Prosperity Bancshares, Inc.® Reports Fourth Quarter 2020 Earnings

Rhea-AI Summary

Prosperity Bancshares (NYSE: PB) reported a robust net income of $137.1 million for Q4 2020, significantly up from $86.1 million in Q4 2019. Earnings per diluted share reached $1.48, a 46.5% increase year-over-year. The bank's deposits surged by $901.3 million (3.4%) in Q4. For the full year, net income totaled $528.9 million, reflecting a 59% increase, driven by the merger with LegacyTexas. However, challenges such as potential tax hikes and low interest rates remain a concern.

Positive

• Net income increased by 59% to $137.1 million for Q4 2020.
• Deposits rose by $901.3 million in Q4 2020.
• Net interest income grew by 11% to $257.6 million for Q4 2020.

Negative

• Net interest margin declined to 3.49% in Q4 2020 from 3.66% in Q4 2019.
• Challenges include potential higher tax rates and low interest rates affecting net interest margin.

HOUSTON, Jan. 27, 2021 /PRNewswire/ -- Prosperity Bancshares, Inc.^® (NYSE: PB), the parent company of Prosperity Bank^® (collectively, "Prosperity"), reported net income for the quarter ended December 31, 2020 of  $137.1 million compared with $86.1 million for the same period in 2019. Net income per diluted common share was $1.48 compared with $1.01 for the same period in 2019, which is net of merger related expenses of $0.43⁽¹⁾ per diluted common share. Excluding merger related expenses, the earnings per diluted common share was $1.44⁽¹⁾ for the fourth quarter 2019. Additionally, deposits increased $901.3 million or 3.4% (13.6% annualized) during the fourth quarter 2020 and nonperforming assets remain low at 0.20% of fourth quarter average interest-earning assets with an annualized return on fourth quarter average assets of 1.63%. On November 1, 2019, LegacyTexas Financial Group, Inc. ("LegacyTexas") merged with Prosperity Bancshares and LegacyTexas Bank merged with Prosperity Bank (collectively, the "Merger").

"Prosperity Bancshares reported some of the best results in our history, with net income of $137.1 million for the fourth quarter of 2020 and $528.9 million for the full year. Much of the success is attributed to the dedicated associates of Prosperity and LegacyTexas who helped make our combination with LegacyTexas successful. Also, during 2020 we had organic deposit growth of $3.161 billion, a 13.1% increase. Asset quality continued to improve with nonperforming assets at 0.20% of fourth quarter average earning assets. We ended the year with $59.6 million in nonperforming assets compared with $69.5 million at September 30, 2020, a 14.3% decrease," said David Zalman, Prosperity's Senior Chairman and Chief Executive Officer.

"Texas and Oklahoma continue to benefit from a pro-business attitude. Companies continue to move to Texas, with HP and Oracle announcing a headquarters move and other companies, such as Tesla, announcing a major expansion into Texas. The Federal Reserve Bank of Dallas has projected a nationwide 5% GDP growth by year-end 2021 and an unemployment rate of 4.5%, noting that the first half of the year will be slower, with an expected increase in the second half of the year. We believe Texas will have a higher growth rate and outperform other states over the next several years," continued Zalman.

"We expect that we will face several challenges over the next few years, such as higher tax rates that will affect income and continued low interest rates that will affect our net interest margin. However, a steeper yield curve could help to mitigate both issues," added Zalman.

"Again, I would like to thank all our customers, shareholders and associates for their dedication and support of our company," concluded Zalman.

Results of Operations for the Three Months Ended December 31, 2020

Net income was $137.1 million⁽²⁾ for the three months ended December 31, 2020 compared with $86.1 million⁽³⁾ for the same period in 2019, an increase of $51.0 million or 59.2%. Net income per diluted common share was $1.48 for the three months ended December 31, 2020 compared with $1.01 for the same period in 2019, an increase of 46.5%. Net income for the fourth quarter of 2019 included $46.4 million of merger related expenses, or $0.43⁽¹⁾ per diluted common share. Net income was $137.1 million⁽²⁾ for the three months ended December 31, 2020 compared with $130.1 million⁽⁴⁾ for the three months ended September 30, 2020, an increase of $7.0 million or 5.4%. Net income per diluted common share was $1.48 for the three months ended December 31, 2020 compared with $1.40 for the three months ended September 30, 2020, an increase of 5.7%. Net income for the fourth quarter of 2020 had no provision for credit losses, reflected a $3.3 million decrease in interest expense and a $6.5 million decrease in loan discount accretion compared to the net income for the third quarter of 2020. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended December 31, 2020 were 1.63%, 8.98% and 19.57%⁽¹⁾, respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 40.77%⁽¹⁾ for the three months ended December 31, 2020.

Net interest income before provision for credit losses for the three months ended December 31, 2020 was $257.6 million compared with $232.0 million for the same period in 2019, an increase of $25.6 million or 11.0%. The increase was primarily due to an increase in the average balance of interest-earning assets, a decrease in the average rate on interest-bearing liabilities and three months of combined bank earnings in the fourth quarter of 2020 compared to only two months in the fourth quarter of 2019 following the Merger, partially offset by decreases in interest income on securities and loan discount accretion of $7.7 million. On a linked quarter basis, net interest income before provision for credit losses was $257.6 million compared with $258.1 million for the three months ended September 30, 2020, a decrease of $479 thousand or 0.2%.

The net interest margin on a tax equivalent basis was 3.49% for the three months ended December 31, 2020 compared with 3.66% for the same period in 2019. The change was primarily due to an increase in lower yielding Warehouse Purchase Program and Paycheck Protection Program ("PPP") loans, a $7.7 million decrease in loan discount accretion and higher cash balances due to excess liquidity, partially offset by a decrease in the average rate on interest-bearing liabilities. On a linked quarter basis, the net interest margin on a tax equivalent basis was 3.49% for the three months ended December 31, 2020 compared with 3.57% for the three months ended September 30, 2020. This change was primarily due to a $6.5 million decrease in loan discount accretion, higher net premium amortization on securities and higher cash balances due to excess liquidity, partially offset by higher PPP loan fee income during the fourth quarter.

Noninterest income was $36.5 million for the three months ended December 31, 2020 compared with $35.5 million for the same period in 2019, an increase of $1.0 million or 2.9%. This increase was primarily due to an increase in mortgage income and lower loss on write-down of assets, partially offset by a decrease in nonsufficient funds ("NSF") fees. On a linked quarter basis, noninterest income increased $1.6 million or 4.6% to $36.5 million compared with $34.9 million for the three months ended September 30, 2020. This increase was primarily due to increases in mortgage income and NSF fees.

Noninterest expense was $120.2 million for the three months ended December 31, 2020 compared with $156.5 million for the same period in 2019, a decrease of $36.2 million or 23.2%, primarily due to the $46.4 million of merger related expenses recorded during the fourth quarter of 2019, partially offset by higher salaries and benefits expense in the fourth quarter of 2020 due to three months of salaries and benefits compared to two months in the fourth quarter of 2019 resulting from the Merger. On a linked quarter basis, noninterest expense increased $2.3 million or 1.9% to $120.2 million compared with $117.9 million for the three months ended September 30, 2020. The increase was primarily due to an increase in salaries and benefits.

Results of Operations for the Year Ended December 31, 2020

Net income was $528.9 million⁽⁵⁾ for the year ended December 31, 2020 compared with $332.6 million⁽⁶⁾ for the prior year, an increase of $196.4 million or 59.0%. Net income per diluted common share was $5.68 for the year ended December 31, 2020 compared with $4.52 for the prior year, an increase of 25.7%. The increase in net income and earnings per diluted common share for the year ended December 31, 2020 was primarily due to the Merger, a $38.4 million decrease in merger related expenses and a tax benefit for net operating losses ("NOL") of $20.1 million. Annualized returns on average assets, average common equity and average tangible common equity for the year ended December 31, 2020 were 1.62%, 8.85% and 19.83%⁽¹⁾, respectively. Excluding merger related expenses, net of tax, and the NOL tax benefit, annualized returns on average assets, average common equity and average tangible common equity for the year ended December 31, 2020 were 1.58%⁽¹⁾, 8.62%⁽¹⁾ and 19.31%⁽¹⁾, respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 42.58%⁽¹⁾ for the year ended December 31, 2020. Excluding merger related expenses (and net gains and losses on the sale or write down of assets and taxes) the efficiency ratio was 41.89%⁽¹⁾ for the year ended December 31, 2020.

Net interest income before provision for credit losses for the year ended December 31, 2020 was $1.031 billion compared with $695.8 million for the prior year, an increase of $335.0 million or 48.1%. This change was primarily due to the Merger and the increase in loan discount accretion of $63.3 million. 

The net interest margin on a tax equivalent basis for the year ended December 31, 2020 was 3.64% compared with 3.32% for the prior year. This change was primarily due to increased interest-earning assets due to the Merger and the increase in loan discount accretion of $63.3 million.

Noninterest income was $131.5 million for the year ended December 31, 2020 compared with $124.3 million for the prior year, an increase of $7.3 million or 5.8%. This increase was primarily due to increases in mortgage income, credit card, debit card and ATM card income and service charges on deposit accounts, all primarily due to the Merger, partially offset by a higher net loss on write-down of assets of $3.7 million and decrease in NSF fees.

Noninterest expense was $497.2 million for the year ended December 31, 2020 compared with $396.5 million for the prior year, an increase of $100.7 million or 25.4%. The change was primarily due to increases in salaries and benefits, credit and debit card, data processing and software amortization, net occupancy and equipment and other noninterest expense, all primarily due to the Merger, partially offset by a $38.4 million decrease in merger related expenses.

Balance Sheet Information

At December 31, 2020, Prosperity had $34.059 billion in total assets, an increase of $1.874 billion or 5.8% compared with $32.186 billion at December 31, 2019.

