• Completed the merger of Lone Star State Bancshares, Inc. on April 1, 2024
• Net income of $111.6 million and diluted earnings per share of $1.17 for second quarter 2024
• Net income of $116.6 million⁽¹⁾ and diluted earnings per share of $1.22⁽¹⁾, excluding merger related provision and expenses, gain on Visa Class B-1 stock exchange net of investment securities sales and FDIC special assessment
• Net interest margin increased 15 basis points to 2.94% during second quarter 2024
• Loans increased $1.06 billion or 5.0% during second quarter 2024
• Loans, excluding Warehouse Purchase Program loans, increased $839.1 million or 4.1% during second quarter 2024
• Deposits increased $757.6 million or 2.8% during second quarter 2024
• Noninterest-bearing deposits of $9.7 billion, representing 34.7% of total deposits
• Allowance for credit losses on loans and on off-balance sheet credit exposure of $397.5 million and allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program, of 1.69%⁽¹⁾
• Nonperforming assets remain low at 0.25% of second quarter average interest-earning assets
• Repurchased 671 thousand shares of common stock during second quarter 2024, and 1.2 million shares during 2024

HOUSTON, July 24, 2024 /PRNewswire/ -- Prosperity Bancshares, Inc.^® (NYSE: PB), the parent company of Prosperity Bank^® (collectively, "Prosperity"), reported net income of $111.6 million for the quarter ended June 30, 2024 compared with $86.9 million for the same period in 2023. Net income per diluted common share was $1.17 for the quarter ended June 30, 2024 compared with $0.94 for the same period in 2023. On April 1, 2024, Lone Star State Bancshares, Inc. ("Lone Star") merged with Prosperity Bancshares and Lone Star State Bank of West Texas ("Lone Star Bank") merged with Prosperity Bank (collectively, the "LSSB Merger"). During the second quarter 2024, Prosperity incurred a merger related provision for credit losses of $9.1 million, or $0.07⁽¹⁾ per diluted common share, merger related expenses of $4.4 million, or $0.04⁽¹⁾ per diluted common share, and a Federal Deposit Insurance Corporation ("FDIC") special assessment of $3.6 million, or $0.03⁽¹⁾ per diluted common share, partially offset by a net gain of $10.7 million, or $0.09⁽¹⁾ per diluted common share as a result of the exchange and conversion of Visa Class B-1 stock and the sale of investment securities. Excluding these charges and the net gain, earnings per diluted common share was $1.22⁽¹⁾ for the second quarter of 2024. Additionally, loans, excluding Warehouse Purchase Program loans, increased $839.1 million or 4.1% during the second quarter of 2024, primarily due to the Merger.

The annualized return on second quarter average assets was 1.12%; and the annualized return on second quarter average assets excluding merger related provision and expenses, net of tax, gain on Visa Class B-1 stock exchange net of investment securities sales, net of tax, and FDIC special assessment, net of tax, was 1.17%⁽¹⁾. Nonperforming assets remain low at 0.25% of second quarter average interest-earning assets.

"We want to welcome the customers and associates from Lone Star State Bank of West Texas and are excited about our partnership. As previously announced, on April 1, 2024, Prosperity completed the merger of Lone Star State Bancshares, Inc. and its wholly owned subsidiary, Lone Star Bank, headquartered in Lubbock, Texas. Lone Star Bank operated 5 banking offices in the West Texas area," said David Zalman, Prosperity's Senior Chairman and Chief Executive Officer.

"We are also pleased to report that our net interest income before provision for credit losses was $258.8 million for the three months ended June 30, 2024, compared with $238.2 million for the three months ended March 31, 2024, an increase of $20.5 million or 8.6%. In addition, our net interest margin on a tax equivalent basis was 2.94% for the three months ended June 30, 2024, compared with 2.79% for the three months ended March 31, 2024, and 2.73% for the same period in 2023. As mentioned on prior calls, these are the results we expected, and we anticipate these tailwinds to continue to be positive for the near future," added Zalman.

