Renasant Corporation

11/07/2025 | Press release | Distributed by Public on 11/07/2025 11:44

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In Thousands, Except Share Data)
This Form 10-Q may contain or incorporate by reference statements regarding Renasant Corporation (referred to herein as the "Company", "Renasant", "we", "our", or "us") that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements preceded by, followed by or that otherwise include the words "believes," "expects", "projects," "anticipates," "intends," "estimates," "plans," "potential," "focus," "possible," "may increase," "may fluctuate," "will likely result," and similar expressions, or future or conditional verbs such as "will," "should," "would" and "could," are generally forward-looking in nature and not historical facts. Forward-looking statements include information about the Company's future financial performance, business strategy, projected plans and objectives and are based on the current beliefs and expectations of management. The Company's management believes these forward-looking statements are reasonable, but they are all inherently subject to significant business, economic and competitive risks and uncertainties, many of which are beyond the Company's control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ from those indicated or implied in the forward-looking statements, and such differences may be material. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and, accordingly, investors should not place undue reliance on these forward-looking statements, which speak only as of the date they are made.
Important factors currently known to management that could cause our actual results to differ materially from those in forward-looking statements include the following: (i) the Company's ability to efficiently integrate acquisitions (including its merger with The First Bancshares, Inc. ("The First")) into its operations, retain the customers of these businesses, grow the acquired operations and realize the cost savings expected from an acquisition to the extent and in the timeframe anticipated by management (including the possibility that such cost savings will not be realized when expected, or at all, as a result of the impact of, or challenges arising from, the integration of the acquired assets and assumed liabilities into the Company, potential adverse reactions or changes to business or employee relationships, or as a result of other unexpected factors or events); (ii) potential exposure to unknown or contingent risks and liabilities we have acquired, or may acquire, or target for acquisition, including in connection with the Company's merger with The First; (iii) the effect of economic conditions and interest rates on a national, regional or international basis; (iv) timing and success of the implementation of changes in operations to achieve enhanced earnings or effect cost savings; (v) competitive pressures in the consumer finance, commercial finance, financial services, asset management, retail banking, factoring, mortgage lending and auto lending industries; (vi) the financial resources of, and products available from, competitors; (vii) changes in laws and regulations as well as changes in accounting standards; (viii) changes in governmental and regulatory policy, whether applicable specifically to financial institutions or impacting the United States generally (such as, for example, changes in trade policy); (ix) increased scrutiny by, and/or additional regulatory requirements of, regulatory agencies as a result of the Company's merger with The First; (x) changes in the securities and foreign exchange markets; (xi) the Company's potential growth, including its entrance or expansion into new markets, and the need for sufficient capital to support that growth; (xii) changes in the quality or composition of the Company's loan or investment securities portfolios, including adverse developments in borrower industries or in the repayment ability of individual borrowers or issuers of investment securities, or the impact of interest rates on the value of our investment portfolio; (xiii) an insufficient allowance for credit losses as a result of inaccurate assumptions; (xiv) changes in the sources and costs of the capital we use to make loans and otherwise fund our operations, due to deposit outflows, changes in the mix of deposits and the cost and availability of borrowings; (xv) general economic, market or business conditions, including the impact of inflation; (xvi) changes in demand for loan and deposit products and other financial services; (xvii) concentrations of credit or deposit exposure; (xviii) changes or the lack of changes in interest rates, yield curves and interest rate spread relationships; (xix) increased cybersecurity risk, including potential network breaches, business disruptions or financial losses; (xx) civil unrest, natural disasters, epidemics and other catastrophic events in the Company's geographic area; (xxi) geopolitical conditions, including acts or threats of terrorism and actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the United States and abroad; (xxii) the impact, extent and timing of technological changes; and (xxiii) other circumstances, many of which are beyond management's control. Management believes that the assumptions underlying the Company's forward-looking statements are reasonable, but any of the assumptions could prove to be inaccurate.
The Company undertakes no obligation, and specifically disclaims any obligation, to update or revise forward-looking statements, whether as a result of new information or to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, except as required by federal securities laws.
Financial Condition
The following discussion provides details regarding the changes in significant balance sheet accounts at September 30, 2025 compared to December 31, 2024.
Mergers and Acquisitions
On April 1, 2025 the Company completed its merger with The First. At closing, The First merged with and into the Company, with the Company the surviving corporation in the merger; immediately thereafter, The First Bank merged with and into Renasant Bank, with Renasant Bank the surviving banking corporation in the merger. For more information, including the fair value of assets acquired and liabilities assumed, see Note 2, "Mergers and Acquisitions," in the Notes to Consolidated Financial Statements of the Company in Item 1, Financial Statements, in this report.
Assets
Total assets were $26,726,165 at September 30, 2025, compared to $18,034,868 at December 31, 2024. The acquisition of The First increased total assets $7,979,299 at April 1, 2025.
Investments
The securities portfolio is used to provide a source for meeting liquidity needs and to supply securities to be used in collateralizing certain deposits and certain types of borrowings. The securities portfolio also serves as an outlet to deploy excess liquidity and generate interest income rather than hold excess funds as cash. The following table shows the carrying value of our securities portfolio by investment type and the percentage of such investment type relative to the entire securities portfolio as of the dates presented:
September 30, 2025 December 31, 2024
Balance Percentage of
Portfolio 		Balance Percentage of
Portfolio
Obligations of states and political subdivisions $ 554,185 15.55 % $ 302,596 15.46 %
Mortgage-backed securities 2,600,186 72.94 1,472,918 75.26
Other debt securities 410,195 11.51 181,643 9.28
$ 3,564,566 100.00 % $ 1,957,157 100.00 %
Allowance for credit losses - held to maturity securities (32) (32)
Securities, net of allowance for credit losses $ 3,564,534 $ 1,957,125
The Company purchased $1,058,969 and $60,656 in investment securities during the nine months ended September 30, 2025 and 2024, respectively. The merger with The First contributed approximately $1,457,377 to the securities portfolio at April 1, 2025.
Proceeds from maturities, calls and principal payments on securities during the first nine months of 2025 totaled $282,347. Shortly after the merger with The First, certain securities from the acquired portfolio were sold at carrying value, resulting in net proceeds of $686,485. No gain or loss on sales of securities was recorded in the first nine months of 2025. Proceeds from the maturities, calls and principal payments on securities during the first nine months of 2024 totaled $142,480. During the first nine months of 2024, the Company sold from the available for sale portfolio municipal securities, residential mortgage backed securities and commercial mortgage backed securities for net proceeds of $177,185. The Company intended to sell these securities as of December 31, 2023; therefore, the Company impaired the securities and recognized the loss in net income as of December 31, 2023. The carrying value of the securities immediately prior to the impairment was $196,537, and the impairment charge was $19,352. No gain or loss on sales of securities was recorded in the first nine months of 2024.
During the third quarter of 2022, the Company transferred, at fair value, $882,927 of securities from the available for sale portfolio to the held to maturity portfolio as the Company has the intent and ability to hold these securities until their maturity. The related net unrealized losses of $99,675 (after tax losses of $74,307) remained in accumulated other comprehensive income (loss) and will be amortized over the remaining life of the securities, offsetting the related amortization of discount on the transferred securities. At September 30, 2025, the net unrealized after tax losses remaining to be amortized in accumulated other comprehensive income (loss) was $42,430. No gains or losses were recognized at the time of transfer.
For more information about the Company's security portfolio, see Note 3, "Securities," in the Notes to Consolidated Financial Statements of the Company in Item 1, Financial Statements, in this report.
Loans Held for Sale
Loans held for sale, which consist of residential mortgage loans being held until they are sold in the secondary market, were $286,779 at September 30, 2025, as compared to $246,171 at December 31, 2024. Mortgage loans to be sold are sold either on a "best efforts" basis or under a mandatory delivery sales agreement. Under a "best efforts" sales agreement, residential real estate originations are locked in at a contractual rate with third party private investors or directly with government sponsored agencies, and the Company is obligated to sell the mortgages to such investors only if the mortgages are closed and funded. The risk we assume is conditioned upon loan underwriting and market conditions in the national mortgage market. Under a mandatory delivery sales agreement, the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price and delivery date. Penalties are paid to the investor if we fail to satisfy the contract. Gains and losses are realized at the time consideration is received and all other criteria for sales treatment have been met. Our standard practice is to sell the loans within approximately 45 days after the loan is funded. Although loan fees and some interest income are derived from mortgage loans held for sale, the main source of income is gains from the sale of these loans in the secondary market.
Loans
Total loans, excluding loans held for sale, were $19,025,521 at September 30, 2025 and $12,885,020 at December 31, 2024. The acquisition of The First increased total loans $5,171,236, excluding loans held for sale, at April 1, 2025.
The table below sets forth the balance of loans outstanding, net of unearned income and excluding loans held for sale, by loan type and the percentage of each loan type to total loans as of the dates presented:
September 30, 2025 December 31, 2024
Total
Loans 		Percentage of Total Loans Total
Loans 		Percentage of Total Loans
Commercial, financial, agricultural $ 2,760,490 14.51 % $ 1,885,817 14.64 %
Lease financing, net of unearned income 74,179 0.39 90,591 0.70
Real estate - construction:
Residential 404,651 2.13 256,655 1.99
Commercial 1,122,839 5.90 836,998 6.50
Total real estate - construction 1,527,490 8.03 1,093,653 8.49
Real estate - 1-4 family mortgage:
Primary 3,061,356 16.09 2,428,076 18.84
Home equity 739,786 3.89 544,158 4.22
Rental/investment 841,515 4.42 402,938 3.13
Land development 239,955 1.26 113,705 0.88
Total real estate - 1-4 family mortgage 4,882,612 25.66 3,488,877 27.07
Real estate - commercial mortgage:
Owner-occupied 3,321,186 17.46 1,894,679 14.70
Non-owner occupied 6,120,677 32.17 4,226,937 32.81
Land development 223,212 1.17 114,452 0.89
Total real estate - commercial mortgage 9,665,075 50.80 6,236,068 48.40
Installment loans to individuals 115,675 0.61 90,014 0.70
Total loans, net of unearned income $ 19,025,521 100.00 % $ 12,885,020 100.00 %
Loan concentrations are considered to exist when there are loans to a number of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At September 30, 2025, there were no concentrations of loans exceeding 10% of total loans other than loans disclosed in the table above. Non-owner occupied commercial mortgage term loans was the largest concentration and comprised 32.17% of total loans at September 30, 2025. The following table provides additional detail, broken down by collateral type, about loan segments within the non-owner occupied commercial mortgage loan category as of the date presented.
