PB 10-K & 10-Q changes, risk factors and insider trading

Interest rates are highly sensitive to many factors that are beyond the Company’s control, including general economic conditions, inflationary trends, changes in government spending and debt issuances and policies of various governmental and regulatory agencies and, in particular, the Federal Open Market Committee. Changes in monetary policy, including changes in interest rates, could influence the interest the Company receives on loans and securities and the amount of interest it pays on deposits and borrowings, and could also affect (1) the Company’s ability to originate loans, such as decreased demand due to higher interest rates, and obtain deposits, (2) the fair value of the Company’s financial assets and liabilities and (3) the average duration of the Company’s mortgage-backed securities portfolio. Beginning early in 2022, in response to growing signs of inflation, the Federal Reserve Board increased interest rates rapidly; however, interest rates have begun to decreasedecreased following three cuts to the Federal Funds rate by the Federal Reserve Board in 20242024, and an additional three cuts in 2025 in response to declining inflation. New appointments to the Federal Reserve Board, or increased political pressures on the Federal Reserve Board, could impact monetary policy, which will directly impact our liquidity, results of operations, financial condition and capital position. Although the inflationary outlook in the United States has improved, it remains above the Federal Reserve Board’s target and the Federal Reserve Board may take further actions to mitigate inflationary pressures. Further reductions in interest rates by the FOMC could exacerbate inflationary pressures. If heightened inflation continues, sustained higher interest rates by the FOMC may be needed, which could push down asset prices and weaken economic activity. A deterioration in economic conditions in the United States and our markets could result in a further increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, could adversely affect our business, financial condition and results of operations.

Despite recent interest rate cuts, any future need to increase rates to address persistent or renewed inflationary pressures could increase borrowing costs for customers, potentially leading to reduced loan demand, increased credit risk, and weakened asset values in the Company’s lending portfolio. Changes in trade policies by the United States or other countries, such as tariffs or retaliatory tariffs, could further adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability, and may cause inflation which could impact the prices of products sold by the Company’s borrowers and have the potential to reduce demand for their products impacting their profitability and making it difficult for borrowers to repay their loans. The Company’s general business strategy may be adversely affected by any such economic downturn, volatile business environment, hostile third-party action or unpredictable and unstable market conditions. Further, evolving responses from federal and state governments and other regulators, and the Company’s customers or vendors, to new challenges such as climate change have impacted and could continue to impact the economic and political conditions under which the Company operates, which could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company’s success depends primarily on the general economic conditions of the primary markets in Texas and Oklahoma in which it operates and where its loans are concentrated. The local economic conditions in Texas and Oklahoma have a significant impact on the Company’s commercial, real estate and construction, land development and other land loans; the ability of its borrowers to repay their loans; and the value of the collateral securing these loans. Accordingly, if the population or income growth in the Company’s market areas is slower than projected, income levels, deposits and housing starts could be adversely affected and could result in a reduction of the Company’s expansion, growth and profitability. In addition, due to the large number of oil and gas companies in the Company’s market areas, the volatility in oil prices may negatively impact economic conditions in these areas. If the Company’s market areas experience a downturn or a recession for a prolonged period of time, the Company could experience significant increases in nonperforming loans, which could lead to operating losses, impaired liquidity and eroding capital. A significant decline in general economic conditions, tariff or trade policies, inflation, an increase or decline in commodity prices, recession, weather extremes, acts of terrorism, outbreaks of hostilities or other international or domestic calamities, unemployment or other factors could impact these local economic conditions and could negatively affect the Company’s financial condition, results of operations and cash flows.

As of December 31, 2024,2025, commercial real estate loans (including multifamily residential and excluding farmland) comprised approximately 26.2%26.5% of the Company’s loan portfolio. Commercial real estate loans generally involve a greater degree of credit risk than residential real estate loans because they typically have larger balances and are more affected by adverse conditions in the economy. Because payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulations.regulations or policies. Commercial real estate markets havecontinue beento be impacted by the economic disruptions caused by the COVID-19 pandemic. The pandemic has also been a catalyst for the evolution of various remote work options that could have an adverse effect on the long-term performance of some types of office properties within the Company’s commercial real estate portfolio. A failure by the Company to have adequate risk management policies, procedures and controls could adversely affect the Company’s ability to increase this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which, accordingly, could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company relies heavily upon information supplied by third parties, including the information contained in credit applications, property appraisals, title information, equipment pricing and valuation and employment and income documentation, in deciding which loans the Company will originate, as well as the terms of those loans. If any of the information upon which the Company relies is misrepresented, either fraudulently or inadvertently, and the misrepresentation is not detected prior to asset funding, the value of the asset may be significantly lower than expected, or the Company may fund a loan that it would not have funded or on terms it would not have extended. Whether a misrepresentation is made by the applicant or another third-party, the Company generally bears the risk of loss associated with the misrepresentation. A loan subject to a material misrepresentation is typically unsellable or subject to repurchase if it is sold prior to detection of the misrepresentation. The sources of the misrepresentations are often difficult to locate, and it is often difficult to recover any of the monetary losses the Company may suffer. The Company believes it has underwriting and operational controls in place to prevent or detect such fraud, but these controls may not be effective in detecting fraud and the Company could experience fraud losses or incur costs or other damage related to such fraud, at levels that adversely affect financial results or reputation. The Company’s lending customers may also experience fraud in their businessesbusinesses, which could adversely affect their ability to repay their loans or make use of services. The Company’s and its customers’ exposure to fraud may increase the Company’s financial risk and reputation risk as it may result in unexpected loan losses that exceed those that have been provided for in the allowance for credit losses. Some level of fraud loss is unavoidable, and the risk of loss cannot be eliminated.