"We are optimistic about the future and confident in our ability to create meaningful long-term value for our shareholders. Over the last twelve months, we have returned $284.6 million to shareholders - $74.8 million through share repurchases and $209.8 million through cash dividends," stated Zalman.

"Texas continues to shine as more people and companies move to the state because of the business-friendly political structure and no state income tax," continued Zalman.

"Prosperity continues to focus on building core customer relationships, maintaining sound asset quality and operating the bank in an efficient manner, while investing in ever-changing technology and product distribution channels. Thank you to all of our customers, shareholders and associates who make this possible," concluded Zalman.

Results of Operations for the Three Months Ended June 30, 2024

For the three months ended June 30, 2024, net income was $111.6 million⁽²⁾ or $1.17 per diluted common share compared with $110.4 million⁽³⁾ or $1.18 per diluted common share for the three months ended March 31, 2024. Net income and net income per diluted common share for the second quarter of 2024 was impacted by an increase in net interest income and a gain on Visa Class B-1 stock exchange net of investment securities sales of $10.7 million, partially offset by a merger related provision for credit losses of $9.1 million, merger related expenses of $4.4 million, a FDIC special assessment of $3.6 million and an increase in noninterest expenses related to three months of Lone Star Bank operations. For the three months ended June 30, 2024, net income was $111.6 million⁽²⁾ or $1.17 per diluted common share compared with $86.9 million⁽⁴⁾ or $0.94 per diluted common share for the same period in 2023. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended June 30, 2024 were 1.12%, 6.10% and 11.81%⁽¹⁾, respectively.

Excluding merger related provision and expenses, gain on Visa Class B-1 stock exchange net of investment securities sales, and FDIC special assessment, each net of tax, net income was $116.6 million⁽¹⁾ or $1.22⁽¹⁾ per diluted common share for the three months ended June 30, 2024, and annualized returns on average assets, average common equity and average tangible common equity were 1.17%⁽¹⁾, 6.37%⁽¹⁾ and 12.34%⁽¹⁾, respectively, for the same period. Prosperity's efficiency ratio (excluding net gains and losses on the sale, write-down or write-up of assets and securities) was 51.82%⁽¹⁾ for the three months ended June 30, 2024; and excluding merger related expenses and FDIC special assessment, the efficiency ratio was 49.13%⁽¹⁾.

Net interest income before provision for credit losses was $258.8 million for the three months ended June 30, 2024 compared with $238.2 million for the three months ended March 31, 2024, an increase of $20.5 million or 8.6%. Net interest income before provision for credit losses increased $22.3 million or 9.4% to $258.8 million for the three months ended June 30, 2024 compared with $236.5 million for the same period in 2023. The change for both periods was primarily due to an increase in the average balances and average rates on loans, an increase in the average balances on federal funds sold and other earning assets, an increase in loan discount accretion, and a decrease in the average balances on other borrowings, partially offset by a decrease in the average balances on investment securities and an increase in the average balances and rates on interest-bearing deposits.

The net interest margin on a tax equivalent basis was 2.94% for the three months ended June 30, 2024 compared with 2.79% for the three months ended March 31, 2024 and 2.73% for the same period in 2023. The change was primarily due to an increase in the average balances and average rates on loans, an increase in the average balances on federal funds sold and other earning assets, an increase in loan discount accretion, and a decrease in the average balances on other borrowings, partially offset by a decrease in the average balances on investment securities and an increase in the average balances and rates on interest-bearing deposits. The increases in the average balances on loans and deposits were primarily due to the LSSB Merger.

Noninterest income was $46.0 million for the three months ended June 30, 2024 compared with $38.9 million for the three months ended March 31, 2024, an increase of $7.1 million or 18.4%. Noninterest income was $46.0 million for the three months ended June 30, 2024 compared $39.7 million for the same period in 2023, an increase of $6.3 million or 15.9%. The increase for both periods was primarily due to a gain on Visa Class B-1 stock exchange net of investment securities sales, partially offset by the change in the net (loss) gain on sale or write-down of assets and a decrease in other noninterest income.

