Southside Bancshares SBSI Form 10-Q filing Q2 FY2026

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED BALANCE SHEETS 3

CONSOLIDATED STATEMENTS OF INCOME 4

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 5

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY 6

CONSOLIDATED STATEMENTS OF CASH FLOWS 8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 43

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 65

ITEM 4. CONTROLS AND PROCEDURES 66

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS 66

ITEM 1A. RISK FACTORS 66

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 67

ITEM 3. DEFAULTS UPON SENIOR SECURITIES 67

ITEM 4. MINE SAFETY DISCLOSURES 67

ITEM 5. OTHER INFORMATION 67

ITEM 6. EXHIBITS 68

EXHIBIT INDEX 68

SIGNATURES 69

SOUTHSIDE BANCSHARES, INC.

Glossary of Acronyms, Abbreviations and Terms

The acronyms, abbreviations and terms listed below are used in various sections of this Form 10-Q, including "Item 1. Financial Statements" and "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations."

Southside Bancshares, Inc. |1

HTM Held to maturity

ITM Interactive teller machines

MBS Mortgage-backed securities

MVPE Market value of portfolio equity

OREO Other real estate owned

Plan Stock Repurchase Plan

Repurchase agreements Securities sold under agreements to repurchase

Restoration Plan Nonfunded supplemental retirement plan

Retirement Plan Defined benefit pension plan

ROU Right-of-use

SEC Securities and Exchange Commission

SOFR Secured Overnight Financing Rate provided by the Federal Reserve Bank of New York

U.S. United States

Southside Bancshares, Inc. |2

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (UNAUDITED)

ITEM 1. FINANCIAL STATEMENTS

SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(UNAUDITED)
(in thousands, except share amounts)

The accompanying notes are an integral part of these consolidated financial statements.

Southside Bancshares, Inc. |3

The accompanying notes are an integral part of these consolidated financial statements.

Southside Bancshares, Inc. |4

The accompanying notes are an integral part of these consolidated financial statements.

Southside Bancshares, Inc. |5

Southside Bancshares, Inc. |6

The accompanying notes are an integral part of these consolidated financial statements.

Southside Bancshares, Inc. |7

Southside Bancshares, Inc. | 8

The accompanying notes are an integral part of these consolidated financial statements.

Southside Bancshares, Inc. |9

SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Summary of Significant Accounting and Reporting Policies

Basis of Presentation

In this report, the words “the Company,” “we,” “us,” and “our” refer to the combined entities of Southside Bancshares, Inc. and its subsidiaries, including Southside Bank. The words “Southside” and “Southside Bancshares” refer to Southside Bancshares, Inc. The words “Southside Bank” and “the Bank” refer to Southside Bank.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, not all information required by GAAP for complete financial statements is included in these interim statements. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted only of normal recurring items. The preparation of these consolidated financial statements in accordance with GAAP requires the use of management’s estimates. These estimates are subjective in nature and involve matters of judgment. Actual amounts could differ from these estimates.

Interim results are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the financial statements and notes thereto in our 2025 Form 10-K.

Accounting Changes and Reclassifications

Certain prior period amounts may be reclassified to conform to current year presentation.

2. Earnings Per Share

Earnings per share on a basic and diluted basis are calculated as follows (in thousands, except per share amounts):

For the three and six months ended June 30, 2026, there were approximately 427,000 and 428,000 anti-dilutive shares, respectively. For the six months ended June 30, 2025, there were approximately 524,000 and 520,000 anti-dilutive shares, respectively.

Southside Bancshares, Inc. |10

3. Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component are as follows (in thousands):

Southside Bancshares, Inc. |11

Southside Bancshares, Inc. |12

The reclassification adjustments out of accumulated other comprehensive income (loss) included in net income are presented below (in thousands):

(1) Included in interest income on the consolidated statements of income.

(2) Listed as net gain (loss) on sale of securities AFS on the consolidated statements of income.

(3) Included in interest expense for FHLB borrowings, other borrowings and deposits on the consolidated statements of income.

(4) These AOCI components are included in the computation of net periodic pension cost (income) presented in “Note 8 – Employee Benefit Plans.”

Southside Bancshares, Inc. |13

4. Securities

Debt securities

The amortized cost, gross unrealized gains and losses and estimated fair value of investment and mortgage-backed AFS and HTM securities, net of allowance for credit losses, as of June 30, 2026 and December 31, 2025 are reflected in the tables below (in thousands):

(1) All MBS are issued and/or guaranteed by U.S. government agencies or U.S. GSEs.

From time to time, we transfer securities from AFS to HTM due to overall balance sheet strategies and our intent and ability to hold these securities until maturity. We did not transfer any securities from AFS to HTM during the six months ended June 30,

Southside Bancshares, Inc. |14

2026 or the year ended December 31, 2025. The remaining net unamortized, unrealized loss on the transferred securities included in AOCI in the accompanying balance sheets totaled $92.0 million ($72.7 million, net of tax) at June 30, 2026 and $96.6 million ($76.3 million, net of tax) at December 31, 2025. Any net unrealized gain or loss on the transferred securities included in AOCI at the time of transfer will be amortized over the remaining life of the underlying security as an adjustment to the yield on those securities. Securities transferred with losses included in AOCI continue to be included in management’s assessment for impairment for each individual security.

Investment securities and MBS with carrying values of $2.21 billion and $1.94 billion were pledged as of June 30, 2026 and December 31, 2025, respectively, to collateralize borrowings from the FRDW, repurchase agreements and public fund deposits, for potential liquidity needs or other purposes as required by law. At June 30, 2026 and December 31, 2025, the amount of excess collateral at the FRDW was $279.3 million and $241.8 million, respectively.

The following tables present the fair value and unrealized losses on AFS, if applicable, for which an allowance for credit losses has not been recorded, as well as HTM investment securities and MBS, if applicable, as of June 30, 2026 and December 31, 2025, segregated by major security type and length of time in a continuous loss position (in thousands):

Southside Bancshares, Inc. |15

For those AFS debt securities in an unrealized loss position (i) where management has the intent to sell or (ii) where it will more-likely-than-not be required to sell the security before the recovery of its amortized cost basis, we recognize the loss in earnings. For those AFS debt securities in an unrealized loss position that do not meet either of these criteria, management assesses whether the decline in fair value has resulted from credit-related factors, using both qualitative and quantitative criteria. Determining the allowance under the credit loss method requires the use of a discounted cash flow method to assess the credit losses. Any credit-related impairment will be recognized in allowance for credit losses on the balance sheet with a corresponding adjustment to earnings. Noncredit-related temporary impairment, the portion of the impairment relating to factors other than credit (such as changes in market interest rates), is recognized in other comprehensive income, net of tax.

As of June 30, 2026 and December 31, 2025, we did not have an allowance for credit losses on our AFS securities, based on our consideration of the qualitative factors associated with each security type in our AFS portfolio. The unrealized losses on our investment and MBS are due to changes in interest rates and spreads and other market conditions. We had 195 and 161 AFS debt securities in an unrealized loss position at June 30, 2026 and December 31, 2025, respectively. Our state and political subdivisions are highly rated municipal securities with a long history of no credit losses. Our AFS MBS are highly rated securities, which are either explicitly or implicitly backed by the U.S. Government through its agencies and which are highly rated by major ratings agencies and also have a long history of no credit losses. Our corporate bonds and other investment securities consist of primarily investment grade bonds.

We assess the likelihood of default and the potential amount of default when assessing our HTM securities for credit losses. We utilize term structures and, due to no prior loss exposure on our state and political subdivision securities or our corporate securities, we currently apply a third-party average loss given default rate to model these securities. We elected to use the collective evaluation method to model our HTM securities, which aligns with our third-party fair value measurement process. The model determined an expected credit loss over the life of the HTM securities of $25,000, resulting in no additional credit loss recognized for the six months ended June 30, 2026. For the three and six months ended June 30, 2025, we recognized a reversal of provision for credit loss of $9,000 and a provision for credit loss of $55,000, respectively. Management evaluated the remote expectation of loss on the HTM portfolio, along with the qualitative factors associated with these securities, as well as the credit loss estimate of the model and concluded that an allowance for credit loss of $25,000 was sufficient as of June 30, 2026 and December 31, 2025, due to the securities being highly rated municipals and primarily investment grade corporates with a long history of no credit losses.

The accrued interest receivable on our debt securities (including the effect of interest rate swaps) is excluded from the credit loss estimate and is included in interest receivable on our consolidated balance sheets. As of June 30, 2026, accrued interest receivable on AFS and HTM debt securities totaled $9.9 million and $12.5 million, respectively. As of December 31, 2025, accrued interest receivable on AFS and HTM debt securities totaled $9.4 million and $12.7 million, respectively. No HTM debt securities were past-due or on nonaccrual status as of June 30, 2026 or December 31, 2025.

The following table reflects interest income recognized on securities for the periods presented (in thousands):

There were no sales from the AFS securities portfolio during the six months ended June 30, 2026. There was a $554,000 net realized loss as a result of sales from the AFS securities portfolio for the six months ended June 30, 2025, which consisted of a net loss of $1.2 million on the unwind of fair value MBS hedges in the AFS securities portfolio, partially offset by $600,000 in

Southside Bancshares, Inc. |16

realized gains. There were no sales from the HTM portfolio during the three and six months ended June 30, 2026 or 2025. We calculate realized gains and losses on sales of securities under the specific identification method.

Expected maturities on our securities may differ from contractual maturities because issuers may have the right to call or prepay obligations. MBS are presented in total by category since MBS are typically issued with stated principal amounts and are backed by pools of mortgages that have loans with varying maturities. The characteristics of the underlying pool of mortgages, such as fixed-rate or adjustable-rate, as well as prepayment risk, are passed on to the security holder. The term of a mortgage-backed pass-through security thus approximates the term of the underlying mortgages and can vary significantly due to prepayments.

The amortized cost and estimated fair value of AFS and HTM securities at June 30, 2026, are presented below by contractual maturity (in thousands):

Equity Investments

Equity investments on our consolidated balance sheets include Community Reinvestment Act funds with a readily determinable fair value as well as equity investments without readily determinable fair values. At June 30, 2026 and December 31, 2025, we had equity investments recorded in our consolidated balance sheets of $9.5 million and $9.6 million, respectively.

Any realized and unrealized gains and losses on equity investments are reported in income. Equity investments without readily determinable fair values are recorded at cost, less impairment, if any. For the three and six months ended June 30, 2026, there was no gain or loss on the sale of equity securities.

The following is a summary of unrealized and realized gains and losses on equity investments recognized in other noninterest income in the consolidated statements of income during the periods presented (in thousands):

Southside Bancshares, Inc. |17

Equity investments are assessed quarterly for other-than-temporary impairment. Based upon that evaluation, management does not consider any of our equity investments to be other-than-temporarily impaired at June 30, 2026.

