Prosperity Bancshares, Inc.® Reports Third Quarter 2020 Earnings

Rhea-AI Summary

Prosperity Bancshares, Inc. (NYSE: PB) reported a net income of $130.1 million for Q3 2020, up 59.1% from $81.8 million in Q3 2019. Earnings per share rose to $1.40, reflecting a 17.6% increase year-over-year. Deposits grew by $306.5 million, and nonperforming assets remained low at 0.24% of average interest-earning assets. The Board approved a 6.5% dividend increase, now set at $0.49 per share. Although the net interest income before provision for credit losses was $258.1 million, it slightly decreased by 0.3% from the previous quarter. Overall, strong financial metrics highlight the company's robust position.

Positive

• Net income rose by 59.1% year-over-year to $130.1 million.
• Earnings per share increased 17.6% to $1.40.
• Deposits increased by $306.5 million or 1.2% quarter-over-quarter.
• Low nonperforming assets at 0.24%, signaling solid asset quality.
• Board approved a 6.5% increase in the quarterly dividend to $0.49.

Negative

• Net income decreased by 0.6% compared to Q2 2020.
• Net interest income before provision for credit losses decreased by 0.3% from the previous quarter.

HOUSTON, Oct. 28, 2020 /PRNewswire/ -- Prosperity Bancshares, Inc.^® (NYSE: PB), the parent company of Prosperity Bank^® (collectively, "Prosperity"), reported net income for the quarter ended September 30, 2020 of  $130.1 million compared with $81.8 million for the same period in 2019. Net income per diluted common share was $1.40 compared with $1.19 for the same period in 2019. Additionally, deposits increased $306.5 million or 1.2% (4.7% annualized) during the third quarter 2020 and nonperforming assets remain low at 0.24% of third quarter average interest-earning assets with an annualized return on third quarter average assets of 1.58%. On November 1, 2019, LegacyTexas Financial Group, Inc. ("LegacyTexas") merged with Prosperity Bancshares and LegacyTexas Bank merged with Prosperity Bank (collectively, the "Merger").

"We are pleased with our third quarter 2020 results of $1.40 in earnings per share and annualized returns on average tangible equity of 19.19% and on average assets of 1.58%. Because of these metrics, our strong capital position and confidence in our business, Prosperity Bancshares' Board has approved a 6.5% increase in the fourth quarter dividend to $0.49 per share," said David Zalman, Prosperity's Senior Chairman and Chief Executive Officer.

"Our asset quality remains sound, with nonperforming assets at $69.5 million or 0.24% of average interest earning assets for the third quarter, a decrease of $8.4 million compared with the second quarter 2020. Loans on forbearance decreased from 17.2% of total loans as of June 30, 2020 to 1.1% as of October 26, 2020. Our allowance for credit losses as a percent of total loans is higher than at any time in my banking career and equates to a coverage ratio of 5.6 times our nonperforming loans," continued Zalman.

"Linked quarter deposits increased $306.5 million or 1.2% (4.7% annualized) from $26.153 billion at June 30, 2020. Based on our experience, people are spending more money and generating more account activity than earlier this year. Mortgage production continues to be robust, with consumers taking advantage of the historically low interest rates," stated Zalman.

"We are starting to see green shoots in the economy, with consumers and businesses feeling more confident. The unemployment numbers are better than predicted and we believe third quarter GDP will also be higher than predicted," concluded Zalman.

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

Net income was $130.1 million⁽²⁾ for the three months ended September 30, 2020 compared with $81.8 million⁽³⁾ for the same period in 2019, an increase of $48.3 million or 59.1%, primarily due to the Merger. Net income per diluted common share was $1.40 for the three months ended September 30, 2020 compared with $1.19 for the same period in 2019, an increase of 17.6%. Net income was $130.1 million⁽²⁾ for the three months ended September 30, 2020 compared with $130.9 million⁽⁴⁾ for the three months ended June 30, 2020, a decrease of $837 thousand or 0.6%. Net income per diluted common share was $1.40 for the three months ended September 30, 2020 compared with $1.41 for the three months ended June 30, 2020, a decrease of 0.7%. Net income for the second quarter of 2020 included a tax benefit for net operating losses ("NOL") 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 September 30, 2020 were 1.58%, 8.64% and 19.19%⁽¹⁾, respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 40.17%⁽¹⁾ for the three months ended September 30, 2020.

Net interest income before provision for credit losses for the three months ended September 30, 2020 was $258.1 million compared with $154.0 million for the same period in 2019, an increase of $104.1 million or 67.6%. The increase was primarily due to the Merger and the increase in loan discount accretion of $21.3 million. On a linked quarter basis, net interest income before provision for credit losses was $258.1 million compared with $259.0 million for the three months ended June 30, 2020, a decrease of $842 thousand or 0.3%. The decrease was primarily due to a decrease in loan discount accretion of $1.7 million and interest income on securities partially offset by decrease in interest expense.

The net interest margin on a tax equivalent basis was 3.57% for the three months ended September 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 a $21.3 million increase in loan discount accretion. On a linked quarter basis, the net interest margin on a tax equivalent basis was 3.57% for the three months ended September 30, 2020 compared with 3.69% for the three months ended June 30, 2020. This change was primarily due to a $1.7 million decrease in loan discount accretion, higher net premium amortization on securities and higher cash balances due to excess liquidity.

Noninterest income was $34.9 million for the three months ended September 30, 2020 compared with $30.7 million for the same period in 2019, an increase of $4.3 million or 13.9%. This increase was primarily due to increases in mortgage income, which was primarily due to the Merger and increased activity, credit card, debit card and ATM card income and other noninterest income primarily due to the Merger, that was partially offset by a decrease in nonsufficient funds ("NSF") fees. On a linked quarter basis, noninterest income increased $9.2 million or 36.0% to $34.9 million compared with $25.7 million for the three months ended June 30, 2020. This increase was primarily due to a lower loss on write-down of assets and increases in NSF fees, other noninterest income, mortgage income and credit card, debit card and ATM income.

Noninterest expense was $117.9 million for the three months ended September 30, 2020 compared with $80.7 million for the same period in 2019, an increase of $37.2 million or 46.1%, primarily due to the Merger. On a linked quarter basis, noninterest expense decreased $16.4 million or 12.2% to $117.9 million compared with $134.4 million for the three months ended June 30, 2020. The decrease was primarily due to no merger related expenses in the third quarter and decreases in salaries and benefits, credit and debit card, data processing and software amortization and other noninterest expense due to efficiencies gained following the LegacyTexas system conversion.

