PROSPERITY BANCSHARES INC

Previous wording

the timing, impact and other uncertainties of any future acquisitions, including the pending acquisitions of American and Southwest, 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 Stellar, 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

changes in trade policies by the United States or other countries, such as tariffs or retaliatory tariffs;

Current wording

changes in trade policies by the United States or other countries, such as the imposition of tariffs or retaliatory tariffs or other trade barriers;

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 September 30, 2025, the Bank operated 283 full-service banking locations: 62 in the Houston area, including The Woodlands; 33 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.

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 March 31, 2026, the Bank operated 312 full-service banking locations: 62 in the Houston area, including The Woodlands; 36 in the South Texas area including Corpus Christi and Victoria; 61 in the Dallas/Fort Worth area; 22 in the East Texas area; 28 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; 8 in the Tulsa, Oklahoma area; 18 in the Central, South Texas and San Antonio areas doing business as American Bank and 11 in the San Antonio area doing business as Texas Partners Bank. 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

Three principal components of the Company’s growth strategy are internal growth, efficient operations and acquisitions, including strategic merger transactions. The Company focuses on continual internal growth. The Company maintains separate data with respect to each banking center’s net interest income, efficiency ratio, deposit growth and loan growth for purposes of measuring its overall profitability. The Company also focuses on maintaining efficiency and stringent cost control practices and policies. The Company has centralized many of its critical operations, such as data processing and loan processing. Management believes that this centralized infrastructure can accommodate substantial additional growth and achieve necessary controls while enabling the Company to minimize operational costs through certain economies of scale. The Company also intends to continue to seek expansion opportunities. The Company’s banking operations are considered by management to be aggregated in one reportable operating segment. For more information about the Company’s segment reporting, refer to Note 1 to the consolidated financial statements.

Current wording

Three principal components of the Company’s growth strategy are internal growth, efficient operations and acquisitions, including strategic merger transactions. The Company focuses on continuous internal growth. The Company maintains separate data with respect to each banking center’s net interest income, efficiency ratio, deposit growth and loan growth for purposes of measuring its overall profitability. The Company also focuses on maintaining efficiency and stringent cost control practices and policies. The Company has centralized many of its critical operations, such as data processing and loan processing. Management believes that this centralized infrastructure can accommodate substantial additional growth and achieve necessary controls while enabling the Company to minimize operational costs through certain economies of scale. The Company also intends to continue to seek expansion opportunities. The Company’s banking operations are considered by management to be aggregated in one reportable operating segment. For more information about the Company’s segment reporting, refer to Note 1 to the consolidated financial statements.

Previous wording

Agreement to Acquire American Bank Holding Corporation — On July 18, 2025, Bancshares and American Bank Holding Corporation (“American”) jointly announced the signing of a definitive merger agreement (the “American Merger Agreement”) whereby American, a Texas Corporation and bank holding company of American Bank, N.A. (“American Bank”), will merge with and into Bancshares and American Bank will merge with and into the Bank (collectively, the “American Merger”). American Bank operates eighteen banking offices and two loan production offices in South and Central Texas including its main office in Corpus Christi, and banking offices in San Antonio, Austin, Victoria and the greater Corpus Christi area including Port Aransas and Rockport and a loan production office in Houston, Texas. As of June 30, 2025, American, on a consolidated basis, reported total assets of $2.55 billion, total loans of $1.80 billion and total deposits of $2.29 billion.

Current wording

Acquisition of American Bank Holding Corporation — On January 1, 2026, the Company completed the merger of American Bank Holding Corporation (“American”) into Bancshares and the subsequent merger of American’s wholly owned subsidiary American Bank, N.A. (“American Bank”), into the Bank (collectively, the “American Merger”). American Bank operated 18 banking offices and two loan production offices in South and Central Texas including its main office in Corpus Christi, and banking offices in San Antonio, Austin, Victoria and the greater Corpus Christi area including Port Aransas and Rockport and a loan production office in Houston, Texas.

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 September 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 related to the Lone Star Merger. 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 4,439,938 shares of its common stock for all outstanding shares of American common stock in the first quarter of 2026. This resulted in goodwill of $185.0 million as of March 31, 2026, which does not include all the subsequent fair value adjustments that have not yet been finalized. 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 $31.1 million of core deposit intangibles as of March 31, 2026.

