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): January 26, 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 January 26, 2022, Prosperity Bancshares, Inc. publicly disseminated a press release announcing its financial results for the fourth quarter ended December 31, 2021. 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 January 26, 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: January 26, 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 FOURTH QUARTER
2021 EARNINGS
| • | Fourth quarter net income of $126.8 million and earnings per share (diluted) of $1.38 |
|---|---|
| • | Loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, increased $76.7 million or 0.5% (1.8% annualized) during the fourth quarter 2021 |
| --- | --- |
| • | Loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, increased $229.2 million or 1.4% during 2021 |
| --- | --- |
| • | Deposits increased $1.320 billion or 4.5% (17.9% annualized) during the fourth quarter 2021 |
| --- | --- |
| • | Deposits increased $3.411 billion or 12.5% during 2021 |
| --- | --- |
| • | Allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, of 1.72%^(1)^ |
| --- | --- |
| • | Nonperforming assets remain low at 0.09% of fourth quarter average interest-earning assets |
| --- | --- |
| • | Return (annualized) on fourth quarter average assets of 1.37% |
| --- | --- |
| • | Returns (annualized) on fourth quarter average common equity of 7.91% and average tangible common equity of 16.26%^(1)^ |
| --- | --- |
HOUSTON, January 26, 2022. Prosperity Bancshares, Inc.^®^ (NYSE: PB), the parent company of Prosperity Bank^®^ (collectively, “Prosperity”), reported net income of $126.8 million for the quarter ended December 31, 2021 compared with $137.1 million for the same period in 2020. Net income per diluted common share was $1.38 for the quarter ended December 31, 2021, compared with $1.48 for the same period in 2020, and the annualized return on fourth quarter average assets was 1.37%. Additionally, loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program (“PPP”) loans, increased $76.7 million or 0.5% (1.8% annualized) and deposits increased $1.320 billion or 4.5% (17.9% annualized) during the fourth quarter of 2021. Nonperforming assets remain low at 0.09% of fourth quarter average interest-earning assets.
“We believe that Texas and Oklahoma will have a higher growth rate and outperform other states over the next several years. Companies and individuals continue to move to Texas and Oklahoma because of lower tax rates and a business-friendly political environment, and we believe that will continue, which should benefit our bank. We expect that companies will need more infrastructure and buildings, people will need more housing and consumer staples, and both will need banks to finance the growth,” said David Zalman, Prosperity’s Senior Chairman and Chief Executive Officer.
______________
| (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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“Our bank continues to show strong deposit growth, with over $3.4 billion added in 2021, and a strong return on assets of 1.37% and return on average tangible equity of 16.26%. Our asset quality continues to be one of the best in the industry. We predict loans will grow given the vibrant economy and the bank’s net interest margin should improve going forward with potential rate hikes forecasted by the Federal Reserve. I would like to thank all our customers, associates, and directors for helping us build such a successful bank,” concluded Zalman.
Results of Operations for the Three Months Ended December 31, 2021
Net income was $126.8 million^(2)^ for the three months ended December 31, 2021 compared with $137.1 million^(3)^ for the same period in 2020, a decrease of $10.3 million or 7.5%. The change was primarily due to a decrease in loan interest income and loan discount accretion of $10.7 million, partially offset by an increase in securities interest income and a decrease in interest expense. Net income per diluted common share was $1.38 for the three months ended December 31, 2021 compared with $1.48 for the same period in 2020, a decrease of 6.8%. On a linked quarter basis, net income was $126.8 million^(2)^ for the three months ended December 31, 2021 compared with $128.6 million^(4)^ for the three months ended September 30, 2021. Net income per diluted common share was $1.38 for the three months ended December 31, 2021 compared with $1.39 for the three months ended September 30, 2021. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended December 31, 2021 were 1.37%, 7.91% and 16.26%^(1)^, respectively. Prosperity’s efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 42.79%^(1)^ for the three months ended December 31, 2021.
Net interest income before provision for credit losses for the three months ended December 31, 2021 was $244.8 million compared with $257.6 million for the same period in 2020, a decrease of $12.9 million or 5.0%. 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 $10.7 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 $244.8 million compared with $248.6 million for the three months ended September 30, 2021.
The net interest margin on a tax equivalent basis was 2.97% for the three months ended December 31, 2021 compared with 3.49% for the same period in 2020. The change was primarily due to lower average rates on loans and investment securities and a decrease in loan discount accretion of $10.7 million, partially offset by 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 December 31, 2021 compared with 3.10% for the three months ended September 30, 2021. The change was primarily due to lower average rates on loans and 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 $35.8 million for the three months ended December 31, 2021 compared with $36.5 million for the same period in 2020, a decrease of $790 thousand or 2.2%. This change was primarily due to a decrease in mortgage income and a decrease in other noninterest income, partially offset by the net gain on sale of assets compared to prior year’s net loss on write-down of assets. On a linked quarter basis, noninterest income increased $1.1 million or 3.2% to $35.8 million compared with $34.6 million for the three months ended September 30, 2021. This change was primarily due to an increase in net gain on sale of assets and an increase in nonsufficient funds (“NSF”) fees, partially offset by a decrease in mortgage income.
Noninterest expense was $119.5 million for the three months ended December 31, 2021 compared with $120.2 million for the same period in 2020 and $119.8 million for the three months ended September 30, 2021.
Results of Operations for the Year Ended December 31, 2021
Net income was $519.3 million^(^^5^^)^ for the year ended December 31, 2021 compared with $528.9 million^(^^6^^)^ for the same period in 2020, a decrease of $9.6 million or 1.8%. Net income per diluted common share was $5.60 for the year ended December 31, 2021 compared with $5.68 for the same period in 2020, a decrease of 1.4%. Returns on average assets, average common equity and average tangible common equity for the year ended December 31, 2021 were 1.44%, 8.21% and 17.18%^(1)^, respectively. Prosperity’s efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 41.83%^(1)^ for the year ended December 31, 2021.
______________
| (2) | Includes purchase accounting adjustments of $4.2 million, net of tax, primarily comprised of loan discount accretion of $5.4 million for the three months ended December 31, 2021. |
|---|---|
| (3) | Includes purchase accounting adjustments of $13.3 million, net of tax, primarily comprised of loan discount accretion of $16.1 million for the three months ended December 31, 2020. |
| --- | --- |
| (4) | 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. |
| --- | --- |
| (5) | Includes purchase accounting adjustments of $31.5 million, net of tax, primarily comprised of loan discount accretion of $39.3 million for the year ended December 31, 2021. |
| --- | --- |
| (6) | Includes purchase accounting adjustments of $76.5 million, net of tax, primarily comprised of loan discount accretion of $91.3 million, and merger related expenses of $8.0 million and tax benefit for NOL of $20.1 million for the year ended December 31, 2020. |
| --- | --- |
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Net interest income before provision for credit losses for the year ended December 31, 2021 was $993.3 million compared with $1.031 billion for the same period in 2020, a decrease of $37.4 million or 3.6%. The change was primarily due to lower average rates on loans and a decrease in loan discount accretion of $52.1 million, partially offset by an increase in the average investment securities balance and a decrease in the average rate on interest-bearing liabilities.
The net interest margin on a tax equivalent basis for the year ended December 31, 2021 was 3.14% compared with 3.64% for the same period in 2020. The change was primarily due to lower average rates on loans and investment securities, a decrease in loan discount accretion of $52.1 million, and higher cash balances due to excess liquidity, partially offset by a decrease in the average rate on interest-bearing liabilities.
Noninterest income was $140.0 million for the year ended December 31, 2021 compared with $131.5 million for the same period in 2020, an increase of $8.4 million or 6.4%. This increase was primarily due to the net gain on sale of assets compared to prior year’s net loss on write-down of assets and an increase in credit card, debit card and ATM card income, partially offset by a decrease in mortgage income.
Noninterest expense was $473.6 million for the year ended December 31, 2021 compared with $497.2 million for the same period in 2020, a decrease of $23.6 million or 4.7%. 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.
Balance Sheet Information
At December 31, 2021, Prosperity had $37.834 billion in total assets, an increase of $3.775 billion or 11.1% compared with $34.059 billion at December 31, 2020.