Results of Operations for the Nine Months Ended September 30, 2020

Net income was $391.8 million⁽⁵⁾ for the nine months ended September 30, 2020 compared with $246.4 million⁽⁶⁾ for the same period in 2019, an increase of $145.4 million or 59.0%. Net income per diluted common share was $4.20 for the nine months ended September 30, 2020 compared with $3.55 for the same period in 2019, an increase of 18.3%. The increase in net income and earnings per diluted common share for the nine months ended September 30, 2020 was primarily due to the Merger and a tax benefit for NOLs of $20.1 million, partially offset by merger related expenses of $8.0 million. Annualized returns on average assets, average common equity and average tangible common equity for the nine months ended September 30, 2020 were 1.62%, 8.78% and 19.77%⁽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 nine months ended September 30, 2020 were 1.56%⁽¹⁾, 8.47%⁽¹⁾ and 19.07%⁽¹⁾, respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale of assets and taxes) was 43.19%⁽¹⁾ for the nine months ended September 30, 2020. Excluding merger related expenses, the efficiency ratio was 42.27%⁽¹⁾ for the nine months ended September 30, 2020.

Net interest income before provision for credit losses for the nine months ended September 30, 2020 was $773.1 million compared with $463.7 million for the same period in 2019, an increase of $309.4 million or 66.7%. This change was primarily due to the Merger and the increase in loan discount accretion of $71.0 million. 

The net interest margin on a tax equivalent basis for the nine months ended September 30, 2020 was 3.69% compared with 3.17% 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 $71.0 million.

Noninterest income was $95.0 million for the nine months ended September 30, 2020 compared with $88.8 million for the same period in 2019, an increase of $6.2 million or 7.0%. This increase was primarily due to increases in mortgage income, which was primarily due to the Merger and increased activity, credit card, debit card and ATM card income, other noninterest income and service charges on deposit accounts due to the Merger, partially offset by a net loss on write-down of assets of $4.9 million and decrease in NSF fees.

Noninterest expense was $377.0 million for the nine months ended September 30, 2020 compared with $240.1 million for the same period in 2019, an increase of $136.9 million or 57.0%. 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 September 30, 2020, Prosperity had $33.198 billion in total assets, an increase of $11.105 billion or 50.3% compared with $22.093 billion at September 30, 2019.

Loans at September 30, 2020 were $20.796 billion, an increase of $10.122 billion or 94.8%, compared with $10.673 billion at September 30, 2019. Linked quarter loans decreased $229.5 million or 1.1% from $21.025 billion at June 30, 2020. At September 30, 2020, the Company had $1.394 billion of 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 September 30, 2020, oil and gas loans totaled $604.7 million (net of discount and excluding PPP loans totaling $115.3 million) or 2.9% of total loans, of which $359.6 million were production loans and $245.1 million were servicing loans, compared with total oil and gas loans of $339.5 million (net of discount) or 3.2% of total loans at September 30, 2019, of which $82.4 million were production loans and $257.1 million were servicing loans. In addition, as of September 30, 2020, Prosperity had total unfunded commitments to oil and gas companies of $258.1 million compared with total unfunded commitments to oil and gas companies of $248.9 million as of September 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 September 30, 2020, loans to hotels totaled $386.3 million (excluding PPP loans totaling $8.8 million) or 1.9% of total loans and loans to restaurants totaled $215.1 million (excluding PPP loans totaling $110.9 million) or 1.0% of total loans.

Deposits at September 30, 2020 were $26.459 billion, an increase of $9.529 billion or 56.3%, compared with $16.930 billion at September 30, 2019. Linked quarter deposits increased $306.5 million or 1.2% from $26.153 billion at June 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)
		Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 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			6,349,251				6,601,006				6,713,337				6,636,855				—
Loans held for investment - Warehouse    Purchase Program			2,730,614				2,557,183				1,713,762				1,552,762				—
All other loans			11,715,776				11,851,259				10,645,867				10,588,984				10,673,345
Total loans		$	20,795,641			$	21,025,173			$	19,127,195			$	18,845,346			$	10,673,345
Deposits assumed (including new deposits since    acquisition date):
LegacyTexas		$	5,977,357			$	5,997,395			$	5,605,986			$	6,141,546			$	—
All other deposits			20,481,849				20,155,293				18,220,371				18,058,186				16,929,920
Total deposits		$	26,459,206			$	26,152,688			$	23,826,357			$	24,199,732			$	16,929,920

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(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 September 30, 2020 grew $1.042 billion or 9.8% compared with September 30, 2019 and decreased $135.5 million or 1.1% compared with June 30, 2020.

Excluding deposits assumed in the Merger and new deposits generated at the acquired banking centers since November 1, 2019, deposits at September 30, 2020 grew $3.552 billion or 21.0% compared with September 30, 2019 and grew $326.6 million or 1.6% compared with June 30, 2020.

Asset Quality

Nonperforming assets totaled $69.5 million or 0.24% of quarterly average interest-earning assets at September 30, 2020, compared with $51.2 million or 0.26% of quarterly average interest-earning assets at September 30, 2019, and $77.9 million or 0.28% of quarterly average interest-earning assets at June 30, 2020.

The allowance for credit losses on loans was $323.6 million or 1.56% of total loans at September 30, 2020 compared to $324.2 million or 1.54% of total loans at June 30, 2020 and $87.1 million or 0.82% of total loans at September 30, 2019. The allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program and PPP loans, was 1.94%⁽¹⁾ at September 30, 2020 compared with 1.90%⁽¹⁾ at June 30, 2020 and 0.82%⁽¹⁾ at September 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 September 30, 2020 compared with $1.1 million for the three months ended September 30, 2019 and $10.0 million for the three months ended June 30, 2020.  The provision for credit losses was $20.0 million for the nine months ended September 30, 2020 compared with $2.6 million for the nine months ended September 30, 2019.

Net charge-offs were $10.6 million for the three months ended September 30, 2020 compared with net charge-offs of $1.0 million for the three months ended September 30, 2019 and net charge-offs of $13.0 million for the three months ended June 30, 2020. Net charge-offs for the third quarter of 2020 included $8.6 million related to resolved PCD loans. These PCD loans had specific reserves of $15.7 million, of which $8.6 million was allocated to the charge-offs and $7.1 million was moved to the general reserve. Additionally, $6.1 million of specific reserves on resolved PCD loans was released to the general reserve without taking any charge-off. Net charge-offs were $24.4 million for the nine months ended September 30, 2020 compared with $2.0 million for the nine months ended September 30, 2019. Net charge-offs for the nine months ended September 30, 2020 included $21.0 million related to resolved PCD loans. These PCD loans had specific reserves of $44.2 million, of which $21.0 million was allocated to the charge-offs and $23.2 million was moved to the general reserve.

Dividend

Prosperity Bancshares declared a fourth quarter cash dividend of $0.49 per share to be paid on January 4, 2021 to all shareholders of record as of December 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 98.0 thousand shares of its common stock at an average weighted price of $49.99 during the three months ended September 30, 2020 and 2.2 million shares of its common stock at an average weighted price of $52.47 per share during the nine months ended September 30, 2020.