Previous wording

Agreement to Acquire Southwest Bancshares, Inc. — On October 1, 2025, Bancshares and Southwest Bancshares, Inc. (“Southwest) jointly announced the signing of a definitive merger agreement (the “Southwest Merger Agreement”) whereby Southwest, a Texas corporation and bank holding company of Texas Partners Bank (“Texas Partners”), will merge with and into Bancshares and Texas Partners will merge with and into the Bank (collectively, the “Southwest Merger”). Texas Partners operates eleven banking offices in Central Texas including its main office in San Antonio, and banking offices in the San Antonio area, Austin and the Hill Country. As of June 30, 2025, Southwest, on a consolidated basis, reported total assets of $2.35 billion, total loans of $1.89 billion and total deposits of $2.13 billion.

Current wording

Acquisition of Southwest Bancshares, Inc. — On February 1, 2026, the Company completed the merger of Southwest Bancshares, Inc. (“Southwest”) into Bancshares and the subsequent merger of Southwest’s wholly owned subsidiary Texas Partners Bank (“Texas Partners”), into the Bank (collectively, the “Southwest Merger”, together with the American Merger, the “Mergers”). Texas Partners operated 11 banking offices in Central Texas including its main office in San Antonio, and banking offices in the San Antonio area, Austin and the Hill Country.

Previous wording

Pursuant to the terms of the American Merger Agreement, Bancshares will issue 4,439,981 shares of its common stock for all outstanding shares of American common stock, subject to certain potential adjustments. Based on Bancshares’ closing price of $72.40 on July 16, 2025, the total consideration was valued at approximately $321.5 million. Bancshares has received all necessary regulatory approvals for the acquisition of American, and the shareholders of American approved the transaction on November 3, 2025. The transaction is expected to be completed on January 1, 2026, subject to the satisfaction or waiver of the remaining customary closing conditions set forth in the Prosperity/American Merger Agreement.

Current wording

Under the terms and subject to the conditions of the Merger Agreement, Bancshares will issue 0.3803 shares of its common stock and $11.36 in cash for each outstanding share of Stellar common stock. Based on Bancshares’ closing price of $72.90 on January 27, 2026, the total consideration was valued at approximately $2.002 billion. The Company has received all necessary regulatory approvals for the acquisition of Stellar and Stellar Bank, and the transaction is expected to be completed on or about July 1, 2026, subject to approval by Stellar shareholders and the satisfaction or waiver of other customary closing conditions set forth in the Merger Agreement.

Previous wording

Allowance for Credit Losses—The allowance for credit losses is accounted for in accordance with FASB ASC Topic 326, “Financial Instruments-Credit Losses” (“CECL”), which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss methodology. CECL requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is an allowance available for losses on loans and held-to-maturity securities that is deducted from the amortized cost basis to estimate the net amount expected to be collected. The allowance for credit losses is adjusted through charges to earnings in the form of a provision for credit losses. All losses are charged to the allowance when the loss actually occurs or when a determination is made that such a loss is likely and can be reasonably estimated. Recoveries are credited to the allowance at the time of recovery.

Current wording

Allowance for Credit Losses—The allowance for credit losses is accounted for in accordance with FASB ASC Topic 326, “Financial Instruments-Credit Losses” (“CECL”), which uses an expected loss methodology that is referred to as the current expected credit loss methodology. CECL requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is an allowance available for losses on loans and held-to-maturity securities that is deducted from the amortized cost basis to estimate the net amount expected to be collected. The allowance for credit losses is adjusted through charges to earnings in the form of a provision for credit losses. All losses are charged to the allowance when the loss actually occurs or when a determination is made that such a loss is likely and can be reasonably estimated. Recoveries are credited to the allowance at the time of recovery.

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 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. 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. Based on this evaluation, management has established an allowance for credit losses that it believes is management’s best estimate of current expected credit losses in the Company’s loan portfolio.