Loans at December 31, 2021 were $18.616 billion, a decrease of $1.631 billion or 8.1%, compared with $20.247 billion at December 31, 2020, primarily due to a decrease in Warehouse Purchase Program, commercial real estate and PPP loans, partially offset by an increase in 1-4 family residential loans. Linked quarter loans decreased $341.6 million or 1.8% from $18.958 billion at September 30, 2021. At December 31, 2021, the Company had $169.9 million of PPP loans compared to $963.2 million of PPP loans at December 31, 2020 and $365.8 million of PPP loans at September 30, 2021. Excluding Warehouse Purchase Program and PPP loans, loans at December 31, 2021 were $16.671 billion compared to $16.441 billion at December 31, 2020, an increase of $229.2 million or 1.4%. Linked quarter loans, excluding Warehouse Purchase Program and PPP loans, increased $76.7 million or 0.5% (1.8% annualized) from $16.594 billion at September 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 December 31, 2021, oil and gas loans totaled $491.3 million (net of discount and excluding PPP loans totaling $27.9 million) or 2.6% of total loans, of which $294.1 million were production loans and $197.2 million were servicing loans, compared with total oil and gas loans of $512.7 million (net of discount and excluding PPP loans totaling $88.7 million) or 2.5% of total loans at December 31, 2020, of which $285.8 million were production loans and $226.9 million were servicing loans. In addition, as of December 31, 2021, Prosperity had total unfunded commitments to oil and gas companies of $419.0 million compared with total unfunded commitments to oil and gas companies of $243.2 million as of December 31, 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 December 31, 2021, loans to hotels totaled $386.4 million (excluding PPP loans totaling $920 thousand) or 2.1% of total loans, a decrease of $7.4 million or 1.9%, compared with $393.8 million (excluding PPP loans totaling $6.5 million) at December 31, 2020. At December 31, 2021, loans to restaurants totaled $201.7 million (excluding PPP loans totaling $29.3 million) or 1.1% of total loans, a decrease of $13.0 million or 6.1%, compared with $214.7 million (excluding PPP loans totaling $83.6 million) at December 31, 2020.
Deposits at December 31, 2021 were $30.772 billion, an increase of $3.411 billion or 12.5%, compared with $27.360 billion at December 31, 2020. Linked quarter deposits increased $1.320 billion or 4.5% (17.9% annualized) from $29.452 billion at September 30, 2021.
Asset Quality
Nonperforming assets totaled $28.1 million or 0.09% of quarterly average interest-earning assets at December 31, 2021, compared with $59.6 million or 0.20% of quarterly average interest-earning assets at December 31, 2020 and $36.5 million or 0.11% of quarterly average interest-earning assets at September 30, 2021.
The allowance for credit losses on loans and off-balance sheet credit exposures was $316.3 million at December 31, 2021 compared with $346.0 million at December 31, 2020 and with $317.1 million at September 30, 2021.
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The allowance for credit losses on loans was $286.4 million or 1.54% of total loans at December 31, 2021 compared with $316.1 million or 1.56% of total loans at December 31, 2020 and with $287.2 million or 1.51% of total loans at September 30, 2021. Excluding Warehouse Purchase Program and PPP loans, the allowance for credit losses on loans to total loans was 1.72%^(1)^ at December 31, 2021 compared with 1.92%^(1)^ at December 31, 2020 and 1.73%^(1)^ at September 30, 2021.
There was no provision for credit losses for the three month periods ended December 31, 2021, December 31, 2020 and September 30, 2021. There was no provision for credit losses for the year ended December 31, 2021 compared with $20.0 million for the year ended December 31, 2020.
Net charge-offs were $807 thousand for the three months ended December 31, 2021 compared with net charge-offs of $7.6 million for the three months ended December 31, 2020 and net charge-offs of $15.7 million for the three months ended September 30, 2021. Net charge-offs for the fourth quarter of 2021 did not include any purchased credit deteriorated (“PCD”) loans and $1.7 million of specific reserves on resolved PCD loans was released to the general reserve.
Net charge-offs were $29.7 million for the year ended December 31, 2021 compared with $31.9 million for the year ended December 31, 2020. Net charge-offs for the year ended December 31, 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 $21.6 million of specific reserves on resolved PCD loans without any related charge-offs was released to the general reserve.
Dividend
Prosperity Bancshares declared a first quarter cash dividend of $0.52 per share to be paid on April 1, 2022 to all shareholders of record as of March 15, 2022.
Stock Repurchase Program
On January 18, 2022, Prosperity Bancshares announced a stock repurchase program under which up to 5%, or approximately
4.6 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. Under its 2021 stock repurchase program, Prosperity Bancshares repurchased zero shares of its common stock during the three months ended December 31, 2021 and 767,134 shares of its common stock at an average weighted price of $67.87 per share during the year ended December 31, 2021.
COVID-19 Pandemic
Prosperity continues to monitor the latest developments regarding COVID-19. As of December 31, 2021, pandemic-related restrictions on all business and activities in the states of Texas and Oklahoma remained lifted. 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.
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 December 31, 2021, had an outstanding balance of 1,512 loans totaling $169.9 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 December 31, 2021, Prosperity had approximately $29.5 million in outstanding loans subject to deferral and modification agreements.
Conference Call
Prosperity’s management team will host a conference call on Wednesday, January 26, 2022 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity’s fourth 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 0033886.
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 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 on loans 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 December 31, 2021, Prosperity Bancshares, Inc.^®^ is a $37.834 billion Houston, Texas based regional financial holding company providing personal banking services and investments to consumers and businesses throughout Texas and Oklahoma. Founded in 1983, Prosperity believes in a community banking philosophy, taking care of customers, businesses and communities in the areas it serves by providing financial solutions to simplify everyday financial needs. In addition to offering traditional deposit and loan products, Prosperity offers digital banking solutions, credit and debit cards, mortgage services, retail brokerage services, trust and wealth management, and treasury management.
Prosperity currently operates 273 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 63 in the Dallas/Fort Worth area; 22 in the East Texas area; 29 in the Central Texas area including Austin and San Antonio; 34 in the West Texas area including Lubbock, Midland-Odessa and Abilene; 16 in the Bryan/College Station area; 6 in the Central Oklahoma area; and 8 in the Tulsa, Oklahoma area.
Cautionary Notes on Forward-Looking Statements
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by Prosperity’s management on the conference call may contain, forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are typically, but not exclusively, identified by the use in the statements of words or phrases such as “aim,” “anticipate,” “estimate,” “expect,” “goal,” “guidance,” “intend,” “is anticipated,” “is expected,” “is intended,” “objective,” “plan,” “projected,” “projection,” “will affect,” “will be,” “will continue,” “will decrease,” “will grow,” “will impact,” “will increase,” “will incur,” “will reduce,” “will remain,” “will result,” “would be,” variations of such words or phrases (including where the word “could,” “may,” or “would” is used rather than the word “will” in a phrase) and similar words and phrases indicating that the statement addresses some future result, occurrence, plan or objective. Forward-looking statements include all statements other than statements of historical fact, including forecasts or trends, and are based on current expectations, assumptions, estimates and projections about Prosperity Bancshares and its subsidiaries. These forward-looking statements may include information about Prosperity’s possible or assumed future economic performance or future results of operations, including future revenues, income, expenses, provision for loan losses, provision for taxes, effective tax rate, earnings per share and cash flows and Prosperity’s future capital expenditures and dividends, future financial condition and changes therein, including changes in Prosperity’s loan portfolio and allowance for loan losses, future capital structure or changes therein, as well as the plans and objectives of management for Prosperity’s future operations, future or proposed acquisitions, the future or expected effect of acquisitions on Prosperity’s operations, results of operations, financial condition, and future economic performance, statements about the anticipated benefits of the proposed transaction, and statements about the assumptions underlying any such statement, as well as expectations regarding the effects of the COVID-19 pandemic on Prosperity’s operating income, financial condition and cash flows. These forward‑looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperity’s control, which may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include but are not limited to whether Prosperity can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks; continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives. Other risks include, but are not limited to: the possibility that credit quality could deteriorate; actions of competitors;
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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, Quarterly Report on Form 10-Q for the period ended September 30, 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 | Mount Vernon | Liberty | North University |
|---|---|---|---|---|
| Bryan | Grapevine | Palestine | Magnolia | Texas Tech Student Union |
| Bryan-29^th^ 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 | 23^rd^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 | 98^th^ Street | |
| Frisco-West | Longview | Hitchcock | Avenue Q |
Page 7
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(In thousands)
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance Sheet Data (at period end) | |||||||||||||||
| Loans held for sale | $ | 7,274 | $ | 10,197 | $ | 9,080 | $ | 20,991 | $ | 46,777 | |||||
| Loans held for investment | 16,833,171 | 16,949,486 | 17,147,146 | 17,345,506 | 17,357,788 | ||||||||||
| Loans held for investment - Warehouse Purchase Program | 1,775,699 | 1,998,049 | 2,095,559 | 2,272,389 | 2,842,379 | ||||||||||
| Total loans | 18,616,144 | 18,957,732 | 19,251,785 | 19,638,886 | 20,246,944 | ||||||||||
| Investment securities^(A)^ | 12,818,901 | 12,629,368 | 11,918,691 | 10,088,002 | 8,542,820 | ||||||||||
| Federal funds sold | 241 | 237 | 281 | 8,986 | 553 | ||||||||||
| Allowance for credit losses on loans | (286,380 | ) | (287,187 | ) | (302,884 | ) | (307,210 | ) | (316,068 | ) | |||||
| Cash and due from banks | 2,547,739 | 1,055,386 | 1,059,879 | 1,947,235 | 1,342,996 | ||||||||||
| Goodwill | 3,231,636 | 3,231,636 | 3,231,636 | 3,231,636 | 3,231,636 | ||||||||||
| Core deposit intangibles, net | 61,684 | 64,539 | 67,417 | 70,304 | 73,235 | ||||||||||
| Other real estate owned | 622 | 150 | 144 | 462 | 10,593 | ||||||||||
| Fixed assets, net | 319,799 | 322,799 | 324,502 | 326,970 | 323,572 | ||||||||||
| Other assets | 523,584 | 537,459 | 548,473 | 553,147 | 602,994 | ||||||||||
| Total assets | $ | 37,833,970 | $ | 36,512,119 | $ | 36,099,924 | $ | 35,558,418 | $ | 34,059,275 | |||||
| Noninterest-bearing deposits | $ | 10,750,034 | $ | 10,326,489 | $ | 10,099,149 | $ | 9,820,445 | $ | 9,151,233 | |||||
| Interest-bearing deposits | 20,021,728 | 19,125,163 | 19,011,092 | 18,942,660 | 18,209,259 | ||||||||||
| Total deposits | 30,771,762 | 29,451,652 | 29,110,241 | 28,763,105 | 27,360,492 | ||||||||||
| Other borrowings | — | — | — | — | — | ||||||||||
| Securities sold under repurchase agreements | 448,099 | 440,969 | 433,069 | 377,106 | 389,583 | ||||||||||
| Subordinated notes | — | — | — | — | — | ||||||||||
| Allowance for credit losses on off-balance sheet credit exposures | 29,947 | 29,947 | 29,947 | 29,947 | 29,947 | ||||||||||
| Other liabilities | 156,926 | 244,110 | 216,330 | 166,414 | 148,584 | ||||||||||
| Total liabilities | 31,406,734 | 30,166,678 | 29,789,587 | 29,336,572 | 27,928,606 | ||||||||||
| Shareholders' equity^(B)^ | 6,427,236 | 6,345,441 | 6,310,337 | 6,221,846 | 6,130,669 | ||||||||||
| Total liabilities and equity | $ | 37,833,970 | $ | 36,512,119 | $ | 36,099,924 | $ | 35,558,418 | $ | 34,059,275 |
(A) Includes $2,290, $2,483, $1,394, $970 and $974 in unrealized gains on available for sale securities for the quarterly periods ended December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021 and December 31, 2020, respectively.
