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 29, 2020
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 29, 2020, Prosperity Bancshares, Inc. publicly disseminated a press release announcing its financial results for the fourth quarter ended December 31, 2019. 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 29, 2020. |
| 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 29, 2020 | 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 | 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
2019 EARNINGS
| • | Completed the merger with LegacyTexas Financial Group, Inc. on November 1, 2019 |
|---|---|
| • | Fourth quarter net income of $86.134 million and earnings per share (diluted) of $1.01, both impacted by merger related expenses of $46.402 million |
| --- | --- |
| • | Deposits increased $7.270 billion or 42.9% during the fourth quarter 2019 |
| --- | --- |
| • | Deposits (excluding impact of LegacyTexas) increased $801.6 million or 4.6% during 2019 |
| --- | --- |
| • | Loans increased $8.172 billion or 76.6% during the fourth quarter 2019 |
| --- | --- |
| • | Average loans (excluding impact of LegacyTexas) increased $407.341 million or 4.0% during 2019 |
| --- | --- |
| • | Nonperforming assets remain low at 0.25% of fourth quarter average interest-earning assets |
| --- | --- |
| • | Prosperity Bank has been rated in the Top 10 of Forbes Best Banks in America for seven consecutive years |
| --- | --- |
HOUSTON, January 29, 2020. Prosperity Bancshares, Inc.^®^ (NYSE: PB), the parent company of Prosperity Bank^®^ (collectively, “Prosperity”), reported net income for the quarter ended December 31, 2019 of $86.134 million compared with $83.331 million for the same period in 2018. Net income per diluted common share was $1.01 compared with $1.19 for the same period in 2018. On November 1, 2019, LegacyTexas Financial Group, Inc. (“LegacyTexas”), merged with Prosperity Bancshares and LegacyTexas Bank merged with Prosperity Bank (collectively, the “Merger”). During the fourth quarter of 2019, Prosperity incurred merger related charges of $46.402 million, or $0.43^(1)^ per diluted common share. Excluding these charges, earnings per diluted common share was $1.44^(1)^ for the fourth quarter of 2019. Additionally, loans increased 76.6% during the fourth quarter 2019, primarily due to the Merger. Nonperforming assets remain low at 0.25% of fourth quarter average interest-earning assets.
“The combination of LegacyTexas Bank and Prosperity Bank, which was effective November 1, 2019, has been one of the most exciting times in Prosperity’s history. The commonalities, enthusiasm and strengths that both companies offer should not only result in asset growth, but should also enhance customer and associate opportunities, and ultimately increase shareholder value. We are excited about Prosperity’s future opportunities,” said David Zalman, Prosperity’s Chairman and Chief Executive Officer.
“Prosperity Bank has been rated in the Top 10 of Forbes Best Banks in America for the seventh consecutive year, and we are the highest rated Texas-based bank,” continued Zalman.
“Despite oil and gas prices remaining in the $55 to $60 per barrel range, Texas and Oklahoma continue to experience employment and population growth, with many companies moving to these states because of favorable tax environments and business friendly political climates. Consumer sentiment remains strong and the trends suggest a positive start to 2020,” concluded 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. |
|---|
Page 1 of 18
Results of Operations for the Three Months Ended December 31, 2019
Net income was $86.134 million^(2)^ for the three months ended December 31, 2019 compared with $83.331 million^(3)^ for the same period in 2018 and was impacted by merger related expenses of $46.402 million. Net income per diluted common share was $1.01 for the three months ended December 31, 2019 compared with $1.19 for the same period in 2018 and was also impacted by the merger related expenses. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended December 31, 2019 were 1.19%, 6.33% and 12.50%^(1)^, respectively. Excluding merger related expenses, annualized returns on average assets, average common equity and average tangible common equity for the three months ended December 31, 2019 were 1.69%^(1)^, 9.02%^(1)^ and 17.82%^(1)^, respectively. Prosperity’s efficiency ratio (excluding credit loss provisions, net gains on the sale of assets and securities and taxes) was 58.07%^(1)^ for the three months ended December 31, 2019. Excluding merger related expenses, the efficiency ratio was 40.85%^(1)^ for the three months ended December 31, 2019.
Net interest income before provision for credit losses for the three months ended December 31, 2019 was $232.030 million compared with $157.248 million for the same period in 2018, an increase of $74.782 million or 47.6%. The increase was primarily due to the Merger and the increase in loan discount accretion of $20.839 million. On a linked quarter basis, net interest income before provision for credit losses was $232.030 million compared with $153.990 million for the three months ended September 30, 2019. The increase was primarily due to the Merger and the increase in loan discount accretion of $22.459 million.
The net interest margin on a tax equivalent basis was 3.66% for the three months ended December 31, 2019 compared with 3.15% for the same period in 2018. The change was primarily due to increased interest-earning assets and the $20.839 million increase in loan discount accretion related to the Merger. On a linked quarter basis, the net interest margin on a tax equivalent basis was 3.66% for the three months ended December 31, 2019 compared with 3.16% for the three months ended September 30, 2019. The change was primarily due to increased interest-earning assets and the $22.459 million increase in loan discount accretion related to the Merger.
Noninterest income was $35.506 million for the three months ended December 31, 2019 compared with $29.079 million for the same period in 2018, an increase of $6.427 million or 22.1%. This increase was primarily due to an increase in other noninterest income, mortgage income, nonsufficient funds fees and credit card, debit card and ATM card fees mainly due to the Merger, partially offset by the loss on sale of assets. On a linked quarter basis, noninterest income increased $4.833 million or 15.8% to $35.506 million compared with $30.673 million for the three months ended September 30, 2019, primarily due to the Merger.
Noninterest expense was $156.451 million for the three months ended December 31, 2019 compared with $80.804 million for the same period in 2018, an increase of $75.647 million or 93.6%. On a linked quarter basis, noninterest expense increased $75.752 million or 93.9% to $156.451 million compared with $80.699 million for the three months ended September 30, 2019. Both increases were primarily due to the merger related expenses of $46.402 million and additional expenses related to two months of operations related to the LegacyTexas banking centers and lending function.
Results of Operations for the Year Ended December 31, 2019
Net income was $332.552 million^(4)^ for the year ended December 31, 2019 compared with $321.812 million^(5)^ for the same period in 2018, an increase of $10.740 million or 3.3%, and was impacted by merger related expenses of $46.402 million. Net income per diluted common share was $4.52 for the year ended December 31, 2019 compared with $4.61 for the same period in 2018, a decrease of 2.0%, and was also impacted by the merger related expenses. Annualized returns on average assets, average common equity and average tangible common equity for the year ended December 31, 2019 were 1.38%, 7.46% and 14.23%^(1)^, respectively. Excluding merger related expenses, annualized returns on average assets, average common equity and average tangible common equity for the year ended December 31, 2019 were 1.53%^(1)^, 8.28%^(1)^ and 15.80%^(1)^, respectively. Prosperity’s efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and securities and taxes) was 48.25%^(1)^ for the year ended December 31, 2019. Excluding merger related expenses, the efficiency ratio was 42.60%^(1)^ for the year ended December 31, 2019.
Net interest income before provision for credit losses for the year ended December 31, 2019 was $695.769 million compared with $629.593 million for the same period in 2018, an increase of $66.176 million or 10.5%. This change was primarily due to the Merger and the increase in loan discount accretion of $14.136 million.
The net interest margin on a tax equivalent basis for the year ended December 31, 2019 was 3.32% compared with 3.18% for the same period in 2018. This change was primarily due to increased interest-earning assets related to the Merger and the increase in loan discount accretion of $14.136 million.
______________
| (2) | Includes purchase accounting adjustments of $19.883 million, net of tax, primarily comprised of loan discount accretion of $23.742 million, and merger related expenses of $46.402 million for the three months ended December 31, 2019. |
|---|---|
| (3) | Includes purchase accounting adjustments of $2.099 million, net of tax, primarily comprised of loan discount accretion of $2.903 million for the three months ended December 31, 2018. |
| --- | --- |
| (4) | Includes purchase accounting adjustments of $22.932 million, net of tax, primarily comprised of loan discount accretion of $28.045 million, and merger related expenses of $46.402 million for the year ended December 31, 2019. |
| --- | --- |
| (5) | Includes purchase accounting adjustments of $10.070 million, net of tax, primarily comprised of loan discount accretion of $13.909 million for the year ended December 31, 2018. |
| --- | --- |
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Noninterest income was $124.281 million for the year ended December 31, 2019 compared with $116.012 million for the same period in 2018, an increase of $8.269 million or 7.1%. This increase was primarily due to an increase in other noninterest income, mortgage income, nonsufficient funds fees and credit card, debit card and ATM card fees mainly due to the Merger.
Noninterest expense was $396.542 million for the year ended December 31, 2019 compared with $326.220 million for the same period in 2018, an increase of $70.322 million or 21.6%. The change was primarily due to the $46.402 million of merger related expenses and additional expenses related to two months of operations related to the LegacyTexas banking centers and lending function.
Balance Sheet Information
At December 31, 2019, Prosperity had $32.186 billion in total assets, an increase of $9.492 billion or 41.8%, compared with $22.693 billion at December 31, 2018.
Loans at December 31, 2019 were $18.845 billion, an increase of $8.475 billion or 81.7%, compared with $10.370 billion at December 31, 2018. Linked quarter loans increased $8.172 billion or 76.6% from $10.673 billion at September 30, 2019.
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, 2019, oil and gas loans totaled $698.277 million (net of discount) or 3.7% of total loans, of which $401.452 million were production loans and $296.825 million were servicing loans, compared with total oil and gas loans of $372.482 million (net of discount) or 3.6% of total loans at December 31, 2018, of which $114.175 million were production loans and $258.307 million were servicing loans.
Deposits at December 31, 2019 were $24.200 billion, an increase of $6.943 billion or 40.2%, compared with $17.257 billion at December 31, 2018. Linked quarter deposits increased $7.270 billion or 42.9% from $16.930 billion at September 30, 2019.