Acquisitions of financial institutions, such as the recent acquisitions of Southwest, American, Lone Star and First Bancshares of Texas, Inc., and Lonethe Star,pending acquisition of Stellar, involve operational risks and uncertainties. Acquired companies may have unforeseen liabilities, exposure to asset quality problems, key employee and customer retention problems and other problems that could negatively affect the Company’s organization. The Company may not be able to complete future acquisitions; and, if completed, the Company may not be able to successfully integrate the operations, management, products and services of the entities that it acquires and eliminate redundancies. The integration process could result in the loss of key employees or disruption of the combined entity’s ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect the Company’s ability to maintain relationships with customers and employees or achieve the anticipated benefits of the transaction. The integration process may also require significant time and attention from the Company’s management that they would otherwise direct at servicing existing business and developing new business. The Company’s inability to find suitable acquisition candidates or failure to successfully integrate the entities it acquires into its existing operations may increase its operating costs significantly and adversely affect its business and earnings. Acquisitions may also result in potential dilution to existing shareholders of the Company’s earnings per share if the Company issues common stock in connection with an acquisition.

Acquisitions by financial institutions are subject to approval by a variety of federal and state regulatory agencies. If the Company fails to receive the appropriate regulatory approvals, it will not be able to consummate an acquisition that it believes is in the Company’s best interests. Among other things, the Company’s regulators consider its capital, liquidity, profitability, regulatory compliance, including with respect to anti-money laundering obligations, consumer protection laws and CRA obligations and levels of goodwill and intangibles when considering acquisition and expansion proposals. The process for obtaining these required regulatoryproposals.Regulatory approvals has become substantially more difficult in recent years and may become even more challenging following the review of the merger application process by the federal banking agencies and potentially the CFPB and the review of the competitive effects process by the Department of Justice. Regulatory approvals have been and could continue to be delayed, impeded, restrictively conditioned or denied due to existing or new regulatory issues the Company has, or may have, with regulatory agencies, including, without limitation, issues related to Bank Secrecy Act compliance, Community Reinvestment Act issues, fair lending laws, fair housing laws, consumer protection laws, unfair, deceptive, or abusive acts or practices regulations and other similar laws and regulations. The Company may fail to pursue, evaluate or complete strategic and competitively significant acquisition opportunities as a result of its inability, or perceived or anticipated inability, to obtain regulatory approvals in a timely manner, under reasonable conditions or at all. Difficulties associated with potential acquisitions that may result from these factors could have a material adverse effect on the Company’s business, financial condition and results of operations.

An interruption in the Company’s information systems or breachcompromise in security of the Company’s information systems may result in a loss of customer business and have an adverse effect on the Company’s results of operations, financial condition and cash flows.

The Company relies heavily on communications and information systems to conduct its business and store sensitive data.data, including those maintained with the Company’s service providers and vendors. Any failure, interruption or breachcompromise in security of these systems, whether caused by physical damage, internal or external threat actors, viruses or other malware, phishing attempts, brute force attacks, exploiting software vulnerabilities (including “zero-day attacks”), ransomware, supply chain attacks, and other events could jeopardize the security of information stored in and transmitted through the Company’s computer systems and network infrastructure as well as result in failures or disruptions in the Company’s customer relationship management, general ledger, deposits, servicing or loan origination systems. The amount of cyber insurance coverage that the Company maintains and expects would apply in the event of various breachcyberattack scenarios may not be adequate in any particular case. In addition, cyber threat scenarios are inherently difficult to predict and can take many forms, some of which may not be covered under the Company’s cyber insurance coverage. Security measures that the Company, with the help of third-party service providers, has implemented or intends to continue to implement to prevent damage from cyberattacks may not entirely mitigate these risks. In addition, increases in cyber threats and the sophistication of bad actors, advances in computer capabilities, new discoveries in the field of cryptography and/or artificial intelligence, or other developments could result in a compromise or breach of the programs and processes that the Company and its third-party service providers use to protect client transaction data. The Company’s efforts to maintain the security and integrity of its information systems and its measures to manage the risks of a security breachincident or disruption may not be effective, and attempted security breachesincidents or disruptions could be successful or damaging. BreachesSecurity incidents also may occur as a result of remote working arrangements.

BreachesCompromises of the Company’s or vendors’ systems, thefts of data and other breachesincidents and criminal activity may result in significant disruptions to the Company’s operations, significant costs to respond or remediate losses, damage to the Company’s customer relationships, regulatory scrutiny and enforcement, civil litigation and possible financial liability and/or loss of future business opportunities due to reputational damage, sanctions, fines or penalties (which may not be covered by the Company’s insurance policies), negative publicity, release of sensitive and/or confidential information, diversion of the attention of management away from the operation of our business, increases in operating expenses, and lost revenues any of which could have a material adverse effect on the Company’s results of operations, financial condition and cash flows. Even the most well-protected information, networks, systems and facilities remain potentially vulnerable because attempted security breaches,incidents, particularly cyber-attackscyberattacks and intrusions, or disruptions will occur in the future, and because the techniques used in such attempts are rapidly and constantly evolving and generally are not recognized until launched against a target, in some cases are designed not to be detected and, in fact, may not be detected for a period of time or at all. Accordingly, the Company may be unable to anticipate or be prepared for these techniques or to implement adequate security barriers or other preventative measures, and thus it is not possible for the Company to entirely mitigate this risk. Data privacy laws also continue to evolve, with states increasingly proposing or enacting legislation that relates to data privacy and data protection. The Company may be required to incur additional expense to comply with these evolving regulations and could face penalties for violating any of these regulations.

The banking industry is subject to rapid and significant technological change. To compete effectively, the Company and its third-party (or fourth party) vendors may use new and evolving technologies, including AI and machine learning, to help improve its customer service and products and to automate certain business decisions or risk management practices. The Company’s direct or indirect use of AI and machine learning is subject to risks that algorithms and datasets are flawed or may be insufficient or contain biased information. In addition, the models and processes relating to AI and machine learning are not always transparent, which could increase the risk of unintended deficiencies. These deficiencies could result in inaccurate and ineffective decisions, predictions or analysis, which could subject the Company to competitive harm, legal liability, increased regulatory scrutiny, reputational harm or other consequences that the Company may not be able to predict, any of which could negatively affect the Company’s financial condition and results of operations.

Climate changechange, including the regulatory response thereto, could have a material negative impact on the Company and its customers.