(B) Includes $1,809, $1,961, $1,101, $766 and $769 in after-tax unrealized gains on available for sale securities for the quarterly periods ended December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021 and December 31, 2020, respectively.
Page 8
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(In thousands)
| Three Months Ended | Year-to-Date | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Dec 31, 2021 | Dec 31, 2020 | |||||||||||||
| Income Statement Data | |||||||||||||||||||
| Interest income: | |||||||||||||||||||
| Loans | $ | 206,209 | $ | 213,821 | $ | 216,803 | $ | 233,075 | $ | 241,625 | $ | 869,908 | $ | 975,895 | |||||
| Securities^(C)^ | 46,857 | 46,217 | 43,708 | 38,677 | 36,721 | 175,459 | 166,812 | ||||||||||||
| Federal funds sold and other earning assets | 563 | 302 | 340 | 351 | 301 | 1,556 | 1,203 | ||||||||||||
| Total interest income | 253,629 | 260,340 | 260,851 | 272,103 | 278,647 | 1,046,923 | 1,143,910 | ||||||||||||
| Interest expense: | |||||||||||||||||||
| Deposits | 8,685 | 11,578 | 15,288 | 17,362 | 19,757 | 52,913 | 102,502 | ||||||||||||
| Other borrowings | — | — | — | — | 33 | — | 3,550 | ||||||||||||
| Securities sold under repurchase agreements | 184 | 195 | 164 | 159 | 224 | 702 | 1,627 | ||||||||||||
| Subordinated notes and trust preferred | — | — | — | — | 999 | — | 5,498 | ||||||||||||
| Total interest expense | 8,869 | 11,773 | 15,452 | 17,521 | 21,013 | 53,615 | 113,177 | ||||||||||||
| Net interest income | 244,760 | 248,567 | 245,399 | 254,582 | 257,634 | 993,308 | 1,030,733 | ||||||||||||
| Provision for credit losses | — | — | — | — | — | — | 20,000 | ||||||||||||
| Net interest income after provision for credit losses | 244,760 | 248,567 | 245,399 | 254,582 | 257,634 | 993,308 | 1,010,733 | ||||||||||||
| Noninterest income: | |||||||||||||||||||
| Nonsufficient funds (NSF) fees | 8,401 | 7,962 | 6,560 | 6,687 | 8,051 | 29,610 | 30,295 | ||||||||||||
| Credit card, debit card and ATM card income | 8,894 | 8,837 | 8,918 | 8,031 | 8,193 | 34,680 | 31,245 | ||||||||||||
| Service charges on deposit accounts | 6,237 | 6,115 | 6,062 | 5,978 | 6,046 | 24,392 | 23,860 | ||||||||||||
| Trust income | 2,698 | 2,467 | 2,276 | 2,837 | 2,192 | 10,278 | 9,598 | ||||||||||||
| Mortgage income | 685 | 1,396 | 2,914 | 3,307 | 3,989 | 8,302 | 10,777 | ||||||||||||
| Brokerage income | 953 | 861 | 795 | 711 | 642 | 3,320 | 2,504 | ||||||||||||
| Bank owned life insurance income | 1,317 | 1,325 | 1,294 | 1,292 | 1,252 | 5,228 | 5,754 | ||||||||||||
| Net gain (loss) on sale or write-down of assets | 1,165 | 255 | (244 | ) | (79 | ) | (675 | ) | 1,097 | (5,533 | ) | ||||||||
| Other noninterest income | 5,407 | 5,427 | 6,981 | 5,244 | 6,857 | 23,059 | 23,034 | ||||||||||||
| Total noninterest income | 35,757 | 34,645 | 35,556 | 34,008 | 36,547 | 139,966 | 131,534 | ||||||||||||
| Noninterest expense: | |||||||||||||||||||
| Salaries and benefits | 76,496 | 78,412 | 75,611 | 80,037 | 77,809 | 310,556 | 309,268 | ||||||||||||
| Net occupancy and equipment | 8,140 | 8,165 | 8,046 | 7,833 | 8,223 | 32,184 | 35,037 | ||||||||||||
| Credit and debit card, data processing and software amortization | 9,050 | 9,103 | 8,718 | 8,233 | 8,442 | 35,104 | 40,329 | ||||||||||||
| Regulatory assessments and FDIC insurance | 2,801 | 2,497 | 2,670 | 2,670 | 2,670 | 10,638 | 9,861 | ||||||||||||
| Core deposit intangibles amortization | 2,855 | 2,878 | 2,887 | 2,931 | 3,243 | 11,551 | 13,169 | ||||||||||||
| Depreciation | 4,518 | 4,524 | 4,513 | 4,540 | 4,261 | 18,095 | 18,232 | ||||||||||||
| Communications | 3,134 | 3,013 | 2,982 | 2,899 | 2,931 | 12,028 | 12,477 | ||||||||||||
| Other real estate expense | 24 | 30 | 198 | 244 | 279 | 496 | 623 | ||||||||||||
| Net loss (gain) on sale or write-down of other real estate | 2 | 4 | (1,839 | ) | (887 | ) | (195 | ) | (2,720 | ) | (458 | ) | |||||||
| Merger related expenses | — | — | — | — | — | — | 8,018 | ||||||||||||
| Other noninterest expense | 12,518 | 11,189 | 11,405 | 10,576 | 12,542 | 45,688 | 50,677 | ||||||||||||
| Total noninterest expense | 119,538 | 119,815 | 115,191 | 119,076 | 120,205 | 473,620 | 497,233 | ||||||||||||
| Income before income taxes | 160,979 | 163,397 | 165,764 | 169,514 | 173,976 | 659,654 | 645,034 | ||||||||||||
| Provision for income taxes | 34,192 | 34,807 | 35,153 | 36,205 | 36,885 | 140,357 | 116,130 | ||||||||||||
| Net income available to common shareholders | $ | 126,787 | $ | 128,590 | $ | 130,611 | $ | 133,309 | $ | 137,091 | $ | 519,297 | $ | 528,904 |
(C) Interest income on securities was reduced by net premium amortization of $16,006, $15,141, $14,436, $12,844 and $11,509 for the three months ended December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021 and December 31, 2020, respectively, and $58,427 and $38,827 for the years ended December 31, 2021 and December 31, 2020, 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 | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Dec 31, 2021 | Dec 31, 2020 | ||||||||||||||||
| Profitability | ||||||||||||||||||||||
| Net income ^(D) (E)^ | $ | 126,787 | $ | 128,590 | $ | 130,611 | $ | 133,309 | $ | 137,091 | $ | 519,297 | $ | 528,904 | ||||||||
| Basic earnings per share | $ | 1.38 | $ | 1.39 | $ | 1.41 | $ | 1.44 | $ | 1.48 | $ | 5.60 | $ | 5.68 | ||||||||
| Diluted earnings per share | $ | 1.38 | $ | 1.39 | $ | 1.41 | $ | 1.44 | $ | 1.48 | $ | 5.60 | $ | 5.68 | ||||||||
| Return on average assets ^(F)^ | 1.37 | % | 1.42 | % | 1.45 | % | 1.54 | % | 1.63 | % | 1.44 | % | 1.62 | % | ^(J)^ | |||||||
| Return on average common equity ^(F)^ | 7.91 | % | 8.07 | % | 8.31 | % | 8.60 | % | 8.98 | % | 8.21 | % | 8.85 | % | ^(J)^ | |||||||
| Return on average tangible common equity ^(F)^^^^(G)^ | 16.26 | % | 16.72 | % | 17.49 | % | 18.43 | % | 19.57 | % | 17.18 | % | 19.83 | % | ^(J)^ | |||||||
| Tax equivalent net interest margin ^(D) (E)^^^^(H)^ | 2.97 | % | 3.10 | % | 3.11 | % | 3.41 | % | 3.49 | % | 3.14 | % | 3.64 | % | ||||||||
| Efficiency ratio ^(G) (I)^ | 42.79 | % | 42.34 | % | 40.96 | % | 41.25 | % | 40.77 | % | 41.83 | % | 42.58 | % | ^(K)^ | |||||||
| Liquidity and Capital Ratios | ||||||||||||||||||||||
| Equity to assets | 16.99 | % | 17.38 | % | 17.48 | % | 17.50 | % | 18.00 | % | 16.99 | % | 18.00 | % | ||||||||
| Common equity tier 1 capital | 15.10 | % | 14.84 | % | 15.26 | % | 14.60 | % | 13.74 | % | 15.10 | % | 13.74 | % | ||||||||
