8-K
Prosperity Bancshares Inc (PB)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 27, 2022
PROSPERITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
| Texas | 001-35388 | 74-2331986 |
|---|---|---|
| (State or other jurisdiction<br><br><br>of incorporation) | (Commission<br><br><br>File Number) | (IRS Employer<br><br><br>Identification No.) |
4295 San Felipe
Houston, Texas 77027
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (281) 269-7199
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common stock, par value $1.00 per share | PB | New York Stock Exchange, Inc. |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On July 27, 2022, Prosperity Bancshares, Inc. publicly disseminated a press release announcing its financial results for the second quarter ended June 30, 2022. A copy of the press release is furnished as Exhibit 99.1 hereto and incorporated herein by reference.
As provided in General Instruction B.2 to Form 8-K, the information furnished in Item 2.02 and Exhibit 99.1 of this Current Report on Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, and such information shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
| (d) | Exhibits. The following is furnished as an exhibit to this Current Report on Form 8-K: |
|---|---|
| Exhibit<br><br><br>Number | Description of Exhibit |
| --- | --- |
| 99.1 | Press Release issued by Prosperity Bancshares, Inc. dated July 27, 2022. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| PROSPERITY BANCSHARES, INC.<br><br><br>(Registrant) | ||
|---|---|---|
| Dated: July 27, 2022 | By: | /s/ Charlotte M. Rasche |
| Charlotte M. Rasche | ||
| Executive Vice President and General Counsel |
pb-ex991_6.htm
Exhibit 99.1
| PRESS RELEASE | For more information contact: |
|---|---|
| Prosperity Bancshares, Inc.^®^ | Cullen Zalman |
| Prosperity Bank Plaza | Senior Vice President – Banking and Corporate Activities |
| 4295 San Felipe | 281.269.7199 |
| Houston, Texas 77027 | cullen.zalman@prosperitybankusa.com |
FOR IMMEDIATE RELEASE
PROSPERITY BANCSHARES, INC.^®^
REPORTS SECOND QUARTER
2022 EARNINGS
| • | Second quarter net income of $128.5 million and earnings per share (diluted) of $1.40 |
|---|---|
| • | Second quarter net income increased $6.2 million or 5.0% compared to the first quarter 2022 |
| --- | --- |
| • | Loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, increased $406.9 million or 2.4% (9.8% annualized) during the second quarter 2022 |
| --- | --- |
| • | Allowance for credit losses on loans and on off-balance sheet credit exposure of $313.9 million |
| --- | --- |
| • | Allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, of 1.67%^(1)^ |
| --- | --- |
| • | Nonperforming assets remain low at 0.07% of second quarter average interest-earning assets |
| --- | --- |
| • | Return (annualized) on second quarter average assets of 1.36% |
| --- | --- |
| • | Returns (annualized) on second quarter average common equity of 7.84% and average tangible common equity of 15.73%^(1)^ |
| --- | --- |
| • | Repurchased 981,884 shares during the second quarter 2022 |
| --- | --- |
HOUSTON, July 27, 2022. Prosperity Bancshares, Inc.^®^ (NYSE: PB), the parent company of Prosperity Bank^®^ (collectively, “Prosperity”), reported net income of $128.5 million for the quarter ended June 30, 2022 compared with $130.6 million for the same period in 2021. Net income per diluted common share was $1.40 for the quarter ended June 30, 2022 compared with $1.41 for the same period in 2021, and the annualized return on second quarter average assets was 1.36%. Additionally, loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program (“PPP”) loans, increased $406.9 million or 2.4% (9.8% annualized) during the second quarter of 2022. Nonperforming assets remain low at 0.07% of second quarter average interest-earning assets.
“We experienced a strong second quarter of 2022. Earnings increased 5.0% compared with the first quarter of 2022 and we expect continued earnings growth as interest rates increase. Further, our core loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, grew $406.9 million or 2.4% (9.8% annualized) during the quarter, while our non-performing loans remained very low,” said David Zalman, Prosperity’s Senior Chairman and Chief Executive Officer.
“Texas and Oklahoma continue to shine as more people and companies move to these states. For example, according to CNBC, Texas added more jobs over the last year than the 25 lowest job growth states combined. Further, during the last year, the Dallas-Fort Worth area added 295,000 jobs, three times its average annual growth, and the Houston area added 185,000 jobs. Unemployment remains unusually low,” continued Zalman.
______________
| (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. |
|---|
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“We are optimistic about our company, with increased earnings, strong asset quality and over 250 locations in one of the best economies in the nation. This is evidenced by our repurchase of 981,884 shares of our stock during the second quarter of 2022,” added Zalman.
“Thank you to all the customers, associates and directors for helping build a successful company,” concluded Zalman.
Results of Operations for the Three Months Ended June 30, 2022
Net income was $128.5 million^(2)^ for the three months ended June 30, 2022 compared with $130.6 million^(3)^ for the same period in 2021. The change was primarily due to a decrease in loan interest income (including a decrease in PPP fees and interest income of $10.4 million) and loan discount accretion of $12.1 million, partially offset by an increase in securities interest income and a decrease in interest expense. Net income per diluted common share was $1.40 for the three months ended June 30, 2022 compared with $1.41 for the same period in 2021. On a linked quarter basis, net income was $128.5 million^(2)^ for the three months ended June 30, 2022 compared with $122.3 million^(4)^ for the three months ended March 31, 2022, an increase of $6.2 million or 5.0%. The change was primarily due to an increase in securities interest income, partially offset by a decrease in loan discount accretion of $5.1 million. Net income per diluted common share was $1.40 for the three months ended June 30, 2022 compared with $1.33 for the three months ended March 31, 2022. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended June 30, 2022 were 1.36%, 7.84% and 15.73%^(1)^, respectively. Prosperity’s efficiency ratio (excluding net gains and losses on the sale or write down of assets and securities) was 43.12%^(1)^ for the three months ended June 30, 2022.
Net interest income before provision for credit losses for the three months ended June 30, 2022 was $248.5 million compared with $245.4 million for the same period in 2021, an increase of $3.1 million or 1.3%. On a linked quarter basis, net interest income before provision for credit losses was $248.5 million compared with $239.9 million for the three months ended March 31, 2022, an increase of $8.5 million or 3.6%. The change was primarily due to an increase in the average balances and average rates on investment securities.
The net interest margin on a tax equivalent basis was 2.97% for the three months ended June 30, 2022 compared with 3.11% for the same period in 2021. The change was primarily due to a decrease in loan discount accretion of $12.1 million and a decrease in PPP fees and interest income of $10.4 million, partially offset by an increase in the average balances and average rates on investment securities 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 2.97% for the three months ended June 30, 2022 compared with 2.88% for the three months ended March 31, 2022. The change was primarily due to higher average balances and average rates on investment securities and lower cash balances due to a reduction in liquidity, partially offset by a decrease in loan discount accretion of $5.1 million.
Noninterest income was $37.6 million for the three months ended June 30, 2022 compared with $35.6 million for the same period in 2021, an increase of $2.0 million or 5.7%. This change was primarily due to an increase in nonsufficient funds fees (“NSF”) income, a net gain on the sale or write-down of assets and an increase in trust income, partially offset by a decrease in mortgage income. On a linked quarter basis, noninterest income was $37.6 million compared with $35.1 million for the three months ended March 31, 2022, an increase of $2.5 million or 7.0%. This change was primarily due to increases in credit card, debit card and ATM card income, a net gain on the sale or write-down of assets and other noninterest income.
Noninterest expense was $122.9 million for the three months ended June 30, 2022 compared with $115.2 million for the same period in 2021, an increase of $7.7 million or 6.7%, primarily due to an increase in salaries and benefits and the change in net loss (gain) on sale or write-down of other real estate. On a linked quarter basis, noninterest expense increased $3.0 million or 2.5% to $122.9 million compared with $119.9 million for the three months ended March 31, 2022. The increase was primarily due to an increase in salaries and benefits, the change in net loss (gain) on sale or write-down of other real estate and an increase in other noninterest expense.
______________
| (2) | Includes purchase accounting adjustments of $103 thousand, net of tax, primarily comprised of loan discount accretion of $59 thousand for the three months ended June 30, 2022. |
|---|---|
| (3) | 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. |
| --- | --- |
| (4) | Includes purchase accounting adjustments of $4.1 million, net of tax, primarily comprised of loan discount accretion of $5.2 million for the three months ended March 31, 2022. |
| --- | --- |
| (5) | Includes purchase accounting adjustments of $4.2 million, net of tax, primarily comprised of loan discount accretion of $5.3 million for the six months ended June 30, 2022. |
| --- | --- |
| (6) | Includes purchase accounting adjustments of $23.0 million, net of tax, primarily comprised of loan discount accretion of $28.5 million for the six months ended June 30, 2021. |
| --- | --- |
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Results of Operations for the Six Months Ended June 30, 2022
Net income was $250.8 million^(5)^ for the six months ended June 30, 2022 compared with $263.9 million^(6)^ for the same period in 2021. Net income per diluted common share was $2.73 for the six months ended June 30, 2022 compared with $2.84 for the same period in 2021. Annualized returns on average assets, average common equity and average tangible common equity for the six months ended June 30, 2022 were 1.32%, 7.69% and 15.52%^(1)^, respectively. Prosperity’s efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 43.40%^(1)^ for the six months ended June 30, 2022.
