Prosperity Bancshares, Inc.® Reports Third Quarter 2021 Earnings

Rhea-AI Summary

Prosperity Bancshares, Inc. (NYSE: PB) reported net income of $128.6 million for Q3 2021, a decrease from $130.1 million in Q3 2020. Net income per share fell to $1.39 from $1.40 year-over-year. Loans, excluding PPP loans, rose $217.6 million (1.3%), while deposits increased $341.4 million (1.2%). The board approved a 6.1% dividend increase to $0.52 per share. Despite low nonperforming assets at 0.11%, net interest income declined $9.5 million (3.7%) due to falling loan rates. Total assets reached $36.512 billion, up 10% year-over-year.

Positive

• Dividend increased to $0.52 per share, reflecting confidence in company's success.
• Loans, excluding PPP loans, increased by $217.6 million (1.3%).
• Deposits rose by $341.4 million (1.2%).
• Nonperforming assets at only 0.11% of average interest-earning assets.
• Total assets grew to $36.512 billion, a 10% increase year-over-year.

Negative

• Net income decreased by $1.5 million (1.1%) year-over-year.
• Net interest income fell by $9.5 million (3.7%) from Q3 2020.
• Net interest margin declined from 3.57% to 3.10% year-over-year.
• Loans decreased by $1.838 billion (8.8%) y-o-y, attributed to lower commercial real estate loans.

HOUSTON, Oct. 27, 2021 /PRNewswire/ -- Prosperity Bancshares, Inc.^® (NYSE: PB), the parent company of Prosperity Bank^® (collectively, "Prosperity"), reported net income of  $128.6 million for the quarter ended September 30, 2021 compared with $130.1 million for the same period in 2020. Net income per diluted common share was $1.39 for the quarter ended September 30, 2021, compared with $1.40 for the same period in 2020, and the annualized return on third quarter average assets was 1.42%. Additionally, loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program ("PPP") loans, increased $217.6 million or 1.3% (5.3% annualized) and deposits increased $341.4 million or 1.2% (4.7% annualized) during the third quarter of 2021. Nonperforming assets remain low at 0.11% of third quarter average interest-earning assets. 

"I am pleased to report that the Board of Directors has voted to increase the fourth quarter dividend to $0.52 a share, a 6.1% increase from the third quarter.  The increase represents the confidence the Board has in Prosperity's continuing success.  Additionally, Prosperity Bancshares repurchased 767,134 shares of its stock during the third quarter 2021 at an average price of $67.87," said David Zalman, Prosperity's Senior Chairman and Chief Executive Officer.

"Prosperity Bank was ranked by Forbes as the 2nd Best Bank in America for 2021 and has been in the Top 10 of Forbes' list since 2010," continued Zalman.

"The Texas and Oklahoma economies continue to benefit by companies relocating from states with higher taxes and more regulation.  Texas is projected to increase jobs by 493,000 in 2021.  This increase, combined with people moving to the state, requires additional housing and infrastructure, a driver for loans and increased business opportunities.  We are seeing higher prices for most crops and higher oil prices, which should help local economies.  Inflation continues to be higher than we would like, but we hope that it will moderate next year as the Federal Reserve begins tapering its asset purchases as expected.  We believe there are also signs that inventories are starting to increase and supply chains are improving, although it will take some time to stabilize and return to normal," added Zalman.

"Prosperity continues to exhibit solid operating metrics in net income, return on tangible equity and return on assets, and maintain sound credit quality, with low nonperforming assets.  Net interest margins have been stressed throughout the low-rate environment, however we believe this should improve if interest rates rise as projected," stated Zalman.

"We look forward to continuing to build our company through organic growth as well as mergers and acquisitions, when they make sense and are appropriately accretive to earnings.  Thank you to our customers for their loyalty and business and to our associates and board members for their work and dedication," concluded Zalman.

Results of Operations for the Three Months Ended September 30, 2021

Net income was $128.6 million⁽²⁾ for the three months ended September 30, 2021 compared with $130.1 million⁽³⁾ for the same period in 2020, a decrease of $1.5 million or 1.1%. The change was primarily due to decreases in loan income and loan discount accretion of $17.2 million, partially offset by an increase in securities income and a decrease in interest expenses.  Net income per diluted common share was $1.39 for the three months ended September 30, 2021 compared with $1.40 for the same period in 2020, a decrease of 0.7%. Net income was $128.6 million⁽²⁾ for the three months ended September 30, 2021 compared with $130.6 million⁽⁴⁾ for the three months ended June 30, 2021, a decrease of $2.0 million or 1.5%. The change was primarily due to a decrease in loan discount accretion of $6.8 million, partially offset by an increase in securities income and a decrease in interest expense. Net income per diluted common share was $1.39 for the three months ended September 30, 2021 compared with $1.41 for the three months ended June 30, 2021, a decrease of 1.4%. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended September 30, 2021 were 1.42%, 8.07% and 16.72%⁽¹⁾, respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 42.34%⁽¹⁾ for the three months ended September 30, 2021.

Net interest income before provision for credit losses for the three months ended September 30, 2021 was $248.6 million compared with $258.1 million for the same period in 2020, a decrease of $9.5 million or 3.7%. The change was primarily due to a decrease in the average balance and average rate on loans and a decrease in loan discount accretion of $17.2 million, partially offset by an increase in the average investment securities balance and a decrease in the average rate on interest-bearing liabilities. On a linked quarter basis, net interest income before provision for credit losses was $248.6 million compared with $245.4 million for the three months ended June 30, 2021, an increase of $3.2 million or 1.3%. The change was primarily due to a decrease in the average rate on interest-bearing liabilities and an increase in average investment securities balance, partially offset by a $6.8 million decrease in loan discount accretion.

The net interest margin on a tax equivalent basis was 3.10% for the three months ended September 30, 2021 compared with 3.57% for the same period in 2020. The change was primarily due to a decrease in the average rate on loans and a decrease in loan discount accretion of $17.2 million, partially offset by an increase in the average investment securities balance and a decrease in the average rate on interest-bearing liabilities. On a linked quarter basis, the net interest margin on a tax equivalent basis was 3.10% for the three months ended September 30, 2021 compared with 3.11% for the three months ended June 30, 2021.

Noninterest income was $34.6 million for the three months ended September 30, 2021 compared with $34.9 million for the same period in 2020, a decrease of $279 thousand or 0.8%. On a linked quarter basis, noninterest income decreased $911 thousand or 2.6% to $34.6 million compared with $35.6 million for the three months ended June 30, 2021. This change was primarily due to a decrease in mortgage income and decrease in other noninterest income, partially offset by an increase in nonsufficient funds ("NSF") fees.

Noninterest expense was $119.8 million for the three months ended September 30, 2021 compared with $117.9 million for the same period in 2020, an increase of $1.9 million or 1.6%. This increase was primarily due to an increase in salaries and benefits, partially offset by a decrease in other noninterest expense. On a linked quarter basis, noninterest expense increased $4.6 million or 4.0% to $119.8 million compared with $115.2 million for the three months ended June 30, 2021. This increase was primarily due to an increase in salaries and benefits and gains on sale of other real estate of $1.8 million recorded during the second quarter of 2021.

