PROSPERITY BANCSHARES INC

1. BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Prosperity Bancshares, Inc.® (“Bancshares”) and its wholly-owned subsidiary, Prosperity Bank® (the “Bank,” and together with Bancshares, the “Company”). All intercompany transactions and balances have been eliminated.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for financial information and with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of the Company on a consolidated basis; and all such adjustments are of a normal recurring nature. These financial statements and the notes thereto should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. Operating results for the nine-month period ended September 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026 or any other period.

The Company’s banking operations are considered by management to be aggregated in one reportable operating segment in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280. The Chief Executive Officer is designated as the Company’s chief operating decision maker (“CODM”), who evaluates banking operations and decides how to allocate resources based on consolidated net income that is also reported on the Company’s consolidated statement of income. Consolidated net income is used to monitor the Company’s revenue streams, significant expenses and to compare budget to actual results in assessing performance of the Company’s banking operations. Interest expense, provision for credit losses and salaries and employee benefits are considered significant segment expenses and are listed on the accompanying consolidated statements of income. As the Company’s operations consist of one reportable operating segment, the segment assets are reflected on the accompanying consolidated balance sheets as “total assets.”

2. INCOME PER COMMON SHARE

The following table illustrates the computation of basic and diluted earnings per share:

There wereno stock options outstanding at September 30, 2026 or 2025, or exercisable during the three and nine months ended September 30, 2026 or 2025 that would have had an anti-dilutive effect on the above computation.

3. NEW ACCOUNTING STANDARDS

Accounting Standards Updates (“ASU”)

ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. ASU 2025‑11 clarifies interim disclosure requirements, including providing a comprehensive list of interim disclosure requirements under U.S. GAAP and a disclosure principle that requires entities to disclose events since the last annual reporting period that have a material impact on the entity. The standard is effective for interim periods within annual reporting periods beginning after December 15, 2027. The Company does not expect the adoption of ASU 2025-11 to have a significant impact on its financial statements.

ASU 2025-08, Financial Instruments—Credit Losses (Topic 326): Purchased Loans. ASU 2025-08 updated the accounting for purchased loans under ASC 326. Under ASU 2025-08, loans acquired without credit deterioration (“Non-PCD” loans) and deemed “seasoned” will now be considered purchased seasoned loans (“PSLs”) and accounted for using the gross-up approach at acquisition, which was formerly applicable only to purchased credit deteriorated (“PCD”) assets. PSLs include all loans acquired in a business combination that do not have “more-than-insignificant” deterioration of credit quality since origination, as well as loans purchased at least 90 days after origination where the purchaser was not involved in the origination of the loans. 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. The Company early adopted ASU 2025-08 as of January 1, 2026, on a prospective basis. For further discussion, see Note 5 to the consolidated financial statements.

ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. ASU 2025-06 modernizes the accounting for internal-use software costs. Under this ASU, software development costs are capitalized when (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and interim reporting periods, with early adoption permitted. The Company does not expect the adoption of ASU 2025-06 to have a significant impact on its financial statements.

ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a significant impact on its financial statements.

ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 focuses on the rate reconciliation and income taxes paid. ASU 2023-09 requires a public business entity to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign, and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. The Company adopted ASU 2023-09 as of December 31, 2025 on a retrospective basis, and it did not have a significant impact on the Company’s financial statements.

4. SECURITIES

The amortized cost and fair value of investment securities were as follows:

The investment securities portfolio is measured for expected credit losses by segregating the portfolio intotwo general classifications and applying the appropriate expected credit losses methodology. Investment securities classified as available for sale or held to maturity are evaluated for expected credit losses under FASB ASC Topic 326, “Financial Instruments – Credit Losses” (“CECL”).

Available for sale securities. For available for sale securities in an unrealized loss position, the amount of the expected credit losses recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss. If an entity intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the expected credit losses will be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the expected credit losses will be separated into the amount representing the credit-related portion of the impairment loss (“credit loss”) and the noncredit portion of the impairment loss (“noncredit portion”). The amount of the total expected credit losses related to the credit loss is determined based on the difference between the present value of cash flows expected to be collected and the amortized cost basis and such difference is recognized in earnings. The amount of the total expected credit losses related to the noncredit portion is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the expected credit losses recognized in earnings will become the new amortized cost basis of the investment.

As of September 30, 2026, management does not have the intent to sell any of the securities classified as available for sale before a recovery of cost. In addition, management believes it is more likely than not that the Company will not be required to sell any of its investment securities before a recovery of cost. The unrealized losses are largely due to changes in market interest rates and spread relationships since the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date, or if market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of September 30, 2026, management believes that there is no potential for credit losses on available for sale securities.

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”), Federal National Mortgage Association (“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 or Build America Mutual. As of September 30, 2026, the Company’s municipal securities represent 1.3% 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, 2026, management believes that there isno potential for material credit losses on held to maturity securities.

Securities with unrealized losses, segregated by length of time, that have been in a continuous loss position were as follows:

At September 30, 2026 and December 31, 2025, there were 677 securities and 712 securities, respectively, in an unrealized loss position for 12 months or more.

The table below summarizes the amortized cost and fair value of investment securities at September 30, 2026 by contractual maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations at any time with or without call or prepayment penalties.

The Company recordedno gain or loss on the sale of investment securities for the three months ended September 30, 2026 and a $4.0 million net loss on the sale of investment securities for thenine months ended September 30, 2026 andno gain or loss on the sale of investment securities for the three and nine months ended September 30, 2025. As of September 30, 2026, the Company did not own any non-agency collateralized mortgage obligations.

