8-K
Prosperity Bancshares Inc (PB)
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 27, 2021
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 27, 2021, Prosperity Bancshares, Inc. publicly disseminated a press release announcing its financial results for the fourth quarter ended December 31, 2020. 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 27, 2021. |
| 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 27, 2021 | 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
2020 EARNINGS
| • | Fourth quarter earnings per share (diluted) of $1.48, an increase of 46.5% compared to the fourth quarter 2019 |
|---|---|
| • | Fourth quarter net income of $137.1 million |
| --- | --- |
| • | Deposits increased $901.3 million or 3.4% (13.6% annualized) during the fourth quarter 2020 |
| --- | --- |
| • | Deposits increased $3.161 billion or 13.1% during 2020 |
| --- | --- |
| • | Allowance for credit losses to total loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, of 1.92%^(1)^ |
| --- | --- |
| • | Nonperforming assets remain low at 0.20% of fourth quarter average interest-earning assets |
| --- | --- |
| • | Return (annualized) on fourth quarter average assets of 1.63% |
| --- | --- |
| • | Returns (annualized) on fourth quarter average common equity of 8.98% and average tangible common equity of 19.57%^(1)^ |
| --- | --- |
| • | Fourth quarter efficiency ratio of 40.77%^(1)^ |
| --- | --- |
HOUSTON, January 27, 2021. Prosperity Bancshares, Inc.^®^ (NYSE: PB), the parent company of Prosperity Bank^®^ (collectively, “Prosperity”), reported net income for the quarter ended December 31, 2020 of $137.1 million compared with $86.1 million for the same period in 2019. Net income per diluted common share was $1.48 compared with $1.01 for the same period in 2019, which is net of merger related expenses of $0.43^(1)^ per diluted common share. Excluding merger related expenses, the earnings per diluted common share was $1.44^(1)^ for the fourth quarter 2019. Additionally, deposits increased $901.3 million or 3.4% (13.6% annualized) during the fourth quarter 2020 and nonperforming assets remain low at 0.20% of fourth quarter average interest-earning assets with an annualized return on fourth quarter average assets of 1.63%. On November 1, 2019, LegacyTexas Financial Group, Inc. (“LegacyTexas”) merged with Prosperity Bancshares and LegacyTexas Bank merged with Prosperity Bank (collectively, the “Merger”).
“Prosperity Bancshares reported some of the best results in our history, with net income of $137.1 million for the fourth quarter of 2020 and $528.9 million for the full year. Much of the success is attributed to the dedicated associates of Prosperity and LegacyTexas who helped make our combination with LegacyTexas successful. Also, during 2020 we had organic deposit growth of $3.161 billion, a 13.1% increase. Asset quality continued to improve with nonperforming assets at 0.20% of fourth quarter average earning assets. We ended the year with $59.6 million in nonperforming assets compared with $69.5 million at September 30, 2020, a 14.3% decrease,” said David Zalman, Prosperity’s Senior Chairman and Chief Executive Officer.
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| (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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“Texas and Oklahoma continue to benefit from a pro-business attitude. Companies continue to move to Texas, with HP and Oracle announcing a headquarters move and other companies, such as Tesla, announcing a major expansion into Texas. The Federal Reserve Bank of Dallas has projected a nationwide 5% GDP growth by year-end 2021 and an unemployment rate of 4.5%, noting that the first half of the year will be slower, with an expected increase in the second half of the year. We believe Texas will have a higher growth rate and outperform other states over the next several years,” continued Zalman.
“We expect that we will face several challenges over the next few years, such as higher tax rates that will affect income and continued low interest rates that will affect our net interest margin. However, a steeper yield curve could help to mitigate both issues,” added Zalman.
“Again, I would like to thank all our customers, shareholders and associates for their dedication and support of our company,” concluded Zalman.
Results of Operations for the Three Months Ended December 31, 2020
Net income was $137.1 million^(2)^ for the three months ended December 31, 2020 compared with $86.1 million^(3)^ for the same period in 2019, an increase of $51.0 million or 59.2%. Net income per diluted common share was $1.48 for the three months ended December 31, 2020 compared with $1.01 for the same period in 2019, an increase of 46.5%. Net income for the fourth quarter of 2019 included $46.4 million of merger related expenses, or $0.43^(1)^ per diluted common share. Net income was $137.1 million^(2)^ for the three months ended December 31, 2020 compared with $130.1 million^(4)^ for the three months ended September 30, 2020, an increase of $7.0 million or 5.4%. Net income per diluted common share was $1.48 for the three months ended December 31, 2020 compared with $1.40 for the three months ended September 30, 2020, an increase of 5.7%. Net income for the fourth quarter of 2020 had no provision for credit losses, reflected a $3.3 million decrease in interest expense and a $6.5 million decrease in loan discount accretion compared to the net income for the third quarter of 2020. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended December 31, 2020 were 1.63%, 8.98% and 19.57%^(1)^, respectively. Prosperity’s efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 40.77%^(1)^ for the three months ended December 31, 2020.
Net interest income before provision for credit losses for the three months ended December 31, 2020 was $257.6 million compared with $232.0 million for the same period in 2019, an increase of $25.6 million or 11.0%. The increase was primarily due to an increase in the average balance of interest-earning assets, a decrease in the average rate on interest-bearing liabilities and three months of combined bank earnings in the fourth quarter of 2020 compared to only two months in the fourth quarter of 2019 following the Merger, partially offset by decreases in interest income on securities and loan discount accretion of $7.7 million. On a linked quarter basis, net interest income before provision for credit losses was $257.6 million compared with $258.1 million for the three months ended September 30, 2020, a decrease of $479 thousand or 0.2%.
The net interest margin on a tax equivalent basis was 3.49% for the three months ended December 31, 2020 compared with 3.66% for the same period in 2019. The change was primarily due to an increase in lower yielding Warehouse Purchase Program and Paycheck Protection Program (“PPP”) loans, a $7.7 million decrease in loan discount accretion and higher cash balances due to excess liquidity, 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 3.49% for the three months ended December 31, 2020 compared with 3.57% for the three months ended September 30, 2020. This change was primarily due to a $6.5 million decrease in loan discount accretion, higher net premium amortization on securities and higher cash balances due to excess liquidity, partially offset by higher PPP loan fee income during the fourth quarter.
Noninterest income was $36.5 million for the three months ended December 31, 2020 compared with $35.5 million for the same period in 2019, an increase of $1.0 million or 2.9%. This increase was primarily due to an increase in mortgage income and lower loss on write-down of assets, partially offset by a decrease in nonsufficient funds (“NSF”) fees. On a linked quarter basis, noninterest income increased $1.6 million or 4.6% to $36.5 million compared with $34.9 million for the three months ended September 30, 2020. This increase was primarily due to increases in mortgage income and NSF fees.
Noninterest expense was $120.2 million for the three months ended December 31, 2020 compared with $156.5 million for the same period in 2019, a decrease of $36.2 million or 23.2%, primarily due to the $46.4 million of merger related expenses recorded during
______________
| (2) | 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. |
|---|---|
| (3) | Includes purchase accounting adjustments of $20.0 million, net of tax, primarily comprised of loan discount accretion of $23.7 million, and merger related expenses of $46.4 million for the three months ended December 31, 2019. |
| --- | --- |
| (4) | Includes purchase accounting adjustments of $18.7 million, net of tax, primarily comprised of loan discount accretion of $22.5 million for the three months ended September 30, 2020. |
| --- | --- |
| (5) | 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 a tax benefit for NOL of $20.1 million for the year ended December 31, 2020. |
| --- | --- |
| (6) | Includes purchase accounting adjustments of $22.9 million, net of tax, primarily comprised of loan discount accretion of $28.0 million, and merger related expenses of $46.4 million for the year ended December 31, 2019. |
| --- | --- |
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the fourth quarter of 2019, partially offset by higher salaries and benefits expense in the fourth quarter of 2020 due to three months of salaries and benefits compared to two months in the fourth quarter of 2019 resulting from the Merger. On a linked quarter basis, noninterest expense increased $2.3 million or 1.9% to $120.2 million compared with $117.9 million for the three months ended September 30, 2020. The increase was primarily due to an increase in salaries and benefits.
Results of Operations for the Year Ended December 31, 2020
Net income was $528.9 million^(^^5^^)^ for the year ended December 31, 2020 compared with $332.6 million^(^^6^^)^ for the prior year, an increase of $196.4 million or 59.0%. Net income per diluted common share was $5.68 for the year ended December 31, 2020 compared with $4.52 for the prior year, an increase of 25.7%. The increase in net income and earnings per diluted common share for the year ended December 31, 2020 was primarily due to the Merger, a $38.4 million decrease in merger related expenses and a tax benefit for net operating losses (“NOL”) of $20.1 million. Annualized returns on average assets, average common equity and average tangible common equity for the year ended December 31, 2020 were 1.62%, 8.85% and 19.83%^(1)^, respectively. Excluding merger related expenses, net of tax, and the NOL tax benefit, annualized returns on average assets, average common equity and average tangible common equity for the year ended December 31, 2020 were 1.58%^(1)^, 8.62%^(1)^ and 19.31%^(1)^, respectively. Prosperity’s efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 42.58%^(1)^ for the year ended December 31, 2020. Excluding merger related expenses (and net gains and losses on the sale or write down of assets and taxes) the efficiency ratio was 41.89%^(1)^ for the year ended December 31, 2020.
Net interest income before provision for credit losses for the year ended December 31, 2020 was $1.031 billion compared with $695.8 million for the prior year, an increase of $335.0 million or 48.1%. This change was primarily due to the Merger and the increase in loan discount accretion of $63.3 million.
The net interest margin on a tax equivalent basis for the year ended December 31, 2020 was 3.64% compared with 3.32% for the prior year. This change was primarily due to increased interest-earning assets due to the Merger and the increase in loan discount accretion of $63.3 million.
Noninterest income was $131.5 million for the year ended December 31, 2020 compared with $124.3 million for the prior year, an increase of $7.3 million or 5.8%. This increase was primarily due to increases in mortgage income, credit card, debit card and ATM card income and service charges on deposit accounts, all primarily due to the Merger, partially offset by a higher net loss on write-down of assets of $3.7 million and decrease in NSF fees.
Noninterest expense was $497.2 million for the year ended December 31, 2020 compared with $396.5 million for the prior year, an increase of $100.7 million or 25.4%. The change was primarily due to increases in salaries and benefits, credit and debit card, data processing and software amortization, net occupancy and equipment and other noninterest expense, all primarily due to the Merger, partially offset by a $38.4 million decrease in merger related expenses.
Balance Sheet Information
At December 31, 2020, Prosperity had $34.059 billion in total assets, an increase of $1.874 billion or 5.8% compared with $32.186 billion at December 31, 2019.
Loans at December 31, 2020 were $20.247 billion, an increase of $1.402 billion or 7.4%, compared with $18.845 billion at December 31, 2019. Linked quarter loans decreased $548.7 million or 2.6% from $20.796 billion at September 30, 2020, primarily due to a $430.6 million decrease in PPP loans. At December 31, 2020, the Company had $963.2 million of PPP loans.
