Prosperity Bancshares, Inc.® Reports Second Quarter 2020 Earnings

Rhea-AI Summary

Prosperity Bancshares (NYSE: PB) reported a net income of $130.9 million for Q2 2020, up 59.1% from $82.3 million in Q2 2019. Diluted earnings per share (EPS) increased to $1.41 from $1.18. The results include a $20.1 million tax benefit due to net operating losses from the CARES Act. Loans rose 9.9% and deposits increased 9.8% due to Paycheck Protection Program (PPP) loans. However, merger-related charges were $7.5 million. Nonperforming assets stood at 0.28% of average interest-earning assets. Prosperity remains optimistic about future performance.

Positive

• Net income increased by $48.6 million or 59.1% year-over-year.
• Diluted earnings per share rose by 19.5% to $1.41.
• Loans increased 9.9% due to PPP loans, totaling $1.898 billion.
• Deposits grew by $2.326 billion or 9.8%.
• Operational integration of LegacyTexas was completed on schedule.

Negative

• Merger-related charges totaled $7.5 million.
• Noninterest income decreased by 14.3% compared to Q2 2019.
• Noninterest expense rose by 66.3% year-over-year.

HOUSTON, July 29, 2020 /PRNewswire/ -- Prosperity Bancshares, Inc.^® (NYSE: PB), the parent company of Prosperity Bank^® (collectively, "Prosperity"), reported net income for the quarter ended June 30, 2020 of  $130.9 million compared with $82.3 million for the same period in 2019. Net income per diluted common share was $1.41 compared with $1.18 for the same period in 2019.  The second quarter of 2020 includes a tax benefit for net operating losses ("NOLs") of $20.1 million, or $0.22⁽¹⁾ per diluted common share, as a result of the enactment of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The CARES Act permits a five year carryback period for NOLs, which allowed Prosperity to generate an anticipated tax refund and income tax benefit resulting from the tax rate differential between the current statutory tax rate of 21% and the 35% statutory tax rate in prior years during the carryback period.

During the second quarter of 2020, Prosperity incurred merger related charges of $7.5 million, or $0.06⁽¹⁾ per diluted common share. Additionally, loans increased 9.9% during the second quarter 2020 and nonperforming assets remain low at 0.28% of second quarter average interest-earning assets. On November 1, 2019, LegacyTexas Financial Group, Inc. ("LegacyTexas") merged with Prosperity Bancshares and LegacyTexas Bank merged with Prosperity Bank (collectively, the "Merger"). During the second quarter of 2020, Prosperity completed the operational conversion of LegacyTexas Bank.

"We are pleased with our second quarter 2020 results and with completing the operational integration of Legacy on schedule in early June. The team members from Legacy "now Prosperity" have been excellent and we could not have achieved such a smooth integration without their commitment and efforts. I want to thank all of our team members who worked many hours to make this happen," said David Zalman, Prosperity's Senior Chairman and Chief Executive Officer.

"The second quarter 2020 diluted earnings per share of $1.41 includes a $0.22 income tax benefit, a $0.06 charge for merger related expenses and a $0.03 charge for the write down of fixed assets related to the Merger and CRA funds," continued Zalman.

"During the second quarter, we saw a $1.898 billion, or 9.9%, increase in loans, mostly related to loans made under the SBA Paycheck Protection Program (PPP). We approved 11,972 PPP loans for a total of $1.411 billion. These loans were important to our customers, enabling them to remain in business at a time they were either operating at a reduced capacity or temporarily shut down. Deposits increased $2.326 billion, or 9.8%, during the quarter, related to funds from the PPP loans and decreased customer spending," added Zalman.

"We continue to provide relief to our loan customers through loan extensions and deferrals when possible. For the second quarter of 2020, net charge offs were $13.0 million. Of these charge-offs, $12.4 million were related to PCD loans with specific reserves of $28.5 million that we acquired in the Merger. Further, $16.1 million in specific reserves were released to the general reserve in addition to the $10.0 million provision for loan losses for the second quarter," stated Zalman.

"The Blue-Chip Consensus forecast estimates that fourth quarter 2020 GDP will end at (5.6%) compared with fourth quarter 2019, however, they are forecasting a 4.8% GDP for fourth quarter 2021 compared with fourth quarter 2020. They are also forecasting an unemployment rate of 9.4% for the fourth quarter 2020 compared with an unemployment rate of 6.9% for fourth quarter 2021. Based on these estimates, 2021 looks brighter. We are positive about our company's future. While our operating environment and economy is changing frequently, we remain focused on addressing whatever comes our way and taking care of our customers and associates," concluded Zalman.

Results of Operations for the Three Months Ended June 30, 2020

Net income was $130.9 million⁽²⁾ for the three months ended June 30, 2020 compared with $82.3 million⁽³⁾ for the same period in 2019, an increase of $48.6 million or 59.1%. Net income per diluted common share was $1.41 for the three months ended June 30, 2020 compared with $1.18 for the same period in 2019, an increase of 19.5%.  Net income for the second quarter of 2020 includes a tax benefit for NOLs of $20.1 million and merger related expenses of $7.5 million. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended June 30, 2020 were 1.61%, 8.84% and 19.98%⁽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 three months ended June 30, 2020 were 1.44%⁽¹⁾, 7.88%⁽¹⁾ and 17.81%⁽¹⁾, respectively.  Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 46.56%⁽¹⁾ for the three months ended June 30, 2020. Excluding merger related expenses of $7.5 million, the efficiency ratio was 43.97%⁽¹⁾ for the three months ended June 30, 2020.

Net interest income before provision for credit losses for the three months ended June 30, 2020 was $259.0 million compared with $154.8 million for the same period in 2019, an increase of $104.1 million or 67.2%. The increase was primarily due to the Merger and the increase in loan discount accretion of $23.0 million. On a linked quarter basis, net interest income before provision for credit losses was $259.0 million compared with $256.0 million for the three months ended March 31, 2020, an increase of $2.9 million or 1.1%. The increase was primarily due to a decrease in interest expense partially offset by a decrease in loan discount accretion of $4.2 million and interest income on securities.

The net interest margin on a tax equivalent basis was 3.69% for the three months ended June 30, 2020 compared with 3.16% for the same period in 2019. The change was primarily due to increased interest-earning assets related to the Merger and $23.0 million increase in loan discount accretion. On a linked quarter basis, the net interest margin on a tax equivalent basis was 3.69% for the three months ended June 30, 2020 compared with 3.81% for the three months ended March 31, 2020. The change was primarily due to a $4.2 million decrease in loan discount accretion.

Noninterest income was $25.7 million for the three months ended June 30, 2020 compared with $30.0 million for the same period in 2019, a decrease of $4.3 million or 14.3%. This decrease was primarily due to a loss on write-down of assets of $4.0 million and a decrease in nonsufficient funds ("NSF") fees, partially offset by an increase in mortgage income and credit card, debit card and ATM card income primarily due to the Merger. On a linked quarter basis, noninterest income decreased $8.7 million or 25.3% to $25.7 million compared with $34.4 million for the three months ended March 31, 2020. This decrease was primarily due to a loss on write-down of assets of $4.0 million and a decrease in NSF fees. NSF fees and credit card, debit card and ATM income were negatively impacted by the pandemic.

Noninterest expense was $134.4 million for the three months ended June 30, 2020 compared with $80.8 million for the same period in 2019, an increase of $53.5 million or 66.3%, primarily due to the Merger and merger related expenses of $7.5 million. On a linked quarter basis, noninterest expense increased $9.6 million or 7.7% to $134.4 million compared with $124.7 million for the three months ended March 31, 2020. The increase was primarily due to increases in merger related expenses and salaries and benefits.

