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What changed in PROSPERITY BANCSHARES INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of PROSPERITY BANCSHARES INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+368 added−377 removedSource: 10-K (2026-02-26) vs 10-K (2025-02-27)

Top changes in PROSPERITY BANCSHARES INC's 2025 10-K

368 paragraphs added · 377 removed · 319 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

61 edited+11 added−17 removed164 unchanged
Biggest changeThe Company operates each banking center as a separate profit center, maintaining separate data with respect to each banking center’s net interest income, efficiency ratio, deposit growth, loan growth and overall profitability. Banking center presidents and managers are accountable for performance in these areas and compensated accordingly. The Company also has lending groups focused on specific business segments.
Biggest changeMost banking center locations are overseen by a local president or manager with knowledge of the community and lending expertise in the specific industries found in the community. The Company operates each banking center as a separate profit center, maintaining separate data with respect to each banking center’s net interest income, efficiency ratio, deposit growth, loan growth and overall profitability.
Under federal and state laws and regulations pertaining to the safety and soundness of insured depository institutions, state banking regulators, the Federal Reserve Board, and separately the FDIC as the insurer of bank deposits have the authority to compel or restrict certain actions by the Company if they determine that the Company has insufficient capital or other resources, or is otherwise operating in a manner that may be deemed to be inconsistent with safe and sound banking practices.
Under federal and state laws and regulations pertaining to the safety and soundness of insured depository institutions, state 6 banking regulators, the Federal Reserve Board, and separately the FDIC as the insurer of bank deposits have the authority to compel or restrict certain actions by the Company if they determine that the Company has insufficient capital or other resources, or is otherwise operating in a manner that may be deemed to be inconsistent with safe and sound banking practices.
Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious financial, legal and reputational consequences, including substantial delay or blocking of a merger or other acquisition transaction. Cybersecurity .
Blocked assets (e.g., property and bank deposits) cannot be paid out, 12 withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious financial, legal and reputational consequences, including substantial delay or blocking of a merger or other acquisition transaction. Cybersecurity .
Under this authority, 6 the Company’s regulators can require the Company or its subsidiaries to enter into informal or formal supervisory agreements, including board resolutions, memoranda of understanding, confidential agreements, and consent or cease and desist orders pursuant to which the Company would be required to take identified corrective actions to address cited concerns and to refrain from taking certain actions.
Under this authority, the Company’s regulators can require the Company or its subsidiaries to enter into informal or formal supervisory agreements, including board resolutions, memoranda of understanding, confidential agreements, and consent or cease and desist orders pursuant to which the Company would be required to take identified corrective actions to address cited concerns and to refrain from taking certain actions.
Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious financial, legal and reputational consequences for the institution and could block or substantially delay a merger or other acquisition transaction. 12 Office of Foreign Assets Control Regulation.
Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious financial, legal and reputational consequences for the institution and could block or substantially delay a merger or other acquisition transaction. Office of Foreign Assets Control Regulation.
It is the policy of the Federal Reserve Board that bank holding companies should pay cash dividends on common stock only out of income available over the past year and only if the prospective rate of earnings retention is consistent with the organization’s expected capital needs and financial condition.
It is the policy of the Federal Reserve Board that bank holding companies should pay cash dividends on common stock only out of income available over the past year and only if the prospective rate of earnings retention is 5 consistent with the organization’s expected capital needs and financial condition.
The CFPB regulates the offering and provision of consumer financial products and services under the federal consumer financial laws. Equivalence to National Bank Powers. The Texas Constitution, as amended in 1986, provides that a Texas-chartered bank has the same rights and privileges that are or may be granted to national banks domiciled in Texas.
The CFPB regulates the offering and provision of consumer financial products and services under the federal consumer financial laws. 9 Equivalence to National Bank Powers. The Texas Constitution, as amended in 1986, provides that a Texas-chartered bank has the same rights and privileges that are or may be granted to national banks domiciled in Texas.
Section 13 of the BHCA, commonly referred to as the “Volcker Rule,” generally prohibits the Company and the Company’s subsidiaries from (1) engaging in certain proprietary trading, and (2) acquiring or retaining an ownership interest in or sponsoring a “covered fund,” all subject to certain exceptions.
Section 13 of the BHCA, commonly referred to as the “Volcker Rule,” generally prohibits the Company and the Company’s subsidiaries from (1) engaging in certain proprietary trading, and (2) acquiring or retaining an ownership interest in or 7 sponsoring a “covered fund,” all subject to certain exceptions.
FDICIA provides that no state bank or subsidiary thereof may engage as principal in any activity not 9 permitted for national banks, unless the institution complies with applicable capital requirements and the FDIC determines that the activity poses no significant risk to the DIF.
FDICIA provides that no state bank or subsidiary thereof may engage as principal in any activity not permitted for national banks, unless the institution complies with applicable capital requirements and the FDIC determines that the activity poses no significant risk to the DIF.
Federal bank regulators, the CFPB, state attorneys general and state and local consumer protection agencies may also seek to enforce consumer protection requirements and obtain these and other remedies, including regulatory sanctions, customer rescission rights and civil money penalties in each jurisdiction in which the Bank operates.
Federal bank regulators, the CFPB, state attorneys general and state and local consumer protection agencies may also seek to enforce 10 consumer protection requirements and obtain these and other remedies, including regulatory sanctions, customer rescission rights and civil money penalties in each jurisdiction in which the Bank operates.
On October 25, 2023, the Federal Reserve Board issued a proposal under which the maximum permissible interchange fee for an electronic debit transaction would be the sum of 14.4 cents per transaction and 4 basis points multiplied by the value of the transaction.
On October 25, 2023, the Federal Reserve Board issued a proposal under which 11 the maximum permissible interchange fee for an electronic debit transaction would be the sum of 14.4 cents per transaction and 4 basis points multiplied by the value of the transaction.
A depository institution's holding company must guarantee any required capital restoration plan up to an amount equal to the lesser of 5% of the depository institution's 8 assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan.
A depository institution's holding company must guarantee any required capital restoration plan up to an amount equal to the lesser of 5% of the depository institution's assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan.
FDICIA imposes progressively more restrictive restraints on operations, management, and capital distributions depending on the category in which an institution is classified. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve System.
FDICIA imposes progressively more restrictive restraints on operations, management, and capital distributions depending on the category in which an institution is 8 classified. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve System.
The Federal Reserve Board is authorized to limit or prohibit the payment of dividends 5 if, in the Federal Reserve Board’s opinion, the payment of dividends would constitute an unsafe or unsound practice in light of a bank holding company’s financial condition.
The Federal Reserve Board is authorized to limit or prohibit the payment of dividends if, in the Federal Reserve Board’s opinion, the payment of dividends would constitute an unsafe or unsound practice in light of a bank holding company’s financial condition.
Since neither the Company nor the Bank engages in the types of trading or investing covered by the Volcker Rule, the Volcker Rule does not currently have any effect on the operations of the Company or the Bank. 7 Incentive Compensation.
Since neither the Company nor the Bank engages in the types of trading or investing covered by the Volcker Rule, the Volcker Rule does not currently have any effect on the operations of the Company or the Bank. Incentive Compensation.
All of the Company’s acquisitions have been accretive to earnings within 12 months after acquisition date and generally have supplied the Company with relatively low-cost deposits which have been used to fund the Company’s lending and investing activities. However, future acquisitions, if any, may not be accretive to earnings within any particular time period.
All of the Company’s acquisitions have been accretive to earnings within 12 months after acquisition date and generally have supplied the Company with relatively low-cost deposits that have been used to fund the Company’s lending and investing activities. However, future acquisitions, if any, may not be accretive to earnings within any particular time period.
Failure to meet minimum capital requirements could also result in restrictions on the Company’s or the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth. In 2024, the Company’s and the Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer.
Failure to meet minimum capital requirements could also result in restrictions on the Company’s or the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth. In 2025, the Company’s and the Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer.
The extent to which any additional future assessments will impact the Company’s future deposit insurance expense is currently uncertain. 11 Interchange Fees.
The extent to which any additional future assessments will impact the Company’s future deposit insurance expense is currently uncertain. Interchange Fees.
The Company fosters an environment where associates are encouraged to reach their full potential by enhancing current skills, work toward a future role, or take steps to build new skills through hands-on learning involving common customer interaction scenarios, coaching conversations, mentor relationships, feedback, performance appraisals and working with role models.
The Company fosters an environment where associates are encouraged to reach their full potential by enhancing current skills, working toward a future role, or taking steps to build new skills through hands-on learning involving common customer interaction scenarios, coaching conversations, mentor relationships, feedback, performance appraisals and working with role models.
In addition, effective January 1, 2019, the capital rules required a capital conservation buffer of 2.5% above each of the minimum risk-based capital ratio requirements (CET1, Tier 1, and total capital), which is designed to absorb losses during periods of economic stress.
In addition, effective January 1, 2019, the capital rules required a capital conservation buffer of 2.5% above each of the minimum risk-based capital ratio requirements (CET1, Tier 1, and total capital), which is designed to cover expected losses during periods of economic stress.
The Company recognizes that associates play a valuable role in its overall success. The Company strives to keep associates motivated and focused through the areas discussed above. All related programs or benefits contribute to the Company’s overall productivity and performance and play a vital role in attracting and retaining associates. Business Culture .
The Company recognizes that associates play a valuable role in its overall success. The Company strives to keep associates motivated and focused as discussed above. All related programs or benefits contribute to the Company’s overall productivity and performance and play a vital role in attracting and retaining associates. Business Culture .
Recent Acquisitions Merger of Lone Star State Bancshares, Inc. — Effective April 1, 2024, the Company completed the merger of Lone Star State Bancshares, Inc. (“Lone Star”) into 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 “LSSB Merger”).
Recent Acquisition 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”).
The Company intends to continue to employ the strict underwriting guidelines and comprehensive loan review processes that have contributed to its low incidence of nonperforming assets and minimal charge-offs in relation to its size. Nonperforming assets were 0.37% of total loans and other real estate at December 31, 2024.
The Company intends to continue to employ the strict underwriting guidelines and comprehensive loan review processes that have contributed to its low incidence of nonperforming assets and minimal charge-offs in relation to its size. Nonperforming assets were 0.69% of total loans and other real estate at December 31, 2025.
Excluding Warehouse Purchase Program loans, nonperforming assets were 0.39% of total loans and other real estate at December 31, 2024. All Warehouse Purchase Program loans were performing loans at December 31, 2024. Continue Focus on Efficiency. The Company plans to maintain its stringent cost control practices and policies.
Excluding Warehouse Purchase Program loans, nonperforming assets were 0.74% of total loans and other real estate at December 31, 2025. All Warehouse Purchase Program loans were performing loans at December 31, 2025. Continue Focus on Efficiency. The Company plans to maintain its stringent cost control practices and policies.
By offering certificates of deposit, interest checking accounts, money market accounts and savings accounts at competitive rates, the Company gives its depositors a full range of traditional deposit products. As of December 31, 2024, the Company’s trust department maintained total assets of $2.89 billion, including managed assets of $2.35 billion.
By offering certificates of deposit, interest checking accounts, money market accounts and savings accounts at competitive rates, the Company gives its depositors a full range of traditional deposit products. 3 As of December 31, 2025, the Company’s trust department maintained total assets of $2.89 billion, including managed assets of $2.40 billion.
In 2024, its workforce, from senior officers to tellers, was 50% minority and 75% female. The Company’s associates bring a variety of backgrounds, perspectives, and experiences that are reflective of the communities and customers the Company serves.
In 2025, its workforce, from senior officers to tellers, was 51% minority and 75% female. The Company’s associates bring a variety of backgrounds, perspectives, and experiences that are reflective of the communities and customers the Company serves.
Lone Star State Bank of West Texas 2024 5 (1) The number of banking centers added does not include any locations of the acquired entity that were closed and consolidated with existing banking centers of the Company upon consummation of the transaction or closed after consummation of the transaction.
FirstCapital Bank of Texas 2023 16 Lone Star State Bancshares, Inc. Lone Star State Bank of West Texas 2024 5 (1) The number of banking centers added does not include any locations of the acquired entity that were closed and consolidated with existing banking centers of the Company upon consummation of the transaction or closed after consummation of the transaction.
The Company is active in commercial and industrial lending, with commercial loans comprising 11.3% of the Company’s total loans as of December 31, 2024. The Company also offers agricultural loans, loans for automobiles and other consumer durables, home equity loans, debit and credit cards, digital banking solutions, trust and wealth management, retail brokerage services, mortgage services and treasury management.
The Company is active in commercial and industrial lending, with commercial loans comprising 10.6% of the Company’s total loans as of December 31, 2025. The Company also offers agricultural loans, loans for automobiles and other consumer durables, home equity loans, debit and credit cards, digital banking solutions, trust and wealth management, retail brokerage services, mortgage services and treasury management.
As of December 31, 2024, the Bank operated 283 full service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 62 in the Dallas/Fort Worth area; 22 in the East Texas area; 31 in the Central Texas area including Austin and San Antonio; 44 in the West Texas area including Lubbock, Midland-Odessa, Abilene, Amarillo and Wichita Falls; 15 in the Bryan/College Station area, 6 in the Central Oklahoma area; and 8 in the Tulsa, Oklahoma area.