The table below provides detail on the impact of loans acquired and deposits assumed in the Merger:
| Balance Sheet Data (at period end) | ||||||
|---|---|---|---|---|---|---|
| (In thousands) | ||||||
| Dec 31, 2019 | Sep 30, 2019 | Dec 31, 2018 | ||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||
| Loans acquired (including new production since acquisition date): | ||||||
| LegacyTexas: | ||||||
| Loans held for sale | $ | 66,745 | $ | — | $ | — |
| Loans held for investment | 6,636,855 | — | — | |||
| Loans held for investment - Warehouse Purchase Program | 1,552,762 | — | — | |||
| All other loans | 10,588,984 | 10,673,345 | 10,370,313 | |||
| Total loans | $ | 18,845,346 | $ | 10,673,345 | $ | 10,370,313 |
| Deposits assumed (including new deposits since acquisition date): | ||||||
| LegacyTexas | $ | 6,141,546 | $ | — | $ | — |
| All other deposits | 18,058,186 | 16,929,920 | 17,256,558 | |||
| Total deposits | $ | 24,199,732 | $ | 16,929,920 | $ | 17,256,558 |
Excluding loans acquired in the Merger and new production by the acquired lending operations since November 1, 2019, loans at December 31, 2019 grew $218.671 million or 2.1% compared with December 31, 2018 and decreased $84.361 million or 0.8% compared to September 30, 2019.
Excluding deposits assumed in the Merger and new deposits generated at the acquired banking centers since November 1, 2019, deposits at December 31, 2019 grew $801.628 million or 4.6% compared with December 31, 2018 and grew $1.128 billion or 6.7% compared to September 30, 2019.
Asset Quality
Nonperforming assets totaled $62.943 million or 0.25% of quarterly average interest-earning assets at December 31, 2019, compared with $18.956 million or 0.10% of quarterly average interest-earning assets at December 31, 2018, and $51.157 million or 0.26% of quarterly average interest-earning assets at September 30, 2019. The increase during the fourth quarter 2019 was primarily due to the Merger.
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The allowance for credit losses was $87.469 million or 0.46% of total loans at December 31, 2019, $86.440 million or 0.83% of total loans at December 31, 2018 and $87.061 million or 0.82% of total loans at September 30, 2019. Excluding loans acquired that are accounted for under FASB Accounting Standards Codification (“ASC”) Topics 310-20 and 310-30 and Warehouse Purchase Program loans of $1.553 billion, the allowance for credit losses was 0.83%^(1)^ of remaining loans as of December 31, 2019, compared with 0.88%^(1)^ at December 31, 2018 and 0.85%^(1)^ at September 30, 2019.
The provision for credit losses was $1.700 million for the three months ended December 31, 2019 compared with $1.000 million for the three months ended December 31, 2018 and $1.100 million for the three months ended September 30, 2019. The provision for credit losses was $4.300 million for the year ended December 31, 2019 compared with $16.350 million for the year ended December 31, 2018.
Net charge-offs were $1.291 million for the three months ended December 31, 2019 compared with net charge-offs of $556 thousand for the three months ended December 31, 2018 and net charge-offs of $1.046 million for the three months ended September 30, 2019. Net charge-offs were $3.271 million for the year ended December 31, 2019 compared with $13.951 million for the year ended December 31, 2018.
Dividend
Prosperity Bancshares declared a first quarter cash dividend of $0.46 per share to be paid on April 1, 2020 to all shareholders of record as of March 16, 2020.
Merger with LegacyTexas Financial Group, Inc.
On November 1, 2019, Prosperity completed the merger with LegacyTexas and its wholly-owned subsidiary LegacyTexas Bank headquartered in Plano, Texas. LegacyTexas Bank operated 42 locations in 19 North Texas cities in and around the Dallas-Fort Worth area.
Pursuant to the terms of the merger agreement, Prosperity issued 26,228,148 shares of Prosperity common stock plus $308.585 million in cash for all outstanding shares of LegacyTexas, which resulted in goodwill of $1.323 billion as of December 31, 2019. Additionally, Prosperity recognized $60.058 million of core deposit intangibles as of December 31, 2019. The goodwill balance as of December 31, 2019 does not include subsequent fair value adjustments that are still being finalized.
Conference Call
Prosperity’s management team will host a conference call on Wednesday, January 29, 2020 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity’s fourth quarter 2019 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 elite entry number is 2006967.
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 & Calls” from the drop-down menu on the Investor Relations tab and following the instructions.
Non-GAAP Financial Measures
Prosperity’s management uses certain non-GAAP financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity, tangible equity to tangible assets ratio and the efficiency ratio, excluding net gains and losses on the sale of assets and securities. Further, as a result of acquisitions and the related purchase accounting adjustments, Prosperity uses certain non-GAAP financial measures and ratios that exclude the impact of these items to evaluate its allowance for credit losses to total loans (excluding acquired loans accounted for under ASC Topics 310-20, “Receivables-Nonrefundable Fees and Other Costs” and 310-30, “Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality”). Prosperity believes these non-GAAP financial measures provide information useful to investors in understanding Prosperity’s financial results and that 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.
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Prosperity Bancshares, Inc. ®
As of December 31, 2019, Prosperity Bancshares, Inc.^®^ is a $32.2 billion Houston, Texas based regional financial holding company providing personal banking services and investments to consumers and businesses throughout Texas and Oklahoma. Founded in 1983, Prosperity believes in a community banking philosophy, taking care of customers, businesses and communities in the areas it serves by providing financial solutions to simplify everyday financial needs. In addition to offering traditional deposit and loan products, Prosperity offers digital banking solutions, credit and debit cards, mortgage services, retail brokerage services, trust and wealth management, and cash management.
As of December 31, 2019, Prosperity operated 285 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 33 in the Dallas/Fort Worth area; 22 in the East Texas area; 29 in the Central Texas area including Austin and San Antonio; 34 in the West Texas area including Lubbock, Midland-Odessa and Abilene; 16 in the Bryan/College Station area; 6 in the Central Oklahoma area; 8 in the Tulsa, Oklahoma area and 42 in the Dallas/Fort Worth area currently doing business as LegacyTexas Bank.
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. These forward‑looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperity’s control, which may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include but are not limited to whether Prosperity can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks, including LegacyTexas; continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives. Other risks include, but are not limited to: the possibility that credit quality could deteriorate; actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); the possibility that the anticipated benefits of an acquisition transaction, including the LegacyTexas transaction, are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of two companies or as a result of the strength of the economy and competitive factors generally; a deterioration or downgrade in the credit quality and credit agency ratings of the securities in Prosperity’s securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate, interest rate and commodity price fluctuations; and weather. These and various other factors are discussed in Prosperity Bancshares’ Annual Report on Form 10-K for the year ended December 31, 2018 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 | Fort Worth | Canton | East Bernard | 86^th^ Street |
|---|---|---|---|---|
| Bryan | Haltom City | Carthage | El Campo | 98^th^ Street |
| Bryan-29^th^ Street | Keller | Corsicana | Dayton | Avenue Q |
| Bryan-East | Roanoke | Crockett | Galveston | North University |
| Bryan-North | Stockyards | Eustace | Groves | Texas Tech Student Union |
| Caldwell | Gilmer | Hempstead | ||
| College Station | Other Dallas/Fort Worth Area | Grapeland | Hitchcock | Midland |
| Crescent Point | Locations | Gun Barrel City | Liberty | Wadley |
| Hearne | Arlington | Jacksonville | Magnolia | Wall Street |
| Huntsville | Azle | Kerens | Magnolia Parkway | |
| Madisonville | Ennis | Longview | Mont Belvieu | Odessa |
| Navasota | Gainesville | Mount Vernon | Nederland | Grandview |
| New Waverly | Glen Rose | Palestine | Needville | Grant |
| Rock Prairie | Granbury | Rusk | Rosenberg | Kermit Highway |
| Southwest Parkway | Mesquite | Seven Points | Shadow Creek | Parkway |
| Tower Point | Muenster | Teague | Spring | |
| Wellborn Road | Sanger | Tyler-Beckham | Tomball | Other West Texas Area |
| Waxahachie | Tyler-South Broadway | Waller | Locations | |
| Central Texas Area | Weatherford | Tyler-University | West Columbia | Big Spring |
| Austin | Winnsboro | Wharton | Brownfield | |
| Allandale | LegacyTexas Dallas/Fort Worth Area | Winnie | Brownwood | |
| Cedar Park | LegacyTexas Dallas | Houston Area | Wirt | Cisco |
| Congress | 14th Street | Houston | Comanche | |
| Lakeway | Addison | Aldine | South Texas Area - | Early |
| Liberty Hill | Allen | Alief | Corpus Christi | Floydada |
| Northland | Carrollton | Bellaire | Calallen | Gorman |
| Oak Hill | Coppell | Beltway | Carmel | Levelland |
| Research Blvd | Downtown Grapevine | Clear Lake | Northwest | Littlefield |
| Westlake | East Plano | Copperfield | Saratoga | Merkel |
| El Dorado | Cypress | Timbergate | Plainview | |
| Other Central Texas Area | Frisco | Downtown | Water Street | San Angelo |
| Locations | Frisco-South | Eastex | Slaton | |
| Bastrop | Frisco-West | Fairfield | Victoria | Snyder |