Results of Operations for the Six Months Ended June 30, 2020

Net income was $261.7 million⁽⁴⁾ for the six months ended June 30, 2020 compared with $164.7 million⁽⁵⁾ for the same period in 2019, an increase of $97.1 million or 59.0%. Net income per diluted common share was $2.80 for the six months ended June 30, 2020 compared with $2.36 for the same period in 2019, an increase of 18.6%. Net income for the six months ended June 30, 2020 includes a tax benefit for NOLs of $20.1 million and merger related expenses of $8.0 million. Annualized returns on average assets, average common equity and average tangible common equity for the six months ended June 30, 2020 were 1.64%, 8.85% and 20.07%⁽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 six months ended June 30, 2020 were 1.55%⁽¹⁾, 8.38%⁽¹⁾ and 19.01%⁽¹⁾, respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale of assets and taxes) was 44.72%⁽¹⁾ for the six months ended June 30, 2020. Excluding merger related expenses, the efficiency ratio was 43.34%⁽¹⁾ for the six months ended June 30, 2020.

Net interest income before provision for credit losses for the six months ended June 30, 2020 was $515.0 million compared with $309.7 million for the same period in 2019, an increase of $205.2 million or 66.3%. This change was primarily due to the Merger and the increase in loan discount accretion of $49.7 million. 

The net interest margin on a tax equivalent basis for the six months ended June 30, 2020 was 3.75% compared with 3.18% for the same period in 2019. This change was primarily due to increased interest-earning assets related to the Merger and the increase in loan discount accretion of $49.7 million.

Noninterest income was $60.1 million for the six months ended June 30, 2020 compared with $58.1 million for the same period in 2019, an increase of $2.0 million or 3.4%. This increase was primarily due to an increase in credit card, debit card and ATM card income, mortgage income and service charges on deposit accounts due to the Merger, partially offset by a net loss on write-down of assets of $4.0 million.

Noninterest expense was $259.1 million for the six months ended June 30, 2020 compared with $159.4 million for the same period in 2019, an increase of $99.7 million or 62.6%. The change was primarily due to the increase in salaries and benefits, credit and debit card, data processing and software amortization, net occupancy and equipment and other noninterest expense due to the Merger and $8.0 million of merger related expenses.

Balance Sheet Information

At June 30, 2020, Prosperity had $32.967 billion in total assets, an increase of $10.592 billion or 47.3% compared with $22.375 billion at June 30, 2019.

Loans at June 30, 2020 were $21.025 billion, an increase of $10.438 billion or 98.6%, compared with $10.587 billion at June 30, 2019. Linked quarter loans increased $1.898 billion or 9.9% from $19.127 billion at March 31, 2020, of which $1.392 billion were Paycheck Protection Program ("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 June 30, 2020, oil and gas loans totaled $639.4 million (net of discount and excluding PPP loans totaling $118.6 million) or 3.0% of total loans, of which $394.4 million were production loans and $245.0 million were servicing loans, compared with total oil and gas loans of $367.0 million (net of discount) or 3.5% of total loans at June 30, 2019, of which $95.0 million were production loans and $272.0 million were servicing loans. In addition, as of June 30, 2020, Prosperity had total unfunded commitments to oil and gas companies of $276.9 million compared with total unfunded commitments to oil and gas companies of $220.4 million as of June 30, 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 June 30, 2020, loans to hotels totaled $384.8 million (excluding PPP loans totaling $8.8 million) or 1.8% of total loans and loans to restaurants totaled $212.3 million (excluding PPP loans totaling $110.7 million) or 1.0% of total loans.

Deposits at June 30, 2020 were $26.153 billion, an increase of $9.265 billion or 54.9%, compared with $16.888 billion at June 30, 2019. Linked quarter deposits increased $2.326 billion or 9.8% from $23.826 billion at March 31, 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)
	Jun 30, 2020			Mar 31, 2020			Dec 31, 2019			Sep 30, 2019			Jun 30, 2019
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Loans acquired (including new production since acquisition date):
LegacyTexas:
Loans held for sale	$	15,725		$	54,229		$	66,745		$	—		$	—
Loans held for investment		6,601,006			6,713,337			6,636,855			—			—
Loans held for investment - Warehouse Purchase Program		2,557,183			1,713,762			1,552,762			—			—
All other loans		11,851,259			10,645,867			10,588,984			10,673,345			10,587,375
Total loans	$	21,025,173		$	19,127,195		$	18,845,346		$	10,673,345		$	10,587,375
Deposits assumed (including new deposits since acquisition date):
LegacyTexas	$	5,997,395		$	5,605,986		$	6,141,546		$	—		$	—
All other deposits		20,155,293			18,220,371			18,058,186			16,929,920			16,887,629
Total deposits	$	26,152,688		$	23,826,357		$	24,199,732		$	16,929,920		$	16,887,629

Excluding loans acquired in the Merger and new production by the acquired lending operations since November 1, 2019, loans at June 30, 2020 grew $1.264 billion or 11.9% compared with June 30, 2019 and grew $1.205 billion or 11.3% compared with March 31, 2020.

Excluding deposits assumed in the Merger and new deposits generated at the acquired banking centers since November 1, 2019, deposits at June 30, 2020 grew $3.268 billion or 19.3% compared with June 30, 2019 and grew $1.935 billion or 10.6% compared with March 31, 2020.

Asset Quality

Nonperforming assets totaled $77.9 million or 0.28% of quarterly average interest-earning assets at June 30, 2020, compared with $41.6 million or 0.21% of quarterly average interest-earning assets at June 30, 2019, and $67.2 million or 0.25% of quarterly average interest-earning assets at March 31, 2020.

The allowance for credit losses on loans was $324.2 million or 1.54% of total loans at June 30, 2020 compared to $327.2 million or 1.71% of total loans at March 31, 2020 and $87.0 million or 0.82% of total loans at June 30, 2019. The allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program and PPP loans, was 1.90%⁽¹⁾ at June 30, 2020 compared with 1.88%⁽¹⁾ at March 31, 2020 and 0.82%⁽¹⁾ at June 30, 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.  

The provision for credit losses was $10.0 million for the three months ended June 30, 2020 compared with $800 thousand for the three months ended June 30, 2019 and no provision for the three months ended March 31, 2020.  The provision for credit losses was $10.0 million for the six months ended June 30, 2020 compared with $1.5 million for the six months ended June 30, 2019.

Net charge-offs were $13.0 million for the three months ended June 30, 2020 compared with net recoveries of $115 thousand for the three months ended June 30, 2019 and net charge-offs of $801 thousand for the three months ended March 31, 2020. Net charge-offs for the second quarter of 2020 were primarily due to $12.4 million related to PCD loans. These PCD loans had specific reserves of $28.5 million, of which $12.4 million was allocated to the charge-offs.  Further, $16.1 million of PCD specific reserves was moved to the general reserve. Net charge-offs were $13.8 million for the six months ended June 30, 2020 compared with $934 thousand for the six months ended June 30, 2019.

Dividend

Prosperity Bancshares declared a third quarter cash dividend of $0.46 per share to be paid on October 1, 2020 to all shareholders of record as of September 15, 2020.

Stock Repurchase Program

On January 29, 2020, Prosperity Bancshares announced a stock repurchase program under which up to 5%, or approximately 4.7 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 28, 2021, at the discretion of management. Prosperity Bancshares repurchased zero shares of its common stock during the three months ended June 30, 2020 and 2.1 million shares of its common stock at an average weighted price of $52.59 per share during the six months ended June 30, 2020.

