 Tyler LOUISIANA Lufkin 183 Austin Austin The Woodlands 69 45 35 Houston 69 183 10 Houston 10 290 610 35 9 Financial Highlights Dollars in thousands except per share amounts 2025 2024 NET INCOME $69,220 $88,494 PER SHARE DATA Earnings per common share - basic $ 2.30 $ 2.92 Earnings per common share - diluted $ 2.29 $ 2.91 Cash dividends paid per common share $ 1.44 $ 1.44 Book value per common share $ 28.52 $ 26.73 PERFORMANCE RATIOS Return on average assets 0.83 % 1.06 % Return on average shareholders' equity 8.40 % 11.03 % Dividend payout ratio - basic 62.61 % 49.32 % Dividend payout ratio - diluted 62.88 % 49.48 % Net interest margin 2.81 % 2.74 % Net interest margin (fully taxable equivalent)* 2.93 % 2.88 % BALANCE SHEET DATA Loans $ 4,817,991 $ 4,661,597 Securities $ 2,703,696 $ 2,813,128 Total assets $ 8,514,590 $ 8,517,448 Noninterest bearing deposits $ 1,433,129 $ 1,357,152 Interest bearing deposits $ 5,432,030 $ 5,297,096 Total deposits $ 6,865,159 $ 6,654,248 Other borrowings $ 419,793 $ 808,352 Long-term debt $ 299,957 $ 152,316 Total shareholders' equity $ 847,615 $ 811,942 *A non-GAAP measure. See "Non-GAAP Financial Measures" for more information and a reconciliation to GAAP in our Form 10-K. 10 ANNUAL REPORT 2025 | SOUTHSIDE BANCSHARES, INC. H. J. Shands, III Chairman of the Board John R. (Bob) Garrett Vice Chairman of the Board Board of Directors Southside Bancshares, Inc. Lawrence L. Anderson, MD S. Elaine Anderson, CPA Michael J. Bosworth Patricia A. Callan Kirk A. Calhoun, MD Shannon Dacus Keith M. Donahoe President and CEO Alton L. Frailey Lee R. Gibson, CPA Raymond C. McKinney, CPA Jeb. W. Jones Preston L. Smith Herbert C. Buie Director Emeritus Officers Southside Bancshares, Inc. Keith M. Donahoe President and Chief Executive Officer Lee R. Gibson, CPA Chief Executive Officer (Retired 12.31.2025) Julie N. Shamburger, CPA Chief Financial Officer T. L. Arnold Chief Credit Officer Curtis Burchard Chief Lending Officer Mitchell Craddock Chief Operations Officer Vonna Crowley, CRCM Chief Compliance Officer Suni Davis, CPA, CERP Chief Treasury Officer Sandi Hegwood, CPA, CIA Chief Audit Executive Anne Martinez Chief Risk Officer Brian K. McCabe Chief Operations Officer (Retired 11.14.2025) April Pinkley, CPA Chief Accounting Officer Staci Anderson Senior Vice President and Senior Loan Review Officer Brooke Mott, CRCM Senior Vice President and Fair and Responsible Banking Officer Lindsey Bailes, CPA Senior Vice President and Investor Relations Officer Katherine Clover, CPA, CIA, CISA Vice President and Internal Audit Manager Misty de Wet, CPA, CIA Vice President and Internal Audit Manager Roxanne Reynolds, CPA Vice President and Internal Audit Manager Trent Wilson Vice President and Loan Review Officer Austin Fleet, CPA Assistant Vice President and Internal Auditor Adam McElroy, CPA, CIA Assistant Vice President and Internal Auditor Petra Herbert Banking Officer and Loan Review Analyst Mary McLarry Corporate Secretary Lawrence L. Anderson, MD Retired Physician S. Elaine Anderson, CPA Retired Healthcare Executive Healthcare Consultant T. L. Arnold* Chief Credit Officer Michael J. Bosworth President Bosworth & Associates Kirk A. Calhoun, MD President University of North Texas Health and Vice Chancellor for Health, University of North Texas System Herbert C. Buie Director Emeritus Retired Chief Executive Officer and Business Owner Curtis Burchard* Chief Lending Officer Patricia A. Callan Principal Callan Consulting Shannon Dacus President and Owner The Dacus Firm Keith M. Donahoe President and Chief Executive Officer Alton L. Frailey President Alton L. Frailey & Associates, LLC John R. (Bob) Garrett Vice Chairman of the Board President Fair Oil Company Lee R. Gibson, CPA Chief Executive Officer (Retired 12.31.2025) Jeb W. Jones Chief Executive Officer Pro Star Rental Raymond C. McKinney, CPA President and Chief Executive Officer The Genecov Group Brian K. McCabe* Chief Operations Officer (Retired 11.14.2025) Julie N. Shamburger, CPA* Chief Financial Officer H. J. Shands, III Chairman of the Board Retired Banker Preston L. Smith President PSI Production, Inc. Lonny R. Uzzell* Chief Business Development Officer *Advisory Directors ANNUAL REPORT 2025 | SOUTHSIDE BANCSHARES, INC. Directors Southside Bank Officers Southside Bank Keith M. Donahoe President and Chief Executive Officer Lee R. Gibson, CPA Chief Executive Officer (Retired 12.31.2025) Julie N. Shamburger, CPA Chief Financial Officer T. L. Arnold Chief Credit Officer Curtis Burchard Chief Lending Officer Sherri Anthony Chief Banking Officer Faye Bond Chief Innovation Officer Mitchell Craddock Chief Operations Officer Vonna Crowley, CRCM Chief Compliance Officer Suni Davis, CPA, CERP Chief Treasury Officer Anne Martinez Chief Risk Officer Brian K. McCabe Chief Operations Officer (Retired 11.14.2025) Gary Mills Chief Technology Officer April Pinkley, CPA Chief Accounting Officer Carlos Renteria, CISA, CISM, CDPSE Chief Information Security Officer James Schafer Chief Information Officer Lonny Uzzell Chief Business Development Officer Regional President Jared Green, East Texas Market Presidents Charles Colley, Austin Justin Holt, Fort Worth Michael Goode, Nacogdoches Codie Jenkins, Southeast Texas Amos McDonald, Houston Brian Turner, East Texas Executive Vice Presidents David Braswell, CPA Brad Browder, CFA Mark Cundiff Pam Cunningham Brandon Green Jonathan Hilley Vicki Jennings Christopher Katri Keith Leonhardt, CISA, CDPSE Phyllis Milstead Emily Moore, CPA, SHRM-SCP Chris Phelps Leigh Anne Rozell, CAMS SOUTHSIDE INVESTMENT SERVICES WEALTH MANAGEMENT & TRUST President Joel Adams President Bill Newburn, CFP, CTFA, CWS Regional President Hilary Haglund Walker, JD, East Texas Market President Emily Corbett, Southeast Texas, AAMS Executive Vice President Kim Christie, CPA, CTFA Form 10-K 2025 16 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2025 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From to Commission file number 001-42396 SOUTHSIDE BANCSHARES, INC. (Exact name of registrant as specified in its charter) Texas 75-1848732 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 1201 S. Beckham Avenue, Tyler Texas 75701 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (903) 531-7111 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol Name of each exchange on which registered Common Stock, $1.25 par value SBSI New York Stock Exchange NYSE Texas Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act: Large Accelerated Filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2025, was approximately $837.3 million (based upon the closing price of $29.43 per share as reported by the New York Stock Exchange on June 30, 2025, the last business day of the registrant's most recently completed second fiscal quarter). As of February 24, 2026, there were 29,735,507 shares of the registrant's