Climate change also exposes the Company to risks associated with the transition to a less carbon-dependent economy. These transition risks may result from changes in policies, laws and regulations, technologies, and/or market preferences to address climate change. Such changes could have a material adverse effect on the Company’s business, results of operations, financial condition and/or reputation, in addition to having a similar impact on the Company’s customers. The Company has customers who operate in carbon-intensive industries, such as the oil and gas industry, that are exposed to risks related to the transition to a less carbon-dependent economy, as well as customers who operate in low-carbon industries that may be subject to risks associated with new technologies. However, under the current administration, federal policy has shifted to reduce the emphasis on climate change initiatives and environmental regulations. This includes scaling back federal participation in international agreements, and reducing regulatory pressures on businesses, including banks, to address climate-related risks. Federal legislative and regulatory proposals aimed at combating climate change have and may continue to face greater scrutiny or diminished priority. However, state and local regulations or guidance relating to climate change, as well as changes in consumers’ and businesses’ behaviors and business preferences, continue to affect our business operations.

Increasing scrutiny and evolving expectationsExpectations from customers, regulators, investors, and other stakeholders with respect to the Company’s environmental, social and governance practices may impose additional costs on the Company or expose it to new or additional risks.

geopolitical conditions such as acts or threats of terrorism or military conflicts, such as the wars in Ukraine and the Middle Eastconflicts;

the timing, impact and other uncertainties of any future acquisitionsacquisitions, 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;

Net income was $479.4$542.8 million, $419.3$479.4 million and $524.5$419.3 million for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively, and diluted earnings per share were $5.05,$5.72, $4.51$5.05 and $5.73,$4.51, respectively, for these same periods. Net income and net income per diluted common share for the year ended December 31, 2025, were impacted by an increase in net interest income, lower merger related provision and expenses, and lower regulatory assessments and FDIC insurance, partially offset by a decrease in net gain on sale or write-up of securities. Net income and net income per diluted common share for the year ended December 31, 2024 were impacted by an increase in net interest income, a decrease in the FDIC special assessment of $16.3 million, a gain on Visa Class B-1 stock exchange net of investment securities sales of $11.2 million, a decrease in merger related provision for credit losses of $9.5 million, a decrease in merger related expenses of $10.7 million, and increases in noninterest income and noninterest expense related to nine months of Lone Star Bank operations. The change in net income and earnings per diluted share for the year ended December 31, 2023 was primarily due to lower net interest income, the FDIC special assessment of $19.9 million, merger related provision for credit losses of $18.5 million, merger related expenses of $15.1 million and additional expenses related to the merger of First Bancshares. During the fourth quarter of 2023, the Company accrued for the FDIC special assessment of $19.9 million, which was imposed by the FDIC to recover the cost associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank in early 2023.

Total assets were $38.46 billion at December 31, 2025 , a decrease of $1.10 billion or 2.8% compared with $39.57 billion at December 31, 20242024. ,Total andeposits increasewere of $1.02 billion or 2.6% compared with $38.55$28.48 billion at December 31, 2023.2025, Totalan depositsincrease wereof $101.1 million or 0.4% compared with $28.38 billion at December 31, 2024,2024. anTotal increaseloans ofwere $1.20 billion or 4.4% compared with $27.18$21.81 billion at December 31, 2023.2025, Totala loansdecrease wereof $343.8 million or 1.6% compared with $22.15 billion at December 31, 2024, an increase of $968.7 million or 4.6% compared with $21.18 billion at December 31, 2023.2024. At December 31, 2024,2025, the Company had $75.8$137.5 million in nonperforming loans, and its allowance for credit losses on loans was $351.8$333.7 million compared with $70.9$75.8 million in nonperforming loans and an allowance for credit losses on loans of $332.4$351.8 million at December 31, 2023.2024. Shareholders’ equity was $7.44$7.62 billion and $7.08$7.44 billion at December 31, 20242025 and 2023,2024, respectively.

Acquisition of Lone Star State Bancshares, Inc. — Effective April 1, 2024, the Company completed the merger of Lone Star State Bancshares, Inc. (“Lone Star”) into the Company and the subsequent merger of its wholly owned subsidiary, Lone Star State Bank of West Texas (“Lone Star Bank”), into the Bank (collectively, the “Lone Star Merger”). Lone Star operated five full-service banking offices in the West Texas area, including its main office in Lubbock, and one banking center in each of Brownfield, Midland, Odessa and Big Spring, Texas. Pursuant to the terms of the definitive agreement, the Company issued 2,376,182 shares of its common stock plus approximately $64.1 million in cash for all outstanding shares of Lone Star. This resulted in goodwill of $106.7 million as of December 31, 2024,2025, which does not includereflected all thefinal subsequent fair value adjustments that have not yet been finalized.adjustments. Goodwill represents the excess of the total purchase price paid over the fair value of the assets acquired, net of the fair value of liabilities assumed. Additionally, the Company recognized $17.7 million of core deposit intangibles asrelated ofto Decemberthe 31,Lone 2024.Star Merger. In October 2024, the Company completed the operational conversion of Lone Star Bank.

MergerAcquisition of FirstSouthwest Bancshares of Texas,Bancshares, Inc. — EffectiveOn MayFebruary 1, 2023,2026, the Company completed the merger of FirstSouthwest BancsharesBancshares, Inc. (“Southwest”) into the Company and the subsequent merger of its wholly owned subsidiary,subsidiary FirstCapitalTexas Bank,Partners Bank (“Texas Partners”), into the Bank (collectively, the “FBSouthwest Merger”). FirstCapitalTexas BankPartners operated 16 full-service11 banking offices in six different markets in West, North and Central Texas areas, including its main office in Midland,San Antonio, and banking offices in Midland,the Lubbock,San Amarillo,Antonio Wichitaarea, Falls, Burkburnett, Byers, Henrietta, Dallas, Horseshoe Bay, Marble FallsAustin and Fredericksburg,the Texas.Hill AsCountry. Pursuant to the terms of Marchthe 31,definitive 2023,agreement, Firstthe Bancshares,Company onissued a4,094,974 consolidated basis, reported total assetsshares of $2.14its billion,common totalstock loansfor all outstanding shares of $1.65Southwest billioncommon andstock totalin depositsthe first quarter of $1.71 billion.2026.