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, the U.S. President announced a national emergency relating to the pandemic and has since been extended. On July 10, the Texas governor 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. Prosperity Bank (the "Bank") is considered an essential business and is closely monitoring the latest developments regarding COVID-19. The health and safety of our associates, customers, and communities are of utmost importance, and the Bank remains committed to providing uninterrupted service. Additionally, the Bank has continuity plans in place to ensure critical operations are able to continue without disruption. The COVID-19 pandemic has resulted in significant economic uncertainties that could negatively impact Prosperity's operating income, financial condition and cash flows.

In response to the COVID-19 pandemic, the CARES Act was signed into law on March 27, 2020 by the President of the United States. The CARES Act provides assistance for American workers, families and small businesses. The Paycheck Protection Program ("PPP"), established by the CARES Act, is implemented by the Small Business Administration ("SBA") with support from the Department of the Treasury. This program provides small businesses with funds to pay payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. 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 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 five year term. On July 4, 2020, the President amended the CARES Act to extend the PPP application period for an additional five weeks. The loans are eligible for early forgiveness by the SBA as provided by the CARES Act and the PPP Flexibility Act and related regulations and guidance. 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. As of July 7, 2020, the Company has obtained SBA approvals on approximately 11,972 loans totaling $1.411 billion. 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 June 30, 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, July 29, 2020 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity's second 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 5164054.

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 carryback; return on average assets excluding merger related expenses, net of tax, and NOL carryback; return on average common equity excluding merger related expenses, net of tax, and NOL carryback; tangible book value per share, return on average tangible common equity, the tangible equity to tangible assets ratio and return on average tangible common equity, all excluding merger related expenses, net of tax, and NOL carryback; allowance for credit losses to total loans excluding Warehouse Purchase Program and PPP loans; 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 that 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 June 30, 2020, Prosperity Bancshares, Inc.^® is a $32.967 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 cash management.

As of June 30, 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 March 31, 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 $20.4 million, net of tax, primarily comprised of loan discount accretion of $24.3 million, and merger related expenses of $7.5 million for the three months ended June 30, 2020.
(3)	Includes purchase accounting adjustments of $776 thousand, net of tax, primarily comprised of loan discount accretion of $1.2 million for the three months ended June 30, 2019.
(4)	Includes purchase accounting adjustments of $44.6 million, net of tax, primarily comprised of loan discount accretion of $52.7 million, and merger related expenses of $8.0 million for the six months ended June 30, 2020.
(5)	Includes purchase accounting adjustments of $2.0 million, net of tax, primarily comprised of loan discount accretion of $3.0 million for the six months ended June 30, 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		Grapevine Motor		Rusk		Magnolia Parkway
Caldwell		Kiest		Seven Points		Mont Belvieu		Midland
College Station		Lake Highlands		Teague		Nederland		Wadley
Crescent Point		McKinney		Tyler-Beckham		Needville		Wall Street
Hearne		McKinney Eldorado		Tyler-South Broadway		Rosenberg
Huntsville		McKinney Redbud		Tyler-University		Shadow Creek		Odessa
Madisonville		North Carrolton		Winnsboro		Spring		Grandview
Navasota		Oak Cliff				Tomball		Grant
New Waverly		Park Cities		Houston Area		Waller		Kermit Highway
Rock Prairie		Plano		Houston		West Columbia		Parkway
Southwest Parkway		Plano-West		Aldine		Wharton
Tower Point		Preston Forest		Alief		Winnie		Other West Texas Area
Wellborn Road		Preston Parker		Bellaire		Wirt		Locations
		Preston Royal		Beltway				Big Spring
Central Texas Area		Red Oak		Clear Lake		South Texas Area -		Brownfield
Austin		Richardson		Copperfield		Corpus Christi		Brownwood
Allandale		Richardson-West		Cypress		Calallen		Cisco
Cedar Park		Rosewood Court		Downtown		Carmel		Comanche
Congress		The Colony		Eastex		Northwest		Early
Lakeway		Tollroad		Fairfield		Saratoga		Floydada
Liberty Hill		Trinity Mills		First Colony		Timbergate		Gorman
Northland		Turtle Creek		Fry Road		Water Street		Levelland
Oak Hill		West 15th Plano		Gessner				Littlefield
Research Blvd		West Allen		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)
	Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Jun 30, 2019
Balance Sheet Data (at period end)
Loans held for sale	$	39,516			$	65,035			$	80,959			$	20,284			$	20,315
Loans held for investment		18,428,474				17,348,398				17,211,625				10,653,061				10,567,060
Loans held for investment - Warehouse Purchase Program		2,557,183				1,713,762				1,552,762				—				—
Total loans		21,025,173				19,127,195				18,845,346				10,673,345				10,587,375
Investment securities(A)		7,717,586				8,295,495				8,570,056				8,495,206				8,951,940
Federal funds sold		568				676				519				521				555
Allowance for credit losses(B)		(324,205)				(327,206)				(87,469)				(87,061)				(87,006)
Cash and due from banks		332,873				381,458				573,589				420,359				302,069
Goodwill		3,231,964				3,223,144				3,223,671				1,900,845				1,900,845
Core deposit intangibles, net		79,748				83,041				86,404				29,051				30,299
Other real estate owned		6,160				5,452				6,936				815				2,005
Fixed assets, net		324,975				327,293				326,832				263,703				262,479
Other assets		571,807				626,951				639,824				396,033				424,660
Total assets	$	32,966,649			$	31,743,499			$	32,185,708			$	22,092,817			$	22,375,221
Noninterest-bearing deposits	$	9,040,257			$	7,461,323			$	7,763,894			$	5,784,002			$	5,691,236
Interest-bearing deposits		17,112,431				16,365,034				16,435,838				11,145,918				11,196,393
Total deposits		26,152,688				23,826,357				24,199,732				16,929,920				16,887,629
Other borrowings		103,131				1,338,429				1,303,730				600,795				940,874
Securities sold under repurchase agreements		365,335				344,695				377,294				311,404				313,825
Subordinated notes		125,365				125,585				125,804				—				—
Allowance for credit losses on off-balance sheet credit exposures(B)		29,947				29,947				5,599				—				—
Other liabilities		242,061				222,912				202,714				123,892				104,998
Total liabilities		27,018,527				25,887,925				26,214,873				17,966,011				18,247,326
Shareholders' equity(C)		5,948,122				5,855,574				5,970,835				4,126,806				4,127,895
Total liabilities and equity	$	32,966,649			$	31,743,499			$	32,185,708			$	22,092,817			$	22,375,221

(A)	Includes $(1,767), $(3,421), $763, $49 and $1,611 in unrealized (losses) gains on available for sale securities for the quarterly periods ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively.
(B)	ASU 2016-13 became effective for Prosperity on January 1, 2020.
(C)	Includes $(1,396), $(2,703), $602, $38 and $1,273 in after-tax unrealized (losses) gains on available for sale securities for the quarterly periods ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively.

