PROSPERITY BANCSHARES INC

Previous wording

the risks relating to the pending acquisition of Stellar Bancorp, Inc. and the recent acquisitions of American and Southwest including, without limitation: the risk that the Stellar acquisition will not close; the diversion of management's time on issues related to the acquisitions and integration; unexpected transaction costs, including the costs of integrating operations; the risk that the businesses will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; the potential failure to fully or timely realize expected revenues and revenue synergies; the risk of deposit and customer attrition; regulatory enforcement and litigation risk; unexpected operating and other costs; the risk of customer and employee loss and business disruptions; increased competitive pressures and solicitations of customers by competitors;

Current wording

the risks relating to the recent acquisitions of American, Southwest and Stellar including, without limitation: the diversion of management’s time on issues related to the acquisitions and integration; unexpected transaction costs, including the costs of integrating operations; the risk that the businesses will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; the potential failure to fully or timely realize expected revenues and revenue synergies; the risk of deposit and customer attrition; regulatory enforcement and litigation risk; unexpected operating and other costs; the risk of customer and employee loss and business disruptions; increased competitive pressures and solicitations of customers by competitors;

Previous 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;

Current 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;

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, 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.

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, 2026, the Bank operated 311 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; 21 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

Total assets were $43.62 billion at March 31, 2026, compared with $38.46 billion at December 31, 2025, an increase of $5.16 billion or 13.4%. Total loans were $25.29 billion at March 31, 2026, compared with $21.81 billion at December 31, 2025, an increase of $3.48 billion or 16.0%. Total deposits were $32.63 billion at March 31, 2026, compared with $28.48 billion at December 31, 2025, an increase of $4.15 billion or 14.6%. Total shareholders’ equity was $8.21 billion at March 31, 2026, compared with $7.62 billion at December 31, 2025, an increase of $591.7 million or 7.8%.

Current wording

Total assets were $43.87 billion at June 30, 2026, compared with $38.46 billion at December 31, 2025, an increase of $5.41 billion or 14.1%. Total loans were $25.03 billion at June 30, 2026, compared with $21.81 billion at December 31, 2025, an increase of $3.22 billion or 14.8%. Total deposits were $32.60 billion at June 30, 2026, compared with $28.48 billion at December 31, 2025, an increase of $4.12 billion or 14.5%. Total shareholders’ equity was $8.31 billion at June 30, 2026, compared with $7.62 billion at December 31, 2025, an increase of $689.1 million or 9.0%.

Previous 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.

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. This resulted in goodwill of $185.9 million as of June 30, 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 June 30, 2026.

Previous 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.

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”). 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 definitive agreement, Bancshares issued 4,094,974 shares of its common stock for all outstanding shares of Southwest common stock in the first quarter of 2026. This resulted in goodwill of $134.1 million as of March 31, 2026, which does not include all the subsequent fair value adjustments that have not yet been finalized. Additionally, the Company recognized $33.8 million of core deposit intangibles as of March 31, 2026.

Current wording

Pursuant to the terms of the definitive agreement, Bancshares issued 4,094,974 shares of its common stock for all outstanding shares of Southwest common stock. This resulted in goodwill of $134.9 million as of June 30, 2026, which does not include all the subsequent fair value adjustments that have not yet been finalized. Additionally, the Company recognized $33.8 million of core deposit intangibles as of June 30, 2026.

Previous wording

Pending Acquisition of Stellar Bancorp, Inc. — On January 28, 2026, Bancshares and Stellar Bancorp, Inc. (“Stellar”) jointly announced the signing of an Agreement and Plan of Merger (the “Merger Agreement”), which provides that Stellar, the parent company of Stellar Bank (“Stellar Bank”), will merge with and into Bancshares, and Stellar Bank will merge with and into the Bank. Stellar Bank operates 52 banking offices in greater Houston and Beaumont, Texas and surrounding areas.

Current wording

Acquisition of Stellar Bancorp, Inc.— On July 1, 2026, the Company completed the merger of Stellar Bancorp, Inc. (“Stellar”) into Bancshares and the subsequent merger of Stellar’s wholly owned subsidiary Stellar Bank (“Stellar Bank”) into the Bank (collectively, the “Stellar Merger”). Stellar Bank operated 52 banking offices including its main office in Houston and banking offices in the Houston, Beaumont and East Texas areas and in Dallas, Texas.