September 30, 2025
Balance Average Loan Size Percentage of Total Loans Weighted-Average Loan-to-Value Percentage 30-89 Days Past Due Percentage
Non-performing
Hotels $ 735,666 $ 4,459 3.87 % 53 % - % - %
Self Storage 587,550 3,013 3.09 54 0.04 -
Multi-Family 1,365,217 2,630 7.18 53 - 0.10
Office - Medical 387,581 1,919 2.04 52 - -
Office - Non-Medical 450,674 870 2.37 55 - 7.12
Retail 1,229,189 1,284 6.46 54 - 0.02
Senior Housing 326,086 5,823 1.71 60 - 3.52
Warehouse/Industrial 894,911 2,337 4.70 53 - -
Other 143,803 952 0.75 54 0.31 -
Total non-owner occupied commercial mortgage term loans $ 6,120,677 $ 1,946 32.17 % 54 % 0.01 % 0.74 %
Note: Weighted-average loan-to-value is calculated using the most recent appraisal available.
Bank-owned life insurance
The Company holds bank-owned life insurance policies ("BOLI") on certain employees. The carrying value of these policies was $488,920 and $391,810 at September 30, 2025 and December 31, 2024, respectively. The Company acquired $146,601 of BOLI as a result of its merger with The First. The Company elected to surrender $56,255 of BOLI with below market yields during the first quarter of 2025. The proceeds were deployed into higher yielding assets.
Deposits
The Company relies on deposits as its primary source of funds. Total deposits were $21,424,555 and $14,572,612 at September 30, 2025 and December 31, 2024, respectively. Noninterest-bearing deposits were $5,238,431 and $3,403,981 at September 30, 2025 and December 31, 2024, respectively, while interest-bearing deposits were $16,186,124 and $11,168,631 at September 30, 2025 and December 31, 2024, respectively. The merger with The First increased total deposits at April 1, 2025 by $6,449,394, which consisted of $1,787,866 and $4,661,527 of noninterest-bearing deposit and interest-bearing deposits, respectively.
Management continues to focus on growing and maintaining a stable source of funding, specifically noninterest-bearing deposits and other core deposits (that is, deposits excluding brokered deposits). Noninterest-bearing deposits represented 24.45% of total deposits at September 30, 2025, as compared to 23.36% of total deposits at December 31, 2024. The increase in noninterest-bearing deposits as a percentage of total deposits was primarily driven by the acquisition of The First during the second quarter, as its noninterest-bearing deposits represented 27.72% of its total deposits on the date of acquisition. Under certain circumstances, management may elect to acquire non-core deposits (in the form of brokered deposits) or public fund deposits (which are deposits of counties, municipalities or other political subdivisions). The source of funds that we select depends on the terms of the deposits and how those terms assist us in mitigating interest rate risk, maintaining our liquidity position and managing our net interest margin; business factors, described in the following paragraph, may lead us to obtain public deposits. Accordingly, funds are acquired to meet anticipated funding needs at the rate and with other terms that, in management's view, best address our interest rate risk, liquidity and net interest margin parameters.
Public fund deposits may be readily obtained based on the Company's pricing bid in comparison with competitors. Because public fund deposits are obtained through a bid process, these deposit balances may fluctuate as competitive and market forces change. Although the Company has focused on growing stable sources of deposits to reduce reliance on public fund deposits, it participates in the bidding process for public fund deposits when pricing and other terms make it reasonable given market conditions or when management perceives that other factors, such as the public entity's use of our treasury management or other products and services, make such participation advisable. Our public fund transaction accounts are principally obtained from public universities and municipalities, including school boards and utilities. Public fund deposits were $3,742,390 and $2,256,461 at September 30, 2025 and December 31, 2024, respectively, and represented 17.47% and 15.48% of total deposits as of September 30, 2025 and December 31, 2024, respectively.
Borrowed Funds
Total borrowings may include federal funds purchased, securities sold under agreements to repurchase, advances from the Federal Home Loan Bank of Dallas (the "FHLB"), borrowings from the Federal Reserve Discount Window, subordinated notes and junior subordinated debentures and are classified on the Consolidated Balance Sheets as either short-term borrowings or long-term debt. Short-term borrowings have original maturities less than one year and typically consist of federal funds purchased, securities sold under agreements to repurchase, and short-term FHLB advances. The Company assumed $298,250 of FHLB advances as a result of its merger with The First. We also increased short-term FHLB borrowings in the first nine months of 2025 primarily to fund loan growth, particularly in the second and third quarters of 2025. The following table presents our short-term borrowings by type as of the dates presented:
September 30, 2025 December 31, 2024
Security repurchase agreements $ 6,063 $ 8,018
Short-term borrowings from the FHLB 600,000 100,000
$ 606,063 $ 108,018
Long-term debt typically consists of long-term FHLB advances, our junior subordinated debentures and our subordinated notes. The Company assumed $95,262 of subordinated notes and $25,653 of junior subordinated debentures as a result of its merger with The First. The following table presents our long-term debt by type as of the dates presented:
September 30, 2025 December 31, 2024
Junior subordinated debentures $ 140,355 $ 113,916
Subordinated notes 418,523 316,698
$ 558,878 $ 430,614
Long-term funds obtained from the FHLB are used to match-fund fixed rate loans in order to minimize interest rate risk and to meet day-to-day liquidity needs, particularly when the cost of such borrowing compares favorably to the rates that we would be required to pay to attract deposits (which has not been the case in recent periods). Advances from the FHLB are collateralized by a blanket lien on the Bank's loans. The Company had $5,011,339 of availability on unused lines of credit with the FHLB at September 30, 2025, as compared to $4,004,630 at December 31, 2024. The Company also had credit available at the Federal Reserve Discount Window in the amount of $657,277.
The Company has issued subordinated notes (and assumed subordinated notes in connection with its merger with The First), and the Company owns the outstanding common securities of business trusts that issued corporation-obligated mandatorily redeemable preferred capital securities to third-party investors, the proceeds of which were used to buy floating rate junior subordinated debentures issued by the Company (or by companies that the Company subsequently acquired). The proceeds generated by the Company's subordinated notes and trust preferred securities transactions have been used for general corporate purposes, including providing capital to support the Company's growth organically or through strategic acquisitions, repaying indebtedness and financing investments and capital expenditures, and for investments in Renasant Bank as regulatory capital. On October 1, 2025, the Company redeemed $60,000 in subordinated notes assumed in connection with its merger with The First. The subordinated notes and trust preferred securities qualify as Tier 2 capital under current regulatory guidelines.
Results of Operations
Net Income
Net income for the third quarter of 2025 was $59,788 compared to net income of $72,455 for the third quarter of 2024. Basic and diluted earnings per share ("EPS") for the third quarter of 2025 were $0.63, as compared to basic and diluted EPS of $1.18 for the third quarter of 2024. Net income for the nine months ended September 30, 2025, was $102,324 compared to net income of $150,710 for the same period in 2024. Basic and diluted EPS were $1.21 and $1.20, respectively, for the first nine months of 2025 as compared to $2.60 and $2.59, respectively, for the first nine months of 2024.
From time to time, the Company incurs expenses and charges or recognizes valuation adjustments in connection with certain transactions with respect to which management is unable to accurately predict when these items will be incurred or, when incurred, the amount of such items. The following table presents the impact of these items on reported EPS for the dates presented.
Three Months Ended
September 30, 2025 September 30, 2024
Pre-tax After-tax Impact to Diluted EPS Pre-tax After-tax Impact to Diluted EPS
Merger and conversion related expenses $ (17,494) $ (13,129) $ (0.14) $ (11,273) $ (9,456) $ (0.15)
Gain on sale of insurance agency - - - 53,349 38,951 0.63
Nine Months Ended
September 30, 2025 September 30, 2024
Pre-tax After-tax Impact to Diluted EPS Pre-tax After-tax Impact to Diluted EPS
Merger and conversion related expenses $ (38,764) $ (29,561) $ (0.35) $ (11,273) $ (9,456) $ (0.16)
Day 1 acquisition provision (66,612) (50,026) (0.59) - - -
Gain on sale of MSR 1,467 1,102 0.01 - - -
Gain on sale of insurance agency - - - 53,349 38,951 0.67
Net Interest Income
Net interest income, the difference between interest earned on assets and the cost of interest-bearing liabilities, is the largest component of our net income, comprising 83.21% of total revenue (i.e., net interest income on a fully taxable equivalent basis and noninterest income) for the third quarter of 2025. Changes in net interest income are driven by fluctuations in the volume, mix and repricing of assets and liabilities.
Net interest income was $223,520 and $576,576 for the three and nine months ended September 30, 2025, as compared to $130,998 and $379,314 for the same periods in 2024. On a tax equivalent basis, net interest income was $228,131 and $588,280 for the three and nine months ended September 30, 2025, as compared to $133,576 and $387,024 for the same periods in 2024.
The following tables set forth average balance sheet data, including all major categories of interest-earning assets and interest-bearing liabilities, together with the interest earned or interest paid and the average yield or average rate paid on each such category on a tax-equivalent basis for the periods presented:
Three Months Ended September 30,
2025 2024
Average
Balance 		Interest
Income/
Expense 		Yield/
Rate 		Average
Balance 		Interest
Income/
Expense 		Yield/
Rate
Assets
Interest-earning assets:
Loans held for investment $ 18,750,715 $ 311,903 6.60 % $ 12,584,104 $ 204,935 6.47 %
Loans held for sale 290,756 4,675 6.43 272,110 4,212 6.19
Securities:
Taxable 3,243,693 27,107 3.34 1,794,421 9,212 2.05
Tax-exempt(1)
428,252 3,928 3.67 262,621 1,390 2.12
Interest-bearing balances with banks 814,103 8,096 3.95 894,313 11,872 5.28
Total interest-earning assets 23,527,519 355,709 6.01 15,807,569 231,621 5.82
Cash and due from banks 306,847 189,425
Intangible assets 1,578,846 1,004,701
Other assets 1,043,384 679,901
Total assets $ 26,456,596 $ 17,681,596
Liabilities and shareholders' equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand(2)
$ 11,521,433 $ 82,080 2.83 % $ 7,333,508 $ 60,326 3.26 %
Savings deposits 1,299,396 943 0.29 815,545 729 0.36
Brokered deposits - - - 150,991 1,998 5.25
Time deposits 3,398,402 32,550 3.80 2,546,860 27,734 4.33
Total interest-bearing deposits 16,219,231 115,573 2.83 10,846,904 90,787 3.32
Borrowed funds 961,980 12,005 4.97 562,146 7,258 5.14
Total interest-bearing liabilities 17,181,211 127,578 2.95 11,409,050 98,045 3.41
Noninterest-bearing deposits 5,226,588 3,509,266
Other liabilities 253,801 209,763
Shareholders' equity 3,794,996 2,553,517
Total liabilities and shareholders' equity $ 26,456,596 $ 17,681,596
Net interest income/net interest margin $ 228,131 3.85 % $ 133,576 3.36 %
(1)U.S. Government and some U.S. Government Agency securities are tax-exempt in the states in which the Company operates.