Net interest income before provision for credit losses for the six months ended June 30, 2022 was $488.4 million compared with $500.0 million for the prior year. The change was primarily due to a decrease in the average balances and average rates on loans, a decrease in loan discount accretion of $23.3 million and a decrease in PPP fees and interest income of $22.2 million, partially offset by an increase in the average balance on investment securities and a decrease in the average rate on interest-bearing liabilities.
The net interest margin on a tax equivalent basis for the six months ended June 30, 2022 was 2.92% compared with 3.26% for the same period in 2021. The change was primarily due to a decrease in loan discount accretion of $23.3 million, a decrease in PPP fees and interest income of $22.2 million and an increase in the average balance on investment securities, partially offset by a decrease in the average rate on interest-bearing liabilities.
Noninterest income was $72.7 million for the six months ended June 30, 2022 compared with $69.6 million for the same period in 2021, an increase of $3.2 million or 4.5%. This change was primarily due to an increase in NSF income, a net gain on the sale or write-down of assets and an increase in other noninterest income, partially offset by a decrease in mortgage income.
Noninterest expense was $242.7 million for the six months ended June 30, 2022 compared with $234.3 million for the same period in 2021, an increase of $8.5 million or 3.6%. The increase was primarily due to an increase in salaries and benefits, the change in net loss (gain) on sale or write-down of other real estate, an increase in credit and debit card and data processing expense and an increase in other noninterest expense.
Balance Sheet Information
At June 30, 2022, Prosperity had $37.387 billion in total assets, an increase of $1.287 billion or 3.6%, compared with $36.100 billion at June 30, 2021.
Loans at June 30, 2022 were $18.209 billion, a decrease of $1.043 billion or 5.4%, compared with $19.252 billion at June 30, 2021, primarily due to decreases in Warehouse Purchase Program, PPP and commercial real estate loans, partially offset by increases in 1-4 family residential and construction, land development and other land loans. Linked quarter loans increased $141.3 million or 0.8% (3.1% annualized) from $18.068 billion at March 31, 2022. Excluding Warehouse Purchase Program and PPP loans, loans at June 30, 2022 were $17.044 billion compared to $16.376 billion at June 30, 2021, an increase of $667.4 million or 4.1%. Linked quarter loans, excluding Warehouse Purchase Program and PPP loans, increased $406.9 million or 2.4% (9.8% annualized) from $16.637 billion at March 31, 2022.
As part of its lending activities, Prosperity extends credit to oil and gas production and servicing companies. Oil and gas production loans are loans to companies directly involved in the exploration and/or production of oil and gas. Oil and gas servicing loans are loans to companies that provide services for oil and gas production and exploration. At June 30, 2022, oil and gas loans totaled $430.3 million (net of discount and excluding PPP loans totaling $8.2 million) or 2.4% of total loans, of which $214.0 million were production loans and $216.3 million were servicing loans, compared with total oil and gas loans of $501.8 million (net of discount and excluding PPP loans totaling $92.3 million) or 2.6% of total loans at June 30, 2021, of which $283.1 million were production loans and $218.7 million were servicing loans. In addition, as of June 30, 2022, Prosperity had total unfunded commitments to oil and gas companies of $466.7 million compared with total unfunded commitments to oil and gas companies of $298.4 million as of June 30, 2021. Unfunded commitments to producers include letters of credit issued in lieu of oil well plugging bonds.
Deposits at June 30, 2022 were $29.866 billion, an increase of $755.4 million or 2.6%, compared with $29.110 billion at June 30, 2021. Linked quarter deposits decreased $1.203 billion or 3.9% from $31.068 billion at March 31, 2022, primarily due to a decrease in public fund deposits. Prosperity generally experiences seasonality with its public fund deposits, as public fund customers use the tax dollars they receive in December and January throughout the year, resulting in lower deposit balances in the second and third quarters of the year. On a linked quarter basis, noninterest-bearing deposits increased by $255.5 million.
Asset Quality
Nonperforming assets totaled $22.2 million or 0.07% of quarterly average interest-earning assets at June 30, 2022 compared with $33.7 million or 0.11% of quarterly average interest-earning assets at June 30, 2021 and $27.2 million or 0.08% of quarterly average interest-earning assets at March 31, 2022.
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The allowance for credit losses on loans and off-balance sheet credit exposures was $313.9 million at June 30, 2022 compared with $332.8 million at June 30, 2021 and $315.1 million at March 31, 2022.
The allowance for credit losses on loans was $284.0 million or 1.56% of total loans at June 30, 2022 compared with $302.9 million or 1.57% of total loans at June 30, 2021 and $285.2 million or 1.58% of total loans at March 31, 2022. Excluding Warehouse Purchase Program and PPP loans, the allowance for credit losses on loans to total loans was 1.67%^(1)^ at June 30, 2022 compared with 1.85%^(1)^ at June 30, 2021 and 1.71%^(1)^ at March 31, 2022.
There was no provision for credit losses for the three months ended June 30, 2022 and 2021 or the six months ended June 30, 2022 and 2021.
Net charge-offs were $1.2 million for the three months ended June 30, 2022 compared with net charge-offs of $4.3 million for the three months ended June 30, 2021 and net charge-offs of $1.2 million for the three months ended March 31, 2022. During the second quarter of 2022, net charge-offs did not include any purchased credit deteriorated (“PCD”) loans and $1.4 million of specific reserves on resolved PCD loans was released to the general reserve.
Net charge-offs were $2.4 million for the six months ended June 30, 2022 compared with $13.2 million for the six months ended June 30, 2021. Net charge-offs for the six months ended June 30, 2022 did not include any PCD loans and $2.0 million of specific reserves on resolved PCD loans was released to the general reserve during the period.
Dividend
Prosperity Bancshares declared a third quarter cash dividend of $0.52 per share to be paid on October 3, 2022, to all shareholders of record as of September 15, 2022.
Stock Repurchase Program
On January 18, 2022, Prosperity Bancshares announced a stock repurchase program under which up to 5%, or approximately
4.61 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 18, 2023, at the discretion of management. Prosperity Bancshares repurchased 981,884 shares of its common stock at an average weighted price of $66.90 per share during the three and six months ended June 30, 2022.
COVID-19 Pandemic
The Company continues to monitor the latest developments regarding a novel strain of coronavirus disease (“COVID-19”). Although the restrictions previously imposed on businesses and activities by the states of Texas and Oklahoma remained lifted as of June 30, 2022, it is possible that some restrictions could be re-introduced if the number of cases were to increase due to the emergence of a new variant of COVID-19 or otherwise. The COVID-19 pandemic has resulted in significant economic uncertainties that have had, and could continue to have, an adverse impact on the Company’s operating income, financial condition and cash flows. The extent to which the COVID-19 pandemic will impact the Company’s operations and financial results during 2022 cannot be reasonably or reliably estimated at this time.
Since the implementation of the Paycheck Protection Program (“PPP”) in 2020, the Company has obtained Small Business Administration approvals on approximately 18,700 loans totaling $2.036 billion and, as of June 30, 2022, had an outstanding balance of 237 loans totaling $27.6 million.
In response to the COVID-19 pandemic, the Company provided relief to its loan customers through loan extensions and deferrals beginning in March 2020 to selected borrowers on a case-by-case basis. The Company’s troubled debt restructurings do not include loan modifications related to COVID-19. As of June 30, 2022, the Company had no outstanding loans subject to deferral and modification agreements.
Conference Call
Prosperity’s management team will host a conference call on Wednesday, July 27, 2022, at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity’s second quarter 2022 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 0594487.
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.
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Non-GAAP Financial Measures
Prosperity’s management uses certain non-GAAP financial measures to evaluate its performance. Specifically, Prosperity reviews return on average tangible common equity; tangible book value per share; the tangible equity to tangible assets ratio; allowance for credit losses on loans to total loans excluding Warehouse Purchase Program and PPP loans; and the efficiency ratio excluding net gains and losses on the sale or write down of assets and securities, 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 June 30, 2022, Prosperity Bancshares, Inc.^®^ is a $37.387 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 272 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 62 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
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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, 2021, and other reports and statements Prosperity Bancshares has filed with the Securities and Exchange Commission (“SEC”). Copies of the SEC filings for Prosperity Bancshares may be downloaded from the Internet at no charge from http://www.prosperitybankusa.com.