FHLB Stock

Our FHLB stock, which has limited marketability, is carried at cost, less impairment, if any. Based upon our quarterly evaluation by management at June 30, 2026, our FHLB stock was not impaired.

Southside Bancshares, Inc. |18

5. Loans and Allowance for Loan Losses

Loans in the accompanying consolidated balance sheets are classified as follows (in thousands):

Construction Real Estate Loans

Our construction loans are collateralized by property located primarily in or near the market areas we serve and consist of owner-occupied 1-4 family residential construction loans to consumers, non-owner occupied 1-4 family residential construction loans to homebuilders, and commercial construction loans (both owner- and non-owner occupied). Our owner-occupied 1-4 family construction loans to consumers include fixed interest rates during the construction period and are typically priced and made with the intention of granting the permanent loan on the completed property. Construction loans to homebuilders and commercial construction loans typically have adjustable interest rates and are subject to underwriting standards similar to that of the commercial real estate loan portfolio. Owner occupied 1-4 family residential construction loans are subject to the underwriting standards of the permanent loan.

1-4 Family Residential Real Estate Loans

Residential loan originations are generated by our mortgage loan officers, in-house origination staff, marketing efforts, present customers, walk-in customers and referrals from real estate agents and builders. We focus our lending efforts primarily on the origination of loans secured by first mortgages on owner occupied 1-4 family residences. Substantially all of our 1-4 family residential originations are secured by properties located in or near our market areas.

Our 1-4 family residential loans generally have maturities ranging from 15 to 30 years. These loans are typically fully amortizing with monthly payments sufficient to repay the total amount of the loan. Our 1-4 family residential loans are made at both fixed and adjustable interest rates.

Underwriting for 1-4 family residential loans includes debt-to-income analysis, credit history analysis, appraised value and down payment considerations. Changes in the market value of real estate can affect the potential losses in the residential portfolio.

Commercial Owner-Occupied and Real Estate Loans

As of June 30, 2026 commercial owner-occupied loans were $362.4 million and commercial real estate loans consisted of $1.73 billion of non-owner occupied real estate, $641.8 million of loans secured by multi-family properties and $36.8 million of loans secured by farmland. Commercial real estate loans and commercial owner-occupied primarily include loans collateralized by retail, commercial office buildings, multi-family residential buildings, medical facilities and offices, senior living, assisted living and skilled nursing facilities, warehouse facilities, hotels and churches. In determining whether to originate commercial owner-occupied and commercial real estate loans, we generally consider such factors as the macroeconomic conditions, market conditions to include future supply and rental rate forecast, financial condition of the borrower and the debt service coverage of the property. Generally, commercial real estate loans originated after June 2024 are priced using floating rates and include maturities of five years or less. For competitive reasons, we offer fixed rates for owner-occupied loans with terms of up to 10 years.

Southside Bancshares, Inc. |19

Commercial Loans

Our commercial loans are diversified loan types including short-term working capital loans for inventory and accounts receivable and short- and medium-term loans for equipment or other business capital expansion. In our commercial loan underwriting, we assess the creditworthiness, ability to repay and the value and liquidity of the collateral being offered. Terms of commercial loans are generally commensurate with the useful life of the collateral offered.

Municipal Loans

We make loans to municipalities and school districts primarily throughout the state of Texas, with a small percentage originating outside of the state. The majority of the loans to municipalities and school districts have tax or revenue pledges and in some cases are additionally supported by collateral. Municipal loans made without a direct pledge of taxes or revenues are usually made based on some type of collateral that represents an essential service. These loans allow us to earn a higher yield than we could if we purchased municipal securities for similar durations.

Loans to Individuals

Substantially all originations of our loans to individuals are made to consumers in our market areas. The majority of loans to individuals are collateralized by titled equipment, which are primarily automobiles. Loan terms vary according to the type and value of collateral, length of contract and creditworthiness of the borrower. The underwriting standards we employ for consumer loans include an application and a determination of the applicant’s payment history on other debts, with the greatest weight being given to payment history with us and an assessment of the borrower’s ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of the applicant is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, in relation to the proposed loan amount. Most of our loans to individuals are collateralized, which management believes assists in limiting our exposure.

Credit Quality Indicators

We categorize loans into risk categories on an ongoing basis based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. We use the following definitions for risk ratings:

• Pass (Rating 1 – 4) – This rating is assigned to all satisfactory loans. This category, by definition, consists of acceptable credit. Credit and collateral exceptions should not be present, although their presence would not necessarily prohibit a loan from being rated Pass, if the exception is properly mitigated and/or deficiencies are in the process of correction. These loans are not included in the Watch List.
• Pass Watch (Rating 5) – These loans require some degree of special treatment, but not due to credit quality. This category does not include loans specially mentioned or adversely classified; however, particular attention is warranted to characteristics such as:
• A lack of, or abnormally extended payment program;
• A heavy degree of concentration of collateral without sufficient margin;
• A vulnerability to competition through lesser or extensive financial leverage; and
• A dependence on a single or few customers or sources of supply and materials without suitable substitutes or alternatives.
• Special Mention (Rating 6) – A Special Mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in our credit position at some future date. Special Mention loans are not adversely classified and do not expose us to sufficient risk to warrant adverse classification.
• Substandard (Rating 7) – Substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
• Doubtful (Rating 8) – Loans classified as Doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation, in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.

Southside Bancshares, Inc. |20

The following tables set forth the amortized cost basis by class of financing receivable and credit quality indicator for the periods presented (in thousands):

(1) Includes $434,000 in charged off demand deposit overdrafts reported as 2026 originations.

Southside Bancshares, Inc. |21

(1) Includes $1.2 million in charged off demand deposit overdrafts reported as 2025 originations.

Southside Bancshares, Inc. |22

Watch List loans reported as 2026 originations as of June 30, 2026 and Watch List loans reported as 2025 originations as of December 31, 2025 were, for the majority, first originated in various years prior to 2026 and 2025, respectively, but were renewed in the respective year.

The following tables present the aging of the amortized cost basis in past due loans by class of loans (in thousands):

Southside Bancshares, Inc. |23

The following table sets forth the amortized cost basis of nonperforming assets for the periods presented (in thousands):

(1) Includes $3.6 million and $2.0 million of restructured loans as of June 30, 2026 and December 31, 2025, respectively.

The decrease in restructured loans was primarily due to the payoff of a $27.5 million restructured commercial real estate loan in the first quarter of 2026 that was originally restructured with an extension of maturity in the first quarter of 2025 to allow for an extended lease up period. We reversed $40,000 and $47,000 of interest income on nonaccrual loans during the three and six months ended June 30, 2026, respectively, and $56,000 and $68,000 for the three and six months ended June 30, 2025, respectively. We had $4.6 million and $2.7 million of loans on nonaccrual for which there was no related allowance for credit losses as of June 30, 2026 and December 31, 2025, respectively.

Collateral-dependent loans are loans that we expect the repayment to be provided substantially through the operation or sale of the collateral of the loan and for which we have determined that the borrower is experiencing financial difficulty. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for selling costs. As of June 30, 2026 and December 31, 2025, we had $11.8 million and $38.4 million, respectively, of collateral-dependent loans, secured mainly by real estate and equipment. There have been no significant changes to the collateral that secures the collateral-dependent assets as of June 30, 2026. Foreclosed assets include OREO and repossessed assets. For 1-4 family residential real estate properties, a loan is recognized as a foreclosed property once legal title to the real estate property has been received upon completion of foreclosure or the borrower has conveyed all interest in the residential property through a deed in lieu of foreclosure. There were $80,000 loans secured by 1-4 family residential properties for which formal foreclosure proceedings were in process as of June 30, 2026. There were no loans secured by 1-4 family residential properties for which formal foreclosure proceedings were in process as of December 31, 2025.

Restructured Loans

A loan is considered restructured if the borrower is experiencing financial difficulties and the loan has been modified. Modifications may include interest rate reductions, restructuring amortization schedules, extensions of maturity or a combination of any of these modifications intended to minimize potential losses. In most instances, interest will continue to be charged on principal balances outstanding during the extended term. Therefore, the financial effects of the recorded investment of loans restructured during the six months ended June 30, 2026 were not significant.

Southside Bancshares, Inc. |24

The following table sets forth the recorded balance of restructured loans and type of modification by class of loans during the periods presented (dollars in thousands):

There were 22 restructured loans totaling $3.7 million included in nonperforming assets as of June 30, 2026.

On an ongoing basis, the performance of restructured loans are monitored for subsequent payment default. Payment default is recognized when the borrower is 90 days or more past due. For the six months ended June 30, 2026, there were six restructured loans totaling $1.3 million in default. For the six months ended June 30, 2025, there were no restructured loans in default. Payment defaults for restructured loans did not significantly impact the determination of the allowance for loan losses in the periods presented. At June 30, 2026, there were no commitments to lend additional funds to borrowers whose loans had been restructured.

Southside Bancshares, Inc. |25

Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses by portfolio segment for the periods presented (in thousands):

Southside Bancshares, Inc. |26

The accrued interest receivable on our loan receivables is excluded from the allowance for credit loss estimate and is included in interest receivable on our consolidated balance sheets. As of June 30, 2026 and December 31, 2025, the accrued interest on our loan portfolio was $21.0 million and $19.6 million, respectively.

6. Borrowing Arrangements

Information related to borrowings is provided in the table below (dollars in thousands):

(1) The average amount outstanding during the period was computed by dividing the total daily outstanding principal balances by the number of days in the period.

(2) The maximum amount outstanding at any month-end during the period.

(3) The weighted average interest rate during the period was computed by dividing the actual interest expense (annualized for interim periods) by the average amount outstanding during the period. The weighted average interest rate on FHLB borrowings and other borrowings includes the effect of interest rate swaps.

(4) Stated rate.

(5) The interest rate on FHLB borrowings includes the effect of interest rate swaps.

Southside Bancshares, Inc. |27

Maturities of the obligations associated with our borrowing arrangements based on scheduled repayments at June 30, 2026 are as follows (in thousands):

Other borrowings may include federal funds purchased, repurchase agreements and borrowings from the Federal Reserve through the FRDW. Southside Bank has three unsecured lines of credit for the purchase of overnight federal funds at prevailing rates with Frost Bank, Amegy Bank and TIB – The Independent Bankers Bank for $40.0 million, $25.0 million and $15.0 million, respectively. There were no federal funds purchased at June 30, 2026 or December 31, 2025. To provide more liquidity in response to economic conditions in recent years, the Federal Reserve has encouraged broader use of the discount window. At June 30, 2026, the amount of additional funding the Bank could obtain from the FRDW, collateralized by securities, was approximately $279.3 million. There were $355.0 million and $110.0 million in borrowings from the FRDW at June 30, 2026 and December 31, 2025, respectively. Southside Bank has a $5.0 million line of credit with Frost Bank to be used to issue letters of credit, and at June 30, 2026, the line had one outstanding letter of credit for $155,000. Southside Bank currently has four outstanding letters of credit from FHLB held as collateral for loans totaling $19.3 million.

