Exhibit 99.3

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information and notes thereto have been prepared in accordance with Article 11 of Regulation S-X in order to give effect to the Merger and related transaction accounting adjustments (pro forma adjustments) described in the accompanying notes.

On July 1, 2026, Prosperity Bancshares, Inc. (“Prosperity”) completed its previously announced acquisition of Stellar Bancorp, Inc., a Texas corporation (“Stellar”), pursuant to the Agreement and Plan of Merger, dated as of January 27, 2026 (the “Merger Agreement”), by and between Prosperity and Stellar.

Pursuant to the Merger Agreement, Stellar merged with and into Prosperity (the “Merger”), with Prosperity continuing as the surviving corporation in the Merger. Immediately following the Merger, Stellar Bank, a Texas banking association and wholly owned subsidiary of Stellar, merged with and into Prosperity Bank, a Texas banking association and wholly owned subsidiary of Prosperity (the “Bank Merger”), with Prosperity Bank continuing as the surviving bank in the Bank Merger.

Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of common stock, par value $0.01 per share, of Stellar (“Stellar common stock”) outstanding immediately prior to the Effective Time, other than certain shares held by Prosperity or Stellar, was converted into the right to receive (i) 0.3803 shares of common stock (the “Per Share Stock Consideration”), par value $1.00 per share, of Prosperity (“Prosperity common stock”), (ii) an amount in cash equal to $11.36 (the “Per Share Cash Consideration”) and (iii) cash in lieu of fractional shares.

Prosperity has prepared the unaudited pro forma condensed combined statements of income appearing below to present on a pro forma basis the consolidated statements of income of Prosperity assuming that the merger with Stellar was consummated on January 1, 2025, and to provide information with respect to the pro forma consolidated results of operations that Prosperity would have had for the year ended December 31, 2025, and for the three months ended March 31, 2026. Prosperity has prepared the unaudited pro forma condensed combined balance sheet appearing below to present on a pro forma basis the consolidated financial position of Prosperity assuming that the merger with Stellar was consummated on March 31, 2026.

 

The unaudited pro forma condensed combined financial statements contain information derived from, and should be read together with:

the accompanying notes to the unaudited pro forma condensed combined financial statements;
Prosperity’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2025, included in Prosperity’s Annual Report on Form 10-K for the year ended December 31, 2025;
Prosperity’s separate unaudited historical consolidated financial statements and accompanying notes as of and for the three months ended March 31, 2026, included in Prosperity’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026;
Stellar’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2025, included in Stellar’s Annual Report on Form 10-K for the year ended December 31, 2025, and
Stellar’s separate unaudited historical consolidated financial statements and accompanying notes as of and for the three months ended March 31, 2026, included in Stellar’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026.

The Merger and the Bank Merger will be accounted for as an acquisition of Stellar and Stellar Bank by Prosperity and Prosperity Bank under the acquisition method of accounting in accordance with the Financial Accounting Standard Board’s Accounting Standard Codification Topic 805, Business Combinations (“ASC 805”). The unaudited pro forma condensed combined financial statements of Prosperity and the other pro forma combined financial information appearing below have been prepared using the acquisition method of accounting.

 

1


 

The unaudited pro forma condensed combined statements of income for the year ended December 31, 2025, and for the three months ended March 31, 2026, present the consolidated results of operations giving pro forma effect to the following as if they had occurred as of January 1, 2025:

the full-year impact of Stellar’s statements of income, including pro forma amortization and accretion of purchase accounting adjustments on securities, loans and intangible assets; and
the issuance of the aggregate Per Share Stock Consideration of 19.4 million shares of Prosperity common stock, and the payment of the aggregate Per Share Cash Consideration of $578.7 million.

The unaudited pro forma condensed combined balance sheet as of March 31, 2026 presents the consolidated financial position giving pro forma effect to the following as if they had occurred as of March 31, 2026:

the completion of the Merger, including the issuance of 19.4 million shares of Prosperity common stock and the payment of $578.7 million; and
$63.0 million in estimated direct transaction costs related to the Merger.