| Canyon Lake | Garland | First Colony | Victoria Main | |
| Dime Box | Grapevine | Fry Road | Victoria-Navarro | Oklahoma |
| Dripping Springs | Grapevine Drive-thru | Gessner | Victoria-North | Central Oklahoma Area |
| Elgin | Lake Highlands | Gladebrook | Victoria Salem | Oklahoma City |
| Flatonia | LegacyTexas | Grand Parkway | 23^rd^Street | |
| Georgetown | McKinney | Heights | Other South Texas Area | Expressway |
| Gruene | McKinney-380 | Highway 6 West | Locations | I-240 |
| Kingsland | North Carrolton | Little York | Alice | Memorial |
| La Grange | North East Tarrant County | Medical Center | Aransas Pass | |
| Lexington | Oak Cliff | Memorial Drive | Beeville | Other Central Oklahoma Area |
| New Braunfels | Park Cities | Northside | Colony Creek | Locations |
| Pleasanton | Plano-West | Pasadena | Cuero | Edmond |
| Round Rock | Preston Forest | Pecan Grove | Edna | Norman |
| San Antonio | Preston Road | Pin Oak | Goliad | |
| Schulenburg | Preston Royal | River Oaks | Gonzales | Tulsa Area |
| Seguin | Richardson | Sugar Land | Hallettsville | Tulsa |
| Smithville | Richardson-West | SW Medical Center | Kingsville | Garnett |
| Thorndale | Rosewood Court | Tanglewood | Mathis | Harvard |
| Weimar | Tollroad | The Plaza | Padre Island | Memorial |
| Trinity Mills | Uptown | Palacios | Sheridan | |
| Dallas/Fort Worth Area | West 15th | Waugh Drive | Port Lavaca | S. Harvard |
| Dallas | West Allen | Westheimer | Portland | Utica Tower |
| Abrams Centre | Wylie | West University | Rockport | Yale |
| Balch Springs | Woodcreek | Sinton | ||
| Camp Wisdom | LegacyTexas Fort Worth | Taft | Other Tulsa Area Locations | |
| Cedar Hill | Hulen | Katy | Yoakum | Owasso |
| Frisco | Museum Place | Cinco Ranch | Yorktown | |
| Frisco-West | Renaissance Square | Katy-Spring Green | ||
| Kiest | West Texas Area | |||
| McKinney | LegacyTexas Other Dallas/Fort Worth | The Woodlands | Abilene | |
| McKinney-Stonebridge | Area Locations | The Woodlands-College Park | Antilley Road | |
| Midway | Flower Mound | The Woodlands-I-45 | Barrow Street | |
| Plano | Grand Prairie | The Woodlands-Research Forest | Cypress Street | |
| Preston Forest | Jacksboro | Judge Ely | ||
| Preston Road | Runaway Bay | Other Houston Area | Mockingbird | |
| Red Oak | Weatherford | Locations | ||
| Sachse | Angleton | Lubbock | ||
| The Colony | East Texas Area | Bay City | 4^th^ Street | |
| Turtle Creek | Athens | Beaumont | 66^th^ Street | |
| Westmoreland | Blooming Grove | Cleveland | 82^nd^ Street |
Page 6 of 18
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(In thousands)
| Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance Sheet Data (at period end) | |||||||||||||||
| Loans held for sale | $ | 80,959 | $ | 20,284 | $ | 20,315 | $ | 24,398 | $ | 29,367 | |||||
| Loans held for investment | 17,211,625 | 10,653,061 | 10,567,060 | 10,389,624 | 10,340,946 | ||||||||||
| Loans held for investment - Warehouse Purchase Program | 1,552,762 | — | — | — | — | ||||||||||
| Total loans | 18,845,346 | 10,673,345 | 10,587,375 | 10,414,022 | 10,370,313 | ||||||||||
| Investment securities^(A)^ | 8,570,056 | 8,495,206 | 8,951,940 | 9,137,645 | 9,408,966 | ||||||||||
| Federal funds sold | 519 | 521 | 555 | 566 | 552 | ||||||||||
| Allowance for credit losses | (87,469 | ) | (87,061 | ) | (87,006 | ) | (86,091 | ) | (86,440 | ) | |||||
| Cash and due from banks | 573,589 | 420,359 | 302,069 | 291,498 | 410,575 | ||||||||||
| Goodwill | 3,223,671 | 1,900,845 | 1,900,845 | 1,900,845 | 1,900,845 | ||||||||||
| Core deposit intangibles, net | 86,404 | 29,051 | 30,299 | 31,564 | 32,883 | ||||||||||
| Other real estate owned | 6,936 | 815 | 2,005 | 2,096 | 1,805 | ||||||||||
| Fixed assets, net | 326,832 | 263,703 | 262,479 | 257,595 | 257,046 | ||||||||||
| Other assets | 639,824 | 396,033 | 424,660 | 404,501 | 396,857 | ||||||||||
| Total assets | $ | 32,185,708 | $ | 22,092,817 | $ | 22,375,221 | $ | 22,354,241 | $ | 22,693,402 | |||||
| Noninterest-bearing deposits | $ | 7,763,894 | $ | 5,784,002 | $ | 5,691,236 | $ | 5,673,707 | $ | 5,666,115 | |||||
| Interest-bearing deposits | 16,435,838 | 11,145,918 | 11,196,393 | 11,524,063 | 11,590,443 | ||||||||||
| Total deposits | 24,199,732 | 16,929,920 | 16,887,629 | 17,197,770 | 17,256,558 | ||||||||||
| Other borrowings | 1,303,730 | 600,795 | 940,874 | 680,952 | 1,031,126 | ||||||||||
| Securities sold under repurchase agreements | 377,294 | 311,404 | 313,825 | 254,573 | 284,720 | ||||||||||
| Subordinated notes | 125,804 | — | — | — | — | ||||||||||
| Other liabilities | 208,313 | 123,892 | 104,998 | 111,156 | 68,174 | ||||||||||
| Total liabilities | 26,214,873 | 17,966,011 | 18,247,326 | 18,244,451 | 18,640,578 | ||||||||||
| Shareholders' equity^(B)^ | 5,970,835 | 4,126,806 | 4,127,895 | 4,109,790 | 4,052,824 | ||||||||||
| Total liabilities and equity | $ | 32,185,708 | $ | 22,092,817 | $ | 22,375,221 | $ | 22,354,241 | $ | 22,693,402 |
(A) Includes $763, $49, $1,611, $895 and $392 in unrealized gains on available for sale securities for the quarterly periods ended December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018, respectively.
(B) Includes $602, $38, $1,273, $706 and $310 in after-tax unrealized gains on available for sale securities for the quarterly periods ended December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018, respectively.
Page 7 of 18
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(In thousands)
| Three Months Ended | Year-to-Date | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Dec 31, 2019 | Dec 31, 2018 | |||||||||||||||
| Income Statement Data | |||||||||||||||||||||
| Interest income: | |||||||||||||||||||||
| Loans | $ | 222,910 | $ | 134,943 | $ | 133,525 | $ | 130,065 | $ | 130,627 | $ | 621,443 | $ | 503,963 | |||||||
| Securities^(C)^ | 49,348 | 50,872 | 53,944 | 55,648 | 56,170 | 209,812 | 221,909 | ||||||||||||||
| Federal funds sold and other earning assets | 600 | 363 | 318 | 402 | 397 | 1,683 | 1,337 | ||||||||||||||
| Total interest income | 272,858 | 186,178 | 187,787 | 186,115 | 187,194 | 832,938 | 727,209 | ||||||||||||||
| Interest expense: | |||||||||||||||||||||
| Deposits | 32,759 | 26,939 | 26,562 | 25,128 | 21,643 | 111,388 | 71,384 | ||||||||||||||
| Other borrowings | 6,115 | 4,335 | 5,556 | 5,317 | 7,639 | 21,323 | 24,241 | ||||||||||||||
| Securities sold under repurchase agreements | 879 | 914 | 831 | 759 | 664 | 3,383 | 1,991 | ||||||||||||||
| Subordinated notes and trust preferred | 1,075 | — | — | — | — | 1,075 | — | ||||||||||||||
| Total interest expense | 40,828 | 32,188 | 32,948 | 31,205 | 29,946 | 137,169 | 97,615 | ||||||||||||||
| Net interest income | 232,030 | 153,990 | 154,838 | 154,911 | 157,248 | 695,769 | 629,593 | ||||||||||||||
| Provision for credit losses | 1,700 | 1,100 | 800 | 700 | 1,000 | 4,300 | 16,350 | ||||||||||||||
| Net interest income after provision for credit losses | 230,330 | 152,890 | 154,038 | 154,211 | 156,248 | 691,469 | 613,243 | ||||||||||||||
| Noninterest income: | |||||||||||||||||||||
| Nonsufficient funds (NSF) fees | 9,990 | 8,835 | 7,973 | 7,816 | 8,902 | 34,614 | 33,163 | ||||||||||||||
| Credit card, debit card and ATM card income | 7,728 | 6,688 | 6,480 | 5,971 | 6,508 | 26,867 | 25,046 | ||||||||||||||
| Service charges on deposit accounts | 5,597 | 5,020 | 4,989 | 4,998 | 5,090 | 20,604 | 20,652 | ||||||||||||||
| Trust income | 2,582 | 2,492 | 2,558 | 2,595 | 2,507 | 10,227 | 10,178 | ||||||||||||||
| Mortgage income | 2,455 | 839 | 990 | 722 | 627 | 5,006 | 3,355 | ||||||||||||||
| Brokerage income | 625 | 522 | 541 | 673 | 521 | 2,361 | 2,617 | ||||||||||||||
| Bank owned life insurance income | 1,502 | 1,314 | 1,321 | 1,289 | 1,330 | 5,426 | 5,284 | ||||||||||||||
| Net (loss) gain on sale or write-down of assets | (1,870 | ) | (3 | ) | 2 | 58 | (715 | ) | (1,813 | ) | (755 | ) | |||||||||
| Net loss on sale of securities | — | — | — | — | — | — | (13 | ) | |||||||||||||
| Other noninterest income | 6,897 | 4,966 | 5,104 | 4,022 | 4,309 | 20,989 | 16,485 | ||||||||||||||
| Total noninterest income | 35,506 | 30,673 | 29,958 | 28,144 | 29,079 | 124,281 | 116,012 | ||||||||||||||
| Noninterest expense: | |||||||||||||||||||||
| Salaries and benefits | 69,356 | 52,978 | 52,941 | 51,073 | 51,852 | 226,348 | 207,517 | ||||||||||||||
| Net occupancy and equipment | 7,420 | 5,607 | 5,492 | 5,466 | 5,651 | 23,985 | 22,760 | ||||||||||||||
| Credit and debit card, data processing and software amortization | 9,158 | 4,989 | 4,904 | 4,573 | 4,474 | 23,624 | 17,790 | ||||||||||||||
| Regulatory assessments and FDIC insurance | 2,095 | 1,814 | 2,325 | 2,374 | 2,764 | 8,608 | 13,261 | ||||||||||||||
| Core deposit intangibles amortization | 2,705 | 1,248 | 1,265 | 1,319 | 1,412 | 6,537 | 5,959 | ||||||||||||||
| Depreciation | 4,212 | 3,286 | 3,111 | 3,104 | 3,139 | 13,713 | 12,365 | ||||||||||||||
| Communications | 3,012 | 2,214 | 2,183 | 2,270 | 2,404 | 9,679 | 10,032 | ||||||||||||||
| Other real estate expense | 57 | 68 | 120 | 83 | 110 | 328 | 501 | ||||||||||||||
| Net (gain) loss on sale or write-down of other real estate | (49 | ) | (115 | ) | (54 | ) | (177 | ) | 91 | (395 | ) | 221 | |||||||||
| Merger related expenses | 46,402 | — | — | — | — | 46,402 | — | ||||||||||||||
| Other noninterest expense | 12,083 | 8,610 | 8,534 | 8,486 | 8,907 | 37,713 | 35,814 | ||||||||||||||
| Total noninterest expense | 156,451 | 80,699 | 80,821 | 78,571 | 80,804 | 396,542 | 326,220 | ||||||||||||||
| Income before income taxes | 109,385 | 102,864 | 103,175 | 103,784 | 104,523 | 419,208 | 403,035 | ||||||||||||||
| Provision for income taxes | 23,251 | 21,106 | 20,917 | 21,382 | 21,192 | 86,656 | 81,223 | ||||||||||||||
| Net income available to common shareholders | $ | 86,134 | $ | 81,758 | $ | 82,258 | $ | 82,402 | $ | 83,331 | $ | 332,552 | $ | 321,812 |
(C) Interest income on securities was reduced by net premium amortization of $8,556, $8,027, $7,607, $6,589 and $7,338 for the three-month periods ended December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018, respectively, and $30,779 and $31,614 for the years ended December 31, 2019 and December 31, 2018, respectively.