Noninterest expense was $152.8 million for the three months ended June 30, 2024 compared with $135.8 million for the three months ended March 31, 2024, an increase of $17.0 million or 12.5%, primarily due to a FDIC special assessment of $3.6 million, an increase in merger related expenses, an increase in salaries and benefits and an increase in additional expenses related to three months of Lone Star Bank operations. Noninterest expense was $152.8 million for the three months ended June 30, 2024 compared with $145.9 million for the same period in 2023, an increase of $7.0 million or 4.8%, primarily due to a FDIC special assessment of $3.6 million, an increase in salaries and benefits and an increase in additional expenses related to three months of Lone Star Bank operations, partially offset by a decrease in merger expenses.

Results of Operations for the Six Months Ended June 30, 2024

For the six months ended June 30, 2024, net income was $222.0 million⁽⁵⁾ or $2.34 per diluted common share compared with $211.6 million⁽⁶⁾ or $2.30 per diluted common share for the same period in 2023. Net income and net income per diluted common share for the six months ended June 30, 2024 was impacted by an increase in net interest income, a gain on Visa Class B-1 stock exchange net of investment securities sales of $11.0 million, lower merger related provision for credit losses and a decrease in merger related expenses, partially offset by a FDIC special assessment of $3.6 million and an increase in noninterest expenses related to three months of Lone Star Bank operations. Returns on average assets, average common equity and average tangible common equity for the six months ended June 30, 2024 were 1.13%, 6.15% and 11.93%⁽¹⁾, respectively.

Excluding merger related provision and expenses, gain on Visa Class B-1 stock exchange net of investment securities sales, and FDIC special assessment, each net of tax, net income was $226.8 million⁽¹⁾ or $2.39⁽¹⁾ per diluted common share for the six months ended June 30, 2024 and annualized returns on average assets, average common equity and average tangible common equity for the same period were 1.15%⁽¹⁾, 6.28%⁽¹⁾ and 12.19%⁽¹⁾, respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write-down of assets and securities) was 50.49%⁽¹⁾ for the six months ended June 30, 2024; and excluding merger related expenses and FDIC special assessment, the efficiency ratio was 49.10%⁽¹⁾.

Net interest income before provision for credit losses for the six months ended June 30, 2024 was $497.0 million compared with $479.9 million for the same period in 2023, an increase of $17.1 million or 3.6%. The change was primarily due to an increase in the average balances and average rates on loans, an increase in the average balances on federal funds sold and other earning assets and an increase in loan discount accretion, partially offset by a decrease in the average balances on investment securities and an increase in the average balances and rates on interest-bearing deposits.

The net interest margin on a tax equivalent basis for the six months ended June 30, 2024 was 2.87% compared with 2.83% for the same period in 2023. The change was primarily due to an increase in the average balances and average rates on loans and an increase in the average balances on federal funds sold and other earning assets and an increase in loan discount accretion, partially offset by an increase in the average balances and rates on interest-bearing deposits. The increases in the average balances on loans and deposits were primarily due to the LSSB Merger.

Noninterest income was $84.9 million for the six months ended June 30, 2024 compared with $78.0 million for the same period in 2023, an increase of $6.9 million or 8.9%, primarily due to a gain on Visa Class B-1 stock exchange net of investment securities sales and an increase in trust income, partially offset by the change in the net (loss) gain on sale or write-down of assets and a decrease in other noninterest income.

Noninterest expense was $288.7 million for the six months ended June 30, 2024 compared with $268.9 million for the same period in 2023, an increase of $19.8 million or 7.4%, primarily due to a FDIC special assessment of $3.6 million, an increase in salaries and benefits and an increase in additional expenses related to three months of Lone Star Bank operations, partially offset by a decrease in merger expenses.

Balance Sheet Information

At June 30, 2024, Prosperity had $39.762 billion in total assets, a decrease of $142.8 million or 0.4%, compared with $39.905 billion at June 30, 2023. Linked quarter total assets increased by $1.006 billion or 2.6% compared with $38.757 billion at March 31, 2024, primarily due to the LSSB Merger.

