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HOUSTON, Oct. 16 /PRNewswire-FirstCall/ -- Prosperity Bancshares, Inc.(R) (Nasdaq: PRSP), the parent company of Prosperity Bank(R), reported net income for the quarter ended September 30, 2009 of $29.322 million or $0.63 per diluted common share, an increase in net income of $13.875 million or 89.8%, compared with $15.447 million or $0.33 per diluted common share for the same period in 2008. Earnings for the three months ended September 30, 2008 included a $9.116 million after-tax ($14.025 million pre-tax) impairment charge on Fannie Mae and Freddie Mac perpetual preferred securities ("impairment charge on securities" or "impairment charge"). Excluding the impairment charge, net income for the quarter ended September 30, 2008 would have been $24.563 million or $0.53 per diluted common share. Net income for the quarter ended September 30, 2009 increased $4.759 million or 19.4% when compared to net income for the quarter ended September 30, 2008 excluding the impairment charge.
"I am proud to report our team's outstanding performance during the past quarter," commented David Zalman, Chairman and Chief Executive Officer. "Our bankers are competing well in all of our markets and we continue to believe our strong asset quality and strong earnings capacity will lead to future opportunities."
"We continued to reduce our exposure to construction and development loans while our team of professional bankers continued to attract core deposit customers in our market areas throughout Texas," continued Zalman. "While Texas is certainly not immune to the economic ills affecting other parts of the country, we are encouraged by the resilience of the Texas economy."
Prosperity's management uses certain non GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity and the tangible equity to tangible assets ratio. Prosperity also reviewed its net income, earnings per share, non-interest expense and related performance ratios for the three and nine month periods ending September 30, 2008 excluding the non-recurring impairment charge on Fannie Mae and Freddie Mac perpetual preferred securities. Prosperity has included in this Earnings Release information relating to these non-GAAP financial measures for the applicable periods presented. 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.
Results of operations for the three months ended September 30, 2009
For the three months ended September 30, 2009, net income was $29.322 million compared with $15.447 million for the same period in 2008. Net income per diluted common share was $0.63 for the three months ended September 30, 2009 and $0.33 for the same period in 2008. Earnings for the three months ended September 30, 2008 included a $9.116 million after-tax ($14.025 million pre-tax) impairment charge on Fannie Mae and Freddie Mac perpetual preferred securities. Excluding the impairment charge, net income for the quarter ended September 30, 2008 would have been $24.563 million or $0.53 per diluted common share. Net income for the quarter ended September 30, 2009 increased $4.759 million or 19.4% when compared to net income for the quarter ended September 30, 2008 excluding the impairment charge. Returns on average assets, average common equity and average tangible common equity for the three months ended September 30, 2009 were 1.32%, 8.93% and 29.34%, respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale of securities and assets and impairment charge on securities) was 44.46% for the three months ended September 30, 2009.
Net interest income before provision for credit losses for the quarter ended September 30, 2009 increased 33.9% to $77.413 million compared with $57.806 million during the same period in 2008. The increase was attributable primarily to a 35.7% increase in average earning assets primarily due to the assumption of certain deposits and acquisition of certain assets of Franklin Bank from the FDIC. The net interest margin on a tax equivalent basis decreased to 4.08% for the three months ended September 30, 2009 compared with 4.15% for the same period in 2008.
On a linked quarter basis, the tax equivalent net interest margin increased four basis points to 4.08% for the three months ended September 30, 2009 from 4.04% reported for the three months ended June 30, 2009 as a result of multiple factors, including lower deposit pricing.
Non-interest income increased $2.119 million or 16.2% to $15.236 million for the three months ended September 30, 2009 compared with $13.117 million for the same period in 2008. The increase was mainly attributable to an increase in service charges on deposit accounts related to accounts assumed from the FDIC as part of the Franklin Bank transaction.
Non-interest expense decreased $5.029 million or 10.9% to $41.201 million for the third quarter of 2009 compared with $46.230 million for the third quarter of 2008. The decrease was attributable to a $14.025 million impairment charge on securities during the three months ended September 30, 2008, partially offset by increased expenses related to operating the additional banking offices that were acquired in the Franklin Bank transaction and increased FDIC insurance premiums. Excluding the impairment charge, non-interest expense increased $8.996 million or 27.9%, primarily due to increases in staff and general operating expenses related to the banking centers acquired in the Franklin Bank transaction and increased FDIC deposit insurance assessments.
Prosperity's FDIC deposit insurance assessments for 2008 were approximately $1.4 million. The expected full year 2009 FDIC deposit insurance assessment (excluding any one-time assessments) is currently projected to be between $8.0 million and $9.0 million pre-tax based upon deposit balances at September 30, 2009. Additionally, the FDIC imposed an emergency special assessment as of June 30, 2009, which for Prosperity totaled approximately $4.3 million in pre-tax expense or $0.06 per diluted common share after tax. Additionally, the FDIC has adopted a proposed rule to require depository institutions to pre-pay, on December 30, 2009, estimated quarterly risk-based assessments for the fourth quarter of 2009 and all of 2010, 2011 and 2012. Comments to the proposed rule are due to the FDIC by October 28, 2009 and a final rule will be adopted after that date.
Average loans increased 4.3% or $141.858 million to $3.431 billion for the quarter ended September 30, 2009 compared with $3.289 billion for the same period in 2008. Linked quarter average loans decreased 1.2% or $41.388 million from $3.472 billion at June 30, 2009. Average deposits increased 39.3% or $2.037 billion to $7.224 billion for the quarter ended September 30, 2009 compared with $5.187 billion for the same period in 2008. Linked quarter average deposits decreased 0.3% or $22.541 million from $7.246 billion at June 30, 2009.