Southside Bank enters into sales of securities under repurchase agreements. These repurchase agreements totaled $64.8 million at June 30, 2026, and $98.7 million at December 31, 2025, and had maturities of less than one year. Repurchase agreements are secured by investment and MBS and are stated at the amount of cash received in connection with the transaction.

FHLB borrowings represent borrowings with fixed interest rates ranging from 3.60% to 5.26% (including the effect of interest rate swaps) and with remaining maturities of 1 day to 2.0 years at June 30, 2026. FHLB borrowings may be collateralized by FHLB stock, nonspecified loans and/or securities. At June 30, 2026, the amount of additional funding Southside Bank could obtain from FHLB was approximately $1.63 billion, net of FHLB stock purchases required.

7. Long-term Debt

Information related to our long-term debt is summarized as follows for the periods presented (in thousands):

(1) This debt consists of subordinated notes with a remaining maturity greater than one year that qualify under the risk-based capital guidelines as Tier 2 capital, subject to certain limitations.

(2) The unamortized discount and debt issuance costs reflected in the carrying amount of the subordinated notes totaled approximately $810,000 at December 31, 2025.

(3) The unamortized discount and debt issuance costs reflected in the carrying amount of the subordinated notes totaled approximately $2.4 million at June 30, 2026 and $2.5 million at December 31, 2025.

Southside Bancshares, Inc. |28

(4) This debt consists of trust preferred securities that qualify under the risk-based capital guidelines as Tier 1 capital, subject to certain limitations.

(5) The unamortized debt issuance costs reflected in the carrying amount of the Southside Statutory Trust III junior subordinated debentures totaled $29,000 at June 30, 2026 and $32,000 at December 31, 2025.

As of June 30, 2026, the details of the subordinated notes and the trust preferred subordinated debentures are summarized below (dollars in thousands):

(1) On October 10, 2007, as part of an acquisition we assumed $3.6 million of floating rate junior subordinated debentures issued in 2005 to Magnolia Trust Company I.

On November 6, 2020, the Company issued $100.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes with a maturity date of November 15, 2030. This debt initially charged interest at a fixed rate of 3.875% per year through November 14, 2025, when it became callable, and thereafter, adjusted quarterly at a floating rate equal to the then current three-month term SOFR, as published by the FRBNY, plus 366 basis points. On February 15, 2026, the Company completed the redemption of the subordinated notes. The $100.0 million principal amount included $7.0 million of the notes previously repurchased by the Company. The notes were redeemed in full at 100% of the principal amount plus accrued and unpaid interest. The remaining unamortized discount and debt issuance costs of $791,000 associated with these notes were recorded on our consolidated income statements as loss on redemption of subordinated notes in noninterest expense.

On August 14, 2025, the Company issued $150.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes that mature on August 15, 2035. This debt initially charges interest at a fixed rate of 7.00% per year through August 15, 2030 and thereafter, adjusts quarterly at a floating rate equal to the then current three-month term SOFR, as published by the FRBNY, plus 357 basis points. The proceeds from the sale of the subordinated notes were used for general corporate purposes.

Southside Bancshares, Inc. |29

8. Employee Benefit Plans

The components of net periodic benefit cost (income) related to our employee benefit plans are as follows (in thousands):

Effective January 1, 2026, the Acquired Retirement Plan was merged with the Retirement Plan.

All cost components disclosed above are recorded in other noninterest expense. The noncash adjustment to the employee benefit plan liabilities, consisting of changes in net loss, was $(1.3) million and $(1.2) million for the six months ended June 30, 2026 and 2025, respectively.

Southside Bancshares, Inc. |30

9. Derivative Financial Instruments and Hedging Activities

Our hedging policy allows the use of interest rate derivative instruments to manage our exposure to interest rate risk or hedge specified assets and liabilities. These instruments may include interest rate swaps and interest rate caps and floors. All derivative instruments are carried on the balance sheet at their estimated fair value and are recorded in other assets or other liabilities, as appropriate.

Derivative instruments may be designated as cash flow hedges of variable rate assets or liabilities, cash flow hedges of forecasted transactions, fair value hedges of a recognized asset or liability or as non-hedging instruments.

Cash Flow Hedges

Gains and losses on derivative instruments designated as cash flow hedges are recorded in AOCI to the extent they are effective. If the hedge is effective, the amount recorded in other comprehensive income is reclassified to interest expense in the same periods that the hedged cash flows impact earnings. We have entered into certain interest rate swap contracts on specific variable rate agreements and fixed rate short-term pay agreements with third parties. These interest rate swap contracts were designated as hedging instruments in cash flow hedges under ASC Topic 815. The objective of the interest rate swap contracts is to manage the expected future cash flows on $615.0 million of Bank liabilities. The cash flows from the swap contracts are expected to be highly effective in hedging the variability in future cash flows attributable to fluctuations in the underlying SOFR rate. At June 30, 2026, the net gains recognized in AOCI that are expected to be reclassified into earnings within the next 12 months were $1.4 million.

From time to time, we may terminate an interest rate swap contract designated as a cash flow hedge. In accordance with ASC Topic 815, if a hedging item is terminated prior to maturity for a cash settlement, the existing gain or loss within AOCI will continue to be reclassified into earnings during the period or periods in which the hedged forecasted transaction affects earnings unless it is probable that the forecasted transaction will not occur by the end of the originally specified time period. These transactions are reevaluated on a monthly basis to determine if the hedged forecasted transactions are still probable of occurring. If at a subsequent evaluation, it is determined that the transactions are probable of not occurring, any related gains or losses recorded in AOCI are immediately recognized in earnings. As of June 30, 2026, we have not terminated any cash flow hedges because the transactions were probable of not occurring.

Fair Value Hedges

Gains and losses on derivative instruments designated as fair value hedges, as well as the change in fair value of the hedged item, are recorded in interest income in the consolidated statements of income. Gains and losses due to changes in the fair value of the interest rate swap agreements offset changes in the fair value of the hedged portion of the hedged item. Our fair value hedges may consist of partial term fair value hedges for certain of our fixed rate callable AFS municipal securities and partial term fair value hedges of fixed rate AFS MBS and fixed rate loans using the portfolio layer method. This approach allows us to designate as the hedged item a stated amount of the assets that are not expected to be affected by prepayments, defaults and other factors affecting the timing and amount of cash flows. The fair value portfolio level hedging adjustment on our hedged MBS portfolio and hedged loan portfolio has not been attributed to the individual AFS securities or individual loans in our balance sheet. The instruments are designated as fair value hedges as the changes in the fair value of the interest rate swap are expected to partially offset changes in the fair value of the hedged item attributable to changes in the SOFR swap rate, the designated benchmark interest rate. These derivative contracts involve the receipt of floating rate interest from a counterparty in exchange for us making fixed-rate payments over the life of the agreement, without the exchange of the underlying notional value.

Southside Bancshares, Inc. |31

The following table presents the amounts recorded in the consolidated balance sheets related to the cumulative adjustments for fair value hedges (in thousands):

1. Amounts include the amortized cost basis of closed portfolios used to designate hedging relationships under the portfolio layer method. The hedged item is a layer of the closed portfolio which is expected to be remaining at the end of the hedging relationship. As of June 30, 2026 and December 31, 2025, the amortized cost basis of the closed MBS portfolio used in these hedging relationships was $1.36 billion and $1.07 billion, respectively, the amount of the designated hedged items were $334.0 million and $301.0 million, respectively, and the cumulative amount of fair value hedging adjustments associated with these MBS hedging relationships was a gain of $2.8 million and $789,000, respectively. As of December 31, 2025, the amortized cost basis of the closed loan portfolio used in these hedging relationships was $240.0 million, the amount of the designated hedged items were $155.0 million, and the cumulative amount of fair value hedging adjustments associated with these loan hedging relationships was a loss of $58,000.

2) Excludes fair value hedging adjustments.

3. Excluded from the table above are the cumulative amount of fair value hedging adjustments for securities AFS and loans for which hedge accounting has been discontinued in the amounts of a loss of $503,000 and a loss of $2.6 million, respectively, at June 30, 2026, and a loss of $740,000 and a loss of $3.0 million, respectively, at December 31, 2025.

Derivatives Designated as Non-Hedging Instruments

From time to time, we may enter into certain interest rate swaps, cap and floor contracts that are not designated as hedging instruments. These interest rate derivative contracts relate to transactions in which we enter into an interest rate swap, cap or floor with a customer while concurrently entering into an offsetting interest rate swap, cap or floor with a third-party financial institution. We agree to pay interest to the customer on a notional amount at a variable rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, we agree to pay a third-party financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. These interest rate derivative contracts allow our customers to effectively convert a variable rate loan to a fixed rate loan. The changes in the fair value of the underlying derivative contracts primarily offset each other and do not significantly impact our results of operations. We recognized swap fee income associated with these derivative contracts immediately based upon the difference in the bid/ask spread of the underlying transactions with the customer and the third-party financial institution. The swap fee income is included in other noninterest income in our consolidated statements of income.

At June 30, 2026 and December 31, 2025, net derivative assets included $20.6 million and $5.5 million, respectively, of cash collateral received from counterparties under master netting agreements.

The notional amounts of the derivative instruments represent the contractual cash flows pertaining to the underlying agreements. These amounts are not exchanged and are not reflected in the consolidated balance sheets. The fair value of the interest rate swaps are presented at net in other assets and other liabilities and in the net change in each of these financial statement line items in the accompanying consolidated statements of cash flows when a right of offset exists, based on transactions with a single counterparty that are subject to a legally enforceable master netting agreement.

Southside Bancshares, Inc. |32

The following tables present the notional and estimated fair value amount of derivative positions outstanding (in thousands):

(1) Notional amounts, which represent the extent of involvement in the derivatives market, are used to determine the contractual cash flows required in accordance with the terms of the agreement. These amounts are typically not exchanged, significantly exceed amounts subject to credit or market risk and are not reflected in the consolidated balance sheets.

(2) Net derivative assets are included in other assets and net derivative liabilities are included in other liabilities on the consolidated balance sheets. Included in the fair value of net derivative assets and net derivative liabilities are credit valuation adjustments reflecting counterparty credit risk and our credit risk. At June 30, 2026, we had $1.7 million credit exposure related to interest rate swaps with financial institutions and $1.9 million related to interest rate swaps with customers. At December 31, 2025, we had $612,000 credit exposure related to interest rate swaps with financial institutions and $7.1 million related to interest rate swaps with customers. The credit risk associated with customer transactions is partially mitigated as these are generally secured by the non-cash collateral securing the underlying transaction being hedged.