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(In thousands)
	Three Months Ended																				Year-to-Date
	Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Jun 30, 2020				Jun 30, 2019
Income Statement Data
Interest income:
Loans	$	242,772			$	247,243			$	222,910			$	134,943			$	133,525			$	490,015			$	263,590
Securities(D)		43,776				48,282				49,348				50,872				53,944				92,058				109,592
Federal funds sold and other earning assets		45				713				600				363				318				758				720
Total interest income		286,593				296,238				272,858				186,178				187,787				582,831				373,902
Interest expense:
Deposits		25,269				35,018				32,759				26,939				26,562				60,287				51,690
Other borrowings		533				2,932				6,115				4,335				5,556				3,465				10,873
Securities sold under repurchase agreements		337				757				879				914				831				1,094				1,590
Subordinated notes and trust preferred		1,499				1,500				1,075				—				—				2,999				—
Total interest expense		27,638				40,207				40,828				32,188				32,948				67,845				64,153
Net interest income		258,955				256,031				232,030				153,990				154,838				514,986				309,749
Provision for credit losses		10,000				—				1,700				1,100				800				10,000				1,500
Net interest income after provision for credit losses		248,955				256,031				230,330				152,890				154,038				504,986				308,249
Noninterest income:
Nonsufficient funds (NSF) fees		5,645				9,443				9,990				8,835				7,973				15,088				15,789
Credit card, debit card and ATM card income		7,263				7,474				7,728				6,688				6,480				14,737				12,451
Service charges on deposit accounts		5,790				6,104				5,597				5,020				4,989				11,894				9,987
Trust income		2,242				2,662				2,582				2,492				2,558				4,904				5,153
Mortgage income		1,820				2,010				2,455				839				990				3,830				1,712
Brokerage income		584				650				625				522				541				1,234				1,214
Bank owned life insurance income		1,508				1,545				1,502				1,314				1,321				3,053				2,610
Net (loss) gain on sale or write-down of assets		(3,945)				(385)				(1,870)				(3)				2				(4,330)				60
Other noninterest income		4,768				4,885				6,897				4,966				5,104				9,653				9,126
Total noninterest income		25,675				34,388				35,506				30,673				29,958				60,063				58,102
Noninterest expense:
Salaries and benefits		79,109				77,282				69,356				52,978				52,941				156,391				104,014
Net occupancy and equipment		9,190				8,980				7,420				5,607				5,492				18,170				10,958
Credit and debit card, data processing and software amortization		11,690				11,421				9,158				4,989				4,904				23,111				9,477
Regulatory assessments and FDIC insurance		2,601				2,078				2,095				1,814				2,325				4,679				4,699
Core deposit intangibles amortization		3,293				3,363				2,705				1,248				1,265				6,656				2,584
Depreciation		4,598				4,768				4,212				3,286				3,111				9,366				6,215
Communications		3,324				3,195				3,012				2,214				2,183				6,519				4,453
Other real estate expense		40				46				57				68				120				86				203
Net (gain) loss on sale or write-down of other real estate		4				(130)				(49)				(115)				(54)				(126)				(231)
Merger related expenses		7,474				544				46,402				—				—				8,018				—
Other noninterest expense		13,045				13,194				12,083				8,610				8,534				26,239				17,020
Total noninterest expense		134,368				124,741				156,451				80,699				80,821				259,109				159,392
Income before income taxes		140,262				165,678				109,385				102,864				103,175				305,940				206,959
Provision for income taxes		9,361				34,830				23,251				21,106				20,917				44,191				42,299
Net income available to common shareholders	$	130,901			$	130,848			$	86,134			$	81,758			$	82,258			$	261,749			$	164,660

(D)	Interest income on securities was reduced by net premium amortization of $9,224, $8,005, $8,556, $8,027 and $7,607 for the three-month periods ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively, and $17,229 and $14,196 for the six-month periods ended June 30, 2020 and June 30, 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
	Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Jun 30, 2020				Jun 30, 2019
Profitability
Net income (E) (F)	$	130,901			$	130,848			$	86,134			$	81,758			$	82,258			$	261,749			$	164,660
Basic earnings per share	$	1.41			$	1.39			$	1.01			$	1.19			$	1.18			$	2.80			$	2.36
Diluted earnings per share	$	1.41			$	1.39			$	1.01			$	1.19			$	1.18			$	2.80			$	2.36
Return on average assets (G) (K)		1.61	%			1.67	%			1.19	%			1.47	%			1.46	%			1.64	%			1.46	%
Return on average common equity (G) (K)		8.84	%			8.86	%			6.33	%			7.89	%			7.92	%			8.85	%			7.99	%
Return on average tangible common equity (G) (H) (K)		19.98	%			20.16	%			12.50	%			14.77	%			14.82	%			20.07	%			15.03	%
Tax equivalent net interest margin (E) (F) (I)		3.69	%			3.81	%			3.66	%			3.16	%			3.16	%			3.75	%			3.18	%
Efficiency ratio (H) (J) (L)		46.56	%			42.90	%			58.07	%			43.70	%			43.74	%			44.72	%			43.34	%
Liquidity and Capital Ratios
Equity to assets		18.04	%			18.45	%			18.55	%			18.68	%			18.45	%			18.04	%			18.45	%
Common equity tier 1 capital		12.29	%			12.27	%			12.30	%			16.68	%			16.59	%			12.29	%			16.59	%
Tier 1 risk-based capital		12.29	%			12.27	%			12.30	%			16.68	%			16.59	%			12.29	%			16.59	%
Total risk-based capital		13.36	%			12.81	%			12.70	%			17.34	%			17.25	%			13.36	%			17.25	%
Tier 1 leverage capital		9.41	%			9.49	%			10.42	%			10.86	%			10.67	%			9.41	%			10.67	%
Period end tangible equity to period end tangible assets (H)		8.89	%			8.96	%			9.21	%			10.90	%			10.75	%			8.89	%			10.75	%
Other Data
Weighted-average shares used in computing earnings per common share
Basic		92,658				94,371				85,573				68,738				69,806				93,514				69,832
Diluted		92,658				94,371				85,573				68,738				69,806				93,514				69,832
Period end shares outstanding		92,660				92,652				94,746				68,397				69,261				92,660				69,261
Cash dividends paid per common share	$	0.46			$	0.46			$	0.46			$	0.41			$	0.41			$	0.92			$	0.82
Book value per common share	$	64.19			$	63.20			$	63.02			$	60.34			$	59.60			$	64.19			$	59.60
Tangible book value per common share (H)	$	28.45			$	27.52			$	28.08			$	32.12			$	31.72			$	28.45			$	31.72
Common Stock Market Price
High	$	72.95			$	75.22			$	74.35			$	71.86			$	74.50			$	75.22			$	75.36
Low	$	43.68			$	42.02			$	66.60			$	62.17			$	61.85			$	42.02			$	61.65
Period end closing price	$	59.38			$	48.25			$	71.89			$	70.63			$	66.05			$	59.38			$	66.05
Employees – FTE (excluding overtime)		3,793				3,801				3,867				3,019				3,026				3,793				3,026
Number of banking centers		275				285				285				243				243				275				243

(E)	Includes purchase accounting adjustments for the periods presented as follows:

	Three Months Ended										Year-to-Date
	Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Sep 30, 2019		Jun 30, 2019		Jun 30, 2020		Jun 30, 2019
Loan discount accretion
ASC 310-20	$17,999		$22,463		$17,834		$1,006		$880		$40,462		$2,354
ASC 310-30	$6,267		$6,019		$5,908		$277		$347		$12,286		$666
Securities net amortization	$203		$194		$201		$157		$255		$397		$489
Time deposits amortization	$1,793		$2,270		$1,709		—		—		$4,063		—

(F)	Using effective tax rate of 6.7%, 21.0%, 21.3%, 20.5% and 20.3% for the three-month periods ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively, and 14.4% and 20.4% for the six-month periods ended June 30, 2020 and June 30, 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 days 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)	Excluding merger related expenses, net of tax, and NOL carryback annualized returns on average assets, average common equity and average tangible common equity were 1.44%(H), 7.88%(H) and 17.81%(H) for the three months ended June 30, 2020 and 1.55%(H), 8.38%(H) and 19.01%(H) for the six-month period ended June 30, 2020.
(L)	Excluding merger related expenses, net of tax, the efficiency ratio was 43.97%(H) for the three months ended June 30, 2020 and 43.34%(H) for the six-month period ended June 30, 2020.