As of December 31, 2025, the Bank operated 283 full-service banking locations: 62 in the Houston area, including The Woodlands; 33 in the South Texas area including Corpus Christi and Victoria; 61 in the Dallas/Fort Worth area; 22 in the East Texas area; 31 in the Central Texas area including Austin and San Antonio; 45 in the West Texas area including Lubbock, Midland-Odessa, Abilene, Amarillo and Wichita Falls; 15 in the Bryan/College Station area; 6 in the Central Oklahoma area; and 8 in the Tulsa, Oklahoma area.
As of December 31, 2024, the Company had 3,916 full-time equivalent associates, 1,130 of whom were officers of the Bank. Neither the Company nor the Bank is a party to any collective bargaining agreement. The Company is fully committed to the concept and practice of equal opportunity.
As of December 31, 2025, the Company had 3,941 full-time equivalent associates, 1,147 of whom were officers of the Bank. Neither the Company nor the Bank is a party to any collective bargaining agreement. The Company is fully committed to the concept and practice of equal opportunity.
The Company has been an active real estate lender, with commercial real estate (including farmland and multi-family residential); 1-4 family residential (including home equity); and construction, land development and other land loans comprising 29.3%, 38.3% and 12.9%, respectively, of the Company’s total loans as of December 31, 2024.
The Company has been an active real estate lender, with commercial real estate (including farmland and multi-family residential); 1-4 family residential (including home equity); and construction, land development and other land loans comprising 29.5%, 37.9% and 12.6%, respectively, of the Company’s total loans as of December 31, 2025.
As of December 31, 2024, these rules have not been implemented.
As of December 31, 2025, these rules have not been implemented.
Banking A ctivities The Company, through the Bank, offers a variety of traditional loan and deposit products to its customers, which consist primarily of individual consumers and businesses throughout Texas and Oklahoma. At December 31, 2024, the Bank maintained approximately 816,300 separate deposit accounts including certificates of deposit and 70,400 separate loan accounts.
Banking A ctivities The Company, through the Bank, offers a variety of traditional loan and deposit products to its customers, which consist primarily of individual consumers and businesses throughout Texas and Oklahoma. At December 31, 2025, the Bank maintained approximately 804,300 separate deposit accounts including certificates of deposit and 65,700 separate loan accounts.
Commercial real estate loans (including multifamily residential and excluding farmland) were $5.80 billion and represented 26.2% of the total portfolio as of December 31, 2024. One-to-four-family residential loans (excluding home equity) were $7.58 billion and represented 34.2% of the total loan portfolio as of December 31, 2024.
Commercial real estate loans (including multifamily residential and excluding farmland) were $5.78 billion and represented 26.5% of the total portfolio as of December 31, 2025. One-to-four-family residential loans (excluding home equity) were $7.43 billion and represented 34.1% of the total loan portfolio as of December 31, 2025.
Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs, and many states, including Texas, have also recently implemented or modified their data breach notification, information security and data privacy requirements.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs, and many states, including Texas, have also recently implemented or modified their data breach notification, information security and data privacy requirements.
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, which does not include all the subsequent fair value adjustments that have not yet been finalized.
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, 2025, which reflected all final subsequent fair value adjustments.
To further foster its relationship with its associates, the Company has implemented the following initiatives: • Hiring, training, and retaining associates from diverse backgrounds. • Encouraging associates to recruit new team members through the Company’s Referral Reward Program. • Reaching out to organizations that assist women and minorities in job services in order to attract a more diverse group of applicants. • Participating in a variety of activities that reflect the demographics within the communities the Company serves. • Developing strategies to reach multicultural markets. • Providing training and development opportunities as noted below.
To further foster its relationship with its associates, the Company has implemented the following initiatives: • Hiring, training, and retaining associates from diverse backgrounds. • Encouraging associates to recruit new team members through the Company’s Referral Reward Program. • Participating in a variety of activities that reflect the demographics within the communities the Company serves. • Developing strategies to reach multicultural markets. • Providing training and development opportunities as noted below. 2 Compensation and Benefits.
Recruiting, Training, Development and Retention. In order to provide current associates with the opportunity for advancement, the Company posts job opportunities internally for three calendar days before making them available to the public. Of the approximately 1,690 open positions filled in 2024, 39% were filled by internal associates.
In order to provide current associates with the opportunity for advancement, the Company posts job opportunities internally for three calendar days before making them available to the public. Of the approximately 1,275 open positions filled in 2025, 255 were filled by internal associates.
Goodwill represents the excess of the total purchase price paid over the fair value of the assets acquired, net of the fair value of liabilities assumed. Additionally, the Company recognized $17.7 million of core deposit intangibles as of December 31, 2024.
Goodwill represents the excess of the total purchase price paid over the fair value of the assets acquired, net of the fair value of liabilities assumed. Additionally, the Company recognized $17.7 million of core deposit intangibles related to the Lone Star Merger.
Expand Market Share Through Internal Growth and a Disciplined Acquisition Strategy. The Company intends to continue seeking opportunities, both inside and outside its existing markets, to expand either by acquiring existing banks or branches of banks or by establishing new banking centers.
The Company intends to continue seeking opportunities, both inside and outside its existing markets, to expand either by acquiring existing banks or branches of banks or by establishing new banking centers.
In addition to internal growth, the Company has completed the following acquisitions since 2014 (through December 31, 2024): Acquired Entity Acquired Bank Completion Date Number of Banking Centers Acquired (1) F&M Bancorporation Inc. The F&M Bank & Trust Company 2014 11 Tradition Bancshares, Inc. Tradition Bank 2016 7 LegacyTexas Financial Group, Inc.
In addition to internal growth, the Company has completed the following acquisitions since 2016 (through December 31, 2025): Acquired Entity Acquired Bank Completion Date Number of Banking Centers Acquired (1) Tradition Bancshares, Inc. Tradition Bank 2016 7 LegacyTexas Financial Group, Inc. LegacyTexas Bank 2019 42 First Bancshares of Texas, Inc.
Construction, land development and other land loans were $2.86 billion and represented 12.9% of the total loan portfolio as of December 31, 2024. Warehouse Purchase Program loans were $1.08 billion and represented 4.9% of the total loan portfolio as of December 31, 2024. Maintain Sound Asset Quality.
Construction, land development and other land loans were $2.74 billion and represented 12.6% of the total loan portfolio as of December 31, 2025. Warehouse Purchase Program loans were $1.30 billion and represented 6.0% of the total loan portfolio as of December 31, 2025. Maintain Sound Asset Quality.
Compensation and Benefits. The Company believes in maintaining progressive employment policies, as well as a competitive wage and benefit package. The Company has invested heavily in its officers and associates by recruiting talented officers in its market areas and providing them with economic incentives.
The Company believes in maintaining progressive employment policies, as well as a competitive wage and benefit package. The Company has invested heavily in its officers and associates by recruiting talented officers in its market areas and providing them with economic incentives. The senior management team, including area leadership, has substantial experience in the Company’s business and market areas.
At December 31, 2024, noninterest-bearing demand deposits were 34.5% of the Bank’s total deposits. For the year ended December 31, 2024, the Company’s average cost of funds was 1.87%, and the Company’s average cost of deposits (excluding all borrowings) was 1.47%.
At December 31, 2025, noninterest-bearing demand deposits were 33.2% of the Bank’s total deposits. For the year ended December 31, 2025, the Company’s average cost of funds was 1.61%, and the Company’s average cost of deposits (excluding all borrowings) was 1.37%.
Officers and associates have access to each customer’s existing and related account relationships and are better able to inform customers of additional products when customers visit or call the various banking centers or use their drive-in facilities.
Officers and associates have access to each customer’s existing and related account 4 relationships and are better able to inform customers of additional products when customers visit or call the various banking centers or use their drive-in facilities. In addition, the Company includes product information on its web page and in monthly statements and other mailings.
The trust department provides trust services in the Company’s various market areas. The Company’s banking operations are considered by management to be aggregated in one reportable operating segment.
The trust department provides trust services in the Company’s various market areas. The Company’s banking operations are considered by management to be aggregated in one reportable operating segment. For more information about the Company’s segment reporting, refer to Note 1 to the consolidated financial statements.
The performance of these groups is also reviewed when setting lender compensation. 2 The Company offers a variety of benefits to full-time associates, including Medical Insurance, Dental Insurance, Vision Insurance, Basic Life Insurance, Voluntary Life Insurance, Spouse/Dependent Life Insurance, Short Term Disability, Long Term Disability, Worksite Supplemental Benefits, Flexible Spending Account, 401(k)/Profit Sharing Plan, Vacation Leave, Sick Leave and Paid Holidays.
The Company offers a variety of benefits to full-time associates, including Medical Insurance, Dental Insurance, Vision Insurance, Basic Life Insurance, Voluntary Life Insurance, Spouse/Dependent Life Insurance, Short Term Disability, Long Term Disability, Worksite Supplemental Benefits, Flexible Spending Account, 401(k)/Profit Sharing Plan, Paid Time Off and Paid Holidays. Recruiting, Training, Development and Retention.
In addition, the Company includes product information on its web page and in monthly statements and other mailings. 4 Compet ition The banking business is highly competitive, and the profitability of the Company depends principally on its ability to compete in its market areas.
Compet ition The banking business is highly competitive, and the profitability of the Company depends principally on its ability to compete in its market areas.
Each banking center has its own listed local business telephone number. Customers are served by a local banker with decision making authority. The Company also maintains specialty commercial lending lines of business staffed by bankers with lending expertise in the various business lines—commercial middle market, energy, mortgage warehouse and insurance lending.
Customers are served by a local banker with decision making authority. The Company also maintains specialty commercial lending lines of business staffed by bankers with lending expertise in the various business lines—commercial middle market, energy, mortgage warehouse and insurance lending. Expand Market Share Through Internal Growth and a Disciplined Acquisition Strategy.
The Company provides a high degree of responsiveness combined with a wide variety of banking products and services. The Company staffs its banking centers with experienced bankers who possess lending expertise to effectively serve their community and gives them authority with centralized support to make certain pricing and credit decisions, avoiding the bureaucratic structure of larger banks.
The Company staffs its banking centers with experienced bankers who possess lending expertise to effectively serve their community and gives them authority with centralized support to make certain pricing and credit decisions, avoiding the bureaucratic structure of larger banks. Each banking center has its own listed local business telephone number.
As of December 31, 2024, the Company’s ratio of CET1 to risk-weighted assets was 16.42%, Tier 1 capital to risk-weighted assets was 16.42%, total capital to risk-weighted assets was 17.67% and Tier 1 capital to average quarterly assets (leverage ratio) was 10.82%.
As of December 31, 2025, the Company’s ratio of CET1 to risk-weighted assets was 17.55%, Tier 1 capital to risk-weighted assets was 17.55%, total capital to risk-weighted assets was 18.80% and Tier 1 capital to average quarterly assets (leverage ratio) was 11.93%.
To achieve this objective, the Company has employed the following strategic goals: Continue Community Banking Emphasis. Although the Company has significantly grown in the last several years, it intends to continue operating as a community banking organization focused on meeting the specific needs of consumers and businesses in its market areas.
Although the Company has significantly grown in the last several years, it intends to continue operating as a community banking organization focused on meeting the specific needs of consumers and businesses in its market areas. The Company provides a high degree of responsiveness combined with a wide variety of banking products and services.
Lone Star operated five full-service banking offices in the West Texas area, including its main office in Lubbock, and one banking center in each of Brownfield, Midland, Odessa and Big Spring, Texas. As of March 31, 2024, Lone Star, on a consolidated basis, reported total assets of $1.38 billion, total loans of $1.07 billion and total deposits of $1.24 billion.
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.
These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits; and their use may affect interest rates charged on loans or paid for deposits. 13 Federal Reserve Board monetary policies have materially affected the operating results of commercial banks in the past and are expected to continue to do so in the future.
These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits; and their use may affect interest rates charged on loans or paid for deposits.
Anti-Money Laundering and Anti-Terrorism Legislation. A major focus of governmental policy on financial institutions has been aimed at combating money laundering and terrorist financing. The U.S.
The agencies continue to apply the CRA rules as they existed before the 2023 modernization, considering the injunction and pending finalization of the rescission of the modernization rule. Anti-Money Laundering and Anti-Terrorism Legislation. A major focus of governmental policy on financial institutions has been aimed at combating money laundering and terrorist financing. The U.S.
Failure to comply with consumer protection requirements may also result in the Bank’s failure to obtain any required regulatory approval for merger or other acquisition transactions the Bank may wish to pursue or its prohibition from engaging in such transactions even if approval is not required. 10 The Dodd-Frank Act established the CFPB, which has supervisory, examination and enforcement authority over depository institutions with total assets of $10 billion or greater and other providers of consumer financial products or services such as the Bank.
Failure to comply with consumer protection requirements may also result in the Bank’s failure to obtain any required regulatory approval for merger or other acquisition transactions the Bank may wish to pursue or its prohibition from engaging in such transactions even if approval is not required.
Loans at December 31, 2024 were $22.15 billion compared with $21.18 billion at December 31, 2023, an increase of $968.7 million or 4.6%. Commercial and industrial loans were $2.51 billion and represented 11.3% of the total loan portfolio as of December 31, 2024.
Loans at December 31, 2025, were $21.81 billion compared with $22.15 billion at December 31, 2024, a decrease of $343.8 million or 1.6%. Commercial and industrial loans were $2.30 billion and represented 10.6% of the total loan portfolio as of December 31, 2025.