Results of Operations for the Nine Months Ended September 30, 2021

Net income was $392.5 million⁽⁵⁾ for the nine months ended September 30, 2021 compared with $391.8 million⁽⁶⁾ for the same period in 2020, an increase of $697 thousand or 0.2%. Net income per diluted common share was $4.23 for the nine months ended September 30, 2021 compared with $4.20 for the same period in 2020, an increase of 0.7%. Annualized returns on average assets, average common equity and average tangible common equity for the nine months ended September 30, 2021 were 1.47%, 8.32% and 17.53%⁽¹⁾, respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 41.52%⁽¹⁾ for the nine months ended September 30, 2021.

Net interest income before provision for credit losses for the nine months ended September 30, 2021 was $748.5 million compared with $773.1 million for the prior year, a decrease of $24.6 million or 3.2%. The change was primarily due to a decrease in the average rate on interest-earning assets and a decrease in loan discount accretion of $41.4 million, partially offset by a decrease in the average rate on interest-bearing liabilities.

The net interest margin on a tax equivalent basis for the nine months ended September 30, 2021 was 3.20% compared with 3.69% for the same period in 2020. The change was primarily due to a decrease in the average rate on loans, a decrease in loan discount accretion of $41.4 million, lower rates on investment securities and higher cash balances due to excess liquidity, partially offset by a decrease in the average rate on interest-bearing liabilities.

Noninterest income was $104.2 million for the nine months ended September 30, 2021 compared with $95.0 million for the same period in 2020, an increase of $9.2 million or 9.7%. This increase was primarily due to lower net loss on write-down of assets, an increase in credit card, debit card and ATM card income and an increase in other noninterest income.

Noninterest expense was $354.1 million for the nine months ended September 30, 2021 compared with $377.0 million for the same period in 2020, a decrease of $22.9 million or 6.1%. The change was primarily due to decreases in merger related expenses, data processing, net occupancy and equipment and other noninterest expense as a result of efficiencies gained following the LegacyTexas Bank system conversion during the second quarter of 2020 and net gains on sale of other real estate of $2.7 million, partially offset by an increase in salaries and benefits.

Balance Sheet Information

At September 30, 2021, Prosperity had $36.512 billion in total assets, an increase of $3.315 billion or 10.0% compared with $33.198 billion at September 30, 2020.

Loans at September 30, 2021 were $18.958 billion, a decrease of $1.838 billion or 8.8%, compared with $20.796 billion at September 30, 2020, primarily due to a decrease in commercial real estate, PPP and Warehouse Purchase Program loans, partially offset by an increase in 1-4 family residential loans. Linked quarter loans decreased $294.1 million or 1.5% from $19.252 billion at June 30, 2021, primarily due to a $414.1 million decrease in PPP loans. At September 30, 2021, the Company had $365.8 million of PPP loans compared to $1.394 billion of PPP loans at September 30, 2020 and $780.0 million of PPP loans at June 30, 2021.  Linked quarter loans, excluding Warehouse Purchase Program and PPP loans, increased $217.6 million or 1.3% (5.3% annualized) from $16.376 billion at June 30, 2021.

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, 2021, oil and gas loans totaled $569.3 million (net of discount and excluding PPP loans totaling $55.8 million) or 3.0% of total loans, of which $352.4 million were production loans and $216.9 million were servicing loans, compared with total oil and gas loans of $604.7 million (net of discount and excluding PPP loans totaling $115.3 million) or 2.9% of total loans at September 30, 2020, of which $359.6 million were production loans and $245.1 million were servicing loans. In addition, as of September 30, 2021, Prosperity had total unfunded commitments to oil and gas companies of $363.3 million compared with total unfunded commitments to oil and gas companies of $258.1 million as of September 30, 2020. 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, 2021, loans to hotels totaled $407.1 million (excluding PPP loans totaling $5.7 million) or 2.1% of total loans, an increase of $20.8 million or 5.4%, compared with $386.3 million (excluding PPP loans totaling $8.8 million) at September 30, 2020.  At September 30, 2021, loans to restaurants totaled $198.2 million (excluding PPP loans totaling $49.7 million) or 1.0% of total loans, a decrease of $16.9 million or 7.9%, compared with $215.1 million (excluding PPP loans totaling $110.9 million) at September 30, 2020.

Deposits at September 30, 2021 were $29.452 billion, an increase of $2.992 billion or 11.3%, compared with $26.459 billion at September 30, 2020. Linked quarter deposits increased $341.4 million or 1.2% (4.7% annualized) from $29.110 billion at June 30, 2021.

Asset Quality

Nonperforming assets totaled $36.5 million or 0.11% of quarterly average interest-earning assets at September 30, 2021, compared with $69.5 million or 0.24% of quarterly average interest-earning assets at September 30, 2020, and $33.7 million or 0.11% of quarterly average interest-earning assets at June 30, 2021.

The allowance for credit losses on loans was $287.2 million or 1.51% of total loans at September 30, 2021 compared with $302.9 million or 1.57% of total loans at June 30, 2021 and $323.6 million or 1.56% of total loans at September 30, 2020. The allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program and PPP loans, was 1.73%⁽¹⁾ at September 30, 2021 compared with 1.94%⁽¹⁾ at September 30, 2020 and 1.85%⁽¹⁾ at June 30, 2021.

There was no provision for credit losses for the three months ended September 30, 2021 compared with $10.0 million for the three months ended September 30, 2020 and no provision for credit losses for the three months ended June 30, 2021.  There was no provision for credit losses for the nine months ended September 30, 2021 compared with $20.0 million for the nine months ended September 30, 2020.

Net charge-offs were $15.7 million for the three months ended September 30, 2021 compared with net charge-offs of $10.6 million for the three months ended September 30, 2020 and net charge-offs of $4.3 million for the three months ended June 30, 2021. Net charge-offs for the third quarter of 2021 included $4.6 million related to resolved purchased credit deteriorated ("PCD") loans and $10.8 million related to the partial charge-off of one commercial real estate loan obtained through acquisition. The PCD loans had specific reserves of $3.1 million, of which $2.2 million was allocated to the charge-offs and $944 thousand was moved to the general reserve. Further, an additional $14.3 million of specific reserves on resolved PCD loans without any related charge-offs was released to the general reserve.

Net charge-offs were $28.9 million for the nine months ended September 30, 2021 compared with $24.4 million for the nine months ended September 30, 2020. Net charge-offs for the nine months ended September 30, 2021 included $12.7 million related to resolved PCD loans and $10.8 million related to the partial charge-off of one commercial real estate loan obtained through acquisition. The PCD loans had specific reserves of $12.9 million, of which $9.9 million was allocated to the charge-offs and $3.0 million was moved to the general reserve. Further, an additional $19.9 million of specific reserves on resolved PCD loans without any related charge-offs was released to the general reserve.

Dividend

Prosperity Bancshares declared a fourth quarter cash dividend of $0.52 per share to be paid on January 3, 2022 to all shareholders of record as of December 15, 2021.

Stock Repurchase Program

On January 26, 2021, Prosperity Bancshares announced a stock repurchase program under which up to 5%, or approximately 4.65 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 26, 2022, at the discretion of management. Prosperity Bancshares repurchased 767,134 shares of its common stock at an average weighted price of $67.87 per share during the three and nine months ended September 30, 2021.

COVID-19 Pandemic

Prosperity continues to monitor the latest developments regarding COVID-19. As of September 30, 2021, the states of Texas and Oklahoma have lifted their respective restrictions on all business and activities. The COVID-19 pandemic has resulted in significant economic uncertainties that have had, and could continue to have, an adverse impact on Prosperity's operating income, financial condition and cash flows. The extent to which the COVID-19 pandemic will impact Prosperity's operations and financial results during 2021 cannot be reasonably or reliably estimated at this time.

