PROSPERITY BANCSHARES INC

Previous wording

the timing, impact and other uncertainties of any future acquisitions and the Company’s ability to identify suitable future acquisition candidates, the success or failure in the integration of their operations, and the ability to enter new markets successfully and capitalize on growth opportunities;

Current wording

the timing, impact and other uncertainties of any future acquisitions, including the pending acquisition of American, and the Company’s ability to identify suitable future acquisition candidates, the success or failure in the integration of their operations, and the ability to enter new markets successfully and capitalize on growth opportunities;

Previous wording

Prosperity Bancshares, Inc., a Texas corporation (“Bancshares”), is a registered financial holding company that derives substantially all of its revenues and income from the operation of its bank subsidiary, Prosperity Bank (the “Bank,” and together with Bancshares, the “Company”). The Bank provides a wide array of financial products and services to businesses and consumers throughout Texas and Oklahoma. As of March 31, 2025, the Bank operated 284 full service banking locations: 65 in the Houston area including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 62 in the Dallas/Fort Worth area; 22 in the East Texas area; 31 in the Central Texas area including Austin and San Antonio; 45 in the West Texas area including Lubbock,

Current wording

Prosperity Bancshares, Inc., a Texas corporation (“Bancshares”), is a registered financial holding company that derives substantially all of its revenues and income from the operation of its bank subsidiary, Prosperity Bank (the “Bank,” and together with Bancshares, the “Company”). The Bank provides a wide array of financial products and services to businesses and consumers throughout Texas and Oklahoma. As of June 30, 2025, the Bank operated 283 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 61 in the Dallas/Fort Worth area; 22 in the East Texas area; 31 in the Central Texas area including Austin and San Antonio; 45 in the West Texas area including Lubbock, Midland-Odessa, Abilene, Amarillo and Wichita Falls; 15 in the Bryan/College Station area; 6 in the Central Oklahoma area; and 8 in the Tulsa, Oklahoma area. The Company’s principal executive office is located at Prosperity Bank Plaza, 4295 San Felipe in Houston, Texas, and its telephone number is (281) 269-7199. The Company’s website address is www.prosperitybankusa.com. Information contained on the Company’s website is not incorporated by reference into this quarterly report on Form 10-Q and is not part of this or any other report.

Previous wording

Total assets were $38.76 billion at March 31, 2025 compared with $39.57 billion at December 31, 2024, a decrease of $802.1 million or 2.0%. Total loans were $21.98 billion at March 31, 2025 compared with $22.15 billion at December 31, 2024, a decrease of $171.6 million or 0.8%. Total deposits were $28.03 billion at March 31, 2025 compared with $28.38 billion at December 31, 2024, a decrease of $354.5 million or 1.2%. Total shareholders’ equity was $7.52 billion at March 31, 2025 compared with $7.44 billion at December 31, 2024, an increase of $78.6 million or 1.1%.

Current wording

Total assets were $38.42 billion at June 30, 2025 compared with $39.57 billion at December 31, 2024. Total loans were $22.20 billion at June 30, 2025 compared with $22.15 billion at December 31, 2024, an increase of $48.2 million or 0.2%. Total deposits were $27.47 billion at June 30, 2025 compared with $28.38 billion at December 31, 2024, a decrease of $907.9 million or 3.2%. Total shareholders’ equity was $7.60 billion at June 30, 2025 compared with $7.44 billion at December 31, 2024, an increase of $161.2 million or 2.2%.

Previous wording

Merger of Lone Star State Bancshares, Inc. — Effective April 1, 2024, the Company completed the merger of Lone Star State Bancshares, Inc. (“Lone Star”) into Bancshares and the subsequent merger of its wholly owned subsidiary, Lone Star State Bank of West Texas (“Lone Star Bank”), into the Bank (collectively, the “Merger”). Lone Star operated five full-service banking offices in the West Texas area, including its main office in Lubbock, and one banking center in each of Brownfield, Midland, Odessa and Big Spring, Texas. As of March 31, 2024, Lone Star, on a consolidated basis, reported total assets of $1.38 billion, total loans of $1.08 billion and total deposits of $1.24 billion.

Current wording

Merger of Lone Star State Bancshares, Inc.— Effective April 1, 2024, the Company completed the merger of Lone Star State Bancshares, Inc. (“Lone Star”) into Bancshares and the subsequent merger of its wholly owned subsidiary, Lone Star State Bank of West Texas (“Lone Star Bank”), into the Bank (collectively, the “Lone Star Merger”). Lone Star operated five full-service banking offices in the West Texas area, including its main office in Lubbock, and one banking center in each of Brownfield, Midland, Odessa and Big Spring, Texas. As of March 31, 2024, Lone Star, on a consolidated basis, reported total assets of $1.38 billion, total loans of $1.08 billion and total deposits of $1.24 billion.