The summarized expected weighted average remaining maturity of the notional amount of interest rate swaps and the weighted average interest rates associated with the amounts expected to be received or paid on interest rate swap agreements are presented below (dollars in thousands). Variable rates received on fixed pay swaps are based on overnight SOFR rates in effect at June 30, 2026 and December 31, 2025:

Southside Bancshares, Inc. |33

The following table presents amounts included in the consolidated statements of income related to interest rate swap agreements (in thousands):

Southside Bancshares, Inc. |34

10. Fair Value Measurement

Fair value is the price that would be received upon the sale of an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants. A fair value measurement assumes the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

Valuation techniques including the market approach, the income approach and/or the cost approach are utilized to determine fair value. Inputs to valuation techniques refer to the assumptions market participants would use in pricing the asset or liability. Valuation policies and procedures are determined by our investment department and reported to our ALCO for review. An entity must consider all aspects of nonperforming risk, including the entity’s own credit standing, when measuring fair value of a liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A fair value hierarchy for valuation inputs gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Certain financial assets are measured at fair value in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of fair value accounting or write-downs of individual assets. A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Securities AFS and Equity Investments with readily determinable fair values – U.S. Treasury securities and equity investments with readily determinable fair values are reported at fair value utilizing Level 1 inputs. Other securities classified as AFS are reported at fair value utilizing Level 2 inputs. For most of these securities, we obtain fair value measurements from independent pricing services and obtain an understanding of the pricing methodologies used by these independent pricing services. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things, as stated in the pricing methodologies of the independent pricing services.

We review and validate the prices supplied by the independent pricing services for reasonableness by comparison to prices obtained from, in some cases, two additional third-party sources. For securities where prices are outside a reasonable range, we further review those securities, based on internal ALCO approved procedures, to determine what a reasonable fair value measurement is for those securities, given available data.

Derivatives – Derivatives are reported at fair value utilizing Level 2 inputs. We obtain fair value measurements from two sources including an independent pricing service and the counterparty to the derivatives designated as hedges. The fair value measurements consider observable data that may include dealer quotes, market spreads, the U.S. Treasury yield curve, live trading levels, trade execution data, credit information and the derivatives’ terms and conditions, among other things. We review the prices supplied by the sources for reasonableness. In addition, we obtain a basic understanding of their underlying pricing methodology. We validate prices supplied by the sources by comparison to one another.

Certain nonfinancial assets and nonfinancial liabilities measured at fair value on a recurring basis include reporting units measured at fair value and tested for goodwill impairment.

Southside Bancshares, Inc. |35

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis, which means that the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets and financial liabilities measured at fair value on a nonrecurring basis included foreclosed assets and collateral-dependent loans at June 30, 2026 and December 31, 2025.

Foreclosed Assets – Foreclosed assets are initially recorded at fair value less costs to sell. The fair value measurements of foreclosed assets can include Level 2 measurement inputs such as real estate appraisals and comparable real estate sales information, in conjunction with Level 3 measurement inputs such as cash flow projections, qualitative adjustments and sales cost estimates. As a result, the categorization of foreclosed assets is Level 3 of the fair value hierarchy. In connection with the measurement and initial recognition of certain foreclosed assets, we may recognize charge-offs through the allowance for credit losses.

Collateral-Dependent Loans – Certain loans may be reported at the fair value of the underlying collateral if repayment is expected substantially from the operation or sale of the collateral. Collateral values are estimated using Level 3 inputs based on customized discounting criteria or appraisals. At June 30, 2026 and December 31, 2025, the impact of the fair value of collateral-dependent loans was reflected in our allowance for loan losses.

The fair value estimate of financial instruments for which quoted market prices are unavailable is dependent upon the assumptions used. Consequently, those estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Accordingly, the aggregate fair value amounts presented in the fair value tables do not necessarily represent their underlying value.

Southside Bancshares, Inc. |36

The following tables summarize assets measured at fair value on a recurring and nonrecurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

Southside Bancshares, Inc. |37

(1) All MBS are issued and/or guaranteed by U.S. government agencies or U.S. GSEs.

(2) Consists of individually evaluated loans. Loans for which the fair value of the collateral and commercial real estate fair value of the properties is less than cost basis are presented net of allowance. Losses on these loans represent charge-offs which are netted against the allowance for loan losses.

Southside Bancshares, Inc. |38

Disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, is required when it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other estimation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Such techniques and assumptions, as they apply to individual categories of our financial instruments, are as follows:

Cash and cash equivalents – The carrying amount for cash and cash equivalents is a reasonable estimate of those assets’ fair value.

Investment and MBS HTM – Fair values for these securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices for similar securities or estimates from independent pricing services.

FHLB stock – The carrying amount of FHLB stock is a reasonable estimate of the fair value of those assets.

Equity investments – The carrying value of equity investments without readily determinable fair values are measured at cost less impairment, if any, adjusted for observable price changes for an identical or similar investment of the same issuer. This carrying value is a reasonable estimate of the fair value of those assets.

Loans receivable – We estimate the fair value of our loan portfolio to an exit price notion with adjustments for liquidity, credit and prepayment factors. Nonperforming loans continue to be estimated using discounted cash flow analyses or the underlying value of the collateral where applicable.

Loans held for sale – The fair value of loans held for sale is determined based on expected proceeds, which are based on sales contracts and commitments.

Deposit liabilities – The fair value of demand deposits, savings accounts and certain money market deposits is the amount on demand at the reporting date, which is the carrying value. Fair values for fixed rate CDs are estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities.

Other borrowings – Federal funds purchased generally have original terms to maturity of one day and repurchase agreements generally have terms of less than one year, and therefore both are considered short-term borrowings. Consequently, their carrying value is a reasonable estimate of fair value. Borrowings from the Federal Reserve through the FRDW have original maturities of one year or less, and the fair value is estimated by discounting the future cash flows using rates at which borrowings would be made to borrowers with similar credit ratings and for the same remaining maturities.

FHLB borrowings – The fair value of these borrowings is estimated by discounting the future cash flows using rates at which borrowings would be made to borrowers with similar credit ratings and for the same remaining maturities.

Subordinated notes – The fair value of the subordinated notes is estimated by discounting future cash flows using estimated rates at which long-term debt would be made to borrowers with similar credit ratings and for the remaining maturities.

Trust preferred subordinated debentures – The fair value of the long-term debt is estimated by discounting future cash flows using estimated rates at which long-term debt would be made to borrowers with similar credit ratings and for the remaining maturities.

Southside Bancshares, Inc. |39

The following tables present our financial assets and financial liabilities measured on a nonrecurring basis at both their respective carrying amounts and estimated fair value (in thousands):

Southside Bancshares, Inc. |40

11. Income Taxes

The income tax expense included in the accompanying consolidated statements of income consists of the following (in thousands):

The net deferred tax asset totaled $26.1 million at June 30, 2026, as compared to $27.1 million at December 31, 2025. The decrease in the net deferred tax asset is primarily the result of an increase in the estimated fair value of the effective hedging derivatives. No valuation allowance was recorded at June 30, 2026 or December 31, 2025, as management believes it is more likely than not that all of the deferred tax asset items will be realized in future years. Unrecognized tax benefits were not material at June 30, 2026 or December 31, 2025.

We recognized income tax expense of $5.7 million and $10.8 million, for an ETR of 17.6% and 17.7% for the three and six months ended June 30, 2026, respectively, compared to income tax expense of $4.7 million and $9.4 million, for an ETR of 17.8% and 17.9%, for the three and six months ended June 30, 2025, respectively. The marginally lower ETR for the three and six months ended June 30, 2026 was partially due to a decrease in state income tax expense as a percentage of pre-tax income, as well as a discrete tax benefit recorded in connection with equity award transactions as compared to the same periods in 2025. The ETR differs from the statutory rate of 21% for the three and six months ended June 30, 2026 and 2025 primarily due to the effect of tax-exempt income from municipal loans and securities, BOLI and state income tax. We file income tax returns in the U.S. federal jurisdictions and in certain states. We are no longer subject to U.S. federal income tax examinations by tax authorities for years before 2022 or Texas state tax examinations by tax authorities for years before 2021.

Southside Bancshares, Inc. |41

12. Off-Balance-Sheet Arrangements, Commitments and Contingencies

Financial Instruments with Off-Balance-Sheet Risk. In the normal course of business, we are a party to certain financial instruments with off-balance-sheet risk to meet the financing needs of our customers. These off-balance-sheet instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount reflected in the financial statements. The contract or notional amounts of these instruments reflect the extent of involvement and exposure to credit loss that we have in these particular classes of financial instruments. The allowance for credit losses on these off-balance-sheet credit exposures is calculated using the same methodology as loans including a conversion or usage factor to anticipate ultimate exposure and expected losses and is included in other liabilities on our consolidated balance sheets.

Allowance for off-balance-sheet credit exposures were as follows (in thousands):

Contractual commitments to extend credit are agreements to lend to a customer provided the terms established in the contract are met. Commitments to extend credit generally have fixed expiration dates and may require the payment of fees. Since some commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in commitments to extend credit and similarly do not necessarily represent future cash obligations.

Financial instruments with off-balance-sheet risk were as follows (in thousands):

We apply the same credit policies in making commitments to extend credit and standby letters of credit as we do for on-balance-sheet instruments. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, upon extension of credit is based on management’s credit evaluation of the borrower. Collateral held varies but may include cash or cash equivalents, negotiable instruments, real estate, accounts receivable, inventory, oil, gas and mineral interests, property, plant and equipment.

Leases. During the three months ended June 30, 2026, there were no operating lease ROU assets obtained in exchange for new operating lease liabilities. During the six months ended June 30, 2026, there were $468,000 operating lease ROU assets obtained in exchange for new operating lease liabilities. There were no operating lease ROU assets obtained in exchange for new operating lease liabilities during the three or six months ended June 30, 2025.

Securities. In the normal course of business, we buy and sell securities. At June 30, 2026, there were no unsettled trades to purchase securities and no unsettled trades to sell securities. At December 31, 2025, there were no unsettled trades to purchase securities and no unsettled trades to sell securities.

Deposits. There were no unsettled issuances of brokered CDs at June 30, 2026 or December 31, 2025.

Litigation. We are involved with various litigation in the normal course of business. Management, after consulting with our legal counsel, believes that any liability resulting from litigation will not have a material effect on our financial position, results of operations or liquidity.

Southside Bancshares, Inc. |42

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

The following is a discussion of our consolidated financial condition, changes in our financial condition and results of our operations, and should be read and reviewed in conjunction with the financial statements, and the notes thereto, in this Quarterly Report on Form 10-Q, and in our 2025 Form 10-K. Certain risks, uncertainties and other factors, including those set forth under “Risk Factors” in Part I, Item 1A. of the 2025 Form 10-K and elsewhere in this Quarterly Report on Form 10-Q, may cause actual results to differ materially from the results discussed in the forward-looking statements appearing in this discussion and analysis.