(2)Interest-bearing demand deposits include interest-bearing transactional accounts and money market deposits.
Nine Months Ended September 30,
2025 2024
Average
Balance 		Interest
Income/
Expense 		Yield/
Rate 		Average
Balance 		Interest
Income/
Expense 		Yield/
Rate
Assets
Interest-earning assets:
Loans held for investment $ 16,743,048 $ 816,241 6.52 % $ 12,522,802 $ 600,245 6.39 %
Loans held for sale 260,172 12,322 6.32 215,978 10,050 6.20
Securities:
Taxable 2,749,580 62,995 3.05 1,839,249 27,975 2.03
Tax-exempt(1)
384,212 9,680 3.36 265,601 4,346 2.18
Interest-bearing balances with banks 846,844 25,792 4.07 687,318 27,527 5.35
Total interest-earning assets 20,983,856 927,030 5.90 15,530,948 670,143 5.75
Cash and due from banks 282,476 188,485
Intangible assets 1,392,393 1,007,710
Other assets 915,322 694,427
Total assets $ 23,574,047 $ 17,421,570
Liabilities and shareholders' equity
Interest-bearing liabilities:
Deposits:
Interest-bearing demand(2)
$ 10,196,332 $ 213,332 2.80 % $ 7,128,721 $ 168,958 3.16 %
Savings deposits 1,146,732 2,686 0.31 838,443 2,188 0.35
Brokered deposits - - - 296,550 11,929 5.36
Time deposits 3,095,753 90,862 3.92 2,451,733 77,946 4.25
Total interest-bearing deposits 14,438,817 306,880 2.84 10,715,447 261,021 3.25
Borrowed funds 853,071 31,870 4.99 569,476 22,098 5.17
Total interest-bearing liabilities 15,291,888 338,750 2.96 11,284,923 283,119 3.35
Noninterest-bearing deposits 4,629,790 3,512,318
Other liabilities 237,417 221,932
Shareholders' equity 3,414,952 2,402,397
Total liabilities and shareholders' equity $ 23,574,047 $ 17,421,570
Net interest income/net interest margin $ 588,280 3.75 % $ 387,024 3.32 %
(1)U.S. Government and some U.S. Government Agency securities are tax-exempt in the states in which the Company operates.
(2)Interest-bearing demand deposits include interest-bearing transactional accounts and money market deposits.
The average balances of nonaccruing assets are included in the tables above. Interest income and weighted average yields on tax-exempt loans and securities have been computed on a fully tax equivalent basis assuming a federal tax rate of 21%.
Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes in volume and mix and pricing decisions. External factors include changes in market interest rates, competition and other factors affecting the banking industry in general, and the shape of the interest rate yield curve. The addition of The First's loan portfolio, strong organic loan growth in 2025 and the Federal Reserve lowering the federal funds rate by 100 basis points in the second half of 2024 were the largest contributing factors to the increase in net interest income for the three and nine months ended September 30, 2025, as compared to the same periods in 2024. (The Federal Reserve lowered the federal funds rate by 25 basis points in September 2025, but it did not have a significant impact on the Company's results because it occurred late in the quarter.) Lower interest rates and the addition of The First's deposits generated a positive impact to both the cost and mix of our funding sources. The Company has continued its efforts to mitigate increases in the cost of funding due to competition or otherwise through maintaining noninterest-bearing deposits and staying disciplined yet competitive in pricing on interest-bearing deposits in the current rate environment.
The following tables set forth a summary of the changes in interest earned, on a tax equivalent basis, and interest paid resulting from changes in volume and rates for the Company for the three and nine months ended September 30, 2025, as compared to the same periods in 2024 (the changes attributable to the combined impact of yield/rate and volume have been allocated on a pro-rata basis using the absolute value of amounts calculated):
Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024
Volume Rate Net
Interest income:
Loans held for investment $ 102,755 $ 4,213 $ 106,968
Loans held for sale 296 167 463
Securities:
Taxable 10,058 7,837 17,895
Tax-exempt 1,175 1,363 2,538
Interest-bearing balances with banks (991) (2,785) (3,776)
Total interest-earning assets 113,293 10,795 124,088
Interest expense:
Interest-bearing demand deposits 30,586 (8,832) 21,754
Savings deposits 378 (164) 214
Brokered deposits (1,998) - (1,998)
Time deposits 8,507 (3,691) 4,816
Borrowed funds 4,996 (249) 4,747
Total interest-bearing liabilities 42,469 (12,936) 29,533
Change in net interest income $ 70,824 $ 23,731 $ 94,555
Nine months ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024
Volume Rate Net
Interest income:
Loans held for investment $ 203,699 $ 12,297 $ 215,996
Loans held for sale 2,076 196 2,272
Securities:
Taxable 17,378 17,642 35,020
Tax-exempt 2,411 2,923 5,334
Interest-bearing balances with banks 7,810 (9,545) (1,735)
Total interest-earning assets 233,374 23,513 256,887
Interest expense:
Interest-bearing demand deposits 75,668 (31,294) 44,374
Savings deposits 892 (394) 498
Brokered deposits (11,929) - (11,929)
Time deposits 22,459 (9,543) 12,916
Borrowed funds 11,050 (1,278) 9,772
Total interest-bearing liabilities 98,140 (42,509) 55,631
Change in net interest income $ 135,234 $ 66,022 $ 201,256
Interest income, on a tax equivalent basis, was $355,709 and $927,030 for the three and nine months ended September 30, 2025, as compared to $231,621 and $670,143 for the same period in 2024. The increase in interest income, on a tax equivalent basis, for the three and nine months ended September 30, 2025, as compared to the same time periods in 2024 is due primarily to the addition of The First's earning assets.
The following tables present the percentage of total average earning assets, by type and yield, for the periods presented:
Percentage of Total Average Earning Assets Yield
Three Months Ended Three Months Ended
September 30, September 30,
2025 2024 2025 2024
Loans held for investment 79.70 % 79.61 % 6.60 % 6.47 %
Loans held for sale 1.24 1.72 6.43 6.19
Securities 15.61 13.01 3.38 2.06
Interest-bearing balances with banks 3.45 5.66 3.95 5.28
Total earning assets 100.00 % 100.00 % 6.01 % 5.82 %
Percentage of Total Average Earning Assets Yield
Nine Months Ended Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Loans held for investment 79.79 % 80.63 % 6.52 % 6.39 %
Loans held for sale 1.24 1.39 6.32 6.20
Securities 14.93 13.55 3.09 2.05
Interest-bearing balances with banks 4.04 4.43 4.07 5.35
Total earning assets 100.00 % 100.00 % 5.90 % 5.75 %
For the third quarter of 2025, interest income on loans held for investment, on a tax equivalent basis, increased $106,968 to $311,903 from $204,935 for the same period in 2024. For the nine months ended September 30, 2025, interest income on loans held for investment, on a tax equivalent basis, increased $215,996 to $816,241 from $600,245 in the same period of 2024. Driven largely by the addition of $5,171,236 in loans held for investment through our merger with The First on April l, 2025, the year-to-date average balance of loans held for investment increased $4,220,246 from September 2024, thereby resulting in the increase in interest income on loans held for investment for the three and nine months ended September 30, 2025, as compared to the same periods in 2024.
The impact from interest income collected on problem loans and purchase accounting adjustments on loans to total interest income on loans held for investment, loan yield and net interest margin is shown in the following table for the periods presented.
Three Months Ended Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Net interest income collected on problem loans $ 664 $ 642 $ 4,469 $ 619
Accretable yield recognized on purchased loans 16,862 1,089 35,254 2,786
Total impact to interest income on loans $ 17,526 $ 1,731 $ 39,723 $ 3,405
Impact to loan yield 0.37 % 0.05 % 0.32 % 0.04 %
Impact to net interest margin 0.23 % 0.04 % 0.20 % 0.03 %
Interest income on loans held for sale (consisting of mortgage loans held for sale) increased $463 to $4,675 for the third quarter of 2025 from $4,212 for the same period in 2024. Interest income on loans held for sale (consisting of mortgage loans held for sale) for the nine months ended September 30, 2025 was $12,322 as compared to $10,050 for the same period in 2024.
Investment income, on a tax equivalent basis, increased $20,433 to $31,035 for the third quarter of 2025 from $10,602 for the third quarter of 2024. Investment income, on a tax equivalent basis, increased $40,354 to $72,675 for the nine months ended September 30, 2025 from $32,321 for the same period in 2024. The increase in investment income, on a tax equivalent basis, was primarily due to the acquisition of The First's investment portfolio. The tax equivalent yield on the investment portfolio for the third quarter of 2025 was 3.38%, up 132 basis points from 2.06% for the same period in 2024. The tax equivalent yield on
the investment portfolio for the nine months ended September 30, 2025 was 3.09%, up 104 basis points from 2.05% for the same period in 2024.
Interest expense was $127,578 for the third quarter of 2025 as compared to $98,045 for the same period in 2024. Interest expense for the nine months ended September 30, 2025 was $338,750 as compared to $283,119 for the same period in 2024. The increase in interest expense was primarily due to the assumption of The First's deposits and borrowed funds.
The following table presents, by type, the Company's funding sources, which consist of total average deposits and borrowed funds, and the total cost of each funding source for the periods presented:
Percentage of Total Average Deposits and Borrowed Funds Cost of Funds
Three Months Ended Three Months Ended
September 30, September 30,
2025 2024 2025 2024
Noninterest-bearing demand 23.32 % 23.52 % - % - %
Interest-bearing demand 51.42 49.16 2.83 3.26
Savings 5.80 5.47 0.29 0.36
Brokered deposits - 1.01 - 5.25
Time deposits 15.17 17.07 3.80 4.33
Short term borrowings 1.75 0.77 3.55 1.11
Subordinated notes 1.92 2.24 5.72 5.50
Other borrowed funds 0.62 0.76 6.63 8.17
Total deposits and borrowed funds 100.00 % 100.00 % 2.26 % 2.61 %
Percentage of Total Average Deposits and Borrowed Funds Cost of Funds
Nine Months Ended Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Noninterest-bearing demand 23.24 % 23.74 % - % - %
Interest-bearing demand 51.18 48.18 2.80 3.16
Savings 5.76 5.67 0.31 0.35
Brokered deposits - 2.00 - 5.36
Time deposits 15.54 16.57 3.92 4.25
Short-term borrowings 1.62 0.83 3.33 1.44
Subordinated notes 2.00 2.25 5.55 5.51
Other long term borrowings 0.66 0.76 7.36 8.23
Total deposits and borrowed funds 100.00 % 100.00 % 2.27 % 2.55 %
Interest expense on deposits was $115,573 and $90,787 for the three months ended September 30, 2025 and 2024, respectively, and the cost of total deposits was 2.14% and 2.51% for the same respective periods. Interest expense on deposits was $306,880 and $261,021 for the nine months ended September 30, 2025 and 2024, respectively, and the cost of total deposits was 2.15% and 2.45% for the same respective periods. The increase in deposit expense and decrease in cost is attributable to the acquisition of The First's deposits. The cost of total deposits was also affected by the Federal Reserve's rate cuts during the second half of 2024, with minor impact from the rate cut in September 2025. The payoff of higher costing brokered deposits has also helped lower our total deposit cost. The Company has continued its efforts to maintain non-interest bearing deposits. Low cost deposits continue to be the preferred choice of funding; however, the Company may rely on brokered deposits or wholesale borrowings when advantageous, to address liquidity needs or as otherwise deemed advisable due to market conditions.
