Form 8-K PROSPERITY BANCSHARES For: Oct 29

October 29, 2014 6:06 AM

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 8-K

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CURRENT REPORT

PURSUANT TO SECTION 13 or 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

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Date of Report (Date of earliest event reported):��October 29, 2014

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Prosperity bancshares, inc.

(Exact name of registrant as specified in its charter)

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Texas

001-35388

74-2331986

(State or other jurisdiction

of incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

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4295 San Felipe

Houston, Texas 77027

(Address of principal executive offices including zip code)

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Registrant's telephone number, including area code: (281) 269-7199

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Check the appropriate box below if the Form�8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

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[� ]	Written communications pursuant to Rule�425 under the Securities Act (17 CFR 230.425)
[� ]	Soliciting material pursuant to Rule�14a-12 under the Exchange Act (17 CFR 240.14a-12)
[� ]	Pre-commencement communications pursuant to Rule�14d-2(b) under the Exchange Act (17�CFR 240.14d-2(b))

[� ]	Pre-commencement communications pursuant to Rule�13e-4(c) under the Exchange Act (17�CFR 240.13e-4(c))

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Item 2.02��Results of Operations and Financial Condition.

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On October 29, 2014, Prosperity Bancshares, Inc. publicly disseminated a press release announcing its financial results for the third quarter and the nine months ending September 30, 2014. A copy of the press release is furnished as Exhibit 99.1 hereto and incorporated herein by reference.

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As provided in General Instruction B.2 to Form 8-K, the information furnished in Item 2.02 and Exhibit 99.1 of this Current Report on Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, and such information shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

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Item 9.01��Financial Statements and Exhibits.

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(d)�� Exhibits. The following is furnished as an exhibit to this Current Report on Form 8-K:

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�	Exhibit	�
�	Number	Description of Exhibit
�	�	�
�	99.1	Press Release issued by Prosperity Bancshares, Inc. dated October�29, 2014.

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Signatures

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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�	PROSPERITY BANCSHARES, INC. (Registrant)		�
�	�	�	�
�	�	�	�
Dated: October�29, 2014	By:	/s/�Charlotte M. Rasche	�
�	�	Charlotte M. Rasche	�
�	�	Executive Vice President and General Counsel	�

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exhibit index

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�	Exhibit	�
�	Number�	Description of Exhibit
�	�	�
�	99.1	Press Release issued by Prosperity Bancshares, Inc. dated October�29, 2014.

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Exhibit 99.1

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PRESS RELEASE	�For more information contact:
�	�
Prosperity Bancshares, Inc.^�^��	�David Zalman
Prosperity Bank Plaza�	�Chairman and Chief Executive Officer
4295 San Felipe�	�281.269.7199
Houston, Texas 77027�	�[email protected]

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FOR IMMEDIATE RELEASE

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Prosperity Bancshares, Inc.^�

REPORTS RECORD THIRD QUARTER

2014 EARNINGS

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Third quarter 2014 earnings per share (diluted) increased 20.9% to $1.10 compared with the third quarter 2013

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Net income increased $21.292 million or 38.5% compared with the third quarter 2013

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Nonperforming assets remain low at 0.27% of third quarter average earning assets

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Loans increased $3.186 billion or 51.5% compared with the third quarter 2013

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Deposits increased $4.558 billion or 36.6% compared with the third quarter 2013

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Dividend increased 13.5% to $0.2725 for the fourth quarter 2014

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HOUSTON, October 29, 2014. Prosperity Bancshares, Inc.^� (NYSE: PB), the parent company of Prosperity Bank^�(collectively, Prosperity), reported net income for the quarter ended September 30, 2014, of $76.570 million or $1.10 per diluted common share, an increase in net income of $21.292 million or 38.5%, compared with $55.278 million, and an increase in diluted earnings per share of 20.9%, compared with $0.91 per diluted common share for the same period in 2013.

