Prosperity Bancshares, Inc.® Reports Third Quarter 2021 Earnings

- Third quarter earnings per share (diluted) of $1.39
Published: Oct. 27, 2021 at 5:30 AM CDT

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.

PROSPERITY BANCSHARES, INC. (PRNewsfoto/Prosperity Bancshares, Inc.)
PROSPERITY BANCSHARES, INC. (PRNewsfoto/Prosperity Bancshares, Inc.)

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.

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