Previous wording

Pursuant to the terms of the definitive agreement, Bancshares issued 2,376,182 shares of its common stock plus approximately $64.1 million in cash for all outstanding shares of Lone Star. This resulted in goodwill of $106.7 million as of March 31, 2025. Goodwill represents the excess of the total purchase price paid over the fair value of the assets acquired, net of the fair value of liabilities assumed. Additionally, the Company recognized $17.7 million of core deposit intangibles as of March 31, 2025. In October 2024, the Company completed the operational conversion of Lone Star Bank.

Current wording

Pursuant to the terms of the definitive agreement, Bancshares issued 2,376,182 shares of its common stock plus approximately $64.1 million in cash for all outstanding shares of Lone Star. This resulted in goodwill of $106.7 million as of June 30, 2025, which reflected all final subsequent fair value adjustments. Goodwill represents the excess of the total purchase price paid over the fair value of the assets acquired, net of the fair value of liabilities assumed. Additionally, the Company recognized $17.7 million of core deposit intangibles as of June 30, 2025. In October 2024, the Company completed the operational conversion of Lone Star Bank.

Previous wording

The Company’s allowance for credit losses consists of two elements: (1) specific valuation allowances based on expected losses on impaired loans and certain purchased credit deteriorated loans (“PCD”) loans; and (2) a general valuation allowance based on historical lifetime loan loss experience, current economic conditions, reasonable and supportable forecasted economic conditions and other qualitative risk factors both internal and external to the Company. Management has established an allowance for credit losses which it believes is adequate to cover the expected losses in the Company’s loan portfolio. Based on an evaluation of the portfolio, management presents a quarterly review of the allowance for credit losses to the Bank’s Board of Directors, indicating any change in the allowance since the last review and any recommendations as to adjustments in the allowance. In making its evaluation, management considers factors such as historical lifetime loan loss experience, the amount of nonperforming assets and related collateral, the volume, growth and composition of the portfolio, current economic conditions and reasonable and supportable forecasted economic conditions that may affect borrower ability to pay and the value of collateral, the evaluation of the portfolio through its internal loan review process and other relevant factors. Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that, in management’s judgment, should be charged off. Charge-offs occur when loans are deemed to be uncollectible.

Current wording

The Company’s allowance for credit losses consists of two elements: (1) specific valuation allowances based on expected losses on impaired loans and certain purchased credit deteriorated loans (“PCD”) loans; and (2) a general valuation allowance based on historical lifetime loan loss experience, current economic conditions, reasonable and supportable forecasted economic conditions and other qualitative risk factors both internal and external to the Company. Management has established an allowance for credit losses which it believes is adequate to cover expected losses in the Company’s loan portfolio. Based on an evaluation of the portfolio, management presents a quarterly review of the allowance for credit losses to the Bank’s Board of Directors, indicating any change in the allowance since the last review and any recommendations as to adjustments in the allowance. In making its evaluation, management considers factors such as historical lifetime loan loss experience, the amount of nonperforming assets and related collateral, the volume, growth and composition of the portfolio, current economic conditions and reasonable and supportable forecasted economic conditions that may affect borrower ability to pay and the value of collateral, the evaluation of the portfolio through its internal loan review process and other relevant factors. Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that, in management’s judgment, should be charged off. Charge-offs occur when loans are deemed to be uncollectible.

Previous wording

The Company evaluates all restructurings, including restructurings for borrowers experiencing financial difficulty, to determine whether they result in a new loan or a continuation of an existing loan. In accordance with CECL, the Company only establishes a specific reserve for modifications of loans made to borrowers experiencing financial difficulty when the loan is identified as impaired. The effect of most modifications of loans made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance. The Company adjusts the terms of loans for certain borrowers when it believes such changes will help its customers manage their loan obligations and increase the collectability of the loans. Modifications of loans made to borrowers experiencing financial difficulty may include but are not limited to changes in committed loan amount, interest rate, amortization, note maturity, borrower, guarantor, collateral, forbearance, forgiveness of principal or interest, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. The approval of modifications of loans for borrowers experiencing financial difficulty are handled on a case-by-case basis. For further discussion of the methodology used in the determination of the allowance for credit losses on loans, see “Accounting for Acquired Loans and the Allowance for Acquired Credit Losses” below and “Financial Condition—Allowance for Credit Losses on Loans” below.