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, 2020, oil and gas loans totaled $512.7 million (net of discount and excluding PPP loans totaling $88.7 million) or 2.5% of total loans, of which $285.8 million were production loans and $226.9 million were servicing loans, compared with total oil and gas loans of $698.3 million (net of discount) or 3.7% of total loans at December 31, 2019, of which $401.5 million were production loans and $296.8 million were servicing loans. In addition, as of December 31, 2020, Prosperity had total unfunded commitments to oil and gas companies of $243.2 million compared with total unfunded commitments to oil and gas companies of $342.2 million as of December 31, 2019. 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, 2020, loans to hotels totaled $393.8 million (excluding PPP loans totaling $6.5 million) or 1.9% of total loans and loans to restaurants totaled $214.7 million (excluding PPP loans totaling $83.6 million) or 1.1% of total loans.
Deposits at December 31, 2020 were $27.360 billion, an increase of $3.161 billion or 13.1%, compared with $24.200 billion at December 31, 2019. Linked quarter deposits increased $901.3 million or 3.4% from $26.459 billion at September 30, 2020.
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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, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | ||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||
| Loans acquired (including new production since acquisition date): | ||||||||||
| LegacyTexas: | ||||||||||
| Loans held for sale ^(1)^ | $ | — | $ | — | $ | 15,725 | $ | 54,229 | $ | 66,745 |
| Loans held for investment | 6,013,305 | 6,349,251 | 6,601,006 | 6,713,337 | 6,636,855 | |||||
| Loans held for investment - Warehouse Purchase Program | 2,842,379 | 2,730,614 | 2,557,183 | 1,713,762 | 1,552,762 | |||||
| All other loans | 11,391,260 | 11,715,776 | 11,851,259 | 10,645,867 | 10,588,984 | |||||
| Total loans | $ | 20,246,944 | $ | 20,795,641 | $ | 21,025,173 | $ | 19,127,195 | $ | 18,845,346 |
| Deposits assumed (including new deposits since acquisition date): | ||||||||||
| LegacyTexas | $ | 6,047,363 | $ | 5,977,357 | $ | 5,997,395 | $ | 5,605,986 | $ | 6,141,546 |
| All other deposits | 21,313,129 | 20,481,849 | 20,155,293 | 18,220,371 | 18,058,186 | |||||
| Total deposits | $ | 27,360,492 | $ | 26,459,206 | $ | 26,152,688 | $ | 23,826,357 | $ | 24,199,732 |
(1) The LegacyTexas mortgage business was combined with the Prosperity Bank mortgage business in the second quarter of 2020. Accordingly, all loans held for sale will be reported only for Prosperity Bank going forward and not separately tracked for LegacyTexas.
Excluding loans acquired in the Merger and new production by the acquired lending operations since November 1, 2019, loans at December 31, 2020 grew $802.3 million or 7.6% compared with December 31, 2019 and decreased $324.5 million or 2.8% compared with September 30, 2020.
Excluding deposits assumed in the Merger and new deposits generated at the acquired banking centers since November 1, 2019, deposits at December 31, 2020 grew $3.255 billion or 18.0% compared with December 31, 2019 and grew $831.3 million or 4.1% compared with September 30, 2020.
Asset Quality
Nonperforming assets totaled $59.6 million or 0.20% of quarterly average interest-earning assets at December 31, 2020, compared with $62.9 million or 0.25% of quarterly average interest-earning assets at December 31, 2019, and $69.5 million or 0.24% of quarterly average interest-earning assets at September 30, 2020.
The allowance for credit losses on loans was $316.1 million or 1.56% of total loans at December 31, 2020 compared to $323.6 million or 1.56% of total loans at September 30, 2020 and $87.5 million or 0.46% of total loans at December 31, 2019. The allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program and PPP loans, was 1.92%^(1)^ at December 31, 2020 compared with 1.94%^(1)^ at September 30, 2020 and 0.51%^(^^1^^)^ at December 31, 2019. On January 1, 2020, Prosperity adopted the measurement of current expected credit losses (“CECL”). Upon adoption of CECL, Prosperity recognized an increase in allowance for credit losses on loans of $108.7 million, of which $102.5 million was related to LegacyTexas and an increase in allowance for credit losses on off-balance sheet credit exposures of $24.4 million, of which $6.3 million was related to LegacyTexas, with a corresponding decrease in retained earnings (pre-tax). Additionally, Prosperity recognized an increase in the allowance for credit losses on loans of $131.8 million, of which $130.3 million was related to LegacyTexas, due to the reclass of purchased credit deteriorated (“PCD”) discounts as a result of adopting CECL.
There was no provision for credit losses for the three months ended December 31, 2020 compared with $1.7 million for the three months ended December 31, 2019 and $10.0 million for the three months ended September 30, 2020. The provision for credit losses was $20.0 million for the year ended December 31, 2020 compared with $4.3 million for the year ended December 31, 2019.
Net charge-offs were $7.6 million for the three months ended December 31, 2020 compared with net charge-offs of $1.3 million for the three months ended December 31, 2019 and net charge-offs of $10.6 million for the three months ended September 30, 2020. Net charge-offs for the fourth quarter of 2020 included $4.8 million related to resolved PCD loans. These PCD loans had specific reserves of $9.6 million, of which $4.8 million was allocated to the charge-offs and $4.8 million was moved to the general reserve. Further, an additional $4.8 million of specific reserves on resolved PCD loans without any related charge-offs was released to the general reserve. Net charge-offs were $31.9 million for the year ended December 31, 2020 compared with $3.3 million for the year ended
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December 31, 2019. Net charge-offs for the year ended December 31, 2020 included $25.7 million related to resolved PCD loans. These PCD loans had specific reserves of $53.8 million, of which $25.7 million was allocated to the charge-offs and $28.1 million was moved to the general reserve.
Dividend
Prosperity Bancshares declared a first quarter cash dividend of $0.49 per share to be paid on April 1, 2021 to all shareholders of record as of March 15, 2021.
Stock Repurchase Program
On January 26, 2021, Prosperity Bancshares announced a stock repurchase program under which up to 5%, or approximately 4.65 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 26, 2022, at the discretion of management. Prosperity Bancshares repurchased 4.0 thousand shares of its common stock at an average weighted price of $50.89 during the three months ended December 31, 2020 and 2.2 million shares of its common stock at an average weighted price of $52.47 per share during the year ended December 31, 2020.
Redemption of Outstanding Subordinated Notes
On November 30, 2020, $125.0 million in subordinated notes assumed in the Merger were redeemed. The redemption was funded by dividends from Prosperity Bank.
COVID-19 Pandemic
In December 2019, a novel strain of coronavirus disease (“COVID-19”) was first reported in Wuhan, Hubei Province, China. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. On March 13, 2020, the U.S. President announced a national emergency relating to the pandemic, which has since been extended. On October 7, 2020, the Governor of Texas extended the proclamation certifying that COVID-19 poses an imminent threat of disaster in the state and declaring a state of disaster for all counties in Texas and detailed the ongoing plan to open businesses and activities in Texas. On December 14, 2020, the Governor of Oklahoma extended the executive order that declared an emergency caused by the impending threat of COVID-19 to the people of Oklahoma. The Bank is considered an essential business and is closely monitoring the latest developments regarding COVID-19. The COVID-19 pandemic has resulted in significant economic uncertainties that have had, and could continue to have, an adverse impact on the Company’s operating income, financial condition and cash flows. The extent to which the COVID-19 pandemic will impact the Company’s operations and financial results during 2021 cannot be reasonably or reliably estimated at this time.
The health and safety of the Bank’s associates, customers, and communities are of utmost importance; and the Company has taken additional measures in an effort to ensure this safety, including restricting nonessential employee travel, expanding remote access availability, distancing work stations, professional cleaning of its facilities, and signs and distancing reminders for customers in the banking centers. Further, the Company remains committed to providing uninterrupted and reliable banking service and has business continuity plans and protocols in place to ensure critical operations are able to continue without disruption.
In response to the COVID-19 pandemic, on March 27, 2020 the President of the United States signed the CARES Act into law. The CARES Act provides assistance for American workers, families and small businesses. The Paycheck Protection Program (“PPP”), established by the CARES Act and implemented by the Small Business Administration (“SBA”) with support from the Department of the Treasury, provides small businesses with funds to pay payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities and are 100% guaranteed by the SBA. On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act of 2020 (“PPP Flexibility Act”), which modified the covered expense period from eight weeks to 24 weeks, extended the maturity date of the loans out to five years and gave greater flexibility to employers having difficulty hiring workers. PPP loans originated prior to June 5, 2020, have a two year term and earn interest at 1%. PPP loans originated on and after June 5, 2020, have a minimum five year term, which can be extended for up to five additional years if the lender and borrower both agree. The Consolidated Appropriations Act of 2021 (“CAA”), which was signed into law on December 27, 2020, extends certain provisions of the CARES Act, provides additional funding and contains new relief provisions. The CAA extended the PPP application period to March 31, 2021 and permits eligible companies to obtain a second PPP loan (“second draw”) under terms specified in the CAA, with a maximum amount of $2.0 million and limit of one second draw loan. Second draw PPP borrowers are eligible for loan forgiveness on the same terms as the first draw PPP borrowers, whose loans are eligible for early forgiveness by the SBA as provided by the CARES Act, the PPP Flexibility Act, the CAA and related regulations and guidance. Lenders that were permitted to approve first draw PPP loans are permitted to approve second draw loans. Additionally, the Bank is entitled to a per loan processing fee based on a tiered schedule ranging from 5% to 1% of the loan balance for the first draw PPP loans, and the CAA established pre-determined fees for processing and servicing the second draw PPP loans. In 2020, the Company obtained SBA approvals on approximately 11,900 loans totaling $1.397 billion and, as of December 31, 2020, had an outstanding balance of 8,816 loans totaling $963.2 million after remittance. The Company has also provided relief to its loan customers through loan extensions and deferrals.
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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 with a closing price of $69.02 per share plus $318.0 million in cash, made up of $308.6 million in cash and $9.4 million in cash for taxes withheld, for all outstanding shares of LegacyTexas. This resulted in goodwill of $1.331 billion as of December 31, 2020, which was subject to subsequent fair value adjustments. During the second quarter of 2020, Prosperity completed the operational conversion of LegacyTexas Bank.
Conference Call
Prosperity’s management team will host a conference call on Wednesday, January 27, 2021 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity’s fourth quarter 2020 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 9347138.
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, Webcast & Calls” from the menu on the Investor Relations link and following the instructions.
Non-GAAP Financial Measures
Prosperity’s management uses certain non-GAAP financial measures to evaluate its performance. Specifically, Prosperity reviews diluted earnings per share excluding merger related expenses, net of tax, and NOL tax benefit; return on average assets excluding merger related expenses, net of tax, and NOL tax benefit; return on average common equity excluding merger related expenses, net of tax, and NOL tax benefit; return on average tangible common equity; return on average tangible common equity excluding merger related expenses, net of tax, and NOL tax benefit; tangible book value per share; the tangible equity to tangible assets ratio; allowance for credit losses to total loans excluding Warehouse Purchase Program and PPP loans; the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities; and the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities and merger related expenses, for internal planning and forecasting purposes. Prosperity believes these non-GAAP financial measures provide information useful to investors in understanding Prosperity’s financial results and their presentation, together with the accompanying reconciliations, provides a more complete understanding of factors and trends affecting Prosperity’s business and allows investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. Further, Prosperity believes that these non-GAAP financial measures provide useful information by excluding certain items that may not be indicative of its core operating earnings and business outlook. These non-GAAP financial measures should not be considered a substitute for, nor of greater importance than, GAAP basis financial measures and results; Prosperity strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. Please refer to the “Notes to Selected Financial Data” at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures to the nearest respective GAAP financial measures.