| Tier 1 risk-based capital | 15.10 | % | 14.84 | % | 15.26 | % | 14.60 | % | 13.74 | % | 15.10 | % | 13.74 | % | ||||||||
| Total risk-based capital | 15.45 | % | 15.20 | % | 15.71 | % | 15.07 | % | 14.23 | % | 15.45 | % | 14.23 | % | ||||||||
| Tier 1 leverage capital | 9.62 | % | 9.55 | % | 9.50 | % | 9.68 | % | 9.67 | % | 9.62 | % | 9.67 | % | ||||||||
| Period end tangible equity to period end tangible assets ^(G)^ | 9.07 | % | 9.18 | % | 9.18 | % | 9.05 | % | 9.19 | % | 9.07 | % | 9.19 | % | ||||||||
| Other Data | ||||||||||||||||||||||
| Weighted-average shares used in computing earnings per common share | ||||||||||||||||||||||
| Basic | 92,162 | 92,683 | 92,935 | 92,854 | 92,559 | 92,657 | 93,058 | |||||||||||||||
| Diluted | 92,162 | 92,683 | 92,935 | 92,854 | 92,559 | 92,657 | 93,058 | |||||||||||||||
| Period end shares outstanding | 92,170 | 92,160 | 92,935 | 92,929 | 92,571 | 92,170 | 92,571 | |||||||||||||||
| Cash dividends paid per common share | $ | 0.52 | $ | 0.49 | $ | 0.49 | $ | 0.49 | $ | 0.49 | $ | 1.99 | $ | 1.87 | ||||||||
| Book value per common share | $ | 69.73 | $ | 68.85 | $ | 67.90 | $ | 66.95 | $ | 66.23 | $ | 69.73 | $ | 66.23 | ||||||||
| Tangible book value per common share ^(G)^ | $ | 34.00 | $ | 33.09 | $ | 32.40 | $ | 31.42 | $ | 30.53 | $ | 34.00 | $ | 30.53 | ||||||||
| Common Stock Market Price | ||||||||||||||||||||||
| High | $ | 78.67 | $ | 72.97 | $ | 78.06 | $ | 83.02 | $ | 70.38 | $ | 83.02 | $ | 75.22 | ||||||||
| Low | $ | 68.53 | $ | 64.40 | $ | 69.83 | $ | 66.45 | $ | 50.43 | $ | 64.40 | $ | 42.02 | ||||||||
| Period end closing price | $ | 72.35 | $ | 71.13 | $ | 71.80 | $ | 76.16 | $ | 69.36 | $ | 72.35 | $ | 69.36 | ||||||||
| Employees – FTE (excluding overtime) | 3,704 | 3,625 | 3,724 | 3,724 | 3,756 | 3,704 | 3,756 | |||||||||||||||
| Number of banking centers | 273 | 273 | 274 | 275 | 275 | 273 | 275 |
(D) Includes purchase accounting adjustments for the periods presented as follows:
| Three Months Ended | Year-to-Date | ||||||
|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Dec 31, 2021 | Dec 31, 2020 | |
| Loan discount accretion | |||||||
| ASC 310-20 | $4,635 | $3,761 | $9,731 | $13,313 | $13,514 | $31,440 | $70,705 |
| ASC 310-30 | $731 | $1,618 | $2,462 | $3,027 | $2,545 | $7,838 | $20,636 |
| Securities net amortization | $139 | $136 | $171 | $111 | $66 | $557 | $579 |
| Time deposits amortization | $127 | $201 | $327 | $507 | $790 | $1,162 | $6,093 |
(E) Using effective tax rate of 21.2%, 21.3%, 21.2%, 21.4% and 21.2% for the three months ended December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021 and December 31, 2020, respectively, and 21.3% and 18.0% for the years ended December 31, 2021 and December 31, 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.
Page 10
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| YIELD ANALYSIS | Three Months Ended | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | Sep 30, 2021 | Dec 31, 2020 | |||||||||||||||||||||
| 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 | ^(L)^ | 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 | ^(L)^ | 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 | ^(L)^ | ||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||
| Loans held for sale | $ | 8,794 | $ | 71 | 3.20% | $ | 11,714 | $ | 91 | 3.08% | $ | 42,856 | $ | 348 | 3.23% | ||||||||
| Loans held for investment | 16,830,163 | 192,200 | 4.53% | 17,102,998 | 199,019 | 4.62% | 17,700,756 | 220,357 | 4.95% | ||||||||||||||
| Loans held for investment - Warehouse Purchase Program | 1,772,971 | 13,938 | 3.12% | 1,836,252 | 14,711 | 3.18% | 2,603,455 | 20,920 | 3.20% | ||||||||||||||
| Total Loans | 18,611,928 | 206,209 | 4.40% | 18,950,964 | 213,821 | 4.48% | 20,347,067 | 241,625 | 4.72% | ||||||||||||||
| Investment securities | 12,751,857 | 46,857 | 1.46% | ^(M)^ | 12,184,964 | 46,217 | 1.50% | ^(M)^ | 8,001,679 | 36,721 | 1.83% | ^(M)^ | |||||||||||
| Federal funds sold and other earning assets | 1,393,859 | 563 | 0.16% | 734,787 | 302 | 0.16% | 1,094,487 | 301 | 0.11% | ||||||||||||||
| Total interest-earning assets | 32,757,644 | 253,629 | 3.07% | 31,870,715 | 260,340 | 3.24% | 29,443,233 | 278,647 | 3.76% | ||||||||||||||
| Allowance for credit losses on loans | (287,191 | ) | (301,011 | ) | (322,138 | ) | |||||||||||||||||
| Noninterest-earning assets | 4,476,582 | 4,728,965 | 4,569,811 | ||||||||||||||||||||
| Total assets | $ | 36,947,035 | $ | 36,298,669 | $ | 33,690,906 | |||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 6,196,283 | $ | 2,187 | 0.14% | $ | 6,089,678 | $ | 3,614 | 0.24% | $ | 5,545,298 | $ | 5,301 | 0.38% | ||||||||
| Savings and money market deposits | 10,286,650 | 3,817 | 0.15% | 9,944,664 | 4,522 | 0.18% | 9,170,179 | 6,985 | 0.30% | ||||||||||||||
| Certificates and other time deposits | 2,766,123 | 2,681 | 0.38% | 2,897,123 | 3,442 | 0.47% | 3,047,475 | 7,471 | 0.98% | ||||||||||||||
| Other borrowings | — | — | — | — | — | — | 2,435 | 33 | 5.39% | ||||||||||||||
| Securities sold under repurchase agreements | 432,981 | 184 | 0.17% | 448,338 | 195 | 0.17% | 376,779 | 224 | 0.24% | ||||||||||||||
| Subordinated notes | — | — | — | — | — | — | 81,570 | 999 | 4.87% | ||||||||||||||
| Total interest-bearing liabilities | 19,682,037 | 8,869 | 0.18% | ^(N)^ | 19,379,803 | 11,773 | 0.24% | ^(N)^ | 18,223,736 | 21,013 | 0.46% | ^(N)^ | |||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||||
| Noninterest-bearing demand deposits | 10,587,441 | 10,286,062 | 9,103,742 | ||||||||||||||||||||
| Allowance for credit losses on off-balance sheet credit exposures | 29,947 | 29,947 | 29,947 | ||||||||||||||||||||
| Other liabilities | 234,746 | 229,502 | 224,907 | ||||||||||||||||||||
| Total liabilities | 30,534,171 | 29,925,314 | 27,582,332 | ||||||||||||||||||||
| Shareholders' equity | 6,412,864 | 6,373,355 | 6,108,574 | ||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 36,947,035 | $ | 36,298,669 | $ | 33,690,906 | |||||||||||||||||
| Net interest income and margin | $ | 244,760 | 2.96% | $ | 248,567 | 3.09% | $ | 257,634 | 3.48% | ||||||||||||||
| Non-GAAP to GAAP reconciliation: | |||||||||||||||||||||||
| Tax equivalent adjustment | 457 | 551 | 664 | ||||||||||||||||||||
| Net interest income and margin (tax equivalent basis) | $ | 245,217 | 2.97% | $ | 249,118 | 3.10% | $ | 258,298 | 3.49% |
(L) Annualized and based on an actual 365-day or 366-day basis.