Current wording

The Company evaluates all restructurings, including restructurings for borrowers experiencing financial difficulty, to determine whether they result in a new loan or a continuation of an existing loan. In accordance with CECL, the Company only establishes a specific reserve for modifications of loans made to borrowers experiencing financial difficulty when the loan is identified as impaired. The effect of most modifications of loans made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance. The Company adjusts the terms of loans for certain borrowers when it believes such changes will help its customers manage their loan obligations and increase the collectability of the loans. Modifications of loans made to borrowers experiencing financial difficulty may include but are not limited to changes in committed loan amount, interest rate, amortization, note maturity, borrower, guarantor, collateral, forbearance, forgiveness of principal or interest, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. The approval of modifications of loans for borrowers experiencing financial difficulty are handled on a case-by-case basis. For further discussion of the methodology used in the determination of the allowance for credit losses on loans, see “Accounting for Acquired

Previous wording

For the quarter ended March 31, 2025, net income available to common shareholders was $130.2 million or $1.37 per diluted common share compared with $110.4 million or $1.18 per diluted common share for the same period in 2024. The changes were primarily due to an increase in net interest income, partially offset by an increase in salaries and benefits and provision for income taxes. The Company posted annualized returns on average common equity of 6.94% and 6.20%, annualized returns on average assets of 1.34% and 1.13% and efficiency ratios of 45.71% and 49.07% for the quarters ended March 31, 2025 and 2024, respectively. The efficiency ratio is calculated by dividing total noninterest expense (excluding net gains and losses on the sale, write down or write up of assets and securities) by the sum of net interest income and noninterest income. Because the ratio is a measure of revenues and expenses resulting from the Company’s lending activities and fee-based banking services, net gains and losses on the sale, write-up or write-down of assets and securities are not included. Additionally, taxes are not part of this calculation.

Current wording

For the quarter ended June 30, 2025, net income available to common shareholders was $135.2 million compared with $111.6 million for the same period in 2024, an increase of $23.6 million or 21.1%. Net income per diluted common share was $1.42 for the quarter ended June 30, 2025 compared with $1.17 for the same period in 2024, an increase of 21.4%. The changes were primarily due to an increase in net interest income, a decrease in merger related provision and expenses and lower regulatory assessments and FDIC insurance, partially offset by a decrease in net gain on sale or write-up of securities. The Company posted annualized returns on average common equity of 7.13% and 6.10%, annualized returns on average assets of 1.41% and 1.12% and efficiency ratios of 44.80% and 51.82% for the quarters ended June 30, 2025 and 2024, respectively. The efficiency ratio is calculated by dividing total noninterest expense (excluding net gains and losses on the sale, write down or write up of assets and securities) by the sum of net interest income and noninterest income. Because the ratio is a measure of revenues and expenses resulting from the Company’s lending activities and fee-based banking services, net gains and losses on the sale, write-up or write-down of assets and securities are not included. Additionally, taxes are not part of this calculation.

Previous wording

Net interest income before the provision for credit losses was $265.4 million for the quarter ended March 31, 2025, an increase of $27.1 million or 11.4% compared with $238.2 million for the same period in 2024. The change was primarily due to an increase in the average balances and average rates on loans, an increase in the average balances on federal funds sold and other earning assets and a decrease in the average balances and rates on other borrowings, partially offset by a decrease in the average balances on investment securities and an increase in the average balances on interest-bearing deposits.

Current wording

Net interest income before the provision for credit losses was $267.7 million for the quarter ended June 30, 2025, an increase of $8.9 million or 3.5% compared with $258.8 million for the same period in 2024. The change was primarily due to a decrease in the average balances and average rates on other borrowings and a decrease in the average rates on interest-bearing deposits, partially offset by a decrease in the average rates on loans, a decrease in the average balances on investment securities and a decrease in the average balances and average rates on federal funds sold and other earning assets.

Previous wording

Interest income on securities was $57.9 million for the quarter ended March 31, 2025, a decrease of $8.5 million or 12.8% compared with $66.4 million for the same period in 2024, primarily due to a decrease in the average balances on investment securities.

Current wording

Interest income on securities was $57.8 million for the quarter ended June 30, 2025, a decrease of $4.6 million or 7.4% compared with $62.4 million for the same period in 2024, primarily due to a decrease in the average balances on investment securities.

Previous wording

The net interest margin on a tax-equivalent basis was 3.14% for the quarter ended March 31, 2025, an increase of 35 basis points compared with 2.79% for the same period in 2024. The change was primarily due to an increase in the average balances and average rates on loans, an increase in the average balances on federal funds sold and other earning assets and a decrease in the average balances and average rates on other borrowings, partially offset by a decrease in the average balances on investment securities and an increase in the average balances on interest-bearing deposits.