Loans at September 30, 2009 were $3.406 billion, an increase of $157,520 million or 4.9%, compared with $3.249 billion at September 30, 2008. Loans decreased 1.3% or $45.182 million on a linked quarter basis compared with loans of $3.451 billion at June 30, 2009. As reflected in the table below, linked quarter loans for the third quarter of 2009 were impacted by the loans acquired from the FDIC as a part of the Franklin Bank transaction in November 2008. Excluding the loans acquired in this transaction, linked quarter loans decreased 0.8%.
Deposits at September 30, 2009 were $7.118 billion, an increase of $2.013 billion or 39.4%, compared with $5.105 billion at September 30, 2008. Linked quarter deposits decreased $139.902 million or 1.9% from $7.258 billion at June 30, 2009. As reflected in the table below, linked quarter deposits for the third quarter of 2009 were impacted by the deposits assumed from the FDIC as part of the Franklin Bank transaction. Excluding the deposits assumed in this transaction, linked quarter deposits increased 1.0% and 9.4% from September 30, 2008.
Balance Sheet Data (at period
end) Sept 30, 2009 June 30, 2009 Sept 30, 2008
------------- ------------- -------------
(In thousands) (Unaudited) (Unaudited) (Unaudited)
Loans:
Acquired from FDIC (related to
Franklin Bank) $264,319 $282,733 $0
All other 3,141,818 3,168,586 3,248,617
--------- --------- ---------
Total Loans $3,406,137 $3,451,319 $3,248,617
========== ========== ==========
Deposits:
Assumed from FDIC (related to
Franklin Bank) $1,533,641 $1,729,657 $0
All other 5,584,352 5,528,238 5,104,842
--------- --------- ---------
Total Deposits $7,117,993 $7,257,895 $5,104,842
========== ========== ==========
At September 30, 2009, construction loans totaled $564.106 million, consisting of approximately $152 million of single family residential construction loans; $77 million of land development loans; $84 million of raw land loans; $104 million of residential lot loans; $48 million of commercial lot loans; and $99 million of commercial and other construction loans. This is a decrease of $49.280 million from construction loans at June 30, 2009.
At September 30, 2009, Prosperity had $8.957 billion in total assets, $3.406 billion in loans, and $7.118 billion in deposits. Assets, loans and deposits at September 30, 2009 increased by 32.0%, 4.9% and 39.4%, respectively, compared with their level at September 30, 2008.
Results of operations for the nine months ended September 30, 2009
For the nine months ended September 30, 2009, net income was $81.310 million compared with $61.822 million for the same period in 2008. Net income per diluted common share was $1.76 for the nine months ended September 30, 2009 compared with $1.37 for the same period in 2008. Returns on average assets, average common equity and average tangible common equity for the nine months ended September 30, 2009 were 1.22%, 8.39% and 28.72%, respectively. Prosperity's efficiency ratio was 47.60% for the nine months ended September 30, 2009.
Net interest income before provision for credit losses for the nine months ended September 30, 2009 increased $63.240 million or 38.6%, to $227.012 million compared with $163.772 million during the same period in 2008. The increase was attributable primarily to a 40.5% increase in average earning assets.
Non-interest income increased $6.524 million or 16.8% to $45.386 million for the nine months ended September 30, 2009 compared with $38.862 million for the same period in 2008. The increase was mainly attributable to an increase in service charges on deposit accounts related to accounts assumed from the FDIC as part of the Franklin Bank transaction and deposit accounts assumed from the 1st Choice acquisition.
Non-interest expense increased $23.314 million or 22.0% to $129.524 million for the nine months ended September 30, 2009 compared with $106.210 million for the same period in 2008. The increase was attributable to the increased expenses related to operating the additional banking offices that were acquired in the Franklin Bank transaction, the 1st Choice acquisition and FDIC deposit insurance assessments, partially offset by a $14.025 million pre-tax impairment charge on securities recognized in the third quarter of 2008.
The provision for credit losses was $20.275 million for the nine months ended September 30, 2009 compared to $3.867 million for the nine months ended September 30, 2008. Net charge offs were $9.932 million for the nine months ended September 30, 2009 compared to $4.611 million for the nine months ended September 30, 2008.
Asset Quality
Non-performing assets totaled $21.920 million or 0.29% of average earning assets at September 30, 2009 compared with $14.536 million or 0.26% of average earning assets at September 30, 2008 and $19.587 million or 0.26% of average earnings assets at June 30, 2009. The allowance for credit losses was 1.39% of total loans at September 30, 2009 compared with 1.05% at September 30, 2008 and 1.23% of total loans at June 30, 2009.
Non-performing
assets Sept 30, 2009 June 30, 2009 Sept 30, 2008
(In thousands) ------------- ------------- -------------
Amount # Amount # Amount #
------ --- ------ --- ------ ---
Commercial $920 26 $955 28 $1,600 26
Construction 10,975 40 10,969 38 6,562 29
1-4 family
(including home
equity) 1,285 16 1,353 22 2,962 17
Commercial real
estate (including
multi-family) 8,592 13 6,157 9 2,886 8
Agriculture 0 0 0 0 400 2
Consumer 148 13 153 11 126 18
Other 0 0 0 0 0 0
--- --- --- --- --- ---
Total $21,920 108 $19,587 108 $14,536 100
======= === ======= === ======= ===
Net Charge-offs Three Months Three Months Three Months
Ended Ended Ended
(In thousands) Sept 30, 2009 June 30, 2009 Sept 30, 2008
------------- ------------- -------------
Commercial $712 $307 $223
Construction 780 1,185 1,043
1-4 family (including
home equity) 297 510 128
Commercial real estate
(including
multi-family) 215 1,091 (14)
Agriculture 53 (1) 51
Consumer 492 434 373
--- --- ---
Total $2,549 $3,526 $1,804
====== ====== ======
The provision for credit losses was $7.250 million for the three months ended September 30, 2009 and $1.700 million for the three months ended September 30, 2008. Prosperity's loan loss reserve model called for increased provisioning in the third quarter due to increased charge-offs resulting from a general weakening of the economy. Net charge offs were $2.549 million for the three months ended September 30, 2009 and $1.804 million for the three months ended September 30, 2008.