Loans at December 31, 2020 were $20.247 billion, an increase of $1.402 billion or 7.4%, compared with $18.845 billion at December 31, 2019. Linked quarter loans decreased $548.7 million or 2.6% from $20.796 billion at September 30, 2020, primarily due to a $430.6 million decrease in PPP loans. At December 31, 2020, the Company had $963.2 million of PPP loans.

As part of its lending activities, Prosperity extends credit to oil and gas production and servicing companies. Oil and gas production loans are loans to companies directly involved in the exploration and/or production of oil and gas. Oil and gas servicing loans are loans to companies that provide services for oil and gas production and exploration. At December 31, 2020, oil and gas loans totaled $512.7 million (net of discount and excluding PPP loans totaling $88.7 million) or 2.5% of total loans, of which $285.8 million were production loans and $226.9 million were servicing loans, compared with total oil and gas loans of $698.3 million (net of discount) or 3.7% of total loans at December 31, 2019, of which $401.5 million were production loans and $296.8 million were servicing loans. In addition, as of December 31, 2020, Prosperity had total unfunded commitments to oil and gas companies of $243.2 million compared with total unfunded commitments to oil and gas companies of $342.2 million as of December 31, 2019. Unfunded commitments to producers include letters of credit issued in lieu of oil well plugging bonds.

Additionally, Prosperity extends credit to hotels and restaurants. At December 31, 2020, loans to hotels totaled $393.8 million (excluding PPP loans totaling $6.5 million) or 1.9% of total loans and loans to restaurants totaled $214.7 million (excluding PPP loans totaling $83.6 million) or 1.1% of total loans.

Deposits at December 31, 2020 were $27.360 billion, an increase of $3.161 billion or 13.1%, compared with $24.200 billion at December 31, 2019. Linked quarter deposits increased $901.3 million or 3.4% from $26.459 billion at September 30, 2020.

The table below provides detail on the impact of loans acquired and deposits assumed in the Merger:

Balance Sheet Data (at period end)
(In thousands)
		Dec 31, 2020				Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Loans acquired (including new production since acquisition date):
LegacyTexas:
Loans held for sale (1)		$	—			$	—			$	15,725			$	54,229			$	66,745
Loans held for investment			6,013,305				6,349,251				6,601,006				6,713,337				6,636,855
Loans held for investment - Warehouse Purchase Program			2,842,379				2,730,614				2,557,183				1,713,762				1,552,762
All other loans			11,391,260				11,715,776				11,851,259				10,645,867				10,588,984
Total loans		$	20,246,944			$	20,795,641			$	21,025,173			$	19,127,195			$	18,845,346
Deposits assumed (including new deposits since acquisition date):
LegacyTexas		$	6,047,363			$	5,977,357			$	5,997,395			$	5,605,986			$	6,141,546
All other deposits			21,313,129				20,481,849				20,155,293				18,220,371				18,058,186
Total deposits		$	27,360,492			$	26,459,206			$	26,152,688			$	23,826,357			$	24,199,732

(1)	The LegacyTexas mortgage business was combined with the Prosperity Bank mortgage business in the second quarter of 2020. Accordingly, all loans held for sale will be reported only for Prosperity Bank going forward and not separately tracked for LegacyTexas.

 

Excluding loans acquired in the Merger and new production by the acquired lending operations since November 1, 2019, loans at December 31, 2020 grew $802.3 million or 7.6% compared with December 31, 2019 and decreased $324.5 million or 2.8% compared with September 30, 2020.

Excluding deposits assumed in the Merger and new deposits generated at the acquired banking centers since November 1, 2019, deposits at December 31, 2020 grew $3.255 billion or 18.0% compared with December 31, 2019 and grew $831.3 million or 4.1% compared with September 30, 2020.

Asset Quality

Nonperforming assets totaled $59.6 million or 0.20% of quarterly average interest-earning assets at December 31, 2020, compared with $62.9 million or 0.25% of quarterly average interest-earning assets at December 31, 2019, and $69.5 million or 0.24% of quarterly average interest-earning assets at September 30, 2020.

The allowance for credit losses on loans was $316.1 million or 1.56% of total loans at December 31, 2020 compared to $323.6 million or 1.56% of total loans at September 30, 2020 and $87.5 million or 0.46% of total loans at December 31, 2019. The allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program and PPP loans, was 1.92%⁽¹⁾ at December 31, 2020 compared with 1.94%⁽¹⁾ at September 30, 2020 and 0.51%⁽¹⁾ at December 31, 2019. On January 1, 2020, Prosperity adopted the measurement of current expected credit losses ("CECL"). Upon adoption of CECL, Prosperity recognized an increase in allowance for credit losses on loans of $108.7 million, of which $102.5 million was related to LegacyTexas and an increase in allowance for credit losses on off-balance sheet credit exposures of $24.4 million, of which $6.3 million was related to LegacyTexas, with a corresponding decrease in retained earnings (pre-tax). Additionally, Prosperity recognized an increase in the allowance for credit losses on loans of $131.8 million, of which $130.3 million was related to LegacyTexas, due to the reclass of purchased credit deteriorated ("PCD") discounts as a result of adopting CECL.  

There was no provision for credit losses for the three months ended December 31, 2020 compared with $1.7 million for the three months ended December 31, 2019 and $10.0 million for the three months ended September 30, 2020.  The provision for credit losses was $20.0 million for the year ended December 31, 2020 compared with $4.3 million for the year ended December 31, 2019.

Net charge-offs were $7.6 million for the three months ended December 31, 2020 compared with net charge-offs of $1.3 million for the three months ended December 31, 2019 and net charge-offs of $10.6 million for the three months ended September 30, 2020. Net charge-offs for the fourth quarter of 2020 included $4.8 million related to resolved PCD loans. These PCD loans had specific reserves of $9.6 million, of which $4.8 million was allocated to the charge-offs and $4.8 million was moved to the general reserve. Further, an additional $4.8 million of specific reserves on resolved PCD loans without any related charge-offs was released to the general reserve. Net charge-offs were $31.9 million for the year ended December 31, 2020 compared with $3.3 million for the year ended December 31, 2019. Net charge-offs for the year ended December 31, 2020 included $25.7 million related to resolved PCD loans. These PCD loans had specific reserves of $53.8 million, of which $25.7 million was allocated to the charge-offs and $28.1 million was moved to the general reserve.

Dividend

Prosperity Bancshares declared a first quarter cash dividend of $0.49 per share to be paid on April 1, 2021 to all shareholders of record as of March 15, 2021.

Stock Repurchase Program

On January 26, 2021, Prosperity Bancshares announced a stock repurchase program under which up to 5%, or approximately 4.65 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 26, 2022, at the discretion of management. Prosperity Bancshares repurchased 4.0 thousand shares of its common stock at an average weighted price of $50.89 during the three months ended December 31, 2020 and 2.2 million shares of its common stock at an average weighted price of $52.47 per share during the year ended December 31, 2020.

Redemption of Outstanding Subordinated Notes

On November 30, 2020, $125.0 million in subordinated notes assumed in the Merger were redeemed. The redemption was funded by dividends from Prosperity Bank.

COVID-19 Pandemic

In December 2019, a novel strain of coronavirus disease ("COVID-19") was first reported in Wuhan, Hubei Province, China. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. On March 13, 2020, the U.S. President announced a national emergency relating to the pandemic, which has since been extended. On October 7, 2020, the Governor of Texas extended the proclamation certifying that COVID-19 poses an imminent threat of disaster in the state and declaring a state of disaster for all counties in Texas and detailed the ongoing plan to open businesses and activities in Texas. On December 14, 2020, the Governor of Oklahoma extended the executive order that declared an emergency caused by the impending threat of COVID-19 to the people of Oklahoma. The Bank is considered an essential business and is closely monitoring the latest developments regarding COVID-19. The COVID-19 pandemic has resulted in significant economic uncertainties that have had, and could continue to have, an adverse impact on the Company's operating income, financial condition and cash flows. The extent to which the COVID-19 pandemic will impact the Company's operations and financial results during 2021 cannot be reasonably or reliably estimated at this time.

The health and safety of the Bank's associates, customers, and communities are of utmost importance; and the Company has taken additional measures in an effort to ensure this safety, including restricting nonessential employee travel, expanding remote access availability, distancing work stations, professional cleaning of its facilities, and signs and distancing reminders for customers in the banking centers. Further, the Company remains committed to providing uninterrupted and reliable banking service and has business continuity plans and protocols in place to ensure critical operations are able to continue without disruption.

In response to the COVID-19 pandemic, on March 27, 2020 the President of the United States signed the CARES Act into law. The CARES Act provides assistance for American workers, families and small businesses. The Paycheck Protection Program ("PPP"), established by the CARES Act and implemented by the Small Business Administration ("SBA") with support from the Department of the Treasury, provides small businesses with funds to pay payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities and are 100% guaranteed by the SBA. On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act of 2020 ("PPP Flexibility Act"), which modified the covered expense period from eight weeks to 24 weeks, extended the maturity date of the loans out to five years and gave greater flexibility to employers having difficulty hiring workers. PPP loans originated prior to June 5, 2020, have a two year term and earn interest at 1%. PPP loans originated on and after June 5, 2020, have a minimum five year term, which can be extended for up to five additional years if the lender and borrower both agree. The Consolidated Appropriations Act of 2021 ("CAA"), which was signed into law on December 27, 2020, extends certain provisions of the CARES Act, provides additional funding and contains new relief provisions. The CAA extended the PPP application period to March 31, 2021 and permits eligible companies to obtain a second PPP loan ("second draw") under terms specified in the CAA, with a maximum amount of $2.0 million and limit of one second draw loan.  Second draw PPP borrowers are eligible for loan forgiveness on the same terms as the first draw PPP borrowers, whose loans are eligible for early forgiveness by the SBA as provided by the CARES Act, the PPP Flexibility Act, the CAA and related regulations and guidance. Lenders that were permitted to approve first draw PPP loans are permitted to approve second draw loans. Additionally, the Bank is entitled to a per loan processing fee based on a tiered schedule ranging from 5% to 1% of the loan balance for the first draw PPP loans, and the CAA established pre-determined fees for processing and servicing the second draw PPP loans. In 2020, the Company obtained SBA approvals on approximately 11,900 loans totaling $1.397 billion and as of December 31, 2020, had an outstanding balance of 8,816 loans totaling $963.2 million after remittance. The Company has also provided relief to its loan customers through loan extensions and deferrals.