common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the Registrant's proxy statement to be filed for the Company's Annual Meeting of Shareholders to be held on May 14, 2026 are incorporated by reference into Part III of this Annual Report on Form 10-K. Other than those portions of the proxy statement specifically incorporated by reference pursuant to Items 10-14 of Part III hereof, no other portions of the proxy statement shall be deemed so incorporated herein. SOUTHSIDE BANCSHARES, INC. Glossary of Acronyms, Abbreviations and Terms The acronyms, abbreviations and terms listed below are used in various sections of this Form 10-K, including "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 8. Financial Statements and Supplementary Data." Entities: Southside Bancshares, Inc. Bank holding company for Southside Bank Southside Bank Texas state bank and wholly owned subsidiary of Southside Bancshares, Inc. Company Combined entities of Southside Bancshares, Inc. and its subsidiaries, including Southside Bank Bank Southside Bank Omni OmniAmerican Bancorp, Inc., a bank holding company, and its wholly-owned subsidiary, OmniAmerican Bank, acquired by Southside on December 17, 2014 Southside Southside Bancshares, Inc. Other Acronyms, Abbreviations and Terms: 2024 Form 10-K Southside Bancshares, Inc. Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025 2025 Incentive Plan Southside Bancshares, Inc. 2025 Incentive Plan 401(k) Plan 401(k) Defined Contribution Plan Acquired Retirement Plan OmniAmerican Bank defined benefit pension plan AFS Available for sale AI Artificial intelligence ALCO Asset/Liability Committee AML Anti-money laundering AOCI Accumulated other comprehensive income or loss ASC Accounting Standards Codification ASU Accounting Standards Update issued by the FASB ATM Automated teller machines BTFP The Federal Reserve's Bank Term Funding Program Basel Committee Basel Committee on Banking Supervision BHCA Bank Holding Company Act of 1956 Board Board of directors BOLI Bank owned life insurance CBCA Change in Bank Control Act CBLR Community Bank Leverage Ratio framework CDs Certificates of deposit CECL ASC 326, Financial Instruments- Credit Losses, also known as Current Expected Credit Losses CET1 Common Equity Tier 1 CFPB Consumer Financial Protection Bureau CISO Chief Information Security Officer CMOs Collateralized mortgage obligations CRE Commercial real estate CRE Guidance Collectively, the Final Interagency Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts and the Interagency Statement on Prudent Risk Management for Commercial Real Estate Lending released in December 2015. COVID-19 Novel strain of coronavirus CRA Community Reinvestment Act DEI Diversity, equity and inclusion DIF FDIC's Deposit Insurance Fund Dodd-Frank Act Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 DRIP Dividend Reinvestment Plan ESG Environmental, social and governance ESOP Employee Stock Ownership Plan ETR Effective tax rate Exchange Act Securities Exchange Act of 1934 Fannie Mae Federal National Mortgage Association FFIEC Federal Financial Institutions Examination Council FASB Financial Accounting Standards Board FDIA Federal Deposit Insurance Act FDIC Federal Deposit Insurance Corporation FDICIA Federal Deposit Insurance Corporation Improvement Act of 1991 Federal Reserve The Board of Governors of the Federal Reserve System FHLB Federal Home Loan Bank FinCEN Financial Crimes Enforcement Network Fintech Financial technology FRA Federal Reserve Act FRBNY Federal Reserve Bank of New York FRDW Federal Reserve Discount Window Freddie Mac Federal Home Loan Mortgage Corporation FTE Fully-taxable equivalents measurements GAAP United States generally accepted accounting principles GLBA Gramm-Leach-Bliley Act GNMA Government National Mortgage Association GSEs U.S. government-sponsored enterprises HTM Held to maturity ITM Interactive teller machines LIBOR London Interbank Offered Rate LPO Loan production office MBS Mortgage-backed securities MVPE Market value of portfolio equity NPI Nonpublic personal information NQSO Nonqualified stock options NYSE New York Stock Exchange OFAC The U.S. Department of the Treasury's Office of Foreign Assets Control OREO Other real estate owned PCAOB Public Company Accounting Oversight Board Plan Stock Repurchase Plan PSU Performance-based restrictive stock units REIT Real estate investment trust Repurchase agreements Securities sold under agreements to repurchase RESPA Real Estate Settlement Procedures Act Restoration Plan Nonfunded supplemental retirement plan Retirement Plan Defined benefit pension plan ROATCE Return on Average Tangible Common Equity ROU Right-of-use RSU Restricted stock units SEC Securities and Exchange Commission SOFR Secured Overnight Financing Rate provided by the Federal Reserve Bank of New York TDB Texas Department of Banking TILA Truth in Lending Act U.S. United States USA PATRIOT Act Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 VIE Variable interest entity Volcker Rule Section 619 of the Dodd-Frank Act IMPORTANT INFORMATION ABOUT THIS REPORT In this report, the words "the Company," "we," "us," and "our" refer to the combined entities of Southside Bancshares, Inc. and its subsidiaries, including Southside Bank. The words "Southside" and "Southside Bancshares" refer to Southside Bancshares, Inc. The words "Southside Bank" and "the Bank" refer to Southside Bank. PART I ITEM 1. BUSINESS FORWARD-LOOKING INFORMATION The disclosures set forth in this item are qualified by the section captioned "Cautionary Notice Regarding Forward-Looking Statements" in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K and other cautionary statements set forth elsewhere in this report. GENERAL Southside Bancshares, Inc., incorporated in Texas in 1982, is a bank holding company for Southside Bank, a Texas state bank headquartered in Tyler, Texas that was formed in 1960. We operate through 53 branches, 12 of which are located in grocery stores, in addition to wealth management and trust services, and/or loan production, brokerage or other financial services offices. At December 31, 2025, our total assets were $8.51 billion, total loans were $4.82 billion, total deposits were $6.87 billion and total equity was $847.6 million. For the years ended December 31, 2025 and 2024, our net income was $69.2 million and $88.5 million, respectively. For the years ended December 31, 2025 and 2024, diluted earnings per common share was $2.29 and $2.91, respectively. We have paid a cash dividend to shareholders every year since 1970 (including dividends paid by Southside Bank prior to the incorporation of Southside Bancshares). We are a community-focused financial institution that offers a full range of financial services to individuals, businesses, municipal entities and nonprofit organizations in the communities that we serve. These services include consumer and commercial loans, deposit accounts, wealth