(M) Yield on securities was impacted by net premium amortization of $16,006, $15,141, and $11,509 for the three months ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively.
(N) Total cost of funds, including noninterest bearing deposits, was 0.12%, 0.16%, and 0.31% for the three months ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively.
Page 11
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| YIELD ANALYSIS | Year-to-Date | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | Dec 31, 2020 | ||||||||||||||
| 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 | ^(O)^ | 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 | ^(O)^ | ||||||||
| Interest-earning assets: | |||||||||||||||
| Loans held for sale | $ | 16,807 | $ | 510 | 3.03% | $ | 55,883 | $ | 1,923 | 3.44% | |||||
| Loans held for investment | 17,128,069 | 806,012 | 4.71% | 17,842,438 | 910,532 | 5.10% | |||||||||
| Loans held for investment - Warehouse Purchase Program | 1,988,724 | 63,386 | 3.19% | 1,964,206 | 63,440 | 3.23% | |||||||||
| Total loans | 19,133,600 | 869,908 | 4.55% | 19,862,527 | 975,895 | 4.91% | |||||||||
| Investment securities | 11,328,903 | 175,459 | 1.55% | ^(P)^ | 8,022,205 | 166,812 | 2.08% | ^(P)^ | |||||||
| Federal funds sold and other earning assets | 1,212,698 | 1,556 | 0.13% | 529,075 | 1,203 | 0.23% | |||||||||
| Total interest-earning assets | 31,675,201 | 1,046,923 | 3.31% | 28,413,807 | 1,143,910 | 4.03% | |||||||||
| Allowance for credit losses on loans | (302,381 | ) | (324,308 | ) | |||||||||||
| Noninterest-earning assets | 4,602,458 | 4,555,851 | |||||||||||||
| Total assets | $ | 35,975,278 | $ | 32,645,350 | |||||||||||
| Interest-bearing liabilities: | |||||||||||||||
| Interest-bearing demand deposits | $ | 6,169,864 | $ | 17,215 | 0.28% | $ | 5,177,736 | $ | 22,046 | 0.43% | |||||
| Savings and money market deposits | 9,883,549 | 19,582 | 0.20% | 8,654,874 | 37,685 | 0.44% | |||||||||
| Certificates and other time deposits | 2,917,976 | 16,116 | 0.55% | 3,194,274 | 42,771 | 1.34% | |||||||||
| Other borrowings | — | — | — | 329,276 | 3,550 | 1.08% | |||||||||
| Securities sold under repurchase agreements | 410,747 | 702 | 0.17% | 371,872 | 1,627 | 0.44% | |||||||||
| Subordinated notes | — | — | — | 114,499 | 5,498 | 4.80% | |||||||||
| Total interest-bearing liabilities | 19,382,136 | 53,615 | 0.28% | ^(Q)^ | 17,842,531 | 113,177 | 0.63% | ^(Q)^ | |||||||
| Noninterest-bearing liabilities: | |||||||||||||||
| Noninterest-bearing demand deposits | 10,036,519 | 8,558,385 | |||||||||||||
| Allowance for credit losses on off-balance sheet credit exposures | 29,947 | 25,735 | |||||||||||||
| Other liabilities | 204,522 | 244,047 | |||||||||||||
| Total liabilities | 29,653,124 | 26,670,698 | |||||||||||||
| Shareholders' equity | 6,322,154 | 5,974,652 | |||||||||||||
| Total liabilities and shareholders' equity | 35,975,278 | $ | 32,645,350 | ||||||||||||
| Net interest income and margin | $ | 993,308 | 3.14% | $ | 1,030,733 | 3.63% | |||||||||
| Non-GAAP to GAAP reconciliation: | |||||||||||||||
| Tax equivalent adjustment | 2,229 | 2,735 | |||||||||||||
| Net interest income and margin (tax equivalent basis) | $ | 995,537 | 3.14% | $ | 1,033,468 | 3.64% |
(O) Based on an actual 365-day or 366-day basis.
(P) Yield on securities was impacted by net premium amortization of $58,427 and $38,827 for the years ended December 31, 2021 and 2020, respectively.
(Q) Total cost of funds, including noninterest bearing deposits, was 0.18% and 0.43% for the years ended December 31, 2021 and 2020, respectively.
Page 12
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | |||||||||||
| YIELD TREND ^(R)^ | |||||||||||||||
| Interest-Earning Assets: | |||||||||||||||
| Loans held for sale | 3.20 | % | 3.08 | % | 3.19 | % | 2.90 | % | 3.23 | % | |||||
| Loans held for investment | 4.53 | % | 4.62 | % | 4.65 | % | 5.02 | % | 4.95 | % | |||||
| Loans held for investment - Warehouse Purchase Program | 3.12 | % | 3.18 | % | 3.21 | % | 3.23 | % | 3.20 | % | |||||
| Total loans | 4.40 | % | 4.48 | % | 4.50 | % | 4.80 | % | 4.72 | % | |||||
| Investment securities ^(S)^ | 1.46 | % | 1.50 | % | 1.57 | % | 1.71 | % | 1.83 | % | |||||
| Federal funds sold and other earning assets | 0.16 | % | 0.16 | % | 0.11 | % | 0.09 | % | 0.11 | % | |||||
| Total interest-earning assets | 3.07 | % | 3.24 | % | 3.30 | % | 3.64 | % | 3.76 | % | |||||
| Interest-Bearing Liabilities: | |||||||||||||||
| Interest-bearing demand deposits | 0.14 | % | 0.24 | % | 0.35 | % | 0.39 | % | 0.38 | % | |||||
| Savings and money market deposits | 0.15 | % | 0.18 | % | 0.22 | % | 0.25 | % | 0.30 | % | |||||
| Certificates and other time deposits | 0.38 | % | 0.47 | % | 0.58 | % | 0.76 | % | 0.98 | % | |||||
| Other borrowings | — | — | — | — | 5.39 | % | |||||||||
| Securities sold under repurchase agreements | 0.17 | % | 0.17 | % | 0.17 | % | 0.17 | % | 0.24 | % | |||||
| Subordinated notes | — | — | — | — | 4.87 | % | |||||||||
| Total interest-bearing liabilities | 0.18 | % | 0.24 | % | 0.32 | % | 0.38 | % | 0.46 | % | |||||
| Net Interest Margin | 2.96 | % | 3.09 | % | 3.10 | % | 3.40 | % | 3.48 | % | |||||
| Net Interest Margin (tax equivalent) | 2.97 | % | 3.10 | % | 3.11 | % | 3.41 | % | 3.49 | % |
(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 $16,006, $15,141, $14,436, $12,844 and $11,509 for the three months ended December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021 and December 31, 2020, respectively.