Current wording

The net interest margin on a tax-equivalent basis was 3.18% for the quarter ended June 30, 2025, an increase of 24 basis points compared with 2.94% for the same period in 2024. The change was primarily due to a decrease in the average balances and average rates on other borrowings and a decrease in the average rates on interest-bearing deposits, partially offset by a decrease in the average rates on loans and a decrease in the average balances on investment securities.

Previous wording

Average interest-bearing liabilities were $21.65 billion for the quarter ended March 31, 2025, a decrease of $442.8 million or 2.0% compared with $22.10 billion for the same period in 2024, primarily due to a decrease in other borrowings and securities sold under repurchase agreements, partially offset by an increase in interest-earning deposits. The average rate on interest-bearing liabilities was 2.39% for the quarter ended March 31, 2025, a decrease of 23 basis points compared with 2.62% for the same period in 2024.

Current wording

Average interest-bearing liabilities were $21.34 billion for the six months ended June 30, 2025, a decrease of $948.8 million or 4.3% compared with $22.29 billion for the same period in 2024, primarily due to a decrease in other borrowings partially offset by an increase in interest-bearing deposits. The average rate on interest-bearing liabilities was 2.39% for the six months ended June 30, 2025, a decrease of 30 basis points compared with 2.69% for the same period in 2024.

Previous wording

The following table presents, for the periods indicated, the total dollar amount of average balances, interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities and the resultant rates. Except as indicated in the footnotes, no tax-equivalent adjustments were made and all average balances are daily average balances. Any nonaccruing loans have been included in the tables as loans carrying a zero yield.

Current wording

The following tables present, for the periods indicated, the total dollar amount of average balances, interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities and the resultant rates. Except as indicated in the footnotes, no tax-equivalent adjustments were made and all average balances are daily average balances. Any nonaccruing loans have been included in the tables as loans carrying a zero yield.

Previous wording

There was no provision for credit losses for the three months ended March 31, 2025 and 2024, respectively.

Current wording

There was no provision for credit losses for the three and six months ended June 30, 2025 compared to $9.1 million provision for credit losses for the three and six months ended June 30, 2024. As a result of the loans acquired in the Lone Star Merger, the second quarter of 2024 included a $7.9 million provision for credit losses on loans and a $1.2 million provision for credit losses on off-balance sheet credit exposures.

Previous wording

Net charge-offs were $2.7 million for the quarter ended March 31, 2025 compared with net charge-offs of $2.1 million for the quarter ended March 31, 2024. For the first quarter of 2025, $8.3 million of reserves on resolved PCD loans without any related charge-offs were released to the general reserve.

Current wording

Net charge-offs were $3.0 million for the quarter ended June 30, 2025 compared with net charge-offs of $4.4 million for the quarter ended June 30, 2024. For the three months ended June 30, 2025, $2.1 million of reserves on resolved PCD loans without any related charge-offs was released to the general reserve.

Previous wording

Includes stock-based compensation expense of $3.1 million and $3.4 million for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Includes stock-based compensation expense of $3.0 million and $3.1 million for the three months ended June 30, 2025 and 2024, respectively, and $6.1 million and $6.5 million for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

The amount of federal and state income tax expense is influenced by the amount of pre-tax income, the amount of tax-exempt income and the amount of nondeductible expenses. Income tax expense totaled $36.2 million for the three months ended March 31, 2025 compared with $30.8 million for the same period in 2024, an increase of $5.3 million or 17.2%. The Company’s effective tax rate for the three months ended March 31, 2025 and 2024 was 21.7% and 21.8%, respectively.

Current wording

The amount of federal and state income tax expense is influenced by the amount of pre-tax income, the amount of tax-exempt income and the amount of nondeductible expenses. Income tax expense totaled $37.0 million for the three months ended June 30, 2025 compared with $31.3 million for the same period in 2024, an increase of $5.7 million or 18.2%. Income tax expense totaled $73.1 million for the six months ended June 30, 2025 compared with $62.1 million for the same period in 2024, an increase of $11.0 million or 17.7%. The Company’s effective tax rate for the three months ended June 30, 2025 and 2024 was 21.5% and 21.9%, respectively. The Company’s effective tax rate for the six months ended June 30, 2025 and 2024 was 21.6% and 21.9%, respectively.

Previous wording

At March 31, 2025, total loans were $21.98 billion, a decrease of $171.6 million or 0.8% compared with $22.15 billion at December 31, 2024. Loans at March 31, 2025 included $9.8 million of loans held for sale and $1.06 billion of Warehouse Purchase Program loans compared with $10.7 million of loans held for sale and $1.08 billion of Warehouse Purchase Program loans at December 31, 2024. At March 31, 2025, loans represented 56.7% of total assets compared with 56.0% of total assets at December 31, 2024.