Non-GAAP Financial Measures

Certain non-GAAP measures are used by management to supplement the evaluation of our performance. These include the following fully taxable-equivalent measures: net interest income (FTE), net interest margin (FTE) and net interest spread (FTE), which include the effects of taxable-equivalent adjustments using a federal income tax rate of 21% to increase tax-exempt interest income to a tax-equivalent basis. Interest income earned on certain assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments.

Net interest income (FTE), net interest margin (FTE) and net interest spread (FTE). Net interest income (FTE) is a non-GAAP measure that adjusts for the tax-favored status of net interest income from certain loans and investments and is not permitted under GAAP in the consolidated statements of income. We believe that this measure is the preferred industry measurement of net interest income, and that it enhances comparability of net interest income arising from taxable and tax-exempt sources. The most directly comparable financial measure calculated in accordance with GAAP is our net interest income. Net interest margin (FTE) is the ratio of net interest income (FTE) to average earning assets. The most directly comparable financial measure calculated in accordance with GAAP is our net interest margin. Net interest spread (FTE) is the difference in the average yield on average earning assets on a tax-equivalent basis and the average rate paid on average interest bearing liabilities. The most directly comparable financial measure calculated in accordance with GAAP is our net interest spread.

These non-GAAP financial measures should not be considered alternatives to GAAP-basis financial statements and other bank holding companies may define or calculate these non-GAAP measures or similar measures differently. Whenever we present a non-GAAP financial measure in an SEC filing, we are also required to present the most directly comparable financial measure calculated and presented in accordance with GAAP and reconcile the differences between the non-GAAP financial measure and such comparable GAAP measure.

In the following table we present the reconciliation of net interest income to net interest income adjusted to a fully taxable-equivalent basis assuming a 21% marginal tax rate for interest earned on tax-exempt assets such as municipal loans and investment securities (dollars in thousands), along with the calculation of net interest margin (FTE) and net interest spread (FTE).

(1) These amounts are presented on a fully taxable-equivalent basis and are non-GAAP measures.

Management believes adjusting net interest income, net interest margin and net interest spread to a fully taxable-equivalent basis is a standard practice in the banking industry as these measures provide useful information to make peer comparisons. Tax-equivalent adjustments are reported in the respective earning asset categories as listed in the “Average Balances with Average Yields and Rates” tables under Results of Operations.

Southside Bancshares, Inc. |46

OVERVIEW

ECONOMIC CONDITIONS

Ongoing tariff negotiations and conflict in the Middle East have caused some uncertainty related to inflation levels, energy and gas prices, and their impact on interest rates and the overall economy, including the economy in the State of Texas. While it is too early to discern the likely outcome of these tariff negotiations and military conflicts, the current economic conditions and growth prospects for our markets continue to reflect a solid and overall positive outlook. Higher inflation levels, including higher energy and gas prices, and interest rate fluctuations could have a negative impact on both our consumer and commercial borrowers in the future. Overall, however, we believe that the Texas markets we serve remain healthy.

DEPOSITS

Our deposits were $6.17 billion at June 30, 2026, a decrease of $695.8 million, or 10.1%, from December 31, 2025. At June 30, 2026, we had 178,853 total deposit accounts with an average balance of $34,000. Our estimated uninsured deposits were 42.8% of total deposits as of June 30, 2026. When excluding affiliate deposits (Southside-owned deposits) and public fund deposits (all collateralized), our total estimated deposits without insurance or collateral was 24.9% of total deposits as of June 30, 2026.

Our noninterest bearing deposits represent approximately 22.8% of total deposits. During the three months ended June 30, 2026, our cost of interest bearing deposits decreased 33 basis points to 2.49% from 2.82% for the three months ended June 30, 2025. Our cost of total deposits for the second quarter of 2026 decreased 32 basis points to 1.94% from 2.26% for the three months ended June 30, 2025.

Our cost of interest bearing deposits decreased 26 basis points, from 2.83% for the six months ended June 30, 2025 to 2.57% for the six months ended June 30, 2026. Our cost of total deposits decreased 22 basis points, from 2.26% for the six months ended June 30, 2025 to 2.04% for the six months ended June 30, 2026.

CAPITAL RESOURCES AND LIQUIDITY

Our capital ratios and contingent liquidity sources remain solid. The table below shows our total lines of credit, borrowings, total amounts available for future liquidity, and swapped value as of June 30, 2026 (in thousands):

Operating Results

Net income was $26.8 million for the three months ended June 30, 2026, compared to $21.8 million for the same period in 2025, an increase of $5.0 million, or 23.0%. The increase in net income was due to a $3.1 million increase in net interest income, a $1.9 million increase in noninterest income, a $581,000 decrease in noninterest expense and a $539,000 decrease in provision for credit losses, partially offset by a $1.0 million increase in income tax expense. Earnings per diluted common share were $0.90 for the three months ended June 30, 2026, compared to $0.72 for the same period in 2025, an increase of $0.18, or 25.0%.

During the six months ended June 30, 2026, our net income increased $6.8 million, or 15.6%, to $50.1 million from $43.3 million for the same period in 2025. The increase in net income was due to a $6.9 million increase in net interest income and a $4.2 million increase in noninterest income, partially offset by a $2.9 million increase in noninterest expense, a $1.3 million increase in income tax expense and a $113,000 increase in provision for credit losses. Earnings per diluted common share increased $0.26, or 18.3%, to $1.68 for the six months ended June 30, 2026, compared to $1.42 for the same period in 2025.

Southside Bancshares, Inc. |47

Financial Condition

Our total assets increased $249.1 million, or 2.9%, to $8.76 billion at June 30, 2026 from $8.51 billion at December 31, 2025. Our securities portfolio increased by $78.0 million, or 2.9%, to $2.78 billion at June 30, 2026, compared to $2.70 billion at December 31, 2025. The increase in the securities portfolio was due to an increase in MBS during the six months ended June 30, 2026. Our FHLB stock increased $31.2 million, or 222.0%, to $45.3 million from $14.1 million at December 31, 2025, due to the increase in our FHLB borrowings during the six months ended June 30, 2026.

Loans at June 30, 2026 were $4.95 billion, an increase of $131.6 million, or 2.7%, compared to $4.82 billion at December 31, 2025, due to increases of $51.5 million in construction loans, $42.9 million in commercial owner-occupied loans, $22.8 million in commercial loans, $15.3 million in commercial real estate loans and $10.8 million in municipal loans. These increases were partially offset by decreases of $8.3 million in 1-4 family residential loans and $3.5 million in loans to individuals. Loans held for sale decreased $1.0 million, or 74.4%, to $341,000 at June 30, 2026 from $1.3 million at December 31, 2025.

Our nonperforming assets at June 30, 2026 decreased $28.4 million, or 74.4%, to $9.8 million and represented 0.11% of total assets, compared to $38.2 million, or 0.45% of total assets, at December 31, 2025, primarily due to a decrease of $27.5 million in restructured loans. The decrease in restructured loans was due to the payoff of a $27.5 million restructured commercial real estate loan in the first quarter that was originally restructured with an extension of maturity in the first quarter of 2025 to allow for an extended lease up period. Nonaccruing loans decreased $856,000, or 8.2%, to $9.6 million, and the ratio of nonaccruing loans to total loans was 0.19% and 0.22% for June 30, 2026 and December 31, 2025, respectively. Repossessed assets were $5,000 at June 30, 2026, compared to no repossessed assets at December 31, 2025. There was $116,000 of OREO at June 30, 2026 and $248,000 at December 31, 2025.

Our deposits decreased $695.8 million, or 10.1%, to $6.17 billion at June 30, 2026, from $6.87 billion at December 31, 2025, due to decreases in brokered deposits of $667.2 million, or 99.2%, and public fund deposits of $40.1 million, or 3.5%, partially offset by an increase in retail deposits of $11.5 million, or 0.2%. The marginal increase in retail deposits of $11.5 million consists of a $36.0 million increase in interest bearing deposits, partially offset by a $24.5 million decrease in noninterest bearing deposits.

Total FHLB borrowings increased $784.7 million, or 371.7%, to $995.8 million at June 30, 2026 from $211.1 million at December 31, 2025, due to a shift from brokered deposits into FHLB borrowings.

Other borrowings increased $211.1 million, or 101.2%, to $419.8 million at June 30, 2026, from $208.7 million at December 31, 2025, due to a $245.0 million increase in FRDW borrowings, partially offset by a $33.9 million decrease in repurchase agreements.

Our subordinated notes, net of unamortized debt issuance costs, decreased $92.1 million, or 38.4%, to $147.6 million at June 30, 2026 from $239.7 million at December 31, 2025, as a result of the full redemption of $100.0 million in aggregate principal amount of 3.875% fixed-to-floating rate subordinated notes during the first quarter of 2026. Refer to “Note 7 – Long-term Debt” in our consolidated financial statements included in this report for a detailed description of the terms of the redemption of the subordinated notes.

Our total shareholders’ equity at June 30, 2026 increased 4.1%, or $34.8 million, to $882.5 million, or 10.1% of total assets, compared to $847.6 million, or 10.0% of total assets, at December 31, 2025. The increase in shareholders’ equity was the result of net income of $50.1 million, other comprehensive income of $3.6 million, stock compensation expense of $2.7 million and common stock issued under our dividend reinvestment plan of $466,000, partially offset by cash dividends paid of $21.4 million and net issuance of common stock under employee stock plans of $499,000.

Key financial indicators management follows include, but are not limited to, numerous interest rate sensitivity and interest rate risk indicators, credit risk, operations risk, liquidity risk, capital risk, regulatory risk, inflation risk, competition risk, yield curve risk, U.S. agency MBS prepayment risk and economic risk indicators.

Southside Bancshares, Inc. |48

Balance Sheet Strategy

Determining the appropriate size of the balance sheet is one of the critical decisions any bank makes. Our balance sheet is not merely the result of a series of micro-decisions, but rather the size is controlled based on the economics of assets compared to the economics of funding and funding sources. Changing interest rate environments and economic conditions require that we monitor the interest rate sensitivity of our assets, the funding driving our growth and closely align ALCO objectives accordingly.

We ended the second quarter of 2026 with approximately $279.3 million in available liquidity from the FRDW, in addition to the approximately $1.63 billion available from the credit line with FHLB due primarily to the blanket lien on our loan portfolio and to a lesser extent, securities available as collateral. At June 30, 2026, the estimated deposits, without insurance or collateral, to total deposits, excluding affiliate deposits (Southside-owned deposits) was 24.9%, or $1.53 billion.

From time to time, we may enter into certain interest rate swap contracts with third parties using specific variable rate, as well as short-term (generally three months or less) fixed rate borrowings designated as cash flow hedges under ASC Topic 815. At June 30, 2026, we had swap contracts covering $325 million in FHLB borrowings and $290 million in FRDW borrowings for a total of $615 million of cash flow hedges. We expect the cash flows from swap contracts to be highly effective in hedging the variability in future cash flows attributable to fluctuations in the underlying SOFR rate. At June 30, 2026, these contracts reflected a weighted average rate of 3.81% with a remaining average weighted maturity of 1.3 years. During the six months ended June 30, 2026, $245 million cash flow hedge interest rate swap contracts matured. As of June 30, 2026, a pre-tax unrealized gain of $3.8 million was recognized in other comprehensive income, and there was no ineffective portion of these hedges. At December 31, 2025, the outstanding balance of cash flow hedges was $860 million. Refer to “Note 9 – Derivative Financial Instruments and Hedging Activities” in our consolidated financial statements included in this report for a detailed description of our hedging policy and methodology related to derivative instruments.