Conference Call
Prosperity's management team will host a conference call on Friday, October 16, 2009 at 10:30 a.m. Eastern Daylight Time (9:30 a.m. Central Daylight Time) to discuss Prosperity's third quarter earnings. Individuals and investment professionals may participate in the call by dialing 1-800-895-4790, the reference code is PBTX.
Alternatively, individuals may listen to the live webcast of the presentation by visiting Prosperity's website at www.prosperitybanktx.com. The webcast may be accessed directly from Prosperity's Home page under News and Events.
Assumption of deposits and acquisition of certain assets from the FDIC as receiver for Franklin Bank, SSB
On November 7, 2008, Prosperity Bank(R) paid a deposit premium of approximately $60.918 million to assume approximately $3.6 billion of deposits, including all uninsured deposits, from the FDIC, acting in its capacity as receiver for Franklin Bank. The FDIC entered into a purchase and assumption agreement with Prosperity Bank, which paid a premium to ensure that all deposits of Franklin Bank, both insured and uninsured, were transferred to Prosperity Bank(R). Under the terms of the purchase and assumption agreement, Prosperity Bank(R) acquired certain assets from the FDIC, including approximately $350 million in US Treasury and Agency Securities and approximately $350 million in performing loans. The remaining net proceeds were predominately invested in US Agency Securities.
While Franklin Bank operated forty-five (45) full service banking offices, Prosperity Bank continues to operate thirty-three (33) of these locations and has consolidated the remainder with other nearby Prosperity locations.
Acquisition of 1st Choice Bancorp, Inc.
On June 1, 2008, Prosperity completed its previously announced acquisition of 1st Choice Bancorp, Inc. and its wholly owned subsidiary, 1st Choice Bank. 1st Choice Bancorp, Inc. operated two (2) banking offices in Houston, Texas, with one location in South Houston and another in the Heights area which was consolidated with Prosperity's Heights location and is located in 1st Choice's Heights banking office. As of May 31, 2008, 1st Choice Bancorp reported total assets of approximately $314.9 million, loans of approximately $192.7 million, deposits of approximately $285.2 million and stockholders' equity of approximately $26.4 million.
In connection with the acquisition, Prosperity issued 1,757,757 shares of its common stock and paid approximately $18.758 million in cash for all outstanding shares of 1st Choice Bancorp.
Prosperity Bancshares, Inc.(R)
Prosperity Bancshares, Inc.(R), a $9.0 billion Houston, Texas based regional financial holding company, formed in 1983, operates under a community banking philosophy and seeks to develop broad customer relationships based on service and convenience. Prosperity offers a variety of traditional loan and deposit products to its customers, which consist primarily of small and medium sized businesses and consumers. In addition to established banking products, Prosperity offers a complete line of services including: Internet Banking services at http://www.prosperitybanktx.com, Retail Brokerage Services, MasterMoney Debit Cards, and 24 hour voice response banking. Prosperity currently operates one hundred fifty-eight (158) full service banking locations; fifty-one (51) in the Houston area; twenty-seven (27) in the South Texas area including Corpus Christi and Victoria; twenty-four (24) in the Dallas/Fort Worth area; twenty (20) in the East Texas area; twenty-seven (27) in the Central Texas area including Austin and San Antonio; and nine (9) in the Bryan/College Station area.
Bryan/College Station -
Bryan
Bryan-East
Bryan-North
Caldwell
College Station
Greens Prairie
Navasota
Rock Prairie
Wellborn Road
Central Texas Area -
Austin -
Allandale
Cedar Park
Congress
183
Lakeway
Liberty Hill
Northland
Oak Hill
Parmer Lane
Research Blvd
Rollingwood
Slaughter Lane
Other Central Texas Locations -
Bastrop
Dime Box
Dripping Springs
Elgin
Flatonia
Georgetown
Kingsland
La Grange
Lexington
New Braunfels
Round Rock
San Antonio
Schulenburg
Smithville
Weimar
Dallas/Fort Worth Area -
Dallas -
Abrams Centre
Balch Springs
Camp Wisdom
Cedar Hill
Central Expressway
Frisco
Frisco-West
Kiest
Preston Road
Red Oak
The Colony
Turtle Creek
Westmoreland
Fort Worth -
Haltom City
Keller
Roanoke
Stockyards
Other Dallas/Fort Worth Locations -
Azle
Ennis
Gainesville
Mesquite
Muenster
Sanger
Waxahachie
East Texas Area -
Athens
Athens-South
Blooming Grove
Canton
Carthage
Corsicana
Crockett
Eustace
Grapeland
Gun Barrel City
Jacksonville
Kerens
Longview
Mount Vernon
Palestine
Rusk
Seven Points
Tyler
Tyler-University
Winnsboro
Houston Area -
Houston -
Aldine
Bellaire
Clear Lake
Copperfield
Cypress
Downtown
Fairfield
Gessner
Gladebrook
Harrisburg
Heights
Highway 6 West
Hillcroft
Little York
Medical Center
Memorial Drive
Pasadena
Pecan Grove
River Oaks
Sugar Land
SW Medical Center
Tanglewood
Uptown
Waugh Drive
Westheimer
Woodcreek
Other Houston Area Locations -
Angleton
Beaumont
Cinco Ranch
Cleveland
East Bernard
Edna
El Campo
Dayton
Galveston
Groves
Hempstead
Hitchcock
Katy
Liberty
Magnolia
Mont Belvieu
Nederland
Needville
Sweeny
Tomball
Waller
West Columbia
Wharton
Winnie
Wirt
South Texas Area -
Corpus Christi -
Airline
Carmel
Northwest
Saratoga
Water Street
Other South Texas Locations -
Alice
Aransas Pass
Bay City
Beeville
Cuero
Goliad
Gonzales
Hallettsville
Kingsville
Mathis
Padre Island
Palacios
Pleasanton
Port Lavaca
Portland
Rockport
Seguin
Sinton
Victoria
Victoria-North
Yoakum
Yorktown
"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 securities laws that are based on current expectations, assumptions, estimates and projections about Prosperity and its subsidiaries. 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 that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include but are not limited to whether Prosperity can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks; continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives. Other risks include, but are not limited to: the possibility that credit quality could deteriorate; actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); 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 fluctuations and interest rate fluctuations; weather; and the stock price volatility associated with "small-cap" companies. These and various other factors are discussed in Prosperity's Annual Report on Form 10-K for the year ended December 31, 2008 and other reports and statements we have filed with the SEC. Copies of the SEC filings for Prosperity may be downloaded from the Internet at no charge from www.prosperitybanktx.com.