management, trust and brokerage services. Our consumer loan services include 1-4 family residential loans, home equity loans, home improvement loans, automobile loans and other consumer related loans. Commercial loan services include short-term working capital loans for inventory and accounts receivable, short- and medium-term loans for equipment or other business capital expansion, commercial real estate loans and municipal loans. We also offer construction loans for 1-4 family residential and commercial real estate. We offer a variety of deposit accounts with a wide range of interest rates and terms, including savings, money market, interest and noninterest bearing checking accounts and CDs. Our trust and wealth management services include investment management, administration of irrevocable, revocable and testamentary trusts, estate administration, and custodian services, primarily for individuals and, to a lesser extent, partnerships and corporations. Additionally, we offer retirement and employee benefit accounts, including but not limited to, IRAs, 401(k) plans and profit-sharing plans. At December 31, 2025, our wealth management and trust assets under management were approximately $1.65 billion. Our business strategy includes evaluating expansion opportunities through acquisitions of financial institutions in market areas that could complement our existing franchise. We generally seek merger partners that are culturally similar, have experienced management teams and possess either significant market presence or have potential for improved profitability through financial management, economies of scale or expanded services. We and our subsidiaries are subject to comprehensive regulation, examination and supervision by the SEC, the Federal Reserve, the TDB and the FDIC and are subject to numerous laws and regulations relating to internal controls, the extension of credit, making of loans to individuals, deposits and all other facets of our operations. Our primary executive offices are located at 1201 South Beckham Avenue, Tyler, Texas 75701 and our telephone number is 903-531-7111. Our website can be found at www.southside.com . Our public filings with the SEC may be obtained free of charge on either our website, https://investors.southside.com/ under the topic Financials, or the SEC's website, www.sec.gov, as soon as reasonably practicable after filing with the SEC. We include our website address throughout the filing only as textual references. The information contained on our website is not incorporated in this document by reference. MARKET AREA We are headquartered in Tyler, Texas. The Tyler metropolitan area has an estimated population of 245,000 and is located approximately 90 miles east of Dallas, Texas and 90 miles west of Shreveport, Louisiana. We consider our primary market areas to be East Texas, Southeast Texas, as well as the greater Dallas-Fort Worth, Austin and Houston, Texas areas. Our expectation is that our presence in all of the market areas we serve should grow in the future. In addition, we continue to explore new markets in which we believe we can successfully expand. The principal economic activities in our market areas include medical services, retail, education, financial services, technology, distribution, manufacturing, government and to a lesser extent, oil and gas industries. These economic activities support a growing regional system of medical service, retail and education centers. Tyler, Dallas-Fort Worth, Austin and Houston are home to several nationally recognized health care systems that represent all major specialties. Our 53 branches, 37 drive-thru facilities and two LPOs are located in and around Arlington, Austin, Bullard, Chandler, Cleburne, Cleveland, Dallas, Diboll, Euless, Fort Worth, Frisco, Granbury, Grapevine, Gresham, Gun Barrel City, Hawkins, Hemphill, Houston, Irving, Jacksonville, Jasper, Lindale, Longview, Lufkin, Nacogdoches, Palestine, Pineland, San Augustine, Splendora, The Woodlands, Tyler, Watauga, Weatherford and Whitehouse. Our advertising is designed to target the market areas we serve. The type and amount of advertising in each location is determined based on our market share in that area, combined with overall cost by market. Additionally, our customers may access various banking services through a wide network of ATMs, ITMs, automated telephone, internet and mobile banking products. Customers can apply for loans, open deposit accounts, access account information and conduct various other transactions online from their smart phones or computers. RECENT DEVELOPMENTS We expect to open traditional branch locations at Bellwood Park in Tyler, Texas and The Woodlands in the first quarter of 2026. THE BANKING INDUSTRY IN TEXAS The banking industry is affected by general economic conditions such as interest rates, inflation, recession, unemployment and other factors beyond our control. During the last 30 years the Texas economy has continued to diversify, decreasing the overall impact of fluctuations in oil and gas prices; however, the oil and gas industry is still a significant component of the Texas economy. Continued tariff announcements and ongoing tariff negotiations have caused some uncertainty related to inflation levels and its impact on the overall economy. While it is too early to discern the likely outcome of these tariff announcements and negotiations, the current economic conditions and growth prospects for our markets continue to reflect a solid and positive outlook. Higher inflation levels and interest rate fluctuations could have a negative impact on both our consumer and commercial borrowers in the future. Overall, however, the Texas markets we serve remain healthy. COMPETITION The activities we are engaged in are highly competitive. Financial institutions such as credit unions, fintech companies, consumer finance companies, insurance companies, brokerage companies and other financial institutions with varying degrees of regulatory restrictions compete vigorously for a share of the financial services market. Fintech, brokerage and insurance companies continue to become more competitive in the financial services arena and pose an ever-increasing challenge to banks. Legislative changes also greatly affect the level of competition we face. Federal legislation allows credit unions to use their expanded membership capabilities, combined with tax-free status, to compete more openly for traditional bank business. The tax-free status granted to credit unions provides them with a significant competitive advantage. Many of the largest banks operating in Texas, including some of the largest banks in the country, have offices in our market areas with capital resources, broader geographic markets and legal lending limits substantially in excess of those available to us. We face competition from institutions that offer products