Prosperity Bancshares, Inc. ®
As of December 31, 2020, Prosperity Bancshares, Inc.^®^ is a $34.059 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.
As of December 31, 2020, Prosperity operated 275 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 65 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.
Page 6 of 21
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 the Bank’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, 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; 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, 2019, Quarterly Report on Form 10-Q for the period ended September 30, 2020, and other reports and statements Prosperity Bancshares has filed with the Securities and Exchange Commission (“SEC”). Copies of the SEC filings for Prosperity Bancshares may be downloaded from the Internet at no charge from http://www.prosperitybankusa.com.
Page 7 of 21
| Bryan/College Station Area | Frisco-West | Kerens | Hempstead | 98^th^ Street |
|---|---|---|---|---|
| Bryan | Garland | Longview | Hitchcock | Avenue Q |
| Bryan-29^th^ Street | Grapevine | Mount Vernon | Liberty | North University |
| Bryan-East | Grapevine Main | Palestine | Magnolia | Texas Tech Student Union |
| Bryan-North | Kiest | Rusk | Magnolia Parkway | |
| Caldwell | Lake Highlands | Seven Points | Mont Belvieu | Midland |
| College Station | McKinney | Teague | Nederland | Wadley |
| Crescent Point | McKinney Eldorado | Tyler-Beckham | Needville | Wall Street |
| Hearne | McKinney Redbud | Tyler-South Broadway | Rosenberg | |
| Huntsville | North Carrolton | Tyler-University | Shadow Creek | Odessa |
| Madisonville | Oak Cliff | Winnsboro | Spring | Grandview |
| Navasota | Park Cities | Tomball | Grant | |
| New Waverly | Plano | Houston Area | Waller | Kermit Highway |
| Rock Prairie | Plano-West | Houston | West Columbia | Parkway |
| Southwest Parkway | Preston Forest | Aldine | Wharton | |
| Tower Point | Preston Parker | Alief | Winnie | Other West Texas Area |
| Wellborn Road | Preston Royal | Bellaire | Wirt | Locations |
| Red Oak | Beltway | Big Spring | ||
| Central Texas Area | Richardson | Clear Lake | South Texas Area - | Brownfield |
| Austin | Richardson-West | Copperfield | Corpus Christi | Brownwood |
| Allandale | Rosewood Court | Cypress | Calallen | Cisco |
| Cedar Park | The Colony | Downtown | Carmel | Comanche |
| Congress | Tollroad | Eastex | Northwest | Early |
| Lakeway | Trinity Mills | Fairfield | Saratoga | Floydada |
| Liberty Hill | Turtle Creek | First Colony | Timbergate | Gorman |
| Northland | West 15th Plano | Fry Road | Water Street | Levelland |
| Oak Hill | West Allen | Gessner | Littlefield | |
| Research Blvd | Westmoreland | Gladebrook | Victoria | Merkel |
| Westlake | Wylie | Grand Parkway | Victoria Main | Plainview |
| Heights | Victoria-Navarro | San Angelo | ||
| Other Central Texas Area | Fort Worth | Highway 6 West | Victoria-North | Slaton |
| Locations | Haltom City | Little York | Victoria Salem | Snyder |
| Bastrop | Hulen | Medical Center | ||
| Canyon Lake | Keller | Memorial Drive | Other South Texas Area | Oklahoma |
| Dime Box | Museum Place | Northside | Locations | Central Oklahoma Area |
| Dripping Springs | Renaissance Square | Pasadena | Alice | Oklahoma City |
| Elgin | Roanoke | Pecan Grove | Aransas Pass | 23^rd^Street |
| Flatonia | Stockyards | Pin Oak | Beeville | Expressway |
| Georgetown | River Oaks | Colony Creek | I-240 | |
| Gruene | Other Dallas/Fort Worth Area | Sugar Land | Cuero | Memorial |
| Kingsland | Locations | SW Medical Center | Edna | |
| La Grange | Arlington | Tanglewood | Goliad | Other Central Oklahoma Area |
| Lexington | Azle | The Plaza | Gonzales | Locations |
| New Braunfels | Ennis | Uptown | Hallettsville | Edmond |
| Pleasanton | Flower Mound | Waugh Drive | Kingsville | Norman |
| Round Rock | Gainesville | Westheimer | Mathis | |
| San Antonio | Glen Rose | West University | Padre Island | Tulsa Area |
| Schulenburg | Granbury | Woodcreek | Palacios | Tulsa |
| Seguin | Grand Prairie | Port Lavaca | Garnett | |
| Smithville | Jacksboro | Katy | Portland | Harvard |
| Thorndale | Mesquite | Cinco Ranch | Rockport | Memorial |
| Weimar | Muenster | Katy-Spring Green | Sinton | Sheridan |
| Runaway Bay | Taft | S. Harvard | ||
| Dallas/Fort Worth Area | Sanger | The Woodlands | Yoakum | Utica Tower |
| Dallas | Waxahachie | The Woodlands-College Park | Yorktown | Yale |
| 14th Street Plano | Weatherford | The Woodlands-I-45 | ||
| Abrams Centre | The Woodlands-Research Forest | West Texas Area | Other Tulsa Area Locations | |
| Addison | East Texas Area | Abilene | Owasso | |
| Allen | Athens | Other Houston Area | Antilley Road | |
| Balch Springs | Blooming Grove | Locations | Barrow Street | |
| Camp Wisdom | Canton | Angleton | Cypress Street | |
| Carrollton | Carthage | Bay City | Judge Ely | |
| Cedar Hill | Corsicana | Beaumont | Mockingbird | |
| Coppell | Crockett | Cleveland | ||
| East Plano | Eustace | East Bernard | Lubbock | |
| Euless | Gilmer | El Campo | 4th Street | |
| Frisco | Grapeland | Dayton | 66th Street | |
| Frisco Gaylord | Gun Barrel City | Galveston | 82nd Street | |
| Frisco Warren | Jacksonville | Groves | 86th Street |
Page 8 of 21
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(In thousands)
| Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance Sheet Data (at period end) | |||||||||||||||
| Loans held for sale | $ | 46,777 | $ | 51,694 | $ | 39,516 | $ | 65,035 | $ | 80,959 | |||||
| Loans held for investment | 17,357,788 | 18,013,333 | 18,428,474 | 17,348,398 | 17,211,625 | ||||||||||
| Loans held for investment - Warehouse Purchase Program | 2,842,379 | 2,730,614 | 2,557,183 | 1,713,762 | 1,552,762 | ||||||||||
| Total loans | 20,246,944 | 20,795,641 | 21,025,173 | 19,127,195 | 18,845,346 | ||||||||||
| Investment securities^(A)^ | 8,542,820 | 7,431,495 | 7,717,586 | 8,295,495 | 8,570,056 | ||||||||||
| Federal funds sold | 553 | 56,469 | 568 | 676 | 519 | ||||||||||
| Allowance for credit losses^(B)^ | (316,068 | ) | (323,635 | ) | (324,205 | ) | (327,206 | ) | (87,469 | ) | |||||
| Cash and due from banks | 1,342,996 | 1,031,193 | 332,873 | 381,458 | 573,589 | ||||||||||
| Goodwill | 3,231,636 | 3,231,692 | 3,231,964 | 3,223,144 | 3,223,671 | ||||||||||
| Core deposit intangibles, net | 73,235 | 76,478 | 79,748 | 83,041 | 86,404 | ||||||||||
| Other real estate owned | 10,593 | 11,548 | 6,160 | 5,452 | 6,936 | ||||||||||
| Fixed assets, net | 323,572 | 325,994 | 324,975 | 327,293 | 326,832 | ||||||||||
| Other assets | 602,994 | 560,724 | 571,807 | 626,951 | 639,824 | ||||||||||
| Total assets | $ | 34,059,275 | $ | 33,197,599 | $ | 32,966,649 | $ | 31,743,499 | $ | 32,185,708 | |||||
| Noninterest-bearing deposits | $ | 9,151,233 | $ | 8,998,328 | $ | 9,040,257 | $ | 7,461,323 | $ | 7,763,894 | |||||
| Interest-bearing deposits | 18,209,259 | 17,460,878 | 17,112,431 | 16,365,034 | 16,435,838 | ||||||||||
| Total deposits | 27,360,492 | 26,459,206 | 26,152,688 | 23,826,357 | 24,199,732 | ||||||||||
| Other borrowings | — | 2,570 | 103,131 | 1,338,429 | 1,303,730 | ||||||||||
| Securities sold under repurchase agreements | 389,583 | 380,274 | 365,335 | 344,695 | 377,294 | ||||||||||
| Subordinated notes | — | 125,146 | 125,365 | 125,585 | 125,804 | ||||||||||
| Allowance for credit losses on off-balance sheet credit exposures^(B)^ | 29,947 | 29,947 | 29,947 | 29,947 | 5,599 | ||||||||||
| Other liabilities | 148,584 | 165,579 | 242,061 | 222,912 | 202,714 | ||||||||||
| Total liabilities | 27,928,606 | 27,162,722 | 27,018,527 | 25,887,925 | 26,214,873 | ||||||||||
| Shareholders' equity^(C)^ | 6,130,669 | 6,034,877 | 5,948,122 | 5,855,574 | 5,970,835 | ||||||||||
| Total liabilities and equity | $ | 34,059,275 | $ | 33,197,599 | $ | 32,966,649 | $ | 31,743,499 | $ | 32,185,708 | |||||
| (A) | Includes $974, $(442), $(1,767), $(3,421) and $763 in unrealized gains (losses) on available for sale securities for the quarterly periods ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively. | ||||||||||||||
| --- | --- | ||||||||||||||
| (B) | ASU 2016-13 became effective for Prosperity on January 1, 2020. | ||||||||||||||
| --- | --- | ||||||||||||||
| (C) | Includes $770, $(349), $(1,396), $(2,703) and $602 in after-tax unrealized gains (losses) on available for sale securities for the quarterly periods ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively. | ||||||||||||||
| --- | --- |
Page 9 of 21
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(In thousands)
| Three Months Ended | Year-to-Date | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Dec 31, 2020 | Dec 31, 2019 | |||||||||||||||
| Income Statement Data | |||||||||||||||||||||
| Interest income: | |||||||||||||||||||||
| Loans | $ | 241,625 | $ | 244,255 | $ | 242,772 | $ | 247,243 | $ | 222,910 | $ | 975,895 | $ | 621,443 | |||||||
| Securities^(D)^ | 36,721 | 38,033 | 43,776 | 48,282 | 49,348 | 166,812 | 209,812 | ||||||||||||||