For more information about the Company’s segment reporting, refer to Note 1 to the consolidated financial statements. 3 Business S trategies The Company’s main objective is to increase deposits and loans through internal growth, as well as through acquisition opportunities, while maintaining efficiency, providing individualized customer service and maximizing profitability.
Business S trategies The Company’s main objective is to increase deposits and loans through internal growth, as well as through acquisition opportunities, while maintaining efficiency, providing individualized customer service and maximizing profitability. To achieve this objective, the Company has employed the following strategic goals: Continue Community Banking Emphasis.
In October 2024, the Company completed the operational conversion of Lone Star Bank. 1 Merger of First Bancshares of Texas, Inc. — Effective May 1, 2023, the Company completed the merger of First Bancshares of Texas, Inc. (“First Bancshares”) into the Company and the subsequent merger of its wholly owned subsidiary, FirstCapital Bank of Texas, N.A.
In October 2024, the Company completed the operational conversion of Lone Star Bank. 1 S ubsequent Events Acquisition of American Bank Holding Corporation — On January 1, 2026, the Company completed the merger of American Bank Holding Corporation (“American”) into the Company and the subsequent merger of its wholly owned subsidiary American Bank, N.A.
The revised rules substantially alter the methodology for assessing compliance with the CRA, with material aspects taking effect January 1, 2026, and revised data reporting requirements taking effect January 1, 2027.
An unsatisfactory record can substantially delay or block the transaction. In 2023 the OCC, FRB and FDIC issued a final rule to modernize their respective CRA regulations. The revised rules would substantially alter the methodology for assessing compliance with the CRA, with material aspects taking effect January 1, 2026 and revised data reporting requirements taking effect January 1, 2027.
The nature of future monetary policies and the effect of such policies on the business and earnings of the Company and its subsidiaries cannot be predicted.
Federal Reserve Board monetary policies have materially affected the operating results of commercial banks in the past and are expected to continue to do so in the future. The nature of future monetary policies and the effect of such policies on the business and earnings of the Company and its subsidiaries cannot be predicted.
Removed
LegacyTexas Bank 2019 42 First Bancshares of Texas, Inc. FirstCapital Bank of Texas 2023 16 Lone Star State Bancshares, Inc.
Added
(“American Bank”), into the Bank (collectively, the “ American Merger”). American Bank operated 18 banking offices and 2 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.
Removed
(“FirstCapital Bank”), into the Bank (collectively, the “FB Merger”). FirstCapital Bank operated 16 full-service banking offices in six different markets in West, North and Central Texas areas, including its main office in Midland, Texas, and banking offices in Midland, Lubbock, Amarillo, Wichita Falls, Burkburnett, Byers, Henrietta, Dallas, Horseshoe Bay, Marble Falls and Fredericksburg, Texas.
Added
Pursuant to the terms of the definitive agreement, the Company issued 4,439,938 shares of its common stock for all outstanding shares of American common stock in the first quarter of 2026. Acquisition of Southwest Bancshares, Inc. — On February 1, 2026, the Company completed the merger of Southwest Bancshares, Inc.
Removed
As of March 31, 2023, First Bancshares, on a consolidated basis, reported total assets of $2.14 billion, total loans of $1.65 billion and total deposits of $1.71 billion. Pursuant to the terms of the definitive agreement, the Company issued 3,583,370 shares of its common stock plus approximately $91.5 million in cash for all outstanding shares of First Bancshares capital stock.
Added
(“Southwest”) into the Company and the subsequent merger of its wholly owned subsidiary Texas Partners Bank (“Texas Partners”), into the Bank (collectively, the “Southwest Merger”). Texas Partners operated 11 banking offices in Central Texas including its main office in San Antonio, and banking offices in the San Antonio area, Austin and the Hill Country.
Removed
This resulted in goodwill of $164.8 million as of December 31, 2024, which includes all the final subsequent fair value adjustments. Additionally, the Company recognized $23.5 million of core deposit intangibles related to the FB Merger. During the second quarter of 2023, the Company completed the operational conversion of FirstCapital Bank. Available I nformation The Company’s website address is www.prosperitybankusa.com.
Added
Pursuant to the terms of the definitive agreement, the Company issued 4,094,974 shares of its common stock for all outstanding shares of Southwest common stock in the first quarter of 2026. Pending Acquisition of Stellar Bancorp, Inc. — On January 28, 2026, the Company and Stellar Bancorp, Inc.
Removed
The senior management team, including area leadership, has substantial experience in the Company’s business and market areas. Most banking center locations are overseen by a local president or manager with knowledge of the community and lending expertise in the specific industries found in the community.
Added
(“Stellar”) jointly announced the signing of a definitive merger agreement whereby Stellar, the parent company of Stellar Bank (“Stellar Bank”), will merge with and into the Company and Stellar Bank will merge with and into the Bank. Stellar Bank operates 52 banking offices in greater Houston and Beaumont, Texas and surrounding areas.
Removed
The Company expects the Trump administration will seek to implement a regulatory reform agenda that is significantly different than that of the Biden administration, impacting the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies.
Added
Under the terms and subject to the conditions of the definitive agreement, the Company will issue 0.3803 shares of its common stock and $11.36 in cash for each outstanding share of Stellar common stock. Based on the closing price of the Company’s common stock of $72.90 on January 27, 2026, the total consideration was valued at approximately $2.00 billion.
Removed
Data is required to be made available under the rule includes transaction information, account balance, account and routing numbers, terms and conditions, upcoming bill information, and certain account verification data.
Added
The transaction is subject to customary closing conditions, including the receipt of regulatory approvals. Available I nformation The Company’s website address is www.prosperitybankusa.com.
Removed
The final rule is intended to give consumers control over their financial data, including with whom it is shared, and encourage competition in the provision of consumer financial products or services. Banks with over $10 billion and less than $250 billion in total assets, such as the Bank, must comply with the new requirements by April 1, 2027.
Added
Banking center presidents and managers are accountable for performance in these areas and compensated accordingly. The Company also has lending groups focused on specific business segments. The performance of these groups is also reviewed when setting lender compensation.
Removed
In December 2024, the CFPB issued a final rule that, among other things, amends Regulation Z (otherwise known as the “Truth In Lending Act”) and impacts extensions of overdraft credit offered by financial institutions with more than $10 billion in assets.
Added
The Dodd-Frank Act established the CFPB, which has supervisory, examination and enforcement authority over depository institutions with total assets of $10 billion or greater and other providers of consumer financial products or services such as the Bank.
Removed
The final rule defines overdraft credit as generally including consumer credit extended by a financial institution to pay a transaction from a checking or other transaction account (other than a prepaid account) held at the financial institution when the consumer has insufficient or unavailable funds in that account.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

55 edited+11 added−5 removed185 unchanged
Biggest changeIf the Company is unable to identify and acquire other financial institutions and successfully integrate its acquired businesses, its business and earnings may be negatively affected. The market for acquisitions remains highly competitive, and the Company may be unable to find acquisition candidates in the future that fit its acquisition and growth strategy.
Biggest changeThese risks, individually or in combination, could have a material adverse effect on the Company’s business, financial condition and results of operations. If the Company is unable to identify and acquire other financial institutions and successfully integrate its acquired businesses, its business and earnings may be negatively affected.
These provisions include: • a Board of Directors classified into three classes of directors with the directors of each class having staggered three-year terms; 25 • a provision that any special meeting of the Company’s shareholders may be called only by the chairman of the board and chief executive officer, the president, a majority of the Board of Directors or the holders of at least 50% of the Company’s shares entitled to vote at the meeting; and • a provision establishing certain advance notice procedures for nomination of candidates for election as directors and for shareholder proposals to be considered at an annual or special meeting of shareholders.
These provisions include: • a Board of Directors classified into three classes of directors with the directors of each class having staggered three-year terms; • a provision that any special meeting of the Company’s shareholders may be called only by the chairman of the board and chief executive officer, the president, a majority of the Board of Directors or the holders of at least 50% of the Company’s shares entitled to vote at the meeting; and • a provision establishing certain advance notice procedures for nomination of candidates for election as directors and for shareholder proposals to be considered at an annual or special meeting of shareholders.
In addition, future 17 laws or more stringent interpretations or enforcement policies with respect to existing laws may increase the Company’s exposure to environmental liability. Although the Company has policies and procedures to perform an environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards.
In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase the Company’s exposure to environmental liability. Although the Company has policies and procedures to perform an environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards.
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.
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 or policies.
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.
A failure by the Company to have adequate risk management policies, procedures and controls could adversely affect the Company’s ability to increase this 16 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.
Additionally, the market for bank acquisitions was significantly and adversely impacted in 2023, by a number of factors, including: • increased regulatory scrutiny; • elevated interest rates; 19 • declining financial institution stock value • lower fair market values of investment securities portfolios; and • high-profile regional bank failures and the resulting effects therefrom.
Additionally, the market for bank acquisitions was significantly and adversely impacted in 2023, by a number of factors, including: • increased regulatory scrutiny; • elevated interest rates; • declining financial institution stock value • lower fair market values of investment securities portfolios; and • high-profile regional bank failures and the resulting effects therefrom.
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 Company is subject to certain risks in connection with its use of technology. The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services.
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. 21 The Company is subject to certain risks in connection with its use of technology. The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services.
If this were to happen, the value of the common stock could decline significantly and all or part of an investment could be lost. Risks Associated with the Company’s Business Interest Rate Risks The Company’s business is subject to interest rate risk, and fluctuations in interest rates may adversely affect its financial condition and results of operations.
If this were to happen, the value of the common stock could decline significantly and all or part of an investment could be lost. 13 Risks Associated with the Company’s Business Interest Rate Risks The Company’s business is subject to interest rate risk, and fluctuations in interest rates may adversely affect its financial condition and results of operations.
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.
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 of the programs and processes that the Company and its third-party service providers use to protect client transaction data.
The banking industry is subject to rapid and significant technological change. To compete effectively, the Company and its third-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 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.
If this framework is not effective, the Company may be subject to potentially adverse regulatory consequences and could suffer unexpected losses and its financial condition or results of operations could be materially adversely affected. 22 The Company is subject to risk arising from the failure or circumvention of internal controls and procedures.
If this framework is not effective, the Company may be subject to potentially adverse regulatory consequences and could suffer unexpected losses and its financial condition or results of operations could be materially adversely affected. The Company is subject to risk arising from the failure or circumvention of internal controls and procedures.
If such estimates or assumptions underlying its financial statements are incorrect, the Company’s financial condition and results of operations could be adversely affected. Environmental, Social and Governance Risks Severe weather, natural disasters and other adverse external climate events could significantly impact the Company’s business and customers.
If such estimates or assumptions underlying its financial statements are incorrect, the Company’s financial condition and results of operations could be adversely affected. 24 Environmental, Social and Governance Risks Severe weather, natural disasters and other adverse external climate events could significantly impact the Company’s business and customers.
Additional factors related to the credit quality of commercial loans include the quality of the management of the business and the borrower's ability to properly evaluate changes in the supply and demand characteristics affecting their market for products and services, to evaluate regulatory changes affecting their products and services, such as climate change regulation, and to effectively respond to those changes.
Additional factors related to the credit quality of commercial loans include the quality of the management of the 14 business and the borrower's ability to properly evaluate changes in the supply and demand characteristics affecting their market for products and services, to evaluate regulatory changes affecting their products and services, such as climate change regulation, and to effectively respond to those changes.
An increase in the Company’s allowance for credit losses or charge-offs as required by these regulatory agencies could have a material adverse effect on the Company’s operating results and financial condition. 15 The Company’s profitability depends significantly on local economic conditions.
An increase in the Company’s allowance for credit losses or charge-offs as required by these regulatory agencies could have a material adverse effect on the Company’s operating results and financial condition. The Company’s profitability depends significantly on local economic conditions.
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on the Company’s business, financial condition and results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 27
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on the Company’s business, financial condition and results of operations. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
In addition, the Company is exposed to risks with 14 respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting, risks resulting from changes in economic and industry conditions, and risks inherent in dealing with individual loans and borrowers.
In addition, the Company is exposed to risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting, risks resulting from changes in economic and industry conditions, and risks inherent in dealing with individual loans and borrowers.
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.
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 15 to repay their loans; and the value of the collateral securing these loans.
Any such losses could have a material adverse effect on the Company’s financial condition, results of operations and cash flows. New lines of business or new products and services may subject the Company to additional risks.
Any such losses could have a material adverse effect on the Company’s financial condition, results of operations and cash flows. 27 New lines of business or new products and services may subject the Company to additional risks.
The Dodd-Frank Act, enacted in July 2010, instituted major changes to the banking and financial institutions regulatory regimes in light of the performance of and government intervention in the financial services sector during the several years prior to the implementation of such Act.
The Dodd-Frank Act, enacted in July 2010, instituted major changes to the banking and financial institutions regulatory regimes in light of the performance of and government intervention in the financial services sector during the several years prior to the 23 implementation of such Act.
Current economic conditions are significantly affected by elevated interest rates and levels of inflation. Continuing inflationary pressures in 2025 could lead to increased costs to the Company’s customers, making it more difficult for them to repay their loans or other obligations, which would increase the Company’s credit risk.
Current economic conditions are significantly affected by elevated interest rates and levels of inflation. Continuing inflationary pressures in 2026 could lead to increased costs to the Company’s customers, making it more difficult for them to repay their loans or other obligations, which would increase the Company’s credit risk.
The amount of cyber insurance coverage that the Company maintains and expects would apply in the event of various breach 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.