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. 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.

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, two-year 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

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.

Current wording

For the quarter ended June 30, 2026, net income available to common shareholders was $168.6 million or $1.67 per diluted common share compared with $135.2 million or $1.42 for the same period in 2025. Net income and net income per diluted common share for the second quarter of 2026 was primarily impacted by an increase in net interest income and a gain on Visa Class B-2 stock exchange net of investment securities sales of $8.2 million, partially offset by an increase in noninterest expenses related to the American and Southwest operations and an increase in provision for income taxes. The Company posted annualized returns on average common equity of 8.14% and 7.13%, annualized returns on average assets of 1.55% and 1.41% and efficiency ratios of 45.99% and 44.80% for the quarters ended June 30, 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 $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.

Current wording

Average interest-bearing liabilities were $24.29 billion for the quarter ended June 30, 2026, an increase of $3.26 billion or 15.5% compared with $21.03 billion for the same period in 2025. The increase was primarily due to the American Merger and the Southwest Merger, partially offset by the decrease in other borrowings. The average rate on interest-bearing liabilities was 2.13% for the quarter ended June 30, 2026, a decrease of 25 basis points compared with 2.38% for the same period in 2025.

Previous wording

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

Current wording

There was no provision for credit losses for the three and six months ended June 30, 2026 and 2025.

Previous 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.

Current wording

Net charge-offs were $43.5 million for the six months ended June 30, 2026, compared with $5.7 million for the six months ended June 30, 2025. For the six months ended June 30, 2026, net charge-offs included a $39.2 million increase in net charge-offs for commercial and industrial loans. Additionally, due to the American Merger and the Southwest Merger, reserves increased by Day One accounting for PCD loans of $53.3 million and Day One accounting for PSLs of $39.3 million. Further, $12.3 million of reserves on resolved PCD loans without any related charge-offs were released to the general reserve.

Previous wording

Noninterest expense totaled $217.3 million for the three months ended March 31, 2026, compared with $140.3 million for the same period in 2025, an increase of $77.0 million, primarily due to an increase in merger related expenses of $42.5 million, an increase in salaries and benefits and an increase in additional expenses related to three months of American operations and two months of Southwest operations.

Current wording

Noninterest expense totaled $176.2 million for the three months ended June 30, 2026, compared with $138.6 million for the same period in 2025, an increase of $37.6 million or 27.1%, which was primarily due to an increase in salaries and benefits and an increase in additional expenses related to three months of American and Southwest operations. Noninterest expense totaled $393.5 million for the six months ended June 30, 2026, compared with $278.9 million for the six months ended June 30, 2025, an increase of $114.6 million or 41.1%, primarily due to an increase in merger related expenses of $43.3 million, an increase in salaries and benefits and an increase in additional expenses related to six months of American operations and five months of Southwest operations.

Previous 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.

Current wording

Includes stock-based compensation expense of $3.2 million and $3.0 million for the three months ended June 30, 2026, and 2025, respectively, and $6.6 million and $6.1 million for the six months ended June 30, 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 $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.

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 $46.5 million for the three months ended June 30, 2026, compared with $37.0 million for the same period in 2025, an increase of $9.5 million or 25.7%. Income tax expense totaled $80.6 million for the six months ended June 30, 2026, compared with $73.1 million for the same period in 2025, an increase of $7.4 million or 10.2%. The Company’s effective tax rate for the three months ended June 30, 2026, and 2025 was 21.6% and 21.5%, respectively. The Company’s effective tax rate for the six months ended June 30, 2026, and 2025 was 22.0% and 21.6%, 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. 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.

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 six months ended June 30, 2026 and year ended December 31, 2025.

Previous 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.

Current wording

At June 30, 2026, total loans were $25.03 billion, an increase of $3.22 billion or 14.8% compared with $21.81 billion at December 31, 2025. Loans at June 30, 2026, included $18.7 million of loans held for sale and $1.29 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 June 30, 2026, loans represented 57.0% of total assets compared with 56.7% of total assets at December 31, 2025.

Previous wording

Nonperforming assets decreased $28.7 million or 19.0% to $122.1 million at March 31, 2026, compared with $150.8 million at December 31, 2025.

Current wording

Nonperforming assets decreased $20.3 million to $130.6 million at June 30, 2026, compared with $150.8 million at December 31, 2025.

Previous 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.