Interest expense on total borrowings was $12,005 and $7,258 for the three months ended September 30, 2025 and 2024, respectively. Interest expense on total borrowings was $31,870 and $22,098 for the nine months ended September 30, 2025 and 2024, respectively. The increase in interest expense on borrowings is due to higher average short-term borrowings and the additional subordinated notes and other long-term borrowings added as a result of the merger with The First.
A more detailed discussion of the cost of our funding sources is set forth below under the heading "Liquidity and Capital Resources" in this Item.
Noninterest Income
Noninterest Income to Average Assets
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
0.69% 2.01% 0.74% 1.30%
Total noninterest income includes fees generated from deposit services and other fees and commissions, income from our wealth management and mortgage banking operations, realized gains and losses on the sale of securities and all other noninterest income. Our focus is to develop and enhance our products that generate noninterest income in order to diversify revenue sources. Noninterest income was $46,026 for the third quarter of 2025 as compared to $89,299 for the same period in 2024. Noninterest income was $130,755 for the nine months ended September 30, 2025 as compared to $169,442 for the same period in 2024. The decrease in noninterest income for both the three and nine months ended September 30, 2025 was primarily driven by the elevated level of noninterest income in the third quarter of 2024 resulting from the gain on sale of the Company's insurance agency that occurred in such period, somewhat offset by additional income associated with the acquisition of The First's operations.
Service charges on deposit accounts include maintenance fees on accounts, per item charges, account enhancement charges for additional packaged benefits and overdraft fees (which encompasses traditional overdraft fees as well as non-sufficient funds fees). Service charges on deposit accounts were $13,416 and $10,438 for the third quarter of 2025 and 2024, respectively, and $37,398 and $31,230 for the nine months ended September 30, 2025 and 2024, respectively. Overdraft fees, the largest component of service charges on deposits, were $6,772 for the three months ended September 30, 2025, as compared to $5,122 for the same period in 2024. These fees were $18,672 for the nine months ended September 30, 2025 compared to $15,380 for the same period in 2024.
Fees and commissions were $4,167 during the third quarter of 2025 as compared to $4,116 for the same period in 2024, and were $14,604 for the first nine months of 2025 as compared to $12,009 for the same period in 2024. Fees and commissions include fees related to deposit services, such as ATM fees and interchange fees on debit card transactions, and lending services, such as collateral management fees and unused commitment fees. For the third quarter of 2025, interchange fees were $1,841 as compared to $2,246 for the same period in 2024. Interchange fees were $8,048 for the nine months ended September 30, 2025 as compared to $6,697 for the same period in 2024. The decrease in interchange fees for the third quarter of 2025 as compared to the same period in 2024 is due to higher debit card expenses that offset the increase of debit card income associated with the acquisition of The First.
Our Wealth Management segment has two divisions: Trust and Financial Services. The Trust division operates on a custodial basis, which includes administration of benefit plans, as well as accounting and money management for trust accounts. The division manages a number of trust accounts inclusive of personal and corporate benefit accounts, IRAs, and custodial accounts. Fees for managing these accounts are based on changes in market values of the assets under management in the account, with the amount of the fee depending on the type of account. The Financial Services division provides specialized products and services to our customers, which include fixed and variable annuities, mutual funds, and stocks offered through a third party provider. Wealth Management revenue was $8,217 for the third quarter of 2025 compared to $5,835 for the same period in 2024, and was $22,629 for the nine months ended September 30, 2025 compared to $17,188 for the same period in 2024. The market value of assets under management or administration was $6,847,724 and $5,694,433 at September 30, 2025 and September 30, 2024, respectively. The Company acquired approximately $471,000 of assets under management through its merger with The First.
Mortgage banking income is derived from the origination and sale of mortgage loans and the servicing of mortgage loans that the Company has sold but retained the right to service. Although loan fees and some interest income are derived from mortgage loans held for sale, the main source of income is gains from the sale of these loans in the secondary market. Interest rate lock commitments and originations of mortgage loans to be sold totaled $590,160 and $425,482, respectively, in the third quarter of 2025 compared to $543,597 and $412,059, respectively, for the same period in 2024. The increase in interest rate lock commitments for the three months ended September 30, 2025 as compared to the same period in 2024 was due to the slight decrease in mortgage interest rates during the third quarter of 2025 as compared to the same period in 2024. Interest rate lock commitments and originations of mortgage loans to be sold totaled $1,901,918 and $1,220,267 in the nine months ended September 30, 2025 compared to $1,548,198 and $1,053,190 for the same period in 2024. The high rates in 2024 significantly dampened demand for mortgages nationwide. In the second quarter of 2025 and the first quarter of 2024, the Company sold a portion of its mortgage servicing rights portfolio with a carrying value of $7,886 and $19,539, respectively, for a pre-tax gain of
$1,467 and $3,472, respectively. The table below presents the components of mortgage banking income included in noninterest income for the periods presented.
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Gain on sales of loans, net(1)
$ 5,270 $ 4,499 $ 15,086 $ 14,233
Fees, net 3,050 2,646 9,107 7,366
Mortgage servicing income, net(2)
697 1,302 4,234 7,916
Mortgage banking income, net $ 9,017 $ 8,447 $ 28,427 $ 29,515
(1) Gain on sales of loans, net includes pipeline fair value adjustments
(2) Mortgage servicing income, net includes gain on sale of MSR
BOLI income is derived from changes in the cash surrender value of the bank-owned life insurance policies and proceeds received upon the death of covered individuals. BOLI income was $4,235 for the three months ended September 30, 2025 as compared to $2,858 for the same period in 2024, and $10,547 for the nine months ended September 30, 2025 as compared to $8,250 for the same period in 2024. The increase in BOLI income is primarily due to the acquisition of BOLI from The First with a cash surrender value of $146,601.
Other noninterest income was $6,974 and $4,256 for the three months ended September 30, 2025 and 2024, respectively, and was $17,150 and $12,371 for the nine months ended September 30, 2025 and 2024, respectively. Other noninterest income includes income from our SBA banking division, our capital markets division and other miscellaneous income and can fluctuate based on production in our SBA banking and capital markets divisions and recognition of other seasonal income items.
Noninterest Expense
Noninterest Expense to Average Assets
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
2.76% 2.74% 2.73% 2.66%
Noninterest expense was $183,830 and $121,983 for the third quarter of 2025 and 2024, respectively, and was $480,910 and $346,871 for the nine months ended September 30, 2025 and 2024, respectively. The increase is primarily due to $38,764 in expenses relating to the merger with The First and additional expenses associated with the operations of The First.
Salaries and employee benefits increased $27,675 to $98,982 for the third quarter of 2025 as compared to $71,307 for the same period in 2024. Salaries and employee benefits increased $56,973 to $270,481 for the nine months ended September 30, 2025 as compared to $213,508 for the same period in 2024. The increase in salaries and employee benefits is primarily attributable to the addition of The First employees, and to a lesser extent to annual merit increases implemented in April 2025.
Data processing costs were $5,541 in the third quarter of 2025 as compared to $4,133 for the same period in 2024 and were $15,068 for the nine months ended September 30, 2025 as compared to $11,885 for the same period in 2024. The increase in data processing costs is attributable to the acquisition of The First and the cost associated with operating two core systems. Core systems were converted during the third quarter of 2025. The Company continues to examine new and existing contracts to negotiate favorable terms to offset the increased variable cost components of our data processing costs, such as new accounts and increased transaction volume.
Net occupancy and equipment expense for the third quarter of 2025 was $18,415, as compared to $11,415 for the same period in 2024. These expenses for the first nine months of 2025 were $47,528, as compared to $34,648 for the same period in 2024. The increase in net occupancy and equipment expense is primarily due to the additional locations and assets attributable to the merger with The First.
Professional fees include fees for legal and accounting services, such as routine litigation matters, external audit services as well as assistance in complying with banking and other governmental regulations. Professional fees were $3,435 for the third quarter of 2025 as compared to $3,189 for the same period in 2024 and were $10,542 for the nine months ended September 30, 2025 as compared to $9,732 for the same period in 2024.
Advertising and public relations expense was $5,254 for the third quarter of 2025 as compared to $3,677 for the same period in 2024 and was $14,041 for the nine months ended September 30, 2025 as compared to $12,370 for the same period in 2024. During the nine months ended September 30, 2025 and 2024, the Company contributed approximately $1,125 and $1,305,
respectively, to charitable organizations and government economic development programs, which contributions are included in our advertising and public relations expense, and for which the Company received a dollar-for-dollar tax credit.
Amortization of intangible assets totaled $8,674 and $1,160 for the third quarter of 2025 and 2024, respectively, and $18,638 and $3,558 for the nine months ended September 30, 2025 and 2024, respectively. This amortization relates to finite-lived intangible assets which are being amortized over the useful lives as determined at acquisition. The increase for the three and nine months ended September 30, 2025 is primarily due to the addition of the core deposit intangible associated with our merger with The First. These finite-lived intangible assets have remaining estimated useful lives ranging from approximately 1 year to 10 years.
Communication expenses, those expenses incurred for communication to clients and between employees, were $3,955 for the third quarter of 2025 as compared to $2,176 for the same period in 2024. Communication expenses were $9,172 for the nine months ended September 30, 2025 as compared to $6,312 for the same period in 2024.
Other noninterest expense includes business development and travel expenses, other discretionary expenses, loan fees expense and other miscellaneous fees and operating expenses. Other noninterest expense was $21,752 for the third quarter of 2025 as compared to $13,597 for the same period in 2024 and was $55,506 for the nine months ended September 30, 2025 as compared to $43,317 for the same period in 2024.