Page 13
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | |||||||||||
| Balance Sheet Averages | |||||||||||||||
| Loans held for sale | $ | 8,794 | $ | 11,714 | $ | 13,716 | $ | 33,327 | $ | 42,856 | |||||
| Loans held for investment | 16,830,163 | 17,102,998 | 17,305,259 | 17,279,066 | 17,700,756 | ||||||||||
| Loans held for investment - Warehouse Purchase Program | 1,772,971 | 1,836,252 | 1,984,305 | 2,369,601 | 2,603,455 | ||||||||||
| Total Loans | 18,611,928 | 18,950,964 | 19,303,280 | 19,681,994 | 20,347,067 | ||||||||||
| Investment securities | 12,751,857 | 12,184,964 | 11,180,948 | 9,148,841 | 8,001,679 | ||||||||||
| Federal funds sold and other earning assets | 1,393,859 | 734,787 | 1,221,993 | 1,506,645 | 1,094,487 | ||||||||||
| Total interest-earning assets | 32,757,644 | 31,870,715 | 31,706,221 | 30,337,480 | 29,443,233 | ||||||||||
| Allowance for credit losses on loans | (287,191 | ) | (301,011 | ) | (306,059 | ) | (315,590 | ) | (322,138 | ) | |||||
| Cash and due from banks | 329,406 | 570,765 | 521,737 | 308,787 | 289,579 | ||||||||||
| Goodwill | 3,231,637 | 3,231,637 | 3,231,637 | 3,233,231 | 3,231,850 | ||||||||||
| Core deposit intangibles, net | 63,091 | 65,955 | 68,830 | 71,763 | 74,919 | ||||||||||
| Other real estate | 321 | 279 | 3,001 | 6,385 | 14,573 | ||||||||||
| Fixed assets, net | 321,524 | 323,584 | 326,570 | 326,004 | 325,485 | ||||||||||
| Other assets | 530,603 | 536,745 | 544,085 | 576,300 | 633,405 | ||||||||||
| Total assets | $ | 36,947,035 | $ | 36,298,669 | $ | 36,096,022 | $ | 34,544,360 | $ | 33,690,906 | |||||
| Noninterest-bearing deposits | $ | 10,587,441 | $ | 10,286,062 | $ | 10,062,085 | $ | 9,206,791 | $ | 9,103,742 | |||||
| Interest-bearing demand deposits | 6,196,283 | 6,089,678 | 6,281,068 | 6,112,469 | 5,545,298 | ||||||||||
| Savings and money market deposits | 10,286,650 | 9,944,664 | 9,872,624 | 9,420,064 | 9,170,179 | ||||||||||
| Certificates and other time deposits | 2,766,123 | 2,897,123 | 2,980,186 | 3,031,621 | 3,047,475 | ||||||||||
| Total deposits | 29,836,497 | 29,217,527 | 29,195,963 | 27,770,945 | 26,866,694 | ||||||||||
| Other borrowings | — | — | — | — | 2,435 | ||||||||||
| Securities sold under repurchase agreements | 432,981 | 448,338 | 383,975 | 376,662 | 376,779 | ||||||||||
| Subordinated notes | — | — | — | — | 81,570 | ||||||||||
| Allowance for credit losses on off-balance sheet credit exposures | 29,947 | 29,947 | 29,947 | 29,947 | 29,947 | ||||||||||
| Other liabilities | 234,746 | 229,502 | 198,748 | 169,138 | 224,907 | ||||||||||
| Shareholders' equity | 6,412,864 | 6,373,355 | 6,287,389 | 6,197,668 | 6,108,574 | ||||||||||
| Total liabilities and equity | $ | 36,947,035 | $ | 36,298,669 | $ | 36,096,022 | $ | 34,544,360 | $ | 33,690,906 |
Page 14
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Period End Balances | |||||||||||||||||||||||||
| Loan Portfolio | |||||||||||||||||||||||||
| Commercial and industrial | $ | 2,050,631 | 11.0 | % | $ | 1,841,899 | 9.7 | % | $ | 2,021,951 | 10.5 | % | $ | 2,104,116 | 10.7 | % | $ | 2,210,003 | 10.9 | % | |||||
| Warehouse purchase program | 1,775,699 | 9.5 | % | 1,998,049 | 10.6 | % | 2,095,559 | 10.9 | % | 2,272,389 | 11.6 | % | 2,842,379 | 14.0 | % | ||||||||||
| Construction, land development and other land loans | 2,299,715 | 12.4 | % | 2,269,417 | 12.0 | % | 2,147,474 | 11.2 | % | 2,031,355 | 10.4 | % | 1,956,960 | 9.7 | % | ||||||||||
| 1-4 family residential | 4,860,419 | 26.1 | % | 4,709,468 | 24.8 | % | 4,531,589 | 23.5 | % | 4,310,437 | 21.9 | % | 4,253,331 | 21.0 | % | ||||||||||
| Home equity | 808,289 | 4.4 | % | 746,426 | 3.9 | % | 637,431 | 3.3 | % | 554,278 | 2.8 | % | 504,207 | 2.5 | % | ||||||||||
| Commercial real estate (includes multi-family residential) | 5,251,368 | 28.2 | % | 5,550,841 | 29.3 | % | 5,681,184 | 29.5 | % | 5,858,475 | 29.8 | % | 6,078,764 | 30.0 | % | ||||||||||
| Agriculture (includes farmland) | 620,338 | 3.3 | % | 631,497 | 3.3 | % | 590,135 | 3.1 | % | 571,783 | 2.9 | % | 581,352 | 2.9 | % | ||||||||||
| Consumer and other | 288,496 | 1.6 | % | 274,980 | 1.5 | % | 264,652 | 1.4 | % | 293,023 | 1.5 | % | 344,028 | 1.7 | % | ||||||||||
| Energy | 491,305 | 2.6 | % | 569,314 | 3.0 | % | 501,821 | 2.6 | % | 503,947 | 2.6 | % | 512,735 | 2.5 | % | ||||||||||
| Paycheck Protection Program | 169,884 | 0.9 | % | 365,841 | 1.9 | % | 779,989 | 4.0 | % | 1,139,083 | 5.8 | % | 963,185 | 4.8 | % | ||||||||||
| Total loans | $ | 18,616,144 | $ | 18,957,732 | $ | 19,251,785 | $ | 19,638,886 | $ | 20,246,944 | |||||||||||||||
| Deposit Types | |||||||||||||||||||||||||
| Noninterest-bearing DDA | $ | 10,750,034 | 34.9 | % | $ | 10,326,489 | 35.0 | % | $ | 10,099,149 | 34.7 | % | $ | 9,820,445 | 34.1 | % | $ | 9,151,233 | 33.4 | % | |||||
| Interest-bearing DDA | 6,741,092 | 21.9 | % | 6,088,923 | 20.7 | % | 6,185,115 | 21.2 | % | 6,158,641 | 21.4 | % | 5,899,051 | 21.6 | % | ||||||||||
| Money market | 7,178,904 | 23.3 | % | 6,864,664 | 23.3 | % | 6,706,252 | 23.0 | % | 6,714,889 | 23.4 | % | 6,381,014 | 23.3 | % | ||||||||||
| Savings | 3,401,727 | 11.1 | % | 3,293,850 | 11.2 | % | 3,160,606 | 10.9 | % | 3,083,447 | 10.7 | % | 2,863,086 | 10.5 | % | ||||||||||
| Certificates and other time deposits | 2,700,005 | 8.8 | % | 2,877,726 | 9.8 | % | 2,959,119 | 10.2 | % | 2,985,683 | 10.4 | % | 3,066,108 | 11.2 | % | ||||||||||
| Total deposits | $ | 30,771,762 | $ | 29,451,652 | $ | 29,110,241 | $ | 28,763,105 | $ | 27,360,492 | |||||||||||||||
| Loan to Deposit Ratio | 60.5 | % | 64.4 | % | 66.1 | % | 68.3 | % | 74.0 | % |
Page 15
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
Construction Loans
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Single family residential construction | $ | 728,393 | 31.7 | % | $ | 659,248 | 29.0 | % | $ | 624,954 | 29.1 | % | $ | 590,223 | 29.1 | % | $ | 579,761 | 29.6 | % | |||||
| Land development | 99,099 | 4.3 | % | 92,623 | 4.1 | % | 97,709 | 4.6 | % | 97,267 | 4.8 | % | 103,307 | 5.3 | % | ||||||||||
| Raw land | 322,673 | 14.0 | % | 315,803 | 13.9 | % | 245,484 | 11.4 | % | 243,394 | 12.0 | % | 247,628 | 12.7 | % | ||||||||||
| Residential lots | 206,978 | 9.0 | % | 195,201 | 8.6 | % | 165,645 | 7.7 | % | 176,884 | 8.6 | % | 158,441 | 8.1 | % | ||||||||||
| Commercial lots | 184,901 | 8.0 | % | 169,189 | 7.5 | % | 153,714 | 7.2 | % | 137,512 | 6.8 | % | 114,427 | 5.8 | % | ||||||||||
| Commercial construction and other | 757,687 | 33.0 | % | 837,436 | 36.9 | % | 860,069 | 40.0 | % | 786,192 | 38.7 | % | 753,587 | 38.5 | % | ||||||||||
| Net unaccreted discount | (16 | ) | (83 | ) | (101 | ) | (117 | ) | (191 | ) | |||||||||||||||
| Total construction loans | $ | 2,299,715 | $ | 2,269,417 | $ | 2,147,474 | $ | 2,031,355 | $ | 1,956,960 |
Non-Owner Occupied Commercial Real Estate Loans by Metropolitan Statistical Area (MSA) as of December 31, 2021
| Houston | Dallas | Austin | OK City | Tulsa | Other ^(T)^ | Total | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Collateral Type | |||||||||||||||
| Shopping center/retail | $ | 338,333 | $ | 295,795 | $ | 43,084 | $ | 17,404 | $ | 28,424 | $ | 285,351 | $ | 1,008,391 | |
| Commercial and industrial buildings | 156,430 | 75,850 | 17,850 | 22,957 | 17,848 | 158,717 | 449,652 | ||||||||
| Office buildings | 110,424 | 423,035 | 23,515 | 70,651 | 4,761 | 77,452 | 709,838 | ||||||||
| Medical buildings | 96,724 | 21,552 | 2,594 | 22,871 | 43,311 | 65,361 | 252,413 | ||||||||
| Apartment buildings | 120,376 | 199,421 | 12,842 | 15,669 | 34,737 | 139,622 | 522,667 | ||||||||
| Hotel | 86,187 | 68,438 | 41,308 | 28,958 | — | 140,210 | 365,101 | ||||||||
| Other | 74,949 | 68,338 | 28,468 | 7,932 | 3,735 | 72,608 | 256,030 | ||||||||
| Total | $ | 983,423 | $ | 1,152,429 | $ | 169,661 | $ | 186,442 | $ | 132,816 | $ | 939,321 | $ | 3,564,092 | ^(U)^ |
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>Sep 30, 2021 | Balance at<br><br><br>Dec 31, 2021 | Balance at<br><br><br>Acquisition<br><br><br>Date | Balance at<br><br><br>Sep 30, 2021 | Balance at<br><br><br>Dec 31, 2021 | Balance at<br><br><br>Acquisition<br><br><br>Date | Balance at<br><br><br>Sep 30, 2021 | Balance at<br><br><br>Dec 31, 2021 | |||||||||||
| Loan marks: | |||||||||||||||||||
| Acquired banks ^(V)^ | $ | 345,599 | $ | 12,774 | $ | 8,143 | $ | 320,052 | $ | 5,569 | $ | 4,838 | $ | 665,651 | $ | 18,343 | $ | 12,981 | |
| Acquired portfolio loan balances: | |||||||||||||||||||
| Acquired banks ^(V)^ | 12,286,159 | 2,585,926 | 2,094,039 | 689,573 | 89,833 | 83,909 | 12,975,732 | ^(W)^ | 2,675,759 | 2,177,948 | |||||||||
| Acquired portfolio loan balances less loan marks | $ | 11,940,560 | $ | 2,573,152 | $ | 2,085,896 | $ | 369,521 | $ | 84,264 | $ | 79,071 | $ | 12,310,081 | $ | 2,657,416 | $ | 2,164,967 |
(T) Includes other MSA and non-MSA regions.