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It is an honor and a pleasure for me to be able to share such positive news with our shareholders. We continue to see strong organic loan growth. Excluding loans acquired in our recent acquisitions and new production at the acquired banking centers since the respective acquisition dates, loans at September 30, 2014 grew $405.687 million or 6.6% compared with September 30, 2013 and increased $207.345 million or 3.2% (13.0% annualized) on a linked quarter basis, said David Zalman, Prosperitys Chairman and Chief Executive Officer.

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Strong asset quality continues to be one of the core values and principles of our company. Nonperforming assets totaled $50.082 million or 0.27% of quarterly average earning assets at September 30, 2014. While the increase in nonperforming assets from 0.15% of quarterly average earning assets at June 30, 2014 is significant, it was not unexpected as most of the loans added to nonperforming assets this quarter were identified and marked in our due diligence at one of the recently acquired banks. While the majority of these loans were nonperforming, several are related to renewals that have been delayed due to documentation or procedural issues. At the date of this release, approximately $16.5 million of these loans are expected to be paid off, moved or renewed, but there are no guarantees that such payoffs and renewals will occur. We believe that for the next 12 to 18 months we will have a nonperforming ratio similar to the one this quarter, continued Zalman.

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Page 1 of 19

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The Texas and Oklahoma economies continued to expand during the first nine months of 2014. Employment growth and population growth continues to outpace the majority of the nation. Texas had the highest rate of job creation in the country, with 375,000 jobs created in the past year. The unemployment rate for Texas is 5.1% and the unemployment rate for Oklahoma is 4.6%, while the rate for the rest of the nation is 6.2%. With continued strength in home sales, lower apartment and office vacancy rates, and increasing rental rates, the general economic outlook remains positive for the remainder of 2014, concluded Zalman.

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Results of operations for the three months ended September 30, 2014

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For the three months ended September 30, 2014, net income was $76.570 million compared with $55.278 million for the same period in 2013. Net income per diluted common share was $1.10 for the three months ended September 30, 2014, compared with $0.91 for the same period in 2013. Returns on average assets, average common equity and average tangible common equity, each on an annualized basis, for the three months ended September 30, 2014 were 1.45%, 9.69% and 24.84%, respectively. Prosperitys efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and securities and taxes) was 41.55% for the three months ended September 30, 2014.

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Net interest income before provision for credit losses for the quarter ended September 30, 2014 increased 38.8% to $175.657 million, compared with $126.533 million during the same period in 2013. The increase was primarily due to a 28.8% increase in average interest-earning assets for the same period. The net interest margin on a tax equivalent basis for the three months ended September 30, 2014 increased to 3.85%, compared with 3.59% for the same period in 2013 and increased from 3.83% for the three months ended June 30, 2014. Linked quarter net interest income before provision for credit losses increased 0.9% or $1.602 million to $175.657 million, compared with $174.055 million during the three months ended June 30, 2014. Excluding purchase accounting adjustments, the net interest margin on a tax equivalent basis decreased on a linked quarter basis from 3.31% for the quarter ended June 30, 2014 to 3.26% for the quarter ended September 30, 2014.

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Noninterest income increased $8.607 million or 39.9% to $30.161 million for the three months ended September 30, 2014, compared with $21.554 million for the same period in 2013. This increase was primarily due to an increase in fees, credit and debit card income, and service charges as a result of the additional accounts acquired from F&M Bancorporation Inc. and its wholly-owned subsidiary, The F&M Bank & Trust Company (collectively, F&M) and FVNB Corp. and its wholly-owned subsidiary, First Victoria National Bank (collectively, FVNB). Additionally, trust and brokerage income increased as a result of the additional products and services acquired through the acquisition of FVNB in the fourth quarter 2013. On a linked quarter basis, noninterest income decreased $3.840 million or 11.3%, primarily due to decreases in gains on sale of fixed assets and other real estate, and a decrease in life insurance proceeds received during the second quarter 2014. This decrease was partially offset by an increase in NSF fees for the three months ended September 30, 2014.