Efficiency Ratio
Efficiency Ratio
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Efficiency ratio 67.05 % 54.73 % 66.88 % 62.33 %
The efficiency ratio is a measure of productivity in the banking industry. (This ratio is a measure of our ability to turn expenses into revenue. That is, the ratio is designed to reflect the percentage of one dollar that we must expend to generate a dollar of revenue.) The Company calculates this ratio by dividing noninterest expense by the sum of net interest income on a fully tax equivalent basis and noninterest income. The gain on sale of the insurance agency that occurred in the third quarter of 2024 resulted in a significant enhancement to our efficiency ratio for the three and nine months ended September 30, 2024, which contributed to the change in our efficiency ratio for the three and nine months ended September 30, 2025 as compared to the same periods in 2024. Our goal is to improve the efficiency ratio over time from currently reported levels as a result of revenue growth while at the same time controlling noninterest expenses and eliminating duplicative expenses as we continue to integrate The First into our business model throughout the remainder of 2025.
Income Taxes
Income tax expense for the third quarter of 2025 and 2024 was $15,478 and $24,924, respectively, and $27,575 and $44,502 for the nine months ended September 30, 2025 and 2024, respectively. The Company's sale of its insurance business in the third quarter of 2024 resulted in a significant discrete tax expense during such period, which contributed to the year-over-year decrease in the Company's effective tax rate.
Risk Management
The management of risk is an on-going process. Primary risks that are associated with the Company include credit, interest rate and liquidity risk. Credit risk and interest rate risk are discussed below, while liquidity risk is discussed in the next subsection under the heading "Liquidity and Capital Resources."
Credit Risk and the Allowance for Credit Losses on Loans and Unfunded Commitments
Management of Credit Risk - Roles and Responsibilities.Inherent in any lending activity is credit risk related to asset quality deterioration and its impact on capital should a borrower default. Credit risk is monitored and managed on an ongoing basis using a cross-functional and multi-layered approach that includes the Company's loan production, credit administration (including appraisal review), and internal loan review functions. The Board of Directors, and specifically its Credit Review Committee, provide oversight and governance of the Company's credit risk management process.
The first line of defense against credit risk is embedded within our lending function. An integral part of a lending officer's responsibilities is to assess credit risk at the inception of the lending relationship, monitor ongoing risk over the life of the loan, and report any changes in asset quality or other components of credit risk to the appropriate parties within the Company. The
Company's policies and procedures governing our lending function provide guidelines for assigning lending limits based on a lending officer's knowledge and experience. These lending limits are monitored on an ongoing basis for appropriateness based on evaluations of the credit quality and compliance with the approved terms of the loan agreements within such lending officer's loan portfolio. Based on the Company's risk appetite and procedures for the management of loan concentrations (by geography, collateral type and other criteria), a lending officer may be subject to additional levels of approval for new loan originations, so that more technical expertise and greater oversight are allocated to such portfolio.
The Company's credit administration function is considered the second line of defense against credit risk. Oversight of the Company's lending operations (including adherence to our policies and procedures governing the loan underwriting and monitoring process), ongoing credit quality monitoring and loss mitigation are the primary focus areas of credit administration. This includes monitoring the loan portfolio to ensure it is properly underwritten, evaluating credit quality metrics to identify indicators of potential loss and assigning risk rating grades which appropriately reflect the potential risk of loss.
To verify the value of real estate collateral, the Company maintains a central appraisal review department, within credit administration. This department engages, reviews and approves third-party appraisals obtained by the Company on real estate collateral in accordance with banking regulations. This department is managed by a State Certified General Real Estate Appraiser and employs other trained appraisers and evaluators.
The internal loan review function is considered the third line of defense and operates independently of credit administration to monitor the Company's lending practices and loan quality. Loan review personnel evaluate and, if necessary, adjust the risk rating grades assigned to loans through periodic examination, focusing their review on commercial and real estate loans, and the consumer loan portfolio.
Finally, the Company's internal audit department provides oversight of all of the above functions. Internal audit staff reviews, among other things, whether these units are operating in adherence to their respective policies, processes and procedures. The internal audit department reports independently to the Board's Audit Committee.
Management of Credit Risk - Risk Measurement Practices. For commercial and commercial real estate secured loans, internal risk-rating grades are assigned based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Risk rating grades are evaluated on an ongoing basis over the life of the loan. The Company maintains an internal risk rating scale that aligns with regulatory risk classifications. For more information about the Company's risk rating grades, see the information under the heading "Credit Quality" in Note 4, "Loans," in the Notes to Consolidated Financial Statements in Item 1, Financial Statements, in this report.
In response to changes in the economic, geopolitical, or operating environments impacting the Company's loan portfolio, the Company may implement additional or enhanced risk management practices. The Company adjusts its processes to the current environment and evaluates the sensitivity of industry sectors, loan types and underlying collateral to changes in macroeconomic factors. Such factors include, but are not limited to, changes in interest rates, inflation on goods, labor costs, and supply chain disruptions. When such factors indicate that a heightened level of credit risk may impact our portfolio, risk management procedures are expanded to include enhanced oversight of past due loans, documented plans for resolving problem loans, enhanced exception monitoring as well as targeted reviews of loans within certain risk classifications. The Company uses information from these risk measurement processes to formulate its credit risk appetite statement, which is used to manage production activity and concentrations within the portfolio, whether by collateral type, industry, geography, relationship size or others factors, such that the Company's loan mix is consistent with its risk tolerance and does not expose the Company to undue risk. For more information about the Company's evaluation of loan concentrations, see the information under the heading "Loans" in the Financial Condition section above.
Management of Credit Risk - Loss Identification. Loans that are past due or not in compliance with financial or performance covenants, or that are otherwise adversely rated are subject to enhanced scrutiny and monitoring through a variety of processes within our special assets department, which is a division of credit administration. Results and findings are reported to management's problem asset resolution committee and the Board of Directors Credit Review Committee. When the ultimate collectability of a loan's principal becomes doubtful, the loan is placed on nonaccrual.
The Company's practice is to charge off estimated losses as soon as such loss is identified and reasonably quantifiable. If the value of the collateral after consideration of disposition costs is less than the loan balance, a charge off is recorded to reduce the allowance for credit losses on loans. Charge-offs reflect the realization of losses in the portfolio that were recognized previously through the provision for credit losses on loans. After collection efforts have been exhausted or a settlement agreement is reached with the borrower, underlying collateral is liquidated.
Allowance for Credit Losses on Loans; Provision for Credit Losses on Loans. The allowance for credit losses is available to absorb credit losses inherent in the loans held for investment portfolio. Management evaluates the adequacy of the allowance on a quarterly basis.
The appropriate level of the allowance is based on an ongoing analysis of the loan portfolio and represents an amount that management deems adequate to provide for inherent losses, including loans evaluated on a collective (pooled) basis and those evaluated on an individual basis as set forth in Accounting Standards Codification Topic 326, "Financial Instruments - Credit Losses," often referred to as CECL. The credit loss estimation process involves procedures to appropriately consider the unique characteristics of the Company's loan portfolio segments. Credit quality is assessed and monitored by evaluating various attributes, and the results of those evaluations are utilized in underwriting new loans and in the Company's process for the estimation of expected credit losses. Credit quality monitoring procedures and indicators can include an assessment of problem loans, the types of loans, historical loss experience, new lending products, emerging credit trends, changes in the size and character of loan categories, and other factors, including our risk rating system, regulatory guidance and economic conditions, such as the unemployment rate and change in GDP in the national and local economies as well as trends in the market values of underlying collateral securing loans, all as determined based on input from management, loan review staff and other sources. This evaluation is complex and inherently subjective, as it requires estimates by management that are inherently uncertain and therefore susceptible to significant revision as more information becomes available. In future periods, evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and provision for credit loss in those future periods.
The methodology for estimating the amount of expected credit losses reported in the allowance for credit losses has two basic components: first, a collective or pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics; and second, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans.
•The allowance for credit losses for loans that share similar risk characteristics with other loans is calculated on a collective (or pooled) basis, where such loans are segregated into loan portfolio segments. In determining the allowance for credit losses on loans evaluated on a collective basis, the Company further categorizes the loan segments based on risk rating. The Company uses two CECL models: (1) for the Real Estate - 1-4 Family Mortgage, Real Estate - Construction and the Installment Loans to Individuals portfolio segments, the Company uses a loss rate model, based on average historical life-of-loan loss rates, and (2) for the Commercial, Real Estate - Commercial Mortgage and Lease Financing portfolio segments, the Company uses a probability of default/loss given default model, which calculates an expected loss percentage for each loan pool by considering (a) the probability of default, based on the migration of loans from performing (using risk ratings) to default using life-of-loan analysis periods, and (b) the historical severity of loss, based on the aggregate net lifetime losses incurred per loan pool.
The historical loss rates calculated as described above are adjusted, as necessary, for both internal and external qualitative factors where there are differences in the historical loss data of the Company and current or projected future conditions. Internal factors include loss history, changes in credit quality (including movement between risk ratings) and/or credit concentration and the nature and volume of the respective loan portfolio segments. External factors include current and reasonable and supportable forecasted economic conditions and changes in collateral values. These factors are used to adjust the historical loss rates (as described above) to ensure that they reflect management's expectation of future conditions based on a reasonable and supportable forecast period. To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made, when necessary, the models immediately revert to the historical loss rates adjusted for qualitative factors related to current conditions.
•For loans that do not share similar risk characteristics with other loans, an individual analysis is performed to determine the expected credit loss. If the respective loan is collateral dependent (that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral), the expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral. The fair value of collateral is initially based on external appraisals. Generally, collateral values for loans for which measurement of expected losses is dependent on the fair value of such collateral are updated every twelve months, either from external third parties or in-house certified appraisers. Third-party appraisals are obtained from a pre-approved list of independent, third-party, local appraisal firms. The fair value of the collateral derived from the external appraisal is then adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral. Other acceptable methods for determining the expected credit losses for collateral dependent loans is a discounted cash flow approach or, if applicable, an observable market price. Once the expected credit loss amount is determined, an allowance equal to such expected credit loss is included in the allowance for credit losses.
In addition to its quarterly analysis of the allowance for credit losses, management and the Board of Directors review loan ratios on a regular basis. These ratios include the allowance for credit losses as a percentage of total loans, net charge-offs as a percentage of average loans, nonperforming loans as a percentage of total loans and the allowance coverage on nonperforming loans, among others. Also, management reviews past due ratios by officer, community bank and the Company as a whole.
The following table presents the allocation of the allowance for credit losses on loans by loan category and the percentage of loans in each category to total loans as of the dates presented:
September 30, 2025 December 31, 2024 September 30, 2024
Balance % of Total Balance % of Total Balance % of Total
Commercial, financial, agricultural $ 60,526 20.34 % $ 38,527 14.64 % $ 43,053 14.29 %
Lease financing 1,480 0.50 3,368 0.70 2,384 0.78
Real estate - construction 23,953 8.05 15,126 8.49 16,656 9.50
Real estate - 1-4 family mortgage 66,826 22.46 47,761 27.07 47,219 27.24
Real estate - commercial mortgage 139,342 46.81 90,204 48.40 82,087 47.47
Installment loans to individuals 5,464 1.84 6,770 0.70 8,979 0.72
Total $ 297,591 100.00 % $ 201,756 100.00 % $ 200,378 100.00 %
The provision for credit losses on loans charged to operating expense is an amount which, in the judgment of management, is necessary to maintain the allowance for credit losses on loans at a level that is believed to be adequate to meet the inherent risks of losses in our loan portfolio. The Company's allowance for credit losses model considers economic projections, primarily the national unemployment rate and GDP, over a reasonable and supportable period of two years.