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

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

Pursuant to the Company’s adoption of ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures effective January 1, 2023, the Company prospectively discontinued troubled debt restructurings accounting and no longer measures the economic concession for loan modifications occurring on or after the adoption date. In addition, modifications to loans previously designated as troubled debt restructurings that occur on or after January 1, 2023, are accounted for under the adopted ASU and result in the elimination of any prior economic concession recorded in the allowance related to such loans. 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 ASC 326, 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 who are 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 to borrowers experiencing financial difficulty may include but are not limited to changes in committed loan amount, interest rate, amortization, note maturity, borrower, guarantor, collateral, forbearance, forgiveness of principal or interest, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. The approval of modifications of loans for borrowers experiencing financial difficulty are handled on a case-by-case basis. For further discussion of the methodology used in the determination of the allowance for credit losses, see “Accounting for Acquired Loans and the Allowance for Acquired Credit Losses”, “Financial Condition—Allowance for Credit Losses” sections below and Note 1 and Note 5 to the consolidated financial statements.

20242025 versus 2023.2024. Net interest income before the provision for credit losses for 20242025 was $1.03$1.08 billion compared with $956.4$1.03 millionbillion for 2023,2024, an increase of $70.1$55.0 million or 7.3%.5.4%. The change was primarily due to ana increasedecrease in the average balances and average rates on loans and on federal funds sold and other earning assets, an increase in loan discount accretion of $9.4 millionborrowings and a decrease in the average balance and rates on otherinterest-bearing borrowings,deposits, partially offset by a decrease in the average balances and average rates on investmentfederal securitiesfunds sold and another increaseearning assets, a decrease in the average balances andon investment securities, a decrease in the average rates on interest-bearingloans deposits.and a decrease in loan discount accretion of $5.1 million. Interest income was $1.62$1.57 billion in 2024,2025, ana increasedecrease of $179.2$53.4 million or 12.4%3.3% compared with 2023.2024. Interest income on loans was $1.31$1.30 billion for 2024,2025, ana increasedecrease of $164.2$17.7 million or 14.3%1.3% compared with 2023,2024, primarily due anto increasea decrease in the average balances and average rates on loans.loans and a decrease in loan discount accretion of $5.1 million. The Company had $35.2$22.7 million of total outstanding net accretable discounts on Non-PCD loans and PCD loans at December 31, 2024.2025. Interest income on securities was $246.7$230.7 million during 2024,2025, a decrease of $36.6$16.0 million or 12.9%6.5% compared with 20232024, primarily due primarily to a decrease in the average balances on investment securities. Average interest-bearing liabilities increaseddecreased $699.4$1.32 millionbillion or 3.3%5.9% during 20242025 compared with 2023.2024. The average rate on interest-bearing liabilities increaseddecreased from 2.27%2.69% to 2.69%2.34% during the same time period, resulting in ana increasedecrease in interest expense of $109.1$108.4 million. The total cost of funds increaseddecreased to 1.61% during 2025 compared to 1.87% during 2024 compared to 1.54% during 2023.2024.

The Company’s provision for credit losses is established through charges to income to bring the Company’s allowance for credit losses on loans and off-balance sheets credit exposures to a level deemed appropriate by management based on the factors discussed under “Financial Condition—Allowance for Credit Losses” and “Financial Condition—Allowance for Credit Losses on Off-Balance Sheet Credit Exposures”. The allowance for credit losses on loans at December 31, 20242025, was $351.8$333.7 million, or 1.59%1.53% of total loans and 1.67%1.63% of total loans excluding Warehouse Purchase Program loans. The allowance for credit losses on loans at December 31, 20232024, was $332.4$351.8 million, or 1.57%1.59% of total loans and 1.63%1.67% of total loans excluding Warehouse Purchase Program loans. Acquired loans were recorded at fair value based on a discounted cash flow valuation methodology that considers, among other things, interest rates, projected default rates, loss given defaults and recovery rates, with no carryover of any existing allowance for credit losses. The allowance for credit losses on off-balance sheet credit exposures was $37.6 million at December 31, 2024,2025 comparedand with2024. $36.5 million at December 31, 2023. The provision for credit lossesThere was $9.1 million for the year ended December 31, 2024 compared with $18.5 million for the year ended December 31, 2023 and no provision for credit losses for the year ended December 31, 2022.2025, compared with $9.1 million for the year ended December 31, 2024, and $18.5 million for the year ended December 31, 2023. The $9.1 million provision was due to loans acquired in the LSSBLone Star Merger and consisted of a $7.9 million provision for credit losses on loans and a $1.2 million provision for credit losses on off-balance sheet credit exposures. The $18.5 million provision was made as a result of the loans acquired in the FBmerger Mergerof First Bancshares of Texas, Inc., and consisted of a $12.0 million provision for credit losses on loans and a $6.5 million provision for credit losses on off-balance sheet credit exposures.

Net charge-offs for the years ended December 31, 2024,2025, 2024 and 2023 and 2022 were $14.6$18.1 million, $38.0$14.6 million and $4.8$38.0 million, respectively. Net charge-offs forFor the year ended December 31, 20242025, included $3.4 million related to resolved PCD loans, which had specific reserves that were allocated to the charge-offs. Additionally, reserves on PCD loans increased by $26.1 million due to Day One accounting for PCD loans at the time of the LSSB Merger. Further, $15.4$18.9 million of reserves on resolved PCD loans without any related charge-offs were released to the general reserve.

The Company’s primary sources of recurring noninterest income are credit, debit and ATM card income, nonsufficient funds (“NSF”) fees, and service charges on deposit accounts. Additionally, the Company generates recurring noninterest income from its various additional products and services, including trust services, mortgage lending, brokeragelending and independent sales organization sponsorship operations.brokerage. Noninterest income does not include loan origination fees, which are recognized over the life of the related loan as an adjustment to yield using the interest method. For the year ended December 31, 2024,2025, noninterest income totaled $165.8$168.3 million, an increase of $12.5$2.5 million or 8.2%1.5%, compared with 2023.2024. This increase was primarily due to a gain on Visa Class B-1 stock exchange net of investment securities sales of $11.2 million and increases in other noninterest income and service charges on deposit accounts, partially offset by a decrease in othernet noninterestgain income.on sale or write-up of securities.