Current wording

At June 30, 2025, total loans were $22.20 billion, an increase of $48.2 million or 0.2% compared with $22.15 billion at December 31, 2024. Loans at June 30, 2025 included $6.0 million of loans held for sale and $1.29 billion of Warehouse Purchase Program loans compared with $10.7 million of loans held for sale and $1.08 billion of Warehouse Purchase Program loans at December 31, 2024. At June 30, 2025, loans represented 57.8% of total assets compared with 56.0% of total assets at December 31, 2024.

Previous wording

Nonperforming assets were 0.37% of total loans and other real estate at March 31, 2025 and December 31, 2024. The allowance for credit losses on loans as a percentage of total nonperforming loans was 475.8% at March 31, 2025 and 463.9% at December 31, 2024.

Current wording

Nonperforming assets were 0.50% of total loans and other real estate at June 30, 2025 and 0.37% of total loans and other real estate at December 31, 2024. The allowance for credit losses on loans as a percentage of total nonperforming loans was 337.3% at June 30, 2025 and 463.9% at December 31, 2024.

Previous wording

The allowance for credit losses is adjusted through charges to earnings in the form of a provision for credit losses. Management has established an allowance for credit losses on loans which it believes is adequate to cover the expected losses in the Company’s loan portfolio as of March 31, 2025. The amount of the allowance for credit losses on loans is affected by the following: (1) charge-offs of loans that occur when loans are deemed uncollectible and decrease the allowance, (2) recoveries on loans previously charged off that increase the allowance, (3) provisions for credit losses charged to earnings that increase the allowance, and (4) provision releases returned to earnings that decrease the allowance. Based on an evaluation of the loan portfolio and consideration of the factors listed below, management presents a quarterly review of the allowance for credit losses to the Bank’s Board of Directors, indicating any change in the allowance since the last review and any recommendations as to adjustments in the allowance. Although management believes it uses the best information available to make determinations with respect to the allowance for credit losses, future adjustments may be necessary if economic conditions or borrower performance differ from the assumptions used in making the initial determinations.

Current wording

The allowance for credit losses is adjusted through charges to earnings in the form of a provision for credit losses. Management has established an allowance for credit losses on loans which it believes is adequate to cover expected losses in the Company’s loan portfolio as of June 30, 2025. The amount of the allowance for credit losses on loans is affected by the following: (1) charge-offs of loans that occur when loans are deemed uncollectible and decrease the allowance, (2) recoveries on loans previously charged off that increase the allowance, (3) provisions for credit losses charged to earnings that increase the allowance, and (4) provision releases returned to earnings that decrease the allowance. Based on an evaluation of the loan portfolio and consideration of the factors listed below, management presents a quarterly review of the allowance for credit losses to the Bank’s Board of Directors, indicating any change in the allowance since the last review and any recommendations as to adjustments in the allowance. Although management believes it uses the best information available to make determinations with respect to the allowance for credit losses, future adjustments may be necessary if economic conditions or borrower performance differ from the assumptions used in making the initial determinations.

Previous wording

The Company had gross charge-offs on originated loans of $3.4 million during the three months ended March 31, 2025. Partially offsetting these charge-offs were recoveries on originated loans of $786 thousand. Gross charge-offs on acquired loans were $567 thousand during the three months ended March 31, 2025. Offsetting these charge-offs were recoveries on acquired loans of $453 thousand. Total charge-offs for the three months ended March 31, 2025 were $3.9 million, partially offset by total recoveries of $1.2 million.

Current wording

The Company had gross charge-offs on originated loans of $7.4 million during the six months ended June 30, 2025. Partially offsetting these charge-offs were recoveries on originated loans of $1.3 million. Gross charge-offs on acquired loans were $795 thousand during the six months ended June 30, 2025. Offsetting these charge-offs were recoveries on acquired loans of $1.1 million. Total charge-offs for the six months ended June 30, 2025 were $8.2 million, partially offset by total recoveries of $2.4 million.

Previous wording

The allowance for credit losses on loans totaled $349.1 million at March 31, 2025 compared with $351.8 million at December 31, 2024, a decrease of $2.7 million or 0.8%. The allowance for credit losses on loans totaled 1.59% of total loans at March 31, 2025 and December 31, 2024.

Current wording

The allowance for credit losses on loans totaled $346.1 million at June 30, 2025 compared with $351.8 million at December 31, 2024, a decrease of $5.7 million or 1.6%. The allowance for credit losses on loans totaled 1.56% of total loans at June 30, 2025 and 1.59% of total loans at December 31, 2024.