Planned Redemption of Outstanding Subordinated Notes

In September 2020, Prosperity Bancshares notified the Trustee of its intent to redeem $125.0 million in subordinated notes assumed in the Merger. The redemption will occur on December 1, 2020 and will be 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 August 8, 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 on September 17, 2020, signed an Executive Order that detailed the ongoing plan to open businesses and activities in Texas. On September 25, 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 the remainder of 2020 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. 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 five year term. 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. The PPP application period expired on August 8, 2020.  As of September 30, 2020, the Company has obtained SBA approvals on approximately 11,948 loans totaling $1.394 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 September 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, October 28, 2020 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity's third 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 6937658.

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; return on average tangible common equity; return on average tangible common equity excluding merger related expenses, net of tax, and NOL carryback; 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 September 30, 2020, Prosperity Bancshares, Inc.^® is a $33.198 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 September 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 June 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.

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(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 $18.7 million, net of tax, primarily comprised of loan discount accretion of $22.5 million for the three months ended September 30, 2020.
(3)	Includes purchase accounting adjustments of $895 thousand, net of tax, primarily comprised of loan discount accretion of $1.3 million for the three months ended September 30, 2019.
(4)	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.
(5)	Includes purchase accounting adjustments of $63.3 million, net of tax, primarily comprised of loan discount accretion of $75.3 million, and merger related expenses of $8.0 million for the nine months ended September 30, 2020.
(6)	Includes purchase accounting adjustments of $2.9 million, net of tax, primarily comprised of loan discount accretion of $4.3 million for the nine months ended September 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		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)
		Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019
Balance Sheet Data (at period end)
Loans held for sale		$	51,694			$	39,516			$	65,035			$	80,959			$	20,284
Loans held for investment			18,013,333				18,428,474				17,348,398				17,211,625				10,653,061
Loans held for investment - Warehouse Purchase    Program			2,730,614				2,557,183				1,713,762				1,552,762				—
Total loans			20,795,641				21,025,173				19,127,195				18,845,346				10,673,345
Investment securities(A)			7,431,495				7,717,586				8,295,495				8,570,056				8,495,206
Federal funds sold			56,469				568				676				519				521
Allowance for credit losses(B)			(323,635)				(324,205)				(327,206)				(87,469)				(87,061)
Cash and due from banks			1,031,193				332,873				381,458				573,589				420,359
Goodwill			3,231,692				3,231,964				3,223,144				3,223,671				1,900,845
Core deposit intangibles, net			76,478				79,748				83,041				86,404				29,051
Other real estate owned			11,548				6,160				5,452				6,936				815
Fixed assets, net			325,994				324,975				327,293				326,832				263,703
Other assets			560,724				571,807				626,951				639,824				396,033
Total assets		$	33,197,599			$	32,966,649			$	31,743,499			$	32,185,708			$	22,092,817
Noninterest-bearing deposits		$	8,998,328			$	9,040,257			$	7,461,323			$	7,763,894			$	5,784,002
Interest-bearing deposits			17,460,878				17,112,431				16,365,034				16,435,838				11,145,918
Total deposits			26,459,206				26,152,688				23,826,357				24,199,732				16,929,920
Other borrowings			2,570				103,131				1,338,429				1,303,730				600,795
Securities sold under repurchase agreements			380,274				365,335				344,695				377,294				311,404
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				5,599				—
Other liabilities			165,579				242,061				222,912				202,714				123,892
Total liabilities			27,162,722				27,018,527				25,887,925				26,214,873				17,966,011
Shareholders' equity(C)			6,034,877				5,948,122				5,855,574				5,970,835				4,126,806
Total liabilities and equity		$	33,197,599			$	32,966,649			$	31,743,499			$	32,185,708			$	22,092,817

(A)	Includes $(442), $(1,767), $(3,421), $763 and $49 in unrealized (losses) gains on available for sale securities for the quarterly periods ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively.
(B)	ASU 2016-13 became effective for Prosperity on January 1, 2020.
(C)	Includes $(349), $(1,396), $(2,703), $602 and $38 in after-tax unrealized (losses) gains on available for sale securities for the quarterly periods ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively.

 

 

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (In thousands)
		Three Months Ended																				Year-to-Date
		Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Sep 30, 2020				Sep 30, 2019
Income Statement Data
Interest income:
Loans		$	244,255			$	242,772			$	247,243			$	222,910			$	134,943			$	734,270			$	398,533
Securities(D)			38,033				43,776				48,282				49,348				50,872				130,091				160,464
Federal funds sold and other earning assets			144				45				713				600				363				902				1,083
Total interest income			282,432				286,593				296,238				272,858				186,178				865,263				560,080
Interest expense:
Deposits			22,458				25,269				35,018				32,759				26,939				82,745				78,629
Other borrowings			52				533				2,932				6,115				4,335				3,517				15,208
Securities sold under repurchase agreements			309				337				757				879				914				1,403				2,504
Subordinated notes and trust preferred			1,500				1,499				1,500				1,075				—				4,499				—
Total interest expense			24,319				27,638				40,207				40,828				32,188				92,164				96,341
Net interest income			258,113				258,955				256,031				232,030				153,990				773,099				463,739
Provision for credit losses			10,000				10,000				-				1,700				1,100				20,000				2,600
Net interest income after provision for credit losses			248,113				248,955				256,031				230,330				152,890				753,099				461,139
Noninterest income:
Nonsufficient funds (NSF) fees			7,156				5,645				9,443				9,990				8,835				22,244				24,624
Credit card, debit card and ATM card income			8,315				7,263				7,474				7,728				6,688				23,052				19,139
Service charges on deposit accounts			5,920				5,790				6,104				5,597				5,020				17,814				15,007
Trust income			2,502				2,242				2,662				2,582				2,492				7,406				7,645
Mortgage income			2,958				1,820				2,010				2,455				839				6,788				2,551
Brokerage income			628				584				650				625				522				1,862				1,736
Bank owned life insurance income			1,449				1,508				1,545				1,502				1,314				4,502				3,924
Net (loss) gain on sale or write-down of assets			(528)				(3,945)				(385)				(1,870)				(3)				(4,858)				57
Other noninterest income			6,524				4,768				4,885				6,897				4,966				16,177				14,092
Total noninterest income			34,924				25,675				34,388				35,506				30,673				94,987				88,775
Noninterest expense:
Salaries and benefits			75,068				79,109				77,282				69,356				52,978				231,459				156,992
Net occupancy and equipment			8,644				9,190				8,980				7,420				5,607				26,814				16,565
Credit and debit card, data processing and    software amortization			8,776				11,690				11,421				9,158				4,989				31,887				14,466
Regulatory assessments and FDIC insurance			2,512				2,601				2,078				2,095				1,814				7,191				6,513
Core deposit intangibles amortization			3,270				3,293				3,363				2,705				1,248				9,926				3,832
Depreciation			4,605				4,598				4,768				4,212				3,286				13,971				9,501
Communications			3,027				3,324				3,195				3,012				2,214				9,546				6,667
Other real estate expense			258				40				46				57				68				344				271
Net (gain) loss on sale or write-down of other    real estate			(137)				4				(130)				(49)				(115)				(263)				(346)
Merger related expenses			—				7,474				544				46,402				—				8,018				—
Other noninterest expense			11,896				13,045				13,194				12,083				8,610				38,135				25,630
Total noninterest expense			117,919				134,368				124,741				156,451				80,699				377,028				240,091
Income before income taxes			165,118				140,262				165,678				109,385				102,864				471,058				309,823
Provision for income taxes			35,054				9,361				34,830				23,251				21,106				79,245				63,405
Net income available to common shareholders		$	130,064			$	130,901			$	130,848			$	86,134			$	81,758			$	391,813			$	246,418