The preparation of the unaudited pro forma condensed combined financial statements and related adjustments required Prosperity’s management to make certain assumptions and estimates, which it believes are reasonable under the circumstances. Prosperity has not completed the valuation analysis and calculations in sufficient detail necessary to arrive at the required fair market value estimates of the Stellar’s assets acquired or liabilities assumed, other than a preliminary estimate for intangible assets. Accordingly, apart from the aforementioned, certain Stellar assets and liabilities are presented at their respective carrying amounts and should be treated as preliminary values. Accordingly, the unaudited pro forma adjustments, including the allocations of the purchase price, are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. Certain reclassifications have been made to the historical financial statements of Stellar to conform to the presentation in Prosperity’s financial statements. Accordingly, the unaudited pro forma condensed combined financial statements and other unaudited pro forma condensed combined financial information are presented for illustrative purposes only and are not necessarily indicative of the results that might have occurred had the Merger taken place on January 1, 2025, for statement of income purposes, and on March 31, 2026, for balance sheet purposes. Historical results for any prior period are not necessarily indicative of results to be expected in any future period, and historical results for the three months ended March 31, 2026, are not necessarily indicative of results to be expected for all of 2026. A final determination of the fair values of Stellar’s assets and liabilities will be based on the actual net tangible and intangible assets of Stellar that existed as of the date of completion of the Merger, which are subject to adjustments for up to one year after the Merger date. Consequently, amounts preliminarily allocated to goodwill and identifiable intangibles could change significantly from those allocations used in the unaudited pro forma condensed combined financial statements presented below and could result in a material change in amortization of acquired intangible assets.

In connection with the plan to integrate the operations of Prosperity and Stellar following the Effective Time, Prosperity anticipates that nonrecurring charges, such as costs associated with systems implementation, severance, and other costs related to exit or disposal activities, could be incurred. Prosperity is not yet able to fully determine the timing, nature and amount of these charges. However, these charges could affect the results of operations of the combined company in the period in which they are recorded. The unaudited pro forma condensed combined financial statements do not include the effects of the costs associated with any restructuring or integration activities resulting from the transaction or any anticipated disposition of assets that may result from such integration.

 

2


 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF MARCH 31, 2026

(in thousands)

 

Prosperity
(as reported)

 

 

Stellar
(as reported)

 

 

Reclassifications
Note 3

 

 

Pro Forma
Adjustments

 

 

Note 5

 

Pro Forma
Combined

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

$

1,547,967

 

 

$

549,570

 

 

$

 

 

$

(641,697

)

 

(a)

 

$

1,455,840

 

Federal funds sold

 

209

 

 

 

 

 

 

 

 

 

 

 

 

 

 

209

 

  Total cash and cash equivalents

 

1,548,176

 

 

 

549,570

 

 

 

 

 

 

(641,697

)

 

 

 

 

1,456,049

 

Available for sale securities, at fair value

 

356,134

 

 

 

1,864,710

 

 

 

 

 

 

 

 

 

 

 

2,220,844

 

Held to maturity securities, at cost

 

11,595,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,595,457

 

  Total loans

 

25,287,986

 

 

 

7,587,952

 

 

 

 

 

 

(28,480

)

 

(b)

 

 

32,847,458

 

  Less allowance for credit losses

 

(383,840

)

 

 

(85,431

)

 

 

 

 

 

(169

)

 

(c)

 

 

(469,440

)

Loans, net

 

24,904,146

 

 

 

7,502,521

 

 

 

 

 

 

(28,649

)

 

 

 

 

32,378,018

 

Bank premises and equipment, net

 

429,775

 

 

 

99,861

 

 

 

(14,342

)

 

 

 

 

 

 

 

515,294

 

Accrued interest receivable

 

120,565

 

 

 

36,589

 

 

 

 

 

 

 

 

 

 

 

157,154

 

Goodwill

 

3,822,283

 

 

 

497,318

 

 

 

 

 

 

236,385

 

 

(d)

 

 

4,555,986

 

Core deposit intangibles

 

111,243

 

 

 

66,137

 

 

 

 

 

 

93,453

 

 

(e)

 

 

270,833

 

Other real estate owned

 

13,257

 

 

 

9,454

 

 

 

 

 

 

 

 

 

 

 

22,711

 

Bank owned life insurance (BOLI), net

 