For the year ended December 31, 2023,2024, noninterest income totaled $153.3$165.8 million, an increase of $8.1$12.5 million or 5.6%8.2%, compared with 2022.2023. This increase was primarily due to thea FBgain Merger,on Visa Class B-1 stock exchange net of investment securities sales of $11.2 million and increases in service charges on deposit accounts, partially offset by lowera netdecrease gainin onother thenoninterest sale or write-down of assets.income.

For the year ended December 31, 2023,2025, noninterest expense totaled $556.7$556.2 million, ana increasedecrease of $72.5$14.4 million or 15.0%2.5% compared with 2022.2024. The change was primarily due to lower regulatory assessments and FDIC insurance, a reversal of the 2024 FDIC special assessmentassessment, ofa $19.9decrease million,in other noninterest expense and a decrease in merger related expenses of $15.1 million and additional expenses related to the FB Merger.expenses.

OtherNet other real estate expense is netconsists of rental expense, rental income and gains and losses on sales of real estate.

Salaries and Employee Benefits. Salaries and employee benefits were $353.1 million for the year ended December 31, 2025, compared with $352.4 million for the year ended December 31, 2024. Salaries and employee benefits were $352.4 million for the year ended December 31, 2024, an increase of $23.9 million or 7.3% compared with 2023, primarily as a result of the LSSBLone Merger. Salaries and employee benefits were $328.4 million for the year ended December 31, 2023, an increase of $13.7 million or 4.4% compared with 2022, primarily as a result of the FBStar Merger. The number of full-time equivalent associates employed by the Company was 3,916,3,941, 3,8503,916 and 3,6333,850 at December 31, 2024,2025, 20232024 and 2022,2023, respectively. Total salaries and benefits for the year ended December 31, 20242025, included $12.8$12.1 million in stock‑based compensation expense compared with $12.2$12.8 million and $11.8$12.2 million recorded for the years ended December 31, 20232024 and 2022,2023, respectively.

Net Occupancy and Equipment:Equipment. Net occupancy and equipment expense was $37.1 million for the year ended December 31, 2025, an increase of $1.3 million compared with $35.8 million for the year ended December 31, 2024. Net occupancy and equipment expense was $35.8 million for the year ended December 31, 2024, an increase of $269 thousand compared with 2023. Net occupancy and equipment expense was $35.5 million for the year ended December 31, 2023, an increase of $3.1 million or 9.5% compared with 2022, primarily due to the FB Merger.2023.

Credit and Debit Card, Data Processing and Software Amortization. Credit and debit card, data processing and software amortization expenses were $48.6 million for the year ended December 31, 2025, an increase of $1.3 million or 2.8% compared with 2024. Credit and debit card, data processing and software amortization expenses were $47.3 million for the year ended December 31, 2024, an increase of $5.7 million or 13.8% compared with 2023, primarily due to an increase in software maintenance expense, data processing costs and the LSSBLone Star Merger. Credit and debit card, data processing and software amortization expenses were $41.6 million for the year ended December 31, 2023, an increase of $4.2 million or 11.4% compared with 2022, primarily due to an increase in data processing costs and the FB Merger.

Core Deposit Intangibles Amortization. Core deposit intangibles (“CDI”) amortization was $14.4 million for the year ended December 31, 2025, a decrease of $1.2 million or 7.8% compared with the year ended December 31, 2024. CDI amortization was $15.7 million for the year ended December 31, 2024, an increase of $3.0 million or 23.6% compared with the year ended December 31, 2023, primarily due to the LSSBLone Star Merger. CDI amortization was $12.7 million for the year ended December 31, 2023, an increase of $2.3 million or 22.6% compared with $10.3 million for the year ended December 31, 2022.

Merger Related Expenses. Merger related expenses were $330 thousand for the year ended December 31, 2025, a decrease of $4.1 million compared with the year ended December 31, 2024. Merger related expenses were $4.4 million for the year ended December 31, 2024, a decrease of $10.7 million, primarily due to lower merger related expenses for the LSSBLone Star Merger. Merger related expenses were $15.1 million for the year ended December 31, 2023, due to the FB Merger and the LSSB Merger.

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 was $150.7 million for the year ended December 31, 2025, an increase of $17.5 million or 13.1% compared with $133.3 million for the year ended December 31, 2024. Income tax expense was $133.3 million for the year ended December 31, 2024, an increase of $18.1 million or 15.7% compared with $115.1 million for the year ended December 31, 2023. Income tax expense was $115.1 million for the year ended December 31, 2023, a decrease of $26.5 million or 18.7% compared with $141.7 million for the year ended December 31, 2022. The effective tax rate for the years ended December 31, 2024,2025, 2024 and 2023 and 2022 was 21.8%,21.7%, 21.5%21.8% and 21.3%,21.5%, respectively. The effective income tax rates differed from the U.S. statutory rate of 21% during 2024,2025, 20232024 and 20222023 primarily due to the effect of tax-exempt income from loans, securities and bank owned life insurance (“BOLI”) offset by the effect of state taxes.

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

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 whichthat it believes is adequatemanagement’s tobest coverestimate theof current expected credit losses inon the Company’s loan portfolio as of December 31, 2024.2025. The amount of the allowance for credit losses on loans is affected by the following: (1) charge-offs of loans that occur when loans are deemed uncollectible and decrease the allowance, (2) recoveries on loans previously charged off that increase the allowance, (3) provisions for credit losses charged to earnings that increase the allowance, and (4) provision releases returned to earnings that decrease the allowance. Based on an evaluation of the loan portfolio and consideration of the factors listed below, management presents a quarterly review of the allowance for credit losses to the Bank’s Board of Directors, indicating any change in the allowance since the last review and any recommendations as to adjustments in the allowance. Although management believes it uses the best information available to make determinations with respect to the allowance for credit losses, future adjustments may be necessary if economic conditions or borrower performance differ from the assumptions used in making the initial determinations.