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
YIELD ANALYSIS	Three Months Ended
	Jun 30, 2020												Mar 31, 2020												Jun 30, 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	$	63,338			$	523			3.32%				$	66,917			$	632			3.80%				$	20,315			$	316			6.24%
Loans held for investment		18,135,226				228,062			5.06%					17,263,098				236,517			5.51%					10,500,110				133,209			5.09%
Loans held for investment - Warehouse Purchase Program		1,843,097				14,187			3.10%					1,120,324				10,094			3.62%					—				—				—
Total Loans		20,041,661				242,772			4.87%					18,450,339				247,243			5.39%					10,520,425				133,525			5.09%
Investment securities		8,054,008				43,776			2.19%			(N)		8,434,196				48,282			2.30%			(N)		9,185,877				53,944			2.36%			(N)
Federal funds sold and other earning assets		172,761				45			0.10%					223,631				713			1.28%					64,335				318			1.98%
Total interest-earning assets		28,268,430				286,593			4.08%					27,108,166				296,238			4.40%					19,770,637				187,787			3.81%
Allowance for credit losses(B)		(325,720)												(328,005)												(86,158)
Noninterest-earning assets		4,562,016												4,577,251												2,842,478
Total assets	$	32,504,726											$	31,357,412											$	22,526,957
Interest-bearing liabilities:
Interest-bearing demand deposits	$	4,949,023			$	4,621			0.38%				$	4,990,376			$	7,096			0.57%				$	3,714,968			$	5,813			0.63%
Savings and money market deposits		8,537,352				8,745			0.41%					7,965,440				14,122			0.71%					5,647,494				12,722			0.90%
Certificates and other time deposits		3,224,196				11,903			1.48%					3,404,748				13,800			1.63%					2,057,033				8,027			1.57%
Other borrowings		474,867				533			0.45%					832,961				2,932			1.42%					883,557				5,556			2.52%
Securities sold under repurchase agreements		365,077				337			0.37%					366,615				757			0.83%					288,666				831			1.15%
Subordinated notes and trust preferred		125,475				1,499			4.80%					125,694				1,500			4.80%					—				—				—
Total interest-bearing liabilities		17,675,990				27,638			0.63%			(O)		17,685,834				40,207			0.91%			(O)		12,591,718				32,949			1.05%			(O)
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		8,583,734												7,491,798												5,674,615
Allowance for credit losses on off-balance sheet credit exposures(B)		29,947												13,009												—
Other liabilities		289,899												262,523												108,246
Total liabilities		26,579,570												25,453,164												18,374,579
Shareholders' equity		5,925,156												5,904,248												4,152,378
Total liabilities and shareholders' equity	$	32,504,726											$	31,357,412											$	22,256,957
Net interest income and margin					$	258,955			3.68%								$	256,031			3.80%								$	154,838			3.14%
Non-GAAP to GAAP reconciliation:
Tax equivalent adjustment						690												723												827
Net interest income and margin (tax equivalent basis)					$	259,645			3.69%								$	256,754			3.81%								$	155,665			3.16%

(M)	Annualized and based on an actual 365 day or 366 day basis.
(N)	Yield on securities was impacted by net premium amortization of $9,224, $8,005 and $7,607 for the three-month periods ended June 30, 2020, March 31, 2020 and June 30, 2019, respectively.
(O)	Total cost of funds, including noninterest bearing deposits, was 0.42%, 0.64% and 0.72% for the three-month periods ended June 30, 2020, March 31, 2020 and June 30, 2019, respectively.

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
YIELD ANALYSIS	Year-to-Date
	Jun 30, 2020												Jun 30, 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	$	65,128			$	1,155			3.57%				$	20,315			$	621			6.16%
Loans held for investment		17,699,162				464,579			5.28%					10,436,369				262,969			5.08%
Loans held for investment - Warehouse Purchase Program		1,481,710				24,281			3.30%					—				—				—
Total loans		19,246,000				490,015			5.12%					10,456,684				263,590			5.08%
Investment securities		8,244,102				92,058			2.25%			(Q)		9,242,605				109,592			2.39%			(Q)
Federal funds sold and other earning assets		198,196				758			0.77%					68,068				720			2.13%
Total interest-earning assets		27,688,298				582,831			4.23%					19,767,357				373,902			3.81%
Allowance for credit losses		(326,862)												(86,332)
Noninterest-earning assets		4,569,631												2,853,199
Total assets	$	31,931,067											$	22,534,224
Interest-bearing liabilities:
Interest-bearing demand deposits	$	4,969,700			$	11,717			0.47%				$	3,930,475			$	12,625			0.65%
Savings and money market deposits		8,251,396				22,867			0.56%					5,560,625				23,906			0.87%
Certificates and other time deposits		3,314,472				25,703			1.56%					2,059,877				15,159			1.48%
Other borrowings		653,914				3,465			1.07%					864,322				10,873			2.54%
Securities sold under repurchase agreements		365,846				1,094			0.60%					280,692				1,590			1.14%
Subordinated notes and trust preferred		125,585				2,999			4.80%					—				—				—
Total interest-bearing liabilities		17,680,913				67,845			0.77%			(R)		12,695,991				64,153			1.02%			(R)
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		8,037,767												5,616,541
Allowance for credit losses on off-balance sheet credit exposures(B)		21,478												—
Other liabilities		276,211												97,610
Total liabilities		26,016,369												18,410,142
Shareholders' equity		5,914,698												4,124,082
Total liabilities and shareholders' equity		31,931,067											$	22,534,224
Net interest income and margin					$	514,986			3.74%								$	309,749			3.16%
Non-GAAP to GAAP reconciliation:
Tax equivalent adjustment						1,413												1,690
Net interest income and margin (tax equivalent basis)					$	516,399			3.75%								$	311,439			3.18%

(P)	Annualized and based on an actual 365 day or 366 day basis.
(Q)	Yield on securities was impacted by net premium amortization of $17,229 and $14,196 for the six-month periods ended June 30, 2020 and 2019, respectively.
(R)	Total cost of funds, including noninterest bearing deposits, was 0.53% and 0.71% for the six-month periods ended June 30, 2020 and 2019, respectively.

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
	Three Months Ended
	Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Jun 30, 2019
YIELD TREND (S)
Interest-Earning Assets:
Loans held for sale		3.32	%			3.80	%			3.96	%			5.01	%			6.25	%
Loans held for investment		5.06	%			5.51	%			5.52	%			5.05	%			5.09	%
Loans held for investment - Warehouse Purchase Program		3.10	%			3.62	%			3.93	%			—				—
Total loans		4.87	%			5.39	%			5.42	%			5.05	%			5.09	%
Investment securities (T)		2.19	%			2.30	%			2.28	%			2.30	%			2.36	%
Federal funds sold and other earning assets		0.10	%			1.28	%			0.78	%			1.93	%			1.98	%
Total interest-earning assets		4.08	%			4.40	%			4.29	%			3.80	%			3.81	%
Interest-Bearing Liabilities:
Interest-bearing demand deposits		0.38	%			0.57	%			0.54	%			0.62	%			0.63	%
Savings and money market deposits		0.41	%			0.71	%			0.79	%			0.90	%			0.90	%
Certificates and other time deposits		1.48	%			1.63	%			1.67	%			1.67	%			1.57	%
Other borrowings		0.45	%			1.42	%			1.73	%			2.29	%			2.52	%
Securities sold under repurchase agreements		0.37	%			0.83	%			0.99	%			1.15	%			1.15	%
Subordinated notes and trust preferred		4.80	%			4.80	%			4.85	%			—				—
Total interest-bearing liabilities		0.63	%			0.91	%			1.00	%			1.04	%			1.05	%
Net Interest Margin		3.68	%			3.80	%			3.65	%			3.14	%			3.14	%
Net Interest Margin (tax equivalent)		3.69	%			3.81	%			3.66	%			3.16	%			3.16	%

(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 $9,224, $8,005, $8,556, $8,027 and $7,607 for the three-month periods ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively.