| Federal funds sold and other earning assets | 301 | 144 | 45 | 713 | 600 | 1,203 | 1,683 | ||||||||||||||
| Total interest income | 278,647 | 282,432 | 286,593 | 296,238 | 272,858 | 1,143,910 | 832,938 | ||||||||||||||
| Interest expense: | |||||||||||||||||||||
| Deposits | 19,757 | 22,458 | 25,269 | 35,018 | 32,759 | 102,502 | 111,388 | ||||||||||||||
| Other borrowings | 33 | 52 | 533 | 2,932 | 6,115 | 3,550 | 21,323 | ||||||||||||||
| Securities sold under repurchase agreements | 224 | 309 | 337 | 757 | 879 | 1,627 | 3,383 | ||||||||||||||
| Subordinated notes and trust preferred | 999 | 1,500 | 1,499 | 1,500 | 1,075 | 5,498 | 1,075 | ||||||||||||||
| Total interest expense | 21,013 | 24,319 | 27,638 | 40,207 | 40,828 | 113,177 | 137,169 | ||||||||||||||
| Net interest income | 257,634 | 258,113 | 258,955 | 256,031 | 232,030 | 1,030,733 | 695,769 | ||||||||||||||
| Provision for credit losses | — | 10,000 | 10,000 | — | 1,700 | 20,000 | 4,300 | ||||||||||||||
| Net interest income after provision for credit losses | 257,634 | 248,113 | 248,955 | 256,031 | 230,330 | 1,010,733 | 691,469 | ||||||||||||||
| Noninterest income: | |||||||||||||||||||||
| Nonsufficient funds (NSF) fees | 8,051 | 7,156 | 5,645 | 9,443 | 9,990 | 30,295 | 34,614 | ||||||||||||||
| Credit card, debit card and ATM card income | 8,193 | 8,315 | 7,263 | 7,474 | 7,728 | 31,245 | 26,867 | ||||||||||||||
| Service charges on deposit accounts | 6,046 | 5,920 | 5,790 | 6,104 | 5,597 | 23,860 | 20,604 | ||||||||||||||
| Trust income | 2,192 | 2,502 | 2,242 | 2,662 | 2,582 | 9,598 | 10,227 | ||||||||||||||
| Mortgage income | 3,989 | 2,958 | 1,820 | 2,010 | 2,455 | 10,777 | 5,006 | ||||||||||||||
| Brokerage income | 642 | 628 | 584 | 650 | 625 | 2,504 | 2,361 | ||||||||||||||
| Bank owned life insurance income | 1,252 | 1,449 | 1,508 | 1,545 | 1,502 | 5,754 | 5,426 | ||||||||||||||
| Net (loss) gain on sale or write-down of assets | (675 | ) | (528 | ) | (3,945 | ) | (385 | ) | (1,870 | ) | (5,533 | ) | (1,813 | ) | |||||||
| Other noninterest income | 6,857 | 6,524 | 4,768 | 4,885 | 6,897 | 23,034 | 20,989 | ||||||||||||||
| Total noninterest income | 36,547 | 34,924 | 25,675 | 34,388 | 35,506 | 131,534 | 124,281 | ||||||||||||||
| Noninterest expense: | |||||||||||||||||||||
| Salaries and benefits | 77,809 | 75,068 | 79,109 | 77,282 | 69,356 | 309,268 | 226,348 | ||||||||||||||
| Net occupancy and equipment | 8,223 | 8,644 | 9,190 | 8,980 | 7,420 | 35,037 | 23,985 | ||||||||||||||
| Credit and debit card, data processing and software amortization | 8,442 | 8,776 | 11,690 | 11,421 | 9,158 | 40,329 | 23,624 | ||||||||||||||
| Regulatory assessments and FDIC insurance | 2,670 | 2,512 | 2,601 | 2,078 | 2,095 | 9,861 | 8,608 | ||||||||||||||
| Core deposit intangibles amortization | 3,243 | 3,270 | 3,293 | 3,363 | 2,705 | 13,169 | 6,537 | ||||||||||||||
| Depreciation | 4,261 | 4,605 | 4,598 | 4,768 | 4,212 | 18,232 | 13,713 | ||||||||||||||
| Communications | 2,931 | 3,027 | 3,324 | 3,195 | 3,012 | 12,477 | 9,679 | ||||||||||||||
| Other real estate expense | 279 | 258 | 40 | 46 | 57 | 623 | 328 | ||||||||||||||
| Net (gain) loss on sale or write-down of other real estate | (195 | ) | (137 | ) | 4 | (130 | ) | (49 | ) | (458 | ) | (395 | ) | ||||||||
| Merger related expenses | — | — | 7,474 | 544 | 46,402 | 8,018 | 46,402 | ||||||||||||||
| Other noninterest expense | 12,542 | 11,896 | 13,045 | 13,194 | 12,083 | 50,677 | 37,713 | ||||||||||||||
| Total noninterest expense | 120,205 | 117,919 | 134,368 | 124,741 | 156,451 | 497,233 | 396,542 | ||||||||||||||
| Income before income taxes | 173,976 | 165,118 | 140,262 | 165,678 | 109,385 | 645,034 | 419,208 | ||||||||||||||
| Provision for income taxes | 36,885 | 35,054 | 9,361 | 34,830 | 23,251 | 116,130 | 86,656 | ||||||||||||||
| Net income available to common shareholders | $ | 137,091 | $ | 130,064 | $ | 130,901 | $ | 130,848 | $ | 86,134 | $ | 528,904 | $ | 332,552 |
(D) Interest income on securities was reduced by net premium amortization of $11,509, $10,089, $9,224, $8,005 and $8,556 for the three-month periods ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively, and $38,827 and $30,779 for the years ended December 31, 2020 and December 31, 2019, respectively.
Page 10 of 21
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, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Dec 31, 2020 | Dec 31, 2019 | ||||||||||||||||||||
| Profitability | ||||||||||||||||||||||||||
| Net income ^(E) (F)^ | $ | 137,091 | $ | 130,064 | $ | 130,901 | $ | 130,848 | $ | 86,134 | $ | 528,904 | $ | 332,552 | ||||||||||||
| Basic earnings per share | $ | 1.48 | $ | 1.40 | $ | 1.41 | $ | 1.39 | $ | 1.01 | $ | 5.68 | $ | 4.52 | ||||||||||||
| Diluted earnings per share | $ | 1.48 | $ | 1.40 | $ | 1.41 | $ | 1.39 | $ | 1.01 | $ | 5.68 | $ | 4.52 | ||||||||||||
| Return on average assets ^(G)^ | 1.63 | % | 1.58 | % | 1.61 | % | ^(K)^ | 1.67 | % | ^(K)^ | 1.19 | % | ^(K)^ | 1.62 | % | ^(K)^ | 1.38 | % | ^(K)^ | |||||||
| Return on average common equity ^(G)^ | 8.98 | % | 8.64 | % | 8.84 | % | ^(K)^ | 8.86 | % | ^(K)^ | 6.33 | % | ^(K)^ | 8.85 | % | ^(K)^ | 7.46 | % | ^(K)^ | |||||||
| Return on average tangible common equity ^(G)^^^^(H)^ | 19.57 | % | 19.19 | % | 19.98 | % | ^(K)^ | 20.16 | % | ^(K)^ | 12.50 | % | ^(K)^ | 19.83 | % | ^(K)^ | 14.23 | % | ^(K)^ | |||||||
| Tax equivalent net interest margin ^(E) (F)^^^^(I)^ | 3.49 | % | 3.57 | % | 3.69 | % | 3.81 | % | 3.66 | % | 3.64 | % | 3.32 | % | ||||||||||||
| Efficiency ratio ^(H) (J)^ | 40.77 | % | 40.17 | % | 46.56 | % | ^(L)^ | 42.90 | % | ^(L)^ | 58.07 | % | ^(L)^ | 42.58 | % | ^(L)^ | 48.25 | % | ^(L)^ | |||||||
| Liquidity and Capital Ratios | ||||||||||||||||||||||||||
| Equity to assets | 18.00 | % | 18.18 | % | 18.04 | % | 18.45 | % | 18.55 | % | 18.00 | % | 18.55 | % | ||||||||||||
| Common equity tier 1 capital | 13.74 | % | 13.17 | % | 12.29 | % | 12.27 | % | 12.30 | % | 13.74 | % | 12.30 | % | ||||||||||||
| Tier 1 risk-based capital | 13.74 | % | 13.17 | % | 12.29 | % | ^^ | 12.27 | % | ^^ | 12.30 | % | ^^ | 13.74 | % | ^^ | 12.30 | % | ||||||||
| Total risk-based capital | 14.23 | % | 14.28 | % | 13.36 | % | ^^ | 12.81 | % | ^^ | 12.70 | % | ^^ | 14.23 | % | ^^ | 12.70 | % | ||||||||
| Tier 1 leverage capital | 9.67 | % | 9.57 | % | 9.41 | % | ^^ | 9.49 | % | ^^ | 10.42 | % | ^^ | 9.67 | % | ^^ | 10.37 | % | ||||||||
| Period end tangible equity to period end tangible assets ^(H)^ | 9.19 | % | 9.12 | % | 8.89 | % | 8.96 | % | 9.21 | % | 9.19 | % | 9.21 | % | ||||||||||||
| Other Data | ||||||||||||||||||||||||||
| Weighted-average shares used in computing earnings per common share | ||||||||||||||||||||||||||
| Basic | 92,559 | 92,656 | 92,658 | 94,371 | 85,573 | 93,058 | 73,524 | |||||||||||||||||||
| Diluted | 92,559 | 92,656 | 92,658 | 94,371 | 85,573 | 93,058 | 73,524 | |||||||||||||||||||
| Period end shares outstanding | 92,571 | 92,562 | 92,660 | 92,652 | 94,746 | 92,571 | 94,746 | |||||||||||||||||||
| Cash dividends paid per common share | $ | 0.49 | $ | 0.46 | $ | 0.46 | $ | 0.46 | $ | 0.46 | $ | 1.87 | $ | 1.69 | ||||||||||||
| Book value per common share | $ | 66.23 | $ | 65.20 | $ | 64.19 | $ | 63.20 | $ | 63.02 | $ | 66.23 | $ | 63.02 | ||||||||||||
| Tangible book value per common share ^(H)^ | $ | 30.53 | $ | 29.46 | $ | 28.45 | $ | 27.52 | $ | 28.08 | $ | 30.53 | $ | 28.08 | ||||||||||||
| Common Stock Market Price | ||||||||||||||||||||||||||
| High | $ | 70.38 | $ | 60.63 | $ | 72.95 | $ | 75.22 | $ | 74.35 | $ | 75.22 | $ | 75.36 | ||||||||||||
| Low | $ | 50.43 | $ | 48.80 | $ | 43.68 | $ | 42.02 | $ | 66.60 | $ | 42.02 | $ | 61.65 | ||||||||||||
| Period end closing price | $ | 69.36 | $ | 51.83 | $ | 59.38 | $ | 48.25 | $ | 71.89 | $ | 69.36 | $ | 71.89 | ||||||||||||
| Employees – FTE (excluding overtime) | 3,756 | 3,716 | 3,793 | 3,801 | 3,867 | 3,756 | 3,867 | |||||||||||||||||||
| Number of banking centers | 275 | 275 | 275 | 285 | 285 | 275 | 285 |
(E) Includes purchase accounting adjustments for the periods presented as follows:
| Three Months Ended | Year-to-Date | ||||||
|---|---|---|---|---|---|---|---|
| Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Dec 31, 2020 | Dec 31, 2019 | |
| Loan discount accretion | |||||||
| ASC 310-20 | $13,514 | $16,729 | $17,999 | $22,463 | $17,834 | $70,705 | $21,194 |
| ASC 310-30 | $2,545 | $5,805 | $6,267 | $6,019 | $5,908 | $20,636 | $6,851 |
| Securities net amortization | $66 | $116 | $203 | $194 | $201 | $579 | $847 |
| Time deposits amortization | $790 | $1,240 | $1,793 | $2,270 | $1,709 | $6,093 | $1,709 |
(F) Using effective tax rate of 21.2%, 21.2%, 6.7%, 21.0% and 21.3% for the three-month periods ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively, and 18.0% and 20.7% for the years ended December 31, 2020 and December 31, 2019, respectively. Net income for the second quarter of 2020 includes a tax benefit for NOLs due to the CARES Act.