(D)	Interest income on securities was reduced by net premium amortization of $10,089, $9,224, $8,005, $8,556 and $8,027 for the three-month periods ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively, and $27,318 and $22,223 for the nine-month periods ended September 30, 2020 and September 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
		Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Sep 30, 2020				Sep 30, 2019
Profitability
Net income (E) (F)		$	130,064			$	130,901			$	130,848			$	86,134			$	81,758			$	391,813			$	246,418
Basic earnings per share		$	1.40			$	1.41			$	1.39			$	1.01			$	1.19			$	4.20			$	3.55
Diluted earnings per share		$	1.40			$	1.41			$	1.39			$	1.01			$	1.19			$	4.20			$	3.55
Return on average assets (G)			1.58	%			1.61	%	(K)		1.67	%	(K)		1.19	%	(K)		1.47	%			1.62	%	(K)		1.47	%
Return on average common equity (G)			8.64	%			8.84	%	(K)		8.86	%	(K)		6.33	%	(K)		7.89	%			8.78	%	(K)		7.95	%
Return on average tangible common equity (G) (H)			19.19	%			19.98	%	(K)		20.16	%	(K)		12.50	%	(K)		14.77	%			19.77	%	(K)		14.94	%
Tax equivalent net interest margin (E) (F) (I)			3.57	%			3.69	%			3.81	%			3.66	%			3.16	%			3.69	%			3.17	%
Efficiency ratio (H) (J)			40.17	%			46.56	%	(L)		42.90	%	(L)		58.07	%	(L)		43.70	%			43.19	%	(L)		43.46	%
Liquidity and Capital Ratios
Equity to assets			18.18	%			18.04	%			18.45	%			18.55	%			18.68	%			18.18	%			18.68	%
Common equity tier 1 capital			13.17	%			12.29	%			12.27	%			12.30	%			16.68	%			13.17	%			16.68	%
Tier 1 risk-based capital			13.17	%			12.29	%			12.27	%			12.30	%			16.68	%			13.17	%			16.68	%
Total risk-based capital			14.28	%			13.36	%			12.81	%			12.70	%			17.34	%			14.28	%			17.34	%
Tier 1 leverage capital			9.57	%			9.41	%			9.49	%			10.42	%			10.86	%			9.57	%			10.86	%
Period end tangible equity to period end tangible    assets (H)			9.12	%			8.89	%			8.96	%			9.21	%			10.90	%			9.12	%			10.90	%
Other Data
Weighted-average shares used in computing    earnings per common share
Basic			92,656				92,658				94,371				85,573				68,738				93,226				69,463
Diluted			92,656				92,658				94,371				85,573				68,738				93,226				69,463
Period end shares outstanding			92,562				92,660				92,652				94,746				68,397				92,562				68,397
Cash dividends paid per common share		$	0.46			$	0.46			$	0.46			$	0.46			$	0.41			$	1.38			$	1.23
Book value per common share		$	65.20			$	64.19			$	63.20			$	63.02			$	60.34			$	65.20			$	60.34
Tangible book value per common share (H)		$	29.46			$	28.45			$	27.52			$	28.08			$	32.12			$	29.46			$	32.12
Common Stock Market Price
High		$	60.63			$	72.95			$	75.22			$	74.35			$	71.86			$	75.22			$	75.36
Low		$	48.80			$	43.68			$	42.02			$	66.60			$	62.17			$	42.02			$	61.65
Period end closing price		$	51.83			$	59.38			$	48.25			$	71.89			$	70.63			$	51.83			$	70.63
Employees – FTE (excluding overtime)			3,716				3,793				3,801				3,867				3,019				3,716				3,044
Number of banking centers			275				275				285				285				243				275				243

 

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

 

	Three Months Ended											Year-to-Date
	Sep 30, 2020		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Sep 30, 2019				Sep 30, 2020		Sep 30, 2019
Loan discount accretion
ASC 310-20	$16,729		$17,999		$22,463		$17,834		$1,006				$57,191		$3,360
ASC 310-30	$5,805		$6,267		$6,019		$5,908		$277				$18,091		$943
Securities net amortization	$116		$203		$194		$201		$157				$513		$646
Time deposits amortization	$1,240		$1,793		$2,270		$1,709		—				$5,303		—

 

(F)	Using effective tax rate of 21.2%, 6.7%, 21.0%, 21.3% and 20.5% for the three-month periods ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively, and 16.8% and 20.5% for the nine-month periods ended September 30, 2020 and September 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 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 carryback, 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
		Sep 30, 2020												Jun 30, 2020												Sep 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		$	50,606			$	420			3.30%				$	63,338			$	523			3.32%				$	21,077			$	266			5.01%
Loans held for investment			18,267,559				225,596			4.91%					18,135,226				228,062			5.06%					10,589,272				134,677			5.05%
Loans held for investment - Warehouse    Purchase Program			2,279,461				18,239			3.18%					1,843,097				14,187			3.10%					—				—				—
Total Loans			20,597,626				244,255			4.72%					20,041,661				242,772			4.87%					10,610,349				134,943			5.05%
Investment securities			7,603,762				38,033			1.99%			(N)		8,054,008				43,776			2.19%			(N)		8,758,056				50,872			2.30%			(N)
Federal funds sold and other earning assets			618,228				144			0.09%					172,761				45			0.10%					74,751				363			1.93%
Total interest-earning assets			28,819,616				282,432			3.90%					28,268,430				286,593			4.08%					19,443,156				186,178			3.80%
Allowance for credit losses(B)			(321,424)												(325,720)												(86,996)
Noninterest-earning assets			4,482,646												4,562,016												2,849,936
Total assets		$	32,980,838											$	32,504,726											$	22,206,096
Interest-bearing liabilities:
Interest-bearing demand deposits		$	5,221,722			$	5,028			0.38%				$	4,949,023			$	4,621			0.38%				$	3,575,249			$	5,602			0.62%
Savings and money market deposits			8,937,751				7,833			0.35%					8,537,352				8,745			0.41%					5,524,277				12,588			0.90%
Certificates and other time deposits			3,103,290				9,597			1.23%					3,224,196				11,903			1.48%					2,083,803				8,749			1.67%
Other borrowings			13,898				52			1.49%					474,867				533			0.45%					749,814				4,335			2.29%
Securities sold under repurchase agreements			378,888				309			0.32%					365,077				337			0.37%					315,277				914			1.15%
Subordinated notes and trust preferred			125,256				1,500			4.76%					125,475				1,499			4.80%					—				—				—
Total interest-bearing liabilities			17,780,805				24,319			0.54%			(O)		17,675,990				27,638			0.63%			(O)		12,248,420				32,188			1.04%			(O)
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits			8,980,814												8,583,734												5,701,419
Allowance for credit losses on off-balance    sheet credit exposures(B)			29,947												29,947												—
Other liabilities			167,532												289,899												111,526
Total liabilities			26,959,098												26,579,570												18,061,365
Shareholders' equity			6,021,740												5,925,156												4,144,731
Total liabilities and shareholders' equity		$	32,980,838											$	32,504,726											$	22,206,096
Net interest income and margin						$	258,113			3.56%								$	258,955			3.68%								$	153,990			3.14%
Non-GAAP to GAAP reconciliation:
Tax equivalent adjustment							658												690												791
Net interest income and margin (tax    equivalent basis)						$	258,771			3.57%								$	259,645			3.69%								$	154,781			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 $10,089, $9,224 and $8,027 for the three-month periods ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively.
(O)	Total cost of funds, including noninterest bearing deposits, was 0.36%, 0.42% and 0.71% for the three-month periods ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively.