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
	Three Months Ended
	Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Jun 30, 2019
Balance Sheet Averages
Loans held for sale	$	63,338			$	66,917			$	57,171			$	21,077			$	24,787
Loans held for investment		18,135,226				17,263,098				15,261,163				10,589,272				10,495,638
Loans held for investment - Warehouse Purchase Program		1,843,097				1,120,324				996,903				—				—
Total Loans		20,041,661				18,450,339				16,315,237				10,610,349				10,520,425
Investment securities		8,054,008				8,434,196				8,598,736				8,758,056				9,185,877
Federal funds sold and other earning assets		172,761				223,631				305,596				74,751				64,335
Total interest-earning assets		28,268,430				27,108,166				25,219,569				19,443,156				19,770,637
Allowance for credit losses(B)		(325,720)				(328,005)				(86,795)				(86,996)				(86,158)
Cash and due from banks		247,426				321,832				275,072				230,986				227,653
Goodwill		3,223,469				3,223,633				2,658,133				1,900,845				1,900,845
Core deposit intangibles, net		81,539				84,865				28,912				29,682				30,933
Other real estate		5,666				5,837				4,864				997				2,053
Fixed assets, net		327,811				325,337				308,692				263,495				260,054
Other assets		676,105				615,747				654,978				423,931				420,940
Total assets	$	32,504,726			$	31,357,412			$	29,063,425			$	22,206,096			$	22,526,957
Noninterest-bearing deposits	$	8,583,734			$	7,491,798			$	7,066,878			$	5,701,419			$	5,674,615
Interest-bearing demand deposits		4,949,023				4,990,376				4,233,880				3,575,249				3,714,968
Savings and money market deposits		8,537,352				7,965,440				7,109,754				5,524,277				5,647,494
Certificates and other time deposits		3,224,196				3,404,748				3,044,843				2,083,803				2,057,033
Total deposits		25,294,305				23,852,362				21,455,355				16,884,748				17,094,110
Other borrowings		474,867				832,961				1,403,686				749,814				883,557
Securities sold under repurchase agreements		365,077				366,615				351,580				315,277				288,666
Subordinated notes and trust preferred		125,475				125,694				87,963				—				—
Allowance for credit losses on off-balance sheet credit exposures(B)		29,947				13,009				5,673				—				—
Other liabilities		289,899				262,523				320,855				111,526				108,246
Shareholders' equity		5,925,156				5,904,248				5,443,986				4,144,731				4,152,378
Total liabilities and equity	$	32,504,726			$	31,357,412			$	29,063,425			$	22,206,096			$	22,526,957

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
	Jun 30, 2020							Mar 31, 2020							Dec 31, 2019							Sep 30, 2019							Jun 30, 2019
Period End Balances
Loan Portfolio
Commercial and industrial	$	2,214,742			10.5	%		$	2,500,110			13.1	%		$	2,507,318			13.3	%		$	1,120,913			10.5	%		$	1,158,657			10.9	%
Warehouse purchase program		2,557,183			12.2	%			1,713,762			9.0	%			1,552,762			8.2	%			—			—				—			—
Construction, land development and other land loans		2,033,037			9.7	%			2,051,021			10.7	%			2,064,167			11.0	%			1,764,648			16.5	%			1,739,308			16.4	%
1-4 family residential		4,184,972			19.9	%			3,993,138			20.9	%			3,880,382			20.6	%			2,472,907			23.2	%			2,456,506			23.2	%
Home equity		437,098			2.1	%			516,003			2.6	%			507,029			2.6	%			250,775			2.3	%			256,772			2.4	%
Commercial real estate (includes multi-family residential)		6,550,086			31.2	%			6,576,213			34.4	%			6,556,285			34.9	%			3,652,176			34.3	%			3,551,668			33.6	%
Agriculture (includes farmland)		612,694			2.9	%			635,295			3.3	%			680,855			3.6	%			729,585			6.8	%			736,470			7.0	%
Consumer and other		403,462			1.9	%			423,000			2.2	%			398,271			2.1	%			342,839			3.2	%			321,023			3.0	%
Energy		639,402			3.0	%			718,653			3.8	%			698,277			3.7	%			339,502			3.2	%			366,971			3.5	%
Paycheck Protection Program		1,392,497			6.6	%			—			—				—			—				—			—				—			—
Total loans	$	21,025,173						$	19,127,195						$	18,845,346						$	10,673,345						$	10,587,375
Deposit Types
Noninterest-bearing DDA	$	9,040,257			34.6	%		$	7,461,323			31.3	%		$	7,763,894			32.1	%		$	5,784,002			34.2	%		$	5,691,236			33.7	%
Interest-bearing DDA		5,130,495			19.6	%			4,980,090			20.9	%			5,100,938			21.1	%			3,564,419			21.0	%			3,530,581			20.9	%
Money market		6,148,206			23.5	%			5,341,525			22.4	%			5,099,024			21.1	%			3,457,728			20.4	%			3,438,164			20.3	%
Savings		2,722,718			10.4	%			2,716,247			11.4	%			2,756,297			11.3	%			2,027,621			12.0	%			2,158,159			12.8	%
Certificates and other time deposits		3,111,012			11.9	%			3,327,172			14.0	%			3,479,579			14.4	%			2,096,150			12.4	%			2,069,489			12.3	%
Total deposits	$	26,152,688						$	23,826,357						$	24,199,732						$	16,929,920						$	16,887,629
Loan to Deposit Ratio		80.4	%						80.3	%						77.9	%						63.0	%						62.7	%

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
Construction Loans
	Jun 30, 2020							Mar 31, 2020							Dec 31, 2019							Sep 30, 2019							Jun 30, 2019
Single family residential construction	$	710,401			34.9	%		$	655,191			31.9	%		$	614,647			29.7	%		$	462,714			26.2	%		$	446,868			25.7	%
Land development		114,748			5.6	%			110,853			5.4	%			88,529			4.3	%			80,711			4.6	%			87,825			5.0	%
Raw land		274,159			13.5	%			265,943			12.9	%			233,559			11.3	%			171,609			9.7	%			168,531			9.7	%
Residential lots		144,765			7.1	%			136,861			6.7	%			138,961			6.7	%			123,265			7.0	%			121,586			7.0	%
Commercial lots		103,267			5.1	%			106,036			5.2	%			101,960			4.9	%			102,084			5.8	%			105,633			6.1	%
Commercial construction and other		687,618			33.8	%			778,731			37.9	%			890,597			43.1	%			825,001			46.7	%			809,680			46.5	%
Net unaccreted discount		(1,921)							(2,594)							(4,086)							(736)							(815)
Total construction loans	$	2,033,037						$	2,051,021						$	2,064,167						$	1,764,648						$	1,739,308

 

Non-Owner Occupied Commercial Real Estate Loans by Metropolitan Statistical Area (MSA) as of June 30, 2020
	Houston				Dallas				Austin				OK City				Tulsa				Other (U)				Total
Collateral Type
Shopping center/retail	$	383,534			$	302,358			$	54,317			$	15,821			$	32,152			$	279,800			$	1,067,982
Commercial and industrial buildings		147,324				168,224				13,955				12,610				19,751				160,817				522,681
Office buildings		209,995				582,866				33,068				44,134				5,324				87,465				962,852
Medical buildings		38,561				50,941				12,817				22,393				25,529				45,135				195,376
Apartment buildings		425,883				681,116				33,444				14,199				19,165				209,404				1,383,211
Hotel		64,530				76,375				34,101				30,037				—				147,004				352,047
Other		46,187				31,511				17,666				10,191				4,344				78,716				188,615
Total	$	1,316,014			$	1,893,391			$	199,368			$	149,385			$	106,265			$	1,008,341			$	4,672,764		(V)

 