Loans were $22.321 billion at June 30, 2024, an increase of $666.9 million or 3.1%, compared with $21.654 billion at June 30, 2023. Linked quarter loans increased $1.056 billion or 5.0% from $21.265 billion at March 31, 2024. Loans increased primarily due to the LSSB Merger. Loans, excluding Warehouse Purchase Program loans, were $21.239 billion at June 30, 2024 compared with $20.505 billion at June 30, 2023, an increase of $734.3 million or 3.6%, and compared with $20.400 billion at March 31, 2024, an increase of $839.1 million or 4.1%.

Deposits were $27.933 billion at June 30, 2024, an increase of $552.2 million or 2.0%, compared with $27.381 billion at June 30, 2023. Linked quarter deposits increased $757.6 million or 2.8% from $27.176 billion at March 31, 2024. The increases were primarily due to the LSSB Merger.

The table below provides detail on the impact of loans acquired and deposits assumed in the FirstCapital Bank and Lone Star Bank mergers completed on May 1, 2023 and April 1, 2024, respectively:

As reflected in the table above, loan and deposit growth was impacted by the FirstCapital Bank and Lone Star Bank mergers.

Excluding loans acquired in these acquisitions and new production at the acquired banking centers since the respective acquisition dates, loans at June 30, 2024 decreased $37.5 million compared with June 30, 2023 and increased $63.7 million compared with March 31, 2024. Excluding loans acquired in these acquisitions and new production at the acquired banking centers since the respective acquisition dates and Warehouse Purchase Program loans, loans at June 30, 2024 increased $30.0 million compared with June 30, 2023 and decreased $152.8 million compared with March 31, 2024.

Excluding deposits assumed in these acquisitions and new deposits generated at the acquired banking centers since the respective acquisition dates, deposits at June 30, 2024 decreased by $470.9 million or 1.8% compared with June 30, 2023 and decreased by $298.2 million or 1.2% compared with March 31, 2024.

Asset Quality

Nonperforming assets totaled $89.6 million or 0.25% of quarterly average interest-earning assets at June 30, 2024 compared with $83.8 million or 0.24% of quarterly average interest-earning assets at March 31, 2024 and $62.7 million or 0.18% of quarterly average interest-earning assets at June 30, 2023, with a significant portion of the balance for each period attributable to acquired loans.

The allowance for credit losses on loans and off-balance sheet credit exposures was $397.5 million at June 30, 2024 compared with $381.7 million at June 30, 2023 and $366.7 million at March 31, 2024. The provision for credit losses was $9.1 million for the six months ended June 30, 2024 compared with an $18.5 million provision for credit losses for the six months ended June 30, 2023 and no provision for credit losses for the three months ended March 31, 2024 and 2023. As a result of the loans acquired in the LSSB Merger, the second quarter of 2024 included a $7.9 million provision for credit losses on loans and a $1.2 million provision for credit losses on off-balance sheet credit exposures.

The allowance for credit losses on loans was $359.9 million or 1.61% of total loans at June 30, 2024 compared with $345.2 million or 1.59% of total loans at June 30, 2023 and $330.2 million or 1.55% of total loans at March 31, 2024. Excluding Warehouse Purchase Program loans, the allowance for credit losses on loans to total loans was 1.69%⁽¹⁾ at June 30, 2024 compared with 1.68%⁽¹⁾ at June 30, 2023 and 1.62%⁽¹⁾ at March 31, 2024.

Net charge-offs were $4.4 million for the three months ended June 30, 2024 compared with net charge-offs of $2.1 million for the three months ended March 31, 2024 and net charge-offs of $16.1 million for the three months ended June 30, 2023. Net charge-offs for the second quarter of 2024 included $878 thousand related to resolved purchased credit deteriorated ("PCD") loans, which had specific reserves that were allocated to the charge-offs. Additionally, reserves on PCD loans increased by $26.1 million due to Day One accounting for PCD loans at the time of the LSSB Merger. Further, $4.8 million of reserves on resolved PCD loans without any related charge-offs was released to the general reserve.