Merger with LegacyTexas Financial Group, Inc.

On November 1, 2019, Prosperity completed the merger with LegacyTexas and its wholly-owned subsidiary LegacyTexas Bank headquartered in Plano, Texas. LegacyTexas Bank operated 42 locations in 19 North Texas cities in and around the Dallas-Fort Worth area.  

Pursuant to the terms of the merger agreement, Prosperity issued 26,228,148 shares of Prosperity common stock with a closing price of $69.02 per share plus $318.0 million in cash, made up of $308.6 million in cash and $9.4 million in cash for taxes withheld, for all outstanding shares of LegacyTexas. This resulted in goodwill of $1.331 billion as of December 31, 2020, which was subject to subsequent fair value adjustments. During the second quarter of 2020, Prosperity completed the operational conversion of LegacyTexas Bank.

Conference Call

Prosperity's management team will host a conference call on Wednesday, January 27, 2021 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity's fourth quarter 2020 earnings. Individuals and investment professionals may participate in the call by dialing 877-883-0383 for domestic participants, or 412-902-6506 for international participants. The participant elite entry number is 9347138.

Alternatively, individuals may listen to the live webcast of the presentation by visiting Prosperity's website at www.prosperitybankusa.com. The webcast may be accessed from Prosperity's home page by selecting "Presentations, Webcast & Calls" from the menu on the Investor Relations link and following the instructions.

Non-GAAP Financial Measures

Prosperity's management uses certain non-GAAP financial measures to evaluate its performance. Specifically, Prosperity reviews diluted earnings per share excluding merger related expenses, net of tax, and NOL tax benefit; return on average assets excluding merger related expenses, net of tax, and NOL tax benefit; return on average common equity excluding merger related expenses, net of tax, and NOL tax benefit; return on average tangible common equity; return on average tangible common equity excluding merger related expenses, net of tax, and NOL tax benefit; tangible book value per share; the tangible equity to tangible assets ratio; allowance for credit losses to total loans excluding Warehouse Purchase Program and PPP loans; the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities; and the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities and merger related expenses, for internal planning and forecasting purposes. Prosperity believes these non-GAAP financial measures provide information useful to investors in understanding Prosperity's financial results and their presentation, together with the accompanying reconciliations, provides a more complete understanding of factors and trends affecting Prosperity's business and allows investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. Further, Prosperity believes that these non-GAAP financial measures provide useful information by excluding certain items that may not be indicative of its core operating earnings and business outlook. These non-GAAP financial measures should not be considered a substitute for, nor of greater importance than, GAAP basis financial measures and results; Prosperity strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. Please refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures to the nearest respective GAAP financial measures.

Prosperity Bancshares, Inc. ®

As of December 31, 2020, Prosperity Bancshares, Inc.^® is a $34.059 billion Houston, Texas based regional financial holding company providing personal banking services and investments to consumers and businesses throughout Texas and Oklahoma.  Founded in 1983, Prosperity believes in a community banking philosophy, taking care of customers, businesses and communities in the areas it serves by providing financial solutions to simplify everyday financial needs. In addition to offering traditional deposit and loan products, Prosperity offers digital banking solutions, credit and debit cards, mortgage services, retail brokerage services, trust and wealth management, and treasury management.

As of December 31, 2020, Prosperity operated 275 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 65 in the Dallas/Fort Worth area; 22 in the East Texas area; 29 in the Central Texas area including Austin and San Antonio; 34 in the West Texas area including Lubbock, Midland-Odessa and Abilene; 16 in the Bryan/College Station area; 6 in the Central Oklahoma area; 8 in the Tulsa, Oklahoma area.

Cautionary Notes on Forward-Looking Statements

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by Prosperity's management on the conference call may contain, forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are typically, but not exclusively, identified by the use in the statements of words or phrases such as "aim," "anticipate," "estimate," "expect," "goal," "guidance," "intend," "is anticipated," "is expected," "is intended," "objective," "plan," "projected," "projection," "will affect," "will be," "will continue," "will decrease," "will grow," "will impact," "will increase," "will incur," "will reduce," "will remain," "will result," "would be," variations of such words or phrases (including where the word "could," "may," or "would" is used rather than the word "will" in a phrase) and similar words and phrases indicating that the statement addresses some future result, occurrence, plan or objective. Forward-looking statements include all statements other than statements of historical fact, including forecasts or trends, and are based on current expectations, assumptions, estimates and projections about Prosperity Bancshares and its subsidiaries. These forward-looking statements may include information about Prosperity's possible or assumed future economic performance or future results of operations, including future revenues, income, expenses, provision for loan losses, provision for taxes, effective tax rate, earnings per share and cash flows and Prosperity's future capital expenditures and dividends, future financial condition and changes therein, including changes in Prosperity's loan portfolio and allowance for loan losses, future capital structure or changes therein, as well as the plans and objectives of management for Prosperity's future operations, future or proposed acquisitions, the future or expected effect of acquisitions on Prosperity's operations, results of operations, financial condition, and future economic performance, statements about the anticipated benefits of the proposed transaction, and statements about the assumptions underlying any such statement, as well as expectations regarding the effects of the COVID-19 pandemic on the Bank's operating income, financial condition and cash flows.  These forward–looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperity's control, which may cause actual results to differ materially from those expressed or implied by the forward-looking statements.  These risks and uncertainties include but are not limited to whether Prosperity can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks, including LegacyTexas; continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives.  Other risks include, but are not limited to: the possibility that credit quality could deteriorate; actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); the possibility that the anticipated benefits of an acquisition transaction, including the LegacyTexas transaction, are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of two companies or as a result of the strength of the economy and competitive factors generally; a deterioration or downgrade in the credit quality and credit agency ratings of the securities in Prosperity's securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate, interest rate and commodity price fluctuations; the effect, impact potential duration or other implications of the COVID-19 pandemic; and weather.  These and various other factors are discussed in Prosperity Bancshares' Annual Report on Form 10-K for the year ended December 31, 2019, Quarterly Report on Form 10-Q for the period ended September 30, 2020, and other reports and statements Prosperity Bancshares has filed with the Securities and Exchange Commission ("SEC"). Copies of the SEC filings for Prosperity Bancshares may be downloaded from the Internet at no charge from http://www.prosperitybankusa.com.

 

(1)	Refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.
(2)	Includes purchase accounting adjustments of $13.3 million, net of tax, primarily comprised of loan discount accretion of $16.1 million for the three months ended December 31, 2020.
(3)	Includes purchase accounting adjustments of $20.0 million, net of tax, primarily comprised of loan discount accretion of $23.7 million, and merger related expenses of $46.4 million for the three months ended December 31, 2019.
(4)	Includes purchase accounting adjustments of $18.7 million, net of tax, primarily comprised of loan discount accretion of $22.5 million for the three months ended September 30, 2020.
(5)	Includes purchase accounting adjustments of $76.5 million, net of tax, primarily comprised of loan discount accretion of $91.3 million, and merger related expenses of $8.0 million and a tax benefit for NOL of $20.1 million for the year ended December 31, 2020.
(6)	Includes purchase accounting adjustments of $22.9 million, net of tax, primarily comprised of loan discount accretion of $28.0 million, and merger related expenses of $46.4 million for the year ended December 31, 2019.

 