Previous wording

At March 31, 2025, $234.2 million of the allowance for credit losses on loans was attributable to originated loans, an increase of $6.9 million or 3.1% compared with $227.2 million of the allowance at December 31, 2024. At March 31, 2025, $31.4 million of the allowance for credit losses on loans was attributable to re-underwritten acquired loans compared with $32.3 million of the allowance at December 31, 2024, a decrease of $882 thousand or 2.7%. At March 31, 2025, $24.5 million of the allowance for credit losses on loans was attributable to Non-PCD loans compared with $25.0 million of the allowance at December 31, 2024, a decrease of $450 thousand or 1.8%. At March 31, 2025, $59.0 million of the allowance for credit losses on loans was attributable to PCD loans compared with $67.4 million of the allowance at December 31, 2024, a decrease of $8.3 million or 12.4%.

Current wording

At June 30, 2025, $234.9 million of the allowance for credit losses on loans was attributable to originated loans, an increase of $7.7 million or 3.4% compared with $227.2 million of the allowance at December 31, 2024. At June 30, 2025, $31.9 million of the allowance for credit losses on loans was attributable to re-underwritten acquired loans compared with $32.3 million of the allowance at December 31, 2024, a decrease of $341 thousand or 1.1%. At June 30, 2025, $22.3 million of the allowance for credit losses on loans was attributable to Non-PCD loans compared with $25.0 million of the allowance at December 31, 2024, a decrease of $2.6 million or 10.5%. At June 30, 2025, $56.9 million of the allowance for credit losses on loans was attributable to PCD loans compared with $67.4 million of the allowance at December 31, 2024, a decrease of $10.5 million or 15.5%.

Previous wording

At March 31, 2025, the Company had $32.0 million of total outstanding net accretable discounts on Non-PCD loans and PCD loans. The Company believes that the allowance for credit losses on loans at March 31, 2025 is adequate to cover expected losses that may be realized from the loan portfolio as of such date. Nevertheless, the Company could sustain losses in future periods which could be substantial in relation to the size of the allowance at March 31, 2025.

Current wording

At June 30, 2025, the Company had $28.8 million of total outstanding accretable discounts on Non-PCD loans and PCD loans. The Company believes that the allowance for credit losses on loans at June 30, 2025 is adequate to cover expected losses that may be realized from the loan portfolio as of such date. Nevertheless, the Company could sustain losses in future periods which could be substantial in relation to the size of the allowance at June 30, 2025.

Previous wording

The carrying cost of securities totaled $10.79 billion at March 31, 2025 compared with $11.09 billion at December 31, 2024, a decrease of $301.7 million or 2.7%. At March 31, 2025, securities represented 27.8% of total assets compared with 28.0% of total assets at December 31, 2024.

Current wording

The carrying cost of securities totaled $10.61 billion at June 30, 2025 compared with $11.09 billion at December 31, 2024, a decrease of $486.3 million or 4.4%. At June 30, 2025, securities represented 27.6% of total assets compared with 28.0% of total assets at December 31, 2024.

Previous wording

Total deposits were $28.03 billion at March 31, 2025 compared with $28.38 billion at December 31, 2024, a decrease of $354.5 million or 1.2%. Total noninterest-bearing deposits were $9.68 billion at March 31, 2025 compared with $9.80 billion at December 31, 2024, a decrease of $122.5 million or 1.3%. Interest-bearing deposits were $18.35 billion at March 31, 2025 compared with $18.58 billion at December 31, 2024, a decrease of $232.0 million or 1.2%.

Current wording

Total deposits were $27.47 billion at June 30, 2025 compared with $28.38 billion at December 31, 2024, a decrease of $907.9 million or 3.2%. Total noninterest-bearing deposits were $9.43 billion at June 30, 2025 compared with $9.80 billion at December 31, 2024, a decrease of $371.8 million or 3.8%. Interest-bearing deposits were $18.05 billion at June 30, 2025 compared with $18.58 billion at December 31, 2024, a decrease of $536.1 million or 2.9%.

Previous wording

Average deposits for the three months ended March 31, 2025 were $28.16 billion, an increase of $1.00 billion or 3.7% compared with $27.16 billion for the three months ended March 31, 2024, primarily due to the Merger. The ratio of average interest-bearing deposits to total average deposits was 66.3% and 65.2% during the first three months of 2025 and 2024, respectively.

Current wording

Average deposits for the six months ended June 30, 2025 were $27.89 billion, an increase of $262.1 million or 0.9% compared with $27.63 billion for the six months ended June 30, 2024. The ratio of average interest-bearing deposits to total average deposits was 65.9% and 65.2% during the first six months of 2025 and 2024, respectively.