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Noninterest expense increased $23.973 million or 39.0% to $85.510 million for the three months ended September 30, 2014, compared with $61.537 million for the same period in 2013. This increase was primarily due to additional noninterest expenses associated with the acquisitions of FVNB and F&M. On a linked quarter basis, noninterest expense decreased $3.186 million or 3.6%. This decrease was primarily due to a decline in salary and benefits expense resulting from a reduction in staff from 3,199 FTEs at June 30, 2014 to 3,057 FTEs at September 30, 2014.

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Loans at September 30, 2014 were $9.369 billion, an increase of $3.186 billion or 51.5%, compared with $6.183 billion at September 30, 2013, primarily due to the acquisitions of FVNB and F&M. Linked quarter loans increased $60.726 million or 0.7% from $9.308 billion at June 30, 2014.

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Deposits at September 30, 2014 were $17.014 billion, an increase of $4.558 billion or 36.6%, compared with $12.456 billion at September 30, 2013, primarily due to the acquisitions of FVNB and F&M. Linked quarter deposits decreased $267.028 million or 1.5% from $17.281 billion at June 30, 2014.

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Page 2 of 19

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Average loans increased 52.0% or $3.208 billion to $9.381 billion for the quarter ended September 30, 2014, compared with $6.173 billion for the same period in 2013. On a linked quarter basis, average loans decreased 0.9% or $86.888 million from $9.468 billion for the quarter ended June 30, 2014. Average deposits increased 37.4% or $4.644 billion to $17.077 billion for the quarter ended September 30, 2014, compared with $12.432 billion for the same period in 2013. On a linked quarter basis, average deposits decreased 0.5% or $87.293 million from $17.164 billion for the quarter ended June 30, 2014.

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Results of operations for the nine months ended September 30, 2014

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For the nine months ended September 30, 2014, net income was $219.213 million, compared with $158.427 million for the same period in 2013. Net income per diluted common share was $3.19 for the nine months ended September 30, 2014, compared with $2.67 for the same period in 2013. Returns on average assets, average common equity and average tangible common equity, each on an annualized basis, for the nine months ended September 30, 2014 were 1.44%, 9.67% and 24.38%, respectively. Prosperitys efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and securities and taxes) was 42.17% for the nine months ended September 30, 2014.

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Net interest income before provision for credit losses for the nine months ended September 30, 2014, increased 39.6% to $493.403 million, compared with $353.357 million during the same period in 2013. The increase was primarily due to a 28.3% increase in average interest-earning assets over the same period. The net interest margin on a tax equivalent basis for the nine months ended September 30, 2014 increased to 3.77%, compared with 3.48% for the same period in 2013. Excluding purchase accounting adjustments, the net interest margin on a tax equivalent basis increased to 3.30% for the nine months ended September 30, 2014 from 3.13% for the same period in 2013.

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Noninterest income increased $22.497 million or 32.0% to $92.766 million for the nine months ended September 30, 2014, compared with $70.269 million for the same period in 2013. This increase was primarily due to the effects of the additional accounts acquired in the acquisitions of FVNB and F&M completed in 2013 and 2014. Trust and brokerage income increased as a result of the additional products and services acquired through the FVNB acquisition. In addition, gain on the sale of assets increased $4.7 million during the nine months ended September 30, 2014 compared to the same period in 2013, primarily due to a $2.224 million gain that was recorded during the first quarter of 2014 on the sale of the agent bank credit card and agent bank merchant processing business of Bankers Credit Card Services, Inc., a subsidiary acquired as part of the acquisition of Coppermark Bancshares, Inc. and its wholly-owned subsidiary, Coppermark Bank.

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Noninterest expense increased $66.636 million or 37.3% to $245.240 million for the nine months ended September 30, 2014, compared with $178.604 million for the same period in 2013. This increase was primarily due to additional noninterest expenses associated with the acquisitions of FVNB and F&M. Additionally, total noninterest expense for the nine months ended September 30, 2014 included one-time pre-tax merger expenses of $3.096 million related primarily to the F&M and FVNB acquisitions.