446,662

 

 

 

110,103

 

 

 

 

 

 

 

 

 

 

 

556,765

 

Federal Home Loan Bank and Federal Reserve Bank stock

 

107,477

 

 

 

51,105

 

 

 

 

 

 

 

 

 

 

 

158,582

 

Other assets

 

164,008

 

 

 

101,988

 

 

 

14,342

 

 

 

24,444

 

 

(f)

 

 

304,782

 

Total assets

$

43,619,183

 

 

$

10,889,356

 

 

$

 

 

$

(316,064

)

 

 

 

$

54,192,475

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Noninterest-bearing

$

10,580,920

 

 

$

3,210,579

 

 

$

 

 

$

 

 

 

 

$

13,791,499

 

     Interest-bearing

 

22,051,836

 

 

 

5,771,431

 

 

 

 

 

 

 

 

 

 

 

27,823,267

 

          Total deposits

 

32,632,756

 

 

 

8,982,010

 

 

 

 

 

 

 

 

 

 

 

41,614,766

 

Other borrowings

 

2,200,000

 

 

 

135,000

 

 

 

 

 

 

 

 

 

 

 

2,335,000

 

Securities sold under repurchase agreements

 

176,099

 

 

 

 

 

 

 

 

 

 

 

 

 

 

176,099

 

Accrued interest payable

 

30,165

 

 

 

5,240

 

 

 

 

 

 

 

 

 

 

 

35,405

 

Allowance for credit losses on off-balance sheet credit exposures

 

37,646

 

 

 

15,441

 

 

 

 

 

 

 

 

(c)

 

 

53,087

 

Other liabilities

 

258,480

 

 

 

43,644

 

 

 

 

 

 

 

 

 

 

 

302,124

 

Subordinated notes and junior subordinated debentures

 

76,186

 

 

 

40,256

 

 

 

 

 

 

 

 

 

 

 

116,442

 

          Total liabilities

 

35,411,332

 

 

 

9,221,591

 

 

 

 

 

 

 

 

 

 

 

44,632,923

 

Shareholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Prosperity equity

 

8,207,851

 

 

 

 

 

 

 

 

 

1,351,701

 

 

(g)

 

 

9,559,552

 

Total Stellar equity

 

 

 

 

1,667,765

 

 

 

 

 

 

(1,667,765

)

 

(g)

 

 

 

Total shareholders' equity

 

8,207,851

 

 

 

1,667,765

 

 

 

 

 

 

(316,064

)

 

(g)

 

 

9,559,552

 

Total liabilities and shareholders' equity

$

43,619,183

 

 

$

10,889,356

 

 

$

 

 

$

(316,064

)

 

 

 

$

54,192,475

 

 

3


 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

FOR THREE MONTHS ENDED MARCH 31, 2026

(in thousands, except per share data)

 

 

Prosperity
(as reported)

 

 

Stellar
(as reported)

 

 

Reclassifications
Note 3

 

 

Pro Forma
Adjustments

 

 

Note 5

 

Pro Forma
Combined

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

$

361,756

 

 

$

119,783

 

 

$

 

 

$

2,310

 

 

(h)

 

$

483,849

 

Securities

 

70,531

 

 

 

20,428

 

 

 

 

 

 

3,648

 

 

(i)

 

 

94,607

 

Federal funds sold and other earning assets

 

9,488

 

 

 

4,884

 

 

 

 

 

 

 

 

 

 

 

14,372

 

Total interest income

 

441,775

 

 

 

145,095

 

 

 

 

 

 

5,958

 

 

 

 

 

592,828

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

104,237

 

 

 

38,268

 

 

 

 

 

 

 

 

 

 

 

142,505

 

Other borrowings

 

14,783

 

 

 

149

 

 

 

 

 

 

 

 

 

 

 

14,932

 

Securities sold under repurchase agreements

 

902

 

 

 

 

 

 

 

 

 

 

 

 

 

 

902

 

Subordinated debentures

 

703

 

 

 

747

 

 

 

 

 

 

 

 

 

 

 

1,450

 

Total interest expense

 

120,625

 

 

 

39,164

 

 

 

 

 

 

 

 

 