Net charge-offs were $6.5 million for the six months ended June 30, 2024 compared with $15.5 million for the six months ended June 30, 2023. Net charge-offs for the six months ended June 30, 2024 included $1.9 million related to resolved PCD loans, which had specific reserves that were allocated to the charge-offs. Additionally, reserves on PCD loans increased by $26.1 million due to Day One accounting for PCD loans at the time of the LSSB Merger. Further, $8.9 million of reserves on resolved PCD loans was released to the general reserve.

Visa Class B-1 Stock Exchange

During the second quarter 2024, Prosperity tendered all of its shares of Visa, Inc. ("Visa") Class B-1 common stock in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock, pursuant to the terms and subject to the conditions of the public offering of Visa to exchange its Class B-1 common stock for a combination of shares of its Class B-2 common stock and Class C common stock, which expired on May 3, 2024. Prosperity recorded an unrealized gain of $20.6 million during the second quarter 2024 based on the conversion privilege of the Class C common stock and the closing price of Visa Class A common stock. In the exchange, Prosperity received 48,492 shares of Class B-2 stock, recorded at zero cost basis, and 19,245 shares of Class C common stock and subsequently sold 6,415 shares of Class C stock. Prosperity intends to sell all remaining shares of Class C stock as permitted by the exchange agreement.

Dividend

Prosperity Bancshares declared a third quarter 2024 cash dividend of $0.56 per share to be paid on October 1, 2024, to all shareholders of record as of September 13, 2024.

Stock Repurchase Program

On January 16, 2024, Prosperity Bancshares announced a stock repurchase program under which up to 5%, or approximately 4.7 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 16, 2025, at the discretion of management. Under its 2024 stock repurchase program, Prosperity Bancshares repurchased approximately 671 thousand shares of its common stock at an average weighted price of $58.86 per share during the three months ended June 30, 2024 and approximately 1.2 million shares of its common stock at an average weighted price of $60.35 per share during the six months ended June 30, 2024.

Merger of Lone Star State Bancshares, Inc.

On April 1, 2024, Prosperity completed the merger of Lone Star and its wholly owned subsidiary Lone Star Bank, headquartered in Lubbock, Texas. Lone Star Bank operated 5 full-service banking offices in the West Texas area, including its main office in Lubbock, and 1 banking center in each of Brownfield, Midland, Odessa and Big Spring, Texas.

Pursuant to the terms of the definitive agreement, Prosperity issued 2,376,182 shares of Prosperity common stock plus approximately $64.1 million in cash for all outstanding shares of Lone Star in the second quarter of 2024. This resulted in goodwill of $107.7 million as of June 30, 2024, which does not include all the subsequent fair value adjustments that have not yet been finalized. Additionally, Prosperity recognized $17.7 million of core deposit intangibles as of June 30, 2024.

Merger of First Bancshares of Texas, Inc.

On May 1, 2023, Prosperity completed the merger (the "FB Merger") of First Bancshares and its wholly owned subsidiary FirstCapital Bank of Texas, N.A. ("FirstCapital Bank"), headquartered in Midland, Texas. FirstCapital Bank operated 16 full-service banking offices in six different markets in West, North and Central Texas areas, including its main office in Midland, and banking offices in Midland, Lubbock, Amarillo, Wichita Falls, Burkburnett, Byers, Henrietta, Dallas, Horseshoe Bay, Marble Falls and Fredericksburg, Texas.

Pursuant to the terms of the definitive agreement, Prosperity issued 3,583,370 shares of Prosperity common stock plus approximately $91.5 million in cash for all outstanding shares of First Bancshares. This resulted in goodwill of $164.8 million as of June 30, 2024, which was subject to all final subsequent fair value adjustments. During the second quarter of 2023, Prosperity completed the operational conversion of FirstCapital Bank.

Conference Call

Prosperity's management team will host a conference call on Wednesday, July 24, 2024, at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity's second quarter 2024 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 8564977.

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 Investor Relations page by selecting "Presentations, Webcasts & Calls" from the menu and following the instructions.