The amount of cyber insurance coverage that the Company maintains and expects would apply in the event of various cyberattack 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.
A significant decline in general economic conditions, 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.
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.
The trading price for the Company’s common stock may fluctuate significantly in response to a variety of factors outside the Company’s control, including, among other things: • actual or anticipated variations in quarterly results of operations; • changes in recommendations by securities analysts; • failure to meet analysts’ revenue or earnings estimates; • changes in ratings from national rating agencies on the securities in the Company’s investment portfolio; • operating and stock price performance of other companies that investors deem comparable to the Company; • news reports relating to trends, concerns and other issues in the financial services industry; • perceptions in the marketplace regarding the Company and/or its competitors; • new technology used, or services offered, by competitors; • cybersecurity breaches; • actions by institutional shareholders; • significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving the Company or its competitors; • failure to integrate acquisitions or realize anticipated benefits from acquisitions; • changes in government regulations; • geopolitical conditions such as acts or threats of terrorism or military conflicts, such as the wars in Ukraine and the Middle East; • general market conditions, including real or anticipated changes in the strength of the Texas and Oklahoma economies; and • industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, presidential and congressional elections, interest rate changes, oil price volatility or credit losses. 26 General Risks Negative publicity could damage the Company’s reputation and business.
The trading price for the Company’s common stock may fluctuate significantly in response to a variety of factors outside the Company’s control, including, among other things: • actual or anticipated variations in quarterly results of operations; • changes in recommendations by securities analysts; • failure to meet analysts’ revenue or earnings estimates; • changes in ratings from national rating agencies on the securities in the Company’s investment portfolio; • operating and stock price performance of other companies that investors deem comparable to the Company; • news reports relating to trends, concerns and other issues in the financial services industry; • perceptions in the marketplace regarding the Company and/or its competitors; 26 • new technology used, or services offered, by competitors; • cybersecurity breaches; • actions by institutional shareholders; • significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving the Company or its competitors; • failure to integrate acquisitions or realize anticipated benefits from acquisitions; • changes in government regulations; • geopolitical conditions such as acts or threats of terrorism or military conflicts; • general market conditions, including real or anticipated changes in the strength of the Texas and Oklahoma economies; and • industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, presidential and congressional elections, interest rate changes, oil price volatility or credit losses.
Even the most well-protected information, networks, systems and facilities remain potentially vulnerable because attempted security breaches, particularly cyber-attacks 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.
Even the most well-protected information, networks, systems and facilities remain potentially vulnerable because attempted security incidents, particularly cyberattacks 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.
Commercial real estate markets have been impacted by the economic disruptions caused by the COVID-19 pandemic. The pandemic 16 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.
Commercial real estate markets continue to 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.
The Company’s loan portfolio, and specifically its energy lending portfolio, could be adversely affected by declines in the prices of oil and natural gas, as well as other factors. As of December 31, 2024, funded commitments to oil and gas production and service companies represented 2.5% of total loans, excluding Warehouse Purchase Program loans.
The Company’s loan portfolio, and specifically its energy lending portfolio, could be adversely affected by declines in the prices of oil and natural gas, as well as other factors. As of December 31, 2025, funded commitments to oil and gas production and service companies represented 2.0% of total loans, excluding Warehouse Purchase Program loans.
Increasing scrutiny and evolving expectations 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.
Expectations 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.
As of December 31, 2024, commercial real estate (including farmland and multifamily residential) and commercial loans comprised approximately 40.6% of the Company’s loan portfolio. In general, commercial real estate loans and commercial loans pose greater credit risks than do owner-occupied residential real estate loans. These types of loans are also typically larger than residential real estate loans.
As of December 31, 2025, commercial real estate (including farmland and multifamily residential) and commercial loans comprised approximately 40.1% of the Company’s loan portfolio. In general, commercial real estate loans and commercial loans pose greater credit risks than do owner-occupied residential real estate loans. These types of loans are also typically larger than residential real estate loans.
Banking and other financial services companies, such as the Company, rely on technology companies to provide information technology products and services necessary to support their day-to-day operations. Technology companies frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights.
The Company is subject to claims and litigation pertaining to intellectual property. Banking and other financial services companies, such as the Company, rely on technology companies to provide information technology products and services necessary to support their day-to-day operations. Technology companies frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights.
The Company’s efforts to maintain the security and integrity of its information systems and its measures to manage the risks of a security breach or disruption may not be effective, and attempted security breaches or disruptions could be successful or damaging. Breaches also may occur as a result of remote working arrangements.
The Company’s efforts to maintain the security and integrity of its information systems and its measures to manage the risks of a security incident or disruption may not be effective, and attempted security incidents or disruptions could be successful or damaging. Security incidents also may occur as a result of remote working arrangements.
The Company may be adversely affected by weaknesses in the commercial real estate market. As of December 31, 2024, commercial real estate loans (including multifamily residential and excluding farmland) comprised approximately 26.2% of the Company’s loan portfolio.
The Company may be adversely affected by weaknesses in the commercial real estate market. As of December 31, 2025, commercial real estate loans (including multifamily residential and excluding farmland) comprised approximately 26.5% of the Company’s loan portfolio.
Furthermore, the occurrence of any such event in the future could have a material adverse effect on the Company’s business, which, in turn, could have a material adverse effect on the Company’s financial condition and results of operations. 24 Climate change could have a material negative impact on the Company and its customers.
Furthermore, the occurrence of any such event in the future could have a material adverse effect on the Company’s business, which, in turn, could have a material adverse effect on the Company’s financial condition and results of operations. Climate change, including the regulatory response thereto, could have a material negative impact on the Company and its customers.
Acquisitions of financial institutions, such as the recent acquisitions of First Bancshares and Lone Star, 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.
Acquisitions of financial institutions, such as the recent acquisitions of Southwest, American, Lone Star and First Bancshares of Texas, Inc., and the 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.
Although the Company seeks to mitigate fraud risk and losses through continued investment in systems, resources, and controls, the Company’s efforts 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 its financial results or reputation.
Although the Company seeks to mitigate fraud risk and losses through continued investment in systems, resources, and controls, the Company’s efforts 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 its financial results or reputation. 22 The Company’s risk management framework may not be effective in identifying, managing or mitigating risks and/or losses to it.
Approximately 80.5% of the Company’s total loans as of December 31, 2024 consisted of loans included in the real estate loan portfolio, with 29.3% in commercial real estate (including farmland and multifamily residential), 38.3% in residential real estate (including home equity) and 12.9% in construction, land development and other land loans.
Approximately 80.0% of the Company’s total loans as of December 31, 2025, consisted of loans included in the real estate loan portfolio, with 29.5% in commercial real estate (including farmland and multifamily residential), 37.9% in residential real estate (including home equity) and 12.6% in construction, land development and other land loans.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Company’s financial condition and results of operations. Liquidity Risks Liquidity risk could impair the Company’s ability to fund operations and jeopardize its financial condition. Liquidity is essential to the Company’s business, and it monitors and manages its liquidity daily.
The remediation 17 costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Company’s financial condition and results of operations. Liquidity Risks Liquidity risk could impair the Company’s ability to fund operations and jeopardize its financial condition.
These technological advances increase cybersecurity risk. The Company’s programs that are intended to prevent or limit the effects of cybersecurity risk may not be sufficient to eliminate all unauthorized transactions or unauthorized access to customer information.
These technological advances increase cybersecurity risk. The Company’s programs that are intended to prevent or limit the effects of cybersecurity risk may not be sufficient to eliminate all unauthorized transactions or unauthorized access to customer information. The financial, reputational and regulatory impact of unauthorized transactions or unauthorized access to customer information could be significant.
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 decrease following three cuts to the Federal Funds rate by the Federal Reserve Board in 2024 in response to declining inflation.
Beginning early in 2022, in response to growing signs of inflation, the Federal Reserve Board increased interest rates rapidly; however, interest rates have decreased following three cuts to the Federal Funds rate by the Federal Reserve Board in 2024, and an additional three cuts in 2025 in response to declining inflation.
Reputation risk, or the risk to earnings and capital from negative public opinion, is inherent in the Company’s business.
General Risks Negative publicity could damage the Company’s reputation and business. Reputation risk, or the risk to earnings and capital from negative public opinion, is inherent in the Company’s business.
Changes in trade policies by the United States or other countries, such as tariffs or retaliatory tariffs, 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.
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.
An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on the Company’s liquidity.
Liquidity is essential to the Company’s business, and it monitors and manages its liquidity daily. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on the Company’s liquidity.
The Company could face increased scrutiny or be viewed as higher risk by regulators or investors, which could have a material adverse effect on the Company’s business, financial condition, and results of operations. 23 The Company is subject to claims and litigation pertaining to intellectual property.
Any of the foregoing could have a material adverse effect on the Company’s business, financial condition and results of operations. The Company could face increased scrutiny or be viewed as higher risk by regulators or investors, which could have a material adverse effect on the Company’s business, financial condition, and results of operations.
Any failure, interruption or breach in security of these systems, whether caused by physical damage, internal or external threat actors, viruses or other malware, 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.
Any failure, interruption or compromise 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.
Additionally, while investors and shareholder advocates continued to place emphasis on how corporations address Environmental, Social and Governance (“ESG”) issues in their business strategy when making investment decisions and when developing their proxy recommendations, the Executive Orders issued by the President of the United States in early 2025 may impact the ESG initiatives of investors and the Company’s decisions with respect to ESG.
Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs. 25 Additionally, while investors and shareholder advocates continued to place emphasis on how corporations address Environmental, Social and Governance (“ESG”) issues in their business strategy when making investment decisions and when developing their proxy recommendations, the Executive Orders issued by the President of the United States in early 2025 may impact the ESG initiatives of investors and the Company’s decisions with respect to ESG.
An interruption in or breach 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.
An interruption in the Company’s information systems or compromise 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.
Although the Company has not recorded any such impairment charges since it initially recorded the goodwill, the Company’s future evaluations of goodwill could result in findings of impairment and related write-downs, which may have a material adverse effect on its financial condition and results of operations. 20 Operational Risks The Company’s accounting estimates and risk management processes rely on analytical and forecasting models and tools that may prove to be inaccurate.
Although the Company has not recorded any such impairment charges since it initially recorded the goodwill, the Company’s future evaluations of goodwill could result in findings of impairment and related write-downs, which may have a material adverse effect on its financial condition and results of operations.
To the extent that the Company is unable to find suitable acquisition candidates, an important component of its growth strategy may be lost.
The market for acquisitions remains highly competitive, and the Company may be unable to find acquisition candidates in the future that fit its acquisition and growth strategy. To the extent that the Company is unable to find suitable acquisition candidates, an important component of its growth strategy may be lost.
If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, the Company’s net interest income, and therefore earnings, could be adversely affected.
Rapid changes in interest rates may make it difficult for the Company to balance its loan and deposit portfolios. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, the Company’s net interest income, and therefore earnings, could be adversely affected.
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.
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.Regulatory approvals could 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.
Breaches of the Company’s or vendors’ systems, thefts of data and other breaches 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, any of which could have a material adverse effect on the Company’s results of operations, financial condition and cash flows.
Compromises of the Company’s or vendors’ systems, thefts of data and other incidents 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.
The Company’s risk management framework may not be effective in identifying, managing or mitigating risks and/or losses to it. The Company has implemented a risk management framework to identify and manage its risk exposure, which is reviewed and overseen by the Company’s Risk Committee.
The Company has implemented a risk management framework to identify and manage its risk exposure, which is reviewed and overseen by the Company’s Risk Committee.
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. Rapid changes in interest rates may make it difficult for the Company to balance its loan and deposit portfolios.
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.
The financial, reputational and regulatory impact of unauthorized transactions or unauthorized access to customer information could be significant. 21 The Company’s operations rely on external vendors, which may fail to provide adequate services. The Company relies on certain external vendors to provide products and services necessary to maintain its day-to-day operations.
The Company’s operations rely on external vendors, which may fail to provide adequate services. The Company relies on certain external vendors to provide products and services necessary to maintain its day-to-day operations.
Goodwill represents the amount by which the acquisition cost exceeds the fair value of net assets the Company acquired in the purchase of another financial institution. The Company reviews goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate the carrying value of the asset might be impaired.
The Company reviews goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate the carrying value of the asset might be impaired. 20 The Company determines impairment by comparing the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill.
Any such adjustments are reflected in the Company’s results of operations in the periods in which they become known. At December 31, 2024, the Company’s goodwill totaled $3.50 billion.
If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. Any such adjustments are reflected in the Company’s results of operations in the periods in which they become known. At December 31, 2025, the Company’s goodwill totaled $3.50 billion.
Removed
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.
Added
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.
Removed
The process for obtaining these required 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.
Added
If heightened inflation continues, sustained higher interest rates by the FOMC may be needed, which could push down asset prices and weaken economic activity.
Removed
The Company determines impairment by comparing the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.
Added
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.
Removed
Any of the foregoing could have a material adverse effect on the Company’s business, financial condition and results of operations.
Added
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.
Removed
Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs.
Added
The Company is subject to risks related to the pending acquisition of Stellar and the recent acquisitions of American and Southwest. The Company recently completed the acquisitions of American and Southwest and the acquisition of Stellar is pending.
Added
The completed and pending acquisitions involve strategic and operational risks and uncertainties, including the risk that the Stellar acquisition will not close; the diversion of management's time on issues related to the acquisitions and integration rather than ongoing business concerns; 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 and increased 19 competitive pressures and solicitations of customers by competitors.