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Average loans increased $3.020 billion or 51.6% to $8.874 billion for the nine months ended September 30, 2014, compared with $5.854 billion for the same period in 2013. Average deposits increased $4.253 billion or 34.6% to $16.547 billion for the nine months ended September 30, 2014, compared with $12.294 billion for the same period of 2013.

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Page 3 of 19

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The table below provides detail on loans acquired and deposits assumed in the acquisitions of FVNB and F&M completed on November 1, 2013 and April 1, 2014, respectively:

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Balance Sheet Data (at period end)

(In thousands)

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Sep 30, 2014

�

Jun 30, 2014

�

Mar 31, 2014

�

Dec 31, 2013

�

Sep 30, 2013

�

(Unaudited)

�

(Unaudited)

�

(Unaudited)

�

(Unaudited)

�

(Unaudited)

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Loans acquired (including new production since respective acquisition dates):

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FVNB

�

1,329,537

�

1,424,395

�

1,509,927

�

1,588,238

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F&M

�

1,451,075

�

1,502,836

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All other loans

�

6,588,276

�

6,380,931

�

6,242,473

�

6,186,983

�

6,182,589

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Total loans

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9,368,888

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9,308,162

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7,752,400

�

7,775,221

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6,182,589

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Deposits assumed (including new deposits since respective acquisition dates):

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FVNB

�

2,102,722

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2,105,120

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2,164,824

�

2,239,415

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F&M

�

1,905,233

�

2,090,468

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All other deposits

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13,006,072

�

13,085,467

�

13,295,233

�

13,051,856

�

12,455,799

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Total deposits

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17,014,027

�

17,281,055

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15,460,057

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15,291,271

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12,455,799

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As reflected in the table above, loan and deposit growth was impacted by the acquisitions of FVNB and F&M. Excluding loans acquired in these acquisitions and new production at the acquired banking centers since the respective acquisition dates, loans at September 30, 2014 grew $405.687 million or 6.6% compared with September 30, 2013 and increased $207.345 million or 3.2% (13.0% annualized) on a linked quarter basis. Excluding deposits assumed in these acquisitions and new deposits generated at the acquired banking centers since the respective acquisition dates, deposits at September 30, 2014 grew $550.273 million or 4.4% compared with September 30, 2013 and decreased $79.395 million or 0.6% on a linked quarter basis.

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At September 30, 2014, Prosperity had $21.117 billion in total assets, $9.369 billion in loans and $17.014 billion in deposits. Assets, loans and deposits at September 30, 2014 increased by 31.5%, 51.5% and 36.6%, respectively, compared with their respective levels at September 30, 2013.

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Asset Quality

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Nonperforming assets totaled $50.082 million or 0.27% of quarterly average earning assets at September 30, 2014, compared with $12.687 million or 0.09% of quarterly average earning assets at September 30, 2013, and $28.521 million or 0.15% of quarterly average earning assets at June 30, 2014. The allowance for credit losses was 0.83% of total loans at September 30, 2014, 0.97% of total loans at September 30, 2013 and 0.79% of total loans at June 30, 2014. Excluding loans acquired that are accounted for under ASC Topics 310-20 and 310-30, the allowance for credit losses was 1.14% of remaining loans as of September 30, 2014, compared with 1.20% at September 30, 2013 and 1.15% at June 30, 2014. Refer to the Notes to Selected Financial Data at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure.

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The provision for credit losses was $5.000 million for the three months ended September 30, 2014, compared with $6.325 million for the three months ended June 30, 2014 and $4.025 million for the three months ended September 30, 2013. The provision for credit losses was $11.925 million for the nine months ended September 30, 2014, compared with $9.375 million for the nine months ended September 30, 2013.

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Net charge offs were $653 thousand for the three months ended September 30, 2014, compared with $155 thousand for the three months ended June 30, 2014 and $288 thousand for the three months ended September 30, 2013. Net charge offs were $1.594 million for the nine months ended September 30, 2014, compared with $2.026 million for the nine months ended September 30, 2013.