Previous wording

Accounting for Acquired Loans and the Allowance for Acquired Credit Losses—The Company accounts for its acquisitions using the acquisition method of accounting. Accordingly, the assets, including loans, and liabilities of the acquired entity are recorded at their fair values at the acquisition date. The fair value estimates associated with acquired loans, based on a discounted cash flow model, include estimates related to market interest rates and undiscounted projections of future cash flows that incorporate expectations of prepayments and the amount and timing of principal, interest and other cash flows, as well as any shortfalls thereof. For further discussion of the methodology used in the determination of the allowance for credit losses for acquired loans, see “Financial Condition—Allowance for Credit Losses on Loans” below. For further discussion of the Company’s acquisition and loan accounting, see Note 5 to the consolidated financial statements.

Current wording

Accounting for Acquired Loans and the Allowance for Acquired Credit Losses—The Company accounts for its acquisitions using the acquisition method of accounting. Accordingly, the assets, including loans, and liabilities of the acquired entity are recorded at their fair values at the acquisition date. The fair value estimates associated with acquired loans, based on a discounted cash flow model, include estimates related to market interest rates and undiscounted projections of future cash flows that incorporate expectations of prepayments and the amount and timing of principal, interest and other cash flows, as well as any shortfalls thereof.

Previous wording

For the quarter ended September 30, 2025, net income available to common shareholders was $137.6 million compared with $127.3 million for the same period in 2024, an increase of $10.3 million or 8.1%. Net income per diluted common share was $1.45 for the quarter ended September 30, 2025, compared with $1.34 for the same period in 2024, an increase of 8.2%. The changes were primarily due to an increase in net interest income, partially offset by an increase in provision for income taxes. The Company posted annualized returns on average common equity of 7.18% and 6.93%, annualized returns on average assets of 1.44% and 1.28% and efficiency ratios of 44.06% and 46.87% for the quarters ended September 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.

Current wording

For the quarter ended March 31, 2026, net income available to common shareholders was $116.3 million or $1.16 per diluted common share compared with $130.2 million or $1.37 per diluted common share for the same period in 2025. Net income and net income per diluted common share for the first quarter of 2026 was impacted by the Mergers and merger related expenses of $42.5 million. The Company posted annualized returns on average common equity of 5.70% and 6.94%, annualized returns on average assets of 1.10% and 1.34% and efficiency ratios of 59.16% and 45.71% for the quarters ended March 31, 2026, and 2025, 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

Average interest-bearing liabilities were $20.72 billion for the quarter ended September 30, 2025, a decrease of $1.67 billion or 7.4% compared with $22.39 billion for the same period in 2024, primarily due to a decrease in the average balances on other borrowings. The average rate on interest-bearing liabilities was 2.39% for the quarter ended September 30, 2025, a decrease of 39 basis points compared with 2.78% for the same period in 2024.

Current wording

Average interest-bearing liabilities were $23.54 billion for the quarter ended March 31, 2026, an increase of $1.89 billion or 8.7% compared with $21.65 billion for the same period in 2025, primarily due to an increase in the average balances on deposits related to the Mergers, partially offset by a decrease in the average balances on other borrowings. The average rate on interest-bearing liabilities was 2.08% for the quarter ended March 31, 2026, a decrease of 31 basis points compared with 2.39% for the same period in 2025.

Previous wording

There was no provision for credit losses for the three and nine months ended September 30, 2025, compared with no provision for credit losses for the three months ended September 30, 2024 and a $9.1 million provision for credit losses for the nine months ended September 30, 2024. As a result of the loans acquired in the Lone Star Merger, the nine months ended September 30, 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.

Current wording

There was no provision for credit losses for the three months ended March 31, 2026 and 2025.

Previous wording

Net charge-offs were $6.5 million for the quarter ended September 30, 2025, compared with net charge-offs of $5.5 million for the quarter ended September 30, 2024. For the three months ended September 30, 2025, $4.5 million of reserves on resolved PCD loans without any related charge-offs was released to the general reserve.

Current wording

Net charge-offs were $41.3 million for the quarter ended March 31, 2026, compared with net charge-offs of $2.7 million for the quarter ended March 31, 2025. Net charge-offs for the first quarter 2026 included a $33.9 million increase in net charge-offs for commercial and industrial loans. Net charge-offs for the first quarter of 2026 included $2.0 million related to resolved PCD loans, which had specific reserves that were allocated to the charge-offs. Additionally, due to the Mergers, reserves increased by Day One accounting for PCD loans of $52.1 million and Day One accounting for PSLs of $39.3 million. Further, $2.0 million of reserves on resolved PCD loans without any related charge-offs were released to the general reserve.