(U) Represents a portion of total commercial real estate loans of $5.251 billion as of December 31, 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.
Page 16
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Three Months Ended | Year-to-Date | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Dec 31, 2021 | Dec 31, 2020 | |||||||||||||||
| Asset Quality | |||||||||||||||||||||
| Nonaccrual loans | $ | 26,269 | $ | 35,035 | $ | 32,880 | $ | 43,025 | $ | 47,185 | $ | 26,269 | $ | 47,185 | |||||||
| Accruing loans 90 or more days past due | 887 | 1,038 | 330 | 313 | 1,699 | 887 | 1,699 | ||||||||||||||
| Total nonperforming loans | 27,156 | 36,073 | 33,210 | 43,338 | 48,884 | 27,156 | 48,884 | ||||||||||||||
| Repossessed assets | 310 | 326 | 310 | 362 | 93 | 310 | 93 | ||||||||||||||
| Other real estate | 622 | 150 | 144 | 462 | 10,593 | 622 | 10,593 | ||||||||||||||
| Total nonperforming assets | $ | 28,088 | $ | 36,549 | $ | 33,664 | $ | 44,162 | $ | 59,570 | $ | 28,088 | $ | 59,570 | |||||||
| Nonperforming assets: | |||||||||||||||||||||
| Commercial and industrial (includes energy) | $ | 6,150 | $ | 8,199 | $ | 8,613 | $ | 11,290 | $ | 16,176 | $ | 6,150 | $ | 16,176 | |||||||
| Construction, land development and other land loans | 1,841 | 803 | 1,423 | 1,692 | 1,566 | 1,841 | 1,566 | ||||||||||||||
| 1-4 family residential (includes home equity) | 11,990 | 11,117 | 11,681 | 11,920 | 25,830 | 11,990 | 25,830 | ||||||||||||||
| Commercial real estate (includes multi-family residential) | 7,276 | 15,691 | 11,266 | 16,896 | 12,315 | 7,276 | 12,315 | ||||||||||||||
| Agriculture (includes farmland) | 816 | 643 | 661 | 803 | 2,075 | 816 | 2,075 | ||||||||||||||
| Consumer and other | 15 | 96 | 20 | 1,561 | 1,608 | 15 | 1,608 | ||||||||||||||
| Total | $ | 28,088 | $ | 36,549 | $ | 33,664 | $ | 44,162 | $ | 59,570 | $ | 28,088 | $ | 59,570 | |||||||
| Number of loans/properties | 157 | 155 | 152 | 167 | 208 | 157 | 208 | ||||||||||||||
| Allowance for credit losses on loans | $ | 286,380 | $ | 287,187 | $ | 302,884 | $ | 307,210 | $ | 316,068 | $ | 286,380 | $ | 316,068 | |||||||
| Net charge-offs (recoveries): | |||||||||||||||||||||
| Commercial and industrial (includes energy) | $ | 177 | $ | 3,763 | $ | 3,529 | $ | 1,584 | $ | 4,085 | $ | 9,053 | $ | 24,607 | |||||||
| Construction, land development and other land loans | (162 | ) | (4 | ) | (105 | ) | (5 | ) | (110 | ) | (276 | ) | 350 | ||||||||
| 1-4 family residential (includes home equity) | (72 | ) | 66 | (6 | ) | 47 | 1,982 | 35 | 2,290 | ||||||||||||
| Commercial real estate (includes multi-family residential) | (10 | ) | 11,180 | 517 | 6,589 | 626 | 18,276 | 1,221 | |||||||||||||
| Agriculture (includes farmland) | (102 | ) | (63 | ) | (9 | ) | 33 | (4 | ) | (141 | ) | (25 | ) | ||||||||
| Consumer and other | 976 | 755 | 400 | 610 | 988 | 2,741 | 3,496 | ||||||||||||||
| Total | $ | 807 | $ | 15,697 | $ | 4,326 | $ | 8,858 | $ | 7,567 | $ | 29,688 | $ | 31,939 | |||||||
| Asset Quality Ratios | |||||||||||||||||||||
| Nonperforming assets to average interest-earning assets | 0.09 | % | 0.11 | % | 0.11 | % | 0.15 | % | 0.20 | % | 0.09 | % | 0.21 | % | |||||||
| Nonperforming assets to loans and other real estate | 0.15 | % | 0.19 | % | 0.17 | % | 0.22 | % | 0.29 | % | 0.15 | % | 0.29 | % | |||||||
| Net charge-offs to average loans (annualized) | 0.02 | % | 0.33 | % | 0.09 | % | 0.18 | % | 0.15 | % | 0.16 | % | 0.16 | % | |||||||
| Allowance for credit losses on loans to total loans | 1.54 | % | 1.51 | % | 1.57 | % | 1.56 | % | 1.56 | % | 1.54 | % | 1.56 | % | |||||||
| Allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program loans and Paycheck Protection Program loans ^(G)^ | 1.72 | % | 1.73 | % | 1.85 | % | 1.89 | % | 1.92 | % | 1.72 | % | 1.92 | % |
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 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 on loans 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 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 | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Dec 31, 2021 | Dec 31, 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 | $ | 126,787 | $ | 128,590 | $ | 130,611 | $ | 133,309 | $ | 137,091 | $ | 519,297 | $ | 528,904 | |||||||
| 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)^ | $ | 126,787 | $ | 128,590 | $ | 130,611 | $ | 133,309 | $ | 137,091 | $ | 519,297 | $ | 515,093 | |||||||
| Weighted average diluted shares outstanding | 92,162 | 92,683 | 92,935 | 92,854 | 92,559 | 92,657 | 93,058 | ||||||||||||||
| 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)^ | $ | 1.38 | $ | 1.39 | $ | 1.41 | $ | 1.44 | $ | 1.48 | $ | 5.60 | $ | 5.54 | |||||||
| 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)^ | $ | 126,787 | $ | 128,590 | $ | 130,611 | $ | 133,309 | $ | 137,091 | $ | 519,297 | $ | 515,093 | |||||||
| Average total assets | $ | 36,947,035 | $ | 36,298,669 | $ | 36,096,022 | $ | 34,544,360 | $ | 33,690,906 | $ | 35,975,278 | $ | 32,645,350 | |||||||
| Return on average assets excluding merger related expenses net of tax, and NOL tax benefit^(F) (X) (Y)^ | 1.37 | % | 1.42 | % | 1.45 | % | 1.54 | % | 1.63 | % | 1.44 | % | 1.58 | % | |||||||
| 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)^ | $ | 126,787 | $ | 128,590 | $ | 130,611 | $ | 133,309 | $ | 137,091 | $ | 519,297 | $ | 515,903 | |||||||
| Average shareholders' equity | $ | 6,412,864 | $ | 6,373,355 | $ | 6,287,389 | $ | 6,197,668 | $ | 6,108,574 | $ | 6,322,154 | $ | 5,974,652 | |||||||
| Return on average common equity excluding merger related expenses net of tax, and NOL tax benefit ^(F) (X) (Y)^ | 7.91 | % | 8.07 | % | 8.31 | % | 8.60 | % | 8.98 | % | 8.21 | % | 8.62 | % | |||||||
| Reconciliation of return on average common equity to return on average tangible common equity: | |||||||||||||||||||||
| Net income | $ | 126,787 | $ | 128,590 | $ | 130,611 | $ | 133,309 | $ | 137,091 | $ | 519,297 | $ | 528,904 | |||||||
| Average shareholders' equity | $ | 6,412,864 | $ | 6,373,355 | $ | 6,287,389 | $ | 6,197,668 | $ | 6,108,574 | $ | 6,322,154 | $ | 5,974,652 | |||||||
| Less: Average goodwill and other intangible assets | (3,294,728 | ) | (3,297,592 | ) | (3,300,467 | ) | (3,304,994 | ) | (3,306,769 | ) | (3,299,412 | ) | (3,307,639 | ) | |||||||
| Average tangible shareholders’ equity | $ | 3,118,136 | $ | 3,075,763 | $ | 2,986,922 | $ | 2,892,674 | $ | 2,801,805 | $ | 3,022,742 | $ | 2,667,013 | |||||||
| Return on average tangible common equity ^(F)^ | 16.26 | % | 16.72 | % | 17.49 | % | 18.43 | % | 19.57 | % | 17.18 | % | 19.83 | % |
(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.