Added
Goodwill represents the amount by which the acquisition cost exceeds the fair value of net assets the Company acquired in the purchase of another financial institution.
Added
Operational Risks The Company’s accounting estimates and risk management processes rely on analytical and forecasting models and tools that may prove to be inaccurate.
Added
The Company relies heavily on communications and information systems to conduct its business and store sensitive data, including those maintained with the Company’s service providers and vendors.
Added
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.
Added
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.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeDespite the Company’s efforts, there can be no assurance that its cybersecurity risk management processes and measures described will be fully implemented, complied with, or effective in protecting its systems and information. The Company faces risks from certain cybersecurity threats that, if realized, are reasonably likely to materially affect its business strategy, results of operations or financial condition.
Biggest changeTo date, the Company has not experienced a cybersecurity incident that has materially impacted its business strategy, results of operations, or financial condition. Despite the Company’s efforts, there can be no assurance that its cybersecurity risk management processes and measures described will be fully implemented, complied with, or effective in protecting its systems and information.
In addition to the STOC, the management-level Operations Committee and the Enterprise Risk Management Committee (“ERM Committee”) focus on and provide oversight of the information security program. The ERM Committee reviews and, as appropriate, approves the broad objectives, strategies and policies governing the Company’s protection of data assets and information 28 security framework.
In addition to the STOC, the management-level Operations Committee and the Enterprise Risk Management Committee (“ERM Committee”) focus on and provide oversight of the information security program. The ERM Committee reviews and, as appropriate, approves the broad objectives, strategies and policies governing the Company’s protection of data assets and information security framework.
The Chief Information Security Officer (CISO), who reports directly to the Chief Risk Officer, and the Chief Information Officer (CIO), who reports directly to the Director of Corporate Strategy, along with key members of their teams, regularly collaborate with peer banks and industry groups to discuss cybersecurity trends, issues and best practices.
The Chief Information Security Officer (“CISO”), who reports directly to the Chief Risk Officer (“CRO”), and the Chief Information Officer (“CIO”), who reports directly to the Director of Corporate Strategy, along with key members of their teams, regularly collaborate with peer banks and industry groups to discuss cybersecurity trends, issues and best practices.
The Company maintains an Information Security Incident Response Policy (“Incident Response Policy”) and related procedures that provide a documented framework for responding to actual or potential cybersecurity incidents, including timely escalation of incidents to the Crisis Management Team and notification to the appropriate regulatory and governmental authorities.
The Company maintains an Information Security Incident Response Policy (“Incident Response Policy”) and related procedures that provide a documented framework for responding to actual or potential cybersecurity incidents, including timely escalation of incidents to the Crisis Management Team, the Chief Executive Officer and/or the Company’s and Bank’s Board of Directors (as appropriate), and notification to the appropriate regulatory and governmental authorities.
The Strategic Technology Oversight Committee (“STOC”) of the Board has primary responsibility for overseeing the technology program, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks.
Governance The Bank’s Board of Directors is responsible for overseeing the risks associated with cybersecurity threats. The Strategic Technology Oversight Committee (“STOC”) of the Board has primary responsibility for overseeing the technology program, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks.
As needed, the notification may include the CEO and/or the Company’s and Bank’s Board of Directors. The Incident Response Policy and related procedures are coordinated through the Chief Risk Officer and key members of management, including but not limited to representatives from the information security, information technology and legal teams that are embedded into the procedures by design.
The Incident Response Policy and related procedures are coordinated through the CRO and key members of management, including but not limited to representatives from the information security, information technology and legal teams that are embedded into the procedures by design. The Incident Response Policy facilitates coordination across multiple parts of the organization and is evaluated at least annually.
The responsibilities of the information security department include threat detection and prevention, cybersecurity risk assessment, a portion of defense operations, incident management, vulnerability assessment, threat intelligence, and third-party risk management. The department also provides security awareness training. The Company’s information technology department works together with information security in defense operations and is responsible for business resilience, including identity management.
The responsibilities of the information security department include threat detection and prevention, cybersecurity risk assessment, a portion of defense operations, incident management, vulnerability assessment, threat intelligence, and security awareness training. The department also supports the Company’s Third-Party Risk Management program by providing subject-matter expertise and oversight with respect to cybersecurity risks associated with third-party service providers.
See Item 1A. “Risk Factors” in this document for further discussion of the risks associated with an interruption or breach in the Company’s information systems or infrastructure. Governance The Bank’s Board of Directors is responsible for overseeing the risks associated with cybersecurity threats.
The Company faces risks from certain cybersecurity threats that, if realized, are reasonably likely to materially affect its business 28 strategy, results of operations or financial condition. See Item 1A. “Risk Factors” in this document for further discussion of the risks associated with an interruption or breach in the Company’s information systems or infrastructure.
Removed
The Incident Response Policy facilitates coordination across multiple parts of the organization and is evaluated at least annually. To date, the Company has not experienced a cybersecurity incident that has materially impacted its business strategy, results of operations, or financial condition.
Added
The Company’s information technology department works together with information security in defense operations and is responsible for business resilience, including identity management. The Company’s CISO has over 20 years of experience in information technology, cybersecurity, and information security for financial institutions and other businesses.
Added
The CISO is a Certified Information Systems Security Professional, a Certified Cloud Security Professional, and a Certified Information Security Manager, and serves as a member of cybersecurity advisory councils. He holds a certificate from the Chief Information Security Certificate Program, Cybersecurity at Carnegie Mellon University – Heinz College of Information Systems and Public Policy.

Item 2. Properties

Properties — owned and leased real estate

4 edited+0 added−0 removed1 unchanged
Biggest changeThe following table sets forth specific information regarding the banking centers located in each of the Company’s geographical market areas at December 31, 2024: Geographical Area Number of Banking Centers Number of Leased Banking Centers Deposits at December 31, 2024 (dollars in thousands) Bryan/College Station area 15 — $ 1,627,833 Houston area 65 13 7,553,823 Central Texas area 31 2 2,153,902 Dallas/Fort Worth area 62 22 5,907,175 East Texas area 22 — 1,127,708 West Texas area 44 10 5,348,163 South Texas area 30 3 3,068,316 Central Oklahoma area 6 1 589,115 Tulsa Oklahoma area 8 2 1,005,303 283 53 $ 28,381,338 ITE M 3.
Biggest changeThe following table sets forth specific information regarding the banking centers located in each of the Company’s geographical market areas at December 31, 2025: Geographical Area Number of Banking Centers Number of Leased Banking Centers Deposits at December 31, 2025 (dollars in thousands) Bryan/College Station area 15 — $ 1,663,547 Houston area 62 13 7,168,130 Central Texas area 31 2 2,156,526 Dallas/Fort Worth area 61 20 5,963,941 East Texas area 22 — 1,118,280 West Texas area 45 9 5,150,871 South Texas area 33 3 3,796,799 Central Oklahoma area 6 1 553,115 Tulsa Oklahoma area 8 2 911,275 283 50 $ 28,482,484 29 ITE M 3.
ITEM 2. PROPERTIES As of December 31, 2024, the Company conducted business at 283 full-service banking centers. The Company’s principal executive office is located at Prosperity Bank Plaza, 4295 San Felipe, Houston, Texas. The Company also owns or leases other facilities in which its banking centers are located as listed below by geographical market area.
ITEM 2. PROPERTIES As of December 31, 2025, the Company conducted business at 283 full-service banking centers. The Company’s principal executive office is located at Prosperity Bank Plaza, 4295 San Felipe, Houston, Texas. The Company also owns or leases other facilities in which its banking centers are located as listed below by geographical market area.
The Company also owns or leases various corporate and operations offices. The expiration dates of the leases range from 2025 to 2032 and do not include renewal periods which may be available at the Company’s option.
The Company also owns or leases various corporate and operations offices. The expiration dates of the leases range from 2026 to 2033 and do not include renewal periods which may be available at the Company’s option.
MINE SAFETY DISCLOSURES Not applicable. 29 PART II.
MINE SAFETY DISCLOSURES Not applicable. 30 PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

11 edited+0 added−3 removed7 unchanged
Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers On January 16, 2024, the Company announced a stock repurchase program under which up to 5%, or approximately 4.7 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 16, 2025, at the discretion of management.
Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers The following table details the Company’s repurchases of shares of its common stock during the three months ended December 31, 2025: Period Total Number of Shares Purchased Weighted Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Program Maximum Number of Shares That May Yet Be Purchased Under the Plan at the End of the Period (1) October 1 - October 31, 2025 — — — 4,464,336 November 1 - November 30, 2025 1,819,342 $ 66.75 1,819,342 2,644,994 December 1 - December 31, 2025 225,000 $ 69.95 225,000 2,419,994 Total 2,044,342 $ 67.10 2,044,342 (1) On January 21, 2025, the Company announced a stock repurchase program under which up to 5%, or approximately 4.8 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 21, 2026, at the discretion of management.
Under the 2025 stock repurchase program, the Company may repurchase shares from time to time at prevailing market prices, through open-market purchases or privately negotiated transactions, depending upon market conditions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition—Share Repurchases” for additional information.
Under the 2026 stock repurchase program, the Company may repurchase shares from time to time at prevailing market prices, through open-market purchases or privately negotiated transactions, depending upon market conditions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition—Share Repurchases” for additional information.
The historical stock price performance for the Company’s common stock shown on the graph below is not necessarily indicative of future stock performance. * $100 invested on 12/31/19 in stock or index, including reinvestment of dividends.
The historical stock price performance for the Company’s common stock shown on the graph below is not necessarily indicative of future stock performance. * $100 invested on 12/31/20 in stock or index, including reinvestment of dividends.
The cash dividends declared per share by quarter (and paid on the first business day of the subsequent quarter) for the Company’s last two fiscal years were as follows: 2024 2023 Fourth Quarter $ 0.58 $ 0.56 Third Quarter 0.56 0.55 Second Quarter 0.56 0.55 First Quarter 0.56 0.55 Recent Sales of Unregistered Securities None. 30 Securities Authorized for Issuance under Equity Compensation Plans The following table provides information as of December 31, 2024 regarding the Company’s equity compensation plan under which the Company’s equity securities are authorized for issuance.
The cash dividends declared per share by quarter (and paid on the first business day of the subsequent quarter) for the Company’s last two fiscal years were as follows: 2025 2024 Fourth Quarter $ 0.60 $ 0.58 Third Quarter 0.58 0.56 Second Quarter 0.58 0.56 First Quarter 0.58 0.56 Recent Sales of Unregistered Securities None. 31 Securities Authorized for Issuance under Equity Compensation Plans The following table provides information as of December 31, 2025, regarding the Company’s equity compensation plan under which the Company’s equity securities are authorized for issuance.
As of December 31, 2024, the Company had shares of restricted stock outstanding under its 2020 Stock Incentive Plan, which was approved by the Company’s shareholders: Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Plan Category (a) (b) (c) Equity compensation plans approved by security holders — $ — 1,508,583 (1) Equity compensation plans not approved by security holders — — — — $ — 1,508,583 (1) All of these awards are available under the Company’s 2020 Stock Incentive Plan.
As of December 31, 2025, the Company had shares of restricted stock outstanding under its 2020 Stock Incentive Plan, which was approved by the Company’s shareholders: Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Plan Category (a) (b) (c) Equity compensation plans approved by security holders — $ — 1,382,031 (1) Equity compensation plans not approved by security holders — — — — $ — 1,382,031 (1) All of these awards are available under the Company’s 2020 Stock Incentive Plan.
Dividend reinvestment has been assumed. The Performance Graph assumes $100 invested on December 31, 2019 in the Company’s common stock, the S&P 500 Total Return Index, the Nasdaq Bank Index and the KBW Nasdaq Regional Banking Index.
Dividend reinvestment has been assumed. The Performance Graph assumes $100 invested on December 31, 2020 in the Company’s common stock, the S&P 500 Total Return Index and the KBW Nasdaq Regional Banking Index.
Although the Company has declared dividends on its common stock since 1994, and paid quarterly dividends aggregating $2.26 per share for 2024 and $2.21 per share for 2023, the Company could discontinue payment of dividends in the future.
Although the Company has declared dividends on its common stock since 1994, and paid quarterly dividends aggregating $2.34 per share for 2025 and $2.26 per share for 2024, the Company could discontinue payment of dividends in the future.
On January 21, 2025, the Company announced a stock repurchase program under which up to 5%, or approximately 4.8 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 21, 2026, at the discretion of management.
On January 26, 2026, the Company announced a stock repurchase program under which up to 5%, or approximately 4.87 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 26, 2027, at the discretion of management.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHA REHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Information The Company’s common stock is listed on the New York Stock Exchange under the symbol “PB.” As of February 24, 2025, there were 95,262,717 shares outstanding and 4,515 shareholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHA REHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Information The Company’s common stock is listed on the New York Stock Exchange under the symbol “PB.” As of February 23, 2026, there were 101,581,522 shares outstanding and 4,894 shareholders of record.
A copy of the Company’s Inside Information and Insider Trading Policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K. 31 Performance Graph The following Performance Graph compares the cumulative total shareholder return on the Company’s common stock for the period beginning at the close of trading on December 31, 2019 to December 31, 2024, with the cumulative total return of the S&P 500 Total Return Index, the Nasdaq Bank Index and the KBW Nasdaq Regional Banking Index for the same period.