 

 

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands)
YIELD ANALYSIS		Year-to-Date
		Sep 30, 2020												Sep 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		$	60,256			$	1,575			3.49%				$	23,605			$	887			5.02%
Loans held for investment			17,890,010				690,175			5.15%					10,484,864				397,646			5.07%
Loans held for investment - Warehouse    Purchase Program			1,749,568				42,520			3.25%					—				—				—
Total loans			19,699,834				734,270			4.98%					10,508,469				398,533			5.07%
Investment securities			8,029,097				130,091			2.16%			(Q)		9,079,314				160,464			2.36%			(Q)
Federal funds sold and other earning assets			339,229				902			0.36%					70,320				1,083			2.06%
Total interest-earning assets			28,068,160				865,263			4.12%					19,658,103				560,080			3.81%
Allowance for credit losses(B)			(325,036)												(86,556)
Noninterest-earning assets			4,540,440												2,852,098
Total assets		$	32,283,564											$	22,423,645
Interest-bearing liabilities:
Interest-bearing demand deposits		$	5,054,320			$	16,745			0.44%				$	3,810,765			$	18,227			0.64%
Savings and money market deposits			8,481,852				30,700			0.48%					5,548,375				36,494			0.88%
Certificates and other time deposits			3,243,564				35,300			1.45%					2,067,940				23,908			1.55%
Other borrowings			439,018				3,517			1.07%					825,733				15,208			2.46%
Securities sold under repurchase agreements			370,225				1,403			0.51%					292,347				2,504			1.15%
Subordinated notes and trust preferred			125,475				4,499			4.79%					—				—				—
Total interest-bearing liabilities			17,714,454				92,164			0.69%			(R)		12,545,160				96,341			1.03%			(R)
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits			8,354,410												5,645,145
Allowance for credit losses on off-balance    sheet credit exposures(B)			24,321												—
Other liabilities			239,747												102,299
Total liabilities			26,332,932												18,292,604
Shareholders' equity			5,950,632												4,131,041
Total liabilities and shareholders' equity			32,283,564											$	22,423,645
Net interest income and margin						$	773,099			3.68%								$	463,739			3.15%
Non-GAAP to GAAP reconciliation:
Tax equivalent adjustment							2,071												2,481
Net interest income and margin (tax    equivalent basis)						$	775,170			3.69%								$	466,220			3.17%

 

(P)	Annualized and based on an actual 365 day or 366 day basis.
(Q)	Yield on securities was impacted by net premium amortization of $27,318 and $22,223 for the nine-month periods ended September 30, 2020 and 2019, respectively.
(R)	Total cost of funds, including noninterest bearing deposits, was 0.47% and 0.71% for the nine-month periods ended September 30, 2020 and 2019, respectively.

 

  

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands)
	Three Months Ended
	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019
YIELD TREND (S)
Interest-Earning Assets:
Loans held for sale		3.30	%			3.32	%			3.80	%			3.96	%			5.01	%
Loans held for investment		4.91	%			5.06	%			5.51	%			5.52	%			5.05	%
Loans held for investment - Warehouse    Purchase Program		3.18	%			3.10	%			3.62	%			3.93	%			—
Total loans		4.72	%			4.87	%			5.39	%			5.42	%			5.05	%
Investment securities (T)		1.99	%			2.19	%			2.30	%			2.28	%			2.30	%
Federal funds sold and other earning assets		0.09	%			0.10	%			1.28	%			0.78	%			1.93	%
Total interest-earning assets		3.90	%			4.08	%			4.40	%			4.29	%			3.80	%
Interest-Bearing Liabilities:
Interest-bearing demand deposits		0.38	%			0.38	%			0.57	%			0.54	%			0.62	%
Savings and money market deposits		0.35	%			0.41	%			0.71	%			0.79	%			0.90	%
Certificates and other time deposits		1.23	%			1.48	%			1.63	%			1.67	%			1.67	%
Other borrowings		1.49	%			0.45	%			1.42	%			1.73	%			2.29	%
Securities sold under repurchase agreements		0.32	%			0.37	%			0.83	%			0.99	%			1.15	%
Subordinated notes and trust preferred		4.76	%			4.80	%			4.80	%			4.85	%			—
Total interest-bearing liabilities		0.54	%			0.63	%			0.91	%			1.00	%			1.04	%
Net Interest Margin		3.56	%			3.68	%			3.80	%			3.65	%			3.14	%
Net Interest Margin (tax equivalent)		3.57	%			3.69	%			3.81	%			3.66	%			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 $10,089, $9,224, $8,005, $8,556 and $8,027 for the three-month periods ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively.