Current wording

Nonperforming assets were 0.52% of total loans and other real estate at June 30, 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 321.0% at June 30, 2026, and 242.7% at December 31, 2025.

Previous wording

The Company’s allowance for credit losses on loans consists of two components: (1) a specific valuation allowance based on expected lifetime losses on specifically identified 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.

Current wording

The Company’s allowance for credit losses on loans consists of two components: (1) a specific valuation allowance based on expected lifetime losses on specifically identified loans and (2) a general valuation allowance based on historical lifetime loan loss experience, current economic conditions, two-year reasonable and supportable forecasted economic conditions and other qualitative risk factors both internal and external to the Company.

Previous wording

The allowance for credit losses is further determined by the size of the loan portfolio subject to the allowance methodology and environmental factors that include Company-specific risk indicators and general economic conditions, both of which are constantly changing. The Company evaluates the economic and portfolio-specific factors on a quarterly basis to determine a qualitative component of the general valuation allowance. The factors include current economic metrics, reasonable and supportable forecasted economic metrics, business conditions, delinquency trends, credit concentrations, nature and volume of the portfolio and other adjustments for items not covered by specific reserves and historical lifetime loss experience. Management’s assessment of qualitative factors is a statistically based approach to determine the loss rate adjustment associated with such factors. Based on the Company’s actual historical lifetime loan loss experience relative to economic and loan portfolio-specific factors at the time the losses occurred, management is able to identify the expected level of lifetime losses as of the date of measurement. The correlation of historical loss experience with current and forecasted economic conditions provides an estimate of lifetime losses that has not been previously factored into the general valuation allowance by the determination of specific reserves and lifetime historical losses. Additionally, the Company considers qualitative factors not easily quantified and the possibility of model imprecision.

Current wording

The allowance for credit losses is further determined by the size of the loan portfolio subject to the allowance methodology and environmental factors that include Company-specific risk indicators and general economic conditions, both of which are constantly changing. The Company evaluates the economic and portfolio-specific factors on a quarterly basis to determine a qualitative component of the general valuation allowance. The factors include current economic metrics, two-year reasonable and supportable forecasted economic metrics, business conditions, delinquency trends, credit concentrations, nature and volume of the portfolio and other adjustments for items not covered by specific reserves and historical lifetime loss experience. Management’s assessment of qualitative factors is a statistically based approach to determine the loss rate adjustment associated with such factors. Based on the Company’s actual historical lifetime loan loss experience relative to economic and loan portfolio-specific factors at the time the losses occurred, management is able to identify the expected level of lifetime losses as of the date of measurement. The correlation of historical loss experience with current and forecasted economic conditions provides an estimate of lifetime losses that has not been previously factored into the general valuation allowance by the determination of specific reserves and lifetime historical losses. Additionally, the Company considers qualitative factors not easily quantified and the possibility of model imprecision.

Previous wording

On January 1, 2026, the Company adopted ASU 2025-08 that updates the accounting for purchased loans under ASC 326. Under ASU 2025-08, Non-PCD loans deemed “seasoned” will now be considered PSLs and accounted for using the gross-up approach at acquisition, which was formerly applicable only to PCD loans. PSLs include all loans acquired in a business combination that do not have “more-than-insignificant” deterioration of credit quality since origination. Under ASU 2025-08, an allowance for expected credit losses is recognized at acquisition, offsetting the loan’s amortized costs basis, thereby eliminating the immediate recognition of day-one credit loss expense previously required for Non-PCD loans. Accordingly, the initial estimate of expected credit losses recognized in the allowance for credit losses on loans on the Mergers included both PCD and PSLs. For the American Merger, the Company recorded an allowance for credit losses on loans of $47.5 million, which included a $27.5 million allowance on PCD loans and a $20.0 million allowance on PSLs. For the Southwest Merger, the Company recorded an allowance for credit losses on loans of $43.9 million, which included a $24.6 million allowance on PCD loans and an $19.3 million allowance on PSLs.