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| Bryan/College Station Area | Garland | Palestine | Magnolia | Texas Tech Student Union |
|---|---|---|---|---|
| Bryan | Grapevine | Rusk | Magnolia Parkway | |
| Bryan-29^th^ Street | Grapevine Main | Seven Points | Mont Belvieu | Midland |
| Bryan-East | Kiest | Teague | Nederland | Wadley |
| Bryan-North | Lake Highlands | Tyler-Beckham | Needville | Wall Street |
| Caldwell | McKinney | Tyler-South Broadway | Rosenberg | |
| College Station | McKinney Eldorado | Tyler-University | Shadow Creek | Odessa |
| Crescent Point | McKinney Redbud | Winnsboro | Spring | Grandview |
| Hearne | North Carrolton | Tomball | Grant | |
| Huntsville | Park Cities | Houston Area | Waller | Kermit Highway |
| Madisonville | Plano | Houston | West Columbia | Parkway |
| Navasota | Plano-West | Aldine | Wharton | |
| New Waverly | Preston Forest | Alief | Winnie | Other West Texas Area |
| Rock Prairie | Preston Parker | Bellaire | Wirt | Locations |
| Southwest Parkway | Preston Royal | Beltway | Big Spring | |
| Tower Point | Red Oak | Clear Lake | South Texas Area - | Brownfield |
| Wellborn Road | Richardson | Copperfield | Corpus Christi | Brownwood |
| Richardson-West | Cypress | Calallen | Cisco | |
| Central Texas Area | Rosewood Court | Downtown | Carmel | Comanche |
| Austin | The Colony | Eastex | Northwest | Early |
| Allandale | Tollroad | Fairfield | Saratoga | Floydada |
| Cedar Park | Trinity Mills | First Colony | Timbergate | Gorman |
| Congress | Turtle Creek | Fry Road | Water Street | Levelland |
| Lakeway | West 15th Plano | Gessner | Littlefield | |
| Liberty Hill | West Allen | Gladebrook | Victoria | Merkel |
| Northland | Westmoreland | Grand Parkway | Victoria Main | Plainview |
| Oak Hill | Wylie | Heights | Victoria-Navarro | San Angelo |
| Research Blvd | Highway 6 West | Victoria-North | Slaton | |
| Westlake | Fort Worth | Little York | Victoria Salem | Snyder |
| Haltom City | Medical Center | |||
| Other Central Texas Area | Hulen | Memorial Drive | Other South Texas Area | Oklahoma |
| Locations | Keller | Northside | Locations | Central Oklahoma Area |
| Bastrop | Museum Place | Pasadena | Alice | Oklahoma City |
| Canyon Lake | Renaissance Square | Pecan Grove | Aransas Pass | 23^rd^Street |
| Dime Box | Roanoke | Pin Oak | Beeville | Expressway |
| Dripping Springs | Stockyards | River Oaks | Colony Creek | I-240 |
| Elgin | Sugar Land | Cuero | Memorial | |
| Flatonia | Other Dallas/Fort Worth Area | SW Medical Center | Edna | |
| Georgetown | Locations | Tanglewood | Goliad | Other Central Oklahoma Area |
| Gruene | Arlington | The Plaza | Gonzales | Locations |
| Kingsland | Azle | Uptown | Hallettsville | Edmond |
| La Grange | Ennis | Waugh Drive | Kingsville | Norman |
| Lexington | Gainesville | Westheimer | Mathis | |
| New Braunfels | Glen Rose | West University | Padre Island | Tulsa Area |
| Pleasanton | Granbury | Woodcreek | Palacios | Tulsa |
| Round Rock | Grand Prairie | Port Lavaca | Garnett | |
| San Antonio | Jacksboro | Katy | Portland | Harvard |
| Schulenburg | Mesquite | Cinco Ranch | Rockport | Memorial |
| Seguin | Muenster | Katy-Spring Green | Sinton | Sheridan |
| Smithville | Runaway Bay | Taft | S. Harvard | |
| Thorndale | Sanger | The Woodlands | Yoakum | Utica Tower |
| Weimar | Waxahachie | The Woodlands-College Park | Yorktown | Yale |
| Weatherford | The Woodlands-I-45 | |||
| Dallas/Fort Worth Area | The Woodlands-Research Forest | West Texas Area | Other Tulsa Area Locations | |
| Dallas | East Texas Area | Abilene | Owasso | |
| 14th Street Plano | Athens | Other Houston Area | Antilley Road | |
| Abrams Centre | Blooming Grove | Locations | Barrow Street | |
| Addison | Canton | Angleton | Cypress Street | |
| Allen | Carthage | Bay City | Judge Ely | |
| Balch Springs | Corsicana | Beaumont | Mockingbird | |
| Camp Wisdom | Crockett | Cleveland | ||
| Carrollton | Eustace | East Bernard | Lubbock | |
| Cedar Hill | Gilmer | El Campo | 4th Street | |
| Coppell | Grapeland | Dayton | 66th Street | |
| East Plano | Gun Barrel City | Galveston | 82nd Street | |
| Euless | Jacksonville | Groves | 86th Street | |
| Frisco | Kerens | Hempstead | 98^th^ Street | |
| Frisco Warren | Longview | Hitchcock | Avenue Q | |
| Frisco-West | Mount Vernon | Liberty | North University |
Page 7
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(In thousands)
| Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance Sheet Data (at period end) | |||||||||||||||
| Loans held for sale | $ | 3,350 | $ | 2,810 | $ | 7,274 | $ | 10,197 | $ | 9,080 | |||||
| Loans held for investment | 17,067,871 | 16,720,173 | 16,833,171 | 16,949,486 | 17,147,146 | ||||||||||
| Loans held for investment - Warehouse Purchase Program | 1,137,623 | 1,344,541 | 1,775,699 | 1,998,049 | 2,095,559 | ||||||||||
| Total loans | 18,208,844 | 18,067,524 | 18,616,144 | 18,957,732 | 19,251,785 | ||||||||||
| Investment securities^(A)^ | 14,912,313 | 14,798,127 | 12,818,901 | 12,629,368 | 11,918,691 | ||||||||||
| Federal funds sold | 201 | 274 | 241 | 237 | 281 | ||||||||||
| Allowance for credit losses on loans | (283,959 | ) | (285,163 | ) | (286,380 | ) | (287,187 | ) | (302,884 | ) | |||||
| Cash and due from banks | 393,716 | 1,560,321 | 2,547,739 | 1,055,386 | 1,059,879 | ||||||||||
| Goodwill | 3,231,636 | 3,231,636 | 3,231,636 | 3,231,636 | 3,231,636 | ||||||||||
| Core deposit intangibles, net | 56,483 | 59,064 | 61,684 | 64,539 | 67,417 | ||||||||||
| Other real estate owned | 1,555 | 1,705 | 622 | 150 | 144 | ||||||||||
| Fixed assets, net | 335,939 | 336,075 | 319,799 | 322,799 | 324,502 | ||||||||||
| Other assets | 530,528 | 501,623 | 523,584 | 537,459 | 548,473 | ||||||||||
| Total assets | $ | 37,387,256 | $ | 38,271,186 | $ | 37,833,970 | $ | 36,512,119 | $ | 36,099,924 | |||||
| Noninterest-bearing deposits | $ | 11,032,184 | $ | 10,776,652 | $ | 10,750,034 | $ | 10,326,489 | $ | 10,099,149 | |||||
| Interest-bearing deposits | 18,833,434 | 20,291,658 | 20,021,728 | 19,125,163 | 19,011,092 | ||||||||||
| Total deposits | 29,865,618 | 31,068,310 | 30,771,762 | 29,451,652 | 29,110,241 | ||||||||||
| Other borrowings | 300,000 | — | — | — | — | ||||||||||
| Securities sold under repurchase agreements | 481,785 | 440,891 | 448,099 | 440,969 | 433,069 | ||||||||||
| Allowance for credit losses on off-balance sheet credit exposures | 29,947 | 29,947 | 29,947 | 29,947 | 29,947 | ||||||||||
| Other liabilities | 188,079 | 227,614 | 156,926 | 244,110 | 216,330 | ||||||||||
| Total liabilities | 30,865,429 | 31,766,762 | 31,406,734 | 30,166,678 | 29,789,587 | ||||||||||
| Shareholders' equity^(B)^ | 6,521,827 | 6,504,424 | 6,427,236 | 6,345,441 | 6,310,337 | ||||||||||
| Total liabilities and equity | $ | 37,387,256 | $ | 38,271,186 | $ | 37,833,970 | $ | 36,512,119 | $ | 36,099,924 |
(A) Includes $1,517, $2,115, $2,290, $2,483 and $1,394 in unrealized gains on available for sale securities for the quarterly periods ended June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021, respectively.
(B) Includes $1,198 $1,671, $1,809, $1,961 and $1,101 in after-tax unrealized gains on available for sale securities for the quarterly periods ended June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021, respectively.