Prosperity Bancshares, Inc.(R)
Financial Highlights
(Dollars and share amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2009 2008 2009 2008
----------- ----------- ----------- -----------
Selected Earnings (Unaudited) (Unaudited) (Unaudited) (Unaudited)
and Per Share Data
Total interest income $101,695 $84,846 $310,029 $251,290
Total interest expense 24,282 27,040 83,017 87,518
------ ------ ------ ------
Net interest income 77,413 57,806 227,012 163,772
Provision for credit losses 7,250 1,700 20,275 3,867
----- ----- ------ -----
Net interest income after
provision for credit
losses 70,163 56,106 206,737 159,905
Total non-interest income 15,236 13,117 45,386 38,862
Total non-interest
expense (A) 41,201 46,230 129,524 106,210
------ ------ ------- -------
Net income before taxes 44,198 22,993 122,599 92,557
Federal income taxes 14,876 7,546 41,289 30,735
------ ----- ------ ------
Net income (B) $29,322 $15,447 $81,310 $61,822
======= ======= ======= =======
Basic earnings per
share (C) $0.64 $0.34 $1.76 $1.37
Diluted earnings per
share (C) $0.63 $0.33 $1.76 $1.37
Period end shares
outstanding 46,153 46,072 46,153 46,072
Weighted average shares
outstanding (basic) 46,125 46,065 46,106 45,038
Weighted average shares
outstanding (diluted) 46,347 46,302 46,243 45,217
(A) Total non-interest expense for the three and nine months ended
September 30, 2008 includes a $14.025 million pre-tax impairment charge on
securities.
(B) Earnings for the three and nine months ended September 30, 2008
include a $14.025 million pre-tax, or $9.116 million after-tax, impairment
charge on securities.
(C) Earnings for the three and nine months ended September 30, 2008
includes a $14.025 million pre-tax, or $9.116 million after-tax,
impairment charge on securities which resulted in a $0.19 and $0.20
decrease in basic and diluted earnings per share to $0.34 and $0.33,
respectively, for the three months ended September 30, 2008 and a $0.21
and $0.20 decrease in basic and diluted earnings per share to $1.37 and
$1.37, respectively, for the nine months ended September 30, 2008.
Prosperity Bancshares, Inc.(R)
Financial Highlights
(Dollars in thousands)
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2009 2008 2009 2008
----------- ----------- ----------- -----------
Balance Sheet Averages (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Total loans $3,431,061 $3,289,203 3,477,972 $3,212,176
Investment securities 4,062,796 2,292,571 4,019,370 2,134,396
Federal funds sold
and other temporary
investments 107,008 18,854 98,782 61,264
------- ------ ------ ------
Total earning assets 7,600,865 5,600,628 7,596,124 5,407,836
Allowance for credit
losses (43,610) (33,746) (40,045) (32,839)
Cash and due from
banks 126,659 134,849 139,017 137,177
Goodwill 875,176 811,726 875,450 785,853
Core deposit
intangibles (CDI) 39,027 46,240 39,217 44,840
Other real estate 13,910 6,972 11,508 8,984
Fixed assets, net 150,216 124,828 141,510 124,082
Other assets 105,304 109,952 106,204 112,720
------- ------- ------- -------
Total assets $8,867,547 $6,801,449 $8,868,985 $6,588,653
========== ========== ========== ==========
Non-interest bearing
deposits $1,475,878 $1,266,924 $1,490,911 $1,212,379
Interest bearing
deposits 5,747,980 3,920,291 5,761,958 3,842,826
--------- --------- --------- ---------
Total deposits 7,223,858 5,187,215 7,252,869 5,055,205
Securities sold under
repurchase agreements 109,961 95,533 95,488 81,390
Federal funds
purchased and
other borrowings 49,539 146,172 53,733 106,572
Junior subordinated
debentures 92,265 92,265 92,265 101,429
Other liabilities 77,913 55,105 82,492 61,405
Shareholders'
equity(D) 1,314,011 1,225,159 1,292,138 1,182,652
--------- --------- --------- ---------
Total liabilities and
equity $8,867,547 $6,801,449 $8,868,985 $6,588,653
========== ========== ========== ==========
(D) Includes $13,735 and ($3,643) in after tax unrealized gains (losses)
on available for sale securities for the three months ending September 30,
2009 and September 30, 2008, respectively, and $13,767 and ($1,109) for
the nine months ending September 30, 2009 and September 30, 2008,
respectively.