Since the implementation of the Paycheck Protection Program in 2020, Prosperity has obtained SBA approvals on approximately 18,700 loans totaling $2.036 billion and, as of September 30, 2021, had an outstanding balance of 3,233 loans totaling $365.8 million.

Also, in response to the COVID-19 pandemic, Prosperity has provided relief to its loan customers through loan extensions and deferrals. Prosperity's troubled debt restructurings do not include loan modifications related to COVID-19. Beginning in mid-March of 2020, Prosperity began offering deferral and modification of principal and/or interest payments to selected borrowers on a case-by-case basis. As of September 30, 2021, Prosperity had approximately $79.5 million in outstanding loans subject to deferral and modification agreements.

Conference Call

Prosperity's management team will host a conference call on Wednesday, October 27, 2021 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity's third quarter 2021 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 0916027.

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

Prosperity Bancshares, Inc. ®

As of September 30, 2021, Prosperity Bancshares, Inc.^® is a $36.512 billion Houston, Texas based regional financial holding company providing personal banking services and investments to consumers and businesses throughout Texas and Oklahoma.  Founded in 1983, Prosperity believes in a community banking philosophy, taking care of customers, businesses and communities in the areas it serves by providing financial solutions to simplify everyday financial needs. In addition to offering traditional deposit and loan products, Prosperity offers digital banking solutions, credit and debit cards, mortgage services, retail brokerage services, trust and wealth management, and treasury management.

Prosperity currently operates 273 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 63 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; and 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 Prosperity'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; 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, 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, 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 $4.3 million, net of tax, primarily comprised of loan discount accretion of $5.4 million for the three months ended September 30, 2021.
(3)	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.
(4)	Includes purchase accounting adjustments of $9.8 million, net of tax, primarily comprised of loan discount accretion of $12.2 million for the three months ended June 30, 2021.
(5)	Includes purchase accounting adjustments of $27.3 million, net of tax, primarily comprised of loan discount accretion of $33.9 million for the nine months ended September 30, 2021.
(6)	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.

 

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

 

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(In thousands)
		Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Sep 30, 2020
Balance Sheet Data (at period end)
Loans held for sale		$	10,197			$	9,080			$	20,991			$	46,777			$	51,694
Loans held for investment			16,949,486				17,147,146				17,345,506				17,357,788				18,013,333
Loans held for investment - Warehouse Purchase Program			1,998,049				2,095,559				2,272,389				2,842,379				2,730,614
Total loans			18,957,732				19,251,785				19,638,886				20,246,944				20,795,641
Investment securities(A)			12,629,368				11,918,691				10,088,002				8,542,820				7,431,495
Federal funds sold			237				281				8,986				553				56,469
Allowance for credit losses			(287,187)				(302,884)				(307,210)				(316,068)				(323,635)
Cash and due from banks			1,055,386				1,059,879				1,947,235				1,342,996				1,031,193
Goodwill			3,231,636				3,231,636				3,231,636				3,231,636				3,231,692
Core deposit intangibles, net			64,539				67,417				70,304				73,235				76,478
Other real estate owned			150				144				462				10,593				11,548
Fixed assets, net			322,799				324,502				326,970				323,572				325,994
Other assets			537,459				548,473				553,147				602,994				560,724
Total assets		$	36,512,119			$	36,099,924			$	35,558,418			$	34,059,275			$	33,197,599
Noninterest-bearing deposits		$	10,326,489			$	10,099,149			$	9,820,445			$	9,151,233			$	8,998,328
Interest-bearing deposits			19,125,163				19,011,092				18,942,660				18,209,259				17,460,878
Total deposits			29,451,652				29,110,241				28,763,105				27,360,492				26,459,206
Other borrowings			—				—				—				—				2,570
Securities sold under repurchase agreements			440,969				433,069				377,106				389,583				380,274
Subordinated notes			—				—				—				—				125,146
Allowance for credit losses on off-balance sheet credit exposures			29,947				29,947				29,947				29,947				29,947
Other liabilities			244,110				216,330				166,414				148,584				165,579
Total liabilities			30,166,678				29,789,587				29,336,572				27,928,606				27,162,722
Shareholders' equity(B)			6,345,441				6,310,337				6,221,846				6,130,669				6,034,877
Total liabilities and equity		$	36,512,119			$	36,099,924			$	35,558,418			$	34,059,275			$	33,197,599

(A) Includes $2,483, $1,394, $970, $974 and $(442) in unrealized gains (losses) on available for sale securities for the quarterly periods ended September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020, respectively.

(B) Includes $1,961, $1,101, $766, $769 and $(349) in after-tax unrealized gains (losses) on available for sale securities for the quarterly periods ended September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020, respectively.

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(In thousands)
		Three Months Ended																				Year-to-Date
		Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Sep 30, 2020				Sep 30, 2021				Sep 30, 2020
Income Statement Data
Interest income:
Loans		$	213,821			$	216,803			$	233,075			$	241,625			$	244,255			$	663,699			$	734,270
Securities(C)			46,217				43,708				38,677				36,721				38,033				128,602				130,091
Federal funds sold and other earning assets			302				340				351				301				144				993				902
Total interest income			260,340				260,851				272,103				278,647				282,432				793,294				865,263
Interest expense:
Deposits			11,578				15,288				17,362				19,757				22,458				44,228				82,745
Other borrowings			—				—				—				33				52				—				3,517
Securities sold under repurchase agreements			195				164				159				224				309				518				1,403
Subordinated notes and trust preferred			—				—				—				999				1,500				—				4,499
Total interest expense			11,773				15,452				17,521				21,013				24,319				44,746				92,164
Net interest income			248,567				245,399				254,582				257,634				258,113				748,548				773,099
Provision for credit losses			—				—				—				—				10,000				—				20,000
Net interest income after provision for credit losses			248,567				245,399				254,582				257,634				248,113				748,548				753,099
Noninterest income:
Nonsufficient funds (NSF) fees			7,962				6,560				6,687				8,051				7,156				21,209				22,244
Credit card, debit card and ATM card income			8,837				8,918				8,031				8,193				8,315				25,786				23,052
Service charges on deposit accounts			6,115				6,062				5,978				6,046				5,920				18,155				17,814
Trust income			2,467				2,276				2,837				2,192				2,502				7,580				7,406
Mortgage income			1,396				2,914				3,307				3,989				2,958				7,617				6,788
Brokerage income			861				795				711				642				628				2,367				1,862
Bank owned life insurance income			1,325				1,294				1,292				1,252				1,449				3,911				4,502
Net gain (loss) on sale or write-down of assets			255				(244)				(79)				(675)				(528)				(68)				(4,858)
Other noninterest income			5,427				6,981				5,244				6,857				6,524				17,652				16,177
Total noninterest income			34,645				35,556				34,008				36,547				34,924				104,209				94,987
Noninterest expense:
Salaries and benefits			78,412				75,611				80,037				77,809				75,068				234,060				231,459
Net occupancy and equipment			8,165				8,046				7,833				8,223				8,644				24,044				26,814
Credit and debit card, data processing and software amortization			9,103				8,718				8,233				8,442				8,776				26,054				31,887
Regulatory assessments and FDIC insurance			2,497				2,670				2,670				2,670				2,512				7,837				7,191
Core deposit intangibles amortization			2,878				2,887				2,931				3,243				3,270				8,696				9,926
Depreciation			4,524				4,513				4,540				4,261				4,605				13,577				13,971
Communications			3,013				2,982				2,899				2,931				3,027				8,894				9,546
Other real estate expense			30				198				244				279				258				472				344
Net loss (gain) on sale or write-down of other real estate			4				(1,839)				(887)				(195)				(137)				(2,722)				(263)
Merger related expenses			—				—				—				—				—				—				8,018
Other noninterest expense			11,189				11,405				10,576				12,542				11,896				33,170				38,135
Total noninterest expense			119,815				115,191				119,076				120,205				117,919				354,082				377,028
Income before income taxes			163,397				165,764				169,514				173,976				165,118				498,675				471,058
Provision for income taxes			34,807				35,153				36,205				36,885				35,054				106,165				79,245
Net income available to common shareholders		$	128,590			$	130,611			$	133,309			$	137,091			$	130,064			$	392,510			$	391,813