Current wording

On January 1, 2026, the Company adopted ASU 2025-08 that updates the accounting for purchased loans under ASC 326. Under ASU 2025-08, Non-PCD loans deemed “seasoned” will now be considered PSLs and accounted for using the gross-up approach at acquisition, which was formerly applicable only to PCD loans. PSLs include all loans acquired in a business combination that do not have “more-than-insignificant” deterioration of credit quality since origination. Under ASU 2025-08, an allowance for expected credit losses is recognized at acquisition, offsetting the loan’s amortized costs basis, thereby eliminating the immediate recognition of day-one credit loss expense previously required for Non-PCD loans. Accordingly, the initial estimate of expected credit losses recognized in the allowance for credit losses on loans on the American Merger and the Southwest Merger included both PCD loans and PSLs. For the American Merger, the Company recorded an allowance for credit losses on loans of $47.5 million, which included a $27.5 million allowance on PCD loans and a $20.0 million allowance on PSLs. For the Southwest Merger, the Company recorded an allowance for credit losses on loans of $45.1 million, which included a $25.8 million allowance on PCD loans and a $19.3 million allowance on PSLs.

Previous 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.

Current wording

The Company had gross charge-offs on originated loans of $36.1 million during the six months ended June 30, 2026. Partially offsetting these charge-offs were recoveries on originated loans of $2.1 million. Gross charge-offs on acquired loans were $11.7 million during the six months ended June 30, 2026. Offsetting these charge-offs were recoveries on acquired loans of $2.2 million. Total charge-offs for the six months ended June 30, 2026, were $47.8 million, partially offset by total recoveries of $4.3 million.

Previous wording

The allowance for credit losses on loans totaled $383.8 million at March 31, 2026, compared with $333.7 million at December 31, 2025, an increase of $50.1 million or 15.0%. The allowance for credit losses on loans totaled 1.52% of total loans at March 31, 2026, and 1.53% of total loans at December 31, 2025.

Current wording

The allowance for credit losses on loans totaled $382.8 million at June 30, 2026, compared with $333.7 million at December 31, 2025, an increase of $49.1 million or 14.7%. The allowance for credit losses on loans totaled 1.53% of total loans at both June 30, 2026 and December 31, 2025.

Previous 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%.

Current wording

At June 30, 2026, $213.7 million of the allowance for credit losses on loans was attributable to originated loans, a decrease of $17.6 million or 7.6% compared with $231.3 million of the allowance at December 31, 2025. At June 30, 2026, $30.2 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 $8.2 million or 21.3%. At June 30, 2026, $54.9 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 $39.2 million or 249.4%. At June 30, 2026, $84.1 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 $35.7 million or 73.8%.

Previous 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.

Current wording

At June 30, 2026, the Company had $73.2 million of total outstanding accretable discounts on PSLs and PCD loans. The Company believes that the allowance for credit losses on loans at June 30, 2026, 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 June 30, 2026.

Previous 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.

Current wording

The carrying cost of securities totaled $12.34 billion at June 30, 2026, compared with $10.61 billion at December 31, 2025, an increase of $1.73 billion or 16.3%. At June 30, 2026, securities represented 28.1% of total assets compared with 27.6% of total assets at December 31, 2025.

Previous wording

Total deposits were $32.63 billion at March 31, 2026, compared with $28.48 billion at December 31, 2025, an increase of $4.15 billion or 14.6%. Total noninterest-bearing deposits were $10.58 billion at March 31, 2026, compared with $9.47 billion at December 31, 2025, an increase of $1.11 billion or 11.8%. Interest-bearing deposits were $22.05 billion at March 31, 2026, compared with $19.01 billion at December 31, 2025, an increase of $3.04 billion or 16.0%.

Current wording

Total deposits were $32.60 billion at June 30, 2026, compared with $28.48 billion at December 31, 2025, an increase of $4.12 billion or 14.5%. Total noninterest-bearing deposits were $10.74 billion at June 30, 2026, compared with $9.47 billion at December 31, 2025, an increase of $1.27 billion or 13.4%. Interest-bearing deposits were $21.86 billion at June 30, 2026, compared with $19.01 billion at December 31, 2025, an increase of $2.85 billion or 15.0%.

Previous 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.

Current wording

Average deposits for the six months ended June 30, 2026, were $32.18 billion, an increase of $4.28 billion or 15.4% compared with $27.89 billion for the six months ended June 30, 2025. The ratio of average interest-bearing deposits to total average deposits was 67.6% and 65.9% during the first six 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 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.

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, 2026, the Company had total borrowing capacity of $7.62 billion under this line. FHLB advances of $2.40 billion were outstanding at June 30, 2026, with a weighted average interest rate of 3.76%. At June 30, 2026, the Company had no FHLB long-term notes payable balance outstanding.