and services we do not or cannot currently offer. Some institutions we compete with offer interest rate levels on loan and deposit products that we are unwilling to offer due to interest rate risk and overall profitability concerns. We expect the level of competition in the financial services market to continue to increase. HUMAN CAPITAL RESOURCES At December 31, 2025, we employed approximately 781 full time equivalent persons. None of our employees are represented by any unions or similar groups. We consider the relationship with our employees to be good, which we believe to be reflected in the average tenure of our employees exceeding eight years, with the tenure of 33% of our employees exceeding ten years. As of December 31, 2025, women and ethnic minorities represented approximately 68% and 41% of our workforce, respectively. During 2025, Southside was awarded "Best Banks to Work For" by American Banker for the fourth consecutive year, "Best Companies to Work For in Fort Worth" for the third consecutive year, and for the first time, received the distinction of "Best Place to Work in Texas" by the Best Companies Group. These awards identify organizations that excel at creating positive and supportive workplaces for employees. We continuously work toward an outstanding workplace with competitive benefits for employees through our initiatives outlined below. The health, safety and wellness of our employees is a top priority for Southside. In 2025, we continued to focus on the health and wellness of our employees through several company-wide efforts including a wellness program that allows employees to earn cash rewards, as well as wellness communications and webinars throughout the year. We maintain a comprehensive employee handbook, code of business conduct, as well as other policies, including a harassment policy, whistleblower policy and a human rights policy statement, to promote a safe and supportive workplace culture. We believe employees to be our greatest asset and that our future success depends on our ability to attract, retain and develop employees. Professional development is a key priority, which is facilitated through our many corporate initiatives including extensive training programs, corporate mentoring, leadership programs, educational reimbursement and corporate and personal development coaching. We recognize and award employees through several different initiatives centered around service to Southside and initiatives that impact workplace culture and the communities we serve. Effective communication is critical to supporting our employees and is carried out through our weekly newsletters, executive announcements, quarterly Town Hall meetings and our corporate intranet. As part of our effort to attract and retain employees, we offer a broad range of benefits, including, but not limited to, 15-30 days of annual paid time off based on length of employment, sick leave, parental leave, participation in our ESOP, 401(k) match for eligible employees and up to 20 hours of paid time off annually to volunteer. We believe our compensation packages and benefits are competitive with others in our industry. For additional information regarding our employee benefit plans, see "Note 10 - Employee Benefits" to our consolidated financial statements included in this report. SUPERVISION AND REGULATION General Banking is a complex, highly regulated industry. As a bank holding company under federal law, the Company is subject to regulation, supervision and examination by the Federal Reserve. As a Texas-chartered state bank, Southside Bank is subject to regulation, supervision and examination by the TDB, as its chartering authority, and by the FDIC, as its primary federal regulator and deposit insurer. This system of regulation and supervision provides a comprehensive legal framework for our operations and is intended primarily for the protection of bank depositors, the FDIC's DIF and the public, rather than our shareholders and creditors. In addition to the system of regulation and supervision outlined above, the CFPB has authority to supervise and examine depository institutions with more than $10 billion in assets for compliance with these federal consumer laws. The CFPB also has rulemaking authority for a range of consumer financial protection laws (such as TILA, the Electronic Fund Transfer Act and RESPA, among others). The authority to supervise and examine depository institutions with $10 billion or less in assets (such as Southside Bank) for compliance with federal consumer laws remains largely with those institutions' primary regulators. However, the CFPB may participate in examinations of these smaller institutions on a "sampling basis" and may refer potential enforcement actions against such institutions to their primary regulators. Accordingly, the CFPB may participate in examinations of Southside Bank, and could supervise and examine other direct or indirect subsidiaries of the Company that offer consumer financial products or services. Notwithstanding ongoing, legal, budgetary and structural challenges affecting the CFPB, the CFPB remains an active federal regulatory agency with continuing supervisory and enforcement authority and retains its broad authority to pursue enforcement actions, including investigations, civil actions and cease and desist proceedings. The CFPB may also refer civil and criminal findings to the Department of Justice for prosecution. The earnings of Southside Bank and, therefore, the earnings of the Company, are affected by general economic conditions, changes in federal and state laws and regulations and actions of various regulatory authorities, including those referenced above. Significant changes to federal and state laws, changes in the interpretation or application of such laws by regulators, and/ or the enactment of new legislation or adoption of new regulations could (i) materially impact the profitability of our business, the value of assets we hold, or the value of collateral available for our loans; (ii) require changes to our business practices; (iii) force us to discontinue certain business lines; and/or (iv) otherwise expose us to additional costs, taxes, liabilities, enforcement actions and reputational risk. The likelihood, timing and scope of any such change of law, and the impact that any such change may have on us, are impossible to determine with any certainty. Set forth below are brief descriptions of the significant federal and state laws and regulations to which we are currently subject. These descriptions do not purport to be complete and are qualified in their entirety by reference to the particular statutory or regulatory provisions. Holding Company Regulation The Company is registered as a bank holding company with the Federal Reserve under the BHCA and qualifies for and has elected to be treated as a financial holding company. As