Prosperity Bancshares, Inc.(R)
Financial Highlights
(Dollars in thousands)
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2009 2008 2009 2008
----------- ----------- ----------- -----------
Income Statement Data (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest on loans $54,809 $56,925 $165,859 $171,393
Interest on securities 46,812 27,834 143,990 78,473
Interest on federal funds
sold and other temporary
investments 74 87 180 1,424
--- --- --- -----
Total interest income 101,695 84,846 310,029 251,290
------- ------ ------- -------
Interest expense - deposits 22,694 23,874 77,772 78,029
Interest expense -
debentures 879 1,410 2,957 4,987
Interest expense - other 709 1,756 2,288 4,502
--- ----- ----- -----
Total interest expense 24,282 27,040 83,017 87,518
------ ------ ------ ------
Net interest income (E) 77,413 57,806 227,012 163,772
Provision for credit losses 7,250 1,700 20,275 3,867
----- ----- ------ -----
Net interest income after
provision for credit
losses 70,163 56,106 206,737 159,905
------ ------ ------- -------
Service charges on
deposit accounts 13,554 11,348 38,789 32,581
Net (loss) gain on sale of
assets (20) 34 277 715
Net gain (loss) on sale of
ORE 115 (210) 552 (648)
Brokered mortgage income 59 74 269 296
Net gain on sale of held
for sale loans 0 46 0 229
Other non-interest income 1,528 1,825 5,499 5,689
----- ----- ----- -----
Total non-interest income 15,236 13,117 45,386 38,862
------ ------ ------ ------
Salaries and benefits (F) 21,507 17,526 64,649 50,407
CDI amortization 2,479 2,562 7,635 7,513
Net occupancy and equipment 3,624 3,088 11,116 8,765
Depreciation 2,100 1,955 6,170 5,812
Data processing
and software amortization 1,446 1,319 5,063 3,971
Impairment charge on
securities 0 14,025 0 14,025
Other non-interest expense 10,045 5,755 34,891 15,717
------ ----- ------ ------
Total non-interest expense 41,201 46,230 129,524 106,210
------ ------ ------- -------
Net income before taxes 44,198 22,993 122,599 92,557
Federal income taxes 14,876 7,546 41,289 30,735
------ ----- ------ ------
Net income available
to common shareholders(G) $29,322 $15,447 $81,310 $61,822
======= ======= ======= =======
(E) Net interest income on a tax equivalent basis would be $78,111 and
$58,471 for the three months ended September 30, 2009 and September 30,
2008, respectively, and $229,096 and $165,995 for the nine months ended
September 30, 2009 and September 30, 2008, respectively.
(F) Salaries and benefits includes stock-based compensation expense of
$267 and $470 for the three months ended September 30, 2009 and September
30, 2008, respectively, and $887 and $1,111 for the nine months ended
September 30, 2009 and September 30, 2008, respectively.
(G) Earnings for the three and nine months ended September 30, 2008
includes a $14.025 million pre-tax, or $9.116 million after-tax,
impairment charge on securities.
Prosperity Bancshares, Inc.(R)
Financial Highlights
(Dollars and share amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2009 2008 2009 2008
----------- ----------- ----------- -----------
Common Share and Other (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Data
Employees - FTE 1,608 1,366 1,608 1,366
Book value per share $28.75 $26.68 $28.75 $26.68
Tangible book value per share $8.93 $8.08 $8.93 $8.08
Period end shares outstanding 46,153 46,072 46,153 46,072
Weighted average shares
outstanding (basic) 46,125 46,065 46,106 45,038
Weighted average shares
outstanding (diluted) 46,347 46,302 46,243 45,217
Non-accrual loans $2,878 $2,757 $2,878 $2,757
Accruing loans 90 or more
days past due 5,938 4,083 5,938 4,083
Restructured loans 0 0 0 0
--- --- --- ---
Total non-performing loans 8,816 6,840 8,816 6,840
Repossessed assets 366 158 366 158
Other real estate 12,738 7,538 12,738 7,538
------ ----- ------ -----
Total non-performing assets $21,920 $14,536 $21,920 $14,536
Allowance for credit losses
at end of period $47,312 $33,981 $47,312 $33,981
Net charge-offs $2,549 $1,804 $9,932 $4,611
Basic earnings per share (H) $0.64 $0.34 $1.76 $1.37
Diluted earnings per share (H) $0.63 $0.33 $1.76 $1.37
(H) Earnings for the three and nine months ended September 30, 2008
includes a $14.025 million pre-tax, or $9.116 million after-tax,
impairment charge on securities which resulted in a $0.19 and $0.20
decrease in basic and diluted earnings per share to $0.34 and $0.33,
respectively, for the three months ended September 30, 2008 and a $0.21
and $0.20 decrease in basic and diluted earnings per share to $1.37 and
$1.37, respectively, for the nine months ended September 30, 2008.