(G) Interim periods annualized.
(H) 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.
| (I) | Net interest margin for all periods presented is based on average balances on an actual 365 day or 366 day basis. |
|---|---|
| (J) | 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. |
| --- | --- |
| (K) | 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. |
| --- | --- |
| (L) | 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 11 of 21
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| YIELD ANALYSIS | Three Months Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2020 | Sep 30, 2020 | Dec 31, 2019 | |||||||||||||||||||
| 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 | ^(M)^ | 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 | ^(M)^ | 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 | ^(M)^ | ||||||||||
| Interest-earning assets: | |||||||||||||||||||||
| Loans held for sale | $ | 42,856 | $ | 348 | 3.23% | $ | 50,606 | $ | 420 | 3.30% | $ | 57,171 | $ | 570 | 3.96% | ||||||
| Loans held for investment | 17,700,756 | 220,357 | 4.95% | 18,267,559 | 225,596 | 4.91% | 15,261,163 | 212,466 | 5.52% | ||||||||||||
| Loans held for investment - Warehouse Purchase Program | 2,603,455 | 20,920 | 3.20% | 2,279,461 | 18,239 | 3.18% | 996,903 | 9,874 | 3.93% | ||||||||||||
| Total Loans | 20,347,067 | 241,625 | 4.72% | 20,597,626 | 244,255 | 4.72% | 16,315,237 | 222,910 | 5.42% | ||||||||||||
| Investment securities | 8,001,679 | 36,721 | 1.83% | ^(N)^ | 7,603,762 | 38,033 | 1.99% | ^(N)^ | 8,598,736 | 49,348 | 2.28% | ^(N)^ | |||||||||
| Federal funds sold and other earning assets | 1,094,487 | 301 | 0.11% | 618,228 | 144 | 0.09% | 305,596 | 600 | 0.78% | ||||||||||||
| Total interest-earning assets | 29,443,233 | 278,647 | 3.76% | 28,819,616 | 282,432 | 3.90% | 25,219,569 | 272,858 | 4.29% | ||||||||||||
| Allowance for credit losses^(B)^ | (322,138 | ) | (321,424 | ) | (86,795 | ) | |||||||||||||||
| Noninterest-earning assets | 4,569,811 | 4,482,646 | 3,930,651 | ||||||||||||||||||
| Total assets | $ | 33,690,906 | $ | 32,980,838 | $ | 29,063,425 | |||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||
| Interest-bearing demand deposits | $ | 5,545,298 | $ | 5,301 | 0.38% | $ | 5,221,722 | $ | 5,028 | 0.38% | $ | 4,233,880 | $ | 5,755 | 0.54% | ||||||
| Savings and money market deposits | 9,170,179 | 6,985 | 0.30% | 8,937,751 | 7,833 | 0.35% | 7,109,754 | 14,187 | 0.79% | ||||||||||||
| Certificates and other time deposits | 3,047,475 | 7,471 | 0.98% | 3,103,290 | 9,597 | 1.23% | 3,044,843 | 12,817 | 1.67% | ||||||||||||
| Other borrowings | 2,435 | 33 | 5.39% | 13,898 | 52 | 1.49% | 1,403,686 | 6,115 | 1.73% | ||||||||||||
| Securities sold under repurchase agreements | 376,779 | 224 | 0.24% | 378,888 | 309 | 0.32% | 351,580 | 879 | 0.99% | ||||||||||||
| Subordinated notes and trust preferred | 81,570 | 999 | 4.87% | 125,256 | 1,500 | 4.76% | 87,963 | 1,075 | 4.85% | ||||||||||||
| Total interest-bearing liabilities | 18,223,736 | 21,013 | 0.46% | ^(O)^ | 17,780,805 | 24,319 | 0.54% | ^(O)^ | 16,231,706 | 40,828 | 1.00% | ^(O)^ | |||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||
| Noninterest-bearing demand deposits | 9,103,742 | 8,980,814 | 7,066,878 | ||||||||||||||||||
| Allowance for credit losses on off-balance sheet credit exposures^(B)^ | 29,947 | 29,947 | — | ||||||||||||||||||
| Other liabilities | 224,907 | 167,532 | 320,855 | ||||||||||||||||||
| Total liabilities | 27,582,332 | 26,959,098 | 23,619,439 | ||||||||||||||||||
| Shareholders' equity | 6,108,574 | 6,021,740 | 5,443,986 | ||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 33,690,906 | $ | 32,980,838 | $ | 29,063,425 | |||||||||||||||
| Net interest income and margin | $ | 257,634 | 3.48% | $ | 258,113 | 3.56% | $ | 232,030 | 3.65% | ||||||||||||
| Non-GAAP to GAAP reconciliation: | |||||||||||||||||||||
| Tax equivalent adjustment | 664 | 658 | 668 | ||||||||||||||||||
| Net interest income and margin (tax equivalent basis) | $ | 258,298 | 3.49% | $ | 258,771 | 3.57% | $ | 232,698 | 3.66% |
(M) Annualized and based on an actual 365 day or 366 day basis.
(N) Yield on securities was impacted by net premium amortization of $11,509, $10,089 and $8,556 for the three-month periods ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively.
(O) Total cost of funds, including noninterest bearing deposits, was 0.31%, 0.36% and 0.70% for the three-month periods ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively.
Page 12 of 21
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| YIELD ANALYSIS | Year-to-Date | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2020 | Dec 31, 2019 | |||||||||||||
| 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 | ^(P)^ | 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 | ^(P)^ | |||||||
| Interest-earning assets: | ||||||||||||||
| Loans held for sale | $ | 55,883 | $ | 1,923 | 3.44% | $ | 32,065 | $ | 1,457 | 4.54% | ||||
| Loans held for investment | 17,842,438 | 910,532 | 5.10% | 11,688,754 | 610,112 | 5.22% | ||||||||
| Loans held for investment - Warehouse Purchase Program | 1,964,206 | 63,440 | 3.23% | 251,274 | 9,874 | 3.93% | ||||||||
| Total loans | 19,862,527 | 975,895 | 4.91% | 11,972,093 | 621,443 | 5.19% | ||||||||
| Investment securities | 8,022,205 | 166,812 | 2.08% | ^(Q)^ | 8,958,182 | 209,812 | 2.34% | ^(Q)^ | ||||||
| Federal funds sold and other earning assets | 529,075 | 1,203 | 0.23% | 129,622 | 1,683 | 1.30% | ||||||||
| Total interest-earning assets | 28,413,807 | 1,143,910 | 4.03% | 21,059,897 | 832,938 | 3.96% | ||||||||
| Allowance for credit losses^(B)^ | (324,308 | ) | (86,616 | ) | ||||||||||
| Noninterest-earning assets | 4,555,851 | 3,114,426 | ||||||||||||
| Total assets | $ | 32,645,350 | $ | 24,087,707 | ||||||||||
| Interest-bearing liabilities: | ||||||||||||||
| Interest-bearing demand deposits | $ | 5,177,736 | $ | 22,046 | 0.43% | $ | 3,917,413 | $ | 23,982 | 0.61% | ||||
| Savings and money market deposits | 8,654,874 | 37,685 | 0.44% | 5,941,929 | 50,681 | 0.85% | ||||||||
| Certificates and other time deposits | 3,194,274 | 42,771 | 1.34% | 2,314,174 | 36,725 | 1.59% | ||||||||
| Other borrowings | 329,276 | 3,550 | 1.08% | 971,409 | 21,323 | 2.20% | ||||||||
| Securities sold under repurchase agreements | 371,872 | 1,627 | 0.44% | 307,277 | 3,383 | 1.10% | ||||||||
| Subordinated notes and trust preferred | 114,499 | 5,498 | 4.80% | 21,991 | 1,075 | 4.89% | ||||||||
| Total interest-bearing liabilities | 17,842,531 | 113,177 | 0.63% | ^(R)^ | 13,474,193 | 137,169 | 1.02% | ^(R)^ | ||||||
| Noninterest-bearing liabilities: | ||||||||||||||
| Noninterest-bearing demand deposits | 8,558,385 | 6,006,914 | ||||||||||||
| Allowance for credit losses on off-balance sheet credit exposures^(B)^ | 25,735 | — | ||||||||||||
| Other liabilities | 244,047 | 148,079 | ||||||||||||
| Total liabilities | 26,670,698 | 19,629,186 | ||||||||||||
| Shareholders' equity | 5,974,652 | 4,458,521 | ||||||||||||
| Total liabilities and shareholders' equity | 32,645,350 | $ | 24,087,707 | |||||||||||
| Net interest income and margin | $ | 1,030,733 | 3.63% | $ | 695,769 | 3.30% | ||||||||
| Non-GAAP to GAAP reconciliation: | ||||||||||||||
| Tax equivalent adjustment | 2,735 | 3,149 | ||||||||||||
| Net interest income and margin (tax equivalent basis) | $ | 1,033,468 | 3.64% | $ | 698,918 | 3.32% |
(P) Annualized and based on an actual 365 day or 366 day basis.
(Q) Yield on securities was impacted by net premium amortization of $38,827 and $30,779 for the years ended December 31, 2020 and 2019, respectively.
(R) Total cost of funds, including noninterest bearing deposits, was 0.43% and 0.70% for the years ended December 31, 2020 and 2019, respectively.
Page 13 of 21
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | |||||||||||
| YIELD TREND ^(S)^ | |||||||||||||||
| Interest-Earning Assets: | |||||||||||||||
| Loans held for sale | 3.23 | % | 3.30 | % | 3.32 | % | 3.80 | % | 3.96 | % | |||||
| Loans held for investment | 4.95 | % | 4.91 | % | 5.06 | % | 5.51 | % | 5.52 | % | |||||
| Loans held for investment - Warehouse Purchase Program | 3.20 | % | 3.18 | % | 3.10 | % | 3.62 | % | 3.93 | % | |||||
| Total loans | 4.72 | % | 4.72 | % | 4.87 | % | 5.39 | % | 5.42 | % | |||||
| Investment securities ^(T)^ | 1.83 | % | 1.99 | % | 2.19 | % | 2.30 | % | 2.28 | % | |||||
| Federal funds sold and other earning assets | 0.11 | % | 0.09 | % | 0.10 | % | 1.28 | % | 0.78 | % | |||||
| Total interest-earning assets | 3.76 | % | 3.90 | % | 4.08 | % | 4.40 | % | 4.29 | % | |||||
| Interest-Bearing Liabilities: | |||||||||||||||
| Interest-bearing demand deposits | 0.38 | % | 0.38 | % | 0.38 | % | 0.57 | % | 0.54 | % | |||||
| Savings and money market deposits | 0.30 | % | 0.35 | % | 0.41 | % | 0.71 | % | 0.79 | % | |||||
| Certificates and other time deposits | 0.98 | % | 1.23 | % | 1.48 | % | 1.63 | % | 1.67 | % | |||||
| Other borrowings | 5.39 | % | 1.49 | % | 0.45 | % | 1.42 | % | 1.73 | % | |||||
| Securities sold under repurchase agreements | 0.24 | % | 0.32 | % | 0.37 | % | 0.83 | % | 0.99 | % | |||||
| Subordinated notes and trust preferred | 4.87 | % | 4.76 | % | 4.80 | % | 4.80 | % | 4.85 | % | |||||
| Total interest-bearing liabilities | 0.46 | % | 0.54 | % | 0.63 | % | 0.91 | % | 1.00 | % | |||||
| Net Interest Margin | 3.48 | % | 3.56 | % | 3.68 | % | 3.80 | % | 3.65 | % | |||||
| Net Interest Margin (tax equivalent) | 3.49 | % | 3.57 | % | 3.69 | % | 3.81 | % | 3.66 | % |
(S) Annualized and based on average balances on an actual 365 day or 366 day basis.