such, we are subject to comprehensive supervision and regulation by the Federal Reserve and are subject to its regulatory reporting requirements. The Company is required to file annual and other reports with, and furnish information to, the Federal Reserve, which makes periodic inspections of the Company. Violations of laws and regulations, or other unsafe and unsound practices, may result in regulatory agencies imposing fines or penalties, cease and desist orders, or taking other enforcement actions. Under certain circumstances, these agencies may enforce these remedies directly against officers, directors, employees, and other parties participating in the affairs of a bank or bank holding company. Like all bank holding companies, we are regulated extensively under federal and state law. Under federal and state laws and regulations pertaining to the safety and soundness of insured depository institutions, state banking regulators, the Federal Reserve, and separately the FDIC as the insurer of bank deposits have the authority to compel or restrict certain actions on our part if they determine that we have insufficient capital or other resources, or are otherwise operating in a manner that may be deemed inconsistent with safe and sound banking practices. Under this authority, our regulators can require us or our subsidiaries to enter into informal or formal supervisory agreements, including board resolutions, memoranda of understanding, written agreements, and consent or cease and desist orders pursuant to which we would be required to take identified corrective actions to address cited concerns and to refrain from taking certain actions. If we become subject to, and are unable to comply with, the terms of any regulatory actions or directives, supervisory agreements or orders, we could become subject to additional, heightened supervisory actions and orders, possibly including prompt corrective action restrictions or other regulatory actions, including prohibitions on the payment of dividends on our common stock and preferred stock. If our regulators were to take such supervisory actions, then we could, among other things, become subject to significant restrictions on our ability to develop new business, as well as restrictions on our existing business, and we could be required to raise additional capital, dispose of certain assets and liabilities within a prescribed period of time, or both. The terms of any such action could have a material negative effect on our business, reputation, operating flexibility, financial condition, and the value of our stock. Permitted Activities . Under the BHCA, a bank holding company is limited to managing or controlling banks, furnishing services to or performing services for our subsidiaries, and engaging in other activities that the Federal Reserve determines by regulation or order to be the business of banking, managing, or controlling banks, furnishing services to or performing services for its subsidiaries and certain other activities determined by the Federal Reserve to be closely related to banking. In determining whether a particular activity is permissible, the Federal Reserve must consider whether the performance of such an activity reasonably can be expected to produce benefits to the public that outweigh possible adverse effects. Possible benefits include greater convenience, increased competition, and gains in efficiency. Possible adverse effects include undue concentration of resources, decreased or unfair competition, conflicts of interest and unsound banking practices. Examples of activities the Federal Reserve has previously determined are closely related to banking include: factoring accounts receivable; making, acquiring, brokering or servicing loans and usual related activities; leasing personal or real property; operating a nonbank depository institution, such as a savings association; performing trust company functions; conducting financial and investment advisory activities; conducting discount securities brokerage activities; underwriting and dealing in government obligations and money market instruments; providing specified management consulting and counseling activities; performing selected data processing services and support services; acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; performing selected insurance underwriting activities; providing certain community development activities (such as making investments in projects designed primarily to promote community welfare); and issuing and selling money orders and similar consumer-type payment instruments. The Federal Reserve has the authority to order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when the Federal Reserve has reasonable cause to believe that the bank holding company's continued ownership, activity or control constitutes a serious risk to the financial safety, soundness or stability of it or any of its bank subsidiaries. Under the BHCA, a bank holding company meeting certain eligibility requirements may elect to become a "financial holding company." More specifically, a bank holding company may elect to become a financial holding company if the bank holding company is well-capitalized and is well managed and each of its banking subsidiaries is well-capitalized, is well managed and has at least a "Satisfactory" rating under the CRA. As a financial holding company, the Company and companies under its control may engage directly or indirectly in activities that are "financial in nature," as defined by the GLBA and Federal Reserve interpretations, and therefore may engage in a broader range of activities than those permitted for bank holding companies and their subsidiaries under the BHCA. Financial holding companies and their subsidiaries also may engage in additional activities that are determined by the Federal Reserve, in consultation with the U.S. Department of the Treasury, to be "financial in nature or incidental to" a financial activity or are determined by the Federal Reserve unilaterally to be "complementary" to financial activities. In addition, a financial holding company is allowed to conduct permissible new financial activities or acquire permissible non-bank financial companies with after-the-fact notice to the Federal Reserve. Should a financial holding company fail to meet the requirements necessary to maintain its designation as a financial holding company, such failure could result in material restrictions on the activities of the financial holding company and may also adversely affect the financial holding company's ability to engage in mergers and acquisitions, as well as loss of financial holding company status. Restrictions on the activities of a financial holding company may not necessarily be made available to the public. While the company has elected to be treated as a financial holding company, we do not currently engage in