The Company believes that its Inside Information and Insider Trading Policy is reasonably designed to promote compliance with insider trading laws, rules and regulations and listing standards applicable to the Company. 32 Performance Graph The following Performance Graph compares the cumulative total shareholder return on the Company’s common stock for the period beginning at the close of trading on December 31, 2020 to December 31, 2025, with the cumulative total return of the S&P 500 Total Return Index and the KBW Nasdaq Regional Banking Index for the same period.
Fiscal year ended December 31. 12/19 12/20 12/21 12/22 12/23 12/24 Prosperity Bancshares, Inc. $ 100.00 $ 99.59 $ 106.69 $ 110.55 $ 106.79 $ 122.89 S&P 500 100.00 118.40 152.39 124.79 157.59 197.02 NASDAQ Bank 100.00 90.81 128.28 107.54 114.99 141.59 KBW NASDAQ Regional Banking 100.00 91.29 124.74 116.10 115.63 130.90 Copyright© 2025 Standard & Poor's, a division of S&P Global.
Fiscal year ended December 31. 12/20 12/21 12/22 12/23 12/24 12/25 Prosperity Bancshares, Inc. $ 100.00 $ 107.13 $ 111.01 $ 107.23 $ 123.40 $ 117.06 S&P 500 100.00 128.71 105.40 133.10 166.40 196.16 KBW NASDAQ Regional Banking 100.00 136.64 127.17 126.66 143.38 152.71 Copyright© 2026 Standard & Poor's, a division of S&P Global. All rights reserved.
Removed
Under the 2024 stock repurchase program, the Company repurchased approximately 1.2 million shares of its common stock at an average weighted price of $60.35 per share during the year ended December 31, 2024.
Removed
The Company believes that its Inside Information and Insider Trading Policy is reasonably designed to promote compliance with insider trading laws, rules and regulations and listing standards applicable to the Company.
Removed
All rights reserved. ITEM 6. [RESERVED ] 32

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 32 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Overview 34 Recent Acquisitions 35 Critical Accounting Estimates 36 Results of Operations 37 Financial Condition 44 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 68 Item 8. Financial Statements and Supplementary Data 68
Biggest changeItem 6. [Reserved] 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Overview 36 Recent Acquisition 36 Subsequent Events 37 Critical Accounting Estimates 37 Results of Operations 39 Financial Condition 45 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 69 Item 8. Financial Statements and Supplementary Data 69

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

179 edited+25 added−32 removed181 unchanged
Biggest changeThese possible events or factors include, but are not limited to: • changes in the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations resulting in, among other things, a deterioration in credit quality or reduced demand for credit, including the result and effect on the Company’s loan portfolio and allowance for credit losses; • adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, the Company’s stock price, liquidity and regulatory responses to these developments (including increases in the cost of the Company’s deposit insurance assessments); • the Company’s ability to effectively manage its liquidity risk and the availability of capital and funding; • volatility in interest rates and market prices, which could reduce the Company’s net interest margins, asset valuations and expense expectations; • prolonged periods of high inflation and their effects on the Company’s business, profitability and stock price; • changes in the levels of loan prepayments and the resulting effects on the value of the Company’s loan portfolio; • changes in local economic and business conditions, including fluctuations in the price of oil, natural gas and other commodities, which adversely affect the Company’s customers and their ability to transact profitable business with the company, including the ability of the Company’s borrowers to repay their loans according to their terms or a change in the value of the related collateral; • the potential impacts of climate change; • increased competition for deposits and loans adversely affecting balances, rates and terms; • the timing, impact and other uncertainties of any future acquisitions and the Company’s ability to identify suitable future acquisition candidates, the success or failure in the integration of their operations, and the ability to enter new markets successfully and capitalize on growth opportunities; • the risk that the regulatory environment may not be conducive to or may prohibit the consummation of future mergers and/or business combinations, may increase the length of time and amount of resources required to consummate such transactions, and the potential to reduce anticipated benefits from such mergers or combinations; • the possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on the results of operations; • increased credit risk in the Company’s assets and increased operating risk caused by a material change in commercial, consumer and/or real estate loans as a percentage of the total loan portfolio; • the concentration of the Company’s loan portfolio in loans collateralized by residential and commercial real estate; • the failure of assumptions underlying the establishment of and provisions made to the allowance for credit losses, including such assumptions related to potential or recent acquisitions; • changes in the availability of funds resulting in increased costs or reduced liquidity; • a deterioration or downgrade in the credit quality and credit agency ratings of the securities in the Company’s securities portfolio; • increased asset levels and changes in the composition of assets and the resulting impact on the Company’s capital levels and regulatory capital ratios; • the Company’s ability to acquire, operate and maintain cost effective and efficient systems without incurring unexpectedly difficult or expensive but necessary technological changes; 33 • the loss of senior management or operating personnel and the potential inability to hire qualified personnel at reasonable compensation levels; • government intervention in the U.S. financial system; • changes in statutes and government regulations or their interpretations applicable to financial holding companies and the Company’s present and future banking and other subsidiaries, including changes in tax requirements and tax rates; • the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; • the Company’s ability to identify and address cybersecurity risks such as data security breaches, malware, “denial of service” attacks, “hacking”, and identity theft, a failure of which could disrupt business and result in significant losses or adverse effects to the Company’s reputation; • poor performance by, or breach of the operational or security systems of, third-party vendors and other service providers; • risks related to the use of new technologies, including artificial intelligence and machine learning; • exposure to potential losses in the event of fraud and/or theft, or in the event that a third-party vendor, obligor, or business partner fails to pay amounts due to the Company under that relationship or under any other arrangement; • the failure of analytical and forecasting models and tools used by the Company to estimate expected credit losses and to measure the fair value of financial instruments; • additional risks from new lines of businesses or new products and services; • risks related to potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings or enforcement actions, including those related to cybersecurity breaches, intellectual property or fiduciary responsibilities; • the failure of the Company’s enterprise risk management framework to identify or address risks adequately; • potential risk of environmental liability associated with lending activities; • acts of terrorism, an outbreak of hostilities, or other international or domestic calamities, civil unrest, insurrections, other political, economic or diplomatic developments, including those caused by public health issues, outbreaks of diseases and pandemics, weather or other acts of God and other matters beyond the Company’s control; and • other risks and uncertainties described in this Annual Report on Form 10-K or in the Company’s other reports and documents filed with the Securities and Exchange Commission.
Biggest changeThese possible events or factors include, but are not limited to: • changes in the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations resulting in, among other things, a deterioration in credit quality or reduced demand for credit, including the result and effect on the Company’s loan portfolio and allowance for credit losses; • adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, the Company’s stock price, liquidity and regulatory responses to these developments (including increases in the cost of the Company’s deposit insurance assessments); • the Company’s ability to effectively manage its liquidity risk and the availability of capital and funding; • volatility in interest rates and market prices, which could reduce the Company’s net interest margins, asset valuations and expense expectations; • prolonged periods of high inflation and their effects on the Company’s business, profitability and stock price; • changes in the levels of loan prepayments and the resulting effects on the value of the Company’s loan portfolio; • changes in local economic and business conditions, including fluctuations in the price of oil, natural gas and other commodities, which adversely affect the Company’s customers and their ability to transact profitable business with the Company, including the ability of the Company’s borrowers to repay their loans according to their terms or a change in the value of the related collateral; • the potential impacts of climate change; • increased competition for deposits and loans adversely affecting balances, rates and terms; • the risks relating to the pending acquisition of Stellar Bancorp, Inc. and the recent acquisitions of American and Southwest including, without limitation: the risk that the Stellar acquisition will not close; the diversion of management's time on issues related to the acquisitions and integration; unexpected transaction costs, including the costs of integrating operations; the risk that the businesses will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; the potential failure to fully or timely realize expected revenues and revenue synergies; the risk of deposit and customer attrition; regulatory enforcement and litigation risk; unexpected operating and other costs; the risk of customer and employee loss and business disruptions; increased competitive pressures and solicitations of customers by competitors; • 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; • the risk that the regulatory environment may not be conducive to or may prohibit the consummation of future mergers and/or business combinations, may increase the length of time and amount of resources required to consummate such transactions, and the potential to reduce anticipated benefits from such mergers or combinations; • the possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on the results of operations; • increased credit risk in the Company’s assets and increased operating risk caused by a material change in commercial, consumer and/or real estate loans as a percentage of the total loan portfolio; • the concentration of the Company’s loan portfolio in loans collateralized by residential and commercial real estate; • the failure of assumptions underlying the establishment of and provisions made to the allowance for credit losses, including such assumptions related to potential or recent acquisitions; 34 • changes in the availability of funds resulting in increased costs or reduced liquidity; • a deterioration or downgrade in the credit quality and credit agency ratings of the securities in the Company’s securities portfolio; • increased asset levels and changes in the composition of assets and the resulting impact on the Company’s capital levels and regulatory capital ratios; • the Company’s ability to acquire, operate and maintain cost effective and efficient systems without incurring unexpectedly difficult or expensive but necessary technological changes; • the loss of senior management or operating personnel and the potential inability to hire qualified personnel at reasonable compensation levels; • government intervention in the U.S. financial system; • changes in statutes and government regulations or their interpretations applicable to financial holding companies and the Company’s present and future banking and other subsidiaries, including changes in tax requirements and tax rates; • the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters; • the Company’s ability to identify and address cybersecurity risks such as data security breaches, malware, “denial of service” attacks, “hacking”, and identity theft, a failure of which could disrupt business and result in significant losses or adverse effects to the Company’s reputation; • poor performance by, or breach of the operational or security systems of, third-party vendors and other service providers; • risks related to the use of new technologies, including artificial intelligence and machine learning; • exposure to potential losses in the event of fraud and/or theft, or in the event that a third-party vendor, obligor, or business partner fails to pay amounts due to the Company under that relationship or under any other arrangement; • the failure of analytical and forecasting models and tools used by the Company to estimate expected credit losses and to measure the fair value of financial instruments; • additional risks from new lines of businesses or new products and services; • risks related to potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings or enforcement actions, including those related to cybersecurity breaches, intellectual property or fiduciary responsibilities; • the failure of the Company’s enterprise risk management framework to identify or address risks adequately; • potential risk of environmental liability associated with lending activities; • changes in trade policies by the United States or other countries, such as the imposition of tariffs or retaliatory tariffs or other trade barriers; • acts of terrorism, an outbreak of hostilities, or other international or domestic calamities, civil unrest, insurrections, other political, economic or diplomatic developments, including those caused by public health issues, outbreaks of diseases and pandemics, weather or other acts of God and other matters beyond the Company’s control; and • other risks and uncertainties described in this Annual Report on Form 10-K or in the Company’s other reports and documents filed with the Securities and Exchange Commission.
The Company repurchased approximately 1.2 million shares of its common stock at an average weighted price of $60.35 per share during the year ended December 31, 2024. Contractual Obligations The Company’s contractual obligations and other commitments to make future payments (other than deposit obligations and securities sold under repurchase agreements) as of December 31, 2024 are summarized below.
The Company repurchased approximately 1.2 million shares of its common stock at an average weighted price of $60.35 per share during the year ended December 31, 2024. Contractual Obligations The Company’s contractual obligations and other commitments to make future payments (other than deposit obligations and securities sold under repurchase agreements) as of December 31, 2025, are summarized below.
This section should be read in conjunction with the Company’s consolidated financial statements and accompanying notes and other detailed information appearing elsewhere in this Annual Report on Form 10‑K. Overv iew The Company generates the majority of its revenues from interest income on loans, service charges and fees on customer accounts and income from investment in securities.
This section should be read in conjunction with the Company’s consolidated 35 financial statements and accompanying notes and other detailed information appearing elsewhere in this Annual Report on Form 10‑K. Overv iew The Company generates the majority of its revenues from interest income on loans, service charges and fees on customer accounts and income from investment in securities.
The Company 37 had $35.2 million of total outstanding net accretable discounts on Non-PCD loans and PCD loans at December 31, 2024. Interest income on securities was $246.7 million during 2024, a decrease of $36.6 million or 12.9% compared with 2023 due primarily to a decrease in the average balances on investment securities.
The Company had $35.2 million of total outstanding net accretable discounts on Non-PCD loans and PCD loans at December 31, 2024. Interest income on securities was $246.7 million during 2024, a decrease of $36.6 million or 12.9% compared with 2023, primarily due to a decrease in the average balances on investment securities.
In private-label CMOs, losses on underlying mortgages are directed to the most junior of all classes and then to the 59 classes above in order of increasing seniority, which means that the senior classes have enough credit protection to be given the highest credit rating by the rating agencies. Visa Class B-1 Stock Exchange .
In private-label CMOs, losses on underlying mortgages are directed to the most junior of all classes and then to the classes above in order of increasing seniority, which means that the senior classes have enough credit protection to be given the highest credit rating by the rating agencies. Visa Class B-1 Stock Exchange .
This assumption is incorporated into the simulation model and is generally not fully reflected in a gap analysis. The assumptions incorporated into the model are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates 62 on net interest income.
This assumption is incorporated into the simulation model and is generally not fully reflected in a gap analysis. The assumptions incorporated into the model are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income.
The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities impact net interest income and margin. 34 Three principal components of the Company’s growth strategy are internal growth, efficient operations and acquisitions, including strategic merger transactions. The Company focuses on continual internal growth.