We continue to evaluate the lowest cost wholesale funding sources and will utilize either FHLB advances, FRDW borrowings, brokered deposits, or any combination of the three funding sources to minimize interest expense while also utilizing cash flow hedges to mitigate the impacts of interest rate movements. Wholesale funding and securities are utilized to enhance overall profitability, to determine the appropriate leverage of our capital and to determine acceptable levels of credit, interest rate and liquidity risk consistent with prudent capital management. Wholesale funds are invested primarily in U.S. agency MBS and long-term municipal securities and to a lesser extent, corporate securities. Although the securities often carry lower yields than loans, these securities generally (i) increase the overall quality of our assets because of either the implicit or explicit guarantees of the U.S. Government and the guarantees of the municipalities, (ii) are more liquid than individual loans and (iii) may be used to collateralize our borrowings or other obligations.

Risks associated with this asset structure include a potentially lower net interest rate spread and margin when compared to our peers, changes in the slope of the yield curve, increased interest rate risk, the length of interest rate cycles, changes in volatility or spreads associated with the MBS, municipal and corporate securities, the unpredictable nature of MBS prepayments and credit risks associated with the municipal and corporate securities. See “Part I - Item 1A. Risk Factors – Risks Related to Our Business” in the 2025 Form 10-K for a discussion of risks related to interest rates. An additional risk is significant increases in interest rates, especially long-term interest rates, which could adversely impact the fair value of the AFS securities portfolio and could also impact our equity capital. Due to the unpredictable nature of MBS prepayments, the length of interest rate cycles and the slope of the interest rate yield curve, net interest income could fluctuate more than simulated under the scenarios modeled by our ALCO and described under “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in this report.

Our securities portfolio increased $78.0 million, or 2.9%, from $2.70 billion at December 31, 2025 to $2.78 billion at June 30, 2026, with increases in U.S. Agency MBS, and to a lesser extent, corporate bonds, partially offset by a decrease in municipal securities. As a result, securities totaled 31.7% of assets at June 30, 2026, compared to 31.8% at December 31, 2025. The increase in the U.S. Agency MBS was due to the purchase of $332.4 million of low premium and discounted MBS with coupons ranging from 4.50% to 5.50%. The increase in corporate bonds was due to the purchase of $6.0 million in 6.25% coupon corporate bonds. The net increase in the total securities portfolio was due to securities purchased during the six months ended June 30, 2026, which more than offset maturities, principal payments and net amortization.

Cash and cash equivalents decreased to 4.5% of total assets at June 30, 2026, compared to 4.6% at December 31, 2025.

Our FHLB borrowings increased $784.7 million, or 371.7%, to $995.8 million at June 30, 2026, from $211.1 million at December 31, 2025. As of June 30, 2026 and December 31, 2025, we had $355.0 million and $110.0 million, respectively, in borrowings from the FRDW.

As of June 30, 2026, our total wholesale funding as a percentage of deposits, not including brokered deposits, increased to 22.0% from 16.0% at December 31, 2025.

Southside Bancshares, Inc. |49

Our brokered deposits may consist of CDs and non-maturity deposits which may be raised quickly with terms tailored to our funding needs. We had no brokered CDs at June 30, 2026, compared to $19.8 million at December 31, 2025. Our brokered non-maturity deposits decreased to $5.0 million at June 30, 2026, from $652.4 million at December 31, 2025, with a weighted average cost of 373 and 359 basis points, respectively. Our wholesale funding policy currently allows for maximum brokered deposits of the lesser of $1.05 billion, or 12% of total assets. Potential higher interest expense and lack of customer loyalty are risks associated with the use of brokered deposits.

At June 30, 2026, a portion of the securities portfolio was funded by non-maturity deposits, some of which are included in wholesale funding that accounts for approximately 49% of the funding source, of which approximately 45% is swapped at a fixed rate, providing protection from rising interest rates.

We have partial term fair value hedges for certain of our fixed rate callable AFS municipal securities and partial term fair value hedges of fixed rate AFS MBS using the portfolio layer method. The instruments are designated as fair value hedges as the changes in the fair value of the interest rate swap are expected to partially offset changes in the fair value of the hedged item attributable to changes in the SOFR swap rate, the designated benchmark interest rate. As of June 30, 2026, $24.1 million in hedging instruments were used to hedge municipal securities with a carrying amount of $21.7 million included in our AFS securities portfolio in our consolidated balance sheets, representing approximately 12.2% of the AFS municipal portfolio. As of June 30, 2026, $334.0 million in hedging instruments were used to hedge 100.0% of our AFS MBS portfolio with a carrying value of $1.37 billion. These derivative contracts involve the receipt of floating rate interest from a counterparty in exchange for us making fixed-rate payments over the life of the agreement, without the exchange of the underlying notional value.

Southside Bancshares, Inc. |50

Results of Operations

Our results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on assets (loans and investments) and interest expense due on our funding sources (deposits and borrowings) during a particular period. Results of operations are also affected by our noninterest income, provision for credit losses, noninterest expenses and income tax expense. General economic and competitive conditions, particularly changes in interest rates, inflation, changes in interest rate yield curves, prepayment rates of MBS and loans, repricing of loan relationships, government policies and actions of regulatory authorities also significantly affect our results of operations. Future changes in applicable laws, regulations or government policies may also have a material impact on our results of operations. See “Part I - Item 1A. Risk Factors – Risks Related to Our Business” in the 2025 Form 10-K for further discussion of these risks.

The following table presents net interest income for the periods presented (in thousands):

Net Interest Income

Net interest income is one of the principal sources of a financial institution’s earnings stream and represents the difference or spread between interest and fee income generated from interest earning assets and the interest expense paid on interest bearing liabilities. Fluctuations in interest rates or interest rate yield curves, as well as repricing characteristics and volume and changes in the mix of interest earning assets and interest bearing liabilities, materially impact net interest income. During the last four months of 2025, the Federal Reserve reduced the target federal funds rate by 75 basis points to 3.50% to 3.75%. During the six months ended June 30, 2026, the Federal Reserve held the target federal funds rate steady. If the federal funds rate remains elevated or is not further reduced, it could negatively impact our net interest income.

Net interest income for the three months ended June 30, 2026 increased $3.1 million, or 5.7%, compared to the same period in 2025. The increase in net interest income was primarily due to an increase in the average balance of our interest earning assets and a decrease in the average rate paid on our interest bearing liabilities, partially offset by an increase in the average balance and mix of our interest bearing liabilities and a decrease in the average yield of our interest earning assets. Total interest income increased $5.4 million, or 5.4%, to $103.9 million for the three months ended June 30, 2026, compared to $98.6 million during the same period in 2025. Total interest expense increased $2.3 million, or 5.2%, to $46.6 million for the three months ended June 30, 2026, compared to $44.3 million for the same period in 2025. Our net interest margin and our net interest margin (FTE), a non-GAAP measure, both decreased to 2.80% and 2.90%, respectively, for the three months ended June 30, 2026, compared to 2.82% and 2.95%, respectively, for the same period in 2025. Our net interest spread and net interest spread (FTE), also a non-GAAP measure, was 2.17% and 2.26%, respectively, for the three months ended June 30, 2026, compared to 2.15% and 2.27%, respectively, for the same period in 2025. See “Non-GAAP Financial Measures” for more information and a reconciliation to GAAP.

Southside Bancshares, Inc. |51

Net interest income was $115.0 million for the six months ended June 30, 2026, compared to $108.1 million for the same period in 2025, an increase of $6.9 million, or 6.4%. The increase in net interest income for the six months ended June 30, 2026 was due to an increase in the average balance of our interest earning assets and a decrease in the average rate paid on our interest bearing liabilities, partially offset by a decrease in the yield on our interest earning assets and an increase the average balance and mix of our interest bearing liabilities. Total interest income increased $7.3 million, or 3.7%, to $206.2 million for the six months ended June 30, 2026, compared to $198.9 million for the same period in 2025. Total interest expense increased $421,000, or 0.5%, to $91.2 million for the six months ended June 30, 2026, compared to $90.7 million for the same period in 2025. Our net interest margin and net interest margin (FTE), a non-GAAP measure, increased to 2.86% and 2.95%, respectively, for the six months ended June 30, 2026, compared to 2.78% and 2.91%, respectively, for the same period in 2025, and our net interest spread and net interest spread (FTE), also a non-GAAP measure, increased to 2.22% and 2.31%, respectively, compared to 2.11% and 2.23%, respectively, for the same period in 2025. See “Non-GAAP Financial Measures” for more information and for a reconciliation to GAAP.

Quarterly Analysis of Changes in Interest Income and Interest Expense

The following table presents on a fully taxable-equivalent basis, a non-GAAP measure, the net change in net interest income and sets forth the dollar amount of increase (decrease) in the average volume of interest earning assets and interest bearing liabilities and changes in yields/rates. Volume/Yield/Rate variances (change in volume times change in yield/rate) have been allocated to amounts attributable to changes in volumes and to changes in yields/rates in proportion to the amounts directly attributable to those changes (in thousands).

(1) Interest yields on loans and securities that are nontaxable for federal income tax purposes are presented on a fully taxable-equivalent basis. See “Non-GAAP Financial Measures” for more information and for a reconciliation to GAAP.

The increase in total interest income for the three months ended June 30, 2026, was attributable to a $500.8 million, or 6.5%, increase in the average balance of our interest earning assets when compared to the same period in 2025, partially offset by a decrease in the average yield on interest earning assets to 5.17% when compared to 5.25% for the same period in 2025. The increase in total interest expense for the three months ended June 30, 2026, was primarily attributable to an increase in the average balance of our interest bearing liabilities of $449.3 million, or 7.5%, compared to the same period in 2025, partially offset by the decrease in the average rate paid on our interest bearing liabilities to 2.91% for the three months ended June 30, 2026 from 2.98% for the same period in 2025.

Southside Bancshares, Inc. |52

The following table presents average earning assets and interest bearing liabilities together with the average yield on the earning assets and the average rate of the interest bearing liabilities (dollars in thousands) for the three months ended June 30, 2026 and 2025. The interest and related yields presented are on a fully taxable-equivalent basis and are therefore non-GAAP measures. See “Non-GAAP Financial Measures” for more information and for a reconciliation to GAAP.

(1) Interest on loans includes net fees on loans that are not material in amount.

(2) For the purpose of calculating the average yield, the average balance of securities do not include unrealized gains and losses on AFS securities.