financial activities beyond those permissible for a bank holding company. However, if we undertake expanded financial activities (i.e., those that are not permissible for a bank holding company) and we subsequently fail to continue to meet any of the prerequisites for "financial holding company" status, including those described above, the Federal Reserve may, among other things, place limitations on our ability to conduct these broader financial activities or, if the deficiencies persist, require us to divest the banking subsidiary or the businesses engaged in activities permissible only for financial holding companies Capital Adequacy . Each of the federal banking agencies, including the Federal Reserve and the FDIC, has issued substantially similar risk-based and minimum leverage capital guidelines applicable to the banking organizations they supervise. Under existing capital standards, the Company and the Bank are required to maintain certain capital levels based on ratios of capital to total assets and capital to risk-weighted assets. The required capital ratios are minimums, and the federal banking agencies may determine that a banking organization based on its size, complexity, or risk profile must maintain a higher level of capital in order to operate in a safe and sound manner. Risks such as concentration of credit risks and the risk arising from nontraditional activities, as well as the institution's exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution's ability to manage those risks, are important factors in assessing an institution's overall capital adequacy. The following is a brief description of the relevant provisions of these capital rules and their potential impact on our capital levels. The Company and the Bank are subject to the following risk-based capital ratios: a CET1 risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital. CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock plus retained earnings less certain adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets, and deferred tax assets subject to temporary timing differences. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock. Tier 2 capital consists of instruments disqualified from Tier 1 capital, including qualifying subordinated debt and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets, subject to certain eligibility criteria. The capital rules also define the risk-weights assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example, certain "high volatility" commercial real estate, past due assets, structured securities, and equity holdings. In addition to the minimum leverage ratio and the capital conversion buffer discussed above, the Company and the Bank are also subject to the following minimum capital ratios: 4.5% CET1 capital to risk-weighted assets; 6% Tier 1 capital to risk-weighted assets; and 8% total capital to risk-weighted assets. In addition, the capital rules required a "capital conservation buffer" of 2.5% above each of the minimum risk-based capital ratio requirements (CET1, Tier 1, and total capital), which is designed to absorb losses during periods of economic stress. These buffer requirements must be met for a bank or bank holding company to be able to pay dividends, engage in share buybacks, or make discretionary bonus payments to executive management without restriction. The leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly average total consolidated assets, net of goodwill, certain other intangible assets, and certain required deduction items. The required minimum leverage ratio for all banks and bank holding companies is 4%. The FDICIA, among other things, requires the federal bank regulatory agencies to take "prompt corrective action" regarding depository institutions that do not meet minimum capital requirements. FDICIA establishes five regulatory capital tiers: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized." A depository institution's capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors, as established by regulation. FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. FDICIA imposes progressively more restrictive restraints on operations, management, and capital distributions depending on the category in which an institution is classified. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve. In addition, undercapitalized depository institutions may not accept brokered deposits absent a waiver from the FDIC, are subject to growth limitations, and are required to submit capital restoration plans for regulatory approval. A depository institution's holding company must guarantee any required capital restoration plan up to an amount equal to the lesser of 5 percent of the depository institution's assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan. Federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized. To be well-capitalized, the Bank must maintain at least the following capital ratios: 6.5% CET1 to risk-weighted assets; 8% Tier 1 capital to risk-weighted assets; 10% Total capital to risk-weighted assets; and 5% leverage ratio. The Federal Reserve has not yet revised the well-capitalized standard for bank holding companies to reflect the higher capital requirements imposed under the current capital rules applicable to banks. For purposes of the Federal Reserve's Regulation Y, including determining whether a bank holding company meets the requirements to be a financial holding company, bank holding companies, such as the Company, must maintain a Tier 1 risk-based capital ratio of 6% or greater and a total risk-based capital ratio of 10% or greater to be well-capitalized. Also, the Federal Reserve may require bank holding companies, including the Company, to maintain capital ratios substantially in excess of mandated minimum levels depending upon general economic conditions and a bank holding company's particular condition, risk profile, and growth plans. Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on our operations or financial condition. Failure to meet minimum capital requirements could also result in restrictions on the Company's or the Bank's ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth. In 2025, the Company's and the Bank's regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer. Based on current estimates, we believe that the Company and the Bank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2026. Certain regulatory capital ratios of the Company and Southside Bank, as of December 31, 2025, are shown in the following table. Capital Adequacy Ratios Southside Bancshares, Southside Inc. Bank Common equity tier 1 risk-based capital ratio ................................................................................... 12.87 % 16.66 % Tier 1 risk-based capital ratio ............................................................................................................. 