(T) Yield on securities was impacted by net premium amortization of $11,509, $10,089, $9,224, $8,005 and $8,556 for the three-month periods ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively.
Page 14 of 21
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | |||||||||||
| Balance Sheet Averages | |||||||||||||||
| Loans held for sale | $ | 42,856 | $ | 50,606 | $ | 63,338 | $ | 66,917 | $ | 57,171 | |||||
| Loans held for investment | 17,700,756 | 18,267,559 | 18,135,226 | 17,263,098 | 15,261,163 | ||||||||||
| Loans held for investment - Warehouse Purchase Program | 2,603,455 | 2,279,461 | 1,843,097 | 1,120,324 | 996,903 | ||||||||||
| Total Loans | 20,347,067 | 20,597,626 | 20,041,661 | 18,450,339 | 16,315,237 | ||||||||||
| Investment securities | 8,001,679 | 7,603,762 | 8,054,008 | 8,434,196 | 8,598,736 | ||||||||||
| Federal funds sold and other earning assets | 1,094,487 | 618,228 | 172,761 | 223,631 | 305,596 | ||||||||||
| Total interest-earning assets | 29,443,233 | 28,819,616 | 28,268,430 | 27,108,166 | 25,219,569 | ||||||||||
| Allowance for credit losses^(B)^ | (322,138 | ) | (321,424 | ) | (325,720 | ) | (328,005 | ) | (86,795 | ) | |||||
| Cash and due from banks | 289,579 | 267,887 | 247,426 | 321,832 | 275,072 | ||||||||||
| Goodwill | 3,231,850 | 3,231,976 | 3,223,469 | 3,223,633 | 2,658,133 | ||||||||||
| Core deposit intangibles, net | 74,919 | 78,269 | 81,539 | 84,865 | 28,912 | ||||||||||
| Other real estate | 14,573 | 8,061 | 5,666 | 5,837 | 4,864 | ||||||||||
| Fixed assets, net | 325,485 | 325,958 | 327,811 | 325,337 | 308,692 | ||||||||||
| Other assets | 633,405 | 570,495 | 676,105 | 615,747 | 654,978 | ||||||||||
| Total assets | $ | 33,690,906 | $ | 32,980,838 | $ | 32,504,726 | $ | 31,357,412 | $ | 29,063,425 | |||||
| Noninterest-bearing deposits | $ | 9,103,742 | $ | 8,980,814 | $ | 8,583,734 | $ | 7,491,798 | $ | 7,066,878 | |||||
| Interest-bearing demand deposits | 5,545,298 | 5,221,722 | 4,949,023 | 4,990,376 | 4,233,880 | ||||||||||
| Savings and money market deposits | 9,170,179 | 8,937,751 | 8,537,352 | 7,965,440 | 7,109,754 | ||||||||||
| Certificates and other time deposits | 3,047,475 | 3,103,290 | 3,224,196 | 3,404,748 | 3,044,843 | ||||||||||
| Total deposits | 26,866,694 | 26,243,577 | 25,294,305 | 23,852,362 | 21,455,355 | ||||||||||
| Other borrowings | 2,435 | 13,898 | 474,867 | 832,961 | 1,403,686 | ||||||||||
| Securities sold under repurchase agreements | 376,779 | 378,888 | 365,077 | 366,615 | 351,580 | ||||||||||
| Subordinated notes and trust preferred | 81,570 | 125,256 | 125,475 | 125,694 | 87,963 | ||||||||||
| Allowance for credit losses on off-balance sheet credit exposures^(B)^ | 29,947 | 29,947 | 29,947 | 13,009 | 5,673 | ||||||||||
| Other liabilities | 224,907 | 167,532 | 289,899 | 262,523 | 320,855 | ||||||||||
| Shareholders' equity | 6,108,574 | 6,021,740 | 5,925,156 | 5,904,248 | 5,443,986 | ||||||||||
| Total liabilities and equity | $ | 33,690,906 | $ | 32,980,838 | $ | 32,504,726 | $ | 31,357,412 | $ | 29,063,425 |
Page 15 of 21
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Period End Balances | |||||||||||||||||||||||||
| Loan Portfolio | |||||||||||||||||||||||||
| Commercial and industrial | $ | 2,210,003 | 10.9 | % | $ | 2,171,302 | 10.5 | % | $ | 2,214,742 | 10.5 | % | $ | 2,500,110 | 13.1 | % | $ | 2,507,318 | 13.3 | % | |||||
| Warehouse purchase program | 2,842,379 | 14.0 | % | 2,730,614 | 13.1 | % | 2,557,183 | 12.2 | % | 1,713,762 | 9.0 | % | 1,552,762 | 8.2 | % | ||||||||||
| Construction, land development and other land loans | 1,956,960 | 9.7 | % | 2,081,762 | 10.0 | % | 2,033,037 | 9.7 | % | 2,051,021 | 10.7 | % | 2,064,167 | 11.0 | % | ||||||||||
| 1-4 family residential | 4,253,331 | 21.0 | % | 4,189,852 | 20.1 | % | 4,184,972 | 19.9 | % | 3,993,138 | 20.9 | % | 3,880,382 | 20.6 | % | ||||||||||
| Home equity | 504,207 | 2.5 | % | 477,552 | 2.3 | % | 437,098 | 2.1 | % | 516,003 | 2.6 | % | 507,029 | 2.6 | % | ||||||||||
| Commercial real estate (includes multi-family residential) | 6,078,764 | 30.0 | % | 6,179,901 | 29.7 | % | 6,550,086 | 31.2 | % | 6,576,213 | 34.4 | % | 6,556,285 | 34.9 | % | ||||||||||
| Agriculture (includes farmland) | 581,352 | 2.9 | % | 598,972 | 2.9 | % | 612,694 | 2.9 | % | 635,295 | 3.3 | % | 680,855 | 3.6 | % | ||||||||||
| Consumer and other | 344,028 | 1.7 | % | 367,231 | 1.8 | % | 403,462 | 1.9 | % | 423,000 | 2.2 | % | 398,271 | 2.1 | % | ||||||||||
| Energy | 512,735 | 2.5 | % | 604,698 | 2.9 | % | 639,402 | 3.0 | % | 718,653 | 3.8 | % | 698,277 | 3.7 | % | ||||||||||
| Paycheck Protection Program | 963,185 | 4.8 | % | 1,393,757 | 6.7 | % | 1,392,497 | 6.6 | % | — | — | — | — | ||||||||||||
| Total loans | $ | 20,246,944 | $ | 20,795,641 | $ | 21,025,173 | $ | 19,127,195 | $ | 18,845,346 | |||||||||||||||
| Deposit Types | |||||||||||||||||||||||||
| Noninterest-bearing DDA | $ | 9,151,233 | 33.4 | % | $ | 8,998,328 | 34.0 | % | $ | 9,040,257 | 34.6 | % | $ | 7,461,323 | 31.3 | % | $ | 7,763,894 | 32.1 | % | |||||
| Interest-bearing DDA | 5,899,051 | 21.6 | % | 5,297,802 | 20.0 | % | 5,130,495 | 19.6 | % | 4,980,090 | 20.9 | % | 5,100,938 | 21.1 | % | ||||||||||
| Money market | 6,381,014 | 23.3 | % | 6,324,127 | 23.9 | % | 6,148,206 | 23.5 | % | 5,341,525 | 22.4 | % | 5,099,024 | 21.1 | % | ||||||||||
| Savings | 2,863,086 | 10.5 | % | 2,772,492 | 10.5 | % | 2,722,718 | 10.4 | % | 2,716,247 | 11.4 | % | 2,756,297 | 11.3 | % | ||||||||||
| Certificates and other time deposits | 3,066,108 | 11.2 | % | 3,066,457 | 11.6 | % | 3,111,012 | 11.9 | % | 3,327,172 | 14.0 | % | 3,479,579 | 14.4 | % | ||||||||||
| Total deposits | $ | 27,360,492 | $ | 26,459,206 | $ | 26,152,688 | $ | 23,826,357 | $ | 24,199,732 | |||||||||||||||
| Loan to Deposit Ratio | 74.0 | % | 78.6 | % | 80.4 | % | 80.3 | % | 77.9 | % |
Page 16 of 21
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
Construction Loans
| Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Single family residential construction | $ | 579,761 | 29.6 | % | $ | 654,933 | 31.5 | % | $ | 710,401 | 34.9 | % | $ | 655,191 | 31.9 | % | $ | 614,647 | 29.7 | % | |||||
| Land development | 103,307 | 5.3 | % | 114,937 | 5.5 | % | 114,748 | 5.6 | % | 110,853 | 5.4 | % | 88,529 | 4.3 | % | ||||||||||
| Raw land | 247,628 | 12.7 | % | 240,154 | 11.5 | % | 274,159 | 13.5 | % | 265,943 | 12.9 | % | 233,559 | 11.3 | % | ||||||||||
| Residential lots | 158,441 | 8.1 | % | 137,615 | 6.6 | % | 144,765 | 7.1 | % | 136,861 | 6.7 | % | 138,961 | 6.7 | % | ||||||||||
| Commercial lots | 114,427 | 5.8 | % | 109,569 | 5.3 | % | 103,267 | 5.1 | % | 106,036 | 5.2 | % | 101,960 | 4.9 | % | ||||||||||
| Commercial construction and other | 753,587 | 38.5 | % | 825,053 | 39.6 | % | 687,618 | 33.8 | % | 778,731 | 37.9 | % | 890,597 | 43.1 | % | ||||||||||
| Net unaccreted discount | (191 | ) | (499 | ) | (1,921 | ) | (2,594 | ) | (4,086 | ) | |||||||||||||||
| Total construction loans | $ | 1,956,960 | $ | 2,081,762 | $ | 2,033,037 | $ | 2,051,021 | $ | 2,064,167 |
Non-Owner Occupied Commercial Real Estate Loans by Metropolitan Statistical Area (MSA) as of December 31, 2020
| Houston | Dallas | Austin | OK City | Tulsa | Other ^(U)^ | Total | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Collateral Type | |||||||||||||||
| Shopping center/retail | $ | 385,110 | $ | 297,801 | $ | 51,537 | $ | 20,041 | $ | 34,050 | $ | 282,655 | $ | 1,071,194 | |
| Commercial and industrial buildings | 160,522 | 96,304 | 18,897 | 14,146 | 18,613 | 165,228 | 473,710 | ||||||||
| Office buildings | 186,978 | 518,496 | 34,392 | 72,623 | 5,109 | 80,726 | 898,324 | ||||||||
| Medical buildings | 36,975 | 38,031 | 3,512 | 24,195 | 24,583 | 58,597 | 185,893 | ||||||||
| Apartment buildings | 388,780 | 503,734 | 26,505 | 15,439 | 8,942 | 194,904 | 1,138,304 | ||||||||
| Hotel | 70,153 | 76,272 | 43,389 | 28,996 | — | 139,546 | 358,356 | ||||||||
| Other | 59,870 | 29,318 | 27,869 | 8,667 | 2,738 | 57,518 | 185,980 | ||||||||
| Total | $ | 1,288,388 | $ | 1,559,956 | $ | 206,101 | $ | 184,107 | $ | 94,035 | $ | 979,174 | $ | 4,311,761 | ^(V)^ |
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, 2020 | Balance at<br><br><br>Dec 31, 2020 | Balance at<br><br><br>Acquisition<br><br><br>Date | Balance at<br><br><br>Sep 30, 2020 | Balance at<br><br><br>Dec 31, 2020 | Balance at<br><br><br>Acquisition<br><br><br>Date | Balance at<br><br><br>Sep 30, 2020 | Balance at<br><br><br>Dec 31, 2020 | ||||||||||||
| Loan marks: | ||||||||||||||||||||
| Acquired banks ^(W)^ | $ | 229,080 | $ | 6,622 | $ | 5,973 | $ | 142,128 | $ | — | $ | — | $ | 371,208 | $ | 6,622 | $ | 5,973 | ||
| LegacyTexas merger^(X)^ | 116,519 | 46,493 | 33,614 | 177,924 | 16,760 | 14,216 | 294,443 | 63,253 | 47,830 | |||||||||||
| Total | 345,599 | 53,115 | 39,587 | 320,052 | 16,760 | ^(Z)^ | 14,216 | 665,651 | ^^ | 69,875 | 53,803 | |||||||||
| Acquired portfolio loan balances: | ||||||||||||||||||||
| Acquired banks ^(W)^ | 5,690,998 | 281,766 | 266,036 | 275,221 | 4,061 | 3,523 | 5,966,219 | ^^ | 285,827 | 269,559 | ||||||||||
| LegacyTexas merger^(X)^ | 6,595,161 | 4,187,077 | 3,603,169 | 414,352 | 222,019 | 192,108 | 7,009,513 | ^^ | 4,409,096 | 3,795,277 | ||||||||||
| Total | 12,286,159 | 4,468,843 | 3,869,205 | 689,573 | 226,080 | 195,631 | 12,975,732 | ^(Y)^ | 4,694,923 | 4,064,836 | ||||||||||
| Acquired portfolio loan balances less loan marks | $ | 11,940,560 | $ | 4,415,728 | $ | 3,829,618 | $ | 369,521 | $ | 209,320 | $ | 181,415 | $ | 12,310,081 | $ | 4,625,048 | $ | 4,011,033 |
(U) Includes other MSA and non-MSA regions.