Non-GAAP Financial Measures

Prosperity's management uses certain non-GAAP financial measures to evaluate its performance. Specifically, for internal planning and forecasting purposes, Prosperity reviews each of diluted earnings per share, return on average assets, return on average common equity, and return on average tangible common equity, in each case excluding merger related provision for credit losses, net of tax, merger related expenses, net of tax, FDIC special assessment, net of tax, and net gain on the sale or write-up of securities, net of tax; return on average tangible common equity; tangible book value per share; the tangible equity to tangible assets ratio; allowance for credit losses to total loans excluding Warehouse Purchase Program loans; the efficiency ratio, excluding net gains and losses on the sale, write-down or write-up of assets and securities; and the efficiency ratio, excluding net gains and losses on the sale, write-down or write-up of assets and securities, merger related expenses, and FDIC special assessment. 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 June 30, 2024, Prosperity Bancshares, Inc.^® is a $39.762 billion Houston, Texas based regional financial holding company providing personal banking services and investments to consumers and businesses throughout Texas and Oklahoma. Founded in 1983, Prosperity believes in a community banking philosophy, taking care of customers, businesses and communities in the areas it serves by providing financial solutions to simplify everyday financial needs. In addition to offering traditional deposit and loan products, Prosperity offers digital banking solutions, credit and debit cards, mortgage services, retail brokerage services, trust and wealth management, and treasury management.

Prosperity currently operates 288 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 62 in the Dallas/Fort Worth area; 22 in the East Texas area; 31 in the Central Texas area including Austin and San Antonio; 44 in the West Texas area including Lubbock, Midland-Odessa, Abilene, Amarillo and Wichita Falls; 15 in the Bryan/College Station area; 6 in the Central Oklahoma area; 8 in the Tulsa, Oklahoma area and 5 in the West Texas area currently doing business as Lone Star Bank.

Cautionary Notes on Forward-Looking Statements

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by Prosperity's management on the conference call may contain, forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, oral or written forward-looking statements may also be included in other information released to the public. Such forward-looking statements are typically, but not exclusively, identified by the use in the statements of words or phrases such as "aim," "anticipate," "believe," "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 credit 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 credit losses, changes in deposits, borrowings and the investment securities portfolio, 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 any proposed transactions, and statements about the assumptions underlying any such statement. These forward looking statements are not guarantees of future performance and are based on expectations and assumptions Prosperity currently believes to be valid. Because forward-looking statements relate to future results and occurrences, many of which are outside of Prosperity's control, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. 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); the possibility that the anticipated benefits of an acquisition transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of two companies or as a result of the strength of the economy and competitive factors generally; a deterioration or downgrade in the credit quality and credit agency ratings of the securities in Prosperity's securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate, interest rate and commodity price fluctuations; and the effect, impact, potential duration or other implications of weather and climate-related events. Prosperity disclaims any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments. These and various other factors are discussed in Prosperity's Annual Report on Form 10-K for the year ended December 31, 2023, and other reports and statements Prosperity has filed with the Securities and Exchange Commission ("SEC"). Copies of the SEC filings for Prosperity may be downloaded from the Internet at no charge from http://www.prosperitybankusa.com.

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, for internal planning and forecasting purposes, Prosperity reviews each of diluted earnings per share, return on average assets, return on average common equity, and return on average tangible common equity, in each case excluding merger related provision for credit losses, net of tax, merger related expenses, net of tax, FDIC special assessment, net of tax, and net gain on sale or write-up of securities, net of tax; return on average tangible common equity; tangible book value per share; the tangible equity to tangible assets ratio; allowance for credit losses to total loans excluding Warehouse Purchase Program loans; the efficiency ratio, excluding net gains and losses on the sale, write-down or write-up of assets and securities; and the efficiency ratio, excluding net gains and losses on the sale, write-down or write-up of assets and securities, merger related expenses and FDIC special assessment. 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). Prosperity has included information below relating to these non-GAAP financial measures for the applicable periods presented.

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