The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities impact net interest income and margin. Three principal components of the Company’s growth strategy are internal growth, efficient operations and acquisitions, including strategic merger transactions. The Company focuses on continual internal growth.
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. 48 With respect to potential problem loans, an evaluation of borrower 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 on loans.
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. 49 With respect to potential problem loans, an evaluation of borrower 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 on loans.
Interest income was $1.62 billion in 2024, an increase of $179.2 million or 12.4% compared with 2023. Interest income on loans was $1.31 billion for 2024, an increase of $164.2 million or 14.3% compared with 2023, primarily due an increase in the average balances and average rates on loans.
Interest income was $1.62 billion in 2024, an increase of $179.2 million or 12.4% compared with 2023. Interest income on loans was $1.31 billion for 2024, an increase of $164.2 million or 14.3% compared with 2023, primarily due to an increase in the average balances and average rates on loans.
Acquired loans with a fair value discount or premium at the date of the business combination that remained at the reporting date are referred to as “fair-valued acquired loans.” All fair-valued acquired loans are further categorized into “PCD Loans” and “Non-PCD loans.” Acquired loans with evidence of more than insignificant credit quality deterioration as of the acquisition date when compared to the origination date are classified as PCD loans. 44 The following tables summarize the Company’s originated and acquired loan portfolios broken out into originated loans, re-underwritten acquired loans, Non-PCD loans and PCD loans as of the dates indicated.
Acquired loans with a fair value discount or premium at the date of the business combination that remained at the reporting date are referred to as “fair-valued acquired loans.” All fair-valued acquired loans are further categorized into “PCD Loans” and “Non-PCD loans.” Acquired loans with evidence of more than insignificant credit quality deterioration as of the acquisition date when compared to the origination date are classified as PCD loans. 45 The following tables summarize the Company’s originated and acquired loan portfolios broken out into originated loans, re-underwritten acquired loans, Non-PCD loans and PCD loans as of the dates indicated.
Lone Star Bank 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.
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.
Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a 61 loss of future net interest income, a loss of current fair market values, or both.
Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income, a loss of current fair market values, or both.
A deterioration in the credit quality of the loan portfolio in the current period would increase the historical lifetime loss rate to be applied in future periods, just as an improvement in credit quality would decrease the historical lifetime loss rate. 52 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.
A deterioration in the credit quality of the loan portfolio in the current period would increase the historical lifetime loss rate to be applied in future periods, just as an improvement in credit quality would decrease the historical lifetime loss rate. 53 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.
If interest rates begin to fall, prepayments may increase, thereby shortening the estimated life of this security. At December 31, 2024 and 2023, 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.
If interest rates begin to fall, prepayments may increase, thereby shortening the estimated life of this security. At December 31, 2025 and 2024, 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.
Loans to borrowers with aggregate debt relationships above $5.0 million are evaluated and acted upon by an officers’ loan committee that meets weekly. 45 Commercial and Industrial Loans . In nearly all cases, the Company’s commercial loans are made in the Company’s market areas and are underwritten based on the borrower’s ability to service the debt from income.
Loans to borrowers with aggregate debt relationships above $5.0 million are evaluated and acted upon by an officers’ loan committee that meets weekly. 46 Commercial and Industrial Loans . In nearly all cases, the Company’s commercial loans are made in the Company’s market areas and are underwritten based on the borrower’s ability to service the debt from income.
The Company’s net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as a “volume change.” It is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits and other borrowed funds, referred to as a “rate change.” 2024 versus 2023 .
The Company’s net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as a “volume change.” It is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits and other borrowed funds, referred to as a “rate change.” 2025 versus 2024 .
Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements. As of December 31, 2024, the Company had no exposure to future cash requirements associated with known uncertainties or capital expenditures of a material nature.
Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements. As of December 31, 2025, the Company had no exposure to future cash requirements associated with known uncertainties or capital expenditures of a material nature.
As of December 31, 2024, 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.
As of December 31, 2025, 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.
Loans for which specific reserves are provided are excluded from the general valuation allowance described below. 51 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.
Loans for which specific reserves are provided are excluded from the general valuation allowance described below. 52 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.
Share Repurchases On January 21, 2025, the Company announced a stock repurchase program under which the Company could repurchase up to 5%, or approximately 4.8 million shares, of its outstanding common stock over a one-year period expiring on January 21, 2026, at the discretion of management.
On January 21, 2025, the Company announced a stock repurchase program under which the Company could repurchase up to 5%, or approximately 4.8 million shares, of its outstanding common stock over a one-year period expiring on January 21, 2026, at the discretion of management.
The allowance must reflect changes in the balance of loans subject to the allowance methodology, as well as the estimated lifetime losses associated with those loans. 53 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 allowance must reflect changes in the balance of loans subject to the allowance methodology, as well as the estimated lifetime losses associated with those loans. 54 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.
(2) In order to make pretax income and resultant yields on tax-exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment has been computed using a federal income tax rate of 21% and other applicable effective tax rates for the years ended December 31, 2024, 2023 and 2022. 39 The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest-earning assets and interest-bearing liabilities and distinguishes between the changes attributable to changes in volume and changes in interest rates.
(2) In order to make pretax income and resultant yields on tax-exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment has been computed using a federal income tax rate of 21% and other applicable effective tax rates for the years ended December 31, 2025, 2024 and 2023. 40 The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest-earning assets and interest-bearing liabilities and distinguishes between the changes attributable to changes in volume and changes in interest rates.
Although the Company has underwriting procedures designed to 46 identify what it believes to be acceptable levels of risks in construction lending, these procedures may not prevent losses from the risks described above. Warehouse Purchase Program.
Although the Company has underwriting procedures designed to 47 identify what it believes to be acceptable levels of risks in construction lending, these procedures may not prevent losses from the risks described above. Warehouse Purchase Program.
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 December 31, 2024 are summarized below.
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 December 31, 2025, are summarized below.
Based on the Company’s annual goodwill impairment test as of October 1, 2024, management does not believe any of its goodwill is impaired as of December 31, 2024, because the fair value of the Company’s equity exceeded its carrying value.
Based on the Company’s annual goodwill impairment test as of October 1, 2025, management does not believe any of its goodwill is impaired as of December 31, 2025, because the fair value of the Company’s equity exceeded its carrying value.
The Company uses its incremental collateralized borrowing rate to determine the present value of lease payments. Short-term leases and leases with variable lease costs are immaterial and the Company has one sublease arrangement. Sublease income for the years ended December 31, 2024, 2023 and 2022 was $3.4 million, $3.1 million and $3.2 million, respectively.
The Company uses its incremental collateralized borrowing rate to determine the present value of lease payments. Short-term leases and leases with variable lease costs are immaterial and the Company has one sublease arrangement. Sublease income for the years ended December 31, 2025, 2024 and 2023 was $3.3 million, $3.4 million and $3.1 million, respectively.
If the estimated fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired. The Company had no intangible assets with indefinite useful lives at December 31, 2024.
If the estimated fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired. The Company had no intangible assets with indefinite useful lives at December 31, 2025.
The overall change in the average securities portfolio over the comparable periods was primarily due to maturities, principal amortization, prepayments and sales of investment securities during the year ended December 31, 2024.
The overall change in the average securities portfolio over the comparable periods was primarily due to maturities, principal amortization, prepayments and sales of investment securities during the year ended December 31, 2025.
(2) Communications expense includes telephone, data circuits, postage, and courier expenses. (3) Other real estate expense is net of rental income and gains and losses on sales of real estate. Salaries and Employee Benefits .
(2) Communications expense includes telephone, data circuits, postage, and courier expenses. (3) Net other real estate expense consists of rental expense, rental income and gains and losses on sales of real estate. Salaries and Employee Benefits .
As of December 31, 2024, these interest rate shocks consisted of instantaneous and parallel shifts in the yield curve moving from – 400 basis points to + 400 basis points, in 100 basis-point increments.
As of December 31, 2025, these interest rate shocks consisted of instantaneous and parallel shifts in the yield curve moving from – 400 basis points to + 400 basis points, in 100 basis-point increments.
The following table summarizes the simulated change in net interest income at the 12-month horizon, considering the balance sheet composition as of December 31, 2024 and 2023: Percent Change in Net Interest Income Change in Interest Rates (Basis Points) December 31, 2024 December 31, 2023 +200 1.0% (5.5)% +100 0.9% (2.4)% Base 0.0% 0.0% -100 (2.3)% 3.1% -200 (5.0)% 3.2% The Company continues to manage its asset sensitivity within the scope of its risk tolerances and changing market conditions.
The following table summarizes the simulated change in net interest income at the 12-month horizon, considering the balance sheet composition as of December 31, 2025 and 2024: Percent Change in Net Interest Income Change in Interest Rates (Basis Points) December 31, 2025 December 31, 2024 +200 3.5% 1.0% +100 2.2% 0.9% Base 0.0% 0.0% -100 (3.5)% (2.3)% -200 (7.0)% (5.0)% The Company continues to manage its asset sensitivity within the scope of its risk tolerances and changing market conditions.
At December 31, 2024, the allowance for credit losses on loans totaled $351.8 million or 1.59% of total loans, including acquired loans with discounts, an increase of $19.4 million or 5.8% compared to the allowance for credit losses on loans totaling $332.4 million or 1.57% of total loans, including acquired loans with discounts, at December 31, 2023, primarily due to the LSSB Merger.
At December 31, 2024, the allowance for credit losses on loans totaled $351.8 million or 1.59% of total loans, including acquired loans with discounts, an increase of $19.4 million or 5.8% compared to the allowance for credit losses on loans totaling $332.4 million or 1.57% of total loans, including acquired loans with discounts, at December 31, 2023, primarily due to the Lone Star Merger.
Federal Home Loan Bank Borrowings The Company’s future cash payments associated with its contractual obligations pursuant to its FHLB advances as of December 31, 2024 is summarized below. 1 year or less More than 1 year but less than 3 years 3 years or more but less than 5 years 5 years or more Total (Dollars in thousands) FHLB advances $ 3,200,000 $ — $ — $ — $ 3,200,000 Off-Balance Sheet Items 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.
Federal Home Loan Bank Borrowings The Company’s future cash payments associated with its contractual obligations pursuant to its FHLB advances as of December 31, 2025, is summarized below. 1 year or less More than 1 year but less than 3 years 3 years or more but less than 5 years 5 years or more Total (Dollars in thousands) FHLB advances $ 1,950,000 $ — $ — $ — $ 1,950,000 65 Off-Balance Sheet Items 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 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 absorb losses from any loan category, regardless of whether allocated to an originated loan or an acquired loan.
The allocation is made for analytical purposes and is not necessarily indicative of the categories in which future losses may occur. The total allowance is available to cover expected losses from any loan category, regardless of whether allocated to an originated loan or an acquired loan.
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, the Company had total borrowing capacity of $7.94 billion under this line.
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, 2025, the Company had total borrowing capacity of $7.58 billion under this line.
Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of December 31, 2024, management believes that there is no potential for credit losses on available for sale securities. Held to maturity securities .
Management does not believe any of 59 the securities are impaired due to reasons of credit quality. Accordingly, as of December 31, 2025, management believes that there is no potential for credit losses on available for sale securities. Held to maturity securities .
Furthermore, the application of various federal and state laws may limit the amount which can be recovered on such loans. 47 Loan Maturities .
Furthermore, the application of various federal and state laws may limit the amount which can be recovered on such loans. 48 Loan Maturities .
Allowance for Credit Losses — The allowance for credit losses is accounted for in accordance with FASB ASC Topic 326, “ Financial Instruments-Credit Losses” (“CECL”), which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss methodology.
Allowance for Credit Losses — The allowance for credit losses is accounted for in accordance with FASB ASC Topic 326, “ Financial Instruments-Credit Losses” (“CECL”), which uses an expected loss methodology that is referred to as the current expected credit loss methodology.
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 million of reserves on resolved PCD loans were released to the general reserve.
Additionally, reserves on PCD loans increased by $26.1 million due to Day One accounting for PCD loans at the time of the Lone Star Merger. Further, $15.4 million of reserves on resolved PCD loans were released to the general reserve.
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 absorb losses from any loan category.
The allocation is made for analytical purposes and is not necessarily indicative of the categories in which future losses may occur. The total allowance is available to cover expected losses from any loan category.
The average tax equivalent yield of the securities portfolio was 2.05% as of December 31, 2024, compared with 2.07% and 2.02% as of December 31, 2023 and 2022, respectively. The average tax equivalent yield on the securities portfolio is based upon expected prepayment speeds, other industry standard projections and on a 21% tax rate in 2024, 2023 and 2022.
The average tax equivalent yield of the securities portfolio was 2.26% as of December 31, 2025, compared with 2.05% and 2.07% as of December 31, 2024 and 2023, respectively. The average tax equivalent yield on the securities portfolio is based upon expected prepayment speeds, other industry standard projections and on a 21% tax rate in 2025, 2024 and 2023.
The $9.1 million provision was due to loans acquired in the LSSB 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 $9.1 million provision was due to loans acquired in the Lone 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.
Additionally, the Company generates recurring noninterest income from its various additional products and services, including trust services, mortgage lending, brokerage and independent sales organization sponsorship operations. 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.
Additionally, the Company generates recurring noninterest income from its various additional products and services, including trust services, mortgage lending and 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.
Regulatory assessments and FDIC insurance assessments were $27.4 million for the year ended December 31, 2024, a decrease of $12.8 million or 31.9% compared with the year ended December 31, 2023, due to a decrease in the FDIC special assessment.