Page 8
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(In thousands)
| Three Months Ended | Year-to-Date | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Jun 30, 2022 | Jun 30, 2021 | ||||||||||||
| Income Statement Data | ||||||||||||||||||
| Interest income: | ||||||||||||||||||
| Loans | $ | 192,770 | $ | 193,025 | $ | 206,209 | $ | 213,821 | $ | 216,803 | $ | 385,795 | $ | 449,878 | ||||
| Securities^(C)^ | 64,111 | 55,011 | 46,857 | 46,217 | 43,708 | 119,122 | 82,385 | |||||||||||
| Federal funds sold and other earning assets | 925 | 847 | 563 | 302 | 340 | 1,772 | 691 | |||||||||||
| Total interest income | 257,806 | 248,883 | 253,629 | 260,340 | 260,851 | 506,689 | 532,954 | |||||||||||
| Interest expense: | ||||||||||||||||||
| Deposits | 8,641 | 8,754 | 8,685 | 11,578 | 15,288 | 17,395 | 32,650 | |||||||||||
| Other borrowings | 450 | — | — | — | — | 450 | — | |||||||||||
| Securities sold under repurchase agreements | 244 | 185 | 184 | 195 | 164 | 429 | 323 | |||||||||||
| Total interest expense | 9,335 | 8,939 | 8,869 | 11,773 | 15,452 | 18,274 | 32,973 | |||||||||||
| Net interest income | 248,471 | 239,944 | 244,760 | 248,567 | 245,399 | 488,415 | 499,981 | |||||||||||
| Provision for credit losses | — | — | — | — | — | — | — | |||||||||||
| Net interest income after provision for credit losses | 248,471 | 239,944 | 244,760 | 248,567 | 245,399 | 488,415 | 499,981 | |||||||||||
| Noninterest income: | ||||||||||||||||||
| Nonsufficient funds (NSF) fees | 8,484 | 8,124 | 8,401 | 7,962 | 6,560 | 16,608 | 13,247 | |||||||||||
| Credit card, debit card and ATM card income | 8,880 | 8,179 | 8,894 | 8,837 | 8,918 | 17,059 | 16,949 | |||||||||||
| Service charges on deposit accounts | 6,365 | 6,211 | 6,237 | 6,115 | 6,062 | 12,576 | 12,040 | |||||||||||
| Trust income | 2,875 | 2,703 | 2,698 | 2,467 | 2,276 | 5,578 | 5,113 | |||||||||||
| Mortgage income | 502 | 455 | 685 | 1,396 | 2,914 | 957 | 6,221 | |||||||||||
| Brokerage income | 917 | 892 | 953 | 861 | 795 | 1,809 | 1,506 | |||||||||||
| Bank owned life insurance income | 1,293 | 1,283 | 1,317 | 1,325 | 1,294 | 2,576 | 2,586 | |||||||||||
| Net gain (loss) on sale or write-down of assets | 1,108 | 689 | 1,165 | 255 | (244 | ) | 1,797 | (323 | ) | |||||||||
| Other noninterest income | 7,170 | 6,586 | 5,407 | 5,427 | 6,981 | 13,756 | 12,225 | |||||||||||
| Total noninterest income | 37,594 | 35,122 | 35,757 | 34,645 | 35,556 | 72,716 | 69,564 | |||||||||||
| Noninterest expense: | ||||||||||||||||||
| Salaries and benefits | 80,371 | 79,411 | 76,496 | 78,412 | 75,611 | 159,782 | 155,648 | |||||||||||
| Net occupancy and equipment | 8,039 | 7,848 | 8,140 | 8,165 | 8,046 | 15,887 | 15,879 | |||||||||||
| Credit and debit card, data processing and software amortization | 9,246 | 8,849 | 9,050 | 9,103 | 8,718 | 18,095 | 16,951 | |||||||||||
| Regulatory assessments and FDIC insurance | 2,851 | 2,850 | 2,801 | 2,497 | 2,670 | 5,701 | 5,340 | |||||||||||
| Core deposit intangibles amortization | 2,581 | 2,620 | 2,855 | 2,878 | 2,887 | 5,201 | 5,818 | |||||||||||
| Depreciation | 4,539 | 4,547 | 4,518 | 4,524 | 4,513 | 9,086 | 9,053 | |||||||||||
| Communications | 3,206 | 2,919 | 3,134 | 3,013 | 2,982 | 6,125 | 5,881 | |||||||||||
| Other real estate expense | 195 | 214 | 24 | 30 | 198 | 409 | 442 | |||||||||||
| Net loss (gain) on sale or write-down of other real estate | 14 | (621 | ) | 2 | 4 | (1,839 | ) | (607 | ) | (2,726 | ) | |||||||
| Other noninterest expense | 11,836 | 11,213 | 12,518 | 11,189 | 11,405 | 23,049 | 21,981 | |||||||||||
| Total noninterest expense | 122,878 | 119,850 | 119,538 | 119,815 | 115,191 | 242,728 | 234,267 | |||||||||||
| Income before income taxes | 163,187 | 155,216 | 160,979 | 163,397 | 165,764 | 318,403 | 335,278 | |||||||||||
| Provision for income taxes | 34,697 | 32,890 | 34,192 | 34,807 | 35,153 | 67,587 | 71,358 | |||||||||||
| Net income available to common shareholders | $ | 128,490 | $ | 122,326 | $ | 126,787 | $ | 128,590 | $ | 130,611 | $ | 250,816 | $ | 263,920 |
(C) Interest income on securities was reduced by net premium amortization of $11,450, $12,857, $16,006, $15,141 and $14,436 for the three months ended June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021, respectively, and $24,307 and $27,280 for the six months ended June 30, 2022 and June 30, 2021, respectively.
Page 9
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars and share amounts in thousands, except per share data and market prices)
| Three Months Ended | Year-to-Date | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Jun 30, 2022 | Jun 30, 2021 | ||||||||||||||||||
| Profitability | ||||||||||||||||||||||||
| Net income ^(D) (E)^ | $ | 128,490 | $ | 122,326 | $ | 126,787 | $ | 128,590 | $ | 130,611 | $ | 250,816 | $ | 263,920 | ||||||||||
| Basic earnings per share | $ | 1.40 | $ | 1.33 | $ | 1.38 | $ | 1.39 | $ | 1.41 | $ | 2.73 | $ | 2.84 | ||||||||||
| Diluted earnings per share | $ | 1.40 | $ | 1.33 | $ | 1.38 | $ | 1.39 | $ | 1.41 | $ | 2.73 | $ | 2.84 | ||||||||||
| Return on average assets ^(F)^ | 1.36 | % | 1.29 | % | ^^ | 1.37 | % | 1.42 | % | 1.45 | % | 1.32 | % | ^^ | 1.49 | % | ||||||||
| Return on average common equity ^(F)^ | 7.84 | % | 7.54 | % | ^^ | 7.91 | % | 8.07 | % | 8.31 | % | 7.69 | % | ^^ | 8.46 | % | ||||||||
| Return on average tangible common equity ^(F)^^^^(G)^ | 15.73 | % | 15.30 | % | ^^ | 16.26 | % | 16.72 | % | 17.49 | % | 15.52 | % | ^^ | 17.95 | % | ||||||||
| Tax equivalent net interest margin ^(D) (E)^^^^(H)^ | 2.97 | % | 2.88 | % | 2.97 | % | 3.10 | % | 3.11 | % | 2.92 | % | 3.26 | % | ||||||||||
| Efficiency ratio ^(G) (I)^ | 43.12 | % | 43.68 | % | ^^ | 42.79 | % | 42.34 | % | 40.96 | % | 43.40 | % | ^^ | 41.11 | % | ||||||||
| Liquidity and Capital Ratios | ||||||||||||||||||||||||
| Equity to assets | 17.44 | % | 17.00 | % | 16.99 | % | 17.38 | % | 17.48 | % | 17.44 | % | 17.48 | % | ||||||||||
| Common equity tier 1 capital | 15.26 | % | ^(J)^ | 15.32 | % | ^(J)^ | 15.10 | % | 14.84 | % | 15.26 | % | 15.26 | % | ^(J)^ | 15.26 | % | |||||||
| Tier 1 risk-based capital | 15.26 | % | ^(J)^ | 15.32 | % | ^(J)^ | 15.10 | % | 14.84 | % | 15.26 | % | 15.26 | % | ^(J)^ | 15.26 | % | |||||||
| Total risk-based capital | 15.91 | % | ^(J)^ | 15.99 | % | ^(J)^ | 15.45 | % | 15.20 | % | 15.71 | % | 15.91 | % | ^(J)^ | 15.71 | % | |||||||
| Tier 1 leverage capital | 9.58 | % | ^(J)^ | 9.44 | % | ^(J)^ | 9.62 | % | 9.55 | % | 9.50 | % | 9.58 | % | ^(J)^ | 9.50 | % | |||||||
| Period end tangible equity to period end tangible assets ^(G)^ | 9.48 | % | 9.19 | % | 9.07 | % | 9.18 | % | 9.18 | % | 9.48 | % | 9.18 | % | ||||||||||
| Other Data | ||||||||||||||||||||||||
| Weighted-average shares used in computing earnings per common share | ||||||||||||||||||||||||
| Basic | 91,772 | 92,161 | 92,162 | 92,683 | 92,935 | 91,965 | 92,895 | |||||||||||||||||
| Diluted | 91,772 | 92,161 | 92,162 | 92,683 | 92,935 | 91,965 | 92,895 | |||||||||||||||||
| Period end shares outstanding | 91,196 | 92,160 | 92,170 | 92,160 | 92,935 | 91,196 | 92,935 | |||||||||||||||||
| Cash dividends paid per common share | $ | 0.52 | $ | 0.52 | $ | 0.52 | $ | 0.49 | $ | 0.49 | $ | 1.04 | $ | 0.98 | ||||||||||
| Book value per common share | $ | 71.51 | $ | 70.58 | $ | 69.73 | $ | 68.85 | $ | 67.90 | $ | 71.51 | $ | 67.90 | ||||||||||
| Tangible book value per common share ^(G)^ | $ | 35.46 | $ | 34.87 | $ | 34.00 | $ | 33.09 | $ | 32.40 | $ | 35.46 | $ | 32.40 | ||||||||||
| Common Stock Market Price | ||||||||||||||||||||||||
| High | $ | 73.50 | $ | 80.46 | $ | 78.67 | $ | 72.97 | $ | 78.06 | $ | 80.46 | $ | 83.02 | ||||||||||
| Low | $ | 64.69 | $ | 69.08 | $ | 68.53 | $ | 64.40 | $ | 69.83 | $ | 64.69 | $ | 66.45 | ||||||||||
| Period end closing price | $ | 68.27 | $ | 69.38 | $ | 72.35 | $ | 71.13 | $ | 71.80 | $ | 68.27 | $ | 71.80 | ||||||||||
| Employees – FTE (excluding overtime) | 3,576 | 3,595 | 3,704 | 3,625 | 3,724 | 3,576 | 3,724 | |||||||||||||||||
| Number of banking centers | 272 | 272 | 273 | 273 | 274 | 272 | 274 |
(D) Includes purchase accounting adjustments for the periods presented as follows:
| Three Months Ended | Year-to-Date | ||||||
|---|---|---|---|---|---|---|---|
| Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Jun 30, 2022 | Jun 30, 2021 | |
| Loan discount accretion | |||||||
| ASC 310-20 | $(265) | $4,674 | $4,635 | $3,761 | $9,731 | $4,409 | $23,044 |
| ASC 310-30 | $324 | $521 | $731 | $1,618 | $2,462 | $845 | $5,489 |
| Securities net amortization | $12 | $52 | $139 | $136 | $171 | $64 | $282 |
| Time deposits amortization | $84 | $100 | $127 | $201 | $327 | $184 | $834 |
(E) Using effective tax rate of 21.3, 21.2%, 21.2%, 21.3% and 21.2% for the three months ended June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021, respectively, and 21.2% and 21.3% for the six months ended June 30, 2022 and June 30, 2021, respectively.