Page 8 of 18
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, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Dec 31, 2019 | Dec 31, 2018 | |||||||||||||||
| Profitability | |||||||||||||||||||||
| Net income ^(D) (E)^ | $ | 86,134 | $ | 81,758 | $ | 82,258 | $ | 82,402 | $ | 83,331 | $ | 332,552 | $ | 321,812 | |||||||
| Basic earnings per share | $ | 1.01 | $ | 1.19 | $ | 1.18 | $ | 1.18 | $ | 1.19 | $ | 4.52 | $ | 4.61 | |||||||
| Diluted earnings per share | $ | 1.01 | $ | 1.19 | $ | 1.18 | $ | 1.18 | $ | 1.19 | $ | 4.52 | $ | 4.61 | |||||||
| Return on average assets ^(F) (J)^ | 1.19 | % | 1.47 | % | 1.46 | % | 1.46 | % | 1.47 | % | 1.38 | % | 1.42 | % | |||||||
| Return on average common equity ^(F) (J)^ | 6.33 | % | 7.89 | % | 7.92 | % | 8.05 | % | 8.25 | % | 7.46 | % | 8.15 | % | |||||||
| Return on average tangible common equity ^(F)^^^^(G) (J)^ | 12.50 | % | 14.77 | % | 14.82 | % | 15.24 | % | 15.84 | % | 14.23 | % | 16.00 | % | |||||||
| Tax equivalent net interest margin ^(D) (E)^^^^(H)^ | 3.66 | % | 3.16 | % | 3.16 | % | 3.20 | % | 3.15 | % | 3.32 | % | 3.18 | % | |||||||
| Efficiency ratio ^(G) (I) (K)^ | 58.07 | % | 43.70 | % | 43.74 | % | 42.94 | % | 43.20 | % | 48.25 | % | 43.71 | % | |||||||
| Liquidity and Capital Ratios | |||||||||||||||||||||
| Equity to assets | 18.55 | % | 18.68 | % | 18.45 | % | 18.38 | % | 17.86 | % | 18.55 | % | 17.86 | % | |||||||
| Common equity tier 1 capital | 12.30 | % | 16.68 | % | 16.59 | % | 16.76 | % | 16.32 | % | 12.30 | % | 16.32 | % | |||||||
| Tier 1 risk-based capital | 12.30 | % | 16.68 | % | 16.59 | % | 16.76 | % | 16.32 | % | 12.30 | % | 16.32 | % | |||||||
| Total risk-based capital | 12.70 | % | 17.34 | % | 17.25 | % | 17.42 | % | 16.99 | % | 12.70 | % | 16.99 | % | |||||||
| Tier 1 leverage capital | 10.37 | % | 10.86 | % | 10.67 | % | 10.59 | % | 10.23 | % | 10.37 | % | 10.23 | % | |||||||
| Period end tangible equity to period end tangible assets ^(G)^ | 9.21 | % | 10.90 | % | 10.75 | % | 10.66 | % | 10.21 | % | 9.21 | % | 10.21 | % | |||||||
| Other Data | |||||||||||||||||||||
| Weighted-average shares used in computing earnings per common share | |||||||||||||||||||||
| Basic | 85,573 | 68,738 | 69,806 | 69,847 | 69,838 | 73,524 | 69,821 | ||||||||||||||
| Diluted | 85,573 | 68,738 | 69,806 | 69,847 | 69,838 | 73,524 | 69,821 | ||||||||||||||
| Period end shares outstanding | 94,746 | 68,397 | 69,261 | 69,846 | 69,847 | 94,746 | 69,847 | ||||||||||||||
| Cash dividends paid per common share | $ | 0.46 | $ | 0.41 | $ | 0.41 | $ | 0.41 | $ | 0.41 | $ | 1.69 | $ | 1.49 | |||||||
| Book value per common share | $ | 63.02 | $ | 60.34 | $ | 59.60 | $ | 58.84 | $ | 58.02 | $ | 63.02 | $ | 58.02 | |||||||
| Tangible book value per common share ^(G)^ | $ | 28.08 | $ | 32.12 | $ | 31.72 | $ | 31.17 | $ | 30.34 | $ | 28.08 | $ | 30.34 | |||||||
| Common Stock Market Price | |||||||||||||||||||||
| High | $ | 74.35 | $ | 71.86 | $ | 74.50 | $ | 75.36 | $ | 72.24 | $ | 75.36 | $ | 79.20 | |||||||
| Low | $ | 66.60 | $ | 62.17 | $ | 61.85 | $ | 61.65 | $ | 57.01 | $ | 61.65 | $ | 57.01 | |||||||
| Period end closing price | $ | 71.89 | $ | 70.63 | $ | 66.05 | $ | 69.06 | $ | 62.30 | $ | 71.89 | $ | 62.30 | |||||||
| Employees – FTE | 3,901 | 3,044 | 3,046 | 3,065 | 3,036 | 3,901 | 3,036 | ||||||||||||||
| Number of banking centers | 285 | 243 | 243 | 242 | 242 | 285 | 242 |
(D) Includes purchase accounting adjustments for the periods presented as follows:
| Three Months Ended | Year-to-Date | ||||||
|---|---|---|---|---|---|---|---|
| Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Dec 31, 2019 | Dec 31, 2018 | |
| Loan discount accretion | |||||||
| ASC 310-20 | $17,834 | $1,006 | $880 | $1,474 | $1,289 | $21,194 | $5,668 |
| ASC 310-30 | $5,908 | $277 | $347 | $319 | $1,614 | $6,851 | $8,241 |
| Securities net amortization | $201 | $157 | $255 | $234 | $270 | $847 | $1,404 |
| Time deposits amortization | $1,709 | — | — | — | — | $1,709 | $106 |
(E) Using effective tax rate of 21.3%, 20.5%, 20.3%, 20.6% and 20.3% for the three-month periods ended December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018, respectively, and 20.7% and 20.2% for the years ended December 31, 2019 and December 31, 2018, 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 and one-time merger and acquisition expenses, by net interest income plus noninterest income, excluding net gains and losses on the sale of assets and securities. Additionally, taxes are not part of this calculation.
| (J) | Excluding merger related expenses, net of tax, annualized returns on average assets, average common equity and average tangible common equity were 1.69%^(G)^, 9.02%^(G)^ and 17.82%^(G)^ for the three months ended December 31, 2019, respectively, and 1.53%^(G)^, 8.28%^(G)^ and 15.80%^(G)^ for the year ended December 31, 2019, respectively. |
|---|---|
| (K) | Excluding merger related expenses, net of tax, the efficiency ratio was 40.85%^(G)^ for the three months ended December 31, 2019 and 42.60%^(G)^ for the year ended December 31, 2019. |
| --- | --- |
Page 9 of 18
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| YIELD ANALYSIS | Three Months Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2019 | Sep 30, 2019 | Dec 31, 2018 | |||||||||||||||||||
| 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 | $ | 57,171 | $ | 570 | 3.96% | $ | 21,077 | $ | 266 | 5.01% | $ | 28,407 | $ | 356 | 4.97% | ||||||
| Loans held for investment | 15,261,163 | 212,466 | 5.52% | 10,589,272 | 134,677 | 5.05% | 10,291,189 | 130,271 | 5.02% | ||||||||||||
| Loans held for investment - Warehouse Purchase Program | 996,903 | 9,874 | 3.93% | — | — | 0.00% | — | — | 0.00% | ||||||||||||
| Total Loans | 16,315,237 | 222,910 | 5.42% | 10,610,349 | 134,943 | 5.05% | 10,319,596 | 130,627 | 5.02% | ||||||||||||
| Investment securities | 8,598,736 | 49,348 | 2.28% | ^(M)^ | 8,758,056 | 50,872 | 2.30% | ^(M)^ | 9,499,166 | 56,170 | 2.35% | ^(M)^ | |||||||||
| Federal funds sold and other earning assets | 305,596 | 600 | 0.78% | 74,751 | 363 | 1.93% | 100,339 | 397 | 1.57% | ||||||||||||
| Total interest-earning assets | 25,219,569 | 272,858 | 4.29% | 19,443,156 | 186,178 | 3.80% | 19,919,101 | 187,194 | 3.73% | ||||||||||||
| Allowance for credit losses | (86,795 | ) | (86,996 | ) | (86,464 | ) | |||||||||||||||
| Noninterest-earning assets | 3,930,651 | 2,849,936 | 2,861,369 | ||||||||||||||||||
| Total assets | $ | 29,063,425 | $ | 22,206,096 | $ | 22,694,006 | |||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||
| Interest-bearing demand deposits | $ | 4,233,880 | $ | 5,755 | 0.54% | $ | 3,575,249 | $ | 5,602 | 0.62% | $ | 3,720,133 | $ | 5,327 | 0.57% | ||||||
| Savings and money market deposits | 7,109,754 | 14,187 | 0.79% | 5,524,277 | 12,588 | 0.90% | 5,382,699 | 9,842 | 0.73% | ||||||||||||
| Certificates and other time deposits | 3,044,843 | 12,817 | 1.67% | 2,083,803 | 8,749 | 1.67% | 2,087,871 | 6,474 | 1.23% | ||||||||||||
| Other borrowings | 1,403,686 | 6,115 | 1.73% | 749,814 | 4,335 | 2.29% | 1,297,917 | 7,639 | 2.34% | ||||||||||||
| Securities sold under repurchase agreements | 351,580 | 879 | 0.99% | 315,277 | 914 | 1.15% | 285,984 | 664 | 0.92% | ||||||||||||
| Subordinated notes and trust preferred | 87,963 | 1,075 | 4.85% | — | — | 0.00% | — | — | 0.00% | ||||||||||||
| Total interest-bearing liabilities | 16,231,706 | 40,828 | 1.00% | ^(N)^ | 12,248,420 | 32,188 | 1.04% | ^(N)^ | 12,774,604 | 29,946 | 0.93% | ^(N)^ | |||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||
| Noninterest-bearing demand deposits | 7,066,878 | 5,701,419 | 5,785,882 | ||||||||||||||||||
| Other liabilities | 320,855 | 111,526 | 95,124 | ||||||||||||||||||
| Total liabilities | 23,619,439 | 18,061,365 | 18,655,610 | ||||||||||||||||||
| Shareholders' equity | 5,443,986 | 4,144,731 | 4,038,396 | ||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 29,063,425 | $ | 22,206,096 | $ | 22,694,006 | |||||||||||||||
| Net interest income and margin | $ | 232,030 | 3.65% | $ | 153,990 | 3.14% | $ | 157,248 | 3.13% | ||||||||||||
| Non-GAAP to GAAP reconciliation: | |||||||||||||||||||||
| Tax equivalent adjustment | 668 | 791 | 892 | ||||||||||||||||||
| Net interest income and margin (tax equivalent basis) | $ | 232,698 | 3.66% | $ | 154,781 | 3.16% | $ | 158,140 | 3.15% |
(L) Annualized and based on an actual 365 day basis.