Regulatory assessments and FDIC insurance assessments were $27.4 million for the year ended December 31, 2024, a decrease of $12.8 million or 31.9% compared with the year ended December 31, 2023, due to a decrease in the FDIC special assessment. Core Deposit Intangibles Amortization .
A significant portion are guaranteed or insured by either the Texas Permanent School Fund, Assured Guaranty or Build America Mutual. As of December 31, 2024, the Company’s municipal securities represent 0.9% of the securities portfolio.
A significant portion are guaranteed or insured by either the Texas Permanent School Fund, Assured Guaranty or Build America Mutual. As of December 31, 2025, the Company’s municipal securities represent 0.7% of the securities portfolio.
The provision for credit losses 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.
There was no provision for credit losses for the year ended December 31, 2025, compared with $9.1 million for the year ended December 31, 2024, and $18.5 million for the year ended December 31, 2023.
(2) The FDIC may require the Bank to maintain a leverage ratio above the required minimum. 67
(2) The FDIC may require the Bank to maintain a leverage ratio above the required minimum. 68
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.
Recoveries are credited to the allowance at the time of recovery. 37 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.
Year Ended December 31, 2024 2023 (Dollars in thousands) Balance at beginning of period $ 36,503 $ 29,947 Provision for credit losses on off-balance sheet credit exposures 1,143 6,556 Balance at end of period $ 37,646 $ 36,503 Securities The Company uses its securities portfolio to manage interest rate risk and as a source of income and liquidity for cash requirements.
Year Ended December 31, 2025 2024 (Dollars in thousands) Balance at beginning of period $ 37,646 $ 36,503 Provision for credit losses on off-balance sheet credit exposures — 1,143 Balance at end of period $ 37,646 $ 37,646 58 Securities The Company uses its securities portfolio to manage interest rate risk and as a source of income and liquidity for cash requirements.
Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
Allocation of a portion of the allowance to one category of loans does not preclude its availability to cover expected losses in other categories.
Rent expense under all operating lease obligations aggregated approximately $11.5 million, $12.1 million, and $10.9 million for the years ended December 31, 2024, 2023 and 2022, respectively. 65 Capital Resources Capital management consists of providing equity to support the Company’s current and future operations.
Rent expense under all operating lease obligations aggregated approximately $11.6 million, $11.5 million, and $12.1 million for the years ended December 31, 2025, 2024 and 2023, respectively. Capital Resources Capital management consists of providing equity to support the Company’s current and future operations.
The efficiency ratio, as used by the Company, excluding net gains and losses on the sale, write-down or write-up of assets and securities, was 48.43% for the year ended December 31, 2024, compared with 50.26% for the year ended December 31, 2023 and 42.23% for the year ended December 31, 2022.
The efficiency ratio, as used by the Company, excluding net gains and losses on the sale, write-down or write-up of assets and securities, was 44.55% for the year ended December 31, 2025, compared with 48.43% for the year ended December 31, 2024 and 50.26% for the year ended December 31, 2023.
The Company records an allowance for credit losses on off-balance sheet credit exposure that is adjusted through a charge to provision for credit losses on the Company’s consolidated statement of income. At December 31, 2024 and 2023, this allowance, reported as a separate line item on the Company’s consolidated balance sheet, totaled $37.6 million and $36.5 million, respectively.
The Company records an allowance for credit losses on off-balance sheet credit exposure that is adjusted through an entry to provision for credit losses on the Company’s consolidated statement of income. At December 31, 2025 and 2024, this allowance, reported as a separate line item on the Company’s consolidated balance sheet, totaled $37.6 million.
The $18.5 million provision was made as a result of the loans acquired in the FB Merger 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.
The $18.5 million provision was made as a result of the loans acquired in the merger of 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.
Credit and Debit Card, Data Processing and Software Amortization . 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 LSSB Merger.
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 Lone Star Merger. Regulatory Assessments and FDIC Insurance .
The weighted average discount rate used to determine the lease liabilities as of December 31, 2024 for the Company’s operating leases was 3.0%. Cash paid for the Company’s operating leases for the years ended December 31, 2024, 2023 and 2022 was $11.5 million, $12.0 million and $10.9 million, respectively.
The weighted average discount rate used to determine the lease liabilities as of December 31, 2025, for the Company’s operating leases was 3.2%. Cash paid for the Company’s operating leases for the years ended December 31, 2025, 2024 and 2023 was $11.6 million, $11.5 million and $12.0 million, respectively.
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 LSSB Merger.
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 Lone Star Merger.
The Company had gross charge-offs on originated loans of $10.0 million during the year ended December 31, 2024 compared with $9.3 million during the year ended December 31, 2023. Partially offsetting these charge-offs were recoveries on originated loans of $1.8 million for the year ended December 31, 2024 compared with $2.4 million for the year ended December 31, 2023.
The Company had gross charge-offs on originated loans of $21.4 million during the year ended December 31, 2025, compared with $10.0 million during the year ended December 31, 2024. Partially offsetting these charge-offs were recoveries on originated loans of $3.5 million for the year ended December 31, 2025, compared with $1.8 million for the year ended December 31, 2024.
At December 31, 2024, Warehouse Purchase Program loans totaled $1.08 billion, compared to an average balance of $973.2 million. Because the capital ratios above are calculated using ending risk-weighted assets and Warehouse Purchase Program loans are risk-weighted at 100%, the end-of-period increase in these balances can significantly impact the Company’s reported capital ratios.
At December 31, 2025, Warehouse Purchase Program loans totaled $1.30 billion, compared to an average balance of $1.13 billion. Because the capital ratios above are calculated using ending risk-weighted assets and Warehouse Purchase Program loans are risk-weighted at 100%, the end-of-period increase in these balances can significantly impact the Company’s reported capital ratios.
The Company’s average loans increased 6.7% for the year ended December 31, 2024 compared with the year ended December 31, 2023. The Company predominantly invests excess deposits in government-backed securities until the funds are needed to fund loan growth.
The Company’s average loans increased 0.1% for the year ended December 31, 2025, compared with the year ended December 31, 2024. The Company predominantly invests excess deposits in government-backed securities until the funds are needed to fund loan growth.
The contractual maturity ranges of the Company’s loan portfolio, excluding loans held for sale of $10.7 million and Warehouse Purchase Program loans of $1.08 billion, by type of loan and the amount of such loans with predetermined interest rates and variable rates in each maturity range as of December 31, 2024 are summarized in the following table.
The contractual maturity ranges of the Company’s loan portfolio, excluding loans held for sale of $14.2 million and Warehouse Purchase Program loans of $1.30 billion, by type of loan and the amount of such loans with predetermined interest rates and variable rates in each maturity range as of December 31, 2025, are summarized in the following table.
The nonperforming assets consisted of 368 separate credits or other real estate properties at December 31, 2024, compared with 292 at December 31, 2023 and 170 at December 31, 2022. The Company had $73.6 million, $68.7 million and $19.6 million in nonaccrual loans at December 31, 2024, 2023 and 2022, respectively.
The nonperforming assets consisted of 449 separate credits or other real estate properties at December 31, 2025, compared with 368 at December 31, 2024 and 292 at December 31, 2023. The Company had $137.2 million, $73.6 million and $68.7 million in nonaccrual loans at December 31, 2025, 2024 and 2023, respectively.
Securities purchased at a discount will obtain higher net yields in a decreasing interest rate environment as prepayments result in an acceleration of discount accretion. At December 31, 2024, 85.0% of the mortgage-backed securities held by the Company had contractual final maturities of more than ten years with a weighted average life of 5.24 years.
Securities purchased at a discount will obtain higher net yields in a decreasing interest rate environment as prepayments result in an acceleration of discount accretion. At December 31, 2025, 82.4% of the mortgage-backed securities held by the Company had contractual final maturities of more than ten years with a weighted average life of 4.67 years.
Although access to purchased funds from correspondent banks may be available and has been utilized on occasion to take advantage of investment opportunities, the Company does not generally rely on this external funding source.
The Company has available access to purchase funds from correspondent banks, and has been utilized on occasion to take advantage of investment opportunities, however, the Company does not generally rely on this external funding source.
The Company does not expect a change in the source or use of its funds in the foreseeable future. The Company’s average deposits increased 1.8% for the year ended December 31, 2024 compared with the year ended December 31, 2023.
The Company does not expect a change in the source or use of its funds in the foreseeable future. The Company’s average deposits decreased 0.1% for the year ended December 31, 2025, compared with the year ended December 31, 2024.
The Company’s efficiency ratio calculated pursuant to GAAP was 47.85% for the year ended December 31, 2024 compared with 50.17% for the year ended December 31, 2023 and 42.09% for the year ended December 31, 2022.
The Company’s efficiency ratio calculated pursuant to GAAP was 44.50% for the year ended December 31, 2025, compared with 47.85% for the year ended December 31, 2024 and 50.17% for the year ended December 31, 2023.
The Company posted returns on average assets of 1.21%, 1.08% and 1.39% and returns on average common equity of 6.56%, 6.03% and 7.97% for the years ended December 31, 2024, 2023 and 2022, respectively. The Company’s efficiency ratio was 48.43% in 2024, 50.26% in 2023 and 42.23% in 2022.
The Company posted returns on average assets of 1.42%, 1.21% and 1.08% and returns on average common equity of 7.14%, 6.56% and 6.03% for the years ended December 31, 2025, 2024 and 2023, respectively. The Company’s efficiency ratio was 44.55% in 2025, 48.43% in 2024 and 50.26% in 2023.
Contractual maturities are based on contractual amounts outstanding and do not include net loan purchase discounts of $35.2 million.
Contractual maturities are based on contractual amounts outstanding and do not include net loan purchase discounts of $22.7 million.
The average yield excluding the tax equivalent adjustment was 2.07% for the year ended December 31, 2024, compared with 2.06% for the year ended December 31, 2023 and 1.78% for the year ended December 31, 2022.
The average yield excluding the tax equivalent adjustment was 2.16% for the year ended December 31, 2025, compared with 2.07% for the year ended December 31, 2024, and 2.06% for the year ended December 31, 2023.
Net income was $479.4 million, $419.3 million and $524.5 million for the years ended December 31, 2024, 2023 and 2022, respectively, and diluted earnings per share were $5.05, $4.51 and $5.73, respectively, for these same periods.
Net income was $542.8 million, $479.4 million and $419.3 million for the years ended December 31, 2025, 2024 and 2023, respectively, and diluted earnings per share were $5.72, $5.05 and $4.51, respectively, for these same periods.
Net interest margin, defined as net interest income divided by average interest-earning assets, was 2.93% on a tax equivalent basis for 2024, an increase of 15 basis points compared with 2.78% for 2023. 2023 versus 2022 .
Net interest margin, defined as net interest income divided by average interest-earning assets, was 3.22% on a tax equivalent basis for 2025, an increase of 29 basis points compared with 2.93% for 2024. 2024 versus 2023 .
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.
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.
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 LSSB Merger acquired deposits.
Total deposits at December 31, 2025, 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 Lone Star Merger acquired deposits.
The Company’s securities portfolio has a weighted average life of 4.82 years and a modified duration of 3.97 years at December 31, 2024.
The Company’s securities portfolio has a weighted average life of 4.31 years and a modified duration of 3.68 years at December 31, 2025.
At December 31, 2024, $227.2 million of the allowance for credit losses on loans was attributable to originated loans compared with $222.4 million of the allowance at December 31, 2023, an increase of $4.8 million or 2.2%.
At December 31, 2025, $231.3 million of the allowance for credit losses on loans was attributable to originated loans compared with $227.2 million of the allowance at December 31, 2024, an increase of $4.0 million or 1.8%.
If a deterioration in cash flows is identified, an increase to the PCD reserves for that individual loan or pool of loans may be required. PCD loans were recorded at their acquisition date fair values, which were based on expected cash flows and considers estimates of expected future credit losses.
If a deterioration in cash flows is identified, an increase to the PCD reserves for that individual loan or pool of loans may be required. PCD loans were recorded at their acquisition date fair values based on expected cash flows with a reserve established for the estimate of expected future cash flows.
Total charge-offs for the year ended December 31, 2024 were $20.2 million, partially offset by total recoveries of $5.7 million. Total charge-offs for the year ended December 31, 2023 were $42.8 million, partially offset by total recoveries of $4.8 million.
Total charge-offs for the year ended December 31, 2025, were $24.5 million, partially offset by total recoveries of $6.4 million. Total charge-offs for the year ended December 31, 2024, were $20.2 million, partially offset by total recoveries of $5.7 million.
Under the BTFP program, eligible depository institutions could obtain loans of up to one year in length by pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. At December 31, 2024, the Company had no BTFP balance outstanding.
Under the BTFP program, eligible depository institutions could obtain loans of up to one year in length by pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral.
The increase in the allowance was due to the LSSB Merger. 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.
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.
(2) Commercial real estate loans include approximately $2.06 billion and $2.03 billion of owner-occupied loans for the years ended December 31, 2024 and 2023 respectively. (3) Includes net fair value discounts on acquired loans of $35.2 million and $27.9 million at December 31, 2024 and 2023, respectively.
(2) Commercial real estate loans include approximately $1.95 billion and $2.06 billion of owner-occupied loans for the years ended December 31, 2025 and 2024 respectively. (3) Includes net fair value discounts on acquired loans of $22.7 million and $35.2 million at December 31, 2025 and 2024, respectively.

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