Previous wording

Includes stock-based compensation expense of $3.0 million and $3.1 million for the three months ended September 30, 2025, and 2024, respectively, and $9.0 million and $9.6 million for the nine months ended September 30, 2025, and 2024, respectively.

Current wording

Includes stock-based compensation expense of $3.4 million and $3.1 million for the three months ended March 31, 2026, and 2025, 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 $38.5 million for the three months ended September 30, 2025, compared with $35.2 million for the same period in 2024, an increase of $3.3 million or 9.4%. Income tax expense totaled $111.6 million for the nine months ended September 30, 2025, compared with $97.3 million for the same period in 2024, an increase of $14.3 million or 14.7%. The Company’s effective tax rate for the three months ended September 30, 2025, and 2024 was 21.9% and 21.6%, respectively. The Company’s effective tax rate for the nine months ended September 30, 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 $34.1 million for the three months ended March 31, 2026, compared with $36.2 million for the same period in 2025, a decrease of $2.1 million or 5.8%. The Company’s effective tax rate for the three months ended March 31, 2026, and 2025 was 22.7% and 21.7%, respectively.

Previous wording

Enactment of the One Big Beautiful Bill Act — On July 4, 2025, the One Big Beautiful Bill Act (the “OBBB Act”), which included certain modifications to U.S. tax law, was enacted into law. The OBBB Act did not have a material impact on the Company's income tax provision for the three and nine months ended September 30, 2025, and the Company is currently evaluating the potential impact of the OBBB Act on future periods.

Current wording

Enactment of the One Big Beautiful Bill Act — On July 4, 2025, the One Big Beautiful Bill Act (the “OBBB Act”), which included certain modifications to U.S. tax law, was enacted. The Company has completed its initial evaluation of the provisions of the OBBB Act and has concluded that it did not have a material impact on the Company's income tax provision for the three months ended March 31, 2026 and year ended December 31, 2025.

Previous wording

The Company separates its loan portfolio into two general categories of loans: (1) “originated loans,” which are loans originated by the Company and made pursuant to the Company’s loan policy and procedures in effect at the time the loan was made, and (2) “acquired loans,” which are loans acquired in a business combination and recorded at fair value at acquisition date. Those acquired loans that are renewed or substantially modified after the date of the business combination are referred to as “re-underwritten acquired loans.” If a renewal or substantial modification of an acquired loan is underwritten by the Company with a new credit analysis, the loan may no longer be categorized as an acquired loan. For example, acquired loans to one borrower may be combined into a new loan with a new loan number and categorized as an originated loan. Acquired loans with a fair value discount or premium at the date of the business combination that remained at the reporting date are referred to as “fair-valued acquired loans.” All fair-valued acquired loans are further categorized into PCD loans and “Non-PCD loans.” Acquired loans with evidence of credit quality deterioration as of the acquisition date when compared to the origination date are classified as PCD loans.

Current wording

The Company separates its loan portfolio into two general categories of loans: (1) “originated loans,” which are loans originated by the Company and made pursuant to the Company’s loan policy and procedures in effect at the time the loan was made, and (2) “acquired loans,” which are loans acquired in a business combination and recorded at fair value at acquisition date. Those acquired loans that are renewed or substantially modified after the date of the business combination are referred to as “re-underwritten acquired loans.” If a renewal or substantial modification of an acquired loan is underwritten by the Company with a new credit analysis, the loan may no longer be categorized as an acquired loan. For example, acquired loans to one borrower may be combined into a new loan with a new loan number and categorized as an originated loan. Acquired loans with a fair value discount or premium at the date of the business combination that remained at the reporting date are referred to as “fair-valued acquired loans.” All fair-valued acquired loans are further categorized into PCD loans and PSLs. Acquired loans with evidence of credit quality deterioration as of the acquisition date when compared to the origination date are classified as PCD loans.