(M) Yield on securities was impacted by net premium amortization of $8,556, $8,027 and $7,338 for the three-month periods ended December 31, 2019, September 30, 2019 and December 31, 2018, respectively.
(N) Total cost of funds, including noninterest bearing deposits, was 0.70%, 0.71% and 0.64% for the three months ended December 31, 2019, September 30, 2019 and December 31, 2018, respectively.
Page 10 of 18
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| YIELD ANALYSIS | Year-to-Date | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2019 | Dec 31, 2018 | |||||||||||||
| 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 | $ | 32,065 | $ | 1,457 | 4.54% | $ | 29,427 | $ | 1,476 | 5.02% | ||||
| Loans held for investment | 11,688,754 | 610,112 | 5.22% | 10,112,198 | 502,487 | 4.97% | ||||||||
| Loans held for investment - Warehouse Purchase Program | 251,274 | 9,874 | 3.93% | — | — | 0.00% | ||||||||
| Total loans | 11,972,093 | 621,443 | 5.19% | 10,141,625 | 503,963 | 4.97% | ||||||||
| Investment securities | 8,958,182 | 209,812 | 2.34% | ^(P)^ | 9,664,404 | 221,909 | 2.30% | ^(P)^ | ||||||
| Federal funds sold and other earning assets | 129,622 | 1,683 | 1.30% | 82,521 | 1,337 | 1.62% | ||||||||
| Total interest-earning assets | 21,059,897 | 832,938 | 3.96% | 19,888,550 | 727,209 | 3.66% | ||||||||
| Allowance for credit losses | (86,616 | ) | (84,511 | ) | ||||||||||
| Noninterest-earning assets | 3,114,426 | 2,828,706 | ||||||||||||
| Total assets | $ | 24,087,707 | $ | 22,632,745 | ||||||||||
| Interest-bearing liabilities: | ||||||||||||||
| Interest-bearing demand deposits | $ | 3,917,413 | $ | 23,982 | 0.61% | $ | 3,937,479 | $ | 20,072 | 0.51% | ||||
| Savings and money market deposits | 5,941,929 | 50,681 | 0.85% | 5,417,014 | 30,999 | 0.57% | ||||||||
| Certificates and other time deposits | 2,314,174 | 36,725 | 1.59% | 2,101,287 | 20,313 | 0.97% | ||||||||
| Other borrowings | 971,409 | 21,323 | 2.20% | 1,189,459 | 24,241 | 2.04% | ||||||||
| Securities sold under repurchase agreements | 307,277 | 3,383 | 1.10% | 300,429 | 1,991 | 0.66% | ||||||||
| Subordinated notes and trust preferred | 21,991 | 1,075 | 4.89% | — | — | 0.00% | ||||||||
| Total interest-bearing liabilities | 13,474,193 | 137,169 | 1.02% | ^(Q)^ | 12,945,668 | 97,616 | 0.75% | ^(Q)^ | ||||||
| Noninterest-bearing liabilities: | ||||||||||||||
| Noninterest-bearing demand deposits | 6,006,914 | 5,650,720 | ||||||||||||
| Other liabilities | 148,079 | 88,524 | ||||||||||||
| Total liabilities | 19,629,186 | 18,684,912 | ||||||||||||
| Shareholders' equity | 4,458,521 | 3,947,833 | ||||||||||||
| Total liabilities and shareholders' equity | $ | 24,087,707 | $ | 22,632,745 | ||||||||||
| Net interest income and margin | $ | 695,769 | 3.30% | $ | 629,593 | 3.17% | ||||||||
| Non-GAAP to GAAP reconciliation: | ||||||||||||||
| Tax equivalent adjustment | 3,149 | 3,615 | ||||||||||||
| Net interest income and margin (tax equivalent basis) | $ | 698,918 | 3.32% | $ | 633,208 | 3.18% |
(O) Annualized and based on an actual 365 day basis.
(P) Yield on securities was impacted by net premium amortization of $30,779 and $31,614 for the years ended December 31, 2019 and 2018, respectively.
(Q) Total cost of funds, including noninterest bearing deposits, was 0.70% and 0.52% for the years ended December 31, 2019 and 2018, respectively.
Page 11 of 18
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | |||||||||||
| YIELD TREND ^(R)^ | |||||||||||||||
| Interest-Earning Assets: | |||||||||||||||
| Loans held for sale | 3.96 | % | 5.01 | % | 5.12 | % | 4.95 | % | 4.97 | % | |||||
| Loans held for investment | 5.52 | % | 5.05 | % | 5.08 | % | 5.09 | % | 5.02 | % | |||||
| Loans held for investment - Warehouse Purchase Program | 3.93 | % | — | — | — | — | |||||||||
| Total loans | 5.42 | % | 5.05 | % | 5.09 | % | 5.08 | % | 5.02 | % | |||||
| Investment securities ^(S)^ | 2.28 | % | 2.30 | % | 2.36 | % | 2.43 | % | 2.35 | % | |||||
| Federal funds sold and other earning assets | 0.78 | % | 1.93 | % | 1.98 | % | 2.27 | % | 1.57 | % | |||||
| Total interest-earning assets | 4.29 | % | 3.80 | % | 3.81 | % | 3.82 | % | 3.73 | % | |||||
| Interest-Bearing Liabilities: | |||||||||||||||
| Interest-bearing demand deposits | 0.54 | % | 0.62 | % | 0.63 | % | 0.67 | % | 0.57 | % | |||||
| Savings and money market deposits | 0.79 | % | 0.90 | % | 0.90 | % | 0.83 | % | 0.73 | % | |||||
| Certificates and other time deposits | 1.67 | % | 1.67 | % | 1.57 | % | 1.40 | % | 1.23 | % | |||||
| Other borrowings | 1.73 | % | 2.29 | % | 2.52 | % | 2.55 | % | 2.34 | % | |||||
| Securities sold under repurchase agreements | 0.99 | % | 1.15 | % | 1.15 | % | 1.13 | % | 0.92 | % | |||||
| Subordinated notes and trust preferred | 4.85 | % | — | — | — | — | |||||||||
| Total interest-bearing liabilities | 1.00 | % | 1.04 | % | 1.05 | % | 0.99 | % | 0.93 | % | |||||
| Net Interest Margin | 3.65 | % | 3.14 | % | 3.14 | % | 3.18 | % | 3.13 | % | |||||
| Net Interest Margin (tax equivalent) | 3.66 | % | 3.16 | % | 3.16 | % | 3.20 | % | 3.15 | % |
(R) Annualized and based on average balances on an actual 365 day basis.
(S) Yield on securities was impacted by net premium amortization of $8,556, $8,027, $7,607, $6,589 and $7,338 for the three-month periods ended December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018, respectively.