The table below reflects the activity in the allowance for credit losses on loans, including the provision for credit losses, for the periods presented:
Three Months Ended Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Balance at beginning of period $ 290,770 $ 199,871 $ 201,756 $ 198,578
Impact of purchased credit deteriorated loans acquired during the period 1,510 - 25,003 -
Charge-offs
Commercial, financial, agricultural 2,557 347 8,474 882
Lease financing 42 642 2,436 642
Real estate - construction 8 - 113 -
Real estate - 1-4 family mortgage 612 256 1,240 546
Real estate - commercial mortgage 1,296 10 5,701 5,737
Installment loans to individuals 539 649 1,198 1,379
Total charge-offs 5,054 1,904 19,162 9,186
Recoveries
Commercial, financial, agricultural 51 514 1,636 1,385
Lease financing 90 8 103 26
Real estate - construction 6 - 6 -
Real estate - 1-4 family mortgage 84 57 154 130
Real estate - commercial mortgage 429 11 551 116
Installment loans to individuals 55 611 444 1,181
Total recoveries 715 1,201 2,894 2,838
Net charge-offs 4,339 703 16,268 6,348
Provision for credit losses on loans 9,650 1,210 87,100 8,148
Balance at end of period $ 297,591 $ 200,378 $ 297,591 $ 200,378
Net charge-offs (annualized) to average loans 0.09 % 0.02 % 0.14 % 0.07 %
Net charge-offs to allowance for credit losses on loans 1.46 % 0.35 % 5.47 % 3.17 %
Allowance for credit losses on loans to:
Total loans 1.56 % 1.59 %
Nonperforming loans 173.47 % 168.07 %
Nonaccrual loans 174.28 % 175.97 %
Loan growth, including the addition of loans acquired in the merger with The First, as well as changes in credit metrics that influenced our expectations of future credit losses, considered in the context of the existing balance of the allowance for credit losses, resulted in the Company's model indicating that the provision for credit losses on loans during the first nine months of 2025 in the table above was appropriate. Included in the first nine months of 2025 provision for credit losses on loans is a Day 1 acquisition provision of $62,190 associated with the merger with The First.
The table below reflects annualized net charge-offs (recoveries) to daily average loans outstanding, by loan category, for the periods presented:
Nine Months Ended
September 30, 2025 September 30, 2024
Net Charge-offs Average Loans Annualized Net Charge-offs to Average Loans Net Charge-offs (Recoveries) Average Loans Annualized Net Charge-offs (Recoveries) to Average Loans
Commercial, financial, agricultural $ 6,838 $ 2,313,531 0.40% $ (503) $ 1,850,707 (0.04)%
Lease financing 2,333 90,605 3.44% 616 103,954 0.79%
Real estate - construction 107 1,310,487 0.01% - 1,297,036 -%
Real estate - 1-4 family mortgage 1,086 4,435,847 0.03% 416 3,422,711 0.02%
Real estate - commercial mortgage 5,150 8,482,010 0.08% 5,621 5,752,206 0.13%
Installment loans to individuals 754 110,567 0.91% 198 96,188 0.27%
Total $ 16,268 $ 16,743,047 0.13% $ 6,348 $ 12,522,802 0.07%
The following table provides further details of the Company's net charge-offs (recoveries) of loans secured by real estate for the periods presented:
Three Months Ended Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Real estate - construction:
Residential $ 2 $ - $ 107 $ -
Total real estate - construction 2 - 107 -
Real estate - 1-4 family mortgage:
Primary 384 167 775 327
Home equity 125 74 315 93
Rental/investment (6) (41) (29) (3)
Land development 25 - 25 (1)
Total real estate - 1-4 family mortgage 528 200 1,086 416
Real estate - commercial mortgage:
Owner-occupied 857 (9) 5,198 (68)
Non-owner occupied (4) (1) (61) 5,682
Land development 14 7 13 7
Total real estate - commercial mortgage 867 (3) 5,150 5,621
Total net charge-offs of loans secured by real estate $ 1,397 $ 197 $ 6,343 $ 6,037
Allowance for Credit Losses on Unfunded Commitments; Provision for Credit Losses on Unfunded Commitments. The Company maintains a separate allowance for credit losses on unfunded loan commitments, which is included in the "Other liabilities" line item on the Consolidated Balance Sheets. Management estimates the amount of expected losses on unfunded loan commitments by calculating a likelihood of funding over the contractual period for exposures that are not unconditionally cancellable by the Company and applying the loss factors used in the allowance for credit losses on loans methodology described above to unfunded commitments for each loan type. No credit loss estimate is reported for off-balance-sheet credit exposures that are unconditionally cancellable by the Company. A roll-forward of the allowance for credit losses on unfunded commitments is shown in the tables below.
Three Months Ended September 30, 2025 2024
Allowance for credit losses on unfunded loan commitments:
Beginning balance $ 23,565 $ 17,618
Provision for (recovery of) credit losses on unfunded loan commitments 800 (700)
Ending balance $ 24,365 $ 16,918
Nine Months Ended September 30, 2025 2024
Allowance for credit losses on unfunded loan commitments:
Beginning balance $ 14,943 $ 20,118
Provision for (recovery of) credit losses on unfunded loan commitments 9,422 (3,200)
Ending balance $ 24,365 $ 16,918
The increase in the provision for credit losses on unfunded commitments during the three and nine months ended September 30, 2025, as compared to the same periods in 2024 was largely driven by the Day 1 acquisition provision of $4,422 associated with our merger with The First as well as growth in the balance of unfunded loan commitments.
Nonperforming Assets. Nonperforming assets consist of nonperforming loans and other real estate owned. Nonperforming loans are those on which the accrual of interest has stopped or loans which are contractually 90 days past due on which interest continues to accrue. Generally, the accrual of interest is discontinued when the full collection of principal or interest is in doubt or when the payment of principal or interest has been contractually 90 days past due, unless the obligation is both well secured and in the process of collection. Management, the problem asset resolution committee and our loan review staff closely monitor loans that are considered to be nonperforming.
Other real estate owned consists of properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure. These properties are carried at the lower of cost or fair market value based on appraised value less estimated selling costs. Losses arising at the time of foreclosure of properties are charged against the allowance for credit losses on loans. Reductions in the carrying value subsequent to acquisition are charged to earnings and are included in "Other real estate owned" in the Consolidated Statements of Income.
The following table provides details of the Company's nonperforming assets as of the dates presented.
September 30, 2025 December 31, 2024
Nonaccruing loans $ 170,756 $ 110,811
Accruing loans past due 90 days or more 792 2,464
Total nonperforming loans 171,548 113,275
Other real estate owned 10,578 8,673
Total nonperforming assets $ 182,126 $ 121,948
Nonperforming loans to total loans 0.90 % 0.88 %
Nonaccruing loans to total loans 0.89 % 0.88 %
Nonperforming assets to total assets 0.68 % 0.68 %
The following table presents nonperforming loans by loan category as of the dates presented:
September 30,
2025 		December 31, 2024 September 30,
2024
Commercial, financial, agricultural $ 32,829 $ 2,000 $ 5,024
Lease financing 638 4,083 614
Real estate - construction:
Residential 2,525 1,223 1,307
Commercial 2,123 16 -
Total real estate - construction 4,648 1,239 1,307
Real estate - 1-4 family mortgage:
Primary 52,155 55,037 55,076
Home equity 2,560 3,404 3,296
Rental/investment 2,690 388 927
Land development 49 1,760 22
Total real estate - 1-4 family mortgage 57,454 60,589 59,321
Real estate - commercial mortgage:
Owner-occupied 29,877 12,679 9,610
Non-owner occupied 45,144 29,280 39,944
Land development 719 3,291 3,169
Total real estate - commercial mortgage 75,740 45,250 52,723
Installment loans to individuals 239 114 234
Total nonperforming loans $ 171,548 $ 113,275 $ 119,223
Total nonperforming loans as a percentage of total loans were 0.90% as of September 30, 2025 as compared to 0.88% and 0.94% as of December 31, 2024 and September 30, 2024, respectively. The Company's coverage ratio, or its allowance for credit losses on loans as a percentage of nonperforming loans, was 173.47% as of September 30, 2025 as compared to 178.11% as of December 31, 2024 and 168.07% as of September 30, 2024.
Management has evaluated loans classified as nonperforming and believes that all nonperforming loans have been adequately reserved for in the allowance for credit losses at September 30, 2025. Management also continually monitors past due loans for potential credit quality deterioration. Total loans 30-89 days past due but still accruing interest were $48,654, or 0.26% of total loans, at September 30, 2025 as compared to $39,842, or 0.31% of total loans, at December 31, 2024 and $17,523, or 0.14% of total loans, at September 30, 2024.
Certain modifications of loans made to borrowers experiencing financial difficulty in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay (including an extension of the amortization period), or a term extension, but excluding covenant waivers and modification of contingent acceleration clauses, are required to be disclosed in accordance with ASU 2022-02, "Financial Instruments - Credit Losses (Topic326): Troubled Debt Restructurings and Vintage Disclosures" ("ASU 2022-02"). All modifications for the three and nine months ended September 30, 2025 and 2024 and which met the disclosure criteria in ASU 2022-02 were performing in accordance with their modified terms at September 30, 2025 and 2024, respectively. The total amortized cost basis of loans that were modified during the three and nine months ended September 30, 2025 due to borrowers experiencing financial difficulty was $29,148 and $31,551, respectively, as compared to $3,887, and $15,747, respectively, for the same periods in 2024. Unused commitments with respect to these loans were $647 and $464 at September 30, 2025 and September 30, 2024, respectively. Upon the Company's determination that a modified loan has subsequently become uncollectible, the loan, or portion of the loan, is charged off, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted accordingly. For more information about loan modifications made to borrowers experiencing financial difficulty, see the information under the heading "Certain Modifications to Borrowers Experiencing Financial Difficulty" in Note 4, "Loans," in the Notes to Consolidated Financial Statements of the Company in Item 1, Financial Statements.