Prosperity Bancshares, Inc.(R)
Financial Highlights
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2009 2008 2009 2008
----------- ----------- ----------- -----------
Performance Ratios (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Return on average
assets (annualized) (I) 1.32% 0.91% 1.22% 1.25%
Return on average common
equity (annualized) (I) 8.93% 5.04% 8.39% 6.97%
Return on average tangible
common equity
(annualized) (I) 29.34% 16.83% 28.72% 23.42%
Net interest margin
(tax equivalent)
(annualized) (J) 4.08% 4.15% 4.03% 4.10%
Efficiency ratio (K) 44.46% 45.43% 47.60% 45.65%
Asset Quality Ratios
Non-performing assets to
average earning assets 0.29% 0.26% 0.29% 0.27%
Non-performing assets to
loans and other real estate 0.64% 0.45% 0.64% 0.45%
Net charge-offs
to average loans 0.07% 0.05% 0.29% 0.14%
Allowance for credit losses
to total loans 1.39% 1.05% 1.39% 1.05%
Common Stock Market Price
High $37.36 $46.48 $37.36 $46.48
Low $28.13 $23.32 $20.04 $21.96
Period end market price $34.79 $33.99 $34.79 $33.99
(I) Earnings for the three and nine months ended September 30, 2008
includes a $14.025 million pre-tax, or $9.116 million after-tax,
impairment charge on securities which resulted in a 53 and 19 basis point
decrease in return on average assets to 0.91% and 1.25%, respectively, a
298 and 103 basis point decrease in return on average equity to 5.04% and
6.97%, respectively, and a 993 and 345 basis point decrease in return on
average tangible common equity to 16.83% and 23.42%, respectively
(J) Net interest margin for all periods presented is calculated on an
actual 365 or actual 366 day basis.
(K) The Company revised its efficiency ratio in the fourth quarter 2008
and no longer excludes gains and losses on the sale of ORE. The
efficiency ratio is calculated by dividing total non-interest expense
(excluding provision for credit losses) by net interest income plus non-
interest income (excluding net gains and losses on the sale of securities
and assets and impairment charge on securities). Prior period amounts have
been restated to reflect the current methodology. Additionally, taxes are
not part of this calculation.
Prosperity Bancshares, Inc.(R)
Financial Highlights
(Dollars in thousands)
Sept 30, 2009 June 30, 2009
------------- -------------
Loan Portfolio (Unaudited) (Unaudited)
Commercial $439,848 12.92% $461,622 13.38%
Construction 564,106 16.56% 613,386 17.77%
1-4 family residential 692,885 20.34% 675,702 19.58%
Home equity 116,873 3.43% 115,029 3.33%
Commercial real estate 1,336,454 39.24% 1,318,489 38.20%
Agriculture 145,176 4.26% 149,515 4.33%
Consumer 110,795 3.25% 117,576 3.41%
------- -------
Total Loans $3,406,137 $3,451,319
========== ==========
Deposit Types
Non-interest bearing DDA $1,473,189 20.70% $1,476,378 20.34%
Interest bearing DDA 1,066,778 14.99% 1,060,965 14.62%
Money Market 1,682,345 23.63% 1,614,874 22.25%
Savings 320,078 4.50% 325,232 4.48%
Time < $100 1,289,362 18.11% 1,418,375 19.54%
Time > $100 1,286,241 18.07% 1,362,071 18.77%
--------- ---------
Total Deposits $7,117,993 $7,257,895
========== ==========
Loan to Deposit Ratio 47.9% 47.6%
Construction Loans
Single family residential
construction $152,056 26.96% $177,632 28.96%
Land development 76,996 13.65% 86,363 14.08%
Raw land 84,384 14.96% 96,157 15.67%
Residential lots 103,565 18.36% 101,321 16.52%
Commercial lots 48,139 8.53% 49,614 8.09%
Commercial
construction and other 98,966 17.54% 102,299 16.68%
------ -------
Total Construction Loans $564,106 $613,386
======== ========
March 31, 2009 Dec 31, 2008
-------------- ------------
Loan Portfolio (Unaudited) (Unaudited)
Commercial $461,514 13.18% $499,143 13.99%
Construction 643,151 18.37% 666,080 18.67%
1-4 family residential 667,392 19.06% 668,096 18.73%
Home equity 112,053 3.20% 107,048 3.01%
Commercial real estate 1,346,056 38.45% 1,343,401 37.66%
Agriculture 144,384 4.12% 145,649 4.08%
Consumer 126,750 3.62% 137,640 3.86%
------- -------
Total Loans $3,501,300 $3,567,057
========== ==========
Deposit Types
Non-interest bearing DDA $1,510,005 20.95% $1,522,983 20.85%
Interest bearing DDA 1,030,826 14.30% 1,082,078 14.82%
Money Market 1,495,724 20.76% 1,400,673 19.18%
Savings 322,130 4.47% 309,938 4.24%
Time < $100 1,491,380 20.69% 1,577,431 21.60%
Time > $100 1,356,814 18.83% 1,410,194 19.31%
--------- ---------
Total Deposits $7,206,879 $7,303,297
========== ==========
Loan to Deposit Ratio 48.6% 48.8%
Construction Loans
Single family residential
construction $214,034 33.28% $237,191 35.61%
Land development 91,005 14.15% 90,846 13.64%
Raw land 89,003 13.84% 89,120 13.38%
Residential lots 104,684 16.28% 106,869 16.04%
Commercial lots 37,318 5.80% 39,374 5.91%
Commercial construction and
other 107,107 16.65% 102,680 15.42%
------- -------
Total Construction Loans $643,151 $666,080
======== ========
Prosperity Bancshares, Inc.(R)
Financial Highlights
(Dollars in thousands)
Sept 30, June 30, Mar 31, Dec 31, Sept 30,
2009 2009 2009 2008 2008
--------- ----------- ----------- ----------- -----------