At September 30, 2026 and December 31, 2025, the Company did not own securities of any one issuer (other than the U.S. government and its agencies) for which aggregate adjusted cost exceeded 10% of the consolidated shareholders’ equity at such respective dates.

Securities with an amortized cost of $10.57 billion and $9.24 billion and a fair value of $9.45 billion and $8.43 billion at September 30, 2026 and December 31, 2025, respectively, were pledged to collateralize public deposits and for other purposes required or permitted by law.

Visa Class B-2 Stock Exchange. During 2026, the Company tendered all of its shares of Visa, Inc. (“Visa”) Class B-2 common stock in exchange for a combination of Visa Class B-3 common stock and Visa Class C common stock, pursuant to the terms and subject to the conditions of Visa’s public exchange offer, which expired on May 8, 2026. During the nine months ended September 30, 2026, the Company recorded a gain of $13.2 million based on the conversion privilege of the Class C common stock and the closing price of Visa Class A common stock. In the exchange, the Company received 24,246 shares of Class B-3 stock, recorded atzero cost basis, and 9,137 shares of Class C common stock and has subsequently sold all shares of Class C stock.

5. LOANS AND ALLOWANCE FOR CREDIT LOSSES

The loan portfolio consists of various types of loans and is categorized by major type as follows:

Concentrations of Credit. Most of the Company’s lending activity occurs within the states of Texas and Oklahoma. Commercial real estate loans, 1-4 family residential loans and construction, land development and other land loans made up 79.4% and 81.8% of the Company’s total loan portfolio, excluding Warehouse Purchase Program loans, at September 30, 2026 and December 31, 2025, respectively. As of September 30, 2026 and December 31, 2025, excluding Warehouse Purchase Program loans, there were no concentrations of loans related to any single industry in excess of 10% of total loans.

Related Party Loans. As of September 30, 2026 and December 31, 2025, loans outstanding to directors, officers and their affiliates totaled$31.2 million and$272 thousand, respectively. All transactions between the Company and such related parties are conducted in the ordinary course of business and made on the same terms and conditions as similar transactions with unaffiliated persons.

An analysis of activity with respect to these related party loans is as follows:

Nonperforming Assets and Nonaccrual and Past Due Loans. The Company has several procedures in place to assist it in maintaining the overall quality of its loan portfolio. The Company has established underwriting guidelines to be followed by its officers, including requiring appraisals on loans collateralized by real estate. The Company also monitors its delinquency levels for any negative or adverse trends. Nevertheless, the Company’s loan portfolio could become subject to increasing pressures from deteriorating borrower credit due to general economic conditions.

The Company generally places a loan on nonaccrual status and ceases accruing interest when the payment of principal or interest is delinquent for 90 days, or earlier in some cases; unless the loan is in the process of collection and the underlying collateral fully supports the carrying value of the loan. A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future principal and interest amounts contractually due are reasonably assured, which is typically evidenced by a sustained period (at least six months) of repayment performance by the borrower.

With respect to potential problem loans, an evaluation of the borrower’s overall financial condition is made, together with an appraisal for loans collateralized by real estate, to determine the need, if any, for possible write-downs or appropriate additions to the allowance for credit losses.

An aging analysis of past due loans, segregated by category of loan, is presented below:

(1)

Includes$8.4 million and$14.2 million of residential mortgage loans held for sale at September 30, 2026 and December 31, 2025, respectively.

The following table presents information regarding nonperforming assets as of the dates indicated:

(1)

There wereno nonperforming Warehouse Purchase Program loans or Warehouse Purchase Program lines of credit for the periods presented.

The Company had$193.9 million in nonperforming assets at September 30, 2026 compared with$150.8 million at December 31, 2025. Nonperforming assets were 0.60% of total loans and other real estate at September 30, 2026 and 0.69% of total loans and other real estate at December 31, 2025. The Company had$170.3 million in nonaccrual loans at September 30, 2026 compared with$137.2 million at December 31, 2025. The amounts at September 30, 2026 were impacted by nonperforming assets acquired in 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”), nonperforming assets acquired in 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”), and nonperforming assets acquired in 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”, and together with the American Merger and the Southwest Merger, the “Mergers”).

Acquired Loans. Acquired loans were preliminarily recorded at fair value based on a discounted cash flow valuation methodology that considers, among other things, interest rates, projected default rates, loss given default, and recovery rates. Projected default rates, loss given default, and recovery rates for PCD loans and PSLs primarily impact the related allowance, as opposed to the fair value mark. During the valuation process, the Company identified PCD loans and PSLs in the acquired loan portfolios. Loans acquired with evidence of credit quality deterioration since origination as of the acquisition date were accounted for as PCD. PCD loan identification considers the following factors: payment history and past due status, debt service coverage, loan grading, collateral values and other factors that may indicate deterioration of credit quality as of the acquisition date when compared to the origination date. PSL identification considers the following factors: account types, remaining terms, annual interest rates or coupons, current market rates, interest types, past delinquencies, timing of principal and interest payments, loan to value ratios, loss exposures and remaining balances. Accretion of purchased discounts on PCD loans and PSLs will be recognized based on payment structure and the contractual maturity of individual loans.

PCD Loans. The recorded investment in PCD loans included in the consolidated balance sheet and the related outstanding balance as of the dates indicated are presented in the table below. The outstanding balance represents the total amount owed as of September 30, 2026 and December 31, 2025.