(C) Interest income on securities was reduced by net premium amortization of $15,141, $14,436, $12,844, $11,509 and $10,089 for the three months ended September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020, respectively, and $42,421 and $27,318 for the nine months ended September 30, 2021 and September 30, 2020, 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, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Sep 30, 2020				Sep 30, 2021				Sep 30, 2020
Profitability
Net income (D) (E)		$	128,590			$	130,611			$	133,309			$	137,091			$	130,064			$	392,510			$	391,813
Basic earnings per share		$	1.39			$	1.41			$	1.44			$	1.48			$	1.40			$	4.23			$	4.20
Diluted earnings per share		$	1.39			$	1.41			$	1.44			$	1.48			$	1.40			$	4.23			$	4.20
Return on average assets (F)			1.42	%			1.45	%			1.54	%			1.63	%			1.58	%			1.47	%			1.62	%	(J)
Return on average common equity (F)			8.07	%			8.31	%			8.60	%			8.98	%			8.64	%			8.32	%			8.78	%	(J)
Return on average tangible common equity (F) (G)			16.72	%			17.49	%			18.43	%			19.57	%			19.19	%			17.53	%			19.77	%	(J)
Tax equivalent net interest margin (D) (E) (H)			3.10	%			3.11	%			3.41	%			3.49	%			3.57	%			3.20	%			3.69	%
Efficiency ratio (G) (I)			42.34	%			40.96	%			41.25	%			40.77	%			40.17	%			41.52	%			43.19	%	(K)
Liquidity and Capital Ratios
Equity to assets			17.38	%			17.48	%			17.50	%			18.00	%			18.18	%			17.38	%			18.18	%
Common equity tier 1 capital			14.84	%			15.26	%			14.60	%			13.74	%			13.17	%			14.84	%			13.17	%
Tier 1 risk-based capital			14.84	%			15.26	%			14.60	%			13.74	%			13.17	%			14.84	%			13.17	%
Total risk-based capital			15.20	%			15.71	%			15.07	%			14.23	%			14.28	%			15.20	%			14.28	%
Tier 1 leverage capital			9.55	%			9.50	%			9.68	%			9.67	%			9.57	%			9.55	%			9.57	%
Period end tangible equity to period end tangible assets (G)			9.18	%			9.18	%			9.05	%			9.19	%			9.12	%			9.18	%			9.12	%
Other Data
Weighted-average shares used in computing earnings per common share
Basic			92,683				92,935				92,854				92,559				92,656				92,823				93,226
Diluted			92,683				92,935				92,854				92,559				92,656				92,823				93,226
Period end shares outstanding			92,160				92,935				92,929				92,571				92,562				92,160				92,562
Cash dividends paid per common share		$	0.49			$	0.49			$	0.49			$	0.49			$	0.46			$	1.47			$	1.38
Book value per common share		$	68.85			$	67.90			$	66.95			$	66.23			$	65.20			$	68.85			$	65.20
Tangible book value per common share (G)		$	33.09			$	32.40			$	31.42			$	30.53			$	29.46			$	33.09			$	29.46
Common Stock Market Price
High		$	72.97			$	78.06			$	83.02			$	70.38			$	60.63			$	83.02			$	75.22
Low		$	64.40			$	69.83			$	66.45			$	50.43			$	48.80			$	64.40			$	42.02
Period end closing price		$	71.13			$	71.80			$	76.16			$	69.36			$	51.83			$	71.13			$	51.83
Employees – FTE (excluding overtime)			3,625				3,724				3,724				3,756				3,716				3,625				3,716
Number of banking centers			273				274				275				275				275				273				275

 

(D) Includes purchase accounting adjustments for the periods presented as follows:
	Three Months Ended										Year-to-Date
	Sep 30, 2021		Jun 30, 2021		Mar 31, 2021		Dec 31, 2020		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020
Loan discount accretion
ASC 310-20	$3,761		$9,731		$13,313		$13,514		$16,729		$26,805		$57,191
ASC 310-30	$1,618		$2,462		$3,027		$2,545		$5,805		$7,107		$18,091
Securities net amortization	$136		$171		$111		$66		$116		$418		$513
Time deposits amortization	$201		$327		$507		$790		$1,240		$1,035		$5.303

(E) Using effective tax rate of 21.3%, 21.2%, 21.4%, 21.2% and 21.2% for the three months ended September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020, respectively, and 21.3% and 16.8% for the nine months ended September 30, 2021 and September 30, 2020, respectively. Net income for the second quarter of 2020 includes a tax benefit for NOL related to the CARES Act.

(F) Interim periods annualized.

(G) 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.

(H) Net interest margin for all periods presented is based on average balances on an actual 365-day or 366-day basis.

(I)  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.

(J)  For calculations of the annualized returns on average assets, average common equity and average tangible common equity excluding merger related expenses, net of tax, and NOL tax benefit, refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

(K) 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, 2021												Jun 30, 2021												Sep 30, 2020
		Average Balance				Interest Earned/ Interest Paid				Average Yield/ Rate			(L)	Average Balance				Interest Earned/ Interest Paid				Average Yield/ Rate			(L)	Average Balance				Interest Earned/ Interest Paid				Average Yield/ Rate			(L)
Interest-earning assets:
Loans held for sale		$	11,714			$	91			3.08%				$	13,716			$	109			3.19%				$	50,606			$	420			3.30%
Loans held for investment			17,102,998				199,019			4.62%					17,305,259				200,817			4.65%					18,267,559				225,596			4.91%
Loans held for investment - Warehouse Purchase Program			1,836,252				14,711			3.18%					1,984,305				15,877			3.21%					2,279,461				18,239			3.18%
Total Loans			18,950,964				213,821			4.48%					19,303,280				216,803			4.50%					20,597,626				244,255			4.72%
Investment securities			12,184,964				46,217			1.50%			(M)		11,180,948				43,708			1.57%			(M)		7,603,762				38,033			1.99%			(M)
Federal funds sold and other earning assets			734,787				302			0.16%					1,221,993				340			0.11%					618,228				144			0.09%
Total interest-earning assets			31,870,715				260,340			3.24%					31,706,221				260,851			3.30%					28,819,616				282,432			3.90%
Allowance for credit losses			(301,011)												(306,059)												(321,424)
Noninterest-earning assets			4,728,965												4,695,860												4,482,646
Total assets		$	36,298,669											$	36,096,022											$	32,980,838
Interest-bearing liabilities:
Interest-bearing demand deposits		$	6,089,678			$	3,614			0.24%				$	6,281,068			$	5,471			0.35%				$	5,221,722			$	5,028			0.38%
Savings and money market deposits			9,944,664				4,522			0.18%					9,872,624				5,490			0.22%					8,937,751				7,833			0.35%
Certificates and other time deposits			2,897,123				3,442			0.47%					2,980,186				4,327			0.58%					3,103,290				9,597			1.23%
Other borrowings			—				—				—				—				—				—				13,898				52			1.49%
Securities sold under repurchase agreements			448,338				195			0.17%					383,975				164			0.17%					378,888				309			0.32%
Subordinated notes			—				—				—				—				—				—				125,256				1,500			4.76%
Total interest-bearing liabilities			19,379,803				11,773			0.24%			(N)		19,517,853				15,452			0.32%			(N)		17,780,805				24,319			0.54%			(N)
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits			10,286,062												10,062,085												8,980,814
Allowance for credit losses on off-balance sheet credit exposures			29,947												29,947												29,947
Other liabilities			229,502												198,748												167,532
Total liabilities			29,925,314												29,808,633												26,959,098
Shareholders' equity			6,373,355												6,287,389												6,021,740
Total liabilities and shareholders' equity		$	36,298,669											$	36,096,022											$	32,980,838
Net interest income and margin						$	248,567			3.09%								$	245,399			3.10%								$	258,113			3.56%
Non-GAAP to GAAP reconciliation:
Tax equivalent adjustment							551												586												658
Net interest income and margin (tax equivalent basis)						$	249,118			3.10%								$	245,985			3.11%								$	258,771			3.57%