 

 

159,789

 

Net interest income

 

321,150

 

 

 

105,931

 

 

 

 

 

 

5,958

 

 

 

 

 

433,039

 

Provision for credit losses

 

 

 

 

2,497

 

 

 

 

 

 

 

 

 

 

 

2,497

 

Net interest income after provision for credit losses

 

321,150

 

 

 

103,434

 

 

 

 

 

 

5,958

 

 

 

 

 

430,542

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonsufficient funds (NSF) fees

 

10,867

 

 

 

 

 

 

142

 

 

 

 

 

 

 

 

11,009

 

Credit card, debit card and ATM card income

 

9,483

 

 

 

547

 

 

 

774

 

 

 

 

 

 

 

 

10,804

 

Service charges on deposit accounts

 

8,680

 

 

 

1,635

 

 

 

(142

)

 

 

 

 

 

 

 

10,173

 

Trust income

 

4,922

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,922

 

Mortgage income

 

1,280

 

 

 

 

 

 

56

 

 

 

 

 

 

 

 

1,336

 

Brokerage income

 

1,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,568

 

Net gain (loss) on sale or write-down of assets

 

318

 

 

 

(37

)

 

 

 

 

 

 

 

 

 

 

281

 

Other

 

9,356

 

 

 

2,965

 

 

 

(830

)

 

 

 

 

 

 

 

11,491

 

Total noninterest income

 

46,474

 

 

 

5,110

 

 

 

 

 

 

 

 

 

 

 

51,584

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

109,211

 

 

 

43,931

 

 

 

 

 

 

 

 

 

 

 

153,142

 

Net occupancy and equipment

 

10,654

 

 

 

4,575

 

 

 

 

 

 

 

 

 

 

 

15,229

 

Credit and debit card, data processing and software amortization

 

18,114

 

 

 

6,073

 

 

 

 

 

 

 

 

 

 

 

24,187

 

Regulatory assessments and FDIC insurance

 

6,041

 

 

 

1,639

 

 

 

 

 

 

 

 

 

 

 

7,680

 

Core deposit intangibles amortization

 

5,259

 

 

 

4,886

 

 

 

 

 

 

1,643

 

 

(j)

 

 

11,788

 

Depreciation

 

5,548

 

 

 

1,971

 

 

 

 

 

 

 

 

 

 

 

7,519

 

Communications

 

3,834

 

 

 

759

 

 

 

 

 

 

 

 

 

 

 

4,593

 

Net other real estate expense

 

300

 

 

 

 

 

 

184

 

 

 

 

 

 

 

 

484

 

Merger and acquisition expenses

 

42,516

 

 

 

3,307

 

 

 

 

 

 

 

 

 

 

 

45,823

 

Other

 

15,810

 

 

 

8,023

 

 

 

(184

)

 

 

 

 

 

 

 

23,649

 

Total noninterest expense

 

217,287

 

 

 

75,164

 

 

 

 

 

 

1,643

 

 

 

 

 

294,094

 

Income before income taxes

 

150,337

 

 

 

33,380

 

 

 

 

 

 

4,315

 

 

 

 

 

188,032

 

Provision for income taxes

 

34,070

 

 

 

6,414

 

 

 

 

 

 

906

 

 

(l)

 

 

41,390

 

Net income

$

116,267

 

 

$

26,966

 

 

$

 

 

$

3,409

 

 

 

 

$

146,642

 

Basic earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

$

1.16

 

 

$

0.53

 

 

 

 

 

 

 

 

 

 

$

1.23

 

Weighted average shares outstanding

 

99,825

 

 

 

50,829

 

 

 

 

 

 

(31,458

)

 

(m)

 

 

119,196

 

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

$

1.16

 

 

$

0.53

 

 

 

 

 

 

 

 

 

 

$

1.23

 

Weighted average shares outstanding

 

99,825

 

 

 

50,944

 

 

 

 

 

 

(31,573

)

 

(m)

 

 

119,196

 

 

4


 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2025

(in thousands, except per share data)

 

 

Prosperity
(as reported)

 

 

Stellar
(as reported)

 

 

Reclassifications
Note 3

 

 

Pro Forma
Adjustments

 