Changes in the accretable yield for acquired PCD loans for the three andnine months ended September 30, 2026 and 2025 were as follows:

Income recognition on PCD loans is subject to the timing and amount of future cash flows. PCD loans for which the Company is accruing interest income are not considered nonperforming or impaired. The PCD discount reflected above as of September 30, 2026 represents the amount of discount available to be recognized as income.

PSLs. The recorded investment in PSLs included in the consolidated balance sheet and the related outstanding balance as of the dates indicated are presented in the table below. The outstanding balance represents the total amount owed as of September 30, 2026 and December 31, 2025.

Changes in the discount accretion for PSLs for the three andnine months ended September 30, 2026, and 2025 were as follows:

Credit Quality Indicators. As part of the ongoing monitoring of the credit quality of the Company’s loan portfolio and methodology for calculating the allowance for credit losses, management assigns and tracks loan grades to be used as credit quality indicators. The following is a general description of the loan grades used:

Grade 1—Credits in this category have risk potential that is virtually nonexistent. These loans may be secured by insured certificates of deposit, insured savings accounts, U.S. Government securities and highly rated municipal bonds.

Grade 2—Credits in this category are of the highest quality. These borrowers represent top rated companies and individuals with unquestionable financial standing with excellent global cash flow coverage, net worth, liquidity and collateral coverage.

Grade 3—Credits in this category are not immune from risk but are well protected by the collateral and paying capacity of the borrower. These loans may exhibit a minor unfavorable credit factor, but the overall credit is sufficiently strong to minimize the possibility of loss.

Grade 4—Credits in this category are considered to be of acceptable credit quality with moderately greater risk than Grade 3 and receive closer monitoring. Loans in this category have sources of repayment that remain sufficient to preclude a larger than normal probability of default and secondary sources are likewise currently of sufficient quantity, quality, and liquidity to protect the Company against loss of principal and interest. These borrowers have specific risk factors, but the overall strength of the credit is acceptable based on other mitigating credit and/or collateral factors and can repay the debt in the normal course of business.

Grade 5—Credits in this category constitute an undue and unwarranted credit risk; however, the factors do not rise to a level of substandard. These credits have potential weaknesses and/or declining trends that, if not corrected, could expose the Company to risk at a future date. These loans are monitored on the Company’s internally-generated watch list and evaluated on a quarterly basis.

Grade 6—Credits in this category are considered “substandard” but “non-impaired” loans in accordance with regulatory guidelines. Loans in this category have well-defined weaknesses that, if not corrected, could make default of principal and interest possible. Loans in this category are still accruing interest and may be dependent upon secondary sources of repayment and/or collateral liquidation.

Grade 7—Credits in this category are deemed “substandard” and “impaired” pursuant to regulatory guidelines. As such, the Company has determined that it is probable that less than 100% of the contractual principal and interest will be collected. These loans are individually evaluated for a specific reserve and will typically have the accrual of interest stopped.

Grade 8—Credits in this category include “doubtful” loans in accordance with regulatory guidance. Such loans are no longer accruing interest and factors indicate a loss is imminent. These loans are also deemed “impaired.” While a specific reserve may be in place while the loan and collateral are being evaluated, these loans are typically charged down to an amount the Company estimates is collectible.

Grade 9—Credits in this category are deemed a “loss” in accordance with regulatory guidelines and have been charged off or charged down. The Company may continue collection efforts and may have partial recovery in the future.

The following tables present loans by risk grade, by category of loan and by year of origination/renewal at September 30, 2026.

(1)

Includes$8.4 million of residential mortgage loans held for sale at September 30, 2026.

Allowance for Credit Losses on Loans. 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 that it believes is management’s best estimate of current expected credit losses on the Company’s loan portfolio as of September 30, 2026. 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.

The Company’s allowance for credit losses on loans consists of two components: (1) a specific valuation allowance based on expected 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. The Company adopted ASU 2025-08 as of January 1, 2026, which aligned the accounting for PSLs with the treatment of PCD loans’ gross-up approach at acquisition and eliminated the immediate recognition of day-one credit loss expense. Accordingly, the initial estimate of expected credit losses recognized in the allowance for credit losses on loans will include both PCD loans and PSLs.

In setting the specific valuation allowance, the Company follows a loan review program to evaluate the credit risk in the total loan portfolio and assigns risk grades to each loan. Through this loan review process, the Company maintains an internal list of impaired loans, which, along with the delinquency list of loans, helps management assess the overall quality of the loan portfolio and the adequacy of the allowance for credit losses. All loans that have been identified as impaired are reviewed on a quarterly basis in order to determine whether a specific reserve is required. For certain impaired loans, the Company allocates a specific loan loss reserve primarily based on the value of the collateral securing the impaired loan in accordance with CECL. The specific reserves are determined on an individual loan basis. Loans for which specific reserves are provided are excluded from the general valuation allowance described below.