(L) Annualized and based on an actual 365-day or 366-day basis.

(M) Yield on securities was impacted by net premium amortization of $15,141, $14,436, and $10,089 for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

(N) Total cost of funds, including noninterest bearing deposits, was 0.16%, 0.21% and 0.36% for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
YIELD ANALYSIS		Year-to-Date
		Sep 30, 2021												Sep 30, 2020
		Average Balance				Interest Earned/ Interest Paid				Average Yield/ Rate			(O)	Average Balance				Interest Earned/ Interest Paid				Average Yield/ Rate			(O)
Interest-earning assets:
Loans held for sale		$	19,507			$	439			3.01%				$	60,256			$	1,575			3.49%
Loans held for investment			17,228,462				613,813			4.76%					17,890,010				690,175			5.15%
Loans held for investment - Warehouse Purchase Program			2,061,432				49,447			3.21%					1,749,568				42,520			3.25%
Total loans			19,309,401				663,699			4.60%					19,699,834				734,270			4.98%
Investment securities			10,849,373				128,602			1.58%			(P)		8,029,097				130,091			2.16%			(P)
Federal funds sold and other earning assets			1,151,647				993			0.12%					339,229				902			0.36%
Total interest-earning assets			31,310,421				793,294			3.39%					28,068,160				865,263			4.12%
Allowance for credit losses			(307,500)												(325,036)
Noninterest-earning assets			4,644,874												4,540,440
Total assets		$	35,647,795											$	32,283,564
Interest-bearing liabilities:
Interest-bearing demand deposits		$	6,160,988			$	15,028			0.33%				$	5,054,320			$	16,745			0.44%
Savings and money market deposits			9,747,706				15,765			0.22%					8,481,852				30,700			0.48%
Certificates and other time deposits			2,969,151				13,435			0.60%					3,243,564				35,300			1.45%
Other borrowings			—				—				—				439,018				3,517			1.07%
Securities sold under repurchase agreements			403,254				518			0.17%					370,225				1,403			0.51%
Subordinated notes			—				—				—				125,475				4,499			4.79%
Total interest-bearing liabilities			19,281,099				44,746			0.31%			(Q)		17,714,454				92,164			0.69%			(Q)
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits			9,855,599												8,354,410
Allowance for credit losses on off-balance sheet credit exposures			29,947												24,321
Other liabilities			194,347												239,747
Total liabilities			29,360,992												26,332,932
Shareholders' equity			6,286,803												5,950,632
Total liabilities and shareholders' equity			35,647,795											$	32,283,564
Net interest income and margin						$	748,548			3.20%								$	773,099			3.68%
Non-GAAP to GAAP reconciliation:
Tax equivalent adjustment							1,772												2,071
Net interest income and margin (tax equivalent basis)						$	750,320			3.20%								$	775,170			3.69%

(O) Annualized and based on an actual 365-day or 366-day basis.

(P) Yield on securities was impacted by net premium amortization of $42,421 and $27,318 for the nine months ended September 30, 2021 and 2020, respectively.

(Q) Total cost of funds, including noninterest bearing deposits, was 0.21% and 0.47% for the nine months ended September 30, 2021 and 2020, respectively.

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
	Three Months Ended
	Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Sep 30, 2020
YIELD TREND (R)
Interest-Earning Assets:
Loans held for sale		3.08	%			3.19	%			2.90	%			3.23	%			3.30	%
Loans held for investment		4.62	%			4.65	%			5.02	%			4.95	%			4.91	%
Loans held for investment - Warehouse Purchase Program		3.18	%			3.21	%			3.23	%			3.20	%			3.18	%
Total loans		4.48	%			4.50	%			4.80	%			4.72	%			4.72	%
Investment securities (S)		1.50	%			1.57	%			1.71	%			1.83	%			1.99	%
Federal funds sold and other earning assets		0.16	%			0.11	%			0.09	%			0.11	%			0.09	%
Total interest-earning assets		3.24	%			3.30	%			3.64	%			3.76	%			3.90	%
Interest-Bearing Liabilities:
Interest-bearing demand deposits		0.24	%			0.35	%			0.39	%			0.38	%			0.38	%
Savings and money market deposits		0.18	%			0.22	%			0.25	%			0.30	%			0.35	%
Certificates and other time deposits		0.47	%			0.58	%			0.76	%			0.98	%			1.23	%
Other borrowings		—				—				—				5.39	%			1.49	%
Securities sold under repurchase agreements		0.17	%			0.17	%			0.17	%			0.24	%			0.32	%
Subordinated notes		—				—				—				4.87	%			4.76	%
Total interest-bearing liabilities		0.24	%			0.32	%			0.38	%			0.46	%			0.54	%
Net Interest Margin		3.09	%			3.10	%			3.40	%			3.48	%			3.56	%
Net Interest Margin (tax equivalent)		3.10	%			3.11	%			3.41	%			3.49	%			3.57	%

(R) Annualized and based on average balances on an actual 365-day or 366-day basis.

(S) Yield on securities was impacted by net premium amortization of $15,141, $14,436, $12,844, $11,509 and $10,089 for the three months ended September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020, respectively.