 

Note 5

 

Pro Forma
Combined

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

$

1,295,474

 

 

$

484,877

 

 

$

 

 

$

12,320

 

 

(h)

 

$

1,792,671

 

Securities

 

230,696

 

 

 

68,576

 

 

 

 

 

 

14,593

 

 

(i)

 

 

313,865

 

Federal funds sold and other earning assets

 

44,153

 

 

 

21,017

 

 

 

 

 

 

 

 

 

 

 

65,170

 

Total interest income

 

1,570,323

 

 

 

574,470

 

 

 

 

 

 

26,913

 

 

 

 

 

2,171,706

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

379,977

 

 

 

166,807

 

 

 

 

 

 

 

 

 

 

 

546,784

 

Other borrowings

 

104,234

 

 

 

986

 

 

 

 

 

 

 

 

 

 

 

105,220

 

Securities sold under repurchase agreements

 

4,620

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,620

 

Subordinated debentures

 

 

 

 

5,057

 

 

 

 

 

 

 

 

 

 

 

5,057

 

Total interest expense

 

488,831

 

 

 

172,850

 

 

 

 

 

 

 

 

 

 

 

661,681

 

Net interest income

 

1,081,492

 

 

 

401,620

 

 

 

 

 

 

26,913

 

 

 

 

 

1,510,025

 

Provision for credit losses

 

 

 

 

10,158

 

 

 

 

 

 

 

 

 

 

 

10,158

 

Net interest income after provision for credit losses

 

1,081,492

 

 

 

391,462

 

 

 

 

 

 

26,913

 

 

 

 

 

1,499,867

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonsufficient funds (NSF) fees

 

37,552

 

 

 

 

 

 

663

 

 

 

 

 

 

 

 

38,215

 

Credit card, debit card and ATM card income

 

37,408

 

 

 

2,241

 

 

 

1,013

 

 

 

 

 

 

 

 

40,662

 

Service charges on deposit accounts

 

29,988

 

 

 

6,282

 

 

 

(663

)

 

 

 

 

 

 

 

35,607

 

Trust income

 

14,648

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,648

 

Mortgage income

 

3,859

 

 

 

 

 

 

166

 

 

 

 

 

 

 

 

4,025

 

Brokerage income

 

5,385

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,385

 

Net gain (loss) on sale or write-down of assets

 

1,217

 

 

 

(302

)

 

 

3

 

 

 

 

 

 

 

 

918

 

Net loss on sale or write-up of securities

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

(3

)

Other

 

38,244

 

 

 

13,569

 

 

 

(1,179

)

 

 

 

 

 

 

 

50,634

 

Total noninterest income

 

168,301

 

 

 

21,790

 

 

 

 

 

 

 

 

 

 

 

190,091

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

353,105

 

 

 

168,807

 

 

 

 

 

 

 

 

 

 

 

521,912

 

Net occupancy and equipment

 

37,088

 

 

 

17,619

 

 

 

 

 

 

 

 

 

 

 

54,707

 

Credit and debit card, data processing and software amortization

 

48,614

 

 

 

22,980

 

 

 

 

 

 

 

 

 

 

 

71,594

 

Regulatory assessments and FDIC insurance

 

18,095

 

 

 

6,187

 

 

 

 

 

 

 

 

 

 

 

24,282

 

Core deposit intangibles amortization

 

14,442

 

 

 

21,580

 

 

 

 

 

 

7,484

 

 

(j)

 

 

43,506

 

Depreciation

 

19,674

 

 

 

8,058

 

 

 

 

 

 

 

 

 

 

 

27,732

 

Communications

 

13,988

 

 

 

3,435

 

 

 

 

 

 

 

 

 

 

 

17,423

 

Net other real estate expense

 

653

 

 

 

 

 

 

1,034

 

 

 

 

 

 

 

 

1,687

 

Merger and acquisition expenses

 

330

 

 

 

 

 

 

 

 

 

6,000

 

 

(k)

 

 

6,330

 

Other

 

50,224

 

 

 

36,804

 

 

 

(1,034

)

 

 

 

 

 

 

 

85,994

 

Total noninterest expense

 

556,213

 

 

 

285,470

 