In connection with this review of the loan portfolio, the Company considers risk elements attributable to particular loan types or categories in assessing the quality of individual loans. Some of the risk elements include:

•

for 1-4 family residential mortgage loans, the borrower’s ability to repay the loan, including a consideration of the debt to income ratio and employment and income stability, the loan to value ratio, and the age, condition and marketability of collateral;

•

for commercial real estate loans and multifamily residential loans, the debt service coverage ratio (income from the property in excess of operating expenses compared to loan payment requirements), operating results of the owner in the case of owner-occupied properties, the loan to value ratio, the age and condition of the collateral and the volatility of income, property value and future operating results typical of properties of that type;

•

for construction, land development and other land loans, the perceived feasibility of the project, including the ability to sell developed lots or improvements constructed for resale or the ability to lease property constructed for lease, the quality and nature of contracts for presale or prelease, if any, experience and ability of the developer and loan to value ratio;

•

for commercial and industrial loans, the operating results of the commercial, industrial or professional enterprise, the borrower’s business, professional and financial ability and expertise, the specific risks and volatility of income and operating results typical for businesses in that category and the value, nature and marketability of collateral;

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for the Warehouse Purchase Program, the capitalization and liquidity of the mortgage banking client, the operating experience, the client’s satisfactory underwriting of purchased loans and the consistent timeliness by the client of loan resale to investors;

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for agriculture real estate loans, the experience and financial capability of the borrower, projected debt service coverage of the operations of the borrower and loan to value ratio; and

•

for non-real estate agriculture loans, the operating results, experience and financial capability of the borrower, historical and expected market conditions and the value, nature and marketability of collateral.

In addition, for each category, the Company considers secondary sources of income and the financial strength and credit history of the borrower and any guarantors.

In determining the amount of the general valuation allowance, management considers factors such as historical lifetime loan loss experience, concentration risk of specific loan types, the volume, growth and composition of the Company’s loan 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 Company’s loan portfolio through its internal loan review process, other qualitative risk factors both internal and external to the Company and other relevant factors in accordance with CECL. Historical lifetime loan loss experience is determined by utilizing an open-pool (“cumulative loss rate”) methodology. Adjustments to the historical lifetime loan loss experience are made for differences in current loan pool risk characteristics, such as portfolio concentrations, delinquency, non-accrual, and watch list levels, as well as changes in current and forecasted economic conditions such as unemployment rates, property and collateral values, and other indices relating to economic activity. The utilization of reasonable and supportable forecasts includes an immediate reversion to lifetime historical loss rates. Based on a review of these factors for each loan type, the Company applies an estimated percentage to the outstanding balance of each loan type, excluding any loan that has a specific reserve. Allocation of a portion of the allowance to one category of loans does not preclude its availability to cover expected losses in other categories.

The following table details activity in the allowance for credit losses on loans by category of loan for the three andnine months ended September 30, 2026 and 2025.

(1)

The Company adopted ASU 2025-08 on January 1, 2026.

The allowance for credit losses on loans as of September 30, 2026 totaled$592.0 million or 1.85% of total loans, including acquired loans with discounts, an increase of $258.2 million or 77.4% compared to the allowance for credit losses on loans totaling$333.7 million or 1.53% of total loans, including acquired loans with discounts, as of December 31, 2025. The increase in the allowance for credit losses on loans during this period was due to the Mergers, with $47.5 million attributable to the American Merger, $45.1 million attributable to the Southwest Merger, and $213.5 million attributable to the Stellar Merger.

There wasno provision for credit losses for the three andnine months ended September 30, 2026 and 2025.

Net charge-offs were$4.4 million for the three months ended September 30, 2026 compared with net charge-offs of$6.5 million for the three months ended September 30, 2025. For the three months ended September 30, 2026 net charge-offs included $1.7 million related to resolved PCD loans, which had specific reserves that were allocated to the charge-offs. Additionally, the reserves increased by Day One accounting for PCD loans of $146.1 million and Day One accounting for PSLs of $67.4 million due to the Stellar Merger. For the three months ended September 30, 2026, $7.6 million of reserves on resolved PCD loans without any related charge-offs were released to the general reserve.

Net charge-offs were$47.9 million for the nine months ended September 30, 2026 compared with$12.2 million for the nine months ended September 30, 2025. For the nine months ended September 30, 2026, net charge-offs included a $37.7 million increase in net charge-offs for commercial and industrial loans. Additionally, the reserves increased by Day One accounting for PCD loans of $27.5 million and Day One accounting for PSLs of $20.0 million due to the American Merger, increased by Day One accounting for PCD loans of $25.8 million and Day One accounting for PSLs of $19.3 million due to the Southwest Merger, andincreased by Day One accounting for PCD loans of $146.1 million and Day One accounting for PSLs of $67.4 million due to the Stellar Merger. Further, $20.1 million of reserves on resolved PCD loans without any related charge-offs were released to the general reserve.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures. The allowance for credit losses on off-balance sheet credit exposures estimates expected credit losses over the contractual period in which there is exposure to credit risk via a contractual obligation to extend credit, except when an obligation is unconditionally cancellable by the Company. The allowance is adjusted by provisions for credit losses charged to earnings that increase the allowance, or by provision releases returned to earnings that decrease the allowance. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on the commitments expected to fund. The estimate of commitments expected to fund is affected by historical analysis of utilization rates. The expected credit loss rates applied to the commitments expected to fund are affected by the general valuation allowance utilized for outstanding balances with the same underlying assumptions and drivers. As of September 30, 2026, and December 31, 2025, the Company had$37.6 million in allowance for credit losses on off-balance sheet credit exposures. The allowance for credit losses on off-balance sheet credit exposures is a separate line item on the Company’s consolidated balance sheet. As of September 30, 2026, the Company had $2.55 billion in commitments expected to fund.