Bryan/College Station Area		Frisco-West		Kerens		Hempstead		98th Street
Bryan		Garland		Longview		Hitchcock		Avenue Q
Bryan-29th Street		Grapevine		Mount Vernon		Liberty		North University
Bryan-East		Grapevine Main		Palestine		Magnolia		Texas Tech Student Union
Bryan-North		Kiest		Rusk		Magnolia Parkway
Caldwell		Lake Highlands		Seven Points		Mont Belvieu		Midland
College Station		McKinney		Teague		Nederland		Wadley
Crescent Point		McKinney Eldorado		Tyler-Beckham		Needville		Wall Street
Hearne		McKinney Redbud		Tyler-South Broadway		Rosenberg
Huntsville		North Carrolton		Tyler-University		Shadow Creek		Odessa
Madisonville		Oak Cliff		Winnsboro		Spring		Grandview
Navasota		Park Cities				Tomball		Grant
New Waverly		Plano		Houston Area		Waller		Kermit Highway
Rock Prairie		Plano-West		Houston		West Columbia		Parkway
Southwest Parkway		Preston Forest		Aldine		Wharton
Tower Point		Preston Parker		Alief		Winnie		Other West Texas Area
Wellborn Road		Preston Royal		Bellaire		Wirt		Locations
		Red Oak		Beltway				Big Spring
Central Texas Area		Richardson		Clear Lake		South Texas Area -		Brownfield
Austin		Richardson-West		Copperfield		Corpus Christi		Brownwood
Allandale		Rosewood Court		Cypress		Calallen		Cisco
Cedar Park		The Colony		Downtown		Carmel		Comanche
Congress		Tollroad		Eastex		Northwest		Early
Lakeway		Trinity Mills		Fairfield		Saratoga		Floydada
Liberty Hill		Turtle Creek		First Colony		Timbergate		Gorman
Northland		West 15th Plano		Fry Road		Water Street		Levelland
Oak Hill		West Allen		Gessner				Littlefield
Research Blvd		Westmoreland		Gladebrook		Victoria		Merkel
Westlake		Wylie		Grand Parkway		Victoria Main		Plainview
				Heights		Victoria-Navarro		San Angelo
Other Central Texas Area		Fort Worth		Highway 6 West		Victoria-North		Slaton
Locations		Haltom City		Little York		Victoria Salem		Snyder
Bastrop		Hulen		Medical Center
Canyon Lake		Keller		Memorial Drive		Other South Texas Area		Oklahoma
Dime Box		Museum Place		Northside		Locations		Central Oklahoma Area
Dripping Springs		Renaissance Square		Pasadena		Alice		Oklahoma City
Elgin		Roanoke		Pecan Grove		Aransas Pass		23rd Street
Flatonia		Stockyards		Pin Oak		Beeville		Expressway
Georgetown				River Oaks		Colony Creek		I-240
Gruene		Other Dallas/Fort Worth Area		Sugar Land		Cuero		Memorial
Kingsland		Locations		SW Medical Center		Edna
La Grange		Arlington		Tanglewood		Goliad		Other Central Oklahoma Area
Lexington		Azle		The Plaza		Gonzales		Locations
New Braunfels		Ennis		Uptown		Hallettsville		Edmond
Pleasanton		Flower Mound		Waugh Drive		Kingsville		Norman
Round Rock		Gainesville		Westheimer		Mathis
San Antonio		Glen Rose		West University		Padre Island		Tulsa Area
Schulenburg		Granbury		Woodcreek		Palacios		Tulsa
Seguin		Grand Prairie				Port Lavaca		Garnett
Smithville		Jacksboro		Katy		Portland		Harvard
Thorndale		Mesquite		Cinco Ranch		Rockport		Memorial
Weimar		Muenster		Katy-Spring Green		Sinton		Sheridan
		Runaway Bay				Taft		S. Harvard
Dallas/Fort Worth Area		Sanger		The Woodlands		Yoakum		Utica Tower
Dallas		Waxahachie		The Woodlands-College Park		Yorktown		Yale
14th Street Plano		Weatherford		The Woodlands-I-45
Abrams Centre				The Woodlands-Research Forest		West Texas Area		Other Tulsa Area Locations
Addison		East Texas Area				Abilene		Owasso
Allen		Athens		Other Houston Area		Antilley Road
Balch Springs		Blooming Grove		Locations		Barrow Street
Camp Wisdom		Canton		Angleton		Cypress Street
Carrollton		Carthage		Bay City		Judge Ely
Cedar Hill		Corsicana		Beaumont		Mockingbird
Coppell		Crockett		Cleveland
East Plano		Eustace		East Bernard		Lubbock
Euless		Gilmer		El Campo		4th Street
Frisco		Grapeland		Dayton		66th Street
Frisco Gaylord		Gun Barrel City		Galveston		82nd Street
Frisco Warren		Jacksonville		Groves		86th Street

 

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (In thousands)
		Dec 31, 2020				Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019
Balance Sheet Data (at period end)
Loans held for sale		$	46,777			$	51,694			$	39,516			$	65,035			$	80,959
Loans held for investment			17,357,788				18,013,333				18,428,474				17,348,398				17,211,625
Loans held for investment - Warehouse Purchase Program			2,842,379				2,730,614				2,557,183				1,713,762				1,552,762
Total loans			20,246,944				20,795,641				21,025,173				19,127,195				18,845,346
Investment securities(A)			8,542,820				7,431,495				7,717,586				8,295,495				8,570,056
Federal funds sold			553				56,469				568				676				519
Allowance for credit losses(B)			(316,068)				(323,635)				(324,205)				(327,206)				(87,469)
Cash and due from banks			1,342,996				1,031,193				332,873				381,458				573,589
Goodwill			3,231,636				3,231,692				3,231,964				3,223,144				3,223,671
Core deposit intangibles, net			73,235				76,478				79,748				83,041				86,404
Other real estate owned			10,593				11,548				6,160				5,452				6,936
Fixed assets, net			323,572				325,994				324,975				327,293				326,832
Other assets			602,994				560,724				571,807				626,951				639,824
Total assets		$	34,059,275			$	33,197,599			$	32,966,649			$	31,743,499			$	32,185,708
Noninterest-bearing deposits		$	9,151,233			$	8,998,328			$	9,040,257			$	7,461,323			$	7,763,894
Interest-bearing deposits			18,209,259				17,460,878				17,112,431				16,365,034				16,435,838
Total deposits			27,360,492				26,459,206				26,152,688				23,826,357				24,199,732
Other borrowings			—				2,570				103,131				1,338,429				1,303,730
Securities sold under repurchase agreements			389,583				380,274				365,335				344,695				377,294
Subordinated notes			—				125,146				125,365				125,585				125,804
Allowance for credit losses on off-balance sheet credit exposures(B)			29,947				29,947				29,947				29,947				5,599
Other liabilities			148,584				165,579				242,061				222,912				202,714
Total liabilities			27,928,606				27,162,722				27,018,527				25,887,925				26,214,873
Shareholders' equity(C)			6,130,669				6,034,877				5,948,122				5,855,574				5,970,835
Total liabilities and equity		$	34,059,275			$	33,197,599			$	32,966,649			$	31,743,499			$	32,185,708

(A)	Includes $974, $(442), $(1,767), $(3,421) and$763 in unrealized gains (losses) on available for sale securities for the quarterly periods ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively.
(B)	ASU 2016-13 became effective for Prosperity on January 1, 2020.
(C)	Includes $770, $(349), $(1,396), $(2,703) and$602 in after-tax unrealized gains (losses) on available for sale securities for the quarterly periods ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively.

 

 

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (In thousands)
		Three Months Ended																				Year-to-Date
		Dec 31, 2020				Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Dec 31, 2020				Dec 31, 2019
Income Statement Data
Interest income:
Loans		$	241,625			$	244,255			$	242,772			$	247,243			$	222,910			$	975,895			$	621,443
Securities(D)			36,721				38,033				43,776				48,282				49,348				166,812				209,812
Federal funds sold and other earning assets			301				144				45				713				600				1,203				1,683
Total interest income			278,647				282,432				286,593				296,238				272,858				1,143,910				832,938
Interest expense:
Deposits			19,757				22,458				25,269				35,018				32,759				102,502				111,388
Other borrowings			33				52				533				2,932				6,115				3,550				21,323
Securities sold under repurchase agreements			224				309				337				757				879				1,627				3,383
Subordinated notes and trust preferred			999				1,500				1,499				1,500				1,075				5,498				1,075
Total interest expense			21,013				24,319				27,638				40,207				40,828				113,177				137,169
Net interest income			257,634				258,113				258,955				256,031				232,030				1,030,733				695,769
Provision for credit losses			—				10,000				10,000				—				1,700				20,000				4,300
Net interest income after provision for credit losses			257,634				248,113				248,955				256,031				230,330				1,010,733				691,469
Noninterest income:
Nonsufficient funds (NSF) fees			8,051				7,156				5,645				9,443				9,990				30,295				34,614
Credit card, debit card and ATM card income			8,193				8,315				7,263				7,474				7,728				31,245				26,867
Service charges on deposit accounts			6,046				5,920				5,790				6,104				5,597				23,860				20,604
Trust income			2,192				2,502				2,242				2,662				2,582				9,598				10,227
Mortgage income			3,989				2,958				1,820				2,010				2,455				10,777				5,006
Brokerage income			642				628				584				650				625				2,504				2,361
Bank owned life insurance income			1,252				1,449				1,508				1,545				1,502				5,754				5,426
Net (loss) gain on sale or write-down of assets			(675)				(528)				(3,945)				(385)				(1,870)				(5,533)				(1,813)
Other noninterest income			6,857				6,524				4,768				4,885				6,897				23,034				20,989
Total noninterest income			36,547				34,924				25,675				34,388				35,506				131,534				124,281
Noninterest expense:
Salaries and benefits			77,809				75,068				79,109				77,282				69,356				309,268				226,348
Net occupancy and equipment			8,223				8,644				9,190				8,980				7,420				35,037				23,985
Credit and debit card, data processing and software amortization			8,442				8,776				11,690				11,421				9,158				40,329				23,624
Regulatory assessments and FDIC insurance			2,670				2,512				2,601				2,078				2,095				9,861				8,608
Core deposit intangibles amortization			3,243				3,270				3,293				3,363				2,705				13,169				6,537
Depreciation			4,261				4,605				4,598				4,768				4,212				18,232				13,713
Communications			2,931				3,027				3,324				3,195				3,012				12,477				9,679
Other real estate expense			279				258				40				46				57				623				328
Net (gain) loss on sale or write-down of other real estate			(195)				(137)				4				(130)				(49)				(458)				(395)
Merger related expenses			—				—				7,474				544				46,402				8,018				46,402
Other noninterest expense			12,542				11,896				13,045				13,194				12,083				50,677				37,713
Total noninterest expense			120,205				117,919				134,368				124,741				156,451				497,233				396,542
Income before income taxes			173,976				165,118				140,262				165,678				109,385				645,034				419,208
Provision for income taxes			36,885				35,054				9,361				34,830				23,251				116,130				86,656
Net income available to common shareholders		$	137,091			$	130,064			$	130,901			$	130,848			$	86,134			$	528,904			$	332,552

(D)	Interest income on securities was reduced by net premium amortization of $11,509, $10,089, $9,224, $8,005 and $8,556 for the three-month periods ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively, and $38,827 and $30,779 for the years ended December 31, 2020 and December 31, 2019, respectively.