Acquired Loans
	Non-PCD Loans												PCD Loans												Total Acquired Loans
	Balance at Acquisition Date				Balance at Mar 31, 2020				Balance at Jun 30, 2020				Balance at Acquisition Date				Balance at Mar 31, 2020				Balance at Jun 30, 2020				Balance at Acquisition Date				Balance at Mar 31, 2020				Balance at Jun 30, 2020
Loan marks:
Acquired banks (W)	$	229,080			$	9,238			$	7,436			$	142,128			$	—			$	—			$	371,208			$	9,238			$	7,436
LegacyTexas merger(X)		116,519				78,375				62,424				177,924				29,460				22,565				294,443				107,835				84,989
Total		345,599				87,613				69,860				320,052				29,460		(Z)		22,565				665,651				117,073				92,425
Acquired portfolio loan balances:
Acquired banks (W)		5,690,998				350,738				308,692				275,221				7,548				6,952				5,966,219				358,286				315,644
LegacyTexas merger(X)		6,595,161				5,393,630				4,808,987				414,352				347,612				283,237				7,009,513				5,741,242				5,092,224
Total		12,286,159				5,744,368				5,117,679				689,573				355,160				290,189				12,975,732		(Y)		6,099,528				5,407,868
Acquired portfolio loan balances less loan marks	$	11,940,560			$	5,656,755			$	5,047,819			$	369,521			$	325,700			$	267,624			$	12,310,081			$	5,982,455			$	5,315,443

(U)	Includes other MSA and non-MSA regions.
(V)	Represents a portion of total commercial real estate loans of $6.550 billion as of June 30, 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
	Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Jun 30, 2020				Jun 30, 2019
Asset Quality
Nonaccrual loans	$	62,904			$	58,194			$	55,243			$	49,973			$	37,289			$	62,904			$	37,289
Accruing loans 90 or more days past due		8,691				3,255				441				341				1,594				8,691				1,594
Total nonperforming loans		71,595				61,449				55,684				50,314				38,883				71,595				38,883
Repossessed assets		187				278				324				28				670				187				670
Other real estate		6,160				5,452				6,935				815				2,005				6,160				2,005
Total nonperforming assets	$	77,942			$	67,179			$	62,943			$	51,157			$	41,558			$	77,942			$	41,558
Nonperforming assets:
Commercial and industrial (includes energy)	$	15,238			$	15,987			$	17,086			$	15,974			$	17,592			$	15,238			$	17,592
Construction, land development and other land loans		10,530				1,125				1,177				874				2,296				10,530				2,296
1-4 family residential (includes home equity)		29,812				28,996				26,453				19,600				16,641				29,812				16,641
Commercial real estate (includes multi-family residential)		20,748				20,155				18,031				14,384				4,352				20,748				4,352
Agriculture (includes farmland)		1,501				896				101				285				616				1,501				616
Consumer and other		113				20				95				40				61				113				61
Total	$	77,942			$	67,179			$	62,943			$	51,157			$	41,558			$	77,942			$	41,558
Number of loans/properties		213				198				236				89				92				213				92
Allowance for credit losses at end of period	$	324,205			$	327,206			$	87,469			$	87,061			$	87,006			$	324,205			$	87,006
Net charge-offs (recoveries):
Commercial and industrial (includes energy)	$	12,206			$	(28)			$	76			$	(83)			$	(828)			$	12,178			$	891
Construction, land development and other land loans		(6)				(12)				(6)				(6)				7				(18)				7
1-4 family residential (includes home equity)		51				5				20				(9)				11				56				8
Commercial real estate (includes multi-family residential)		—				(81)				254				(1)				(1)				(81)				(2)
Agriculture (includes farmland)		(3)				(1)				(18)				278				46				(4)				(1,232)
Consumer and other		753				918				965				867				650				1,671				1,262
Total	$	13,001			$	801			$	1,291			$	1,046			$	(115)			$	13,802			$	934
Asset Quality Ratios
Nonperforming assets to average interest-earning assets		0.28	%			0.25	%			0.25	%			0.26	%			0.21	%			0.28	%			0.21	%
Nonperforming assets to loans and other real estate		0.37	%			0.35	%			0.33	%			0.48	%			0.39	%			0.37	%			0.39	%
Net charge-offs to average loans (annualized)		0.26	%			0.02	%			0.03	%			0.04	%		—					0.14	%			0.02	%
Allowance for credit losses to total loans(AA)		1.54	%			1.71	%			0.46	%			0.82	%			0.82	%			1.54	%			0.82	%
Allowance for credit losses to total loans, excluding Warehouse Purchase Program loans and Paycheck Protection Program loans (H)(AA)		1.90	%			1.88	%			0.51	%			0.82	%			0.82	%			1.90	%			0.82	%

(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 carryback; return on average assets excluding merger related expenses, net of tax, and NOL carryback; return on average common equity excluding merger related expenses, net of tax, and NOL carryback; tangible book value per share, return on average tangible common equity, the tangible equity to tangible assets ratio and return on average tangible common equity, all excluding merger related expenses, net of tax, and NOL carryback; allowance for credit losses to total loans excluding Warehouse Purchase Program and PPP loans; 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
	Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Jun 30, 2019				Jun 30, 2020				Jun 30, 2019
Reconciliation of diluted earnings per share to diluted earnings per share, excluding merger related expenses, net of tax, and net operating losses carryback:
Net income	$	130,901			$	130,848			$	86,134			$	81,758			$	82,258			$	261,749			$	164,660
Add: merger related expenses, net of tax(AB)		5,904				430				36,658				—				—				6,334				—
Less: net operating losses carryback (AC)		(20,145)				—				—				—				—				(20,145)				—
Net income, excluding merger related expenses, net of tax, and net operating losses carryback (AB) (AC)	$	116,660			$	131,278			$	122,792			$	81,758			$	82,258			$	247,938			$	164,660
Weighted average diluted shares outstanding		92,658				94,371				85,573				68,738				69,806				93,514				69,832
Merger related expenses per diluted share, net of tax(AB)	$	0.06			$	—			$	0.43			$	—			$	—			$	0.07				—
Net operating losses carryback per diluted share (AB)	$	(0.22)			$	—			$	—			$	—			$	—			$	(0.22)			$	—
Diluted earnings per share, excluding merger related expenses, net of tax, and net operating losses carryback (AB) (AC)	$	1.25			$	1.39			$	1.44			$	1.19			$	1.18			$	2.65			$	2.36
Reconciliation of return on average assets to return on average assets excluding merger related expenses, net of tax, and net operating losses carryback:
Net income, excluding merger related expenses, net of tax, and net operating losses carryback (AB) (AC)	$	116,660			$	131,278			$	122,792			$	81,758			$	82,258			$	247,938			$	164,660
Average total assets	$	32,504,726			$	31,357,412			$	29,063,425			$	22,206,096			$	22,526,957			$	31,931,067			$	22,526,957
Return on average assets excluding merger related expenses, net of tax, and net operating losses carryback (G) (AB) (AC)		1.44	%			1.67	%			1.69	%			1.47	%			1.46	%			1.55	%			1.46	%
Reconciliation of return on average common equity to return on average common equity excluding merger related expenses, net of tax, and net operating losses carryback:
Net income, excluding merger related expenses, net of tax, and net operating losses carryback (AB) (AC)	$	116,660			$	131,278			$	122,792			$	81,758			$	82,258			$	247,938			$	164,660
Average shareholders' equity	$	5,925,156			$	5,904,248			$	5,443,986			$	4,144,731			$	4,152,378			$	5,914,698			$	4,124,082
Return on average common equity excluding merger related expenses, net of tax, and net operating losses carryback (G) (AB) (AC)		7.88	%			8.89	%			9.02	%			7.89	%			7.92	%			8.38	%			7.99	%
Reconciliation of return on average common equity to return on average tangible common equity:
Net income	$	130,901			$	130,848			$	86,134			$	81,758			$	82,258			$	261,749			$	164,660
Average shareholders' equity	$	5,925,156			$	5,904,248			$	5,443,986			$	4,144,731			$	4,152,378			$	5,914,698			$	4,124,082
Less: Average goodwill and other intangible assets		(3,305,008)				(3,308,498)				(2,687,045)				(1,930,527)				(1,931,778)				(3,306,753)				(1,932,429)
Average tangible shareholders' equity	$	2,620,148			$	2,595,750			$	2,756,941			$	2,214,204			$	2,220,600			$	2,607,945			$	2,191,653
Return on average tangible common equity (G)		19.98	%			20.16	%			12.50	%			14.77	%			14.82	%			20.07	%			15.03	%