Page 12 of 18
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | |||||||||||
| Balance Sheet Averages | |||||||||||||||
| Loans held for sale | $ | 57,171 | $ | 21,077 | $ | 24,787 | $ | 24,993 | $ | 28,407 | |||||
| Loans held for investment | 15,261,163 | 10,589,272 | 10,495,638 | 10,367,242 | 10,291,189 | ||||||||||
| Loans held for investment - Warehouse Purchase Program | 996,903 | — | — | — | — | ||||||||||
| Total Loans | 16,315,237 | 10,610,349 | 10,520,425 | 10,392,235 | 10,319,596 | ||||||||||
| Investment securities | 8,598,736 | 8,758,056 | 9,185,877 | 9,299,963 | 9,499,166 | ||||||||||
| Federal funds sold and other earning assets | 305,596 | 74,751 | 64,335 | 71,842 | 100,339 | ||||||||||
| Total interest-earning assets | 25,219,569 | 19,443,156 | 19,770,637 | 19,764,040 | 19,919,101 | ||||||||||
| Allowance for credit losses | (86,795 | ) | (86,996 | ) | (86,158 | ) | (86,507 | ) | (86,464 | ) | |||||
| Cash and due from banks | 275,072 | 230,986 | 227,653 | 266,316 | 252,481 | ||||||||||
| Goodwill | 2,658,133 | 1,900,845 | 1,900,845 | 1,900,845 | 1,900,845 | ||||||||||
| Core deposit intangibles, net | 28,912 | 29,682 | 30,933 | 32,243 | 33,580 | ||||||||||
| Other real estate | 4,864 | 997 | 2,053 | 2,100 | 1,325 | ||||||||||
| Fixed assets, net | 308,692 | 263,495 | 260,054 | 257,811 | 257,726 | ||||||||||
| Other assets | 654,978 | 423,931 | 420,940 | 404,724 | 415,412 | ||||||||||
| Total assets | $ | 29,063,425 | $ | 22,206,096 | $ | 22,526,957 | $ | 22,541,572 | $ | 22,694,006 | |||||
| Noninterest-bearing deposits | $ | 7,066,878 | $ | 5,701,419 | $ | 5,674,615 | $ | 5,557,821 | $ | 5,785,882 | |||||
| Interest-bearing demand deposits | 4,233,880 | 3,575,249 | 3,714,968 | 4,148,377 | 3,720,133 | ||||||||||
| Savings and money market deposits | 7,109,754 | 5,524,277 | 5,647,494 | 5,472,789 | 5,382,699 | ||||||||||
| Certificates and other time deposits | 3,044,843 | 2,083,803 | 2,057,033 | 2,062,753 | 2,087,871 | ||||||||||
| Total deposits | 21,455,355 | 16,884,748 | 17,094,110 | 17,241,740 | 16,976,585 | ||||||||||
| Other borrowings | 1,403,686 | 749,814 | 883,557 | 844,873 | 1,297,917 | ||||||||||
| Securities sold under repurchase agreements | 351,580 | 315,277 | 288,666 | 272,630 | 285,984 | ||||||||||
| Subordinated notes and trust preferred | 87,963 | — | — | — | — | ||||||||||
| Other liabilities | 320,855 | 111,526 | 108,246 | 86,868 | 95,124 | ||||||||||
| Shareholders' equity | 5,443,986 | 4,144,731 | 4,152,378 | 4,095,461 | 4,038,396 | ||||||||||
| Total liabilities and equity | $ | 29,063,425 | $ | 22,206,096 | $ | 22,526,957 | $ | 22,541,572 | $ | 22,694,006 |
Page 13 of 18
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Period End Balances | |||||||||||||||||||||||||
| Loan Portfolio | |||||||||||||||||||||||||
| Commercial and industrial | $ | 2,507,318 | 13.3 | % | $ | 1,120,913 | 10.5 | % | $ | 1,158,657 | 10.9 | % | $ | 1,117,753 | 10.7 | % | $ | 1,111,089 | 10.7 | % | |||||
| Warehouse purchase program | 1,552,762 | 8.2 | % | — | — | — | — | — | — | — | — | ||||||||||||||
| Construction, land development and other land loans | 2,064,167 | 11.0 | % | 1,764,648 | 16.5 | % | 1,739,308 | 16.4 | % | 1,709,283 | 16.4 | % | 1,622,289 | 15.7 | % | ||||||||||
| 1-4 family residential | 3,880,382 | 20.6 | % | 2,472,907 | 23.2 | % | 2,456,506 | 23.2 | % | 2,444,434 | 23.5 | % | 2,438,949 | 23.5 | % | ||||||||||
| Home equity | 507,029 | 2.6 | % | 250,775 | 2.3 | % | 256,772 | 2.4 | % | 262,276 | 2.5 | % | 267,960 | 2.6 | % | ||||||||||
| Commercial real estate (includes multi-family residential) | 6,556,285 | 34.9 | % | 3,652,176 | 34.3 | % | 3,551,668 | 33.6 | % | 3,496,688 | 33.6 | % | 3,538,557 | 34.1 | % | ||||||||||
| Agriculture (includes farmland) | 680,855 | 3.6 | % | 729,585 | 6.8 | % | 736,470 | 7.0 | % | 708,348 | 6.8 | % | 729,501 | 7.0 | % | ||||||||||
| Consumer and other | 398,271 | 2.1 | % | 342,839 | 3.2 | % | 321,023 | 3.0 | % | 294,405 | 2.8 | % | 289,486 | 2.8 | % | ||||||||||
| Energy | 698,277 | 3.7 | % | 339,502 | 3.2 | % | 366,971 | 3.5 | % | 380,835 | 3.7 | % | 372,482 | 3.6 | % | ||||||||||
| Total loans | $ | 18,845,346 | $ | 10,673,345 | $ | 10,587,375 | $ | 10,414,022 | $ | 10,370,313 | |||||||||||||||
| Deposit Types | |||||||||||||||||||||||||
| Noninterest-bearing DDA | $ | 7,763,894 | 32.1 | % | $ | 5,784,002 | 34.2 | % | $ | 5,691,236 | 33.7 | % | $ | 5,673,707 | 33.0 | % | $ | 5,666,115 | 32.8 | % | |||||
| Interest-bearing DDA | 5,100,938 | 21.1 | % | 3,564,419 | 21.0 | % | 3,530,581 | 20.9 | % | 3,875,109 | 22.5 | % | 4,124,412 | 23.9 | % | ||||||||||
| Money market | 5,099,024 | 21.1 | % | 3,457,728 | 20.4 | % | 3,438,164 | 20.3 | % | 3,302,445 | 19.2 | % | 3,115,531 | 18.1 | % | ||||||||||
| Savings | 2,756,297 | 11.3 | % | 2,027,621 | 12.0 | % | 2,158,159 | 12.8 | % | 2,293,134 | 13.3 | % | 2,271,170 | 13.2 | % | ||||||||||
| Certificates and other time deposits | 3,479,579 | 14.4 | % | 2,096,150 | 12.4 | % | 2,069,489 | 12.3 | % | 2,053,375 | 12.0 | % | 2,079,330 | 12.0 | % | ||||||||||
| Total deposits | $ | 24,199,732 | $ | 16,929,920 | $ | 16,887,629 | $ | 17,197,770 | $ | 17,256,558 | |||||||||||||||
| Loan to Deposit Ratio | 77.9 | % | 63.0 | % | 62.7 | % | 60.6 | % | 60.1 | % |
Page 14 of 18
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
Construction Loans
| Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Single family residential construction | $ | 614,647 | 29.7 | % | $ | 462,714 | 26.2 | % | $ | 446,868 | 25.7 | % | $ | 454,041 | 26.5 | % | $ | 441,487 | 27.2 | % | |||||
| Land development | 88,529 | 4.3 | % | 80,711 | 4.6 | % | 87,825 | 5.0 | % | 84,562 | 4.9 | % | 89,226 | 5.5 | % | ||||||||||
| Raw land | 233,559 | 11.3 | % | 171,609 | 9.7 | % | 168,531 | 9.7 | % | 156,674 | 9.2 | % | 152,516 | 9.4 | % | ||||||||||
| Residential lots | 138,961 | 6.7 | % | 123,265 | 7.0 | % | 121,586 | 7.0 | % | 119,301 | 7.0 | % | 124,429 | 7.6 | % | ||||||||||
| Commercial lots | 101,960 | 4.9 | % | 102,084 | 5.8 | % | 105,633 | 6.1 | % | 92,683 | 5.4 | % | 92,234 | 5.7 | % | ||||||||||
| Commercial construction and other | 890,597 | 43.1 | % | 825,001 | 46.7 | % | 809,680 | 46.5 | % | 802,996 | 47.0 | % | 723,740 | 44.6 | % | ||||||||||
| Net unaccreted discount | (4,086 | ) | (736 | ) | (815 | ) | (974 | ) | (1,343 | ) | |||||||||||||||
| Total construction loans | $ | 2,064,167 | $ | 1,764,648 | $ | 1,739,308 | $ | 1,709,283 | $ | 1,622,289 |
Non-Owner Occupied Commercial Real Estate Loans by Metropolitan Statistical Area (MSA) as of December 31, 2019
| Houston | Dallas | Austin | OK City | Tulsa | Other ^(T)^ | Total | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Collateral Type | |||||||||||||||
| Shopping center/retail | $ | 338,206 | $ | 285,964 | $ | 41,409 | $ | 16,430 | $ | 32,278 | $ | 283,604 | $ | 997,891 | |
| Commercial and industrial buildings | 148,712 | 81,904 | 13,567 | 12,239 | 19,402 | 172,120 | 447,944 | ||||||||
| Office buildings | 205,845 | 687,145 | 30,731 | 43,229 | 5,983 | 85,333 | 1,058,266 | ||||||||
| Medical buildings | 51,298 | 51,952 | 12,917 | 5,560 | 26,045 | 51,681 | 199,453 | ||||||||
| Apartment buildings | 335,635 | 722,153 | 35,915 | 10,846 | 42,351 | 232,955 | 1,379,855 | ||||||||
| Hotel | 60,519 | 85,912 | 26,172 | 30,318 | — | 135,753 | 338,674 | ||||||||
| Other | 58,735 | 29,892 | 18,748 | 10,811 | 4,555 | 106,120 | 228,861 | ||||||||
| Total | $ | 1,198,950 | $ | 1,944,922 | $ | 179,459 | $ | 129,433 | $ | 130,614 | $ | 1,067,566 | $ | 4,650,944 | ^(U)^ |
Acquired Loans
| Acquired Loans Accounted for<br><br><br>Under ASC 310-20 | Acquired Loans Accounted for<br><br><br>Under ASC 310-30 | Total Loans Accounted for<br><br><br>Under ASC 310-20 and 310-30 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at<br><br><br>Acquisition<br><br><br>Date | Balance at<br><br><br>Sep 30, 2019 | Balance at<br><br><br>Dec 31, 2019 | Balance at<br><br><br>Acquisition<br><br><br>Date | Balance at<br><br><br>Sep 30, 2019 | Balance at<br><br><br>Dec 31, 2019 | Balance at<br><br><br>Acquisition<br><br><br>Date | Balance at<br><br><br>Sep 30, 2019 | Balance at<br><br><br>Dec 31, 2019 | |||||||||||
| Loan marks: | |||||||||||||||||||
| Acquired banks ^(V^^)^ | $ | 229,080 | $ | 11,473 | $ | 10,115 | $ | 142,128 | $ | 1,888 | $ | 1,562 | $ | 371,208 | $ | 13,361 | $ | 11,677 | |
| LegacyTexas merger^(W^^)^ | 116,519 | — | 100,015 | 177,924 | — | 165,758 | 294,443 | — | 265,773 | ||||||||||
| Total | 345,599 | 11,473 | 110,130 | 320,052 | 1,888 | 167,320 | 665,651 | ^^ | 13,361 | 277,450 | |||||||||
| Acquired portfolio loan balances: | |||||||||||||||||||
| Acquired banks ^(V^^)^ | 5,690,998 | 431,319 | 379,729 | 275,221 | 9,630 | 7,889 | 5,966,219 | ^^ | 440,949 | 387,618 | |||||||||
| LegacyTexas merger^(W^^)^ | 6,595,161 | — | 6,191,083 | 414,352 | — | 402,896 | 7,009,513 | ^^ | — | 6,593,979 | |||||||||
| Total | 12,286,159 | 431,319 | 6,570,812 | 689,573 | 9,630 | 410,785 | 12,975,732 | ^(X^^)^ | 440,949 | 6,981,597 | |||||||||
| Acquired portfolio loan balances less loan marks | $ | 11,940,560 | $ | 419,846 | $ | 6,460,682 | $ | 369,521 | $ | 7,742 | $ | 243,465 | $ | 12,310,081 | $ | 427,588 | $ | 6,704,147 |
(T) Includes other MSA and non-MSA regions.