(3) Yield/rate includes the impact of applicable derivatives.

Note: As of June 30, 2026 and 2025, loans totaling $9.6 million and $5.0 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Southside Bancshares, Inc. |53

Year-to-Date Analysis of Changes in Interest Income and Interest Expense

The following table presents on a fully taxable-equivalent basis, a non-GAAP measure, the net change in net interest income and sets forth the dollar amount of increase (decrease) in the average volume of interest earning assets and interest bearing liabilities and changes in yields/rates. Volume/Yield/Rate variances (change in volume times change in yield/rate) have been allocated to amounts attributable to changes in volumes and to changes in yields/rates in proportion to the amounts directly attributable to those changes (in thousands):

(1) Interest yields on loans and securities that are nontaxable for federal income tax purposes are presented on a fully taxable-equivalent basis. See “Non-GAAP Financial Measures” for more information and for a reconciliation to GAAP.

The increase in total interest income was attributable to a $288.1 million, or 3.7%, increase in the average balance of our interest earning assets when compared to the same period in 2025, partially offset by the decrease in the average yield on earning assets to 5.21% for the six months ended June 30, 2026 from 5.24% for the same period in 2025. The increase in total interest expense for the six months ended June 30, 2026 was attributable to an increase in the average balance of our interest bearing liabilities of $260.6 million, or 4.3%, when compared to the same period in 2025, partially offset by a decrease in rate paid on interest bearing liabilities to 2.90% for the six months ended June 30, 2026, from 3.01% for the same period in 2025.

Southside Bancshares, Inc. |54

The following table presents average earning assets and interest bearing liabilities together with the average yield on the earning assets and the average rate of the interest bearing liabilities (dollars in thousands) for the six months ended June 30, 2026 and 2025. The interest and related yields presented are on a fully taxable-equivalent basis and are therefore non-GAAP measures. See “Non-GAAP Financial Measures” for more information and for a reconciliation to GAAP.

(1) Interest on loans includes net fees on loans that are not material in amount.

(2) For the purpose of calculating the average yield, the average balance of securities do not include unrealized gains and losses on AFS securities.

(3) Yield/rate includes the impact of applicable derivatives.

Note: As of June 30, 2026 and 2025, loans totaling $9.6 million and $5.0 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Southside Bancshares, Inc. |55

Noninterest Income

Noninterest income consists of revenue generated from a broad range of financial services and activities and other fee-generating services that we either provide or in which we participate.

The following table details the categories included in noninterest income (dollars in thousands):

The 15.3% increase in noninterest income for the three months ended June 30, 2026, when compared to the same period in 2025, was due to increases in BOLI income, trust fees, other noninterest income, deposit services and brokerage services income. The 18.9% increase in noninterest income for the six months ended June 30, 2026, when compared to the same period in 2025, was due to increases in all noninterest income categories, however, the primary increases occurred in other noninterest income, trust fees, BOLI and a decrease in net loss on sale of AFS securities.

During the six months ended June 30, 2025, we sold MBS that resulted in a net loss on sale of AFS securities of $554,000.

Gain on sale of loans decreased for the three months ended June 30, 2026, when compared to the same period in 2025, due to a decrease in the volume of loans sold. During the six months ended June 30, 2026, gain on sale of loans increased when compared to the same period in 2025, due to an increase in the return on loans sold.

Trust fees increased for the three and six months ended June 30, 2026, when compared to the same periods in 2025, due to an increase in accounts under management, and to a lesser extent, fee repricing.

The increase in BOLI income for the three and six months ended June 30, 2026, when compared to the same periods in 2025, was due to death benefits of $47,000 and $543,000 realized in the first and second quarter of 2026, respectively, for former covered officers, and to a lesser extent, the purchase of a new policy for $5.5 million late in the fourth quarter of 2025.

Brokerage services income increased for the three and six months ended June 30, 2026, when compared to the same periods in 2025, due to an increase in assets under management.

Other noninterest income increased for the three and six months ended June 30, 2026, when compared to the same periods in 2025, primarily due to increases in swap fee income, mortgage servicing fee income and letter of credit fee income.

Southside Bancshares, Inc. |56

Noninterest Expense

We incur certain types of noninterest expenses associated with the operation of our various business activities. The following table details the categories included in noninterest expense (dollars in thousands):

The decrease in noninterest expense for the three months ended June 30, 2026, when compared to the same period in 2025, was primarily due to a decrease in other noninterest expense, partially offset by increases in salaries and employee benefits and professional fees. The increase in noninterest expense for the six months ended June 30, 2026, when compared to the same period in 2025, was primarily due to increases in salaries and employee benefits expense and loss on redemption of subordinated notes, partially offset by a decrease in other noninterest expense.

Salaries and employee benefits expense increased during the three and six months ended June 30, 2026, compared to the same periods in 2025, due to increases in direct salary expense, retirement expense and health insurance expense.

For the three and six months ended June 30, 2026, direct salary expense increased $652,000, or 3.4%, and $2.1 million, or 5.4%, respectively, when compared to the same periods in 2025, primarily due to normal salary increases effective in the first quarter of 2026 and an increase in stock compensation expense.

Retirement expense, included in salaries and employee benefits, increased $21,000, or 2.3%, and $460,000, or 26.3%, for the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025. This increase during the six months ended June 30, 2026, was primarily due to an increase in our split dollar expense related to the execution of a new split dollar agreement with an executive officer.

Health and life insurance expense, included in salaries and employee benefits, increased $29,000, or 1.4%, and $99,000, or 2.4%, for the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, primarily

Southside Bancshares, Inc. |57

due to premiums for a new short-term disability policy. We have a self-insured health plan which is supplemented with a stop loss policy.

ATM expense decreased for the three months ended June 30, 2026, when compared to the same period in 2025, primarily due to decreases in armored car expense and ATM repairs.

Professional fees increased for the three months ended June 30, 2026, when compared to the same period in 2025, due to increases in consulting and managed services fees.

Communications expense decreased for the three and six months ended June 30, 2026, when compared to the same periods in 2025, resulting from improved network management efficiency.

Amortization of intangibles decreased for the three and six months ended June 30, 2026, when compared to the same periods in 2025, due primarily to a decrease in core deposit intangible amortization which is recognized on an accelerated method resulting in a decline in expense over the amortization period.

Loss on redemption of subordinated notes consisted of the remaining unamortized discount of $601,000 and debt issuance costs of $190,000 associated with the notes at the time of redemption on February 15, 2026.

Other noninterest expense decreased for the three and six months ended June 30, 2026, when compared to the same periods in 2025, primarily due to a one-time charge of $1.2 million on the demolition of an old branch facility following completion of the new branch during the second quarter of 2025. Additional decreases included a decrease in the loss on other real estate owned. The decrease for the six months ended June 30, 2026, was partially offset by increases in stationary, printing and supplies expense, online banking expense and computer supplies expense.

Income Taxes

Pre-tax income for the three and six months ended June 30, 2026 was $32.6 million and $60.9 million, respectively, an increase of 22.8% and 15.4%, compared to $26.5 million and $52.8 million for the three and six months ended June 30, 2025. We recorded income tax expense of $5.7 million and $10.8 million for the three and six months ended June 30, 2026, respectively, compared to income tax expense of $4.7 million and $9.4 million for the same periods in 2025. The ETR as a percentage of pre-tax income was 17.6% and 17.7% for the three and six months ended June 30, 2026, respectively, compared to an ETR as a percentage of pre-tax income of 17.8% and 17.9% the three and six months ended June 30, 2025, respectively. The marginally lower ETR for the three and six months ended June 30, 2026 was partially due to a decrease in state income tax expense as a percentage of pre-tax income as well as a discrete tax benefit recorded in connection with equity award transactions as compared to the same periods in 2025.

The ETR differs from the statutory rate of 21% primarily due to the effect of tax-exempt income from municipal loans and securities, BOLI and state income tax. The net deferred tax asset totaled $26.1 million at June 30, 2026, compared to $27.1 million at December 31, 2025. The decrease in the net deferred tax asset is primarily the result of an increase in the estimated fair value of the effective hedging derivatives.

See “Note 11 – Income Taxes” to our consolidated financial statements included in this report. No valuation allowance was recorded at June 30, 2026 or December 31, 2025, as management believes it is more likely than not that all of the deferred tax asset items will be realized in future years.

Southside Bancshares, Inc. |58

Composition of Loans

One of our main objectives is to seek attractive lending opportunities in Texas, primarily in the market areas in which we operate. Refer to “Part I – Item 1. Business – Market Area” in the 2025 Form 10-K for a discussion of our primary market area and the geographic concentration of our loan portfolio as of December 31, 2025. There were no substantial changes in these concentrations during the six months ended June 30, 2026. The majority of our loan originations are made to borrowers who live in and/or conduct business in the market areas of Texas in which we operate or adjoin, with the exception of municipal loans, which were made primarily throughout the state of Texas. Municipal loans are made to municipalities, counties, school districts and colleges.

The following table sets forth loan totals by class as of the dates presented (dollars in thousands):

Our total loan portfolio increased $131.6 million, or 2.7%, compared to December 31, 2025, and increased $347.6 million, or 7.6%, compared to June 30, 2025. Increases when compared to December 31, 2025 include construction, commercial owner-occupied, commercial real estate, commercial loans, and municipal loans, partially offset by decreases in 1-4 family residential and loans to individuals. Compared to June 30, 2025, there were increases in construction, commercial owner-occupied, commercial real estate, and commercial loans, partially offset by decreases in 1-4 family residential, municipal loans, and loans to individuals.

At June 30, 2026, our real estate loans represented 82.6% of our loan portfolio and were comprised of commercial real estate loans of 58.9%, 1-4 family residential loans of 17.5%, construction loans of 14.7% and commercial owner-occupied of 8.9%. Commercial real estate loans and commercial owner-occupied primarily include loans collateralized by retail, commercial office buildings, multi-family residential buildings, medical facilities and offices, senior living, assisted living and skilled nursing facilities, warehouse facilities, hotels and churches. Our 1-4 family residential loans consist primarily of loans secured by first mortgages on owner occupied 1-4 family residences. Our construction loans are collateralized by property located primarily in or near the market areas we serve.

Nonperforming Assets

Nonperforming assets consist of delinquent loans 90 days or more past due, nonaccrual loans, OREO, repossessed assets and restructured loans. Nonaccrual loans are loans 90 days or more delinquent and collection in full of both the principal and interest is not expected. Additionally, some loans that are not delinquent or that are delinquent less than 90 days may be placed on nonaccrual status if it is probable that we will not receive contractual principal and interest payments in accordance with the terms of the respective loan agreements. When a loan is categorized as nonaccrual, the accrual of interest is discontinued and any accrued balance is reversed for financial statement purposes. OREO represents real estate taken in full or partial satisfaction of debts previously contracted. The dollar amount of OREO is based on a current evaluation of the OREO at the time it is recorded on our books, net of estimated selling costs. Updated valuations are obtained as needed and any additional impairments are recognized. Restructured loans represent loans that have been modified due to the borrower experiencing financial difficulty by providing interest rate reductions or below market interest rates, restructuring amortization schedules and other actions intended to minimize potential losses. Categorization of a loan as nonperforming is not in itself a reliable indicator of potential loan loss. Other factors, such as the value of collateral securing the loan and the financial condition of the borrower are considered in judgments as to potential loan loss.