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
		Three Months Ended
		Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Sep 30, 2020
Balance Sheet Averages
Loans held for sale		$	11,714			$	13,716			$	33,327			$	42,856			$	50,606
Loans held for investment			17,102,998				17,305,259				17,279,066				17,700,756				18,267,559
Loans held for investment - Warehouse Purchase Program			1,836,252				1,984,305				2,369,601				2,603,455				2,279,461
Total Loans			18,950,964				19,303,280				19,681,994				20,347,067				20,597,626
Investment securities			12,184,964				11,180,948				9,148,841				8,001,679				7,603,762
Federal funds sold and other earning assets			734,787				1,221,993				1,506,645				1,094,487				618,228
Total interest-earning assets			31,870,715				31,706,221				30,337,480				29,443,233				28,819,616
Allowance for credit losses			(301,011)				(306,059)				(315,590)				(322,138)				(321,424)
Cash and due from banks			570,765				521,737				308,787				289,579				267,887
Goodwill			3,231,637				3,231,637				3,233,231				3,231,850				3,231,976
Core deposit intangibles, net			65,955				68,830				71,763				74,919				78,269
Other real estate			279				3,001				6,385				14,573				8,061
Fixed assets, net			323,584				326,570				326,004				325,485				325,958
Other assets			536,745				544,085				576,300				633,405				570,495
Total assets		$	36,298,669			$	36,096,022			$	34,544,360			$	33,690,906			$	32,980,838
Noninterest-bearing deposits		$	10,286,062			$	10,062,085			$	9,206,791			$	9,103,742			$	8,980,814
Interest-bearing demand deposits			6,089,678				6,281,068				6,112,469				5,545,298				5,221,722
Savings and money market deposits			9,944,664				9,872,624				9,420,064				9,170,179				8,937,751
Certificates and other time deposits			2,897,123				2,980,186				3,031,621				3,047,475				3,103,290
Total deposits			29,217,527				29,195,963				27,770,945				26,866,694				26,243,577
Other borrowings			—				—				—				2,435				13,898
Securities sold under repurchase agreements			448,338				383,975				376,662				376,779				378,888
Subordinated notes			—				—				—				81,570				125,256
Allowance for credit losses on off-balance sheet credit exposures			29,947				29,947				29,947				29,947				29,947
Other liabilities			229,502				198,748				169,138				224,907				167,532
Shareholders' equity			6,373,355				6,287,389				6,197,668				6,108,574				6,021,740
Total liabilities and equity		$	36,298,669			$	36,096,022			$	34,544,360			$	33,690,906			$	32,980,838

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
		Sep 30, 2021							Jun 30, 2021							Mar 31, 2021							Dec 31, 2020							Sep 30, 2020
Period End Balances
Loan Portfolio
Commercial and industrial		$	1,841,899			9.7	%		$	2,021,951			10.5	%		$	2,104,116			10.7	%		$	2,210,003			10.9	%		$	2,171,302			10.5	%
Warehouse purchase program			1,998,049			10.6	%			2,095,559			10.9	%			2,272,389			11.6	%			2,842,379			14.0	%			2,730,614			13.1	%
Construction, land development and other land loans			2,269,417			12.0	%			2,147,474			11.2	%			2,031,355			10.4	%			1,956,960			9.7	%			2,081,762			10.0	%
1-4 family residential			4,709,468			24.8	%			4,531,589			23.5	%			4,310,437			21.9	%			4,253,331			21.0	%			4,189,852			20.1	%
Home equity			746,426			3.9	%			637,431			3.3	%			554,278			2.8	%			504,207			2.5	%			477,552			2.3	%
Commercial real estate (includes multi-family residential)			5,550,841			29.3	%			5,681,184			29.5	%			5,858,475			29.8	%			6,078,764			30.0	%			6,179,901			29.7	%
Agriculture (includes farmland)			631,497			3.3	%			590,135			3.1	%			571,783			2.9	%			581,352			2.9	%			598,972			2.9	%
Consumer and other			274,980			1.5	%			264,652			1.4	%			293,023			1.5	%			344,028			1.7	%			367,231			1.8	%
Energy			569,314			3.0	%			501,821			2.6	%			503,947			2.6	%			512,735			2.5	%			604,698			2.9	%
Paycheck Protection Program			365,841			1.9	%			779,989			4.0	%			1,139,083			5.8	%			963,185			4.8	%			1,393,757			6.7	%
Total loans		$	18,957,732						$	19,251,785						$	19,638,886						$	20,246,944						$	20,795,641
Deposit Types
Noninterest-bearing DDA		$	10,326,489			35.0	%		$	10,099,149			34.7	%		$	9,820,445			34.1	%		$	9,151,233			33.4	%		$	8,998,328			34.0	%
Interest-bearing DDA			6,088,923			20.7	%			6,185,115			21.2	%			6,158,641			21.4	%			5,899,051			21.6	%			5,297,802			20.0	%
Money market			6,864,664			23.3	%			6,706,252			23.0	%			6,714,889			23.4	%			6,381,014			23.3	%			6,324,127			23.9	%
Savings			3,293,850			11.2	%			3,160,606			10.9	%			3,083,447			10.7	%			2,863,086			10.5	%			2,772,492			10.5	%
Certificates and other time deposits			2,877,726			9.8	%			2,959,119			10.2	%			2,985,683			10.4	%			3,066,108			11.2	%			3,066,457			11.6	%
Total deposits		$	29,451,652						$	29,110,241						$	28,763,105						$	27,360,492						$	26,459,206
Loan to Deposit Ratio			64.4	%						66.1	%						68.3	%						74.0	%						78.6	%

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
Construction Loans
		Sep 30, 2021							Jun 30, 2021							Mar 31, 2021							Dec 31, 2020							Sep 30, 2020
Single family residential construction		$	659,248			29.0	%		$	624,954			29.1	%		$	590,223			29.1	%		$	579,761			29.6	%		$	654,933			31.5	%
Land development			92,623			4.1	%			97,709			4.6	%			97,267			4.8	%			103,307			5.3	%			114,937			5.5	%
Raw land			315,803			13.9	%			245,484			11.4	%			243,394			12.0	%			247,628			12.7	%			240,154			11.5	%
Residential lots			195,201			8.6	%			165,645			7.7	%			176,884			8.6	%			158,441			8.1	%			137,615			6.6	%
Commercial lots			169,189			7.5	%			153,714			7.2	%			137,512			6.8	%			114,427			5.8	%			109,569			5.3	%
Commercial construction and other			837,436			36.9	%			860,069			40.0	%			786,192			38.7	%			753,587			38.5	%			825,053			39.6	%
Net unaccreted discount			(83)							(101)							(117)							(191)							(499)
Total construction loans		$	2,269,417						$	2,147,474						$	2,031,355						$	1,956,960						$	2,081,762

 

Non-Owner Occupied Commercial Real Estate Loans by Metropolitan Statistical Area (MSA) as of September 30, 2021
	Houston				Dallas				Austin				OK City				Tulsa				Other (T)				Total
Collateral Type
Shopping center/retail	$	344,431			$	287,295			$	43,715			$	16,729			$	28,842			$	316,601			$	1,037,613
Commercial and industrial buildings		159,540				83,393				19,884				20,930				18,037				158,211				459,995
Office buildings		122,714				471,358				28,437				72,232				4,783				77,257				776,781
Medical buildings		105,696				23,741				2,617				23,053				39,699				65,846				260,652
Apartment buildings		259,581				145,045				37,544				15,854				35,052				179,293				672,369
Hotel		74,641				77,389				42,971				29,372				—				152,221				376,594
Other		75,713				68,519				18,409				8,442				3,769				72,250				247,102
Total	$	1,142,316			$	1,156,740			$	193,577			$	186,612			$	130,182			$	1,021,679			$	3,831,106		(U)

 

Acquired Loans
		Non-PCD Loans												PCD Loans												Total Acquired Loans
		Balance at Acquisition Date				Balance at Jun 30, 2021				Balance at Sep 30, 2021				Balance at Acquisition Date				Balance at Jun 30, 2021				Balance at Sep 30, 2021				Balance at Acquisition Date				Balance at Jun 30, 2021				Balance at Sep 30, 2021
Loan marks:
Acquired banks (V)		$	345,599			$	16,535			$	12,774			$	320,052			$	8,695			$	5,569			$	665,651			$	25,230			$	18,343
Acquired portfolio loan balances:
Acquired banks (V)			12,286,159				2,913,494				2,585,926				689,573				144,694				89,833				12,975,732		(W)		3,058,188				2,675,759
Acquired portfolio loan balances less loan marks		$	11,940,560			$	2,896,959			$	2,573,152			$	369,521			$	135,999			$	84,264			$	12,310,081			$	3,032,958			$	2,657,416

(T) Includes other MSA and non-MSA regions.