 

 

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands)
		Three Months Ended
		Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019
Balance Sheet Averages
Loans held for sale		$	50,606			$	63,338			$	66,917			$	57,171			$	21,077
Loans held for investment			18,267,559				18,135,226				17,263,098				15,261,163				10,589,272
Loans held for investment - Warehouse    Purchase Program			2,279,461				1,843,097				1,120,324				996,903				—
Total Loans			20,597,626				20,041,661				18,450,339				16,315,237				10,610,349
Investment securities			7,603,762				8,054,008				8,434,196				8,598,736				8,758,056
Federal funds sold and other earning assets			618,228				172,761				223,631				305,596				74,751
Total interest-earning assets			28,819,616				28,268,430				27,108,166				25,219,569				19,443,156
Allowance for credit losses(B)			(321,424)				(325,720)				(328,005)				(86,795)				(86,996)
Cash and due from banks			267,887				247,426				321,832				275,072				230,986
Goodwill			3,231,976				3,223,469				3,223,633				2,658,133				1,900,845
Core deposit intangibles, net			78,269				81,539				84,865				28,912				29,682
Other real estate			8,061				5,666				5,837				4,864				997
Fixed assets, net			325,958				327,811				325,337				308,692				263,495
Other assets			570,495				676,105				615,747				654,978				423,931
Total assets		$	32,980,838			$	32,504,726			$	31,357,412			$	29,063,425			$	22,206,096
Noninterest-bearing deposits		$	8,980,814			$	8,583,734			$	7,491,798			$	7,066,878			$	5,701,419
Interest-bearing demand deposits			5,221,722				4,949,023				4,990,376				4,233,880				3,575,249
Savings and money market deposits			8,937,751				8,537,352				7,965,440				7,109,754				5,524,277
Certificates and other time deposits			3,103,290				3,224,196				3,404,748				3,044,843				2,083,803
Total deposits			26,243,577				25,294,305				23,852,362				21,455,355				16,884,748
Other borrowings			13,898				474,867				832,961				1,403,686				749,814
Securities sold under repurchase agreements			378,888				365,077				366,615				351,580				315,277
Subordinated notes and trust preferred			125,256				125,475				125,694				87,963				—
Allowance for credit losses on off-balance    sheet credit exposures(B)			29,947				29,947				13,009				5,673				—
Other liabilities			167,532				289,899				262,523				320,855				111,526
Shareholders' equity			6,021,740				5,925,156				5,904,248				5,443,986				4,144,731
Total liabilities and equity		$	32,980,838			$	32,504,726			$	31,357,412			$	29,063,425			$	22,206,096

 

 

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands)
		Sep 30, 2020							Jun 30, 2020							Mar 31, 2020							Dec 31, 2019							Sep 30, 2019
Period End Balances
Loan Portfolio
Commercial and industrial		$	2,171,302			10.5	%		$	2,214,742			10.5	%		$	2,500,110			13.1	%		$	2,507,318			13.3	%		$	1,120,913			10.5	%
Warehouse purchase program			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			2,081,762			10.0	%			2,033,037			9.7	%			2,051,021			10.7	%			2,064,167			11.0	%			1,764,648			16.5	%
1-4 family residential			4,189,852			20.1	%			4,184,972			19.9	%			3,993,138			20.9	%			3,880,382			20.6	%			2,472,907			23.2	%
Home equity			477,552			2.3	%			437,098			2.1	%			516,003			2.6	%			507,029			2.6	%			250,775			2.3	%
Commercial real estate (includes    multi-family residential)			6,179,901			29.7	%			6,550,086			31.2	%			6,576,213			34.4	%			6,556,285			34.9	%			3,652,176			34.3	%
Agriculture (includes farmland)			598,972			2.9	%			612,694			2.9	%			635,295			3.3	%			680,855			3.6	%			729,585			6.8	%
Consumer and other			367,231			1.8	%			403,462			1.9	%			423,000			2.2	%			398,271			2.1	%			342,839			3.2	%
Energy			604,698			2.9	%			639,402			3.0	%			718,653			3.8	%			698,277			3.7	%			339,502			3.2	%
Paycheck Protection Program			1,393,757			6.7	%			1,392,497			6.6	%			—			—				—			—				—			—
Total loans		$	20,795,641						$	21,025,173						$	19,127,195						$	18,845,346						$	10,673,345
Deposit Types
Noninterest-bearing DDA		$	8,998,328			34.0	%		$	9,040,257			34.6	%		$	7,461,323			31.3	%		$	7,763,894			32.1	%		$	5,784,002			34.2	%
Interest-bearing DDA			5,297,802			20.0	%			5,130,495			19.6	%			4,980,090			20.9	%			5,100,938			21.1	%			3,564,419			21.0	%
Money market			6,324,127			23.9	%			6,148,206			23.5	%			5,341,525			22.4	%			5,099,024			21.1	%			3,457,728			20.4	%
Savings			2,772,492			10.5	%			2,722,718			10.4	%			2,716,247			11.4	%			2,756,297			11.3	%			2,027,621			12.0	%
Certificates and other time deposits			3,066,457			11.6	%			3,111,012			11.9	%			3,327,172			14.0	%			3,479,579			14.4	%			2,096,150			12.4	%
Total deposits		$	26,459,206						$	26,152,688						$	23,826,357						$	24,199,732						$	16,929,920
Loan to Deposit Ratio			78.6	%						80.4	%						80.3	%						77.9	%						63.0	%

 

 

Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands)
Construction Loans
		Sep 30, 2020							Jun 30, 2020							Mar 31, 2020							Dec 31, 2019							Sep 30, 2019
Single family residential construction		$	654,933			31.5	%		$	710,401			34.9	%		$	655,191			31.9	%		$	614,647			29.7	%		$	462,714			26.2	%
Land development			114,937			5.5	%			114,748			5.6	%			110,853			5.4	%			88,529			4.3	%			80,711			4.6	%
Raw land			240,154			11.5	%			274,159			13.5	%			265,943			12.9	%			233,559			11.3	%			171,609			9.7	%
Residential lots			137,615			6.6	%			144,765			7.1	%			136,861			6.7	%			138,961			6.7	%			123,265			7.0	%
Commercial lots			109,569			5.3	%			103,267			5.1	%			106,036			5.2	%			101,960			4.9	%			102,084			5.8	%
Commercial construction and other			825,053			39.6	%			687,618			33.8	%			778,731			37.9	%			890,597			43.1	%			825,001			46.7	%
Net unaccreted discount			(499)							(1,921)							(2,594)							(4,086)							(736)
Total construction loans		$	2,081,762						$	2,033,037						$	2,051,021						$	2,064,167						$	1,764,648

 

Non-Owner Occupied Commercial Real Estate Loans by Metropolitan Statistical Area (MSA) as of September 30, 2020
	Houston				Dallas				Austin				OK City				Tulsa				Other (U)				Total
Collateral Type
Shopping center/retail	$	376,417			$	284,715			$	50,127			$	16,920			$	31,641			$	272,171			$	1,031,991
Commercial and industrial buildings		147,107				156,806				19,927				14,835				19,419				164,408				522,502
Office buildings		190,334				542,135				31,465				74,651				5,218				82,444				926,247
Medical buildings		37,367				40,855				14,234				25,179				25,107				57,283				200,025
Apartment buildings		404,936				512,803				22,666				15,619				19,070				177,745				1,152,839
Hotel		63,380				73,942				43,343				28,996				—				138,579				348,240
Other		57,229				55,436				23,033				11,522				2,486				82,171				231,877
Total	$	1,276,770			$	1,666,692			$	204,795			$	187,722			$	102,941			$	974,801			$	4,413,721		(V)

 