Balance Sheet
Data
(at period
end) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Total
loans $3,406,137 $3,451,319 $3,501,300 $3,567,057 $3,248,617
Investment
securities (L) 4,255,057 3,981,109 3,991,200 4,160,401 2,294,403
Federal
funds
sold and
other
temporary
investments 35,930 128,451 14,930 16,404 25,748
------ ------- ------ ------ ------
Total
earning
assets 7,697,124 7,560,879 7,507,430 7,743,862 5,568,768
Allowance
for
credit
losses (47,312) (42,611) (39,238) (36,970) (33,981)
Cash and
due from
banks 120,932 142,860 148,938 212,335 159,386
Goodwill 876,958 875,434 874,356 874,654 811,916
Core
deposit
intangibles 37,825 40,305 42,796 38,196 44,974
Other
real
estate 12,738 11,101 9,134 4,450 7,538
Fixed
assets,
net 149,725 149,742 151,544 123,638 123,823
Other
assets 109,342 101,241 104,237 112,199 105,485
------- ------- ------- ------- -------
Total
assets $8,957,332 $8,838,951 $8,799,197 $9,072,364 $6,787,909
========== ========== ========== ========== ==========
Demand
deposits $1,473,189 $1,476,378 $1,510,005 $1,522,983 $1,263,407
Interest
bearing
deposits 5,644,804 5,781,517 5,696,874 5,780,314 3,841,435
--------- --------- --------- --------- ---------
Total
deposits 7,117,993 7,257,895 7,206,879 7,303,297 5,104,842
Securities
sold
under
repurchase
agreements 100,636 96,732 81,773 96,017 100,310
Federal
funds
purchased
and
other
borrowings 253,855 28,170 28,441 229,395 219,671
Junior
subordinated
debentures 92,265 92,265 92,265 92,265 92,265
Other
liabilities 65,548 64,794 109,291 96,284 41,641
------ ------ ------- ------ ------
Total
liabilities 7,630,297 7,539,856 7,518,649 7,817,258 5,558,729
Shareholders'
equity (M) 1,327,035 1,299,095 1,280,548 1,255,106 1,229,180
--------- --------- --------- --------- ---------
Total
liabilities
and
equity $8,957,332 $8,838,951 $8,799,197 $9,072,364 $6,787,909
========== ========== ========== ========== ==========
(L) Includes $26,688, $20,153, $23,784, $15,158 and $1,220 in unrealized
gains on available for sale securities for the quarterly periods ending
September 30, 2009, June 30, 2009, March 31, 2009, December 31, 2008, and
September 30, 2008, respectively.
(M) Includes $17,347, $13,099, $15,460, $9,853 and $793 in after-tax
unrealized gains on available for sale securities for the quarterly
periods ending September 30, 2009, June 30, 2009, March 31, 2009, December
31, 2008, and September 30, 2008, respectively.
Prosperity Bancshares, Inc.(R)
Financial Highlights
(Dollars in thousands)
Three Months Ended
Sept 30, June 30, Mar 31, Dec 31, Sept 30,
2009 2009 2009 2008 2008
----------- ----------- ----------- ----------- -----------
Income
Statement
Data (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest on
loans $54,809 $55,248 $55,802 $56,073 $56,925
Interest on
securities 46,812 47,450 49,726 39,713 27,834
Interest on
federal
funds
sold and
other
earning
assets 74 70 38 802 87
-- -- -- --- --
Total
interest
income 101,695 102,768 105,566 96,588 84,846
------- ------- ------- ------ ------
Interest
expense -
deposits 22,694 25,621 29,457 29,663 23,874
Interest
expense -
debentures 879 959 1,119 1,452 1,410
Interest
expense -
other 709 667 912 1,516 1,756
--- --- --- ----- -----
Total
interest
expense 24,282 27,247 31,488 32,631 27,040
------ ------ ------ ------ ------
Net
interest
income 77,413 75,521 74,078 63,957 57,806
Provision
for credit
losses 7,250 6,900 6,125 6,000 1,700
----- ----- ----- ----- -----
Net
interest
income
after
provision
for credit
losses 70,163 68,621 67,953 57,957 56,106
------ ------ ------ ------ ------
Service
charges on
deposits
accounts 13,554 12,863 12,372 13,204 11,348
Net (loss)
gain on
sale of
assets (20) 200 97 130 34
Net gain
(loss) on
sale of
ORE 115 415 22 (1,684) (210)
Brokered
mortgage
income 59 140 70 34 74
Net gain on
sale of
held for
sale loans 0 0 0 0 46
Other
non-interest
income 1,528 1,515 2,456 1,824 1,825
----- ----- ----- ----- -----
Total
non-interest
income 15,236 15,133 15,017 13,508 13,117
------ ------ ------ ------ ------
Salaries and
benefits 21,507 20,494 22,648 20,411 17,526
CDI
amortization 2,479 2,492 2,664 2,284 2,562
Net
occupancy
and
equipment 3,624 3,514 3,978 3,704 3,088
Depreciation 2,100 2,069 2,001 1,854 1,955
Data
processing
and
software
amortization 1,446 1,562 2,055 1,609 1,319
Impairment
charge on
securities 0 0 0 0 14,025
Other
non-interest
expense 10,045 14,169 10,677 7,724 5,755
------ ------ ------ ----- -----
Total
non-interest
expense 41,201 44,300 44,023 37,586 46,230
------ ------ ------ ------ ------
Net income
before
taxes 44,198 39,454 38,947 33,879 22,993
------ ------
Federal
income
taxes 14,876 12,944 13,469 11,194 7,546
------ ------ ------ ------ -----
Net income
available
to
common
share-
holders(N) $29,322 $26,510 $25,478 $22,685 $15,447
======= ======= ======= ======= =======
(N) Earnings for the three months ended September 30, 2008 includes a
$14.025 million pre-tax, or $9.116 million after-tax, impairment charge on
securities.