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Page 4 of 19

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Conference Call

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Prosperitys management team will host a conference call on Wednesday, October 29, 2014 at 10:30 a.m. Eastern Time (9:30 a.m. Central Time) to discuss Prosperitys third quarter 2014 earnings. Individuals and investment professionals may participate in the call by dialing 877-883-0383. The elite entry number is 1373203.

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Alternatively, individuals may listen to the live webcast of the presentation by visiting Prosperitys website at http://www.prosperitybankusa.com. The webcast may be accessed directly from Prosperitys home page by clicking the Investor Relations tab and then the Presentations & Calls link.

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Dividend

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Prosperity Bancshares declared a fourth quarter cash dividend of $0.2725, an increase of 13.5% over the third quarter dividend of $0.24, to be paid on January 2, 2015 to all shareholders of record as of December 15, 2014.

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Acquisition of F&M Bancorporation

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On April 1, 2014, Prosperity completed the acquisition of F&M Bancorporation Inc. (FMBC) and its wholly-owned subsidiary, The F&M Bank & Trust Company (F&M Bank) headquartered in Tulsa, Oklahoma. F&M Bank operated 13 banking offices: 9 in Tulsa, Oklahoma and surrounding areas; 3 in Dallas, Texas; and 1 loan production office in Oklahoma City, Oklahoma. As of March 31, 2014, FMBC, on a consolidated basis, reported total assets of $2.412 billion, total loans of $1.738 billion and total deposits of $2.267 billion.

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Pursuant to the terms of the acquisition agreement, Prosperity issued 3,298,022 shares of Prosperity common stock plus $34.240 million in cash for all outstanding shares of FMBC capital stock, which resulted in goodwill of $214.897 million as of September 30, 2014. The goodwill balance as of September 30, 2014 does not include subsequent fair value adjustments that are still being finalized.

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Acquisition of FVNB Corp.

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On November 1, 2013, Prosperity completed the acquisition of FVNB Corp. and its wholly-owned subsidiary, First Victoria National Bank headquartered in Victoria, Texas. First Victoria National Bank operated 33 banking offices: 4 in Victoria, Texas; 7 in the South Texas area including Corpus Christi; 6 in the Bryan/College Station area; 5 in the Central Texas area including New Braunfels; and 11 in the Houston area including The Woodlands and Huntsville. As of September 30, 2013, FVNB Corp., on a consolidated basis, reported total assets of $2.473 billion, total loans of $1.648 billion and total deposits of $2.195 billion.

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Pursuant to the terms of the acquisition agreement, Prosperity issued 5,570,667 shares of Prosperity common stock plus $91.250 million in cash for all outstanding shares of FVNB Corp. capital stock, which resulted in goodwill of $328.762 million as of September 30, 2014. Additionally, the Company recognized $18.411 million of core deposit intangibles as of September 30, 2014. These goodwill and core deposit intangible balances as of September 30, 2014 do not include subsequent fair value adjustments that are still being finalized.

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Prosperity Bancshares, Inc.^�

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As of September 30, 2014, Prosperity Bancshares Inc.^�, named Americas Best Bank for 2014 by Forbes, is a $21.117 billion Houston, Texas based regional financial holding company, formed in 1983. Operating under a community banking philosophy and seeking to develop broad customer relationships based on service and convenience, Prosperity offers a variety of traditional loan and deposit products to its customers, which consist primarily of small and medium sized businesses and consumers. In addition to established banking products, Prosperity offers a complete line of services including: Internet Banking services at http://www.prosperitybankusa.com, Retail Brokerage Services, Credit Cards, MasterMoney Debit Cards, 24 hour voice response banking, Trust and Wealth Management, Mortgage Services and Mobile Banking. Prosperity currently operates 245 full-service banking locations: 62 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 36 in the Dallas/Fort Worth area; 22 in the East Texas area; 30 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 and 9 in the Tulsa, Oklahoma area.