Acquired Loans
		Non-PCD Loans												PCD Loans												Total Acquired Loans
		Balance at Acquisition Date				Balance at Jun 30, 2020				Balance at Sep 30, 2020				Balance at Acquisition Date				Balance at Jun 30, 2020				Balance at Sep 30, 2020				Balance at Acquisition Date				Balance at Jun 30, 2020				Balance at Sep 30, 2020
Loan marks:
Acquired banks (W)		$	229,080			$	7,436			$	6,622			$	142,128			$	—			$	—			$	371,208			$	7,436			$	6,622
LegacyTexas merger(X)			116,519				62,424				46,493				177,924				22,565				16,760				294,443				84,989				63,253
Total			345,599				69,860				53,115				320,052				22,565		(Z)		16,760				665,651				92,425				69,875
Acquired portfolio loan balances:
Acquired banks (W)			5,690,998				308,692				281,766				275,221				6,952				4,061				5,966,219				315,644				285,827
LegacyTexas merger(X)			6,595,161				4,808,987				4,187,077				414,352				283,237				222,019				7,009,513				5,092,224				4,409,096
Total			12,286,159				5,117,679				4,468,843				689,573				290,189				226,080				12,975,732		(Y)		5,407,868				4,694,923
Acquired portfolio loan balances less loan    marks		$	11,940,560			$	5,047,819			$	4,415,728			$	369,521			$	267,624			$	209,320			$	12,310,081			$	5,315,443			$	4,625,048

 