Loan Modifications Made to Borrowers Experiencing Financial Difficulty. The Company evaluates all restructurings, including restructurings for borrowers experiencing financial difficulty, to determine whether they result in a new loan or a continuation of an existing loan. In accordance with CECL, the Company only establishes a specific reserve for modifications to borrowers experiencing financial difficulty when the loan is identified as impaired. The effect of most modifications of loans made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance. The Company adjusts the terms of loans for certain borrowers when it believes such changes will help its customers manage their loan obligations and increase the collectability of the loans.

Modifications of loans made to borrowers experiencing financial difficulty may include but are not limited to changes in committed loan amount, interest rate, amortization, note maturity, borrower, guarantor, collateral, forbearance, forgiveness of principal or interest, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. The approval of modifications of loans for borrowers experiencing financial difficulty is handled on a case-by-case basis.

The following table displays the amortized cost of loans that were both experiencing financial difficulty and modified during the three andnine months ended September 30, 2026 and 2025 presented by category of loan and type of modification.

The financial effects of the modifications of loans made to borrowers experiencing financial difficulty were not significant during the three and nine months ended September 30, 2026 and 2025. Furthermore, such modifications did not significantly impact the Company’s determination of the allowance for credit losses during those periods.

The Company did not have any loans made to borrowers experiencing financial difficulty that were modified during the three and nine months ended September 30, 2026 that subsequently defaulted and were modified in the twelve months prior to default. Payment default is defined as movement to nonperforming status, foreclosure or charge-off, whichever occurs first.

6. FAIR VALUE

The Company uses fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Fair values represent the estimated price that would be received from selling an asset or paid to transfer a liability, otherwise known as an “exit price.” Securities available for sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis. These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write-downs of individual assets. FASB ASC Topic 820,“Fair Value Measurements and Disclosures,” establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Fair Value Hierarchy

The Company groups financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

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Level 1—Quoted prices in active markets for identical assets or liabilities.

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Level 2—Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities) or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability.

The fair value disclosures below represent the Company’s estimates based on relevant market information and information about the financial instruments. Fair value estimates are based on judgments regarding current economic conditions, risk characteristics of the various instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in the above methodologies and assumptions could significantly affect the estimates.

The following tables present fair values for assets and liabilities measured at fair value on a recurring basis:

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). These instruments include other real estate owned, repossessed assets, held to maturity debt securities, loans held for sale and impaired loans, which are included as loans held for investment. For the three and nine months ended September 30, 2026, the Company had additions to other real estate owned of $14.1 million and $19.4 million, respectively, of which $13.1 million and $15.6 million, respectively, were outstanding as of September 30, 2026. For the three and nine months ended September 30, 2026, the Company had additions to impaired loans of $23.3 million and $57.9 million, respectively, of which $23.3 million and $47.6 million, respectively, were outstanding as of September 30, 2026. The remaining financial assets and liabilities measured at fair value on a non-recurring basis that were recorded in 2026 and remained outstanding at September 30, 2026 were not significant.

The following tables present carrying and fair value information of financial instruments as of the dates indicated:

The following is a description of the fair value estimates, methods and assumptions that are used by the Company in estimating the fair values of financial instruments.

Loans held for sale— Loans held for sale are carried at the lower of cost or estimated fair value. Fair value for consumer mortgages held for sale is based on commitments on hand from investors or prevailing market prices. As such, the Company classifies loans held for sale subjected to nonrecurring fair value adjustments as Level 2.

Loans held for investment— The Company does not record loans at fair value on a recurring basis. As such, valuation techniques discussed herein for loans are primarily for estimating fair value disclosures. The Company’s discounted cash flow calculation to determine fair value considers internal and market-based information such as prepayment risk, cost of funds and liquidity. From time to time, the Company records nonrecurring fair value adjustments to impaired loans to reflect (1) partial write-downs that are based on the observable market price or current appraised value of the collateral, or (2) the full charge-off of the loan carrying value. Where appraisals are not available, estimated cash flows are discounted using a rate commensurate with the credit risk associated with those cash flows. Assumptions regarding credit risk, cash flows and discount rates are judgmentally determined using available market information and specific borrower information.

The Company classifies the estimated fair value of loans held for investment as Level 3.

Other real estate owned— Other real estate owned is primarily foreclosed properties securing residential loans and commercial real estate loans. Foreclosed assets are adjusted to fair value less estimated costs to sell upon transfer of the loans to other real estate owned. Subsequently, these assets are carried at the lower of carrying value or fair value less estimated costs to sell. Other real estate carried at fair value based on an observable market price or a current appraised value is classified by the Company as Level 2. When management determines that the fair value of other real estate requires additional adjustments, either as a result of a non-current appraisal or when there is no observable market price, the Company classifies the other real estate as Level 3.

The fair value estimates presented herein are based on information available to management at September 30, 2026. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

7. GOODWILL AND CORE DEPOSIT INTANGIBLES

Changes in the carrying amount of the Company’s goodwill and core deposit intangibles for thenine months ended September 30, 2026 and the year ended December 31, 2025 were as follows:

Goodwill is recorded as of the acquisition date of each entity. The Company may record subsequent adjustments to goodwill for amounts undeterminable at acquisition date, such as deferred taxes and real estate valuations, and therefore the goodwill amounts may change accordingly. The Company initially records the total premium paid on acquisitions as goodwill. After finalizing the valuation, core deposit intangibles are identified and reclassified from goodwill to core deposit intangibles on the balance sheet. This reclassification has no effect on total assets, liabilities, shareholders’ equity, net income or cash flows. Management performs an evaluation annually, and more frequently if a triggering event occurs, of whether any impairment of the goodwill or core deposit intangibles has occurred. If any such impairment is determined, a write-down is recorded. As of September 30, 2026, there wasno impairment recorded on goodwill and core deposit intangibles.