(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 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) Beginning on January 1, 2022, the cumulative amount of the current expected credit loss (“CECL”) transition adjustments is being phased in over a three-year transition period.
Page 10
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| YIELD ANALYSIS | Three Months Ended | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jun 30, 2022 | Mar 31, 2022 | Jun 30, 2021 | |||||||||||||||||||||
| Average<br><br><br>Balance | Interest<br><br><br>Earned/<br><br><br>Interest<br><br><br>Paid | Average<br><br><br>Yield/<br><br><br>Rate | ^(K)^ | Average<br><br><br>Balance | Interest<br><br><br>Earned/<br><br><br>Interest<br><br><br>Paid | Average<br><br><br>Yield/<br><br><br>Rate | ^(K)^ | Average<br><br><br>Balance | Interest<br><br><br>Earned/<br><br><br>Interest<br><br><br>Paid | Average<br><br><br>Yield/<br><br><br>Rate | ^(K)^ | ||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||
| Loans held for sale | $ | 3,199 | $ | 40 | 5.02% | $ | 4,611 | $ | 40 | 3.52% | $ | 13,716 | $ | 109 | 3.19% | ||||||||
| Loans held for investment | 16,799,609 | 182,286 | 4.35% | 16,712,690 | 183,033 | 4.44% | 17,305,259 | 200,817 | 4.65% | ||||||||||||||
| Loans held for investment - Warehouse Purchase Program | 1,257,521 | 10,444 | 3.33% | 1,268,715 | 9,952 | 3.18% | 1,984,305 | 15,877 | 3.21% | ||||||||||||||
| Total Loans | 18,060,329 | 192,770 | 4.28% | 17,986,016 | 193,025 | 4.35% | 19,303,280 | 216,803 | 4.50% | ||||||||||||||
| Investment securities | 14,989,666 | 64,111 | 1.72% | ^(L)^ | 13,772,974 | 55,011 | 1.62% | ^(L)^ | 11,180,948 | 43,708 | 1.57% | ^(L)^ | |||||||||||
| Federal funds sold and other earning assets | 540,907 | 925 | 0.69% | 2,135,503 | 847 | 0.16% | 1,221,993 | 340 | 0.11% | ||||||||||||||
| Total interest-earning assets | 33,590,902 | 257,806 | 3.08% | 33,894,493 | 248,883 | 2.98% | 31,706,221 | 260,851 | 3.30% | ||||||||||||||
| Allowance for credit losses on loans | (284,550 | ) | (285,692 | ) | (306,059 | ) | |||||||||||||||||
| Noninterest-earning assets | 4,448,060 | 4,458,669 | 4,695,860 | ||||||||||||||||||||
| Total assets | $ | 37,754,412 | $ | 38,067,470 | $ | 36,096,022 | |||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 6,437,614 | $ | 2,154 | 0.13% | $ | 6,775,114 | $ | 2,452 | 0.15% | $ | 6,281,068 | $ | 5,471 | 0.35% | ||||||||
| Savings and money market deposits | 10,702,273 | 4,473 | 0.17% | 10,870,461 | 4,026 | 0.15% | 9,872,624 | 5,490 | 0.22% | ||||||||||||||
| Certificates and other time deposits | 2,409,663 | 2,014 | 0.34% | 2,637,529 | 2,276 | 0.35% | 2,980,186 | 4,327 | 0.58% | ||||||||||||||
| Other borrowings | 112,582 | 450 | 1.60% | — | — | — | — | — | — | ||||||||||||||
| Securities sold under repurchase agreements | 463,108 | 244 | 0.21% | 452,054 | 185 | 0.17% | 383,975 | 164 | 0.17% | ||||||||||||||
| Total interest-bearing liabilities | 20,125,240 | 9,335 | 0.19% | ^(M)^ | 20,735,158 | 8,939 | 0.17% | ^(M)^ | 19,517,853 | 15,452 | 0.32% | ^(M)^ | |||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||||
| Noninterest-bearing demand deposits | 10,855,802 | 10,636,624 | 10,062,085 | ||||||||||||||||||||
| Allowance for credit losses on off-balance sheet credit exposures | 29,947 | 29,947 | 29,947 | ||||||||||||||||||||
| Other liabilities | 186,344 | 176,360 | 198,748 | ||||||||||||||||||||
| Total liabilities | 31,197,333 | 31,578,089 | 29,808,633 | ||||||||||||||||||||
| Shareholders' equity | 6,557,079 | 6,489,381 | 6,287,389 | ||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 37,754,412 | $ | 38,067,470 | $ | 36,096,022 | |||||||||||||||||
| Net interest income and margin | $ | 248,471 | 2.97% | $ | 239,944 | 2.87% | $ | 245,399 | 3.10% | ||||||||||||||
| Non-GAAP to GAAP reconciliation: | |||||||||||||||||||||||
| Tax equivalent adjustment | 445 | 472 | 586 | ||||||||||||||||||||
| Net interest income and margin (tax equivalent basis) | $ | 248,916 | 2.97% | $ | 240,416 | 2.88% | $ | 245,985 | 3.11% |
(K) Annualized and based on an actual 365-day basis.
(L) Yield on securities was impacted by net premium amortization of $11,450, $12,857 and $14,436 for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively.
(M) Total cost of funds, including noninterest bearing deposits, was 0.12%, 0.12% and 0.21% for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively.
Page 11
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| YIELD ANALYSIS | Year-to-Date | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jun 30, 2022 | Jun 30, 2021 | ||||||||||||||
| Average<br><br><br>Balance | Interest<br><br><br>Earned/<br><br><br>Interest<br><br><br>Paid | Average<br><br><br>Yield/<br><br><br>Rate | ^(N)^ | Average<br><br><br>Balance | Interest<br><br><br>Earned/<br><br><br>Interest<br><br><br>Paid | Average<br><br><br>Yield/<br><br><br>Rate | ^(N)^ | ||||||||
| Interest-earning assets: | |||||||||||||||
| Loans held for sale | $ | 3,901 | $ | 80 | 4.14% | $ | 23,468 | $ | 347 | 2.98% | |||||
| Loans held for investment | 16,756,345 | 365,319 | 4.40% | 17,292,235 | 414,795 | 4.84% | |||||||||
| Loans held for investment - Warehouse Purchase Program | 1,263,132 | 20,396 | 3.26% | 2,175,888 | 34,736 | 3.22% | |||||||||
| Total loans | 18,023,378 | 385,795 | 4.32% | 19,491,591 | 449,878 | 4.65% | |||||||||
| Investment securities | 14,384,681 | 119,122 | 1.67% | ^(O)^ | 10,170,508 | 82,385 | 1.63% | ^(O)^ | |||||||
| Federal funds sold and other earning assets | 1,333,800 | 1,772 | 0.27% | 1,363,533 | 691 | 0.10% | |||||||||
| Total interest-earning assets | 33,741,859 | 506,689 | 3.03% | 31,025,632 | 532,954 | 3.46% | |||||||||
| Allowance for credit losses on loans | (285,118 | ) | (310,798 | ) | |||||||||||
| Noninterest-earning assets | 4,453,117 | 4,609,640 | |||||||||||||
| Total assets | $ | 37,909,858 | $ | 35,324,474 | |||||||||||
| Interest-bearing liabilities: | |||||||||||||||
| Interest-bearing demand deposits | $ | 6,605,431 | $ | 4,606 | 0.14% | $ | 6,197,235 | $ | 11,414 | 0.37% | |||||
| Savings and money market deposits | 10,785,902 | 8,499 | 0.16% | 9,647,594 | 11,243 | 0.24% | |||||||||
| Certificates and other time deposits | 2,522,966 | 4,290 | 0.34% | 3,005,761 | 9,993 | 0.67% | |||||||||
| Other borrowings | 56,602 | 450 | 1.60% | — | — | — | |||||||||
| Securities sold under repurchase agreements | 457,612 | 429 | 0.19% | 380,339 | 323 | 0.17% | |||||||||
| Total interest-bearing liabilities | 20,428,513 | 18,274 | 0.18% | ^(P)^ | 19,230,929 | 32,973 | 0.35% | ^(P)^ | |||||||
| Noninterest-bearing liabilities: | |||||||||||||||
| Noninterest-bearing demand deposits | 10,746,819 | 9,636,800 | |||||||||||||
| Allowance for credit losses on off-balance sheet credit exposures | 29,947 | 29,947 | |||||||||||||
| Other liabilities | 181,157 | 184,023 | |||||||||||||
| Total liabilities | 31,386,436 | 29,081,699 | |||||||||||||
| Shareholders' equity | 6,523,422 | 6,242,775 | |||||||||||||
| Total liabilities and shareholders' equity | 37,909,858 | $ | 35,324,474 | ||||||||||||
| Net interest income and margin | $ | 488,415 | 2.92% | $ | 499,981 | 3.25% | |||||||||
| Non-GAAP to GAAP reconciliation: | |||||||||||||||
| Tax equivalent adjustment | 917 | 1,222 | |||||||||||||
| Net interest income and margin (tax equivalent basis) | $ | 489,332 | 2.92% | $ | 501,203 | 3.26% |
(N) Annualized and based on an actual 365-day basis.