(U)	Includes other MSA and non-MSA regions.
(V)	Represents a portion of total commercial real estate loans of $6.180 billion as of September 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
	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Sep 30, 2020				Sep 30, 2019
Asset Quality
Nonaccrual loans	$	57,412			$	62,904			$	58,194			$	55,243			$	49,973			$	57,412			$	49,973
Accruing loans 90 or more days past due		462				8,691				3,255				441				341				462				341
Total nonperforming loans		57,874				71,595				61,449				55,684				50,314				57,874				50,314
Repossessed assets		120				187				278				324				28				120				28
Other real estate		11,548				6,160				5,452				6,935				815				11,548				815
Total nonperforming assets	$	69,542			$	77,942			$	67,179			$	62,943			$	51,157			$	69,542			$	51,157
Nonperforming assets:
Commercial and industrial (includes energy)	$	17,273			$	15,238			$	15,987			$	17,086			$	15,974			$	17,273			$	15,974
Construction, land development and other land    loans		2,633				10,530				1,125				1,177				874				2,633				874
1-4 family residential (includes home equity)		29,953				29,812				28,996				26,453				19,600				29,953				19,600
Commercial real estate (includes multi-family    residential)		16,069				20,748				20,155				18,031				14,384				16,069				14,384
Agriculture (includes farmland)		1,931				1,501				896				101				285				1,931				285
Consumer and other		1,683				113				20				95				40				1,683				40
Total	$	69,542			$	77,942			$	67,179			$	62,943			$	51,157			$	69,542			$	51,157
Number of loans/properties		198				213				198				236				89				198				89
Allowance for credit losses at end of period	$	323,635			$	324,205			$	327,206			$	87,469			$	87,061			$	323,635			$	87,061
Net charge-offs (recoveries):
Commercial and industrial (includes energy)	$	8,344			$	12,206			$	(28)			$	76			$	(83)			$	20,522			$	808
Construction, land development and other land loans		478				(6)				(12)				(6)				(6)				460				1
1-4 family residential (includes home equity)		252				51				5				20				(9)				308				(1)
Commercial real estate (includes multi-family    residential)		676				—				(81)				254				(1)				595				(3)
Agriculture (includes farmland)		(17)				(3)				(1)				(18)				278				(21)				(954)
Consumer and other		837				753				918				965				867				2,508				2,129
Total	$	10,570			$	13,001			$	801			$	1,291			$	1,046			$	24,372			$	1,980
Asset Quality Ratios
Nonperforming assets to average interest-earning    assets		0.24	%			0.28	%			0.25	%			0.25	%			0.26	%			0.25	%			0.26	%
Nonperforming assets to loans and other real estate		0.33	%			0.37	%			0.35	%			0.33	%			0.48	%			0.33	%			0.48	%
Net charge-offs to average loans (annualized)		0.21	%			0.26	%			0.02	%			0.03	%			0.04	%			0.17	%			0.03	%
Allowance for credit losses to total loans(AA)		1.56	%			1.54	%			1.71	%			0.46	%			0.82	%			1.56	%			0.82	%
Allowance for credit losses to total loans, excluding    Warehouse Purchase Program loans and    Paycheck Protection Program loans (H)(AA)		1.94	%			1.90	%			1.88	%			0.51	%			0.82	%			1.94	%			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; return on average tangible common equity; return on average tangible common equity excluding merger related expenses, net of tax, and NOL carryback; 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
		Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Sep 30, 2020				Sep 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		$	130,064			$	130,901			$	130,848			$	86,134			$	81,758			$	391,813			$	246,418
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)		$	130,064			$	116,660			$	131,278			$	122,792			$	81,758			$	378,002			$	246,418
Weighted average diluted shares outstanding			92,656				92,658				94,371				85,573				68,738				93,226				68,397
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)		$	1.40			$	1.25			$	1.39			$	1.44			$	1.19			$	4.05			$	3.60
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)		$	130,064			$	116,660			$	131,278			$	122,792			$	81,758			$	378,002			$	246,418
Average total assets		$	32,980,838			$	32,504,726			$	31,357,412			$	29,063,425			$	22,206,096			$	32,283,564			$	22,206,096
Return on average assets excluding merger related expenses, net of tax, and net operating losses carryback (G) (AB) (AC)			1.58	%			1.44	%			1.67	%			1.69	%			1.47	%			1.56	%			1.48	%
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)		$	130,064			$	116,660			$	131,278			$	122,792			$	81,758			$	378,002			$	246,418
Average shareholders' equity		$	6,021,740			$	5,925,156			$	5,904,248			$	5,443,986			$	4,144,731			$	5,950,632			$	4,131,041
Return on average common equity excluding merger related expenses, net of tax, and net operating losses carryback (G) (AB) (AC)			8.64	%			7.88	%			8.89	%			9.02	%			7.89	%			8.47	%			7.95	%
Reconciliation of return on average common equity to return on average tangible common equity:
Net income		$	130,064			$	130,901			$	130,848			$	86,134			$	81,758			$	391,813			$	246,418
Average shareholders' equity		$	6,021,740			$	5,925,156			$	5,904,248			$	5,443,986			$	4,144,731			$	5,950,632			$	4,131,041
Less: Average goodwill and other intangible assets			(3,310,245)				(3,305,008)				(3,308,498)				(2,687,045)				(1,930,527)				(3,307,925)				(1,931,788)
Average tangible shareholders' equity		$	2,711,495			$	2,620,148			$	2,595,750			$	2,756,941			$	2,214,204			$	2,642,707			$	2,199,253
Return on average tangible common equity (G)			19.19	%			19.98	%			20.16	%			12.50	%			14.77	%			19.77	%			14.94	%
(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
		Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Sep 30, 2020				Sep 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)		$	130,064			$	116,660			$	131,278			$	122,792			$	81,758			$	378,002			$	246,418
Average shareholders' equity		$	6,021,740			$	5,925,156			$	5,904,248			$	5,443,986			$	4,144,731			$	5,950,632			$	4,131,041
Less: Average goodwill and other intangible assets			(3,310,245)				(3,305,008)				(3,308,498)				(2,687,045)				(1,930,527)				(3,307,925)				(1,931,788)
Average tangible shareholders' equity		$	2,711,495			$	2,620,148			$	2,595,750			$	2,756,941			$	2,214,204			$	2,642,707			$	2,199,253
Return on average tangible common equity excluding merger related expenses, net of tax, and net operating losses carryback (G) (AB) (AC)			19.19	%			17.81	%			20.23	%			17.82	%			14.77	%			19.07	%			14.94	%
Reconciliation of book value per share to tangible book value per share:
Shareholders' equity		$	6,034,877			$	5,948,122			$	5,855,574			$	5,970,835			$	4,126,806			$	6,034,877			$	4,126,806
Less: Goodwill and other intangible assets			(3,308,170)				(3,311,712)				(3,306,185)				(3,310,075)				(1,929,896)				(3,308,170)				(1,929,896)
Tangible shareholders' equity		$	2,726,707			$	2,636,410			$	2,549,389			$	2,660,760			$	2,196,910			$	2,726,707			$	2,196,910
Period end shares outstanding			92,562				92,660				92,652				94,746				68,397				92,562				68,397
Tangible book value per share:		$	29.46			$	28.45			$	27.52			$	28.08			$	32.12			$	29.46				32.12
Reconciliation of equity to assets ratio to period end tangible equity to period end tangible assets ratio:
Tangible shareholders' equity		$	2,726,707			$	2,636,410			$	2,549,389			$	2,660,760			$	2,196,910			$	2,726,707			$	2,196,910
Total assets		$	33,197,599			$	32,966,649			$	31,743,499			$	32,185,708			$	22,092,817			$	33,197,599			$	22,092,817
Less: Goodwill and other intangible assets			(3,308,170)				(3,311,712)				(3,306,185)				(3,310,075)				(1,929,896)				(3,308,170)				(1,929,896)
Tangible assets		$	29,889,429			$	29,654,937			$	28,437,314			$	28,875,633			$	20,162,921			$	29,889,429			$	20,162,921
Period end tangible equity to period end tangible assets ratio:			9.12	%			8.89	%			8.96	%			9.21	%			10.90	%			9.12	%			10.90	%
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)		$	323,635			$	324,205			$	327,206			$	87,469			$	87,061			$	323,635			$	87,061
Total loans		$	20,795,641			$	21,025,173			$	19,127,195			$	18,845,346			$	10,673,345			$	20,795,641			$	10,673,345
Less: Warehouse Purchase Program loans			(2,730,614)				(2,557,183)				(1,713,762)				(1,552,762)				—				(2,730,614)				—
Less: Paycheck Protection Program loans			(1,393,757)				(1,392,497)				—				—				—				(1,393,757)				—
Total loans less Warehouse Purchase Program and Paycheck Protection Program loans		$	16,671,270			$	17,075,493			$	17,413,433			$	17,292,584			$	10,673,345			$	16,671,270			$	10,673,345
Allowance for credit losses to total loans, excluding Warehouse Purchase Program and Paycheck Protection Program loans			1.94	%			1.90	%			1.88	%			0.51	%			0.82	%			1.94	%			0.82	%
Reconciliation of efficiency ratio to efficiency ratio, excluding net gains and losses on the sale of assets and taxes:
Noninterest expense		$	117,919			$	134,368			$	124,741			$	156,451			$	80,699			$	377,028			$	240,091
Net interest income		$	258,113			$	258,955			$	256,031			$	232,030			$	153,990			$	773,099			$	463,739
Noninterest income			34,924				25,675				34,388				35,506				30,673				94,987				88,775
Less: net (loss) gain on sale or write down of assets			(528)				(3,945)				(385)				(1,870)				(3)				(4,858)				57
Noninterest income excluding net gains and losses on the sale or write down of assets and taxes			35,452				29,620				34,773				37,376				30,676				99,845				88,718
Total income excluding net gains and losses on the sale or write down of assets and taxes		$	293,565			$	288,575			$	290,804			$	269,406			$	184,666			$	872,944			$	552,457
Efficiency ratio, excluding net gains and losses on the sale or write down of assets and taxes			40.17	%			46.56	%			42.90	%			58.07	%			43.70	%			43.19	%			43.46	%
		Three Months Ended																				Year-to-Date
		Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019				Sep 30, 2020				Sep 30, 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		$	117,919			$	134,368			$	124,741			$	156,451			$	80,699			$	377,028			$	240,091
Less: merger related expenses			—				7,474				544				46,402				—				8,018				—
Noninterest expense excluding merger related expenses		$	117,919			$	126,894			$	124,197			$	110,049			$	80,699			$	369,010			$	240,091
Net interest income		$	258,113			$	258,955			$	256,031			$	232,030			$	153,990			$	773,099			$	463,739
Noninterest income			34,924				25,675				34,388				35,506				30,673				94,987				88,775
Less: net (loss) gain on sale or write down of assets			(528)				(3,945)				(385)				(1,870)				(3)				(4,858)				57
Noninterest income excluding net gains and losses on the sale or write down of assets and taxes			35,452				29,620				34,773				37,376				30,676				99,845				88,718
Total income excluding net gains and losses on the sale or write down of assets and taxes		$	293,565			$	288,575			$	290,804			$	269,406			$	184,666			$	872,944			$	552,457
Efficiency ratio, excluding net gains and losses on the sale or write down of assets, taxes and merger related expenses			40.17	%			43.97	%			42.71	%			40.85	%			43.70	%			42.27	%			43.46	%

 

 

 

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SOURCE Prosperity Bancshares, Inc.

FAQ

What were Prosperity Bancshares' earnings results for Q3 2020?

Prosperity Bancshares reported a net income of $130.1 million for Q3 2020, translating to earnings per share of $1.40.

How did Prosperity Bancshares perform compared to Q3 2019?

Net income increased by 59.1% from $81.8 million in Q3 2019 to $130.1 million in Q3 2020.

What is the current dividend for Prosperity Bancshares?

The Board approved a 6.5% increase in the dividend, now set at $0.49 per share.

How much did deposits increase in Q3 2020?

Deposits increased by $306.5 million or 1.2% during Q3 2020.

What was the status of nonperforming assets for Prosperity Bancshares?

Nonperforming assets remained low at 0.24% of average interest-earning assets.