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)

January 27, 2021 6:30 AM EST

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HOUSTON, Jan. 27, 2021 /PRNewswire/ -- 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.

"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 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.

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 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.

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.

PROSPERITY BANCSHARES, INC. (PRNewsfoto/Prosperity Bancshares, Inc.)

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.

 

(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.

(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.

 

Bryan/College Station Area

Frisco-West

Kerens

Hempstead

98th Street

Bryan

Garland

Longview

Hitchcock

Avenue Q

Bryan-29th 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

23rd 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

 

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.

 

 

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.

 

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.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)

YIELD ANALYSIS

Three Months Ended

Dec 31, 2020

Sep 30, 2020

Dec 31, 2019

Average

Balance

Interest

Earned/

Interest

Paid

Average

Yield/

Rate

(M)

Average

Balance

Interest

Earned/

Interest

Paid

Average

Yield/

Rate

(M)

Average

Balance

Interest

Earned/

Interest

Paid

Average

Yield/

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.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)

YIELD ANALYSIS

Year-to-Date

Dec 31, 2020

Dec 31, 2019

Average

Balance

Interest

Earned/

Interest

Paid

Average

Yield/

Rate

(P)

Average

Balance

Interest

Earned/

Interest

Paid

Average

Yield/

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.

  

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.

 

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

 

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

%

 

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

Acquisition

Date

Balance at

Sep 30, 2020

Balance at

Dec 31, 2020

Balance at

Acquisition

Date

Balance at

Sep 30, 2020

Balance at

Dec 31, 2020

Balance at

Acquisition

Date

Balance at

Sep 30, 2020

Balance at

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.

  

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.

 

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.

 

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

%

 

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

%

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/prosperity-bancshares-inc-reports-fourth-quarter-2020-earnings-301215864.html

SOURCE Prosperity Bancshares, Inc.



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