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| Three Months Ended | Year-to-Date | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Dec 31, 2021 | Dec 31, 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)^ | $ | 126,787 | $ | 128,590 | $ | 130,611 | $ | 133,309 | $ | 137,091 | $ | 519,297 | $ | 515,093 | |||||||
| Average shareholders' equity | $ | 6,412,864 | $ | 6,373,355 | $ | 6,287,389 | $ | 6,197,668 | $ | 6,108,574 | $ | 6,322,154 | $ | 5,974,652 | |||||||
| Less: Average goodwill and other intangible assets | (3,294,728 | ) | (3,297,592 | ) | (3,300,467 | ) | (3,304,994 | ) | (3,306,769 | ) | (3,299,412 | ) | (3,307,639 | ) | |||||||
| Average tangible shareholders’ equity | $ | 3,118,136 | $ | 3,075,763 | $ | 2,986,922 | $ | 2,892,674 | $ | 2,801,805 | $ | 3,022,742 | $ | 2,667,013 | |||||||
| Return on average tangible common equity excluding merger related expenses net of tax, and NOL tax benefit ^(F) (X) (Y)^ | 16.26 | % | 16.72 | % | 17.49 | % | 18.43 | % | 19.57 | % | 17.18 | % | 19.31 | % | |||||||
| Reconciliation of book value per share to tangible book value per share: | |||||||||||||||||||||
| Shareholders’ equity | $ | 6,427,236 | $ | 6,345,441 | $ | 6,310,337 | $ | 6,221,846 | $ | 6,130,669 | $ | 6,427,236 | $ | 6,130,669 | |||||||
| Less: Goodwill and other intangible assets | (3,293,320 | ) | (3,296,175 | ) | (3,299,053 | ) | (3,301,940 | ) | (3,304,871 | ) | (3,293,320 | ) | (3,304,871 | ) | |||||||
| Tangible shareholders’ equity | $ | 3,133,916 | $ | 3,049,266 | $ | 3,011,284 | $ | 2,919,906 | $ | 2,825,798 | $ | 3,133,916 | $ | 2,825,798 | |||||||
| Period end shares outstanding | 92,170 | 92,160 | 92,935 | 92,929 | 92,571 | 92,170 | 92,571 | ||||||||||||||
| Tangible book value per share | $ | 34.00 | $ | 33.09 | $ | 32.40 | $ | 31.42 | $ | 30.53 | $ | 34.00 | 30.53 | ||||||||
| Reconciliation of equity to assets ratio to period end tangible equity to period end tangible assets ratio: | |||||||||||||||||||||
| Tangible shareholders’ equity | $ | 3,133,916 | $ | 3,049,266 | $ | 3,011,284 | $ | 2,919,906 | $ | 2,825,798 | $ | 3,133,916 | $ | 2,825,798 | |||||||
| Total assets | $ | 37,833,970 | $ | 36,512,119 | $ | 36,099,924 | $ | 35,558,418 | $ | 34,059,275 | $ | 37,833,970 | $ | 34,059,275 | |||||||
| Less: Goodwill and other intangible assets | (3,293,320 | ) | (3,296,175 | ) | (3,299,053 | ) | (3,301,940 | ) | (3,304,871 | ) | (3,293,320 | ) | (3,304,871 | ) | |||||||
| Tangible assets | $ | 34,540,650 | $ | 33,215,944 | $ | 32,800,871 | $ | 32,256,478 | $ | 30,754,404 | $ | 34,540,650 | $ | 30,754,404 | |||||||
| Period end tangible equity to period end tangible assets ratio | 9.07 | % | 9.18 | % | 9.18 | % | 9.05 | % | 9.19 | % | 9.07 | % | 9.19 | % | |||||||
| Reconciliation of allowance for credit losses on loans 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 | $ | 286,380 | $ | 287,187 | $ | 302,884 | $ | 307,210 | $ | 316,068 | $ | 286,380 | $ | 316,068 | |||||||
| Total loans | $ | 18,616,144 | $ | 18,957,732 | $ | 19,251,785 | $ | 19,638,886 | $ | 20,246,944 | $ | 18,616,144 | $ | 20,246,944 | |||||||
| Less: Warehouse Purchase Program loans | (1,775,699 | ) | (1,998,049 | ) | (2,095,559 | ) | (2,272,389 | ) | (2,842,379 | ) | (1,775,699 | ) | (2,842,379 | ) | |||||||
| Less: Paycheck Protection Program loans | (169,884 | ) | (365,841 | ) | (779,989 | ) | (1,139,083 | ) | (963,185 | ) | (169,884 | ) | (963,185 | ) | |||||||
| Total loans less Warehouse Purchase Program and Paycheck Protection Program loans | $ | 16,670,561 | $ | 16,593,842 | $ | 16,376,237 | $ | 16,227,414 | $ | 16,441,380 | $ | 16,670,561 | $ | 16,441,380 | |||||||
| Allowance for credit losses on loans to total loans excluding Warehouse Purchase Program and Paycheck Protection Program loans | 1.72 | % | 1.73 | % | 1.85 | % | 1.89 | % | 1.92 | % | 1.72 | % | 1.92 | % | |||||||
| Reconciliation of efficiency ratio to efficiency ratio excluding net gains and losses on the sale of assets and taxes: | |||||||||||||||||||||
| Noninterest expense | $ | 119,538 | $ | 119,815 | $ | 115,191 | $ | 119,076 | $ | 120,205 | $ | 473,620 | $ | 497,233 | |||||||
| Net interest income | $ | 244,760 | $ | 248,567 | $ | 245,399 | $ | 254,582 | $ | 257,634 | $ | 993,308 | $ | 1,030,733 | |||||||
| Noninterest income | 35,757 | 34,645 | 35,556 | 34,008 | 36,547 | 139,966 | 131,534 | ||||||||||||||
| Less: net gain (loss) on sale or write down of assets | 1,165 | 255 | (244 | ) | (79 | ) | (675 | ) | 1,097 | (5,533 | ) | ||||||||||
| Noninterest income excluding net gains and losses on the sale or write down of assets and securities | 34,592 | 34,390 | 35,800 | 34,087 | 37,222 | 138,869 | 137,067 | ||||||||||||||
| Total income excluding net gains and losses on the sale or write down of assets and taxes | $ | 279,352 | $ | 282,957 | $ | 281,199 | $ | 288,669 | $ | 294,856 | $ | 1,132,177 | $ | 1,167,800 | |||||||
| Efficiency ratio, excluding net gains and losses on the sale or write down of assets and taxes | 42.79 | % | 42.34 | % | 40.96 | % | 41.25 | % | 40.77 | % | 41.83 | % | 42.58 | % |
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| Three Months Ended | Year-to-Date | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Dec 31, 2021 | Dec 31, 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 | $ | 119,538 | $ | 119,815 | $ | 115,191 | $ | 119,076 | $ | 120,205 | $ | 473,620 | $ | 497,233 | |||||||
| Less: merger related expenses | — | — | — | — | — | — | 8,018 | ||||||||||||||
| Noninterest expense excluding merger related expenses | $ | 119,538 | $ | 119,815 | $ | 115,191 | $ | 119,076 | $ | 120,205 | $ | 473,620 | $ | 489,215 | |||||||
| Net interest income | $ | 244,760 | $ | 248,567 | $ | 245,399 | $ | 254,582 | $ | 257,634 | $ | 993,308 | $ | 1,030,733 | |||||||
| Noninterest income | 35,757 | 34,645 | 35,556 | 34,008 | 36,547 | 139,966 | 131,534 | ||||||||||||||
| Less: net gain (loss) on sale or write down of assets | 1,165 | 255 | (244 | ) | (79 | ) | (675 | ) | 1,097 | (5,533 | ) | ||||||||||
| Noninterest income excluding net gains and losses on the sale or write down of assets and taxes | 34,592 | 34,390 | 35,800 | 34,087 | 37,222 | 138,869 | 137,067 | ||||||||||||||
| Total income excluding net gains and losses on the sale or write down of assets and taxes | $ | 279,352 | $ | 282,957 | $ | 281,199 | $ | 288,669 | $ | 294,856 | $ | 1,132,177 | $ | 1,167,800 | |||||||
| Efficiency ratio excluding net gains and losses on the sale or write down of assets, taxes and merger related expenses | 42.79 | % | 42.34 | % | 40.96 | % | 41.25 | % | 40.77 | % | 41.83 | % | 41.89 | % |
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