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Page 5 of 19

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Bryan/College Station Area -

Bryan

Bryan-29^th Street

Bryan-East

Bryan-North

Caldwell

College Station

Crescent Point

Hearne

Huntsville

Madisonville

Navasota

New Waverly

Rock Prairie

Southwest Parkway

Tower Point

Wellborn Road

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Central Texas Area -

Austin -

183

Allandale

Cedar Park

Congress

Lakeway

Liberty Hill

Northland

Oak Hill

Research Blvd

Westlake

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Other Central Texas Locations -

Bastrop

Canyon Lake

Dime Box

Dripping Springs

Elgin

Flatonia

Georgetown

Gruene

Kingsland

La Grange

Lexington

New Braunfels

Pleasanton

Round Rock

San Antonio

Schulenburg

Seguin

Smithville

Thorndale

Weimar

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Dallas/Fort Worth Area -

Dallas -

Abrams Centre

Balch Springs

Camp Wisdom

Cedar Hill

Dallas Central Expressway

Forest Park

Frisco

Frisco-West

Kiest

McKinney

McKinney-Stonebridge

Midway

Northwest Highway

Plano

Preston Forest

Preston Road

Red Oak

Sachse�

The Colony

Turtle Creek

Westmoreland�

Fort Worth -�

Haltom City

Keller

Roanoke

Stockyards

�

Other Dallas/Fort Worth Locations -

Arlington

Azle

Ennis

Gainesville

Glen Rose

Granbury

Mesquite

Muenster

Sanger

Waxahachie

Weatherford

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East Texas Area -

Athens

Blooming Grove

Canton

Carthage

Corsicana

Crockett

Eustace

Gilmer

Grapeland

Gun Barrel City

Jacksonville

Kerens

Longview

Mount Vernon

Palestine

Rusk

Seven Points

Teague

Tyler-Beckham

Tyler-South Broadway

Tyler-University

Winnsboro

�

Houston Area -

Houston -�

Aldine

Allen Parkway

Bellaire

Beltway

Clear Lake

Copperfield

Cypress

Downtown

Eastex

Fairfield

First Colony

Gessner

Gladebrook

Heights

Highway 6 West

Little York

Medical Center

Memorial Drive

Northside

Pasadena

Pecan Grove

River Oaks

Sugar Land

SW Medical Center

Tanglewood

Uptown

Waugh Drive

Westheimer

West University

Woodcreek

Other Houston Area

Locations -�

Angleton

Bay City

Beaumont

Cinco Ranch

Cleveland

East Bernard

El Campo

Dayton

Galveston

Groves

Hempstead

Hitchcock

Katy

Katy-Spring Green

Liberty

Magnolia

Magnolia Parkway

Mont Belvieu

Nederland

Needville

Rosenberg

Shadow Creek

Spring

Sweeny

The Woodlands-I-45

The Woodlands-Research Forest

Tomball

Waller

West Columbia

Wharton

Winnie

Wirt

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South Texas Area -

Corpus Christi -

Airline

Calallen

Carmel

Northwest

Saratoga

Timbergate

Water Street

�

Other South Texas

Locations -�

Alice

Aransas Pass

Beeville

Colony Creek

Cuero

Edna

Goliad�

Gonzales

Hallettsville

Kingsville

Mathis

Padre Island

Palacios

Port Lavaca

Portland

Rockport

Sinton

Taft�

Victoria

Victoria-Navarro

Victoria-North

Yoakum

Yorktown

West Texas Area -

Abilene -

Antilley Road

Barrow Street

Cypress Street

Judge Ely

Mockingbird

�

Lubbock -

4^th Street

66^th Street

82^nd Street

86^th Street

98^th Street

Avenue Q

North University

Texas Tech Student Union

�

Midland -

Wadley

Wall Street

�

Odessa -

Grandview

Grant

Kermit Highway

Parkway

�

Other West Texas Locations -

Big Spring

Brownfield

Brownwood

Cisco

Comanche

Early

Floydada

Gorman

Levelland

Littlefield

Merkel

Plainview

San Angelo

Slaton

Snyder

�

Oklahoma

Central Oklahoma-

23^rdStreet

Edmond

Expressway

I-240

Memorial

Norman

�

Tulsa-

Garnett

Harvard

Memorial

Owasso

Sheridan

S. Harvard

Utica Square

Utica Tower

Yale

�

- - -

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Page 6 of 19