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. 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 absorbcover expected losses in other categories.

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

The following table shows the allocation of the allowance for credit losses among various categories of loans and certain other information as of the dates indicated. The allocation is made for analytical purposes and is not necessarily indicative of the categories in which future losses may occur. The total allowance is available to absorbcover expected losses from any loan category.

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

At December 31, 2023,2025, the allowance for credit losses on loans totaled $332.4$333.7 million or 1.57%1.53% of total loans, including acquired loans with discounts, ana increasedecrease of $50.8$18.1 million or 18.0%5.1% compared to the allowance for credit losses on loans totaling $281.6$351.8 million or 1.49%1.59% of total loans, including acquired loans with discounts, at December 31, 2022, primarily due to the FB Merger.2024. Net charge-offs were $38.0$18.1 million for the year ended December 31, 2023.2025. Net charge-offs forFor the year ended December 31, 20232025, included $16.6 million related to resolved PCD loans and $15.0 million related to one commercial real estate loan acquired in a previous merger. The PCD loans had reserves of $16.3 million assigned as of the acquisition date. Additionally, reserves on PCD loans increased by $76.8 million due to the FB Merger and $23.5$18.9 million of reserves on resolved PCD loans waswithout any related charge-offs were released to the general reserve.

At December 31, 2024,2025, $227.2$231.3 million of the allowance for credit losses on loans was attributable to originated loans compared with $222.4$227.2 million of the allowance at December 31, 2023,2024, an increase of $4.8$4.0 million or 2.2%.1.8%. At December 31, 2024,2025, $32.3$38.4 million of the allowance for credit losses on loans was attributable to re-underwritten acquired loans compared with $30.0$32.3 million of the allowance at December 31, 2023,2024, an increase of $2.3$6.1 million or 7.7%.19.0%. At December 31, 2024,2025, $25.0$15.7 million of the allowance for credit losses on loans was attributable to Non-PCD loans compared with $22.3$25.0 million of the allowance at December 31, 2023,2024, ana increasedecrease of $2.6$9.2 million or 11.8%.37.1%. At December 31, 2024,2025, $67.4$48.4 million of the allowance for credit losses on loans attributable to PCD loans compared with $57.7$67.4 million of the allowance at December 31, 2023,2024, ana increasedecrease of $9.7$19.0 million or 16.8%.28.2%.

The Company believes that the allowance for credit losses on loans represent management’s best estimate of current expected credit losses on the Company’s loan portfolio at December 31, 2024 is adequate to cover the expected losses that may be realized from the loan portfolio as of such date.2025. Nevertheless, the Company could sustain losses in future periods that could be substantial in relation to the size of the allowance at December 31, 2024.2025.

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 cancelable 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 December 31, 20242025 and 2023,2024, the Company had $37.6 million and $36.5 million, respectively, in allowance for credit losses on off-balance sheet credit exposures, with the increase due to the LSSB Merger.exposures. The allowance for credit losses on off-balance sheet credit exposures is a separate line item on the Company’s consolidated balance sheet.

The Company uses its securities portfolio to manage interest rate risk and as a source of income and liquidity for cash requirements. At December 31, 2024,2025, the carrying amount of investment securities totaled $11.09$10.61 billion, a decrease of $1.71$481.0 billionmillion or 13.4%4.3% compared with $12.80$11.09 billion at December 31, 2023.2024. At December 31, 2024,2025, securities represented 28.0%27.6% of total assets compared with 33.2%28.0% of total assets at December 31, 2023.2024.

Total deposits at December 31, 20242025, were $28.48 billion, an increase of $101.1 million compared with $28.38 billion at December 31, 2024. Total deposits at December 31, 2024, were $28.38 billion, an increase of $1.20 billion or 4.4% compared with $27.18 billion at December 31, 2023, primarily due to the LSSBLone Star Merger acquired deposits. TotalNoninterest-bearing deposits at December 31, 20232025, were $27.18 billion, a decrease of $1.35$9.47 billion or 4.7% compared with $28.53$9.80 billion at December 31, 2022, primarily due to2024, a decrease inof business$330.5 deposits and public fund deposits, partially offset by the FB Merger acquired deposits.million. Noninterest-bearing deposits at December 31, 2024 were $9.80 billion compared with $9.78 billion at December 31, 2023, an increase of $21.9 million. Noninterest-bearingInterest-bearing deposits at December 31, 20232025, were $9.78$19.01 billionbillion, an increase of $431.7 million or 2.3% compared with $10.92$18.58 billion at December 31, 2022, a decrease of $1.14 billion or 10.4%.2024. Interest-bearing deposits at December 31, 20242024, were $18.58 billion, an increase of $1.18 billion or 6.8% compared with $17.40 billion at December 31, 2023. Interest-bearing deposits at December 31, 2023 were $17.40 billion, a decrease of $214.8 million or 1.2% compared with $17.62 billion at December 31, 2022.

The Company utilizes borrowings to supplement deposits to fund its lending and investment activities. Borrowings consist of funds from the Federal Home Loan Bank of Dallas (“FHLB”), securities sold under repurchase agreements and in 2024, the Federal Reserve Board Bank Term Funding Program (“BTFP”), the Federal Home Loan Bank (“FHLB”) and securities sold under repurchase agreements..

FHLB advances and long-term notes payable—The Company has an available line of credit with the FHLB of Dallas, 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 December 31, 2024,2025, the Company had total borrowing capacity of $7.94$7.58 billion under this line. FHLB advances of $3.20$1.95 billion were outstanding at December 31, 2024,2025, with ana weighted average interest rate of 4.38%.3.63%. At December 31, 2024,2025, the Company had no FHLB long-term notes payable balance outstanding.

the risks relating to the pending acquisition of Stellar Bancorp, Inc. and the recent acquisitions of AmericanAmerican, Southwest and SouthwestStellar including, without limitation: the risk that the Stellar acquisition will not close; the diversion of management'smanagement’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;

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;

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 MarchJune 31,30, 2026, the Bank operated 312311 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; 2221 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;Abilene, Amarillo and Wichita Falls; 15 in the Bryan/College Station area,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.