 

Prosperity Bancshares, Inc. ® Financial Highlights (Unaudited) (Dollars and share amounts in thousands, except per share data and market prices)
		Three Months Ended																				Year-to-Date
		Dec 31, 2020				Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Dec 31, 2020				Dec 31, 2019
Profitability
Net income (E) (F)		$	137,091			$	130,064			$	130,901			$	130,848			$	86,134			$	528,904			$	332,552
Basic earnings per share		$	1.48			$	1.40			$	1.41			$	1.39			$	1.01			$	5.68			$	4.52
Diluted earnings per share		$	1.48			$	1.40			$	1.41			$	1.39			$	1.01			$	5.68			$	4.52
Return on average assets (G)			1.63	%			1.58	%			1.61	%	(K)		1.67	%	(K)		1.19	%	(K)		1.62	%	(K)		1.38	%	(K)
Return on average common equity (G)			8.98	%			8.64	%			8.84	%	(K)		8.86	%	(K)		6.33	%	(K)		8.85	%	(K)		7.46	%	(K)
Return on average tangible common equity (G) (H)			19.57	%			19.19	%			19.98	%	(K)		20.16	%	(K)		12.50	%	(K)		19.83	%	(K)		14.23	%	(K)
Tax equivalent net interest margin (E) (F) (I)			3.49	%			3.57	%			3.69	%			3.81	%			3.66	%			3.64	%			3.32	%
Efficiency ratio (H) (J)			40.77	%			40.17	%			46.56	%	(L)		42.90	%	(L)		58.07	%	(L)		42.58	%	(L)		48.25	%	(L)
Liquidity and Capital Ratios
Equity to assets			18.00	%			18.18	%			18.04	%			18.45	%			18.55	%			18.00	%			18.55	%
Common equity tier 1 capital			13.74	%			13.17	%			12.29	%			12.27	%			12.30	%			13.74	%			12.30	%
Tier 1 risk-based capital			13.74	%			13.17	%			12.29	%			12.27	%			12.30	%			13.74	%			12.30	%
Total risk-based capital			14.23	%			14.28	%			13.36	%			12.81	%			12.70	%			14.23	%			12.70	%
Tier 1 leverage capital			9.67	%			9.57	%			9.41	%			9.49	%			10.42	%			9.67	%			10.37	%
Period end tangible equity to period end tangible assets (H)			9.19	%			9.12	%			8.89	%			8.96	%			9.21	%			9.19	%			9.21	%
Other Data
Weighted-average shares used in computing earnings per common share
Basic			92,559				92,656				92,658				94,371				85,573				93,058				73,524
Diluted			92,559				92,656				92,658				94,371				85,573				93,058				73,524
Period end shares outstanding			92,571				92,562				92,660				92,652				94,746				92,571				94,746
Cash dividends paid per common share		$	0.49			$	0.46			$	0.46			$	0.46			$	0.46			$	1.87			$	1.69
Book value per common share		$	66.23			$	65.20			$	64.19			$	63.20			$	63.02			$	66.23			$	63.02
Tangible book value per common share (H)		$	30.53			$	29.46			$	28.45			$	27.52			$	28.08			$	30.53			$	28.08
Common Stock Market Price
High		$	70.38			$	60.63			$	72.95			$	75.22			$	74.35			$	75.22			$	75.36
Low		$	50.43			$	48.80			$	43.68			$	42.02			$	66.60			$	42.02			$	61.65
Period end closing price		$	69.36			$	51.83			$	59.38			$	48.25			$	71.89			$	69.36			$	71.89
Employees – FTE (excluding overtime)			3,756				3,716				3,793				3,801				3,867				3,756				3,867
Number of banking centers			275				275				275				285				285				275				285
(E) Includes purchase accounting adjustments for the periods presented as follows:

	Three Months Ended										Year-to-Date
	Dec 31, 2020		Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Dec 31, 2020		Dec 31, 2019
Loan discount accretion
ASC 310-20	$13,514		$16,729		$17,999		$22,463		$17,834		$70,705		$21,194
ASC 310-30	$2,545		$5,805		$6,267		$6,019		$5,908		$20,636		$6,851
Securities net amortization	$66		$116		$203		$194		$201		$579		$847
Time deposits amortization	$790		$1,240		$1,793		$2,270		$1,709		$6,093		$1,709

(F)	Using effective tax rate of 21.2%, 21.2%, 6.7%, 21.0% and 21.3% for the three-month periods ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively, and 18.0% and 20.7% for the years ended December 31, 2020 and December 31, 2019, respectively.  Net income for the second quarter of 2020 includes a tax benefit for NOLs due to the CARES Act.
(G)	Interim periods annualized.
(H)	Refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.
(I)	Net interest margin for all periods presented is based on average balances on an actual 365 day or 366 day basis.
(J)	Calculated by dividing total noninterest expense, excluding credit loss provisions, by net interest income plus noninterest income, excluding net gains and losses on the sale or write down of assets and securities. Additionally, taxes are not part of this calculation.
(K)	For calculations of the annualized returns on average assets, average common equity and average tangible common equity excluding merger related expenses, net of tax, and NOL tax benefit, refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.
(L)	For calculations of the efficiency ratio excluding merger related expenses, net of tax, refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

 

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands)
YIELD ANALYSIS		Three Months Ended
		Dec 31, 2020												Sep 30, 2020												Dec 31, 2019
		Average Balance				Interest Earned/ Interest Paid				Average Yield/ Rate			(M)	Average Balance				Interest Earned/ Interest Paid				Average Yield/ Rate			(M)	Average Balance				Interest Earned/ Interest Paid				Average Yield/ Rate			(M)
Interest-earning assets:
Loans held for sale		$	42,856			$	348			3.23%				$	50,606			$	420			3.30%				$	57,171			$	570			3.96%
Loans held for investment			17,700,756				220,357			4.95%					18,267,559				225,596			4.91%					15,261,163				212,466			5.52%
Loans held for investment - Warehouse Purchase Program			2,603,455				20,920			3.20%					2,279,461				18,239			3.18%					996,903				9,874			3.93%
Total Loans			20,347,067				241,625			4.72%					20,597,626				244,255			4.72%					16,315,237				222,910			5.42%
Investment securities			8,001,679				36,721			1.83%			(N)		7,603,762				38,033			1.99%			(N)		8,598,736				49,348			2.28%			(N)
Federal funds sold and other earning assets			1,094,487				301			0.11%					618,228				144			0.09%					305,596				600			0.78%
Total interest-earning assets			29,443,233				278,647			3.76%					28,819,616				282,432			3.90%					25,219,569				272,858			4.29%
Allowance for credit losses(B)			(322,138)												(321,424)												(86,795)
Noninterest-earning assets			4,569,811												4,482,646												3,930,651
Total assets		$	33,690,906											$	32,980,838											$	29,063,425
Interest-bearing liabilities:
Interest-bearing demand deposits		$	5,545,298			$	5,301			0.38%				$	5,221,722			$	5,028			0.38%				$	4,233,880			$	5,755			0.54%
Savings and money market deposits			9,170,179				6,985			0.30%					8,937,751				7,833			0.35%					7,109,754				14,187			0.79%
Certificates and other time deposits			3,047,475				7,471			0.98%					3,103,290				9,597			1.23%					3,044,843				12,817			1.67%
Other borrowings			2,435				33			5.39%					13,898				52			1.49%					1,403,686				6,115			1.73%
Securities sold under repurchase agreements			376,779				224			0.24%					378,888				309			0.32%					351,580				879			0.99%
Subordinated notes and trust preferred			81,570				999			4.87%					125,256				1,500			4.76%					87,963				1,075			4.85%
Total interest-bearing liabilities			18,223,736				21,013			0.46%			(O)		17,780,805				24,319			0.54%			(O)		16,231,706				40,828			1.00%			(O)
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits			9,103,742												8,980,814												7,066,878
Allowance for credit losses on off-balance sheet credit exposures(B)			29,947												29,947												—
Other liabilities			224,907												167,532												320,855
Total liabilities			27,582,332												26,959,098												23,619,439
Shareholders' equity			6,108,574												6,021,740												5,443,986
Total liabilities and shareholders' equity		$	33,690,906											$	32,980,838											$	29,063,425
Net interest income and margin						$	257,634			3.48%								$	258,113			3.56%								$	232,030			3.65%
Non-GAAP to GAAP reconciliation:
Tax equivalent adjustment							664												658												668
Net interest income and margin (tax equivalent basis)						$	258,298			3.49%								$	258,771			3.57%								$	232,698			3.66%

(M)	Annualized and based on an actual 365 day or 366 day basis.
(N)	Yield on securities was impacted by net premium amortization of $11,509, $10,089 and $8,556 for the three-month periods ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively.
(O)	Total cost of funds, including noninterest bearing deposits, was 0.31%, 0.36% and 0.70% for the three-month periods ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively.