(U) Represents a portion of total commercial real estate loans of $6.556 billion as of December 31, 2019.
(V) Includes Bank of Texas, Bank Arlington, American State Bank, Community National Bank, First Federal Bank Texas, Coppermark Bank, First Victoria National Bank, The F&M Bank & Trust Company and Tradition Bank.
(W) LegacyTexas merger was completed on November 1, 2019. During the fourth quarter of 2019, LegacyTexas added $7.010 billion in loans with related purchase accounting adjustments of $294.443 million at acquisition date.
(X) Actual principal balances acquired.
Page 15 of 18
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Three Months Ended | Year-to-Date | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Dec 31, 2019 | Dec 31, 2018 | |||||||||||||||
| Asset Quality | |||||||||||||||||||||
| Nonaccrual loans | $ | 55,243 | $ | 49,973 | $ | 37,289 | $ | 37,491 | $ | 13,147 | $ | 55,243 | $ | 13,147 | |||||||
| Accruing loans 90 or more days past due | 441 | 341 | 1,594 | 647 | 4,004 | 441 | 4,004 | ||||||||||||||
| Total nonperforming loans | 55,684 | 50,314 | 38,883 | 38,138 | 17,151 | 55,684 | 17,151 | ||||||||||||||
| Repossessed assets | 324 | 28 | 670 | 649 | — | 324 | — | ||||||||||||||
| Other real estate | 6,935 | 815 | 2,005 | 2,096 | 1,805 | 6,935 | 1,805 | ||||||||||||||
| Total nonperforming assets | $ | 62,943 | $ | 51,157 | $ | 41,558 | $ | 40,883 | $ | 18,956 | $ | 62,943 | $ | 18,956 | |||||||
| Nonperforming assets: | |||||||||||||||||||||
| Commercial and industrial (includes energy) | $ | 17,086 | $ | 15,974 | $ | 17,592 | $ | 17,119 | $ | 4,435 | $ | 17,086 | $ | 4,435 | |||||||
| Construction, land development and other land loans | 1,177 | 874 | 2,296 | 1,488 | 3,100 | 1,177 | 3,100 | ||||||||||||||
| 1-4 family residential (includes home equity) | 26,453 | 19,600 | 16,641 | 17,508 | 8,135 | 26,453 | 8,135 | ||||||||||||||
| Commercial real estate (includes multi-family residential) | 18,031 | 14,384 | 4,352 | 4,166 | 2,982 | 18,031 | 2,982 | ||||||||||||||
| Agriculture (includes farmland) | 101 | 285 | 616 | 542 | 256 | 101 | 256 | ||||||||||||||
| Consumer and other | 95 | 40 | 61 | 60 | 48 | 95 | 48 | ||||||||||||||
| Total | $ | 62,943 | $ | 51,157 | $ | 41,558 | $ | 40,883 | $ | 18,956 | $ | 62,943 | $ | 18,956 | |||||||
| Number of loans/properties | 236 | 89 | 92 | 84 | 83 | 236 | 83 | ||||||||||||||
| Allowance for credit losses at end of period | $ | 87,469 | $ | 87,061 | $ | 87,006 | $ | 86,091 | $ | 86,440 | $ | 87,469 | $ | 86,440 | |||||||
| Net charge-offs (recoveries): | |||||||||||||||||||||
| Commercial and industrial (includes energy) | $ | 76 | $ | (83 | ) | $ | (828 | ) | $ | 1,719 | $ | (685 | ) | $ | 884 | $ | 9,035 | ||||
| Construction, land development and other land loans | (6 | ) | (6 | ) | 7 | — | 97 | (5 | ) | 218 | |||||||||||
| 1-4 family residential (includes home equity) | 20 | (9 | ) | 11 | (3 | ) | 42 | 19 | 424 | ||||||||||||
| Commercial real estate (includes multi-family residential) | 254 | (1 | ) | (1 | ) | (1 | ) | 34 | 251 | 1,512 | |||||||||||
| Agriculture (includes farmland) | (18 | ) | 278 | 46 | (1,278 | ) | (54 | ) | (972 | ) | (273 | ) | |||||||||
| Consumer and other | 965 | 867 | 650 | 612 | 1,122 | 3,094 | 3,035 | ||||||||||||||
| Total | $ | 1,291 | $ | 1,046 | $ | (115 | ) | $ | 1,049 | $ | 556 | $ | 3,271 | $ | 13,951 | ||||||
| Asset Quality Ratios | |||||||||||||||||||||
| Nonperforming assets to average interest-earning assets | 0.25 | % | 0.26 | % | 0.21 | % | 0.21 | % | 0.10 | % | 0.30 | % | 0.10 | % | |||||||
| Nonperforming assets to loans and other real estate | 0.33 | % | 0.48 | % | 0.39 | % | 0.39 | % | 0.18 | % | 0.33 | % | 0.18 | % | |||||||
| Net charge-offs to average loans (annualized) | 0.03 | % | 0.04 | % | — | 0.04 | % | 0.02 | % | 0.03 | % | 0.14 | % | ||||||||
| Allowance for credit losses to total loans | 0.46 | % | 0.82 | % | 0.82 | % | 0.83 | % | 0.83 | % | 0.46 | % | 0.83 | % | |||||||
| Allowance for credit losses to total loans, excluding Warehouse Purchase Program loans | 0.51 | % | 0.82 | % | 0.82 | % | 0.83 | % | 0.83 | % | 0.51 | % | 0.83 | % | |||||||
| Allowance for credit losses to total loans (excluding acquired loans accounted for under ASC Topics 310-20 and 310-30 and Warehouse Purchase Program loans) ^(G)^ | 0.83 | % | 0.85 | % | 0.86 | % | 0.87 | % | 0.88 | % | 0.83 | % | 0.88 | % |
Page 16 of 18
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, tangible book value per share, return on average tangible common equity, the tangible equity to tangible assets ratio and the efficiency ratio, excluding net gains and losses on the sale 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 to total loans (excluding acquired loans accounted for under ASC Topics 310-20 and 310-30 and Warehouse Purchase Program 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, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Dec 31, 2019 | Dec 31, 2018 | |||||||||||||||
| Reconciliation of diluted earnings per share to diluted earnings per share, excluding merger related expenses: | |||||||||||||||||||||
| Net income | $ | 86,134 | $ | 81,758 | $ | 82,258 | $ | 82,402 | $ | 83,331 | $ | 332,552 | $ | 321,812 | |||||||
| Add: merger related expenses, net of tax^(Y)^ | 36,658 | — | — | — | — | 36,658 | — | ||||||||||||||
| Net income, excluding merger related expenses, net of tax^(Y)^ | $ | 122,792 | $ | 81,758 | $ | 82,258 | $ | 82,402 | $ | 83,331 | $ | 369,210 | $ | 321,812 | |||||||
| Weighted average diluted shares outstanding | 85,573 | 68,738 | 69,806 | 69,847 | 69,838 | 73,524 | 69,821 | ||||||||||||||
| Merger related expenses per diluted share, net of tax^(Y)^ | $ | 0.43 | — | — | — | — | $ | 0.50 | — | ||||||||||||
| Diluted earnings per share, excluding merger related expenses, net of tax^(Y)^ | $ | 1.44 | $ | 1.19 | $ | 1.18 | $ | 1.18 | $ | 1.19 | $ | 5.02 | $ | 4.61 | |||||||
| Reconciliation of return on average assets to return on average assets excluding merger related expenses, net of tax: | |||||||||||||||||||||
| Net income, excluding merger related expenses, net of tax^(Y)^ | $ | 122,792 | $ | 81,758 | $ | 82,258 | $ | 82,402 | $ | 83,331 | $ | 369,210 | $ | 321,812 | |||||||
| Average total assets | $ | 29,063,425 | $ | 22,206,096 | $ | 22,526,957 | $ | 22,541,572 | $ | 22,694,006 | $ | 24,087,706 | $ | 22,632,745 | |||||||
| Return on average assets excluding merger related expenses, net of tax ^(F) (Y)^ | 1.69 | % | 1.47 | % | 1.46 | % | 1.46 | % | 1.47 | % | 1.53 | % | 1.42 | % | |||||||
| Reconciliation of return on average common equity to return on average common equity excluding merger related expenses, net of tax: | |||||||||||||||||||||
| Net income, excluding merger related expenses, net of tax^(Y)^ | $ | 122,792 | $ | 81,758 | $ | 82,258 | $ | 82,402 | $ | 83,331 | $ | 369,210 | $ | 321,812 | |||||||
| Average shareholders' equity | $ | 5,443,986 | $ | 4,144,731 | $ | 4,152,378 | $ | 4,095,461 | $ | 4,038,396 | $ | 4,458,521 | $ | 3,947,833 | |||||||
| Return on average common equity excluding merger related expenses, net of tax ^(F) (Y)^ | 9.02 | % | 7.89 | % | 7.92 | % | 8.05 | % | 8.25 | % | 8.28 | % | 8.15 | % | |||||||
| Reconciliation of return on average common equity to return on average tangible common equity: | |||||||||||||||||||||
| Net income | $ | 86,134 | $ | 81,758 | $ | 82,258 | $ | 82,402 | $ | 83,331 | $ | 332,552 | $ | 321,812 | |||||||
| Average shareholders' equity | $ | 5,443,986 | $ | 4,144,731 | $ | 4,152,378 | $ | 4,095,461 | $ | 4,038,396 | $ | 4,458,521 | $ | 3,947,833 | |||||||
| Less: Average goodwill and other intangible assets | (2,687,045 | ) | (1,930,527 | ) | (1,931,778 | ) | (1,933,088 | ) | (1,934,425 | ) | (2,122,154 | ) | (1,936,639 | ) | |||||||
| Average tangible shareholders’ equity | $ | 2,756,941 | $ | 2,214,204 | $ | 2,220,600 | $ | 2,162,373 | $ | 2,103,971 | $ | 2,336,367 | $ | 2,011,194 | |||||||
| Return on average tangible common equity ^(F)^ | 12.50 | % | 14.77 | % | 14.82 | % | 15.24 | % | 15.84 | % | 14.23 | % | 16.00 | % | |||||||
| Reconciliation of return on average common equity to return on average tangible common equity excluding merger related expenses, net of tax: | |||||||||||||||||||||
| Net income excluding merger related expenses, net of tax^(Y)^ | $ | 122,792 | $ | 81,758 | $ | 82,258 | $ | 82,402 | $ | 83,331 | $ | 369,210 | $ | 321,812 | |||||||
| Average shareholders' equity | $ | 5,443,986 | $ | 4,144,731 | $ | 4,152,378 | $ | 4,095,461 | $ | 4,038,396 | $ | 4,458,521 | $ | 3,947,833 | |||||||
| Less: Average goodwill and other intangible assets | (2,687,045 | ) | (1,930,527 | ) | (1,931,778 | ) | (1,933,088 | ) | (1,934,425 | ) | (2,122,154 | ) | (1,936,639 | ) | |||||||
| Average tangible shareholders’ equity | $ | 2,756,941 | $ | 2,214,204 | $ | 2,220,600 | $ | 2,162,373 | $ | 2,103,971 | $ | 2,336,367 | $ | 2,011,194 | |||||||
| Return on average tangible common equity excluding merger related expenses, net of tax ^(F) (Y)^ | 17.82 | % | 14.77 | % | 14.82 | % | 15.24 | % | 15.84 | % | 15.80 | % | 16.00 | % |
(Y) Calculated assuming a federal tax rate of 21.0%.