Total assets were $43.62$43.87 billion at MarchJune 31,30, 2026, compared with $38.46 billion at December 31, 2025, an increase of $5.16$5.41 billion or 13.4%.14.1%. Total loans were $25.29$25.03 billion at MarchJune 31,30, 2026, compared with $21.81 billion at December 31, 2025, an increase of $3.48$3.22 billion or 16.0%.14.8%. Total deposits were $32.63$32.60 billion at MarchJune 31,30, 2026, compared with $28.48 billion at December 31, 2025, an increase of $4.15$4.12 billion or 14.6%.14.5%. Total shareholders’ equity was $8.21$8.31 billion at MarchJune 31,30, 2026, compared with $7.62 billion at December 31, 2025, an increase of $591.7$689.1 million or 7.8%.9.0%.

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

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.stock. This resulted in goodwill of $185.0$185.9 million as of MarchJune 31,30, 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 MarchJune 31,30, 2026.

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.

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.stock. This resulted in goodwill of $134.1$134.9 million as of MarchJune 31,30, 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 MarchJune 31,30, 2026.

Pending Acquisition of Stellar Bancorp, Inc. — On JanuaryJuly 28,1, 2026, Bancsharesthe andCompany completed the merger of Stellar Bancorp, Inc. (“Stellar”) jointlyinto announcedBancshares and the signingsubsequent merger of anStellar’s Agreementwholly andowned Plan of Merger (the “Merger Agreement”), which provides that Stellar, the parent company ofsubsidiary Stellar Bank (“Stellar Bank”), will merge with and into Bancshares,the andBank (collectively, the “Stellar Merger”). Stellar Bank will merge with and into the Bank. Stellar Bank operatesoperated 52 banking offices including its main office in greater Houston and Beaumont,banking offices in the Houston, Beaumont and East Texas areas and surroundingin areas.Dallas, Texas.

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.

For the quarter ended MarchJune 31,30, 2026, net income available to common shareholders was $116.3$168.6 million or $1.16$1.67 per diluted common share compared with $130.2$135.2 million or $1.37 per diluted common share$1.42 for the same period in 2025. Net income and net income per diluted common share for the firstsecond quarter of 2026 was primarily impacted by thean Mergersincrease in net interest income and mergera 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 expensesto ofthe $42.5American million.and Southwest operations and an increase in provision for income taxes. The Company posted annualized returns on average common equity of 5.70%8.14% and 6.94%,7.13%, annualized returns on average assets of 1.10%1.55% and 1.34%1.41% and efficiency ratios of 59.16%45.99% and 45.71%44.80% for the quarters ended MarchJune 31,30, 2026, and 2025, respectively. The efficiency ratio is calculated by dividing total noninterest expense (excluding net gains and losses on the sale, write downwrite-down or write upwrite-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.

For the Three Months Ended MarchJune 31,30, 2026

Net interest income before the provision for credit losses was $330.6 million for the quarter ended June 30, 2026, an increase of $62.8 million or 23.5% compared with $267.7 million for the same period in 2025. The net interest margin on a tax-equivalent basis was 3.51%3.47% for the quarter ended MarchJune 31,30, 2026, an increase of 3729 basis points compared with 3.14%3.18% for the same period in 2025. The changechanges wasto both measures were primarily due to the repricing of assetsassets, a decrease in the average balance and average rate on other borrowings and the impact of the Mergers.American Merger and the Southwest Merger.

Annualized and based on average balances on an actual 365-day basis for the three months ended MarchJune 31,30, 2026, and 2025.

There was no provision for credit losses for the three and six months ended MarchJune 31,30, 2026 and 2025.

Net charge-offs were $41.3$2.2 million for the quarter ended MarchJune 31,30, 2026, compared with net charge-offs of $2.7$3.0 million for the quarter ended MarchJune 31,30, 2025. Net charge-offs forFor the firstthree quartermonths 2026ended includedJune a30, $33.9 million increase in2026, net charge-offs for commercial and industrial loans. Net charge-offs for the first quarter of 2026 included $2.0$962 millionthousand related to resolved PCD loans, which had specific reserves that were allocated to the charge-offs. Additionally, due toFor the Mergers,three reservesmonths increasedended byJune Day30, One2026, accounting for PCD loans of $52.1 million and Day One accounting for PSLs of $39.3 million. Further, $2.0$10.3 million of reserves on resolved PCD loans without any related charge-offs were released to the general reserve.

Noninterest income totaled $46.5$60.7 million for the three months ended MarchJune 31,30, 2026, compared with $41.3$43.0 million for the same period in 2025, an increase of $5.2$17.7 million or 12.5%,41.2%. whichNoninterest income totaled $107.2 million for the six months ended June 30, 2026, compared with $84.3 million for the six months ended June 30, 2025, an increase of $22.9 million or 27.2%. The change for both periods was primarily due to the Mergers.American Merger and Southwest Merger and a gain on Visa Class B-2 stock exchange net of investment securities sales of $8.2 million.

Noninterest expense totaled $217.3$176.2 million for the three months ended MarchJune 31,30, 2026, compared with $140.3$138.6 million for the same period in 2025, an increase of $77.0$37.6 million,million or 27.1%, which was 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 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 twofive months of Southwest operations.

Includes stock-based compensation expense of $3.4$3.2 million and $3.1$3.0 million for the three months ended MarchJune 31,30, 2026, and 2025, respectively, and $6.6 million and $6.1 million for the six months ended June 30, 2026, and 2025, respectively.

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$46.5 million for the three months ended MarchJune 31,30, 2026, compared with $36.2$37.0 million for the same period in 2025, aan decreaseincrease of $2.1$9.5 million or 5.8%.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 MarchJune 31,30, 2026, and 2025 was 22.7%21.6% and 21.7%,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.

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 threesix months ended MarchJune 31,30, 2026 and year ended December 31, 2025.