Previous wording

The following tables summarize the Company’s originated and acquired loan portfolios broken out into originated loans, re-underwritten acquired loans, Non-PCD loans and PCD loans, as of the dates indicated.

Current wording

The following tables summarize the Company’s originated and acquired loan portfolios broken out into originated loans, re-underwritten acquired loans, PSLs and PCD loans, as of the dates indicated.

Previous wording

At September 30, 2025, total loans were $22.03 billion, a decrease of $121.4 million or 0.5% compared with $22.15 billion at December 31, 2024. Loans at September 30, 2025, included $11.3 million of loans held for sale and $1.28 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 September 30, 2025, loans represented 57.5% of total assets compared with 56.0% of total assets at December 31, 2024.

Current wording

At March 31, 2026, total loans were $25.29 billion, an increase of $3.48 billion or 16.0% compared with $21.81 billion at December 31, 2025. Loans at March 31, 2026, included $21.9 million of loans held for sale and $1.43 billion of Warehouse Purchase Program loans compared with $14.2 million of loans held for sale and $1.30 billion of Warehouse Purchase Program loans at December 31, 2025. At March 31, 2026, loans represented 58.0% of total assets compared with 56.7% of total assets at December 31, 2025.

Previous wording

(v) Warehouse Purchase Program. The Warehouse Purchase Program allows unaffiliated mortgage originators (“Clients”) to close 1-4 family real estate loans in their own name and manage their cash flow needs until the loans are sold to investors. The Company’s Clients are strategically targeted for their experienced management teams and analyzed for the expected profitability of each Client’s business model over the long term. The Clients are located across the U.S. and originate mortgage loans primarily through traditional retail and/or wholesale business models using underwriting standards as required by United States government-sponsored enterprise agencies, “Agencies” such as the Federal National Mortgage Association (“Fannie Mae”), private investors to which the mortgage loans are ultimately sold and/or mortgage insurers.

Current wording

(v) Warehouse Purchase Program. The Warehouse Purchase Program allows unaffiliated mortgage originators (“Clients”) to close 1-4 family real estate loans in their own name and manage their cash flow needs until the loans are sold to investors. The Company’s Clients are strategically targeted for their experienced management teams and analyzed for the expected profitability of each Client’s business model over the long term. The Clients are located across the U.S. and originate mortgage loans primarily through traditional retail and/or wholesale business models using underwriting standards as required by United States government-sponsored enterprise agencies, such as the Federal National Mortgage Association (“Fannie Mae”) and private investors to which the mortgage loans are ultimately sold and/or mortgage insurers.

Previous wording

Nonperforming assets include loans on nonaccrual status, accruing loans 90 days or more past due, repossessed assets and real estate which has been acquired through foreclosure and is awaiting disposition. Nonperforming assets do not include PCD loans unless the loan has deteriorated since the acquisition date.

Current wording

Nonperforming assets include loans on nonaccrual status, accruing loans 90 days or more past due, repossessed assets and real estate which has been acquired through foreclosure and is awaiting disposition.

Previous wording

The following tables present information regarding nonperforming assets differentiated among originated loans, re-underwritten acquired loans, Non-PCD loans and PCD loans, as of the dates indicated:

Current wording

The following tables present information regarding nonperforming assets differentiated among originated loans, re-underwritten acquired loans, PSLs and PCD loans, as of the dates indicated:

Previous wording

Nonperforming assets were 0.54% of total loans and other real estate at September 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 321.0% at September 30, 2025, and 463.9% at December 31, 2024.

Current wording

Nonperforming assets were 0.48% of total loans and other real estate at March 31, 2026, and 0.69% of total loans and other real estate at December 31, 2025. The allowance for credit losses on loans as a percentage of total nonperforming loans was 353.1% at March 31, 2026, and 242.7% at December 31, 2025.

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 expected losses in the Company’s loan portfolio as of September 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.

Current wording

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, (4) provision releases returned to earnings that decrease the allowance, and (5) increases in reserves related to acquired loans. 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

Non-PCD loans that were not deemed impaired subsequent to the acquisition date are considered non-impaired and are evaluated as part of the general valuation allowance.

Current wording

PSLs that were not deemed impaired subsequent to the acquisition date are considered non-impaired and are evaluated as part of the general valuation allowance.