Previous wording

FHLB advances and long-term notes payable— The Company has an available line of credit with the Federal Home Loan Bank of Dallas (“FHLB”), which allows the Company to borrow on a collateralized basis. The Company’s FHLB advances are typically considered short-term borrowings and are used to manage liquidity as needed. Maturing advances are replaced by drawing on available cash, making additional borrowings or through increased customer deposits. At March 31, 2025, the Company had total borrowing capacity of $7.92 billion under this line. FHLB advances of $2.70 billion were outstanding at March 31, 2025, with an interest rate of 4.38%. At March 31, 2025, the Company had no FHLB long-term notes payable balance outstanding.

Current wording

FHLB advances and long-term notes payable— The Company has an available line of credit with the Federal Home Loan Bank of Dallas (“FHLB”), which allows the Company to borrow on a collateralized basis. The Company’s FHLB advances are typically considered short-term borrowings and are used to manage liquidity as needed. Maturing advances are replaced by drawing on available cash, making additional borrowings or through increased customer deposits. At June 30, 2025, the Company had total borrowing capacity of $7.60 billion under this line. FHLB advances of $2.90 billion were outstanding at June 30, 2025, with a weighted average interest rate of 4.41%. At June 30, 2025, the Company had no FHLB long-term notes payable balance outstanding.

Previous wording

Securities sold under repurchase agreements— At March 31, 2025, the Company had $216.1 million in securities sold under repurchase agreements with banking customers compared with $221.9 million at December 31, 2024, a decrease of $5.8 million or 2.6%. Repurchase agreements are generally settled on the following business day; however, approximately $1.3 million of the repurchase agreements outstanding at March 31, 2025 have maturity terms ranging from 12 to 24 months. All securities sold under repurchase agreements are collateralized by certain pledged securities.

Current wording

Securities sold under repurchase agreements— At June 30, 2025, the Company had $183.6 million in securities sold under repurchase agreements with banking customers compared with $221.9 million at December 31, 2024, a decrease of $38.3 million or 17.3%. Repurchase agreements are generally settled on the following business day; however, approximately $375 thousand of the repurchase agreements outstanding at June 30, 2025 have a maturity term of 24 months. All securities sold under repurchase agreements are collateralized by certain pledged securities.

Previous wording

As of March 31, 2025, the Company had outstanding $3.74 billion in commitments to extend credit, $75.4 million in commitments associated with outstanding standby letters of credit and $930.0 million in commitments associated with unused capacity on Warehouse Purchase Program loans. Since commitments associated with letters of credit, unused capacity on Warehouse Purchase Program loans and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.

Current wording

As of June 30, 2025, the Company had outstanding $3.71 billion in commitments to extend credit, $76.0 million in commitments associated with outstanding standby letters of credit and $831.6 million in commitments associated with unused capacity on Warehouse Purchase Program loans. Since commitments associated with letters of credit, unused capacity on Warehouse Purchase Program loans and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.

Previous wording

Asset liquidity is provided by cash and assets which are readily marketable or which will mature in the near future. As of March 31, 2025, the Company had cash and cash equivalents of $1.69 billion compared with $1.97 billion at December 31, 2024, a decrease of $277.6 million or 14.1%. The decrease was primarily due to net repayments from other short-term borrowings of $500.0 million, a net decrease in deposits of $354.5 million and cash dividend payments of $55.3 million, partially offset by net proceeds from maturities, sales and principal paydowns of investment securities of $297.3 million, net cash provided by operating activities of $178.2 million and net decrease in loans of $166.2 million.

Current wording

Asset liquidity is provided by cash and assets which are readily marketable or which will mature in the near future. As of June 30, 2025, the Company had cash and cash equivalents of $1.31 billion compared with $1.97 billion at December 31, 2024, a decrease of $667.3 million or 33.8%. The decrease was primarily due to a net decrease in deposits of $907.9 million, net repayments from other short-term borrowings of $300.0 million, cash dividend payments of $110.5 million and net increase in loans of $58.7 million, partially offset by net proceeds from maturities, sales and principal paydowns of investment securities of $476.8 million and net cash provided by operating activities of $276.3 million.

Previous wording

On January 21, 2025, the Company announced a stock repurchase program under which Bancshares could repurchase up to 5%, or approximately 4.8 million shares, of its outstanding common stock over a one-year period expiring on January 21, 2026, at the discretion of management. Under the stock repurchase program, Bancshares may repurchase shares from time to time at prevailing market prices, through open-market purchases or privately negotiated transactions, depending upon market conditions. Repurchases under this program may also be made in transactions outside the safe harbor during a pending merger, acquisition or similar transaction. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities. Shares of stock repurchased are held as authorized but unissued shares. Bancshares is not obligated to purchase any particular number of shares, and Bancshares may suspend, modify or terminate the program at any time and for any reason without prior notice. Under its 2025 stock repurchase program, Bancshares repurchased zero shares of its common stock during the three months ended March 31, 2025.