(O) Yield on securities was impacted by net premium amortization of $24,307 and $27,280 for the six months ended June 30, 2022 and 2021, respectively.
(P) Total cost of funds, including noninterest bearing deposits, was 0.12% and 0.23% for the six months ended June 30, 2022 and 2021, respectively.
Page 12
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | |||||||||||
| YIELD TREND ^(Q)^ | |||||||||||||||
| Interest-Earning Assets: | |||||||||||||||
| Loans held for sale | 5.02 | % | 3.52 | % | 3.20 | % | 3.08 | % | 3.19 | % | |||||
| Loans held for investment | 4.35 | % | 4.44 | % | 4.53 | % | 4.62 | % | 4.65 | % | |||||
| Loans held for investment - Warehouse Purchase Program | 3.33 | % | 3.18 | % | 3.12 | % | 3.18 | % | 3.21 | % | |||||
| Total loans | 4.28 | % | 4.35 | % | 4.40 | % | 4.48 | % | 4.50 | % | |||||
| Investment securities ^(R)^ | 1.72 | % | 1.62 | % | 1.46 | % | 1.50 | % | 1.57 | % | |||||
| Federal funds sold and other earning assets | 0.69 | % | 0.16 | % | 0.16 | % | 0.16 | % | 0.11 | % | |||||
| Total interest-earning assets | 3.08 | % | 2.98 | % | 3.07 | % | 3.24 | % | 3.30 | % | |||||
| Interest-Bearing Liabilities: | |||||||||||||||
| Interest-bearing demand deposits | 0.13 | % | 0.15 | % | 0.14 | % | 0.24 | % | 0.35 | % | |||||
| Savings and money market deposits | 0.17 | % | 0.15 | % | 0.15 | % | 0.18 | % | 0.22 | % | |||||
| Certificates and other time deposits | 0.34 | % | 0.35 | % | 0.38 | % | 0.47 | % | 0.58 | % | |||||
| Other borrowings | 1.60 | % | — | — | — | — | |||||||||
| Securities sold under repurchase agreements | 0.21 | % | 0.17 | % | 0.17 | % | 0.17 | % | 0.17 | % | |||||
| Total interest-bearing liabilities | 0.19 | % | 0.17 | % | 0.18 | % | 0.24 | % | 0.32 | % | |||||
| Net Interest Margin | 2.97 | % | 2.87 | % | 2.96 | % | 3.09 | % | 3.10 | % | |||||
| Net Interest Margin (tax equivalent) | 2.97 | % | 2.88 | % | 2.97 | % | 3.10 | % | 3.11 | % |
(Q) Annualized and based on average balances on an actual 365-day basis.
(R) Yield on securities was impacted by net premium amortization of $11,450, $12,857, $16,006, $15,141 and $14,436 for the three months ended June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021, respectively.
Page 13
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | |||||||||||
| Balance Sheet Averages | |||||||||||||||
| Loans held for sale | $ | 3,199 | $ | 4,611 | $ | 8,794 | $ | 11,714 | $ | 13,716 | |||||
| Loans held for investment | 16,799,609 | 16,712,690 | 16,830,163 | 17,102,998 | 17,305,259 | ||||||||||
| Loans held for investment - Warehouse Purchase Program | 1,257,521 | 1,268,715 | 1,772,971 | 1,836,252 | 1,984,305 | ||||||||||
| Total Loans | 18,060,329 | 17,986,016 | 18,611,928 | 18,950,964 | 19,303,280 | ||||||||||
| Investment securities | 14,989,666 | 13,772,974 | 12,751,857 | 12,184,964 | 11,180,948 | ||||||||||
| Federal funds sold and other earning assets | 540,907 | 2,135,503 | 1,393,859 | 734,787 | 1,221,993 | ||||||||||
| Total interest-earning assets | 33,590,902 | 33,894,493 | 32,757,644 | 31,870,715 | 31,706,221 | ||||||||||
| Allowance for credit losses on loans | (284,550 | ) | (285,692 | ) | (287,191 | ) | (301,011 | ) | (306,059 | ) | |||||
| Cash and due from banks | 309,223 | 326,552 | 329,406 | 570,765 | 521,737 | ||||||||||
| Goodwill | 3,231,637 | 3,231,637 | 3,231,637 | 3,231,637 | 3,231,637 | ||||||||||
| Core deposit intangibles, net | 57,728 | 60,346 | 63,091 | 65,955 | 68,830 | ||||||||||
| Other real estate | 1,639 | 1,893 | 321 | 279 | 3,001 | ||||||||||
| Fixed assets, net | 336,242 | 327,297 | 321,524 | 323,584 | 326,570 | ||||||||||
| Other assets | 511,591 | 510,944 | 530,603 | 536,745 | 544,085 | ||||||||||
| Total assets | $ | 37,754,412 | $ | 38,067,470 | $ | 36,947,035 | $ | 36,298,669 | $ | 36,096,022 | |||||
| Noninterest-bearing deposits | $ | 10,855,802 | $ | 10,636,624 | $ | 10,587,441 | $ | 10,286,062 | $ | 10,062,085 | |||||
| Interest-bearing demand deposits | 6,437,614 | 6,775,114 | 6,196,283 | 6,089,678 | 6,281,068 | ||||||||||
| Savings and money market deposits | 10,702,273 | 10,870,461 | 10,286,650 | 9,944,664 | 9,872,624 | ||||||||||
| Certificates and other time deposits | 2,409,663 | 2,637,529 | 2,766,123 | 2,897,123 | 2,980,186 | ||||||||||
| Total deposits | 30,405,352 | 30,919,728 | 29,836,497 | 29,217,527 | 29,195,963 | ||||||||||
| Other borrowings | 112,582 | — | — | — | — | ||||||||||
| Securities sold under repurchase agreements | 463,108 | 452,054 | 432,981 | 448,338 | 383,975 | ||||||||||
| Allowance for credit losses on off-balance sheet credit exposures | 29,947 | 29,947 | 29,947 | 29,947 | 29,947 | ||||||||||
| Other liabilities | 186,344 | 176,360 | 234,746 | 229,502 | 198,748 | ||||||||||
| Shareholders' equity | 6,557,079 | 6,489,381 | 6,412,864 | 6,373,355 | 6,287,389 | ||||||||||
| Total liabilities and equity | $ | 37,754,412 | $ | 38,067,470 | $ | 36,947,035 | $ | 36,298,669 | $ | 36,096,022 |
Page 14
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Period End Balances | |||||||||||||||||||||||||
| Loan Portfolio | |||||||||||||||||||||||||
| Commercial and industrial | $ | 2,155,727 | 11.8 | % | $ | 2,007,783 | 11.1 | % | $ | 2,050,631 | 11.0 | % | $ | 1,841,899 | 9.7 | % | $ | 2,021,951 | 10.5 | % | |||||
| Warehouse purchase program | 1,137,623 | 6.2 | % | 1,344,541 | 7.4 | % | 1,775,699 | 9.5 | % | 1,998,049 | 10.6 | % | 2,095,559 | 10.9 | % | ||||||||||
| Construction, land development and other land loans | 2,460,526 | 13.5 | % | 2,327,837 | 12.9 | % | 2,299,715 | 12.4 | % | 2,269,417 | 12.0 | % | 2,147,474 | 11.2 | % | ||||||||||