13.88 % 16.66 % Total risk-based capital ratio .............................................................................................................. 18.54 % 17.50 % Leverage ratio ..................................................................................................................................... 9.72 % 11.67 % Eligible community banks and holding companies with less than $10 billion in consolidated assets may opt into the CBLR framework. A "qualifying community banking organization" is one that has (i) less than $10 billion in total consolidated assets; (ii) a leverage ratio greater than 9%; (iii) off-balance sheet exposures of 25% or less of total consolidated assets; and (iv) trading assets and liabilities of 5% or less of total consolidated assets. Qualifying banks that meet these thresholds and elect the CBLR framework, are exempt from the agencies' current capital framework, including the risk-based capital requirements and capital conservation buffer, and are deemed well-capitalized under the agencies' prompt corrective action regulations. The Bank has not elected to use the CBLR framework at this time. Source of Strength . A bank holding company, such as us, is required to act as a source of financial and managerial strength to its subsidiary banks and to commit resources to their support. This support may be required at times when the bank holding company may not have the resources to provide it or when doing so is not otherwise in the interests of the Company or its shareholders or creditors. Regulators may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices if the bank holding company fails to commit resources to such a subsidiary bank or if it undertakes actions that the Federal Reserve believes might jeopardize the bank holding company's ability to commit resources to such subsidiary bank. As a result, a bank holding company may be required to contribute additional capital to its subsidiaries. The appropriate federal banking agency for the depository institution (in the case of the Bank, the FDIC) may require reports from us to assess our ability to serve as a source of strength and to enforce compliance with the source of strength requirements by requiring us to provide financial assistance to the Bank in the event of financial distress. Capital loans from the Company to the Bank would be unsecured and subordinated to the Bank's depositors and certain other debts of the Bank. In addition, if a bank holding company enters into bankruptcy or becomes subject to the orderly liquidation process established by the Dodd-Frank Act, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank would be assumed by the bankruptcy trustee or the FDIC, as appropriate, and entitled to a priority of payment. Furthermore, the FDIA provides that any insured depository institution generally will be liable for any loss incurred by the FDIC in connection with the default of, or any assistance provided by the FDIC to, a commonly controlled insured depository institution. The Bank is an FDIC-insured depository institution and thus subject to these requirements. See also Bank Regulation - Prompt Corrective Action and Undercapitalization . Dividends . The Company is a legal entity separate and distinct from its subsidiaries. Under the laws of the State of Texas, we, as a business corporation, may declare and pay dividends. The principal source of funds for our payment of dividends to our shareholders are cash on hand and dividends from the Bank. The Company's ability to declare and pay dividends is limited by and subject to various general regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The Federal Reserve has indicated that depository institutions and their holding companies should generally pay dividends only out of current operating earnings. Under a Federal Reserve policy adopted in 2009, the board of directors of a bank holding company must consider certain factors to ensure that its dividend level is prudent relative to maintaining a strong financial position, and is not based on overly optimistic earnings scenarios, such as potential events that could affect its ability to pay, while still maintaining a strong financial position. As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should consult with the Federal Reserve and eliminate, defer or significantly reduce the bank holding company's dividends if: its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective financial condition; or it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios. The ability of the Company to pay dividends, and the contents of the Company's dividend policy, is subject to changes of law, as well as possible supervisory restrictions imposed by the Federal Reserve. The Federal Reserve also has authority to prohibit a bank holding company from making capital distributions if they would be deemed to be an unsafe or unsound practice. In addition, the Company's ability to make capital distributions, including paying dividends and repurchasing shares, is subject to the Company complying with the automatic restrictions on capital distributions under the Federal Reserve's "Capital Rules" discussed above - see Holding Company Regulation - Capital Adequacy . Incentive Compensation . The Dodd-Frank Act required the federal banking agencies and the SEC to establish joint rules or guidelines for financial institutions with more than $1 billion in assets, such as the Company and the Bank, which prohibit incentive compensation arrangements that the agencies determine to encourage inappropriate risks by the institution. In 2016, the federal banking agencies and the SEC proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation arrangements and would require enhanced oversight and recordkeeping. As of December 31, 2025, these rules have not been implemented, although the SEC did adopt final rules implementing the clawback provisions of the Dodd-Frank Act in 2022 and the NYSE did adopt corresponding listing standards for clawback policies in 2023. The Company and the Bank have undertaken efforts to ensure that our incentive compensation plans do not encourage inappropriate risks, consistent with three key principles: incentive compensation arrangements should appropriately balance risk and financial rewards, be compatible with effective controls and risk management, and be supported by strong corporate governance. Change in Control . Federal law restricts the amount of voting stock in a bank holding company or a bank that a person may acquire without the prior approval of banking regulators. Subject to certain exceptions, under the BHCA, the CBCA and the regulations promulgated thereunder, persons who intend to acquire direct or indirect control of a depository institution or a bank holding company are required to obtain the prior approval of the Federal Reserve. With respect to the Company, "control" is