Prosperity Bancshares, Inc.(R)
Financial Highlights
Three Months Ended
Sept 30, June 30, Mar 31, Dec 31, Sept 30,
2009 2009 2009 2008 2008
----------- ----------- ----------- ----------- -----------
Comparative
Quarterly
Asset Quality,
Performance
& Capital
Ratios (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Return on
average
assets
(annualized)
(O) 1.32% 1.20% 1.15% 1.09% 0.91%
Return on
average
common
equity
(annualized)
(O) 8.93% 8.18% 8.02% 7.30% 5.04%
Return on
average
tangible
equity
(annualized)
(O) 29.34% 27.98% 28.52% 24.89% 16.83%
Net interest
margin
(tax
equivalent)
(annualized) 4.08% 4.04% 3.98% 3.65% 4.15%
Employees
- FTE 1,608 1,634 1,684 1,734 1,366
Efficiency
ratio 44.46% 48.98% 49.47% 48.60% 45.43%
Non-performing
assets to
average
earning
assets 0.29% 0.26% 0.16% 0.20% 0.26%
Non-performing
assets to
loans and
other real
estate 0.64% 0.57% 0.36% 0.40% 0.45%
Net charge-offs
to
average loans 0.07% 0.10% 0.11% 0.09% 0.05%
Allowance for
credit
losses
to total loans 1.39% 1.23% 1.12% 1.04% 1.05%
Book value per
share $28.75 $28.17 $27.78 $27.24 $26.68
Tangible book
value per
share $8.93 $8.31 $7.88 $7.43 $8.08
Tier 1 risk-
based
capital 11.85% 11.24% 10.53% 9.89% 12.71%
Total risk-
based capital 13.01% 12.28% 11.48% 10.76% 13.65%
Tier 1 leverage
capital 6.09% 5.81% 5.48% 5.68% 7.75%
Tangible equity
to
tangible
assets 5.13% 4.84% 4.61% 4.19% 6.28%
Equity to
assets 14.82% 14.70% 14.55% 13.83% 18.11%
(O) Earnings for the three months ended September 30, 2008 includes a
$14.025 million pre-tax, or $9.116 million after-tax, impairment charge on
securities, which resulted in a 53 basis point decrease in return on
average assets to 0.91%, a 298 basis point decrease in return on average
equity to 5.04% and a 993 basis point decrease in return on average
tangible common equity to 16.83%.
Prosperity Bancshares, Inc.(R)
Supplemental Financial Data (Unaudited)
(Dollars in thousands)
Three Months Ended September 30, 2009
YIELD ANALYSIS Average Interest Earned Average
Balance / Interest Paid Yield/Rate
------- --------------- ------------
Interest Earning Assets:
Loans $3,431,061 $54,809 6.34%
Investment securities 4,062,796 46,812 4.61%
Federal funds sold
and other temporary
investments 107,008 74 0.27%
------- --
Total interest earning
assets 7,600,865 $101,695 5.31%
--------
Allowance for credit losses (43,610)
Non-interest earning assets 1,310,292
---------
Total assets $8,867,547
==========
Interest Bearing
Liabilities:
Interest bearing demand
deposits $1,092,719 $2,253 0.82%
Savings and money market
deposits 1,969,427 4,579 0.92%
Certificates and other time
deposits 2,685,834 15,862 2.34%
Securities sold under
repurchase agreements 109,961 320 1.15%
Federal funds purchased and
other borrowings 49,539 389 3.12%
Junior subordinated
debentures 92,265 879 3.78%
------ ---
Total interest bearing
liabilities $5,999,745 $24,282 1.61%
-------
Non-interest bearing
liabilities:
Non-interest bearing demand
deposits $1,475,878
Other liabilities 77,913
------
Total liabilities $7,553,536
----------
Shareholders' equity $1,314,011
----------
Total liabilities and
shareholders' equity $8,867,547
==========
Net Interest Income & Margin $77,413 4.04%
=======
Net Interest Income & Margin
(tax equivalent) $78,111 4.08%
=======
Prosperity Bancshares, Inc.(R)
Supplemental Financial Data (Unaudited)
(Dollars in thousands)
Three Months Ended September 30, 2008
YIELD ANALYSIS Interest
Earned
Average /Interest Average
Balance Paid Yield/Rate
---------- --------- ----------
Interest Earning Assets:
Loans $3,289,203 $56,925 6.89%
Investment securities 2,292,571 27,834 4.86%
Federal funds sold
and other temporary investments 18,854 87 1.84%
------ --
Total interest earning assets 5,600,628 $84,846 6.03%
-------
Allowance for credit losses (33,746)
Non-interest earning assets 1,234,567
---------
Total assets $6,801,449
==========
Interest Bearing Liabilities:
Interest bearing demand deposits $712,741 $1,565 0.87%
Savings and money market deposits 1,439,838 6,783 1.87%
Certificates and other time
deposits 1,767,712 15,526 3.49%
Securities sold under repurchase
agreements 95,533 631 2.63%
Federal funds purchased and other
borrowings Securities sold under
repurchase agreements 146,172 1,125 3.06%
Junior subordinated debentures 92,265 1,410 6.08%
------ -----
Total interest bearing liabilities 4,254,261 $27,040 2.53%
-------
Non-interest bearing liabilities:
Non-interest bearing demand
deposits 1,266,924
Other liabilities 55,105
------
Total liabilities 5,576,290
Shareholders' equity 1,225,159
---------
Total liabilities and shareholders'
equity $6,801,449
==========
Net Interest Income & Margin $57,806 4.11%
=======
Net Interest Income & Margin
(tax equivalent) $58,471 4.15%
=======
Prosperity Bancshares, Inc.(R)
Supplemental Financial Data (Unaudited)
(Dollars in thousands)
Nine Months Ended September 30, 2009
YIELD ANALYSIS Interest
Earned
Average /Interest Average
Balance Paid Yield/Rate
------- ---------- ----------
Interest Earning Assets:
Loans $3,477,972 $165,859 6.38%
Investment securities 4,019,370 143,990 4.78%
Federal funds sold
and other temporary investments 98,782 180 0.24%
------ ---
Total interest earning assets 7
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