| 1-4 family residential | 5,156,200 | 28.3 | % | 4,970,620 | 27.5 | % | 4,860,419 | 26.1 | % | 4,709,468 | 24.8 | % | 4,531,589 | 23.5 | % | ||||||||||
| Home equity | 932,725 | 5.1 | % | 870,130 | 4.8 | % | 808,289 | 4.4 | % | 746,426 | 3.9 | % | 637,431 | 3.3 | % | ||||||||||
| Commercial real estate (includes multi-family residential) | 4,967,662 | 27.3 | % | 5,150,555 | 28.5 | % | 5,251,368 | 28.2 | % | 5,550,841 | 29.3 | % | 5,681,184 | 29.5 | % | ||||||||||
| Agriculture (includes farmland) | 665,960 | 3.7 | % | 617,418 | 3.4 | % | 620,338 | 3.3 | % | 631,497 | 3.3 | % | 590,135 | 3.1 | % | ||||||||||
| Consumer and other | 274,532 | 1.5 | % | 246,433 | 1.4 | % | 288,496 | 1.6 | % | 274,980 | 1.5 | % | 264,652 | 1.4 | % | ||||||||||
| Energy | 430,339 | 2.4 | % | 445,949 | 2.5 | % | 491,305 | 2.6 | % | 569,314 | 3.0 | % | 501,821 | 2.6 | % | ||||||||||
| Paycheck Protection Program | 27,550 | 0.2 | % | 86,258 | 0.5 | % | 169,884 | 0.9 | % | 365,841 | 1.9 | % | 779,989 | 4.0 | % | ||||||||||
| Total loans | $ | 18,208,844 | $ | 18,067,524 | $ | 18,616,144 | $ | 18,957,732 | $ | 19,251,785 | |||||||||||||||
| Deposit Types | |||||||||||||||||||||||||
| Noninterest-bearing DDA | $ | 11,032,184 | 36.9 | % | $ | 10,776,652 | 34.7 | % | $ | 10,750,034 | 34.9 | % | $ | 10,326,489 | 35.0 | % | $ | 10,099,149 | 34.7 | % | |||||
| Interest-bearing DDA | 6,331,314 | 21.2 | % | 6,603,934 | 21.2 | % | 6,741,092 | 21.9 | % | 6,088,923 | 20.7 | % | 6,185,115 | 21.2 | % | ||||||||||
| Money market | 6,646,726 | 22.3 | % | 7,603,329 | 24.5 | % | 7,178,904 | 23.3 | % | 6,864,664 | 23.3 | % | 6,706,252 | 23.0 | % | ||||||||||
| Savings | 3,597,820 | 12.0 | % | 3,543,300 | 11.4 | % | 3,401,727 | 11.1 | % | 3,293,850 | 11.2 | % | 3,160,606 | 10.9 | % | ||||||||||
| Certificates and other time deposits | 2,257,574 | 7.6 | % | 2,541,095 | 8.2 | % | 2,700,005 | 8.8 | % | 2,877,726 | 9.8 | % | 2,959,119 | 10.2 | % | ||||||||||
| Total deposits | $ | 29,865,618 | $ | 31,068,310 | $ | 30,771,762 | $ | 29,451,652 | $ | 29,110,241 | |||||||||||||||
| Loan to Deposit Ratio | 61.0 | % | 58.2 | % | 60.5 | % | 64.4 | % | 66.1 | % |
Page 15
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
Construction Loans
| Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Single family residential construction | $ | 911,443 | 37.0 | % | $ | 816,072 | 35.0 | % | $ | 728,393 | 31.7 | % | $ | 659,248 | 29.0 | % | $ | 624,954 | 29.1 | % | |||||
| Land development | 133,398 | 5.4 | % | 103,853 | 4.5 | % | 99,099 | 4.3 | % | 92,623 | 4.1 | % | 97,709 | 4.6 | % | ||||||||||
| Raw land | 316,750 | 12.9 | % | 310,987 | 13.4 | % | 322,673 | 14.0 | % | 315,803 | 13.9 | % | 245,484 | 11.4 | % | ||||||||||
| Residential lots | 223,703 | 9.1 | % | 212,029 | 9.1 | % | 206,978 | 9.0 | % | 195,201 | 8.6 | % | 165,645 | 7.7 | % | ||||||||||
| Commercial lots | 184,794 | 7.5 | % | 183,760 | 7.9 | % | 184,901 | 8.0 | % | 169,189 | 7.5 | % | 153,714 | 7.2 | % | ||||||||||
| Commercial construction and other | 690,453 | 28.1 | % | 701,148 | 30.1 | % | 757,687 | 33.0 | % | 837,436 | 36.9 | % | 860,069 | 40.0 | % | ||||||||||
| Net unaccreted discount | (15 | ) | (12 | ) | (16 | ) | (83 | ) | (101 | ) | |||||||||||||||
| Total construction loans | $ | 2,460,526 | $ | 2,327,837 | $ | 2,299,715 | $ | 2,269,417 | $ | 2,147,474 |
Non-Owner Occupied Commercial Real Estate Loans by Metropolitan Statistical Area (MSA) as of June 30, 2022
| Houston | Dallas | Austin | OK City | Tulsa | Other ^(S)^ | Total | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Collateral Type | |||||||||||||||
| Shopping center/retail | $ | 332,853 | $ | 262,721 | $ | 52,529 | $ | 18,757 | $ | 27,588 | $ | 278,111 | $ | 972,559 | |
| Commercial and industrial buildings | 145,805 | 76,015 | 14,960 | 32,554 | 16,584 | 163,430 | 449,348 | ||||||||
| Office buildings | 94,768 | 378,379 | 27,539 | 69,217 | 4,532 | 69,667 | 644,102 | ||||||||
| Medical buildings | 97,855 | 19,913 | 2,547 | 21,126 | 40,062 | 75,306 | 256,809 | ||||||||
| Apartment buildings | 104,393 | 64,513 | 11,774 | 14,060 | 8,153 | 171,424 | 374,317 | ||||||||
| Hotel | 93,324 | 69,380 | 44,658 | 28,148 | — | 132,699 | 368,209 | ||||||||
| Other | 74,843 | 75,197 | 28,423 | 7,480 | 2,724 | 70,620 | 259,287 | ||||||||
| Total | $ | 943,841 | $ | 946,118 | $ | 182,430 | $ | 191,342 | $ | 99,643 | $ | 961,257 | $ | 3,324,631 | ^(T)^ |
Acquired Loans
| Non-PCD Loans | PCD Loans | Total Acquired Loans | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at<br><br><br>Acquisition<br><br><br>Date | Balance at<br><br><br>Mar 31, 2022 | Balance at<br><br><br>Jun 30, 2022 | Balance at<br><br><br>Acquisition<br><br><br>Date | Balance at<br><br><br>Mar 31, 2022 | Balance at<br><br><br>Jun 30, 2022 | Balance at<br><br><br>Acquisition<br><br><br>Date | Balance at<br><br><br>Mar 31, 2022 | Balance at<br><br><br>Jun 30, 2022 | |||||||||||
| Loan marks: | |||||||||||||||||||
| Acquired banks ^(U)^ | $ | 345,599 | $ | 3,469 | $ | 3,734 | $ | 320,052 | $ | 4,317 | $ | 3,993 | $ | 665,651 | $ | 7,786 | $ | 7,727 | |
| Acquired portfolio loan balances: | |||||||||||||||||||
| Acquired banks ^(U)^ | 12,286,159 | 1,868,511 | 1,559,270 | 689,573 | 72,992 | 68,125 | 12,975,732 | ^(V)^ | 1,941,503 | 1,627,395 | |||||||||
| Acquired portfolio loan balances less loan marks | $ | 11,940,560 | $ | 1,865,042 | $ | 1,555,536 | $ | 369,521 | $ | 68,675 | $ | 64,132 | $ | 12,310,081 | $ | 1,933,717 | $ | 1,619,668 |
(S) Includes other MSA and non-MSA regions.
(T) Represents a portion of total commercial real estate loans of $4.968 billion as of June 30, 2022.
(U) 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.
(V) Actual principal balances acquired.