Current wording

On January 21, 2025, Bancshares announced a stock repurchase program under which it could repurchase up to 5%, or approximately 4.8 million shares, of its outstanding common stock over a one-year period expiring on January 21, 2026, at the discretion of management. Under the stock repurchase program, Bancshares may repurchase shares from time to time at prevailing market prices, through open-market purchases or privately negotiated transactions, depending upon market conditions. Repurchases under this program may also be made in transactions outside the safe harbor during a pending merger, acquisition or similar transaction. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities. Shares of stock repurchased are held as authorized but unissued shares. Bancshares is not obligated to purchase any particular number of shares, and Bancshares may suspend, modify or terminate the program at any time and for any reason without prior notice. No share repurchases were made during the three and six months ended June 30, 2025.

Previous wording

The Company’s leases relate primarily to operating leases for office space and banking centers. The Company determines if an arrangement is a lease or contains a lease at inception. The Company’s leases have remaining lease terms of 1 to 15 years, which may include the option to extend the lease when it is reasonably certain for the Company to exercise that option. Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses its incremental collateralized borrowing rate to determine the present value of lease payments. Short-term leases and leases with variable lease costs are immaterial, and the Company has one sublease arrangement. Sublease income was $846 thousand and $869 thousand for the three months ended March 31, 2025 and 2024. As of March 31, 2025, operating lease ROU assets and lease liabilities were approximately $31.2 million. ROU assets and lease liabilities were classified as other assets and other liabilities, respectively.

Current wording

The Company’s leases relate primarily to operating leases for office space and banking centers. The Company determines if an arrangement is a lease or contains a lease at inception. The Company’s leases have remaining lease terms of 1 to 15 years, which may include the option to extend the lease when it is reasonably certain for the Company to exercise that option. Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses its incremental collateralized borrowing rate to determine the present value of lease payments. Short-term leases and leases with variable lease costs are immaterial, and the Company has one sublease arrangement. Sublease income was $750 thousand and $828 thousand for the three months ended June 30, 2025 and 2024 and $1.6 million and $1.7 million for the six months ended June 30, 2025 and 2024, respectively. As of June 30, 2025, operating lease ROU assets and lease liabilities were approximately $29.8 million. ROU assets and lease liabilities were classified as other assets and other liabilities, respectively.

Previous wording

As of March 31, 2025, the weighted average of remaining lease terms of the Company’s operating leases was 5.8 years. The weighted average discount rate used to determine the lease liabilities as of March 31, 2025 for the Company’s operating leases was 3.0%. Cash paid for the Company’s operating leases was $2.9 million for the three months ended March 31, 2025 and 2024. During the three months ended March 31, 2025, the Company did not obtain any new ROU assets in exchange for lease liabilities.

Current wording

As of June 30, 2025, the weighted average of remaining lease terms of the Company’s operating leases was 5.8 years. The weighted average discount rate used to determine the lease liabilities as of June 30, 2025 for the Company’s operating leases was 3.1%. Cash paid for the Company’s operating leases was $2.9 million for the three months ended June 30, 2025 and 2024, respectively, and $5.9 million and $5.8 million for the six months ended June 30, 2025 and 2024, respectively. During the six months ended June 30, 2025, the Company obtained $690 thousand in ROU assets in exchange for lease liabilities for two operating leases.

Previous wording

Allowance for Credit Losses on Off-balance Sheet Credit Exposures. The Company records an allowance for credit losses on off-balance sheet credit exposure that is adjusted through a charge to provision for credit losses on the Company’s consolidated statement of income. At March 31, 2025 and December 31, 2024, this allowance, reported as a separate line item on the Company’s consolidated balance sheet, totaled $37.6 million.

Current wording

Allowance for Credit Losses on Off-balance Sheet Credit Exposures. The Company records an allowance for credit losses on off-balance sheet credit exposure that is adjusted through an entry to provision for credit losses on the Company’s consolidated statement of income. At June 30, 2025 and December 31, 2024, this allowance, reported as a separate line item on the Company’s consolidated balance sheet, totaled $37.6 million.

Previous wording

Total shareholders’ equity was $7.52 billion at March 31, 2025 compared with $7.44 billion at December 31, 2024, an increase of $78.6 million or 1.1%. The increase was primarily the result of net income of $130.2 million, partially offset by dividend payments of $55.3 million.

Current wording

Total shareholders’ equity was $7.60 billion at June 30, 2025 compared with $7.44 billion at December 31, 2024, an increase of $161.2 million or 2.2%. The increase was primarily the result of net income of $265.4 million, partially offset by dividend payments of $110.5 million.