Previous wording

Non-PCD loans that have deteriorated to an impaired status subsequent to acquisition are evaluated for a specific reserve on a quarterly basis which, when identified, is added to the allowance for credit losses. The Company reviews impaired Non-PCD loans on a loan-by-loan basis and determines the specific reserve based on the difference between the recorded investment in the loan and one of three factors: expected future cash flows, observable market price or fair value of the collateral. Because essentially all of the Company’s impaired Non-PCD loans have been collateral-dependent, the amount of the specific reserve historically has been determined by comparing the fair value of the collateral securing the Non-PCD loan with the recorded investment in such loan. In the future, the Company will continue to analyze impaired Non-PCD loans on a loan-by-loan basis and may use an alternative measurement method to determine the specific reserve, as appropriate and in accordance with applicable accounting standards.

Current wording

PSLs that have deteriorated to an impaired status subsequent to acquisition are evaluated for a specific reserve on a quarterly basis which, when identified, is added to the allowance for credit losses. The Company reviews impaired PSLs on a loan-by-loan basis and determines the specific reserve based on the difference between the recorded investment in the loan and one of three factors: expected future cash flows, observable market price or fair value of the collateral. Because essentially all of the Company’s impaired PSLs have been collateral-dependent, the amount of the specific reserve historically has been determined by comparing the fair value of the collateral securing the PSL with the recorded investment in such loan. In the future, the Company will continue to analyze impaired PSLs on a loan-by-loan basis and may use an alternative measurement method to determine the specific reserve, as appropriate and in accordance with applicable accounting standards.

Previous wording

PCD loans are monitored individually or on a pooled basis quarterly to assess for changes in expected cash flows subsequent to acquisition. If a deterioration in cash flows is identified, an increase to the PCD reserves for that individual loan or pool of loans may be required. PCD loans were recorded at their acquisition date fair values, which were based on expected cash flows and considered estimates of expected future credit losses. The Company’s estimates of loan fair values at the acquisition date may be adjusted for a period of up to one year as the Company continues to evaluate its estimate of expected future cash flows at the acquisition date. If the Company determines that losses arose after the acquisition date, the additional losses will be reflected as a provision for credit losses.

Current wording

PCD loans are monitored individually or on a pooled basis quarterly to assess for changes in expected cash flows subsequent to acquisition. If a deterioration in cash flows is identified, an increase to the PCD reserves for that individual loan or pool of loans may be required. PCD loans were recorded at their acquisition date fair values based on expected cash flows with a reserve established for the estimate of expected future cash flows. The Company’s estimates of loan fair values at the acquisition date may be adjusted for a period of up to one year as the Company continues to evaluate its estimate of expected future cash flows at the acquisition date. If the Company determines that losses arose after the acquisition date, the additional losses will be reflected as a provision for credit losses.

Previous wording

The following tables present, as of and for the periods indicated, information regarding the allowance for credit losses on loans differentiated between originated loans and acquired loans. Reported net charge-offs may include those from Non-PCD loans and PCD loans, but only if the total charge-off required is greater than the remaining discount.

Current wording

The following tables present, as of and for the periods indicated, information regarding the allowance for credit losses on loans differentiated between originated loans and acquired loans. Reported net charge-offs may include those from PSLs and PCD loans, but only if the total charge-off required is greater than the remaining discount.

Previous wording

The Company had gross charge-offs on originated loans of $12.7 million during the nine months ended September 30, 2025. Partially offsetting these charge-offs were recoveries on originated loans of $1.8 million. Gross charge-offs on acquired loans were $3.0 million during the nine months ended September 30, 2025. Offsetting these charge-offs were recoveries on acquired loans of $1.7 million. Total charge-offs for the nine months ended September 30, 2025, were $15.7 million, partially offset by total recoveries of $3.5 million.

Current wording

The Company had gross charge-offs on originated loans of $33.1 million during the three months ended March 31, 2026. Partially offsetting these charge-offs were recoveries on originated loans of $616 thousand. Gross charge-offs on acquired loans were $9.4 million during the three months ended March 31, 2026. Offsetting these charge-offs were recoveries on acquired loans of $555 thousand. Total charge-offs for the three months ended March 31, 2026, were $42.5 million, partially offset by total recoveries of $1.2 million.