Page 16
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Three Months Ended | Year-to-Date | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Jun 30, 2022 | Jun 30, 2021 | |||||||||||||||
| Asset Quality | |||||||||||||||||||||
| Nonaccrual loans | $ | 20,619 | $ | 21,765 | $ | 26,269 | $ | 35,035 | $ | 32,880 | $ | 20,619 | $ | 32,880 | |||||||
| Accruing loans 90 or more days past due | 13 | 3,695 | 887 | 1,038 | 330 | 13 | 330 | ||||||||||||||
| Total nonperforming loans | 20,632 | 25,460 | 27,156 | 36,073 | 33,210 | 20,632 | 33,210 | ||||||||||||||
| Repossessed assets | — | 19 | 310 | 326 | 310 | — | 310 | ||||||||||||||
| Other real estate | 1,555 | 1,705 | 622 | 150 | 144 | 1,555 | 144 | ||||||||||||||
| Total nonperforming assets | $ | 22,187 | $ | 27,184 | $ | 28,088 | $ | 36,549 | $ | 33,664 | $ | 22,187 | $ | 33,664 | |||||||
| Nonperforming assets: | |||||||||||||||||||||
| Commercial and industrial (includes energy) | $ | 2,964 | $ | 4,403 | $ | 6,150 | $ | 8,199 | $ | 8,613 | $ | 2,964 | $ | 8,613 | |||||||
| Construction, land development and other land loans | 1,866 | 1,761 | 1,841 | 803 | 1,423 | 1,866 | 1,423 | ||||||||||||||
| 1-4 family residential (includes home equity) | 14,335 | 11,899 | 11,990 | 11,117 | 11,681 | 14,335 | 11,681 | ||||||||||||||
| Commercial real estate (includes multi-family residential) | 2,448 | 7,685 | 7,276 | 15,691 | 11,266 | 2,448 | 11,266 | ||||||||||||||
| Agriculture (includes farmland) | 567 | 1,402 | 816 | 643 | 661 | 567 | 661 | ||||||||||||||
| Consumer and other | 7 | 34 | 15 | 96 | 20 | 7 | 20 | ||||||||||||||
| Total | $ | 22,187 | $ | 27,184 | $ | 28,088 | $ | 36,549 | $ | 33,664 | $ | 22,187 | $ | 33,664 | |||||||
| Number of loans/properties | 160 | 147 | 157 | 155 | 152 | 160 | 152 | ||||||||||||||
| Allowance for credit losses on loans | $ | 283,959 | $ | 285,163 | $ | 286,380 | $ | 287,187 | $ | 302,884 | $ | 283,959 | $ | 302,884 | |||||||
| Net charge-offs (recoveries): | |||||||||||||||||||||
| Commercial and industrial (includes energy) | $ | (197 | ) | $ | 14 | $ | 177 | $ | 3,763 | $ | 3,529 | $ | (183 | ) | $ | 5,113 | |||||
| Construction, land development and other land loans | (5 | ) | 430 | (162 | ) | (4 | ) | (105 | ) | 425 | (110 | ) | |||||||||
| 1-4 family residential (includes home equity) | (32 | ) | 87 | (72 | ) | 66 | (6 | ) | 55 | 41 | |||||||||||
| Commercial real estate (includes multi-family residential) | 395 | (366 | ) | (10 | ) | 11,180 | 517 | 29 | 7,106 | ||||||||||||
| Agriculture (includes farmland) | (9 | ) | (103 | ) | (102 | ) | (63 | ) | (9 | ) | (112 | ) | 24 | ||||||||
| Consumer and other | 1,052 | 1,155 | 976 | 755 | 400 | 2,207 | 1,010 | ||||||||||||||
| Total | $ | 1,204 | $ | 1,217 | $ | 807 | $ | 15,697 | $ | 4,326 | $ | 2,421 | $ | 13,184 | |||||||
| Asset Quality Ratios | |||||||||||||||||||||
| Nonperforming assets to average interest-earning assets | 0.07 | % | 0.08 | % | 0.09 | % | 0.11 | % | 0.11 | % | 0.07 | % | 0.11 | % | |||||||
| Nonperforming assets to loans and other real estate | 0.12 | % | 0.15 | % | 0.15 | % | 0.19 | % | 0.17 | % | 0.12 | % | 0.17 | % | |||||||
| Net charge-offs to average loans (annualized) | 0.03 | % | 0.03 | % | 0.02 | % | 0.33 | % | 0.09 | % | 0.03 | % | 0.14 | % | |||||||
| Allowance for credit losses on loans to total loans | 1.56 | % | 1.58 | % | 1.54 | % | 1.51 | % | 1.57 | % | 1.56 | % | 1.57 | % | |||||||
| Allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program loans and Paycheck Protection Program loans ^(G)^ | 1.67 | % | 1.71 | % | 1.72 | % | 1.73 | % | 1.85 | % | 1.67 | % | 1.85 | % |
Page 17
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 return on average tangible common equity; tangible book value per share; the tangible equity to tangible assets ratio; allowance for credit losses on loans to total loans excluding Warehouse Purchase Program and PPP loans; and the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities, 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 on loans to total loans (excluding Warehouse Purchase Program loans and PPP loans). Prosperity has included information below relating to these non-GAAP financial measures for the applicable periods presented.
| Three Months Ended | Year-to-Date | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Jun 30, 2022 | Jun 30, 2021 | |||||||||||||||
| Reconciliation of return on average common equity to return on average tangible common equity: | |||||||||||||||||||||
| Net income | $ | 128,490 | $ | 122,326 | $ | 126,787 | $ | 128,590 | $ | 130,611 | $ | 250,816 | $ | 263,920 | |||||||
| Average shareholders' equity | $ | 6,557,079 | $ | 6,489,381 | $ | 6,412,864 | $ | 6,373,355 | $ | 6,287,389 | $ | 6,523,422 | $ | 6,242,775 | |||||||
| Less: Average goodwill and other intangible assets | (3,289,365 | ) | (3,291,983 | ) | (3,294,728 | ) | (3,297,592 | ) | (3,300,467 | ) | (3,290,667 | ) | (3,302,718 | ) | |||||||
| Average tangible shareholders’ equity | $ | 3,267,714 | $ | 3,197,398 | $ | 3,118,136 | $ | 3,075,763 | $ | 2,986,922 | $ | 3,232,755 | $ | 2,940,057 | |||||||
| Return on average tangible common equity ^(F)^ | 15.73 | % | 15.30 | % | 16.26 | % | 16.72 | % | 17.49 | % | 15.52 | % | 17.95 | % | |||||||
| Reconciliation of book value per share to tangible book value per share: | |||||||||||||||||||||
| Shareholders’ equity | $ | 6,521,827 | $ | 6,504,424 | $ | 6,427,236 | $ | 6,345,441 | $ | 6,310,337 | $ | 6,521,827 | $ | 6,310,337 | |||||||
| Less: Goodwill and other intangible assets | (3,288,119 | ) | (3,290,700 | ) | (3,293,320 | ) | (3,296,175 | ) | (3,299,053 | ) | (3,288,119 | ) | (3,299,053 | ) | |||||||
| Tangible shareholders’ equity | $ | 3,233,708 | $ | 3,213,724 | $ | 3,133,916 | $ | 3,049,266 | $ | 3,011,284 | $ | 3,233,708 | $ | 3,011,284 | |||||||
| Period end shares outstanding | 91,196 | 92,160 | 92,170 | 92,160 | 92,935 | 91,196 | 92,935 | ||||||||||||||
| Tangible book value per share | $ | 35.46 | $ | 34.87 | $ | 34.00 | $ | 33.09 | $ | 32.40 | $ | 35.46 | $ | 32.40 | |||||||
| Reconciliation of equity to assets ratio to period end tangible equity to period end tangible assets ratio: | |||||||||||||||||||||
| Tangible shareholders’ equity | $ | 3,233,708 | $ | 3,213,724 | $ | 3,133,916 | $ | 3,049,266 | $ | 3,011,284 | $ | 3,233,708 | $ | 3,011,284 | |||||||
| Total assets | $ | 37,387,256 | $ | 38,271,186 | $ | 37,833,970 | $ | 36,512,119 | $ | 36,099,924 | $ | 37,387,256 | $ | 36,099,924 | |||||||
| Less: Goodwill and other intangible assets | (3,288,119 | ) | (3,290,700 | ) | (3,293,320 | ) | (3,296,175 | ) | (3,299,053 | ) | (3,288,119 | ) | (3,299,053 | ) | |||||||
| Tangible assets | $ | 34,099,137 | $ | 34,980,486 | $ | 34,540,650 | $ | 33,215,944 | $ | 32,800,871 | $ | 34,099,137 | $ | 32,800,871 | |||||||
| Period end tangible equity to period end tangible assets ratio | 9.48 | % | 9.19 | % | 9.07 | % | 9.18 | % | 9.18 | % | 9.48 | % | 9.18 | % | |||||||
| Reconciliation of allowance for credit losses to total loans to allowance for credit losses on loans to total loans excluding Warehouse Purchase Program and Paycheck Protection Program loans: | |||||||||||||||||||||
| Allowance for credit losses on loans | $ | 283,959 | $ | 285,163 | $ | 286,380 | $ | 287,187 | $ | 302,884 | $ | 283,959 | $ | 302,884 | |||||||
| Total loans | $ | 18,208,844 | $ | 18,067,524 | $ | 18,616,144 | $ | 18,957,732 | $ | 19,251,785 | $ | 18,208,844 | $ | 19,251,785 | |||||||
| Less: Warehouse Purchase Program loans | (1,137,623 | ) | (1,344,541 | ) | (1,775,699 | ) | (1,998,049 | ) | (2,095,559 | ) | (1,137,623 | ) | (2,095,559 | ) | |||||||
| Less: Paycheck Protection Program loans | (27,550 | ) | (86,258 | ) | (169,884 | ) | (365,841 | ) | (779,989 | ) | (27,550 | ) | (779,989 | ) | |||||||
| Total loans less Warehouse Purchase Program and Paycheck Protection Program loans | $ | 17,043,671 | $ | 16,636,725 | $ | 16,670,561 | $ | 16,593,842 | $ | 16,376,237 | $ | 17,043,671 | $ | 16,376,237 | |||||||
| Allowance for credit losses on loans to total loans excluding Warehouse Purchase Program and Paycheck Protection Program loans | 1.67 | % | 1.71 | % | 1.72 | % | 1.73 | % | 1.85 | % | 1.67 | % | 1.85 | % | |||||||
| Reconciliation of efficiency ratio to efficiency ratio excluding net gains and losses on the sale of assets and securities: | |||||||||||||||||||||
| Noninterest expense | $ | 122,878 | $ | 119,850 | $ | 119,538 | $ | 119,815 | $ | 115,191 | $ | 242,728 | $ | 234,267 | |||||||
| Net interest income | $ | 248,471 | $ | 239,944 | $ | 244,760 | $ | 248,567 | $ | 245,399 | $ | 488,415 | $ | 499,981 | |||||||
| Noninterest income | 37,594 | 35,122 | 35,757 | 34,645 | 35,556 | 72,716 | 69,564 | ||||||||||||||
| Less: net gain (loss) on sale or write down of assets | 1,108 | 689 | 1,165 | 255 | (244 | ) | 1,797 | (323 | ) | ||||||||||||
| Noninterest income excluding net gains and losses on the sale or write down of assets and securities | 36,486 | 34,433 | 34,592 | 34,390 | 35,800 | 70,919 | 69,887 | ||||||||||||||
| Total income excluding net gains and losses on the sale or write down of assets and securities | $ | 284,957 | $ | 274,377 | $ | 279,352 | $ | 282,957 | $ | 281,199 | $ | 559,334 | $ | 569,868 | |||||||
| Efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities | 43.12 | % | 43.68 | % | 42.79 | % | 42.34 | % | 40.96 | % | 43.40 | % | 41.11 | % |
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