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Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by Prosperitys management on the conference call may contain, forward-looking statements within the meaning of the securities laws that are based on current expectations, assumptions, estimates and projections about Prosperity and its subsidiaries. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperitys 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; continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives. Other risks include, but are not limited to: the possibility that credit quality could deteriorate; actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); a deterioration or downgrade in the credit quality and credit agency ratings of the securities in Prosperitys securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate fluctuations and interest rate fluctuations; and weather. These and various other factors are discussed in Prosperitys Annual Report on Form 10-K for the year ended December 31, 2013 and other reports and statements Prosperity has filed with the SEC. Copies of the SEC filings for Prosperity Bancshares^� may be downloaded from the Internet at no charge from http://www.prosperitybankusa.com.

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Page 7 of 19

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Prosperity Bancshares, Inc.^�

Financial Highlights (Unaudited)

(In thousands)

�

Sep 30, 2014

�

Jun 30, 2014

�

Mar 31, 2014

�

Dec 31, 2013

�

Sep 30, 2013

�

Balance Sheet Data

�

(at period end)

�

Total loans

�

9,368,888

�

9,308,162

�

7,752,400

�

7,775,221

�

6,182,589

�

Investment securities^(A)

�

8,845,909

�

8,851,235

�

8,561,337

�

8,224,448

�

7,771,345

�

Federal funds sold

�

484

�

3,630

�

382

�

400

�

1,121

�

Allowance for credit losses

�

(77,613

)

�

(73,266

)

�

(67,096

)

�

(67,282

)

�

(59,913

)

Cash and due from banks

�

330,952

�

509,853

�

349,860

�

380,990

�

269,987

�

Goodwill

�

1,892,255

�

1,894,270

�

1,672,004

�

1,671,520

�

1,351,782

�

Core deposit intangibles, net

�

34,474

�

37,072

�

39,702

�

42,049

�

25,233

�

Other real estate owned

�

5,504

�

5,093

�

7,372

�

7,299

�

7,432

�

Fixed assets, net

�

283,011

�

285,751

�

280,812

�

282,925

�

232,240

�

Other assets

�

433,450

�

426,306

�

316,360

�

324,458

�

272,463

�

Total assets

�

21,117,314

�

21,248,106

�

18,913,133

�

18,642,028

�

16,054,279

�

Noninterest-bearing deposits

�

4,968,867

�

4,921,398

�

4,142,042

�

4,108,835

�

3,368,357

�

Interest-bearing deposits

�

12,045,160

�

12,359,657

�

11,318,015

�

11,182,436

�

9,087,442

�

Total deposits

�

17,014,027

�

17,281,055

�

15,460,057

�

15,291,271

�

12,455,799

�

Securities sold under repurchase agreements

�

358,053

�

388,342

�

349,074

�

364,357

�

431,969

�

Other borrowings

�

289,972

�

200,210

�

40,451

�

10,689

�

605,951

�

Junior subordinated debentures

�

167,531

�

167,531

�

124,231

�

124,231

�

85,055

�

Other liabilities

�

104,781

�

90,374

�

98,566

�

64,662

�

86,393

�

Total liabilities

�

17,934,364

�

18,127,512

�

16,072,379

�

15,855,210

�

13,665,167

�

Shareholders' equity^(B)

�

3,182,950

�

3,120,594

�

2,840,754

�

2,786,818

�

2,389,112

�

Total liabilities and equity

�

21,117,314

�

21,248,106

�

18,913,133

�

18,642,028

�

16,054,279

�

(A) Includes $5,756, $6,706, $7,023, $7,512 and $8,588 in unrealized gains on available for sale securities for the quarterly periods ending September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013 and September 30, 2013, respectively.