Southside Bancshares, Inc. |59

The following table sets forth nonperforming assets for the periods presented (dollars in thousands):

Nonperforming assets hinder our ability to earn interest income. Decreases in earnings can result from both the loss of interest income and the costs associated with maintaining the OREO, for taxes, insurance and other operating expenses. We actively market all OREO properties and do not hold them for investment purposes.

Allowance for Credit Losses – Loans

In accordance with ASC 326, the allowance for credit losses on loans is estimated and recognized upon origination of the loan based on expected credit losses. The CECL model uses historical experience and current conditions for homogeneous pools of loans, and reasonable and supportable forecasts about future events. The impact of varying economic conditions and portfolio stress factors are a component of the credit loss models applied to each portfolio. Reserve factors are specific to the loan segments that share similar risk characteristics based on the probability of default assumptions and loss given default assumptions, over the contractual term. The forecasted periods gradually mean-revert the economic inputs to their long-run historical trends. Management evaluates the economic data points used in the Moody’s forecasting scenarios on a quarterly basis to determine the most appropriate impact to the various portfolio characteristics based on management’s view and applies weighting to various forecasting scenarios as deemed appropriate based on known and expected economic activities. Management also considers and may apply relevant qualitative factors, not previously considered, to determine the appropriate allowance level. The use of the CECL model includes significant judgment by management and may differ from those of our peers due to different historical loss patterns, economic forecasts, and the length of time of the reasonable and supportable forecast period and reversion period.

We utilize Moody’s Analytics economic forecast scenarios and assign probability weighting to those scenarios which best reflect management’s views on the economic forecast. The probability weighting and scenarios utilized for the estimate of the allowance were generally reflective of the economic forecast in our CECL model as of June 30, 2026.

When determining the appropriate allowance for credit losses on our loan portfolio, our commercial construction, commercial owner-occupied and commercial real estate loans, commercial loans and municipal loans utilize the probability of default/loss given default discounted cash flow approach. Reserves on these loans are based upon risk factors including the loan type and

Southside Bancshares, Inc. |60

structure, collateral type, leverage ratio, refinancing risk and origination quality, among others. Our consumer construction real estate loans, 1-4 family residential loans and our loans to individuals use a loss rate based upon risk factors including loan types, origination year and credit scores.

Loans evaluated collectively in a pool are monitored to ensure they continue to exhibit similar risk characteristics with other loans in the pool. If a loan does not share similar risk characteristics with other loans, expected credit losses for that loan are evaluated individually.

As of June 30, 2026, our review of the loan portfolio indicated that an allowance for loan losses of $45.6 million was appropriate to cover expected losses in the portfolio. Changes in economic and other conditions, including the application of the CECL model, may require future adjustments to the allowance for loan losses.

During the six months ended June 30, 2026, the allowance for loan losses increased $495,000, or 1.1%, to $45.6 million, or 0.92% of total loans, when compared to $45.1 million, or 0.94% of total loans, at December 31, 2025.

For the three and six months ended June 30, 2026, loan charge-offs were $858,000 and $1.5 million, respectively, and recoveries were $514,000 and $1.0 million, respectively. For the three and six months ended June 30, 2025, loan charge-offs were $1.2 million and $1.8 million, respectively, and recoveries were $342,000 and $652,000, respectively. For the three months ended June 30, 2026, we recorded a reversal of provision for credit losses for loans of $24,000. For the six months ended June 30, 2026 we recorded a provision for credit losses for loans of $990,000. For the three and six months ended June 30, 2025, we recorded a provision for credit losses for loans of $650,000 and $692,000, respectively.

Allowance for Credit Losses – Off-Balance-Sheet Credit Exposures

Allowance for off-balance-sheet credit exposures were as follows (in thousands):

Our off-balance-sheet credit exposures include contractual commitments to extend credit and standby letters of credit. For these credit exposures we evaluate the expected credit losses using usage given defaults and credit conversion factors depending on the type of commitment and based upon historical usage rates. These assumptions are reevaluated on an annual basis and adjusted if necessary. For additional information regarding our methodology used to estimate the allowance for credit losses on off-balance-sheet credit exposures, see “Note 12 – Off-Balance-Sheet Arrangements, Commitments and Contingencies” to our consolidated financial statements included in this report.

Southside Bancshares, Inc. |61

Capital Resources and Liquidity

Our total shareholders’ equity at June 30, 2026 increased 4.1%, or $34.8 million, to $882.5 million, or 10.1% of total assets, compared to $847.6 million, or 10.0% of total assets, at December 31, 2025. The increase in shareholders’ equity was the result of net income of $50.1 million, other comprehensive income of $3.6 million, stock compensation expense of $2.7 million and common stock issued under our dividend reinvestment plan of $466,000, partially offset by cash dividends paid of $21.4 million and net issuance of common stock under employee stock plans of $499,000.

The Company’s Common Equity Tier 1 capital includes common stock and related paid-in capital, net of treasury stock, and retained earnings. The Bank’s Common Equity Tier 1 capital includes common stock and related paid-in capital and retained earnings. In connection with the adoption of the Basel III Capital Rules, we elected to opt-out of the requirement to include accumulated other comprehensive income in Common Equity Tier 1. Common Equity Tier 1 for both the Company and the Bank is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities.

Tier 1 capital includes Common Equity Tier 1 capital and additional Tier 1 capital. For the Company, additional Tier 1 capital at June 30, 2026 included $58.5 million of trust preferred securities. For bank holding companies that had assets of less than $15 billion as of December 31, 2009, trust preferred securities issued prior to May 19, 2010 can be treated as Tier 1 capital to the extent that they do not exceed 25% of Tier 1 capital after the application of capital deductions and adjustments. The Bank did not have any additional Tier 1 capital beyond Common Equity Tier 1 at June 30, 2026.

Total capital includes Tier 1 capital and Tier 2 capital. Tier 2 capital for both the Company and the Bank includes a permissible portion of the allowance for credit losses on loans, off-balance sheet exposures and HTM securities. Tier 2 capital for the Company also includes $147.6 million of qualified subordinated debt as of June 30, 2026. The permissible portion of qualified subordinated notes decreases 20% per year during the final five years of the term of the notes.

Management believes that, as of June 30, 2026, we met all capital adequacy requirements to which we were subject. It is management’s intention to maintain our capital at a level acceptable to all regulatory authorities and future dividend payments will be determined accordingly. Regulatory authorities require that any dividend payments made by either the Company or the Bank not exceed earnings for that year. Accordingly, shareholders should not anticipate a continuation of the cash dividend payments simply because of the existence of a dividend reinvestment program. The payment of dividends will depend upon future earnings, our financial condition and other related factors including the discretion of the Board.

Southside Bancshares, Inc. |62

To be categorized as well capitalized we must maintain minimum Common Equity Tier 1 risk-based, Tier 1 risk-based, Total capital risk-based and Tier 1 leverage ratios as set forth in the following table (dollars in thousands):

(1) Refers to quarterly average assets as calculated in accordance with policies established by bank regulatory agencies.

As of June 30, 2026, Southside Bancshares and Southside Bank met all capital adequacy requirements under the Basel III Capital Rules that became fully phased-in as of January 1, 2019. Refer to the Supervision and Regulation section in the 2025 Form 10-K for further discussion of our capital requirements.

Southside Bancshares, Inc. |63

The table below summarizes our key equity ratios for the periods presented:

Management of Liquidity

Liquidity management involves our ability to convert assets to cash with minimum risk of loss while enabling us to meet our current and future obligations to our customers at any time. This means addressing (1) the immediate cash withdrawal requirements of depositors and other fund providers; (2) the funding requirements of lines and letters of credit; and (3) the short-term credit needs of customers. Liquidity is provided by cash, interest earning deposits and short-term investments that can be readily liquidated with a minimum risk of loss. At June 30, 2026, these investments were 7.3% of total assets, as compared with 8.1% and 8.7% for December 31, 2025 and June 30, 2025, respectively. The decrease to 7.3% at June 30, 2026 as compared to December 31, 2025 and June 30, 2025, is largely driven by an increase in total assets and a decrease in the short-term investment portfolio and cash and due from banks. Liquidity is further provided through the matching, by time period, of rate sensitive interest earning assets with rate sensitive interest bearing liabilities. The Bank has three unsecured lines of credit for the purchase of overnight federal funds at prevailing rates with Frost Bank, Amegy Bank and TIB – The Independent Bankers Bank for $40.0 million, $25.0 million and $15.0 million, respectively. There were no federal funds purchased at June 30, 2026 or December 31, 2025. To provide more liquidity in response to economic conditions in recent years, the Federal Reserve has encouraged broader use of the discount window. At June 30, 2026, the amount of additional funding the Bank could obtain from the FRDW, collateralized by securities, was approximately $279.3 million. At June 30, 2026 and December 31, 2025, we had $355.0 million and $110.0 million, respectively, in borrowings from the FRDW. At June 30, 2026, the amount of additional funding Southside Bank could obtain from FHLB, collateralized by FHLB stock, nonspecified loans and/or securities, was approximately $1.63 billion, net of FHLB stock purchases required. The Bank has a $5.0 million line of credit with Frost Bank to be used to issue letters of credit, and at June 30, 2026, the line had one outstanding letter of credit for $155,000. The Bank currently has four outstanding letters of credit from FHLB held as collateral for loans totaling $19.3 million.

Interest rate sensitivity management seeks to avoid fluctuating net interest margins and to enhance consistent growth of net interest income through periods of changing interest rates. The ALCO closely monitors various liquidity ratios and interest rate spreads and margins. The ALCO utilizes a simulation model to perform interest rate simulation tests that apply various interest rate scenarios including immediate shocks and MVPE to assist in determining our overall interest rate risk and the adequacy of our liquidity position. In addition, the ALCO utilizes this simulation model to determine the impact on net interest income of various interest rate scenarios. By utilizing this methodology, we can determine potential changes to make to the asset and liability mix to minimize the change in net interest income under these various interest rate scenarios.

Management continually evaluates our liquidity position and currently believes the Company has adequate funding to meet our financial needs.

Southside Bancshares, Inc. |64

Expansion

In March 2026, we opened traditional branch locations at Bellwood Park in Tyler, Texas, and in The Woodlands, Texas.

Recent Accounting Pronouncements

See “Note 1 – Summary of Significant Accounting and Reporting Policies” in our consolidated financial statements included in this Quarterly Report on Form 10-Q.