(U) Represents a portion of total commercial real estate loans of $5.551 billion as of September 30, 2021.

(V) Includes Bank Arlington, American State Bank, Community National Bank, First Federal Bank Texas, Coppermark Bank, First Victoria National Bank, The F&M Bank & Trust Company, Tradition Bank and LegacyTexas Bank.

(W) Actual principal balances acquired.

 

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
	Three Months Ended																				Year-to-Date
	Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Sep 30, 2020				Sep 30, 2021				Sep 30, 2020
Asset Quality
Nonaccrual loans	$	35,035			$	32,880			$	43,025			$	47,185			$	57,412			$	35,035			$	57,412
Accruing loans 90 or more days past due		1,038				330				313				1,699				462				1,038				462
Total nonperforming loans		36,073				33,210				43,338				48,884				57,874				36,073				57,874
Repossessed assets		326				310				362				93				120				326				120
Other real estate		150				144				462				10,593				11,548				150				11,548
Total nonperforming assets	$	36,549			$	33,664			$	44,162			$	59,570			$	69,542			$	36,549			$	69,542
Nonperforming assets:
Commercial and industrial (includes energy)	$	8,199			$	8,613			$	11,290			$	16,176			$	17,273			$	8,199			$	17,273
Construction, land development and other land loans		803				1,423				1,692				1,566				2,633				803				2,633
1-4 family residential (includes home equity)		11,117				11,681				11,920				25,830				29,953				11,117				29,953
Commercial real estate (includes multi-family residential)		15,691				11,266				16,896				12,315				16,069				15,691				16,069
Agriculture (includes farmland)		643				661				803				2,075				1,931				643				1,931
Consumer and other		96				20				1,561				1,608				1,683				96				1,683
Total	$	36,549			$	33,664			$	44,162			$	59,570			$	69,542			$	36,549			$	69,542
Number of loans/properties		155				152				167				208				198				155				198
Allowance for credit losses at end of period	$	287,187			$	302,884			$	307,210			$	316,068			$	323,635			$	287,187			$	323,635
Net charge-offs (recoveries):
Commercial and industrial (includes energy)	$	3,763			$	3,529			$	1,584			$	4,085			$	8,344			$	8,876			$	20,522
Construction, land development and other land loans		(4)				(105)				(5)				(110)				478				(114)				460
1-4 family residential (includes home equity)		66				(6)				47				1,982				252				107				308
Commercial real estate (includes multi-family residential)		11,180				517				6,589				626				676				18,286				595
Agriculture (includes farmland)		(63)				(9)				33				(4)				(17)				(39)				(21)
Consumer and other		755				400				610				988				837				1,765				2,508
Total	$	15,697			$	4,326			$	8,858			$	7,567			$	10,570			$	28,881			$	24,372
Asset Quality Ratios
Nonperforming assets to average interest-earning assets		0.11	%			0.11	%			0.15	%			0.20	%			0.24	%			0.12	%			0.25	%
Nonperforming assets to loans and other real estate		0.19	%			0.17	%			0.22	%			0.29	%			0.33	%			0.19	%			0.33	%
Net charge-offs to average loans (annualized)		0.33	%			0.09	%			0.18	%			0.15	%			0.21	%			0.20	%			0.17	%
Allowance for credit losses to total loans		1.51	%			1.57	%			1.56	%			1.56	%			1.56	%			1.51	%			1.56	%
Allowance for credit losses to total loans, excluding Warehouse Purchase Program loans and Paycheck Protection Program loans (G)		1.73	%			1.85	%			1.89	%			1.92	%			1.94	%			1.73	%			1.94	%

 

 

Prosperity Bancshares, Inc.®
Notes to Selected Financial Data (Unaudited)
(Dollars and share amounts in thousands, except per share data)
NOTES TO SELECTED FINANCIAL DATA
Prosperity's management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews diluted earnings per share excluding merger related expenses, net of tax, and NOL tax benefit; return on average assets excluding merger related expenses, net of tax, and NOL tax benefit; return on average common equity excluding merger related expenses, net of tax, and NOL tax benefit; return on average tangible common equity; return on average tangible common equity excluding merger related expenses, net of tax, and NOL tax benefit; tangible book value per share; the tangible equity to tangible assets ratio; allowance for credit losses to total loans excluding Warehouse Purchase Program and PPP loans; the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities; and the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities and merger related expenses, for internal planning and forecasting purposes. In addition, due to the application of purchase accounting, Prosperity uses certain non-GAAP financial measures and ratios that exclude the impact of these items to evaluate its allowance for credit losses to total loans (excluding Warehouse Purchase Program loans and PPP loans). Prosperity has included information below relating to these non-GAAP financial measures for the applicable periods presented.
		Three Months Ended																				Year-to-Date
		Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Sep 30, 2020				Sep 30, 2021				Sep 30, 2020
Reconciliation of diluted earnings per share to diluted earnings per share, excluding merger related expenses, net of tax, and NOL tax benefit:
Net income		$	128,590			$	130,611			$	133,309			$	137,091			$	130,064			$	392,510			$	391,813
Add: merger related expenses, net of tax(X)			—				—				—				—				—				—				6,334
Less: NOL tax benefit (Y)			—				—				—				—				—				—				(20,145)
Net income, excluding merger related expenses, net of tax, and NOL tax benefit (X) (Y)		$	128,590			$	130,611			$	133,309			$	137,091			$	130,064			$	392,510			$	378,002
Weighted average diluted shares outstanding			92,683				92,935				92,854				92,559				92,656				92,823				93,226
Merger related expenses per diluted share, net of tax(X)		$	—			$	—			$	—			$	—			$	—			$	—			$	0.07
NOL tax benefit per diluted share (X)		$	—			$	—			$	—			$	—			$	—			$	—			$	(0.22)
Diluted earnings per share, excluding merger related expenses, net of tax, and NOL tax benefit (X) (Y)		$	1.39			$	1.41			$	1.44			$	1.48			$	1.40			$	4.23			$	4.05
Reconciliation of return on average assets to return on average assets excluding merger related expenses, net of tax, and NOL tax benefit:
Net income, excluding merger related expenses, net of tax, and NOL tax benefit (X) (Y)		$	128,590			$	130,611			$	133,309			$	137,091			$	130,064			$	392,510			$	378,002
Average total assets		$	36,298,669			$	36,096,022			$	34,544,360			$	33,690,906			$	32,980,838			$	35,647,795			$	32,283,564
Return on average assets excluding merger related expenses, net of tax, and NOL tax benefit (F) (X) (Y)			1.42	%			1.45	%			1.54	%			1.63	%			1.58	%			1.47	%			1.56	%
Reconciliation of return on average common equity to return on average common equity excluding merger related expenses, net of tax, and NOL tax benefit:
Net income, excluding merger related expenses, net of tax, and NOL tax benefit (X) (Y)		$	128,590			$	130,611			$	133,309			$	137,091			$	130,064			$	392,510			$	378,002
Average shareholders' equity		$	6,373,355			$	6,287,389			$	6,197,668			$	6,108,574			$	6,021,740			$	6,286,803			$	5,950,632
Return on average common equity excluding merger related expenses, net of tax, and NOL tax benefit (F) (X) (Y)			8.07	%			8.31	%			8.60	%			8.98	%			8.64	%			8.32	%			8.47	%
Reconciliation of return on average common equity to return on average tangible common equity:
Net income		$	128,590			$	130,611			$	133,309			$	137,091			$	130,064			$	392,510			$	391,813
Average shareholders' equity		$	6,373,355			$	6,287,389			$	6,197,668			$	6,108,574			$	6,021,740			$	6,286,803			$	5,950,632
Less: Average goodwill and other intangible assets			(3,297,592)				(3,300,467)				(3,304,994)				(3,306,769)				(3,310,245)				(3,300,990)				(3,307,925)
Average tangible shareholders' equity		$	3,075,763			$	2,986,922			$	2,892,674			$	2,801,805			$	2,711,495			$	2,985,813			$	2,642,707
Return on average tangible common equity (F)			16.72	%			17.49	%			18.43	%			19.57	%			19.19	%			17.53	%			19.77	%

(X) Calculated assuming a federal tax rate of 21.0%.