 

 

 

 

 

13,484

 

 

 

 

 

855,167

 

Income before income taxes

 

693,580

 

 

 

127,782

 

 

 

 

 

 

13,429

 

 

 

 

 

834,791

 

Provision for income taxes

 

150,737

 

 

 

24,910

 

 

 

 

 

 

2,820

 

 

(l)

 

 

178,467

 

Net income

$

542,843

 

 

$

102,872

 

 

$

 

 

$

10,609

 

 

 

 

$

656,324

 

Basic earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

$

5.72

 

 

$

1.99

 

 

 

 

 

 

 

 

 

 

$

5.74

 

Weighted average shares outstanding

 

94,917

 

 

 

51,756

 

 

 

 

 

 

(32,385

)

 

(m)

 

 

114,288

 

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

$

5.72

 

 

$

1.99

 

 

 

 

 

 

 

 

 

 

$

5.74

 

Weighted average shares outstanding

 

94,917

 

 

 

51,808

 

 

 

 

 

 

(32,437

)

 

(m)

 

 

114,288

 

 

5


 

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

Note 1. Basis of Pro Forma Presentation

The accompanying unaudited pro forma condensed combined financial statements and related notes were prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma condensed combined statement of income for the three months ended March 31, 2026, and for the year ended December 31, 2025 combine the historical consolidated statements of income of Prosperity and Stellar giving effect to the Merger as if it had been completed on January 1, 2025. The unaudited pro forma condensed combined balance sheet as of March 31, 2026 combines the historical consolidated balance sheets of Prosperity and Stellar giving effect to the Merger as if it had been completed on March 31, 2026.

Prosperity’s and Stellar’s historical financial statements were prepared in accordance with U.S. GAAP and presented in U.S. dollars. As discussed in Note 3, certain reclassifications were made to align Prosperity’s and Stellar’s financial statement presentation. Prosperity has not identified all adjustments necessary to conform Stellar’s accounting policies to Prosperity’s accounting policies. Prosperity is in the process of performing a more detailed review of Stellar’s accounting policies. As a result of that review, differences could be identified between the accounting policies of the two companies that, when conformed, could have a material impact on the combined company’s financial information.

The accompanying unaudited pro forma condensed combined financial statements and related notes were prepared using the acquisition method of accounting under the provisions of ASC 805, with Prosperity considered the acquirer of Stellar. ASC 805 requires, among other things, that the assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. For purposes of the unaudited pro forma condensed combined balance sheet, the Merger consideration has been allocated to the assets acquired and liabilities assumed of Stellar based upon management’s preliminary estimate of their fair values as of March 31, 2026. Prosperity has not completed the valuation analysis and calculations in sufficient detail necessary to arrive at the required estimates of the fair market value of the Stellar’s assets acquired or liabilities assumed, other than a preliminary estimate for intangible assets. Accordingly, apart from the aforementioned, certain Stellar assets and liabilities are presented at their respective carrying amounts and should be treated as preliminary values. Any differences between the fair value of the Merger consideration and the fair value of the assets acquired and liabilities assumed will be recorded as goodwill. Accordingly, the purchase price allocation and related adjustments reflected in these unaudited pro forma condensed combined financial statements are preliminary and subject to revision based on a final determination of Stellar’s fair value. Actual adjustments may differ from the amounts reflected in the unaudited pro forma condensed combined financial information, and the differences may be material.

All dollar amounts presented within these Notes to Unaudited Pro Forma Condensed Combined Financial Statements are in thousands, except per share data. Share amounts are in thousands.

Note 2. Estimated Operational Cost Savings

Prosperity anticipates operational cost savings in connection with the acquisition of Stellar. Prosperity anticipates that these savings will occur through the combination of back office operations and elimination of duplicate general operations, administrative and salary and benefits expense. Estimated cost savings are not presented as part of the pro forma adjustments and there can be no assurance they will be achieved in the amount or manner currently contemplated.