 

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands)
YIELD ANALYSIS		Year-to-Date
		Dec 31, 2020												Dec 31, 2019
		Average Balance				Interest Earned/ Interest Paid				Average Yield/ Rate			(P)	Average Balance				Interest Earned/ Interest Paid				Average Yield/ Rate			(P)
Interest-earning assets:
Loans held for sale		$	55,883			$	1,923			3.44%				$	32,065			$	1,457			4.54%
Loans held for investment			17,842,438				910,532			5.10%					11,688,754				610,112			5.22%
Loans held for investment - Warehouse Purchase Program			1,964,206				63,440			3.23%					251,274				9,874			3.93%
Total loans			19,862,527				975,895			4.91%					11,972,093				621,443			5.19%
Investment securities			8,022,205				166,812			2.08%			(Q)		8,958,182				209,812			2.34%			(Q)
Federal funds sold and other earning assets			529,075				1,203			0.23%					129,622				1,683			1.30%
Total interest-earning assets			28,413,807				1,143,910			4.03%					21,059,897				832,938			3.96%
Allowance for credit losses(B)			(324,308)												(86,616)
Noninterest-earning assets			4,555,851												3,114,426
Total assets		$	32,645,350											$	24,087,707
Interest-bearing liabilities:
Interest-bearing demand deposits		$	5,177,736			$	22,046			0.43%				$	3,917,413			$	23,982			0.61%
Savings and money market deposits			8,654,874				37,685			0.44%					5,941,929				50,681			0.85%
Certificates and other time deposits			3,194,274				42,771			1.34%					2,314,174				36,725			1.59%
Other borrowings			329,276				3,550			1.08%					971,409				21,323			2.20%
Securities sold under repurchase agreements			371,872				1,627			0.44%					307,277				3,383			1.10%
Subordinated notes and trust preferred			114,499				5,498			4.80%					21,991				1,075			4.89%
Total interest-bearing liabilities			17,842,531				113,177			0.63%			(R)		13,474,193				137,169			1.02%			(R)
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits			8,558,385												6,006,914
Allowance for credit losses on off-balance sheet credit exposures(B)			25,735												—
Other liabilities			244,047												148,079
Total liabilities			26,670,698												19,629,186
Shareholders' equity			5,974,652												4,458,521
Total liabilities and shareholders' equity			32,645,350											$	24,087,707
Net interest income and margin						$	1,030,733			3.63%								$	695,769			3.30%
Non-GAAP to GAAP reconciliation:
Tax equivalent adjustment							2,735												3,149
Net interest income and margin (tax equivalent basis)						$	1,033,468			3.64%								$	698,918			3.32%

(P)	Annualized and based on an actual 365 day or 366 day basis.
(Q)	Yield on securities was impacted by net premium amortization of $38,827 and $30,779 for the years ended December 31, 2020 and 2019, respectively.
(R)	Total cost of funds, including noninterest bearing deposits, was 0.43% and 0.70% for the years ended December 31, 2020 and 2019, respectively.

  

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands)
	Three Months Ended
	Dec 31, 2020				Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019
YIELD TREND (S)
Interest-Earning Assets:
Loans held for sale		3.23	%			3.30	%			3.32	%			3.80	%			3.96	%
Loans held for investment		4.95	%			4.91	%			5.06	%			5.51	%			5.52	%
Loans held for investment - Warehouse Purchase Program		3.20	%			3.18	%			3.10	%			3.62	%			3.93	%
Total loans		4.72	%			4.72	%			4.87	%			5.39	%			5.42	%
Investment securities (T)		1.83	%			1.99	%			2.19	%			2.30	%			2.28	%
Federal funds sold and other earning assets		0.11	%			0.09	%			0.10	%			1.28	%			0.78	%
Total interest-earning assets		3.76	%			3.90	%			4.08	%			4.40	%			4.29	%
Interest-Bearing Liabilities:
Interest-bearing demand deposits		0.38	%			0.38	%			0.38	%			0.57	%			0.54	%
Savings and money market deposits		0.30	%			0.35	%			0.41	%			0.71	%			0.79	%
Certificates and other time deposits		0.98	%			1.23	%			1.48	%			1.63	%			1.67	%
Other borrowings		5.39	%			1.49	%			0.45	%			1.42	%			1.73	%
Securities sold under repurchase agreements		0.24	%			0.32	%			0.37	%			0.83	%			0.99	%
Subordinated notes and trust preferred		4.87	%			4.76	%			4.80	%			4.80	%			4.85	%
Total interest-bearing liabilities		0.46	%			0.54	%			0.63	%			0.91	%			1.00	%
Net Interest Margin		3.48	%			3.56	%			3.68	%			3.80	%			3.65	%
Net Interest Margin (tax equivalent)		3.49	%			3.57	%			3.69	%			3.81	%			3.66	%

(S)	Annualized and based on average balances on an actual 365 day or 366 day basis.
(T)	Yield on securities was impacted by net premium amortization of $11,509, $10,089, $9,224, $8,005 and $8,556 for the three-month periods ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively.

 

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands)
		Three Months Ended
		Dec 31, 2020				Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019
Balance Sheet Averages
Loans held for sale		$	42,856			$	50,606			$	63,338			$	66,917			$	57,171
Loans held for investment			17,700,756				18,267,559				18,135,226				17,263,098				15,261,163
Loans held for investment - Warehouse Purchase Program			2,603,455				2,279,461				1,843,097				1,120,324				996,903
Total Loans			20,347,067				20,597,626				20,041,661				18,450,339				16,315,237
Investment securities			8,001,679				7,603,762				8,054,008				8,434,196				8,598,736
Federal funds sold and other earning assets			1,094,487				618,228				172,761				223,631				305,596
Total interest-earning assets			29,443,233				28,819,616				28,268,430				27,108,166				25,219,569
Allowance for credit losses(B)			(322,138)				(321,424)				(325,720)				(328,005)				(86,795)
Cash and due from banks			289,579				267,887				247,426				321,832				275,072
Goodwill			3,231,850				3,231,976				3,223,469				3,223,633				2,658,133
Core deposit intangibles, net			74,919				78,269				81,539				84,865				28,912
Other real estate			14,573				8,061				5,666				5,837				4,864
Fixed assets, net			325,485				325,958				327,811				325,337				308,692
Other assets			633,405				570,495				676,105				615,747				654,978
Total assets		$	33,690,906			$	32,980,838			$	32,504,726			$	31,357,412			$	29,063,425
Noninterest-bearing deposits		$	9,103,742			$	8,980,814			$	8,583,734			$	7,491,798			$	7,066,878
Interest-bearing demand deposits			5,545,298				5,221,722				4,949,023				4,990,376				4,233,880
Savings and money market deposits			9,170,179				8,937,751				8,537,352				7,965,440				7,109,754
Certificates and other time deposits			3,047,475				3,103,290				3,224,196				3,404,748				3,044,843
Total deposits			26,866,694				26,243,577				25,294,305				23,852,362				21,455,355
Other borrowings			2,435				13,898				474,867				832,961				1,403,686
Securities sold under repurchase agreements			376,779				378,888				365,077				366,615				351,580
Subordinated notes and trust preferred			81,570				125,256				125,475				125,694				87,963
Allowance for credit losses on off-balance sheet credit exposures(B)			29,947				29,947				29,947				13,009				5,673
Other liabilities			224,907				167,532				289,899				262,523				320,855
Shareholders' equity			6,108,574				6,021,740				5,925,156				5,904,248				5,443,986
Total liabilities and equity		$	33,690,906			$	32,980,838			$	32,504,726			$	31,357,412			$	29,063,425

 

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands)
		Dec 31, 2020							Sep 30, 2020							Jun 30, 2020							Mar 31, 2020							Dec 31, 2019
Period End Balances
Loan Portfolio
Commercial and industrial		$	2,210,003			10.9	%		$	2,171,302			10.5	%		$	2,214,742			10.5	%		$	2,500,110			13.1	%		$	2,507,318			13.3	%
Warehouse purchase program			2,842,379			14.0	%			2,730,614			13.1	%			2,557,183			12.2	%			1,713,762			9.0	%			1,552,762			8.2	%
Construction, land development and other land loans			1,956,960			9.7	%			2,081,762			10.0	%			2,033,037			9.7	%			2,051,021			10.7	%			2,064,167			11.0	%
1-4 family residential			4,253,331			21.0	%			4,189,852			20.1	%			4,184,972			19.9	%			3,993,138			20.9	%			3,880,382			20.6	%
Home equity			504,207			2.5	%			477,552			2.3	%			437,098			2.1	%			516,003			2.6	%			507,029			2.6	%
Commercial real estate (includes multi-family residential)			6,078,764			30.0	%			6,179,901			29.7	%			6,550,086			31.2	%			6,576,213			34.4	%			6,556,285			34.9	%
Agriculture (includes farmland)			581,352			2.9	%			598,972			2.9	%			612,694			2.9	%			635,295			3.3	%			680,855			3.6	%
Consumer and other			344,028			1.7	%			367,231			1.8	%			403,462			1.9	%			423,000			2.2	%			398,271			2.1	%
Energy			512,735			2.5	%			604,698			2.9	%			639,402			3.0	%			718,653			3.8	%			698,277			3.7	%
Paycheck Protection Program			963,185			4.8	%			1,393,757			6.7	%			1,392,497			6.6	%			—			—				—			—
Total loans		$	20,246,944						$	20,795,641						$	21,025,173						$	19,127,195						$	18,845,346
Deposit Types
Noninterest-bearing DDA		$	9,151,233			33.4	%		$	8,998,328			34.0	%		$	9,040,257			34.6	%		$	7,461,323			31.3	%		$	7,763,894			32.1	%
Interest-bearing DDA			5,899,051			21.6	%			5,297,802			20.0	%			5,130,495			19.6	%			4,980,090			20.9	%			5,100,938			21.1	%
Money market			6,381,014			23.3	%			6,324,127			23.9	%			6,148,206			23.5	%			5,341,525			22.4	%			5,099,024			21.1	%
Savings			2,863,086			10.5	%			2,772,492			10.5	%			2,722,718			10.4	%			2,716,247			11.4	%			2,756,297			11.3	%
Certificates and other time deposits			3,066,108			11.2	%			3,066,457			11.6	%			3,111,012			11.9	%			3,327,172			14.0	%			3,479,579			14.4	%
Total deposits		$	27,360,492						$	26,459,206						$	26,152,688						$	23,826,357						$	24,199,732
Loan to Deposit Ratio			74.0	%						78.6	%						80.4	%						80.3	%						77.9	%

 