Previous wording

The following tables show the allocation of the allowance for credit losses on loans among various categories of loans disaggregated between originated loans, re-underwritten acquired loans, Non-PCD loans and PCD loans at the dates indicated. The allocation is made for analytical purposes and is not necessarily indicative of the categories in which future losses may occur. The total allowance is available to cover expected losses from any loan category, regardless of whether allocated to an originated loan or an acquired loan.

Current wording

The following tables show the allocation of the allowance for credit losses on loans among various categories of loans disaggregated between originated loans, re-underwritten acquired loans, PSLs and PCD loans at the dates indicated. The allocation is made for analytical purposes and is not necessarily indicative of the categories in which future losses may occur. The total allowance is available to cover expected losses from any loan category, regardless of whether allocated to an originated loan or an acquired loan.

Previous wording

At September 30, 2025, $233.2 million of the allowance for credit losses on loans was attributable to originated loans, an increase of $5.9 million or 2.6% compared with $227.2 million of the allowance at December 31, 2024. At September 30, 2025, $36.0 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, an increase of $3.7 million or 11.6%. At September 30, 2025, $18.1 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 $6.8 million or 27.3%. At September 30, 2025, $52.3 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 $15.0 million or 22.3%.

Current wording

At March 31, 2026, $200.5 million of the allowance for credit losses on loans was attributable to originated loans, a decrease of $30.8 million or 13.3% compared with $231.3 million of the allowance at December 31, 2025. At March 31, 2026, $29.8 million of the allowance for credit losses on loans was attributable to re-underwritten acquired loans compared with $38.4 million of the allowance at December 31, 2025, a decrease of $8.6 million or 22.5%. At March 31, 2026, $58.4 million of the allowance for credit losses on loans was attributable to PSLs compared with $15.7 million of the allowance at December 31, 2025, an increase of $42.7 million or 272.1%. At March 31, 2026, $95.1 million of the allowance for credit losses on loans was attributable to PCD loans compared with $48.4 million of the allowance at December 31, 2025, an increase of $46.8 million or 96.7%.

Previous wording

At September 30, 2025, the Company had $25.9 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 September 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 losses could be substantial in relation to the size of the allowance at September 30, 2025.

Current wording

At March 31, 2026, the Company had $77.0 million of total outstanding accretable discounts on PSLs and PCD loans. The Company believes that the allowance for credit losses on loans at March 31, 2026, represent management’s best estimate of current expected credit losses on the Company’s loan portfolio at such date. Nevertheless, the Company could sustain losses in future periods, which losses could be substantial in relation to the size of the allowance at March 31, 2026.

Previous wording

The carrying cost of securities totaled $10.23 billion at September 30, 2025, compared with $11.09 billion at December 31, 2024, a decrease of $862.0 million or 7.8%. At September 30, 2025, securities represented 26.7% of total assets compared with 28.0% of total assets at December 31, 2024.

Current wording

The carrying cost of securities totaled $11.95 billion at March 31, 2026, compared with $10.61 billion at December 31, 2025, an increase of $1.34 billion or 12.6%. At March 31, 2026, securities represented 27.4% of total assets compared with 27.6% of total assets at December 31, 2025.

Previous wording

Held to maturity securities. The Company’s held to maturity investments include mortgage-related bonds issued by either the Government National Mortgage Corporation (“Ginnie Mae”), Fannie Mae or Federal Home Loan Mortgage Corporation (“Freddie Mac”). Ginnie Mae-issued securities are explicitly guaranteed by the U.S. government, while Fannie Mae- and Freddie Mac-issued securities are fully guaranteed by those respective United States government-sponsored agencies, and conditionally guaranteed by the full faith and credit of the United States. The Company’s held to maturity securities also include taxable and tax-exempt municipal securities issued primarily by school districts, utility districts and municipalities located in Texas. The Company’s investment in municipal securities is exposed to credit risk. The securities are highly rated by major rating agencies and regularly reviewed by management. A significant portion are guaranteed or insured by either the Texas Permanent School Fund, Assured Guaranty or Build America Mutual. As of September 30, 2025, the Company’s municipal securities represent 0.7% of the securities portfolio. Management has the ability and intent to hold the securities classified as held to maturity until they mature, at which time the Company will receive full value for the securities. Accordingly, as of September 30, 2025, management believes that there is no potential for material credit losses on held to maturity securities.