(Y) Net income for the second quarter of 2020 includes a tax benefit for NOL related to the CARES Act.

 

		Three Months Ended																				Year-to-Date
		Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Sep 30, 2020				Sep 30, 2021				Sep 30, 2020
Reconciliation of return on average common equity to return on average tangible common equity excluding merger related expenses, net of tax, and NOL tax benefit:
Net income, excluding merger related expenses, net of tax, and NOL tax benefit (X) (Y)		$	128,590			$	130,611			$	133,309			$	137,091			$	130,064			$	392,510			$	378,002
Average shareholders' equity		$	6,373,355			$	6,287,389			$	6,197,668			$	6,108,574			$	6,021,740			$	6,286,803			$	5,950,632
Less: Average goodwill and other intangible assets			(3,297,592)				(3,300,467)				(3,304,994)				(3,306,769)				(3,310,245)				(3,300,990)				(3,307,925)
Average tangible shareholders' equity		$	3,075,763			$	2,986,922			$	2,892,674			$	2,801,805			$	2,711,495			$	2,985,813			$	2,642,707
Return on average tangible common equity excluding merger related expenses, net of tax, and NOL tax benefit (F) (X) (Y)			16.72	%			17.49	%			18.43	%			19.57	%			19.19	%			17.53	%			19.07	%
Reconciliation of book value per share to tangible book value per share:
Shareholders' equity		$	6,345,441			$	6,310,337			$	6,221,846			$	6,130,669			$	6,034,877			$	6,345,441			$	6,034,877
Less: Goodwill and other intangible assets			(3,296,175)				(3,299,053)				(3,301,940)				(3,304,871)				(3,308,170)				(3,296,175)				3,308,170
Tangible shareholders' equity		$	3,049,266			$	3,011,284			$	2,919,906			$	2,825,798			$	2,726,707			$	3,049,266			$	2,726,707
Period end shares outstanding			92,160				92,935				92,929				92,571				92,562				92,160				92,562
Tangible book value per share		$	33.09			$	32.40			$	31.42			$	30.53			$	29.46			$	33.09				29.46
Reconciliation of equity to assets ratio to period end tangible equity to period end tangible assets ratio:
Tangible shareholders' equity		$	3,049,266			$	3,011,284			$	2,919,906			$	2,825,798			$	2,726,707			$	3,049,266			$	2,726,707
Total assets		$	36,512,119			$	36,099,924			$	35,558,418			$	34,059,275			$	33,197,599			$	36,512,119			$	33,197,599
Less: Goodwill and other intangible assets			(3,296,175)				(3,299,053)				(3,301,940)				(3,304,871)				(3,308,170)				(3,296,175)				(3,308,170)
Tangible assets		$	33,215,944			$	32,800,871			$	32,256,478			$	30,754,404			$	29,889,429			$	33,215,944			$	29,889,429
Period end tangible equity to period end tangible assets ratio			9.18	%			9.18	%			9.05	%			9.19	%			9.12	%			9.18	%			9.12	%
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		$	287,187			$	302,884			$	307,210			$	316,068			$	323,635			$	287,187			$	323,635
Total loans		$	18,957,732			$	19,251,785			$	19,638,886			$	20,246,944			$	20,795,641			$	18,957,732			$	20,795,641
Less: Warehouse Purchase Program loans			(1,998,049)				(2,095,559)				(2,272,389)				(2,842,379)				(2,730,614)				(1,998,049)				(2,730,614)
Less: Paycheck Protection Program loans			(365,841)				(779,989)				(1,139,083)				(963,185)				(1,393,757)				(365,841)				(1,393,757)
Total loans less Warehouse Purchase Program and Paycheck Protection Program loans		$	16,593,842			$	16,376,237			$	16,227,414			$	16,441,380			$	16,671,270			$	16,593,842			$	16,671,270
Allowance for credit losses to total loans, excluding Warehouse Purchase Program and Paycheck Protection Program loans			1.73	%			1.85	%			1.89	%			1.92	%			1.94	%			1.73	%			1.94	%
Reconciliation of efficiency ratio to efficiency ratio, excluding net gains and losses on the sale of assets and taxes:
Noninterest expense		$	119,815			$	115,191			$	119,076			$	120,205			$	117,919			$	354,082			$	377,028
Net interest income		$	248,567			$	245,399			$	254,582			$	257,634			$	258,113			$	748,548			$	773,099
Noninterest income			34,645				35,556				34,008				36,547				34,924				104,209				94,987
Less: net gain (loss) on sale or write down of assets			255				(244)				(79)				(675)				(528)				(68)				(4,858)
Noninterest income excluding net gains and losses on the sale or write down of assets and securities			34,390				35,800				34,087				37,222				35,452				104,277				99,845
Total income excluding net gains and losses on the sale or write down of assets and taxes		$	282,957			$	281,199			$	288,669			$	294,856			$	293,565			$	852,825			$	872,944
Efficiency ratio, excluding net gains and losses on the sale or write down of assets and taxes			42.34	%			40.96	%			41.25	%			40.77	%			40.17	%			41.52	%			43.19	%

 

		Three Months Ended																				Year-to-Date
		Sep 30, 2021				Jun 30, 2021				Mar 31, 2021				Dec 31, 2020				Sep 30, 2020				Sep 30, 2021				Sep 30, 2020
Reconciliation of efficiency ratio to efficiency ratio, excluding net gains and losses on the sale of assets, taxes and merger related expenses:
Noninterest expense		$	119,815			$	115,191			$	119,076			$	120,205			$	117,919			$	354,082			$	377,028
Less: merger related expenses			—				—				—				—				—				—				8,018
Noninterest expense excluding merger related expenses		$	119,815			$	115,191			$	119,076			$	120,205			$	117,919			$	354,082			$	369,010
Net interest income		$	248,567			$	245,399			$	254,582			$	257,634			$	258,113			$	748,548			$	773,099
Noninterest income			34,645				35,556				34,008				36,547				34,924				104,209				94,987
Less: net gain (loss) on sale or write down of assets			255				(244)				(79)				(675)				(528)				(68)				(4,858)
Noninterest income excluding net gains and losses on the sale or write down of assets and taxes			34,390				35,800				34,087				37,222				35,452				104,277				99,845
Total income excluding net gains and losses on the sale or write down of assets and taxes		$	282,957			$	281,199			$	288,669			$	294,856			$	293,565			$	852,825			$	872,944
Efficiency ratio, excluding net gains and losses on the sale or write down of assets, taxes and merger related expenses			42.34	%			40.96	%			41.25	%			40.77	%			40.17	%			41.52	%			42.27	%

 

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SOURCE Prosperity Bancshares, Inc.