The measurement period for the Company to determine the fair value of acquired identifiable assets and assumed liabilities will be at the end of the earlier of (1) twelve months from the date of acquisition or (2) as soon as the Company receives the information it was seeking about facts and circumstances that existed as of the date of acquisition.

Core deposit intangibles are being amortized on a non-pro rata basis over their estimated lives, which the Company believes is between 10 and 15 years. Amortization expense related to intangible assets totaled $12.6 million and $3.6 million for thethree months ended September 30, 2026 and 2025, respectively, and $23.5 million and $10.9 million for thenine months ended September 30, 2026 and 2025, respectively. The estimated aggregate future amortization expense for core deposit intangibles remaining as of September 30, 2026 is as follows (dollars in thousands):

8. STOCK–BASED COMPENSATION

At September 30, 2026, Bancshares hadone active stock-based incentive compensation plan with awards outstanding.

On March 3, 2020, Bancshares’ Board of Directors established the Prosperity Bancshares, Inc. 2020 Stock Incentive Plan (the “2020 Plan”), which was approved by Bancshares’ shareholders on April 21, 2020. The 2020 Plan authorizes the issuance of up to 2,500,000 shares of common stock upon the exercise of options or pursuant to the grant or exercise, as the case may be, of other awards granted under the 2020 Plan, including incentive stock options, nonqualified stock options, stock appreciation rights, shares of restricted stock and restricted stock units. As of September 30, 2026,618,263 shares of issued restricted stock have vested and 742,864 shares of issued restricted stock remain unvested.

As of September 30, 2026, the Company hadno stock options outstanding.

Stock-based compensation expense related to restricted stock was $4.3 million and $3.0 million during the three months ended September 30, 2026 and 2025, and $10.9 million and $9.0 million during thenine months ended September 30, 2026, and 2025, respectively. As of September 30, 2026, there was $23.5 million of total unrecognized compensation expense related to stock-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 2.32 years.

9. BORROWINGS AND SUBORDINATED DEBT

The following table presents the Company’s borrowings and subordinated debt as of the dates indicated:

(1)

Includes a $9.0 million elimination related to the Company’s portion of investment in American and Southwest subordinated notes which were acquired in the Stellar Merger.

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, 2026, the Company had total borrowing capacity of $8.81 billion under this line. FHLB advances of $2.40 billion were outstanding at September 30, 2026 with a weighted average interest rate of 4.01%. At September 30, 2026, the Company hadno FHLB long-term notes payable balance outstanding.

Securities sold under repurchase agreements

At September 30, 2026, the Company had$204.8 million in securities sold under repurchase agreements with banking customers compared with$201.2 million at December 31, 2025, an increase of $3.5 million or 1.8%. Repurchase agreements are generally settled on the following business day. All securities sold under repurchase agreements are collateralized by certain pledged securities.

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. At September 30, 2026, the balance includes a $4.0 million elimination related to the Company’s portion of investment in American subordinated notes which was acquired in the Stellar Merger.

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 onthree-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 a portion of the subordinated notes at any time upon the 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. At September 30, 2026, the balance includes a $5.0 million elimination related to the Company’s portion of investment in Southwest subordinated notes which was acquired in the Stellar Merger.

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 that mature on April 7, 2034. The junior subordinated 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 junior subordinated debentures and trust preferred securities and they were redeemed on April 7, 2026.

On July 1, 2026, in connection with the Stellar Merger, the Company assumed the obligation related to $7.7 million in floating rate junior subordinated debentures and trust preferred securities that mature on November 8, 2033, and $3.6 million in floating rate junior subordinated debentures and trust preferred securities that mature on July 7, 2035. The junior subordinated debentures, which qualify as Tier 2 capital for regulatory purposes, have a floating rate equal to three-month term SOFR plus a spread adjustment. In July 2026, the Company gave irrevocable notice of its intent to redeem the $3.6 million injunior subordinated debentures and trust preferred securities and they were redeemed on October 7, 2026.

10. CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

Leases

The Company’s leases relate primarily to operating leases for office space and banking centers. The Company determines if an arrangement is a lease or contains a lease at inception. The Company’s leases have remaining lease terms of 1 to 15 years, which may include the option to extend the lease when it is reasonably certain for the Company to exercise that option. Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses its incremental collateralized borrowing rate to determine the present value of lease payments. Short-term leases and leases with variable lease costs are immaterial and the Company hasone sublease arrangement. Sublease income was $886 thousand and $856 thousand for the three months ended September 30, 2026 and 2025, respectively, and $2.6 million and $2.5 million for thenine months ended September 30, 2026 and 2025, respectively. As of September 30, 2026, operating lease ROU assets andlease liabilities were approximately $41.9 million. ROU assets and lease liabilities were classified as other assets and other liabilities, respectively.

As of September 30, 2026, the weighted average of remaining lease terms of the Company’s operating leases was 5.6 years. The weighted average discount rate used to determine the lease liabilities as of September 30, 2026 for the Company’s operating leases was 3.8%. Cash paid for the Company’s operating leases was $3.7 million and $2.9 million for the three months ended September 30, 2026 and 2025, respectively, and was $11.2 million and $8.7 million for thenine months ended September 30, 2026, and 2025, respectively. During the nine months ended September 30, 2026, the Company obtained $21.8 million in ROU assets in exchange for lease liabilitiesfor 29 operating leases, of which $18.6 million in ROU assets and 21 operating leases were related to the Mergers.