Note 3. Reclassification Adjustments

During the preparation of the unaudited pro forma condensed combined financial information, Prosperity performed a preliminary analysis of Stellar’s financial information to identify differences in accounting policies and differences in balance sheet and income statement presentation as compared to the presentation of Stellar. At the time of preparing the unaudited pro forma condensed combined financial information, Prosperity had not identified all adjustments necessary to conform Stellar’s accounting policies to Prosperity’s accounting policies and had also not identified all reclassification adjustments necessary to conform Stellar’s financial statement presentation with that of Prosperity’s. The reclassification adjustments represent Prosperity’s best estimates based upon the

6


 

information currently available to Prosperity and could be materially different from the amounts set forth in the unaudited pro forma condensed combined financial information once more detailed information is available.

 

Note 4. Preliminary Purchase Price Allocation

The following table summarizes the preliminary purchase price allocation to the estimated fair value of assets and liabilities assumed in the Merger (in thousands, except per share data):

 

Prosperity shares issued in exchange for outstanding Stellar common stock (50,939 shares as of June 30, 2026) (1)

 

 

19,371

 

Pro forma purchase price—Stock (2)

 

$

1,414,701

 

 

 

 

 

Pro forma purchase price—Cash (1)

 

$

578,697

 

Total pro forma purchase price

 

$

1,993,398

 

 

(1)
Under the terms of the Merger Agreement, holders of Stellar common stock, options and restricted stock awards received 0.3803 shares of Prosperity common stock and $11.36 cash for each share of Stellar common stock (or its equivalent), subject to certain conditions.
(2)
Based upon Prosperity closing price of $73.03 on June 30, 2026.

 

The preliminary estimated Merger consideration as shown in the table above is allocated to the tangible and intangible assets acquired and liabilities assumed of Stellar based on their preliminary estimated fair values. As described above in Note 1, Prosperity has not completed the valuation analysis and calculations in sufficient detail necessary to arrive at the required estimates of the fair market value of the Stellar assets to be acquired or liabilities assumed, other than a preliminary estimate for intangible assets and available for sale securities. Accordingly, apart from the aforementioned, certain assets acquired and liabilities assumed are presented at their respective carrying amounts and should be treated as preliminary values. The fair value assessments are preliminary and are based upon available information and certain assumptions, which Prosperity believes are reasonable under the circumstances. Actual results may differ materially from the assumptions within the unaudited pro forma condensed combined financial statements.

 

7


 

The following table sets forth a preliminary allocation of the estimated Merger consideration to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed of Stellar using Stellar’s consolidated balance sheet as of March 31, 2026:

 

 

As of March 31, 2026

 

 

 

(in thousands)

 

Preliminary fair value of estimated total Merger consideration

 

 

 

$

1,993,398

 

Assets Acquired:

 

 

 

 

 

Total cash and cash equivalents

 

$

549,570

 

 

 

Available for sale securities, at fair value

 

 

1,864,710

 

 

 

Loans, net

 

 

7,473,872

 

 

 

Bank premises and equipment, net

 

 

85,519

 

 

 

Accrued interest receivable

 

 

36,589

 

 

 

Core deposit intangibles

 

 

159,590

 

 

 

Other real estate owned

 

 

9,454

 

 

 

Bank owned life insurance (BOLI), net

 

 

110,103

 

 

 

Federal Home Loan Bank and Federal Reserve Bank stock

 

 

51,105

 

 

 

Other assets

 

 

140,774

 

 

 

Total Assets Acquired

 

$

10,481,286

 

 

 

Liabilities Assumed:

 

 

 

 

 

Deposits-noninterest bearing

 

$

3,210,579

 

 

 

Deposits-interest bearing

 

 

5,771,431

 

 

 

Other borrowings

 

 

135,000

 

 

 

Accrued interest payable

 

 

5,240

 

 

 

Allowance for unused commitments

 

 

15,441

 

 

 

Other liabilities

 

 

43,644

 

 

 

Subordinated debentures

 

 

40,256

 

 

 

Total Liabilities Assumed

 

$

9,221,591

 

 

 

Net Assets Acquired

 

 

 

$

1,259,695

 

Preliminary proforma goodwill

 

 

 

$

733,703

 

 

Note 5. Pro forma Adjustments and Assumptions

The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial information. All adjustments are based on current assumptions and valuations, which are subject to change.