Previous 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.

Current wording

Securities sold under repurchase agreements— At June 30, 2026, the Company had $199.6 million in securities sold under repurchase agreements with banking customers compared with $201.2 million at December 31, 2025, a decrease of $1.6 million or 0.8%. Repurchase agreements are generally settled on the following business day. All securities sold under repurchase agreements are collateralized by certain pledged securities.

Previous wording

Junior Subordinated Debentures—On January 1, 2026, in connection with the American Merger, the Company assumed the obligation related to a $6.2 million in Floating Rate Junior Subordinated Debentures and trust preferred securities (the “Debentures”) that mature in April 7, 2034. The Debentures, which qualify as Tier 1 capital for regulatory purposes, have a floating rate based on the three-month Term Secured Overnight Financing Rate (“SOFR”) plus 2.85%. In March 2026, the Company gave irrevocable notice of its intent to redeem the Debentures and they were redeemed on April 7, 2026.

Current wording

Junior Subordinated Debentures—On January 1, 2026, in connection with the American Merger, the Company assumed the obligation related to $6.2 million in Floating Rate Junior Subordinated Debentures and trust preferred securities (the “Debentures”) that mature in April 7, 2034. The Debentures, which qualify as Tier 2 capital for regulatory purposes, have a floating rate based on the three-month Term Secured Overnight Financing Rate (“SOFR”) plus 2.85%. In March 2026, the Company gave irrevocable notice of its intent to redeem the Debentures and they were redeemed on April 7, 2026.

Previous wording

Subordinated notes—On January 1, 2026, in connection with the American Merger, the Company assumed the obligations related to a $35.0 million of Fixed-to-Floating Rate Subordinated Note that mature on December 29, 2031. The subordinated note is payable quarterly in arrears at an annual floating rate equal to three-month term SOFR as determined for the applicable period, plus 2.50%. The Company may, at its option, beginning on the first repricing date and on any scheduled interest payment date thereafter, redeem the subordinated notes, in whole or in part, at a redemption price equal to 100% of the outstanding principal amount being redeemed plus accrued and unpaid interest to, but excluding, the date of redemption. Any partial redemption will be made pro rata among all of the holders. The subordinated notes are subordinated in right of payment to all of the Company’s existing and future senior indebtedness and effectively subordinated to all existing and future debt and all other liabilities of the Company’s subsidiaries.

Current wording

Subordinated notes—On January 1, 2026, in connection with the American Merger, the Company assumed the obligations related to $35.0 million of Fixed-to-Floating Rate Subordinated Notes that mature on December 29, 2031. The subordinated notes, which qualify as Tier 2 capital for regulatory purposes, are payable quarterly in arrears at an annual floating rate equal to three-month term SOFR as determined for the applicable period, plus 2.50%. The Company may, at its option, beginning on the first repricing date and on any scheduled interest payment date thereafter, redeem the subordinated notes, in whole or in part, at a redemption price equal to 100% of the outstanding principal amount being redeemed plus accrued and unpaid interest to, but excluding, the date of redemption. Any partial redemption will be made pro rata among all of the holders. The subordinated notes are subordinated in right of payment to all of the Company’s existing and future senior indebtedness and effectively subordinated to all existing and future debt and all other liabilities of the Company’s subsidiaries.

Previous wording

On February 1, 2026, in connection with the Southwest Merger, the Company assumed the obligations related to a $35.0 million of Fixed-to-Floating Rate Subordinated Note that mature on June 15, 2032. The subordinated notes have a fixed rate of interest of 5.00% until 2027 followed by a floating rate interest based on three-month term SOFR plus 255 basis points. The Company may, at its option, beginning on June 15, 2027, and on any scheduled interest payment date thereafter, redeem the subordinated notes, in whole or in part, at a redemption price equal to 100% of the outstanding principal amount being redeemed plus accrued and unpaid interest to, but excluding, the date of redemption. Any partial redemption will be made pro rata among all of the holders. In addition, the Company may redeem all or portion of the subordinated notes at any time upon occurrence of a Tier 2 capital event, tax event or investment company event as defined in the agreement. The subordinated notes are subordinated in right of payment to all of the Company’s senior indebtedness and effectively subordinated to all existing and future debt and all other liabilities of the Company’s subsidiaries.