The Company’s future undiscounted cash payments associated with its operating leases as of September 30, 2026 are summarized below (dollars in thousands).

Financial Instruments with Off-Balance Sheet Risk

In the normal course of business, the Company enters into various transactions that, in accordance with GAAP, are not included in its consolidated balance sheets. The Company enters into these transactions to meet the financing needs of its customers. These transactions include commitments to extend credit and standby letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

The Company’s commitments associated with outstanding standby letters of credit, unused capacity on Warehouse Purchase Program loans and commitments to extend credit expiring by period as of September 30, 2026 are summarized below. Since commitments associated with letters of credit, unused capacity on Warehouse Purchase Program loans and commitments to extend credit may expire unused, the amounts shown may not necessarily reflect the actual future cash funding requirements.

Allowance For Credit Losses - Off-Balance-Sheet Credit Exposures

The Company records an allowance for credit losses on off-balance sheet credit exposures that is adjusted through an entry to provision for credit losses on the Company’s consolidated statement of income. At September 30, 2026 and December 31, 2025, this allowance, reported as a separate line item on the Company’s consolidated balance sheet, totaled$37.6 million.

11. OTHER COMPREHENSIVE (LOSS) INCOME

The tax effects allocated to each component of other comprehensive (loss) income were as follows:

Activity in accumulated other comprehensive (loss) income associated with securities available for sale, net of tax, was as follows:

12. DERIVATIVE FINANCIAL INSTRUMENTS

The following table provides the outstanding notional balances and fair values of outstanding derivative positions at September 30, 2026 and December 31, 2025.

These financial instruments are not designated as hedging instruments and are used for asset and liability management and commercial customers’ financing needs. All derivatives are carried at fair value in either other assets or other liabilities, and all related cash flows are reported in the operating section of the consolidated statements of cash flows.

Interest rate lock commitments (“IRLCs”) — In the normal course of business, the Company enters into interest rate lock commitments with consumers to originate mortgage loans at a specified interest rate. These commitments, which contain fixed expiration dates, offer the borrower an interest rate guarantee provided the loan meets underwriting guidelines and closes within the timeframe established by the Company.

Forward mortgage-backed securities trades — The Company manages the changes in fair value associated with changes in interest rates related to IRLCs by using forward sold commitments known as forward mortgage-backed securities trades. These instruments are typically entered into at the time the interest rate lock commitment is made.

Interest rate swaps and caps — These derivative positions relate to transactions in which the Company enters into an interest rate swap or cap with a customer, while at the same time entering into an offsetting interest rate swap or cap with another financial institution. An interest rate swap transaction allows the Company’s customer to effectively convert a variable rate loan to a fixed rate. In connection with each swap, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution a similar fixed interest rate on the same notional amount and receive substantially the same variable interest rate on the same notional amount. In connection with each interest rate cap, the Company sells a cap to the customer and agrees to pay interest if the underlying index exceeds the strike price defined in the cap agreement. Simultaneously the Company purchases a cap with matching terms from another financial institution that agrees to pay the Company if the underlying index exceeds the strike price.

The commercial loan customer counterparty weighted average received and paid interest rates for interest rate swaps outstanding at September 30, 2026 and December 31, 2025, are presented in the following table.

The Company’s credit exposure on interest rate swaps is limited to the net favorable value of all swaps by each counterparty, which was approximately $8.6 million at September 30, 2026 and $778 thousand at December 31, 2025. This credit exposure is partly mitigated as transactions with customers are secured by the collateral, if any, securing the underlying transaction being hedged. The Company’s credit exposure, net of collateral pledged, relating to interest rate swaps with upstream financial institution counterparties was $6.9 million at September 30, 2026. A credit support annex is in place and allows the Company to call collateral from upstream financial institution counterparties. Collateral levels are monitored and adjusted on a regular basis for changes in interest rate swap values. The Company’s cash collateral pledged for interest rate swaps waszero and $650 thousand at September 30, 2026 and December 31, 2025, respectively.

The initial and subsequent changes in the fair value of IRLCs and the forward sales of mortgage-backed securities are recorded in mortgage income. These gains and losses were not attributable to instrument-specific credit risk. For interest rate swaps and caps, because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts substantially offset each other and do not have a material impact on its results of operations. Income (loss) for the three andnine months ended September 30, 2026, and 2025 was as follows:

13. ACQUISITIONS

Acquisitions are an integral part of the Company’s growth strategy. All acquisitions were accounted for using the acquisition method of accounting. Accordingly, the assets and liabilities of the acquired entities were recorded at their fair values at the acquisition date. The excess of the purchase price over the estimated fair value of the net assets for tax-free acquisitions was recorded as goodwill, none of which is deductible for tax purposes. The excess of the purchase price over the estimated fair value of the net assets for taxable acquisitions was also recorded as goodwill, and is deductible for tax purposes. The identified core deposit intangibles for each acquisition are being amortized using a non-pro rata basis over an estimated life of 10 to 15 years. The results of operations for each acquisition have been included in the Company’s consolidated financial results beginning on the respective acquisition date.

The measurement period for the Company to determine the fair values of acquired identifiable assets and assumed liabilities will end at the earlier of (1) twelve months from the date of the acquisition or (2) as soon as the Company receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable.

Recent Acquisitions

Acquisition of American Bank Holding Corporation

On January 1, 2026, the Company completed 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. The acquisition was not considered significant to the Company’s financial statements and therefore pro forma financial data and related disclosures are not included.