At MarchJune 31,30, 2026, total loans were $25.29$25.03 billion, an increase of $3.48$3.22 billion or 16.0%14.8% compared with $21.81 billion at December 31, 2025. Loans at MarchJune 31,30, 2026, included $21.9$18.7 million of loans held for sale and $1.43$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 MarchJune 31,30, 2026, loans represented 58.0%57.0% of total assets compared with 56.7% of total assets at December 31, 2025.

Nonperforming assets decreased $28.7$20.3 million or 19.0% to $122.1$130.6 million at MarchJune 31,30, 2026, compared with $150.8 million at December 31, 2025.

Nonperforming assets were 0.48%0.52% of total loans and other real estate at MarchJune 31,30, 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 353.1%321.0% at MarchJune 31,30, 2026, and 242.7% at December 31, 2025.

Management has established an allowance for credit losses on loans that it believes is management’s best estimate of current expected losses on the Company’s loan portfolio as of MarchJune 31,30, 2026. The allowance for credit losses is adjusted through charges to earnings in the form of a provision for credit losses.

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.

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.

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 MergersAmerican 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 $43.9$45.1 million, which included a $24.6$25.8 million allowance on PCD loans and ana $19.3 million allowance on PSLs.

The Company had gross charge-offs on originated loans of $33.1$36.1 million during the threesix months ended MarchJune 31,30, 2026. Partially offsetting these charge-offs were recoveries on originated loans of $616$2.1 thousand.million. Gross charge-offs on acquired loans were $9.4$11.7 million during the threesix months ended MarchJune 31,30, 2026. Offsetting these charge-offs were recoveries on acquired loans of $555$2.2 thousand.million. Total charge-offs for the threesix months ended MarchJune 31,30, 2026, were $42.5$47.8 million, partially offset by total recoveries of $1.2$4.3 million.

The allowance for credit losses on loans totaled $383.8$382.8 million at MarchJune 31,30, 2026, compared with $333.7 million at December 31, 2025, an increase of $50.1$49.1 million or 15.0%.14.7%. The allowance for credit losses on loans totaled 1.52% of total loans at March 31, 2026, and 1.53% of total loans at both June 30, 2026 and December 31, 2025.

At MarchJune 31,30, 2026, $200.5$213.7 million of the allowance for credit losses on loans was attributable to originated loans, a decrease of $30.8$17.6 million or 13.3%7.6% compared with $231.3 million of the allowance at December 31, 2025. At MarchJune 31,30, 2026, $29.8$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 $8.6$8.2 million or 22.5%.21.3%. At MarchJune 31,30, 2026, $58.4$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 $42.7$39.2 million or 272.1%.249.4%. At MarchJune 31,30, 2026, $95.1$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 $46.8$35.7 million or 96.7%.73.8%.

At MarchJune 31,30, 2026, the Company had $77.0$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 MarchJune 31,30, 2026, representis management’sadequate bestto estimate of currentcover expected credit losses onthat may be realized from the Company’s loan portfolio atas 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 MarchJune 31,30, 2026.

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 cancelable 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 MarchJune 31,30, 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.

The carrying cost of securities totaled $11.95$12.34 billion at MarchJune 31,30, 2026, compared with $10.61 billion at December 31, 2025, an increase of $1.34$1.73 billion or 12.6%.16.3%. At MarchJune 31,30, 2026, securities represented 27.4%28.1% of total assets compared with 27.6% of total assets at December 31, 2025.

As of MarchJune 31,30, 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 MarchJune 31,30, 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”), Fannie Mae or Federal Home Loan Mortgage Corporation (“Freddie Mac”). Ginnie Mae-issued securities are explicitly guaranteed by the U.S. government, while Fannie Mae- and Freddie Mac-issued securities are fully guaranteed by those respective United States government-sponsored agencies, and conditionally guaranteed by the full faith and credit of the United States. The Company’s held to maturity securities also include taxable and tax-exempt municipal securities issued primarily by school districts, utility districts and municipalities located in Texas. The Company’s investment in municipal securities is exposed to credit risk. The securities are highly rated by major rating agencies and regularly reviewed by management. A significant portion are guaranteed or insured by either the Texas Permanent School Fund, Assured Guaranty or Build America Mutual. As of MarchJune 31,30, 2026, the Company’s municipal securities represent 1.0% of the securities portfolio. Management has the ability and intent to hold the securities classified as held to maturity until they mature, at which time the Company will receive full value for the securities. Accordingly, as of MarchJune 31,30, 2026, management believes that there is no potential for material credit losses on held to maturity securities.

Total deposits were $32.63$32.60 billion at MarchJune 31,30, 2026, compared with $28.48 billion at December 31, 2025, an increase of $4.15$4.12 billion or 14.6%.14.5%. Total noninterest-bearing deposits were $10.58$10.74 billion at MarchJune 31,30, 2026, compared with $9.47 billion at December 31, 2025, an increase of $1.11$1.27 billion or 11.8%.13.4%. Interest-bearing deposits were $22.05$21.86 billion at MarchJune 31,30, 2026, compared with $19.01 billion at December 31, 2025, an increase of $3.04$2.85 billion or 16.0%.15.0%.

Average deposits for the threesix months ended MarchJune 31,30, 2026, were $31.94$32.18 billion, an increase of $3.78$4.28 billion or 13.4%15.4% compared with $28.16$27.89 billion for the threesix months ended MarchJune 31,30, 2025. The ratio of average interest-bearing deposits to total average deposits was 67.9%67.6% and 66.3%65.9% during the first threesix months of 2026 and 2025, respectively.

Annualized and based on average balances on an actual 365-day basis for the threesix months ended MarchJune 31,30, 2026, and 2025.

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 MarchJune 31,30, 2026, the Company had total borrowing capacity of $7.56$7.62 billion under this line. FHLB advances of $2.20$2.40 billion were outstanding at MarchJune 31,30, 2026, with a weighted average interest rate of 3.75%.3.76%. At MarchJune 31,30, 2026, the Company had no FHLB long-term notes payable balance outstanding.