Current wording

On February 1, 2026, in connection with the Southwest Merger, the Company assumed the obligations related to $35.0 million of Fixed-to-Floating Rate Subordinated Notes that mature on June 15, 2032. The subordinated notes, which qualify as Tier 2 capital for regulatory purposes, have a fixed rate of interest of 5.00% until 2027 followed by a floating rate interest based on three-month term SOFR plus 255 basis points. The Company may, at its option, beginning on June 15, 2027, and on any scheduled interest payment date thereafter, redeem the subordinated notes, in whole or in part, at a redemption price equal to 100% of the outstanding principal amount being redeemed plus accrued and unpaid interest to, but excluding, the date of redemption. Any partial redemption will be made pro rata among all of the holders. In addition, the Company may redeem all or portion of the subordinated notes at any time upon occurrence of a Tier 2 capital event, tax event or investment company event as defined in the agreement. The subordinated notes are subordinated in right of payment to all of the Company’s senior indebtedness and effectively subordinated to all existing and future debt and all other liabilities of the Company’s subsidiaries.

Previous wording

The Company has an available line of credit with the 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.

Current wording

The Company has an available line of credit with the 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, 2026, the Company had total borrowing capacity of $7.62 billion under this line. FHLB advances of $2.40 billion were outstanding at June 30, 2026, with a weighted average interest rate of 3.76%. At June 30, 2026, the Company had no FHLB long-term notes payable balance outstanding.

Previous wording

The Company has the ability to borrow on a collateralized basis from the Federal Reserve Discount Window. The discount window allows depository institutions to manage liquidity on a short-term basis and borrowings are usually no longer than 90 days. As of March 31, 2026, the Company had $8.18 billion available in borrowings with no borrowings outstanding.

Current wording

The Company has the ability to borrow on a collateralized basis from the Federal Reserve Discount Window. The discount window allows depository institutions to manage liquidity on a short-term basis and borrowings are usually no longer than 90 days. As of June 30, 2026, the Company had $8.45 billion available in borrowings with no borrowings outstanding.

Previous wording

As of March 31, 2026, the Company had outstanding $4.90 billion in commitments to extend credit, $121.3 million in commitments associated with outstanding standby letters of credit and $581.8 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, 2026, the Company had outstanding $5.03 billion in commitments to extend credit, $119.7 million in commitments associated with outstanding standby letters of credit and $879.8 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, 2026, the Company had cash and cash equivalents of $1.55 billion compared with $1.75 billion at December 31, 2025, a decrease of $199.6 million or 11.4%. The change was primarily due to a decrease in net purchases of investment securities of $1.02 billion, a decrease in deposits of $222.4 million, payment of cash dividends of $60.6 million and repurchase of common stock of $57.1 million, partially offset by net cash provided by the Mergers of $478.1 million, an increase in cash provided related to loans of $268.8 million, net proceeds from other short-term borrowings of $250.0 million, and net cash provided by operating activities of $185.1 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, 2026, the Company had cash and cash equivalents of $1.68 billion compared with $1.75 billion at December 31, 2025, a decrease of $64.5 million or 3.7%. The change was primarily due to an increase in net purchases of investment securities of $1.41 billion, a decrease in deposits of $255.1 million, payment of cash dividends of $121.0 million and repurchase of common stock of $70.8 million, partially offset by an increase in cash provided related to loans of $525.6 million, net cash provided by the American Merger and the Southwest Merger of $478.1 million, net proceeds from other short-term borrowings of $450.0 million, and net cash provided by operating activities of $347.5 million.

Previous wording

On January 26, 2026, Bancshares announced a stock repurchase program under which it could repurchase up to 5%, or approximately 4.9 million shares, of its outstanding common stock over a one-year period expiring on January 26, 2027, 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. Bancshares repurchased approximately 837,000 shares of its common stock at an average weighted price of $68.15 per share during the three months ended March 31, 2026.

Current wording

On January 26, 2026, Bancshares announced a stock repurchase program under which it could repurchase up to 5%, or approximately 4.9 million shares, of its outstanding common stock over a one-year period expiring on January 26, 2027, 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. Bancshares repurchased approximately 200 thousand shares of its common stock at an average weighted price of $68.34 per share during the three months ended June 30, 2026, and approximately 1.04 million shares of its common stock at an average weighted price of $68.19 per share for a total of $70.8 million during the six months ended June 30, 2026.