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands)
Construction Loans
		Dec 31, 2020							Sep 30, 2020							Jun 30, 2020							Mar 31, 2020							Dec 31, 2019
Single family residential construction		$	579,761			29.6	%		$	654,933			31.5	%		$	710,401			34.9	%		$	655,191			31.9	%		$	614,647			29.7	%
Land development			103,307			5.3	%			114,937			5.5	%			114,748			5.6	%			110,853			5.4	%			88,529			4.3	%
Raw land			247,628			12.7	%			240,154			11.5	%			274,159			13.5	%			265,943			12.9	%			233,559			11.3	%
Residential lots			158,441			8.1	%			137,615			6.6	%			144,765			7.1	%			136,861			6.7	%			138,961			6.7	%
Commercial lots			114,427			5.8	%			109,569			5.3	%			103,267			5.1	%			106,036			5.2	%			101,960			4.9	%
Commercial construction and other			753,587			38.5	%			825,053			39.6	%			687,618			33.8	%			778,731			37.9	%			890,597			43.1	%
Net unaccreted discount			(191)							(499)							(1,921)							(2,594)							(4,086)
Total construction loans		$	1,956,960						$	2,081,762						$	2,033,037						$	2,051,021						$	2,064,167

 

Non-Owner Occupied Commercial Real Estate Loans by Metropolitan Statistical Area (MSA) as of December 31, 2020
	Houston				Dallas				Austin				OK City				Tulsa				Other (U)				Total
Collateral Type
Shopping center/retail	$	385,110			$	297,801			$	51,537			$	20,041			$	34,050			$	282,655			$	1,071,194
Commercial and industrial buildings		160,522				96,304				18,897				14,146				18,613				165,228				473,710
Office buildings		186,978				518,496				34,392				72,623				5,109				80,726				898,324
Medical buildings		36,975				38,031				3,512				24,195				24,583				58,597				185,893
Apartment buildings		388,780				503,734				26,505				15,439				8,942				194,904				1,138,304
Hotel		70,153				76,272				43,389				28,996				—				139,546				358,356
Other		59,870				29,318				27,869				8,667				2,738				57,518				185,980
Total	$	1,288,388			$	1,559,956			$	206,101			$	184,107			$	94,035			$	979,174			$	4,311,761		(V)

 

Acquired Loans
		Non-PCD Loans												PCD Loans												Total Acquired Loans
		Balance at Acquisition Date				Balance at Sep 30, 2020				Balance at Dec 31, 2020				Balance at Acquisition Date				Balance at Sep 30, 2020				Balance at Dec 31, 2020				Balance at Acquisition Date				Balance at Sep 30, 2020				Balance at Dec 31, 2020
Loan marks:
Acquired banks (W)		$	229,080			$	6,622			$	5,973			$	142,128			$	—			$	—			$	371,208			$	6,622			$	5,973
LegacyTexas merger(X)			116,519				46,493				33,614				177,924				16,760				14,216				294,443				63,253				47,830
Total			345,599				53,115				39,587				320,052				16,760		(Z)		14,216				665,651				69,875				53,803
Acquired portfolio loan balances:
Acquired banks (W)			5,690,998				281,766				266,036				275,221				4,061				3,523				5,966,219				285,827				269,559
LegacyTexas merger(X)			6,595,161				4,187,077				3,603,169				414,352				222,019				192,108				7,009,513				4,409,096				3,795,277
Total			12,286,159				4,468,843				3,869,205				689,573				226,080				195,631				12,975,732		(Y)		4,694,923				4,064,836
Acquired portfolio loan balances less loan marks		$	11,940,560			$	4,415,728			$	3,829,618			$	369,521			$	209,320			$	181,415			$	12,310,081			$	4,625,048			$	4,011,033

(U)	Includes other MSA and non-MSA regions.
(V)	Represents a portion of total commercial real estate loans of $6.079 billion as of December 31, 2020.
(W)	Includes Bank of Texas, Bank Arlington, American State Bank, Community National Bank, First Federal Bank Texas, Coppermark Bank, First Victoria National Bank, The F&M Bank & Trust Company and Tradition Bank.
(X)	The LegacyTexas merger was completed on November 1, 2019.  During the fourth quarter of 2019, LegacyTexas added $7.010 billion in loans with related purchase accounting adjustments of $294.4 million at acquisition date.
(Y)	Actual principal balances acquired.
(Z)	ASU 2016-13 became effective for Prosperity on January 1, 2020.

  

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands)
	Three Months Ended																				Year-to-Date
	Dec 31, 2020				Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Dec 31, 2020				Dec 31, 2019
Asset Quality
Nonaccrual loans	$	47,185			$	57,412			$	62,904			$	58,194			$	55,243			$	47,185			$	55,243
Accruing loans 90 or more days past due		1,699				462				8,691				3,255				441				1,699				441
Total nonperforming loans		48,884				57,874				71,595				61,449				55,684				48,884				55,684
Repossessed assets		93				120				187				278				324				93				324
Other real estate		10,593				11,548				6,160				5,452				6,935				10,593				6,935
Total nonperforming assets	$	59,570			$	69,542			$	77,942			$	67,179			$	62,943			$	59,570			$	62,943
Nonperforming assets:
Commercial and industrial (includes energy)	$	16,176			$	17,273			$	15,238			$	15,987			$	17,086			$	16,176			$	17,086
Construction, land development and other land loans		1,566				2,633				10,530				1,125				1,177				1,566				1,177
1-4 family residential (includes home equity)		25,830				29,953				29,812				28,996				26,453				25,830				26,453
Commercial real estate (includes multi-family residential)		12,315				16,069				20,748				20,155				18,031				12,315				18,031
Agriculture (includes farmland)		2,075				1,931				1,501				896				101				2,075				101
Consumer and other		1,608				1,683				113				20				95				1,608				95
Total	$	59,570			$	69,542			$	77,942			$	67,179			$	62,943			$	59,570			$	62,943
Number of loans/properties		208				198				213				198				236				208				236
Allowance for credit losses at end of period	$	316,068			$	323,635			$	324,205			$	327,206			$	87,469			$	316,068			$	87,469
Net charge-offs (recoveries):
Commercial and industrial (includes energy)	$	4,085			$	8,344			$	12,206			$	(28)			$	76			$	24,607			$	884
Construction, land development and other land loans		(110)				478				(6)				(12)				(6)				350				(5)
1-4 family residential (includes home equity)		1,982				252				51				5				20				2,290				19
Commercial real estate (includes multi-family residential)		626				676				—				(81)				254				1,221				251
Agriculture (includes farmland)		(4)				(17)				(3)				(1)				(18)				(25)				(972)
Consumer and other		988				837				753				918				965				3,496				3,094
Total	$	7,567			$	10,570			$	13,001			$	801			$	1,291			$	31,939			$	3,271
Asset Quality Ratios
Nonperforming assets to average interest-earning assets		0.20	%			0.24	%			0.28	%			0.25	%			0.25	%			0.21	%			0.30	%
Nonperforming assets to loans and other real estate		0.29	%			0.33	%			0.37	%			0.35	%			0.33	%			0.29	%			0.33	%
Net charge-offs to average loans (annualized)		0.15	%			0.21	%			0.26	%			0.02	%			0.03	%			0.16	%			0.03	%
Allowance for credit losses to total loans(AA)		1.56	%			1.56	%			1.54	%			1.71	%			0.46	%			1.56	%			0.46	%
Allowance for credit losses to total loans, excluding Warehouse Purchase Program loans and Paycheck Protection Program loans (H)(AA)		1.92	%			1.94	%			1.90	%			1.88	%			0.51	%			1.92	%			0.51	%
(AA)   ASU 2016-13 became effective for Prosperity on January 1, 2020.

 