The following table provides details of the Company's other real estate owned, net of valuation allowance and direct write-downs, as of the dates presented:
September 30,
2025 		December 31, 2024 September 30,
2024
Residential real estate $ 5,179 $ 2,966 $ 1,004
Commercial real estate 3,711 5,681 6,336
Residential land development 15 19 19
Commercial land development 1,673 7 7
Total other real estate owned $ 10,578 $ 8,673 $ 7,366
Changes in the Company's other real estate owned were as follows:
2025 2024
Balance at January 1 $ 8,673 $ 9,622
Acquired OREO 11,109 -
Transfers of loans 3,971 3,286
Impairments (623) (67)
Dispositions (12,552) (1,323)
Other - (2,382)
Balance at June 30 $ 10,578 $ 9,136
Other real estate owned with a cost basis of $12,552 was sold during the nine months ended September 30, 2025, resulting in a net gain of $53, while other real estate owned with a cost basis of $1,323 was sold during the nine months ended September 30, 2024, resulting in a net gain of $143.
Interest Rate Risk
Market risk is the risk of loss from adverse changes in market prices and rates. The majority of assets and liabilities of a financial institution are monetary in nature and therefore differ greatly from most commercial and industrial companies that have significant investments in fixed assets and inventories. Our market risk arises primarily from interest rate risk inherent in lending, investing and deposit-taking activities. Management believes a significant impact on the Company's financial results stems from our ability to react to changes in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings because the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis. Changes in rates may also limit our liquidity, making it more costly for the Company to generate funds to make loans and to satisfy customers wishing to withdraw deposits.
Because of the impact of interest rate fluctuations on our profitability and liquidity, we actively monitor and manage our interest rate risk exposure. We have an Asset/Liability Committee ("ALCO"), which is comprised of various members of senior management and is authorized by the Board of Directors to monitor interest rate sensitivity and liquidity risk, over the short-, medium-, and long-term, and to make decisions relating to these processes. The ALCO's goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk and preserving adequate liquidity so as to minimize the adverse impact of changes in interest rates on net interest income, liquidity and capital. We regularly monitor liquidity and stress our liquidity position in various simulated scenarios, which are incorporated in our contingency funding plan outlining different potential liquidity environments. The ALCO uses an asset/liability model as the primary quantitative tool in measuring the amount of interest rate risk associated with changing market rates. The model is used to perform both net interest income forecast simulations for multiple year horizons and economic value of equity ("EVE") analyses, each under various interest rate scenarios.
Net interest income forecast simulations measure the short- and medium-term earnings exposure from changes in market interest rates in a rigorous and explicit fashion. Our current financial position is combined with assumptions regarding future business to calculate future net interest income under various hypothetical rate scenarios. EVE measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time for a given set of market rate assumptions. An increase in EVE due to a specified rate change indicates an improvement in the long-term earnings capacity of the balance sheet assuming that the rate change remains in effect over the life of the current balance sheet.
The following table presents the projected impact of a change in interest rates on (1) static EVE and (2) earnings at risk (that is, net interest income) for the 1-12 and 13-24 month periods commencing October 1, 2025, in each case as compared to the result
under rates present in the market on September 30, 2025. The changes in interest rates assume an instantaneous and parallel shift in the yield curve and do not account for changes in the slope of the yield curve.
Percentage Change In:
Immediate Change in Rates of (in basis points): Economic Value Equity (EVE) Earning at Risk (Net Interest Income)
Static 1-12 Months 13-24 Months
+100 2.53% 2.47% 4.56%
-100 (3.75)% (2.82)% (5.04)%
-200 (8.33)% (4.68)% (9.83)%
The rate shock results for the net interest income simulations for the next 24 months produce an asset sensitive position at September 30, 2025. The preceding measures assume no change in the size or asset/liability compositions of the balance sheet, and they do not reflect future actions the ALCO may undertake in response to such changes in interest rates.
The scenarios assume instantaneous movements in interest rates in increments described in the table above. As interest rates are adjusted over a period of time, it is our strategy to proactively change the volume and mix of our balance sheet in order to mitigate our interest rate risk. The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions, including asset prepayment speeds, the impact of competitive factors on our pricing of loans and deposits, the impact of market conditions on the securities yields and interest rates of our borrowings, how responsive our deposit repricing is to the change in market rates and the expected life of non-maturity deposits. These business assumptions are based upon our experience, business plans and published industry experience; however, such assumptions may not necessarily reflect the manner or timing in which cash flows, asset yields and liability costs respond to changes in market rates. Because these assumptions are inherently uncertain, actual results will differ from simulated results.
The Company utilizes derivative financial instruments, including interest rate contracts such as swaps, collars, caps and/or floors, risk participations, forward commitments, and interest rate lock commitments, as part of its ongoing efforts to mitigate its interest rate risk exposure. For more information about the Company's derivatives, see the information under the heading "Loan Commitments and Other Off-Balance Sheet Arrangements" in the Liquidity and Capital Resources section below and Note 10, "Derivative Instruments," in the Notes to Consolidated Financial Statements of the Company in Item 1, Financial Statements. The next section also details our available sources of liquidity, both on and off-balance sheet.
Liquidity and Capital Resources
Liquidity management is the ability to meet the cash flow requirements of customers who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs.
Core deposits, which are deposits excluding brokered deposits, are the major source of funds used by the Bank to meet cash flow needs. Maintaining the ability to acquire these funds as needed in a variety of markets is the key to assuring the Bank's liquidity. We may also access the brokered deposit market where rates are favorable to other sources of liquidity (especially in light of collateral requirements for certain borrowings) and core deposits are not sufficient for meeting our current and anticipated short- or long-term liquidity needs. We did not hold any brokered deposits at September 30, 2025 or December 31, 2024. Management continually monitors the Bank's liquidity and non-core dependency ratios to ensure compliance with targets established by the ALCO.
Our investment portfolio is another alternative for meeting liquidity needs. These assets generally have readily available markets that offer conversions to cash as needed. Within the next twelve months the securities portfolio is forecasted to generate cash flow through principal payments and maturities equal to approximately 13.72% of the carrying value of the total securities portfolio. Securities within our investment portfolio are also used to secure certain deposit types, short-term borrowings and derivative instruments. At September 30, 2025, securities with a carrying value of $1,241,138 were pledged to secure government, public fund and trust deposits and as collateral for short-term borrowings and derivative instruments as compared to securities with a carrying value of $843,870 similarly pledged at December 31, 2024.
Other sources available for meeting liquidity needs include federal funds purchased, short-term and long-term advances from the FHLB and borrowings from the Federal Reserve Discount Window. Interest is charged at the prevailing market rate on federal funds purchased, FHLB advances and borrowings from the Federal Reserve Discount Window. There were $600,000 and $400,000 in short-term borrowings from the FHLB at September 30, 2025 and December 31, 2024, respectively. Long-term funds obtained from the FHLB are used to match-fund fixed rate loans in order to minimize interest rate risk and also are used to meet day-to-day liquidity needs, particularly when the cost of such borrowing compares favorably to the rates that we would
be required to pay to attract deposits. There were no outstanding long-term advances with the FHLB at September 30, 2025 or December 31, 2024. The total amount of the remaining credit available to us from the FHLB at September 30, 2025 was $5,011,339. The credit available at the Federal Reserve Discount Window at September 30, 2025 was $657,277 with no borrowings outstanding as of such date. We also maintain lines of credit with other commercial banks totaling $140,000. These are unsecured lines of credit with the majority maturing at various times within the next twelve months. There were no amounts outstanding under these lines of credit at September 30, 2025 or December 31, 2024.
Finally, we can access the capital markets to meet liquidity needs. The Company maintains a shelf registration statement with the Securities and Exchange Commission ("SEC"). The shelf registration statement, which was effective upon filing, allows the Company to raise capital from time to time through the sale of common stock, preferred stock, depositary shares, debt securities, rights, warrants and units, or a combination thereof, subject to market conditions. Specific terms and prices will be determined at the time of any offering under a separate prospectus supplement that the Company will file with the SEC at the time of the specific offering. The proceeds of the sale of securities, if and when offered, will be used for general corporate purposes or as otherwise described in the prospectus supplement applicable to the offering and could include the expansion of the Company's banking and wealth management operations as well as other business opportunities. Our common stock offering completed in July 2024 reflects our access of the capital markets as described in this paragraph. In addition, in previous years, we have accessed the capital markets to generate liquidity in the form of subordinated notes. We have also assumed subordinated notes as part of acquisitions. The carrying value of subordinated notes, net of unamortized debt issuance costs, was $418,523 at September 30, 2025. On October 1, 2025, the Company redeemed $60,000 in subordinated notes assumed as part of its merger with The First.
The following table presents, by type, the Company's funding sources, which consist of total average deposits and borrowed funds, and the total cost of each funding source for the periods presented:
Percentage of Total Average Deposits and Borrowed Funds Cost of Funds
Nine Months Ended Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Noninterest-bearing demand 23.24 % 23.74 % - % - %
Interest-bearing demand 51.18 48.18 2.80 3.16
Savings 5.76 5.67 0.31 0.35
Brokered deposits - 2.00 - 5.36
Time deposits 15.54 16.57 3.92 4.25
Short-term borrowings 1.62 0.83 3.33 1.44
Subordinated notes 2.00 2.25 5.55 5.51
Other borrowed funds 0.66 0.76 7.36 8.23
Total deposits and borrowed funds 100.00 % 100.00 % 2.27 % 2.55 %
The estimated amount of uninsured and uncollateralized deposits at September 30, 2025 was $6,878,118. Collateralized public funds over FDIC insurance limits were $3,146,202 at September 30, 2025.
Our strategy in choosing funds is focused on minimizing cost in the context of our balance sheet composition, interest rate risk position and liquidity forecast. Accordingly, management targets growth of core deposits, focusing on noninterest-bearing deposits. While we do not control the types of deposit instruments our clients choose, we do influence those choices with the rates and the deposit specials we offer. We constantly monitor our funds position and evaluate the effect that various funding sources have on our financial position.
Cash and cash equivalents were $1,083,785 at September 30, 2025, as compared to $1,275,620 at September 30, 2024. The decrease is largely driven by the funding of loan growth and investing capital into the securities portfolio. We acquired $261,484 in cash and cash equivalents in connection with the merger with The First.
Cash used in investing activities for the nine months ended September 30, 2025 was $710,954, as compared to cash provided by investing activities of $48,583 for the nine months ended September 30, 2024. Proceeds from the sale, maturity or call of securities within our investment portfolio were $968,832 for the nine months ended September 30, 2025, as compared to $319,665 for the same period in 2024. Shortly after merger with The First, certain securities from the acquired portfolio were sold at carrying value, resulting in proceeds of $686,485. A portion of the securities portfolio was also sold during the first quarter of 2024, resulting in proceeds of $177,185 of which a portion were used to purchase higher yielding securities, while
the remainder was used to fund loan growth. Purchases of investment securities were $1,058,969 during the first nine months of 2025 and $60,656 for the same period in 2024. The Company received $261,483 in net cash from its acquisition of The First.