conclusively presumed to exist where an acquiring party directly or indirectly owns, controls or has the power to vote at least 25% of our voting securities. Under the Federal Reserve's CBCA regulations, a rebuttable presumption of control would arise with respect to an acquisition where, after the transaction, the acquiring party owns, controls or has the power to vote at least 10%. The overall effect of such laws is to make it more difficult to acquire a bank holding company and a bank by tender offer or similar means than it might be to acquire control of another type of corporation. Consequently, shareholders of the Company may be less likely to benefit from the rapid increases in stock prices that may result from tender offers or similar efforts to acquire control of other companies. Investors should be aware of these requirements when acquiring shares of our stock. Acquisitions . The BHCA provides that a bank holding company must obtain the prior approval of the Federal Reserve to (i) acquire direct or indirect ownership or control of more than five percent of the outstanding shares of any class of voting securities of any bank or bank holding company, (ii) acquire all or substantially all of the assets of another bank or bank holding company or (iii) merge or consolidate with any other bank holding company. The Federal Reserve, with the input of the Department of Justice, may not approve any such transaction that would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any section of the United States, or the effect of which may be substantially to lessen competition or to tend to create a monopoly in any section of the country, or that in any other manner would be in restraint of trade unless the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served. The Federal Reserve is also required to consider (i) the financial and managerial resources of the companies involved, including pro forma capital ratios, (ii) the risk to the stability of the United States banking or financial system, (iii) the convenience and needs of the communities to be served, including performance under the CRA and (iv) the effectiveness of the company in combatting money laundering. Regulatory Examination . Federal and state banking agencies require the Company and the Bank to prepare annual reports on financial condition and to conduct an annual audit of financial affairs in compliance with minimum standards and procedures. The Bank, and in some cases the Company and any nonbank affiliates, must undergo regular on-site examinations by the appropriate regulatory agency, which will examine for adherence to a range of legal and regulatory compliance responsibilities. A bank regulator conducting an examination has complete access to the books and records of the examined institution, and the results of the examination are confidential. Enforcement Authority . The Federal Reserve has broad enforcement powers over bank holding companies and their nonbank subsidiaries, as well as "institution-affiliated parties," including management, employees, agents, independent contractors and consultants, such as attorneys and accountants and others who participate in the conduct of the institution's affairs, and has authority to prohibit activities that represent unsafe or unsound banking practices or constitute knowing or reckless violations of laws or regulations. These powers may be exercised through the issuance of cease-and-desist orders, civil money penalties or other actions. Civil money penalties can be as high as $1,000,000 for each day the activity continues and criminal penalties for some financial institution crimes may include imprisonment for 20 years. Regulators have flexibility to commence enforcement actions against institutions and institution-affiliated parties, and the FDIC has the authority to terminate deposit insurance. When issued by a banking agency, cease-and-desist and similar orders may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, refrain from declaring or paying dividends, or take other actions determined to be appropriate by the ordering agency. The federal banking agencies also may remove a director or officer from an insured depository institution (or bar them from the industry) if a violation is willful or reckless. Bank Regulation The Bank is a Texas-chartered commercial bank, the deposits of which are insured up to the applicable limits by the FDIC. The Bank is not a member of the Federal Reserve. The Bank is subject to extensive regulation, examination and supervision by the TDB, as its chartering authority, and by the FDIC, as its primary federal regulator and deposit insurer. In addition, as discussed in more detail below, the Bank is subject to regulation and supervision by the CFPB which may participate in examinations of the Bank regarding the Bank's offering of consumer financial products and services. The federal and state laws applicable to banks regulate, among other things, the scope of their activities and investments, lending and deposit-taking activities, borrowings, maintenance of retained earnings and reserve accounts, distribution of earnings and payment of dividends. Further, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are stricter than those regulations promulgated by the CFPB, and state attorneys general are permitted to enforce certain federal consumer financial protection laws. Broadly, regulations applicable to the Bank include limitations on loans to a single borrower and to its directors, officers and employees, restrictions on the opening and closing of branch offices, the maintenance of required capital ratios, the granting of credit under equal and fair conditions, the disclosure of the costs and terms of such credit, requirements to maintain reserves against deposits and loans, limitations on the types of investment that may be made by the Bank and requirements governing risk management practices. Certain of these laws and regulations are referenced above under " Supervision and Regulation -Holding Company Regulation ." Permitted Activities and Investments . Under the FDIA, the activities and investments of state nonmember banks are generally limited to those permissible for national banks, notwithstanding state law. With FDIC approval, a state nonmember bank may engage in activities not permissible for a national bank if the FDIC determines that the activity does not pose a significant risk to the DIF and that the bank meets its minimum capital requirements. Similarly, under Texas law, a state bank may engage in those activities permissible for national banks domiciled in Texas. The TDB may permit a Texas state bank to engage in additional activities so long as the performance of the activity by the bank would not adversely affect the safety and soundness of the bank.

View stock analysis, news, and events for Southside Bancshares, Inc.