Prosperity Bancshares, Inc.® Notes to Selected Financial Data (Unaudited) (Dollars and share amounts in thousands, except per share data)
NOTES TO SELECTED FINANCIAL DATA Prosperity's management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews diluted earnings per share excluding merger related expenses, net of tax, and NOL tax benefit; return on average assets excluding merger related expenses, net of tax, and NOL tax benefit; return on average common equity excluding merger related expenses, net of tax, and NOL tax benefit; return on average tangible common equity; return on average tangible common equity excluding merger related expenses, net of tax, and NOL tax benefit; tangible book value per share; the tangible equity to tangible assets ratio; allowance for credit losses to total loans excluding Warehouse Purchase Program and PPP loans; the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities; and the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities and merger related expenses, for internal planning and forecasting purposes. In addition, due to the application of purchase accounting, Prosperity uses certain non-GAAP financial measures and ratios that exclude the impact of these items to evaluate its allowance for credit losses to total loans (excluding Warehouse Purchase Program loans and PPP loans). Prosperity has included information below relating to these non-GAAP financial measures for the applicable periods presented.
		Three Months Ended																				Year-to-Date
		Dec 31, 2020				Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Dec 31, 2020				Dec 31, 2019
Reconciliation of diluted earnings per share to diluted earnings per share, excluding merger related expenses, net of tax, and NOL tax benefit:
Net income		$	137,091			$	130,064			$	130,901			$	130,848			$	86,134			$	528,904			$	332,552
Add: merger related expenses, net of tax(AB)			—				—				5,904				430				36,658				6,334				36,658
Less: NOL tax benefit (AC)			—				—				(20,145)				—				—				(20,145)				—
Net income, excluding merger related expenses, net of tax, and NOL tax benefit (AB) (AC)		$	137,091			$	130,064			$	116,660			$	131,278			$	122,792			$	515,093			$	369,210
Weighted average diluted shares outstanding			92,559				92,656				92,658				94,371				85,573				93,058				73,524
Merger related expenses per diluted share, net of tax(AB)		$	—			$	—			$	0.06			$	—			$	0.43			$	0.07			$	0.50
NOL tax benefit per diluted share (AB)		$	—			$	—			$	(0.22)			$	—			$	—			$	(0.22)			$	—
Diluted earnings per share, excluding merger related expenses, net of tax, and NOL tax benefit (AB) (AC)		$	1.48			$	1.40			$	1.25			$	1.39			$	1.44			$	5.54			$	5.02
Reconciliation of return on average assets to return on average assets excluding merger related expenses, net of tax, and NOL tax benefit:
Net income, excluding merger related expenses, net of tax, and NOL tax benefit (AB) (AC)		$	137,091			$	130,064			$	116,660			$	131,278			$	122,792			$	515,093			$	369,210
Average total assets		$	33,690,906			$	32,980,838			$	32,504,726			$	31,357,412			$	29,063,425			$	32,645,350			$	24,087,707
Return on average assets excluding merger related expenses, net of tax, and NOL tax benefit (G) (AB) (AC)			1.63	%			1.58	%			1.44	%			1.67	%			1.69	%			1.58	%			1.53	%
Reconciliation of return on average common equity to return on average common equity excluding merger related expenses, net of tax, and NOL tax benefit:
Net income, excluding merger related expenses, net of tax, and NOL tax benefit (AB) (AC)		$	137,091			$	130,064			$	116,660			$	131,278			$	122,792			$	515,093			$	369,210
Average shareholders' equity		$	6,108,574			$	6,021,740			$	5,925,156			$	5,904,248			$	5,443,986			$	5,974,652			$	4,458,521
Return on average common equity excluding merger related expenses, net of tax, and NOL tax benefit (G) (AB) (AC)			8.98	%			8.64	%			7.88	%			8.89	%			9.02	%			8.62	%			8.28	%
Reconciliation of return on average common equity to return on average tangible common equity:
Net income		$	137,091			$	130,064			$	130,901			$	130,848			$	86,134			$	528,904			$	332,552
Average shareholders' equity		$	6,108,574			$	6,021,740			$	5,925,156			$	5,904,248			$	5,443,986			$	5,974,652			$	4,458,521
Less: Average goodwill and other intangible assets			(3,306,769)				(3,310,245)				(3,305,008)				(3,308,498)				(2,687,045)				(3,307,639)				(2,122,154)
Average tangible shareholders' equity		$	2,801,805			$	2,711,495			$	2,620,148			$	2,595,750			$	2,756,941			$	2,667,013			$	2,336,367
Return on average tangible common equity (G)			19.57	%			19.19	%			19.98	%			20.16	%			12.50	%			19.83	%			14.23	%
(AB)   Calculated assuming a federal tax rate of 21.0%. (AC)   Net income for the second quarter of 2020 includes a tax benefit for NOLs due to the CARES Act.

 

		Three Months Ended																				Year-to-Date
		Dec 31, 2020				Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Dec 31,  2020				Dec 31, 2019
Reconciliation of return on average common equity to return on average tangible common equity excluding merger related expenses, net of tax, and NOL tax benefit:
Net income, excluding merger related expenses, net of tax, and NOL tax benefit (AB) (AC)		$	137,091			$	130,064			$	116,660			$	131,278			$	122,792			$	515,093			$	369,210
Average shareholders' equity		$	6,108,574			$	6,021,740			$	5,925,156			$	5,904,248			$	5,443,986			$	5,974,652			$	4,458,521
Less: Average goodwill and other intangible assets			(3,306,769)				(3,310,245)				(3,305,008)				(3,308,498)				(2,687,045)				(3,307,639)				(2,122,154)
Average tangible shareholders' equity		$	2,801,805			$	2,711,495			$	2,620,148			$	2,595,750			$	2,756,941			$	2,667,013			$	2,336,367
Return on average tangible common equity excluding merger related expenses, net of tax, and NOL tax benefit (G) (AB) (AC)			19.57	%			19.19	%			17.81	%			20.23	%			17.82	%			19.31	%			15.80	%
Reconciliation of book value per share to tangible book value per share:
Shareholders' equity		$	6,130,669			$	6,034,877			$	5,948,122			$	5,855,574			$	5,970,835			$	6,130,669			$	5,970,835
Less: Goodwill and other intangible assets			(3,304,871)				(3,308,170)				(3,311,712)				(3,306,185)				(3,310,075)				(3,304,871)				(3,310,075)
Tangible shareholders' equity		$	2,825,798			$	2,726,707			$	2,636,410			$	2,549,389			$	2,660,760			$	2,825,798			$	2,660,760
Period end shares outstanding			92,571				92,562				92,660				92,652				94,746				92,571				94,746
Tangible book value per share		$	30.53			$	29.46			$	28.45			$	27.52			$	28.08			$	30.53				28.08
Reconciliation of equity to assets ratio to period end tangible equity to period end tangible assets ratio:
Tangible shareholders' equity		$	2,825,798			$	2,726,707			$	2,636,410			$	2,549,389			$	2,660,760			$	2,825,798			$	2,660,760
Total assets		$	34,059,275			$	33,197,599			$	32,966,649			$	31,743,499			$	32,185,708			$	34,059,275			$	32,185,708
Less: Goodwill and other intangible assets			(3,304,871)				(3,308,170)				(3,311,712)				(3,306,185)				(3,310,075)				(3,304,871)				(3,310,075)
Tangible assets		$	30,754,404			$	29,889,429			$	29,654,937			$	28,437,314			$	28,875,633			$	30,754,404			$	28,875,633
Period end tangible equity to period end tangible assets ratio			9.19	%			9.12	%			8.89	%			8.96	%			9.21	%			9.19	%			9.21	%
Reconciliation of allowance for credit losses to total loans to allowance for credit losses to total loans, excluding Warehouse Purchase Program and Paycheck Protection Program loans:
Allowance for credit losses (AA)		$	316,068			$	323,635			$	324,205			$	327,206			$	87,469			$	316,068			$	87,469
Total loans		$	20,246,944			$	20,795,641			$	21,025,173			$	19,127,195			$	18,845,346			$	20,246,944			$	18,845,346
Less: Warehouse Purchase Program loans			(2,842,379)				(2,730,614)				(2,557,183)				(1,713,762)				(1,552,762)				(2,842,379)				1,552,762
Less: Paycheck Protection Program loans			(963,185)				(1,393,757)				(1,392,497)				—				—				(963,185)				—
Total loans less Warehouse Purchase Program and Paycheck Protection Program loans		$	16,441,380			$	16,671,270			$	17,075,493			$	17,413,433			$	17,292,584			$	16,441,380			$	10,588,437
Allowance for credit losses to total loans, excluding Warehouse Purchase Program and Paycheck Protection Program loans			1.92	%			1.94	%			1.90	%			1.88	%			0.51	%			1.92	%			0.83	%
Reconciliation of efficiency ratio to efficiency ratio, excluding net gains and losses on the sale of assets and taxes:
Noninterest expense		$	120,205			$	117,919			$	134,368			$	124,741			$	156,451			$	497,233			$	396,542
Net interest income		$	257,634			$	258,113			$	258,955			$	256,031			$	232,030			$	1,030,733			$	695,769
Noninterest income			36,547				34,924				25,675				34,388				35,506				131,534				124,281
Less: net (loss) gain on sale or write down of assets			(675)				(528)				(3,945)				(385)				(1,870)				(5,533)				(1,813)
Noninterest income excluding net gains and losses on the sale or write down of assets and securities			37,222				35,452				29,620				34,773				37,376				137,067				126,094
Total income excluding net gains and losses on the sale or write down of assets and taxes		$	294,856			$	293,565			$	288,575			$	290,804			$	269,406			$	1,167,800			$	821,863
Efficiency ratio, excluding net gains and losses on the sale or write down of assets and taxes			40.77	%			40.17	%			46.56	%			42.90	%			58.07	%			42.58	%			48.25	%

 

		Three Months Ended																				Year-to-Date
		Dec 31, 2020				Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Dec 31, 2020				Dec 31, 2019
Reconciliation of efficiency ratio to efficiency ratio, excluding net gains and losses on the sale of assets, taxes and merger related expenses:
Noninterest expense		$	120,205			$	117,919			$	134,368			$	124,741			$	156,451			$	497,233			$	396,542
Less: merger related expenses			—				—				7,474				544				46,402				8,018				46,402
Noninterest expense excluding merger related expenses		$	120,205			$	117,919			$	126,894			$	124,197			$	110,049			$	489,215			$	350,140
Net interest income		$	257,634			$	258,113			$	258,955			$	256,031			$	232,030			$	1,030,733			$	695,769
Noninterest income			36,547				34,924				25,675				34,388				35,506				131,534				124,281
Less: net (loss) gain on sale or write down of assets			(675)				(528)				(3,945)				(385)				(1,870)				(5,533)				(1,813)
Noninterest income excluding net gains and losses on the sale or write down of assets and taxes			37,222				35,452				29,620				34,773				37,376				137,067				126,094
Total income excluding net gains and losses on the sale or write down of assets and taxes		$	294,856			$	293,565			$	288,575			$	290,804			$	269,406			$	1,167,800			$	821,863
Efficiency ratio, excluding net gains and losses on the sale or write down of assets, taxes and merger related expenses			40.77	%			40.17	%			43.97	%			42.71	%			40.85	%			41.89	%			42.60	%

 

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SOURCE Prosperity Bancshares, Inc.

FAQ

What are Prosperity Bancshares' Q4 2020 earnings results?

Prosperity Bancshares reported a net income of $137.1 million and earnings per diluted share of $1.48 for Q4 2020.

How much did Prosperity Bancshares' deposits increase in Q4 2020?

Deposits increased by $901.3 million or 3.4% during Q4 2020.

What are the financial challenges facing Prosperity Bancshares?

The bank faces challenges such as potential higher tax rates and continued low interest rates impacting net interest margin.

What was Prosperity Bancshares' full-year net income for 2020?

Full-year net income for 2020 amounted to $528.9 million, a 59% increase from the previous year.