Balance Sheet

(a)
This adjustment represents the estimated cash consideration for Stellar and estimated direct transaction costs calculated as follows:

 

Total cash consideration ($11.36/share)

$

578,697

 

Estimated cash paid for direct transaction costs

 

63,000

 

Pro forma net adjustment to cash and due from bank

$

641,697

 

 

(b)
Adjustment to total loans to reflect preliminary estimated fair value adjustments on Stellar’s acquired loans.

8


 

(c)
Adjustment to eliminate Stellar’s allowance for credit losses and establish Prosperity’s allowance for credit losses on loans.

 

Elimination of Stellar's allowance for credit losses on loans

$

85,431

 

Establish Prosperity's allowance for credit losses on loans

 

(85,600

)

 

$

(169

)

 

 

 

Elimination of Stellar's allowance for credit losses on off-balance sheet credit exposures

$

(15,441

)

Establish Prosperity's allowance for credit losses on off-balance sheet credit exposures

 

15,441

 

 

$

 

 

(d)
Adjustment to goodwill based on the preliminary purchase price allocation as follows:

 

Fair value of Merger consideration in excess of the preliminary fair value of net assets acquired (from Note 4 above)

$

733,703

 

Removal of Stellar historical goodwill

 

(497,318

)

Pro Forma net adjustment to goodwill

$

236,385

 

(e)
Adjustment to core deposit intangible (“CDI”) based on the preliminary purchase price allocation as follows:

 

Estimated CDI (2% of non-time deposits)

$

159,590

 

Removal of Stellar historical CDI

 

(66,137

)

Net Adjustment to CDI

$

93,453

 

(f)
Deferred tax impact from fair value adjustments of $24,444.
(g)
Adjustment to Prosperity and Stellar shareholders’ equity based upon the following:

 

Fair value of equity consideration issued to Stellar shareholders (from Note 4 above)

$

1,414,701

 

Removal of Stellar historical equity

 

(1,667,765

)

Estimated cash paid for direct transaction costs

 

(63,000

)

Pro forma net adjustment to shareholders' equity

$

(316,064

)

 

Income Statement

(h)
Adjustment to interest income on loans for estimated fair value mark on loans amortized over 4 years using the sum of years digits method.
(i)
Adjustment to interest income on securities for elimination of Stellar’s net unrealized loss amortized over 5 years using the level yield method.
(j)
Estimated core deposit intangible asset amortization at 2.0% of the acquired non-time deposits based upon 10-year life using the sum of years digits amortization method, net of Stellar historical CDI.

 

 

Three months ended
March 31, 2026

 

 

Year ended
December 31, 2025

 

Estimated CDI (2% of non-time deposits) amortized over 10 years (sum of years digits)

$

6,529

 

 

$

29,064

 

Stellar's historical CDI Expense

 

(4,886

)

 

 

(21,580

)

Estimated net CDI impact

$

1,643

 

 

$

7,484

 

 

(k)
Adjustment to reflect the preliminary estimated one-time merger related expenses, including legal fees and compensation expense.

9


 

(l)
Adjustment to reflect the net federal income tax effect of the pro forma statement of income adjustments using Prosperity statutory tax rate of 21.0%.
(m)
Adjustment to weighted-average shares of Prosperity common stock outstanding to eliminate weighted average shares of Stellar common stock outstanding and to reflect the estimated number of shares issued of Prosperity common stock to holders of Stellar common stock.

 

 

As of
March 31, 2026

 

 

As of
December 31, 2025

 

Adjustments to weighted average number of common shares outstanding—Basic

 

 

 

 

 

To reflect acquisition of Stellar basic common shares

 

(50,829

)

 

 

(51,756

)

To reflect shares of Prosperity common stock issued in the Merger

 

19,371

 

 

 

19,371

 

 

 

(31,458

)

 

 

(32,385

)

 

 

 

 

 

 

Adjustments to weighted average number of common shares outstanding—Diluted

 

 

 

 

 

To reflect acquisition of Stellar diluted common shares

 

(50,944

)

 

 

(51,808

)

To reflect shares of Prosperity common stock issued in the Merger

 

19,371

 

 

 

19,371

 

 

 

(31,573

)

 

 

(32,437

)

 

 

10