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| Three Months Ended | Year-to-Date | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Dec 31, 2019 | Dec 31, 2018 | |||||||||||||||
| Reconciliation of book value per share to tangible book value per share: | |||||||||||||||||||||
| Shareholders’ equity | $ | 5,970,835 | $ | 4,126,806 | $ | 4,127,895 | $ | 4,109,790 | $ | 4,052,824 | $ | 5,970,835 | $ | 4,052,824 | |||||||
| Less: Goodwill and other intangible assets | (3,310,075 | ) | (1,929,896 | ) | (1,931,144 | ) | (1,932,409 | ) | (1,933,728 | ) | (3,310,075 | ) | (1,933,728 | ) | |||||||
| Tangible shareholders’ equity | $ | 2,660,760 | $ | 2,196,910 | $ | 2,196,751 | $ | 2,177,381 | $ | 2,119,096 | $ | 2,660,760 | $ | 2,119,096 | |||||||
| Period end shares outstanding | 94,746 | 68,397 | 69,261 | 69,846 | 69,847 | 94,746 | 69,847 | ||||||||||||||
| Tangible book value per share: | $ | 28.08 | $ | 32.12 | $ | 31.72 | $ | 31.17 | $ | 30.34 | $ | 28.08 | $ | 30.34 | |||||||
| Reconciliation of equity to assets ratio to period end tangible equity to period end tangible assets ratio: | |||||||||||||||||||||
| Tangible shareholders’ equity | $ | 2,660,760 | $ | 2,196,910 | $ | 2,196,751 | $ | 2,177,381 | $ | 2,119,096 | $ | 2,660,760 | $ | 2,119,096 | |||||||
| Total assets | $ | 32,185,708 | $ | 22,092,817 | $ | 22,375,221 | $ | 22,354,241 | $ | 22,693,402 | $ | 32,185,708 | $ | 22,693,402 | |||||||
| Less: Goodwill and other intangible assets | (3,310,075 | ) | (1,929,896 | ) | (1,931,144 | ) | (1,932,409 | ) | (1,933,728 | ) | (3,310,075 | ) | (1,933,728 | ) | |||||||
| Tangible assets | $ | 28,875,633 | $ | 20,162,921 | $ | 20,444,077 | $ | 20,421,832 | $ | 20,759,674 | $ | 28,875,633 | $ | 20,759,674 | |||||||
| Period end tangible equity to period end tangible assets ratio: | 9.21 | % | 10.90 | % | 10.75 | % | 10.66 | % | 10.21 | % | 9.21 | % | 10.21 | % | |||||||
| Reconciliation of allowance for credit losses to total loans to allowance for credit losses to total loans, excluding acquired loans and Warehouse Purchase Program loans: | |||||||||||||||||||||
| Allowance for credit losses | $ | 87,469 | $ | 87,061 | $ | 87,006 | $ | 86,091 | $ | 86,440 | $ | 87,469 | $ | 86,440 | |||||||
| Total loans | $ | 18,845,346 | $ | 10,673,345 | $ | 10,587,375 | $ | 10,414,022 | $ | 10,370,313 | $ | 18,845,346 | $ | 10,370,313 | |||||||
| Less: Fair value of acquired loans (acquired portfolio loan balances less loan marks) | $ | 6,704,147 | $ | 427,588 | $ | 463,111 | $ | 485,415 | $ | 520,595 | $ | 6,704,147 | $ | 520,595 | |||||||
| Less: Warehouse Purchase Program loans | 1,552,762 | — | — | — | — | 1,552,762 | — | ||||||||||||||
| Total loans less acquired loans and Warehouse Purchase Program loans | $ | 10,588,437 | $ | 10,245,757 | $ | 10,124,264 | $ | 9,928,607 | $ | 9,849,718 | $ | 10,588,437 | $ | 9,849,718 | |||||||
| Allowance for credit losses to total loans, excluding acquired loans and Warehouse Purchase Program loans (non-GAAP basis) | 0.83 | % | 0.85 | % | 0.86 | % | 0.87 | % | 0.88 | % | 0.83 | % | 0.88 | % | |||||||
| Reconciliation of efficiency ratio to efficiency ratio, excluding net gains and losses on the sale of assets and securities: | |||||||||||||||||||||
| Noninterest expense | $ | 156,451 | $ | 80,699 | $ | 80,821 | $ | 78,571 | $ | 80,804 | $ | 396,542 | $ | 326,220 | |||||||
| Net interest income | $ | 232,030 | $ | 153,990 | $ | 154,838 | $ | 154,911 | $ | 157,248 | $ | 695,769 | $ | 629,593 | |||||||
| Noninterest income | 35,506 | 30,673 | 29,958 | 28,144 | 29,079 | 124,281 | 116,012 | ||||||||||||||
| Less: net (loss) gain on sale of assets | (1,870 | ) | (3 | ) | 2 | 58 | (715 | ) | (1,813 | ) | (755 | ) | |||||||||
| Less: net loss on sale of securities | — | — | — | — | — | — | (13 | ) | |||||||||||||
| Noninterest income excluding net gains and losses on the sale of assets and securities | 37,376 | 30,676 | 29,956 | 28,086 | 29,794 | 126,094 | 116,780 | ||||||||||||||
| Total income excluding net gains and losses on the sale of assets and securities | $ | 269,406 | $ | 184,666 | $ | 184,794 | $ | 182,997 | $ | 187,042 | $ | 821,863 | $ | 746,373 | |||||||
| Efficiency ratio, excluding net gains and losses on the sale of assets and securities | 58.07 | % | 43.70 | % | 43.74 | % | 42.94 | % | 43.20 | % | 48.25 | % | 43.71 | % | |||||||
| Reconciliation of efficiency ratio to efficiency ratio, excluding net gains and losses on the sale of assets and securities and merger related expenses: | |||||||||||||||||||||
| Noninterest expense | $ | 156,451 | $ | 80,699 | $ | 80,821 | $ | 78,571 | $ | 80,804 | $ | 396,542 | $ | 326,220 | |||||||
| Less: merger related expenses | 46,402 | — | — | — | — | 46,402 | — | ||||||||||||||
| Noninterest expense excluding merger related expenses | $ | 110,049 | $ | 80,699 | $ | 80,821 | $ | 78,571 | $ | 80,804 | $ | 350,140 | $ | 326,220 | |||||||
| Net interest income | $ | 232,030 | $ | 153,990 | $ | 154,838 | $ | 154,911 | $ | 157,248 | $ | 695,769 | $ | 629,593 | |||||||
| Noninterest income | 35,506 | 30,673 | 29,958 | 28,144 | 29,079 | 124,281 | 116,012 | ||||||||||||||
| Less: net (loss) gain on sale of assets | (1,870 | ) | (3 | ) | 2 | 58 | (715 | ) | (1,813 | ) | (755 | ) | |||||||||
| Less: net loss on sale of securities | — | — | — | — | — | — | (13 | ) | |||||||||||||
| Noninterest income excluding net gains and losses on the sale of assets and securities | 37,376 | 30,676 | 29,956 | 28,086 | 29,794 | 126,094 | 116,780 | ||||||||||||||
| Total income excluding net gains and losses on the sale of assets and securities | $ | 269,406 | $ | 184,666 | $ | 184,794 | $ | 182,997 | $ | 187,042 | $ | 821,863 | $ | 746,373 | |||||||
| Efficiency ratio, excluding net gains and losses on the sale of assets and securities and merger related expenses | 40.85 | % | 43.70 | % | 43.74 | % | 42.94 | % | 43.20 | % | 42.60 | % | 43.71 | % |
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