(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
	Jun 30, 2020								Mar 31, 2020								Dec 31, 2019								Sep 30, 2019							Jun 30, 2019								Jun 30, 2020								Jun 30, 2019
Reconciliation of return on average common equity to return on average tangible common equity excluding merger related expenses, net of tax, and net operating losses carryback:
Net income, excluding merger related expenses, net of tax, and net operating losses carryback (AB) (AC)	$		116,660						$		131,278						$		122,792						$	81,758						$		82,258						$		247,938						$		164,660
Average shareholders' equity	$		5,925,156						$		5,904,248						$		5,443,986						$	4,144,731						$		4,152,378						$		5,914,698						$		4,124,082
Less: Average goodwill and other intangible assets			(3,305,008)								(3,308,498)								(2,687,045)							(1,930,527)								(1,931,778)								(3,306,753)								(1,932,429)
Average tangible shareholders' equity	$		2,620,148						$		2,595,750						$		2,756,941						$	2,214,204						$		2,220,600						$		2,607,945						$		2,191,653
Return on average tangible common equity excluding merger related expenses, net of tax, and net operating losses carryback (F) (AB) (AC)			17.81		%						20.23		%						17.82		%					14.77			%					14.82			%					19.01			%					15.03			%
Reconciliation of book value per share to tangible book value per share:
Shareholders' equity	$		5,948,122						$		5,855,574						$		5,970,835						$	4,126,806						$		4,127,895						$		5,948,122						$		4,127,895
Less: Goodwill and other intangible assets			(3,311,712)								(3,306,185)								(3,310,075)							(1,929,896)								(1,931,144)								(3,311,712)								(1,931,144)
Tangible shareholders' equity	$		2,636,410						$		2,549,389						$		2,660,760						$	2,196,910						$		2,196,751						$		2,636,410						$		2,196,751
Period end shares outstanding			92,660								92,652								94,746							68,397								69,261								92,660								69,261
Tangible book value per share:	$		28.45						$		27.52						$		28.08						$	32.12						$		31.72						$		28.45								31.72
Reconciliation of equity to assets ratio to period end tangible equity to period end tangible assets ratio:
Tangible shareholders' equity	$		2,636,410						$		2,549,389						$		2,660,760						$	2,196,910						$		2,196,751						$		2,636,410						$		2,196,751
Total assets	$		32,966,649						$		31,743,499						$		32,185,708						$	22,092,817						$		22,375,221						$		32,966,649						$		22,375,221
Less: Goodwill and other intangible assets			(3,311,712)								(3,306,185)								(3,310,075)							(1,929,896)								(1,931,144)								(3,311,712)								(1,931,144)
Tangible assets	$		29,654,937						$		28,437,314						$		28,875,633						$	20,162,921						$		20,444,077						$		29,654,937						$		20,444,077
Period end tangible equity to period end tangible assets ratio:			8.89		%						8.96		%						9.21		%					10.90			%					10.75			%					8.89			%					10.75			%
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)	$		324,205						$		327,206						$		87,469						$	87,061						$		87,006						$		324,205						$		87,006
Total loans	$		21,025,173						$		19,127,195						$		18,845,346						$	10,673,345						$		10,587,375						$		21,025,173						$		10,587,375
Less: Warehouse Purchase Program loans			2,557,183								1,713,762								1,552,762							—								—								2,557,183								—
Less: Paycheck Protection Program loans			1,392,497								—								—							—								—								1,392,497								—
Total loans less Warehouse Purchase Program and Paycheck Protection Program loans	$		17,075,493						$		17,413,433						$		17,292,584						$	10,673,345						$		10,587,375						$		17,075,493						$		10,587,375
Allowance for credit losses to total loans, excluding Warehouse Purchase Program and Paycheck Protection Program loans			1.90		%						1.88		%						0.51		%					0.82			%					0.82			%					1.90			%					0.82			%
Reconciliation of efficiency ratio to efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities:
Noninterest expense	$		134,368						$		124,741						$		156,451						$	80,699						$		80,821						$		259,109						$		159,392
Net interest income	$		258,955						$		256,031						$		232,030						$	153,990						$		154,838						$		514,986						$		309,749
Noninterest income			25,675								34,388								35,506							30,673								29,958								60,063								58,102
Less: net (loss) gain on sale or write down of assets			(3,945)								(385)								(1,870)							(3)								2								(4,330)								60
Noninterest income excluding net gains and losses on the sale or write down of assets and securities			29,620								34,773								37,376							30,676								29,956								64,393								58,042
Total income excluding net gains and losses on the sale or write down of assets and securities	$		288,575						$		290,804						$		269,406						$	184,666						$		184,794						$		579,379						$		367,791
Efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities			46.56		%						42.90		%						58.07		%					43.70			%					43.74			%					44.72			%					43.34			%

 

		Three Months Ended																																									Year-to-Date
		Jun 30, 2020								Mar 31, 2020								Dec 31, 2019									Sep 30, 2019								Jun 30, 2019								Jun 30, 2020								Jun 30, 2019
Reconciliation of efficiency ratio to efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities and merger related expenses:
Noninterest expense		$		134,368						$		124,741						$		156,451							$	80,699							$	80,821							$	259,109							$	159,392
Less: merger related expenses				7,474								544								46,402								—								—								8,018								—
Noninterest expense excluding merger related expenses		$		126,894						$		124,197						$		110,049							$	80,699							$	80,821							$	251,091							$	159,392
Net interest income		$		258,955						$		256,031						$		232,030							$	153,990							$	154,838							$	514,986							$	309,749
Noninterest income				25,675								34,388								35,506								30,673								29,958								60,063								58,102
Less: net (loss) gain on sale or write down of assets				(3,945)								(385)								(1,870)								(3)								2								(4,330)								60
Noninterest income excluding net gains and losses on the sale or write down of assets and securities				29,620								34,773								37,376								30,676								29,956								64,393								58,042
Total income excluding net gains and losses on the sale or write down of assets and securities		$		288,575						$		290,804						$		269,406							$	184,666							$	184,794							$	579,379							$	367,791
Efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities and merger related expenses				43.97		%						42.71		%						40.85		%						43.70		%						43.74		%						43.34			%					43.34			%

 

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SOURCE Prosperity Bancshares, Inc.

FAQ

What were Prosperity Bancshares' earnings for Q2 2020?

Prosperity Bancshares reported a net income of $130.9 million with diluted earnings per share of $1.41.

How much did loans increase in the second quarter of 2020?

Loans increased by 9.9%, totaling $1.898 billion.

What impact did the CARES Act have on Prosperity Bancshares?

The CARES Act provided a tax benefit of $20.1 million for net operating losses.

What was the status of nonperforming assets for Prosperity Bancshares?

Nonperforming assets were 0.28% of average interest-earning assets.

How much did Prosperity Bancshares' deposits grow in Q2 2020?

Deposits increased by $2.326 billion, or 9.8%.