Current wording

Held to maturity securities. The Company’s held to maturity investments include mortgage-related bonds issued by either the Government National Mortgage Corporation (“Ginnie Mae”), Fannie Mae or Federal Home Loan Mortgage Corporation (“Freddie Mac”). Ginnie Mae-issued securities are explicitly guaranteed by the U.S. government, while Fannie Mae- and Freddie Mac-issued securities are fully guaranteed by those respective United States government-sponsored agencies, and conditionally guaranteed by the full faith and credit of the United States. The Company’s held to maturity securities also include taxable and tax-exempt municipal securities issued primarily by school districts, utility districts and municipalities located in Texas. The Company’s investment in municipal securities is exposed to credit risk. The securities are highly rated by major rating agencies and regularly reviewed by management. A significant portion are guaranteed or insured by either the Texas Permanent School Fund, Assured Guaranty or Build America Mutual. As of March 31, 2026, the Company’s municipal securities represent 1.0% of the securities portfolio. Management has the ability and intent to hold the securities classified as held to maturity until they mature, at which time the Company will receive full value for the securities. Accordingly, as of March 31, 2026, management believes that there is no potential for material credit losses on held to maturity securities.

Previous wording

Average deposits for the nine months ended September 30, 2025, were $27.76 billion, a decrease of $361.1 million or 1.3% compared with $28.13 billion for the nine months ended September 30, 2024. The ratio of average interest-bearing deposits to total average deposits was 65.8% and 65.3% during the first nine months of 2025 and 2024, respectively.

Current wording

Average deposits for the three months ended March 31, 2026, were $31.94 billion, an increase of $3.78 billion or 13.4% compared with $28.16 billion for the three months ended March 31, 2025. The ratio of average interest-bearing deposits to total average deposits was 67.9% and 66.3% during the first three months of 2026 and 2025, 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 September 30, 2025, the Company had total borrowing capacity of $7.57 billion under this line. FHLB advances of $2.40 billion were outstanding at September 30, 2025, with a weighted average interest rate of 4.22%. At September 30, 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 March 31, 2026, the Company had total borrowing capacity of $7.56 billion under this line. FHLB advances of $2.20 billion were outstanding at March 31, 2026, with a weighted average interest rate of 3.75%. At March 31, 2026, the Company had no FHLB long-term notes payable balance outstanding.

Previous wording

Securities sold under repurchase agreements— At September 30, 2025, the Company had $185.8 million in securities sold under repurchase agreements with banking customers compared with $221.9 million at December 31, 2024, a decrease of $36.1 million or 16.3%. Repurchase agreements are generally settled on the following business day. All securities sold under repurchase agreements are collateralized by certain pledged securities.

Current wording

Securities sold under repurchase agreements— At March 31, 2026, the Company had $176.1 million in securities sold under repurchase agreements with banking customers compared with $201.2 million at December 31, 2025, a decrease of $25.1 million or 12.5%. Repurchase agreements are generally settled on the following business day. All securities sold under repurchase agreements are collateralized by certain pledged securities.

Previous wording

Liquidity involves the Company’s ability to raise funds to support asset growth and acquisitions or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate the Company on an ongoing basis and manage unexpected events. The Company’s largest source of funds is deposits and its largest use of funds is loans. The Company does not expect a change in the source or use of its funds in the future. Although access to purchased funds from correspondent banks is available and has been utilized on occasion to take advantage of investment opportunities, the Company does not generally rely on this external funding source. The cash and federal funds sold position, supplemented by amortizing investment and loan portfolios, has generally created an adequate liquidity position.

Current wording

As more fully discussed in the Company’s 2025 Form 10-K, liquidity involves the Company’s ability to raise funds to support asset growth and acquisitions or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate the Company on an ongoing basis and manage unexpected events. The Company’s largest source of funds is deposits and its largest use of funds is loans. The Company does not expect a change in the source or use of its funds in the future.