(V) Represents a portion of total commercial real estate loans of $6.079 billion as of December 31, 2020.
(W) 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.
(X) The 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 $294.4 million at acquisition date.
(Y) Actual principal balances acquired.
(Z) ASU 2016-13 became effective for Prosperity on January 1, 2020.
Page 17 of 21
Prosperity Bancshares, Inc.^®^
Financial Highlights (Unaudited)
(Dollars in thousands)
| Three Months Ended | Year-to-Date | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Dec 31, 2020 | Dec 31, 2019 | |||||||||||||||
| Asset Quality | |||||||||||||||||||||
| Nonaccrual loans | $ | 47,185 | $ | 57,412 | $ | 62,904 | $ | 58,194 | $ | 55,243 | $ | 47,185 | $ | 55,243 | |||||||
| Accruing loans 90 or more days past due | 1,699 | 462 | 8,691 | 3,255 | 441 | 1,699 | 441 | ||||||||||||||
| Total nonperforming loans | 48,884 | 57,874 | 71,595 | 61,449 | 55,684 | 48,884 | 55,684 | ||||||||||||||
| Repossessed assets | 93 | 120 | 187 | 278 | 324 | 93 | 324 | ||||||||||||||
| Other real estate | 10,593 | 11,548 | 6,160 | 5,452 | 6,935 | 10,593 | 6,935 | ||||||||||||||
| Total nonperforming assets | $ | 59,570 | $ | 69,542 | $ | 77,942 | $ | 67,179 | $ | 62,943 | $ | 59,570 | $ | 62,943 | |||||||
| Nonperforming assets: | |||||||||||||||||||||
| Commercial and industrial (includes energy) | $ | 16,176 | $ | 17,273 | $ | 15,238 | $ | 15,987 | $ | 17,086 | $ | 16,176 | $ | 17,086 | |||||||
| Construction, land development and other land loans | 1,566 | 2,633 | 10,530 | 1,125 | 1,177 | 1,566 | 1,177 | ||||||||||||||
| 1-4 family residential (includes home equity) | 25,830 | 29,953 | 29,812 | 28,996 | 26,453 | 25,830 | 26,453 | ||||||||||||||
| Commercial real estate (includes multi-family residential) | 12,315 | 16,069 | 20,748 | 20,155 | 18,031 | 12,315 | 18,031 | ||||||||||||||
| Agriculture (includes farmland) | 2,075 | 1,931 | 1,501 | 896 | 101 | 2,075 | 101 | ||||||||||||||
| Consumer and other | 1,608 | 1,683 | 113 | 20 | 95 | 1,608 | 95 | ||||||||||||||
| Total | $ | 59,570 | $ | 69,542 | $ | 77,942 | $ | 67,179 | $ | 62,943 | $ | 59,570 | $ | 62,943 | |||||||
| Number of loans/properties | 208 | 198 | 213 | 198 | 236 | 208 | 236 | ||||||||||||||
| Allowance for credit losses at end of period | $ | 316,068 | $ | 323,635 | $ | 324,205 | $ | 327,206 | $ | 87,469 | $ | 316,068 | $ | 87,469 | |||||||
| Net charge-offs (recoveries): | |||||||||||||||||||||
| Commercial and industrial (includes energy) | $ | 4,085 | $ | 8,344 | $ | 12,206 | $ | (28 | ) | $ | 76 | $ | 24,607 | $ | 884 | ||||||
| Construction, land development and other land loans | (110 | ) | 478 | (6 | ) | (12 | ) | (6 | ) | 350 | (5 | ) | |||||||||
| 1-4 family residential (includes home equity) | 1,982 | 252 | 51 | 5 | 20 | 2,290 | 19 | ||||||||||||||
| Commercial real estate (includes multi-family residential) | 626 | 676 | — | (81 | ) | 254 | 1,221 | 251 | |||||||||||||
| Agriculture (includes farmland) | (4 | ) | (17 | ) | (3 | ) | (1 | ) | (18 | ) | (25 | ) | (972 | ) | |||||||
| Consumer and other | 988 | 837 | 753 | 918 | 965 | 3,496 | 3,094 | ||||||||||||||
| Total | $ | 7,567 | $ | 10,570 | $ | 13,001 | $ | 801 | $ | 1,291 | $ | 31,939 | $ | 3,271 | |||||||
| Asset Quality Ratios | |||||||||||||||||||||
| Nonperforming assets to average interest-earning assets | 0.20 | % | 0.24 | % | 0.28 | % | 0.25 | % | 0.25 | % | 0.21 | % | 0.30 | % | |||||||
| Nonperforming assets to loans and other real estate | 0.29 | % | 0.33 | % | 0.37 | % | 0.35 | % | 0.33 | % | 0.29 | % | 0.33 | % | |||||||
| Net charge-offs to average loans (annualized) | 0.15 | % | 0.21 | % | 0.26 | % | 0.02 | % | 0.03 | % | 0.16 | % | 0.03 | % | |||||||
| Allowance for credit losses to total loans^(AA)^ | 1.56 | % | 1.56 | % | 1.54 | % | 1.71 | % | 0.46 | % | 1.56 | % | 0.46 | % | |||||||
| Allowance for credit losses to total loans, excluding Warehouse Purchase Program loans and Paycheck Protection Program loans ^(H)^^(AA)^ | 1.92 | % | 1.94 | % | 1.90 | % | 1.88 | % | 0.51 | % | 1.92 | % | 0.51 | % |
(AA) ASU 2016-13 became effective for Prosperity on January 1, 2020.
Page 18 of 21
Prosperity Bancshares, Inc.^®^
Notes to Selected Financial Data (Unaudited)
(Dollars and share amounts in thousands, except per share data)
NOTES TO SELECTED FINANCIAL DATA
Prosperity’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews diluted earnings per share excluding merger related expenses, net of tax, and NOL tax benefit; return on average assets excluding merger related expenses, net of tax, and NOL tax benefit; return on average common equity excluding merger related expenses, net of tax, and NOL tax benefit; return on average tangible common equity; return on average tangible common equity excluding merger related expenses, net of tax, and NOL tax benefit; tangible book value per share; the tangible equity to tangible assets ratio; allowance for credit losses to total loans excluding Warehouse Purchase Program and PPP loans; the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities; and the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities and merger related expenses, for internal planning and forecasting purposes. In addition, due to the application of purchase accounting, Prosperity uses certain non-GAAP financial measures and ratios that exclude the impact of these items to evaluate its allowance for credit losses to total loans (excluding Warehouse Purchase Program loans and PPP loans). Prosperity has included information below relating to these non-GAAP financial measures for the applicable periods presented.