Cash provided by financing activities for the nine months ended September 30, 2025 was $538,376, as compared to $411,366 for the same period in 2024. Deposits increased $395,159 and $432,966 for the nine months ended September 30, 2025 and 2024, respectively.
Restrictions on Bank Dividends, Loans and Advances
The Company's liquidity and capital resources, as well as its ability to pay dividends to its shareholders, are substantially dependent on the ability of Renasant Bank to transfer funds to the Company in the form of dividends, loans and advances. Under Mississippi law, a Mississippi bank may not pay dividends unless its earned surplus is in excess of three times capital stock. A Mississippi bank with earned surplus in excess of three times capital stock may pay a dividend, subject to the approval of the Mississippi Department of Banking and Consumer Finance (the "DBCF"). In addition, the FDIC also has the authority to prohibit the Bank from engaging in business practices that the FDIC considers to be unsafe or unsound, which, depending on the financial condition of the bank, could include the payment of dividends. Accordingly, the approval of the DBCF is required prior to the Bank paying dividends to the Company, and under certain circumstances the approval of the FDIC may be required.
Federal Reserve regulations also limit the amount the Bank may loan to the Company unless such loans are collateralized by specific obligations. At September 30, 2025, the maximum amount available for transfer from the Bank to the Company in the form of loans was $279,440. The Company maintains a $3,000 line of credit collateralized by cash with the Bank. There were no amounts outstanding under this line of credit at September 30, 2025.
These restrictions did not have any impact on the Company's ability to meet its cash obligations in the nine months ended September 30, 2025, nor does management expect such restrictions to materially impact the Company's ability to meet its currently-anticipated cash obligations.
Loan Commitments and Other Off-Balance Sheet Arrangements
The Company enters into loan commitments and standby letters of credit in the normal course of its business. Loan commitments are made to accommodate the financial needs of the Company's customers. Standby letters of credit commit the Company to make payments on behalf of customers when certain specified future events occur. Both arrangements have credit risk essentially the same as that involved in extending loans to customers and are subject to the Company's normal credit policies, including establishing a provision for credit losses on unfunded commitments. Collateral (e.g., securities, receivables, inventory, equipment, etc.) is obtained based on management's credit assessment of the customer.
Loan commitments and standby letters of credit do not necessarily represent future cash requirements of the Company in that while the borrower has the ability to draw upon these commitments at any time, these commitments often expire without being drawn upon. The Company's unfunded loan commitments and standby letters of credit outstanding were as follows as of the dates presented:
September 30, 2025 December 31, 2024
Loan commitments $ 4,425,675 $ 2,856,308
Standby letters of credit 115,618 90,267
The Company closely monitors the amount of remaining future commitments to borrowers in light of prevailing economic conditions and adjusts these commitments and the provision related thereto as necessary; the Company also reviews these commitments as part of its analysis of loan concentrations within the loan portfolio. The Company will continue this process as new commitments are entered into or existing commitments are renewed. For a more detailed discussion related to the allowance and provision for credit losses on unfunded loan commitments, refer to the "Risk Management" section above.
The Company utilizes derivative financial instruments, including interest rate contracts such as swaps, collars, risk participations, caps and/or floors, as part of its ongoing efforts to mitigate its interest rate risk exposure and to facilitate the needs of its customers. The Company enters into derivative instruments that are not designated as hedging instruments to help its commercial customers manage their exposure to interest rate fluctuations. To mitigate the interest rate risk associated with these customer contracts, the Company enters into an offsetting derivative contract position with other financial institutions. The Company manages its credit risk, or potential risk of default by its commercial customers, through credit limit approval and monitoring procedures. At September 30, 2025, the Company had notional amounts of $1,602,805 on interest rate contracts
with corporate customers and $1,603,104 in offsetting interest rate contracts with other financial institutions to mitigate the Company's rate exposure on its corporate customers' contracts and certain fixed rate loans.
Additionally, the Company enters into interest rate lock commitments with its customers to mitigate the interest rate risk associated with the commitments to fund fixed-rate and adjustable rate residential mortgage loans and also enters into forward commitments to sell residential mortgage loans to secondary market investors.
To mitigate future interest rate exposure on its FHLB borrowings and its junior subordinated debentures the Company enters into interest rate swap contracts that are accounted for as cash flow hedges. Under each of these contracts, the Company pays a fixed rate of interest and receives a variable rate of interest. The Company entered into an interest rate swap contract on its subordinated notes that is accounted for as a fair value hedge. Under this contract, the Company pays a variable rate of interest and receives a fixed rate of interest. The Company utilizes interest rate collars to protect against interest rate fluctuations on certain variable-rate loans. Under these contracts, interest income is limited to the interest rate cap; however, interest income is protected when market rates fall below the floor strike rate.
For more information about the Company's derivatives, see Note 10, "Derivative Instruments," in the Notes to Consolidated Financial Statements of the Company in Item 1, Financial Statements.
Shareholders' Equity and Regulatory Matters
Total shareholders' equity of the Company was $3,825,778 at September 30, 2025 compared to $2,678,318 at December 31, 2024. Book value per share was $40.26 and $42.13 at September 30, 2025 and December 31, 2024, respectively. The growth in shareholders' equity is attributable to the merger with The First, current period earnings and declines in accumulated other comprehensive loss, offset by dividends declared.
Effective October 28, 2025, the Company's Board of Directors approved a $150.0 million stock repurchase program under which the Company is authorized to repurchase outstanding shares of its common stock either in open market purchases or privately negotiated transactions. This plan, which will remain in effect until the earlier of October 2026 or the repurchase of the entire amount authorized under the plan, replaces the Company's $100.0 million stock repurchase program that expired October 2025.
The Company has junior subordinated debentures with a carrying value of $140,355 at September 30, 2025, of which $135,959 was included in the Company's Tier 2 capital.
The Company has subordinated notes with a par value of $433,400 at September 30, 2025, of which $418,523 is included in the Company's Tier 2 capital. On October 1, 2025, the Company redeemed $60,000 in subordinated notes assumed as part of its merger with The First.
The Federal Reserve, the FDIC and the Office of the Comptroller of the Currency have issued guidelines governing the levels of capital that bank holding companies and banks must maintain. Those guidelines specify capital tiers, which include the following classifications:
Capital Tiers Tier 1 Capital to
Average Assets
(Leverage) 		Common Equity Tier 1 to
Risk - Weighted Assets 		Tier 1 Capital to
Risk - Weighted
Assets 		Total Capital to
Risk - Weighted
Assets
Well capitalized 5% or above 6.5% or above 8% or above 10% or above
Adequately capitalized 4% or above 4.5% or above 6% or above 8% or above
Undercapitalized Less than 4% Less than 4.5% Less than 6% Less than 8%
Significantly undercapitalized Less than 3% Less than 3% Less than 4% Less than 6%
Critically undercapitalized Tangible Equity / Total Assets less than 2%
The following table provides the capital, risk-based capital and leverage ratios for the Company and for Renasant Bank as of the dates presented:
Actual Minimum Capital
Requirement to be
Well Capitalized 		Minimum Capital
Requirement to be
Adequately
Capitalized (including the Capital Conservation Buffer)
Amount Ratio Amount Ratio Amount Ratio
September 30, 2025
Renasant Corporation:
Risk-based capital ratios:
Common equity tier 1 capital ratio $ 2,364,465 11.04 % $ 1,392,167 6.50 % $ 1,499,257 7.00 %
Tier 1 risk-based capital ratio 2,364,465 11.04 1,713,436 8.00 1,820,526 8.50
Total risk-based capital ratio 3,187,027 14.88 2,141,795 10.00 2,248,885 10.50
Leverage capital ratios:
Tier 1 leverage ratio 2,364,465 9.46 1,249,829 5.00 999,863 4.00
Renasant Bank:
Risk-based capital ratios:
Common equity tier 1 capital ratio $ 2,526,336 11.80 % $ 1,392,069 6.50 % $ 1,499,152 7.00 %
Tier 1 risk-based capital ratio 2,526,336 11.80 1,713,316 8.00 1,820,398 8.50
Total risk-based capital ratio 2,794,398 13.05 2,141,645 10.00 2,248,727 10.50
Leverage capital ratios:
Tier 1 leverage ratio 2,526,336 10.12 1,248,557 5.00 998,846 4.00
December 31, 2024
Renasant Corporation:
Risk-based capital ratios:
Common equity tier 1 capital ratio $ 1,825,197 12.73 % $ 932,162 6.50 % $ 1,003,867 7.00 %
Tier 1 risk-based capital ratio 1,935,522 13.50 1,147,276 8.00 1,218,981 8.50
Total risk-based capital ratio 2,449,129 17.08 1,434,095 10.00 1,505,800 10.50
Leverage capital ratios:
Tier 1 leverage ratio 1,935,522 11.34 853,556 5.00 682,845 4.00
Renasant Bank:
Risk-based capital ratios:
Common equity tier 1 capital ratio $ 1,843,123 12.85 % $ 932,552 6.50 % $ 1,004,287 7.00 %
Tier 1 risk-based capital ratio 1,843,123 12.85 1,147,756 8.00 1,219,491 8.50
Total risk-based capital ratio 2,022,737 14.10 1,434,695 10.00 1,506,430 10.50
Leverage capital ratios:
Tier 1 leverage ratio 1,843,123 10.80 852,933 5.00 682,346 4.00
The Company elected to take advantage of transitional relief offered by the Federal Reserve and FDIC to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transitional period to phase out the capital benefit provided by the two-year delay. The three-year transitional period began on January 1, 2022; the full impact of CECL is reflected in our capital ratios as of September 30, 2025.
For more information regarding the capital adequacy guidelines applicable to the Company and Renasant Bank, please refer to Note 15, "Regulatory Matters," in the Notes to the Consolidated Financial Statements of the Company in Item 1, Financial Statements.
Critical Accounting Estimates
We have identified certain accounting estimates that involve significant judgment and estimates which can have a material impact on our financial condition or results of operations. Our accounting policies are more fully described in Note 1, "Significant Accounting Policies," in the Notes to Consolidated Financial Statements of the Company in Item 8, Financial Statements and Supplementary Data, in our Annual Report on Form 10-K for the year ended December 31, 2024. Actual amounts and values as of the balance sheet dates may be materially different from the amounts and values reported due to the inherent uncertainty in the estimation process. Also, future amounts and values could differ materially from those estimates due to changes in values and circumstances after the balance sheet date.
The accounting estimates that we believe to be the most critical in preparing our consolidated financial statements relate to the allowance for credit losses and acquisition accounting, which are described under "Critical Accounting Policies and Estimates" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 31, 2024. Since December 31, 2024, there have been no material changes in these critical accounting estimates.
Renasant Corporation published this content on November 07, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 07, 2025 at 17:45 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]