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 $185.7 million as of September 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 September 30, 2026. During the third quarter of 2026, the Company completed the operational integration of American Bank.

Acquisition of Southwest Bancshares, Inc.

On February 1, 2026, the Company completed 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. The acquisition was not considered significant to the Company’s financial statements and therefore pro forma financial data and related disclosures are not included.

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 $141.5 million as of September 30, 2026, which does not include all thesubsequent fair value adjustments that have not yet been finalized. Additionally, the Company recognized $33.8 million of core deposit intangibles as of September 30, 2026.

Acquisition of Stellar Bancorp, Inc.

On July 1, 2026, the Company completed 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.

Pursuant to the terms of the definitive agreement, Bancshares issued 19,371,499 shares of its common stock and paid approximately $578.7 million in cash for all outstanding shares of Stellar common stock.

The acquisition of Stellar constituted a business combination in accordance with FASB ASC Topic 805, Business Combinations. The assets acquired and liabilities assumed were recorded on the consolidated balance sheet at estimated fair value on the acquisition date. The determination of fair value requires management to make estimates related to discount rates, expected future cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The purchase consideration allocation is considered preliminary as certain estimates related to the assets acquired and liabilities assumed are subject to continuing refinement. Valuations subject to refinement during the measurement period include, but are not limited to, loans, certain other assets, and the core deposit intangible asset.

As of September 30, 2026, the following table provides the allocation of the purchase consideration to the assets acquired and liabilities assumed on the acquisition date (dollars in thousands).

As of September 30, 2026, the Company recognized goodwill of $898.2 million 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. The goodwill is not deductible for tax purposes. Additionally, as of September 30, 2026, total core deposit intangibles related to the Stellar Merger were $184.0 million.

The Company incurred $67.2 million and $67.6 million of pre-tax merger related expenses during the three and nine months ended September 30, 2026, respectively, related to the Stellar Merger. The Company didnot incur merger-related expenses during 2025 related to the Stellar Merger. The merger related expenses are reflected on the Company’s income statement for the applicable periods under “Merger related expenses” and consist of salaries and benefits, data processing and professional and legal fees.

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above.

Cash and due from banks – The carrying amount of these items is a reasonable estimate of their fair value based on the short-term nature of these assets.

Available for sale securities, at fair value – Fair values for securities were based on quoted market prices or recent transactions, where available.

Loans held for investment, net – Fair values for loans held for investment were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term, amortization status and current discount rates. Loans and leases were grouped together according to similar characteristics when applying various valuation techniques. The discount rates used for loans were based on current market rates for new originations of comparable loans and include adjustments for liquidity. The discount rate does not include a factor for credit losses as that has been included as a reduction to the estimated cash flows. For PCD loans, the initial estimate of expected credit losses is recognized in the allowance on the date of acquisition using the same methodology as other loans held-for-investment. In addition, the Company adopted ASU 2025-08 in the first quarter of 2026. Accordingly, the initial estimate of expected credit losses recognized in the allowance included both PCD and non-PCD loans which were deemed PSLs.

Bank premises and equipment, net - The fair values of premises are based on a market approach by obtaining third-party appraisals and broker opinions of value for land, office and branch space.

Core deposit intangible – The core deposit intangible represents the low cost of funding acquired core deposits provide relative to the Company’s marginal cost of funds. The fair value was estimated based on a cost savings methodology that gave consideration to expected customer attrition rates, net maintenance cost of the deposit base, interest costs associated with customer deposits, and the alternative cost of funds. The estimated fair value was grossed-up for the expected tax amortization benefit. The intangible asset is being amortized over 10 years using an accelerated method, based upon the period over which estimated economic benefits are estimated to be received.

Deposits – The fair values used for demand, savings and money market deposits are equal to the amount payable on demand at the acquisition date. The fair value of time deposits is estimated by discounting the estimated future cash flows using current rates offered for deposits with similar remaining maturities.

Junior subordinated debentures– The fair value of junior subordinated debentures is estimated by discounting the estimated future cash flows by using comparable corporate bond indices and swap rates from the financial services sector and factoring in the applicable credit spreads and optional early redemption provisions.

Pro Forma Financial Information (Unaudited)

Operations of Stellar have been included in the consolidated financial statements since July 1, 2026. The amount of revenue (net interest income plus non-interest income) derived from Stellar since the acquisition date included in the consolidated income statement for the three and nine months ended September 30, 2026 was approximately $88.5 million.

The following unaudited pro forma information presents the results of operations for the three and nine months ended September 30, 2026 and 2025 as if the Stellar Merger had occurred on January 1, 2025. The pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the merged companies that would have been achieved had the Stellar Merger occurred on January 1, 2025, nor are they intended to represent or be indicative of future results of operations. The pro forma results do not include expected operating cost savings as a result of the acquisition. These pro forma results require significant estimates and judgments particularly as they relate to valuation and accretion of income associated with acquired loans. The pro forma combined results for the three and nine months ended September 30, 2026 include merger related expenses for the Stellar Merger of $67.2 million and $67.6 million, respectively.

Pro forma adjustments principally included reversing interest income as previously recorded by Stellar and recording interest income based on impact of estimated fair values of the acquired interest-earning assets and assumed interest-bearing liabilities and reversing core deposit intangible amortization as previously recorded by Stellar and recording amortization expense as it relates to the core deposit intangible recognized from the Stellar Merger.