| Three Months Ended | Year-to-Date | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Dec 31, 2020 | Dec 31, 2019 | |||||||||||||||
| Reconciliation of diluted earnings per share to diluted earnings per share, excluding merger related expenses, net of tax, and NOL tax benefit: | |||||||||||||||||||||
| Net income | $ | 137,091 | $ | 130,064 | $ | 130,901 | $ | 130,848 | $ | 86,134 | $ | 528,904 | $ | 332,552 | |||||||
| Add: merger related expenses, net of tax^(AB)^ | — | — | 5,904 | 430 | 36,658 | 6,334 | 36,658 | ||||||||||||||
| Less: NOL tax benefit ^(AC)^ | — | — | (20,145 | ) | — | — | (20,145 | ) | — | ||||||||||||
| Net income, excluding merger related expenses, net of tax, and NOL tax benefit ^(AB) (AC)^ | $ | 137,091 | $ | 130,064 | $ | 116,660 | $ | 131,278 | $ | 122,792 | $ | 515,093 | $ | 369,210 | |||||||
| Weighted average diluted shares outstanding | 92,559 | 92,656 | 92,658 | 94,371 | 85,573 | 93,058 | 73,524 | ||||||||||||||
| Merger related expenses per diluted share, net of tax^(AB)^ | $ | — | $ | — | $ | 0.06 | $ | — | $ | 0.43 | $ | 0.07 | $ | 0.50 | |||||||
| NOL tax benefit per diluted share (AB) | $ | — | $ | — | $ | (0.22 | ) | $ | — | $ | — | $ | (0.22 | ) | $ | — | |||||
| Diluted earnings per share, excluding merger related expenses, net of tax, and NOL tax benefit ^(AB) (AC)^ | $ | 1.48 | $ | 1.40 | $ | 1.25 | $ | 1.39 | $ | 1.44 | $ | 5.54 | $ | 5.02 | |||||||
| 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 ^(AB) (AC)^ | $ | 137,091 | $ | 130,064 | $ | 116,660 | $ | 131,278 | $ | 122,792 | $ | 515,093 | $ | 369,210 | |||||||
| Average total assets | $ | 33,690,906 | $ | 32,980,838 | $ | 32,504,726 | $ | 31,357,412 | $ | 29,063,425 | $ | 32,645,350 | $ | 24,087,707 | |||||||
| Return on average assets excluding merger related expenses, net of tax, and NOL tax benefit^(G) (AB) (AC)^ | 1.63 | % | 1.58 | % | 1.44 | % | 1.67 | % | 1.69 | % | 1.58 | % | 1.53 | % | |||||||
| 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 ^(AB) (AC)^ | $ | 137,091 | $ | 130,064 | $ | 116,660 | $ | 131,278 | $ | 122,792 | $ | 515,093 | $ | 369,210 | |||||||
| Average shareholders' equity | $ | 6,108,574 | $ | 6,021,740 | $ | 5,925,156 | $ | 5,904,248 | $ | 5,443,986 | $ | 5,974,652 | $ | 4,458,521 | |||||||
| Return on average common equity excluding merger related expenses, net of tax, and NOL tax benefit (G) (AB) (AC) | 8.98 | % | 8.64 | % | 7.88 | % | 8.89 | % | 9.02 | % | 8.62 | % | 8.28 | % | |||||||
| Reconciliation of return on average common equity to return on average tangible common equity: | |||||||||||||||||||||
| Net income | $ | 137,091 | $ | 130,064 | $ | 130,901 | $ | 130,848 | $ | 86,134 | $ | 528,904 | $ | 332,552 | |||||||
| Average shareholders' equity | $ | 6,108,574 | $ | 6,021,740 | $ | 5,925,156 | $ | 5,904,248 | $ | 5,443,986 | $ | 5,974,652 | $ | 4,458,521 | |||||||
| Less: Average goodwill and other intangible assets | (3,306,769 | ) | (3,310,245 | ) | (3,305,008 | ) | (3,308,498 | ) | (2,687,045 | ) | (3,307,639 | ) | (2,122,154 | ) | |||||||
| Average tangible shareholders’ equity | $ | 2,801,805 | $ | 2,711,495 | $ | 2,620,148 | $ | 2,595,750 | $ | 2,756,941 | $ | 2,667,013 | $ | 2,336,367 | |||||||
| Return on average tangible common equity ^(G)^ | 19.57 | % | 19.19 | % | 19.98 | % | 20.16 | % | 12.50 | % | 19.83 | % | 14.23 | % |
(AB) Calculated assuming a federal tax rate of 21.0%.
(AC) Net income for the second quarter of 2020 includes a tax benefit for NOLs due to the CARES Act.
Page 19 of 21
| Three Months Ended | Year-to-Date | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Dec 31, 2020 | Dec 31, 2019 | |||||||||||||||
| 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 (AB) (AC) | $ | 137,091 | $ | 130,064 | $ | 116,660 | $ | 131,278 | $ | 122,792 | $ | 515,093 | $ | 369,210 | |||||||
| Average shareholders' equity | $ | 6,108,574 | $ | 6,021,740 | $ | 5,925,156 | $ | 5,904,248 | $ | 5,443,986 | $ | 5,974,652 | $ | 4,458,521 | |||||||
| Less: Average goodwill and other intangible assets | (3,306,769 | ) | (3,310,245 | ) | (3,305,008 | ) | (3,308,498 | ) | (2,687,045 | ) | (3,307,639 | ) | (2,122,154 | ) | |||||||
| Average tangible shareholders’ equity | $ | 2,801,805 | $ | 2,711,495 | $ | 2,620,148 | $ | 2,595,750 | $ | 2,756,941 | $ | 2,667,013 | $ | 2,336,367 | |||||||
| Return on average tangible common equity excluding merger related expenses, net of tax, and NOL tax benefit (G) (AB) (AC) | 19.57 | % | 19.19 | % | 17.81 | % | 20.23 | % | 17.82 | % | 19.31 | % | 15.80 | % | |||||||
| Reconciliation of book value per share to tangible book value per share: | |||||||||||||||||||||
| Shareholders’ equity | $ | 6,130,669 | $ | 6,034,877 | $ | 5,948,122 | $ | 5,855,574 | $ | 5,970,835 | $ | 6,130,669 | $ | 5,970,835 | |||||||
| Less: Goodwill and other intangible assets | (3,304,871 | ) | (3,308,170 | ) | (3,311,712 | ) | (3,306,185 | ) | (3,310,075 | ) | (3,304,871 | ) | (3,310,075 | ) | |||||||
| Tangible shareholders’ equity | $ | 2,825,798 | $ | 2,726,707 | $ | 2,636,410 | $ | 2,549,389 | $ | 2,660,760 | $ | 2,825,798 | $ | 2,660,760 | |||||||
| Period end shares outstanding | 92,571 | 92,562 | 92,660 | 92,652 | 94,746 | 92,571 | 94,746 | ||||||||||||||
| Tangible book value per share | $ | 30.53 | $ | 29.46 | $ | 28.45 | $ | 27.52 | $ | 28.08 | $ | 30.53 | 28.08 | ||||||||
| Reconciliation of equity to assets ratio to period end tangible equity to period end tangible assets ratio: | |||||||||||||||||||||
| Tangible shareholders’ equity | $ | 2,825,798 | $ | 2,726,707 | $ | 2,636,410 | $ | 2,549,389 | $ | 2,660,760 | $ | 2,825,798 | $ | 2,660,760 | |||||||
| Total assets | $ | 34,059,275 | $ | 33,197,599 | $ | 32,966,649 | $ | 31,743,499 | $ | 32,185,708 | $ | 34,059,275 | $ | 32,185,708 | |||||||
| Less: Goodwill and other intangible assets | (3,304,871 | ) | (3,308,170 | ) | (3,311,712 | ) | (3,306,185 | ) | (3,310,075 | ) | (3,304,871 | ) | (3,310,075 | ) | |||||||
| Tangible assets | $ | 30,754,404 | $ | 29,889,429 | $ | 29,654,937 | $ | 28,437,314 | $ | 28,875,633 | $ | 30,754,404 | $ | 28,875,633 | |||||||
| Period end tangible equity to period end tangible assets ratio | 9.19 | % | 9.12 | % | 8.89 | % | 8.96 | % | 9.21 | % | 9.19 | % | 9.21 | % | |||||||
| Reconciliation of allowance for credit losses to total loans to allowance for credit losses to total loans, excluding Warehouse Purchase Program and Paycheck Protection Program loans: | |||||||||||||||||||||
| Allowance for credit losses ^(AA)^ | $ | 316,068 | $ | 323,635 | $ | 324,205 | $ | 327,206 | $ | 87,469 | $ | 316,068 | $ | 87,469 | |||||||
| Total loans | $ | 20,246,944 | $ | 20,795,641 | $ | 21,025,173 | $ | 19,127,195 | $ | 18,845,346 | $ | 20,246,944 | $ | 18,845,346 | |||||||
| Less: Warehouse Purchase Program loans | (2,842,379 | ) | (2,730,614 | ) | (2,557,183 | ) | (1,713,762 | ) | (1,552,762 | ) | (2,842,379 | ) | 1,552,762 | ||||||||
| Less: Paycheck Protection Program loans | (963,185 | ) | (1,393,757 | ) | (1,392,497 | ) | — | — | (963,185 | ) | — | ||||||||||
| Total loans less Warehouse Purchase Program and Paycheck Protection Program loans | $ | 16,441,380 | $ | 16,671,270 | $ | 17,075,493 | $ | 17,413,433 | $ | 17,292,584 | $ | 16,441,380 | $ | 10,588,437 | |||||||
| Allowance for credit losses to total loans, excluding Warehouse Purchase Program and Paycheck Protection Program loans | 1.92 | % | 1.94 | % | 1.90 | % | 1.88 | % | 0.51 | % | 1.92 | % | 0.83 | % | |||||||
| Reconciliation of efficiency ratio to efficiency ratio, excluding net gains and losses on the sale of assets and taxes: | |||||||||||||||||||||
| Noninterest expense | $ | 120,205 | $ | 117,919 | $ | 134,368 | $ | 124,741 | $ | 156,451 | $ | 497,233 | $ | 396,542 | |||||||
| Net interest income | $ | 257,634 | $ | 258,113 | $ | 258,955 | $ | 256,031 | $ | 232,030 | $ | 1,030,733 | $ | 695,769 | |||||||
| Noninterest income | 36,547 | 34,924 | 25,675 | 34,388 | 35,506 | 131,534 | 124,281 | ||||||||||||||
| Less: net (loss) gain on sale or write down of assets | (675 | ) | (528 | ) | (3,945 | ) | (385 | ) | (1,870 | ) | (5,533 | ) | (1,813 | ) | |||||||
| Noninterest income excluding net gains and losses on the sale or write down of assets and securities | 37,222 | 35,452 | 29,620 | 34,773 | 37,376 | 137,067 | 126,094 | ||||||||||||||
| Total income excluding net gains and losses on the sale or write down of assets and taxes | $ | 294,856 | $ | 293,565 | $ | 288,575 | $ | 290,804 | $ | 269,406 | $ | 1,167,800 | $ | 821,863 | |||||||
| Efficiency ratio, excluding net gains and losses on the sale or write down of assets and taxes | 40.77 | % | 40.17 | % | 46.56 | % | 42.90 | % | 58.07 | % | 42.58 | % | 48.25 | % |
Page 20 of 21
| Three Months Ended | Year-to-Date | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Dec 31, 2020 | Dec 31, 2019 | |||||||||||||||
| Reconciliation of efficiency ratio to efficiency ratio, excluding net gains and losses on the sale of assets, taxes and merger related expenses: | |||||||||||||||||||||
| Noninterest expense | $ | 120,205 | $ | 117,919 | $ | 134,368 | $ | 124,741 | $ | 156,451 | $ | 497,233 | $ | 396,542 | |||||||
| Less: merger related expenses | — | — | 7,474 | 544 | 46,402 | 8,018 | 46,402 | ||||||||||||||
| Noninterest expense excluding merger related expenses | $ | 120,205 | $ | 117,919 | $ | 126,894 | $ | 124,197 | $ | 110,049 | $ | 489,215 | $ | 350,140 | |||||||
| Net interest income | $ | 257,634 | $ | 258,113 | $ | 258,955 | $ | 256,031 | $ | 232,030 | $ | 1,030,733 | $ | 695,769 | |||||||
| Noninterest income | 36,547 | 34,924 | 25,675 | 34,388 | 35,506 | 131,534 | 124,281 | ||||||||||||||
| Less: net (loss) gain on sale or write down of assets | (675 | ) | (528 | ) | (3,945 | ) | (385 | ) | (1,870 | ) | (5,533 | ) | (1,813 | ) | |||||||
| Noninterest income excluding net gains and losses on the sale or write down of assets and taxes | 37,222 | 35,452 | 29,620 | 34,773 | 37,376 | 137,067 | 126,094 | ||||||||||||||
| Total income excluding net gains and losses on the sale or write down of assets and taxes | $ | 294,856 | $ | 293,565 | $ | 288,575 | $ | 290,804 | $ | 269,406 | $ | 1,167,800 | $ | 821,863 | |||||||
| Efficiency ratio, excluding net gains and losses on the sale or write down of assets, taxes and merger related expenses | 40.77 | % | 40.17 | % | 43.97 | % | 42.71 | % | 40.85 | % | 41.89 | % | 42.60 | % |
Page 21 of 21