�

(B) Includes $3,741, $4,359, $4,565, $4,883 and $5,582 in after-tax unrealized gains on available for sale securities for the quarterly periods ending September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013 and September 30, 2013, respectively.

�

Page 8 of 19

�

Prosperity Bancshares, Inc.^�

Financial Highlights (Unaudited)

(In�thousands)

�

Three Months Ended

�

Year-to-Date

�

Sep 30, 2014

�

Jun 30, 2014

�

Mar 31, 2014

�

Dec 31, 2013

�

Sep 30, 2013

�

Sep 30, 2014

�

Sep 30, 2013

�

Income Statement Data

�

Interest income:

�

Loans

�

140,521

�

138,655

�

107,144

�

110,575

�

94,236

�

386,320

�

265,542

�

Securities^(C)

�

46,910

�

47,670

�

47,056

�

45,100

�

41,961

�

141,636

�

117,893

�

Federal funds sold and other earning assets

�

178

�

261

�

111

�

Total interest income

�

187,466

�

186,503

�

154,248

�

155,751

�

136,213

�

528,217

�

383,546

�

Interest expense:

�

Deposits

�

10,240

�

10,918

�

9,387

�

9,048

�

8,314

�

30,545

�

26,174

�

Securities sold under repurchase agreements

�

245

�

254

�

237

�

280

�

317

�

736

�

921

�

Junior subordinated debentures

�

1,099

�

1,087

�

775

�

730

�

610

�

2,961

�

1,821

�

Other borrowings

�

225

�

189

�

158

�

224

�

439

�

572

�

1,273

�

Total interest expense

�

11,809

�

12,448

�

10,557

�

10,282

�

9,680

�

34,814

�

30,189

�

Net interest income

�

175,657

�

174,055

�

143,691

�

145,469

�

126,533

�

493,403

�

353,357

�

Provision for credit losses

�

5,000

�

6,325

�

600

�

7,865

�

4,025

�

11,925

�

9,375

�

Net interest income after provision for credit losses

�

170,657

�

167,730

�

143,091

�

137,604

�

122,508

�

481,478

�

343,982

�

Noninterest income:

�

Nonsufficient funds (NSF) fees

�

9,734

�

9,099

�

8,870

�

9,669

�

8,649

�

27,703

�

25,504

�

Credit card, debit card and ATM card income

�

5,921

�

6,030

�

5,152

�

4,662

�

4,307

�

17,103

�

17,801

�

Service charges on deposit accounts

�

4,255

�

4,325

�

3,609

�

3,460

�

3,169

�

12,189

�

9,404

�

Trust income

�

2,099

�

2,044

�

1,800

�

1,542

�

901

�

5,943

�

2,814

�

Mortgage income

�

1,414

�

1,208

�

593

�

549

�

931

�

3,215

�

3,489

�

Brokerage income

�

1,743

�

1,401

�

1,269

�

719

�

233

�

4,413

�

798

�

Bank owned life insurance income

�

1,404

�

1,365

�

1,028

�

1,011

�

916

�

3,797

�

2,624

�

Net gain (loss) on sale of assets

�

1,301

�

3,310

�

126

�

4,634

�

(53

)

Net gain (loss) on sale of other real estate

�

(30

)

�

1,404

�

(60

)

�

196

�

(864

)

�

1,314

�

(732

)

Other noninterest income

�

3,598

�

5,824

�

3,033

�

3,310

�

3,186

�

12,455

�

8,620

�

Total noninterest income

�

30,161

�

34,001

�

28,604

�

25,158

�

21,554

�

92,766

�

70,269

�

Noninterest expense:

�

Salaries and benefits

�

52,179

�

54,126

�

43,408

�

40,633

�

37,135

�

149,713

�

107,861

�

Net occupancy and equipment

�

6,801

�

5,996

�

5,339

�

4,893

�

5,094

�

18,136

�

14,041

�

Debit card, data processing and software amortization

�

4,044

�

4,009

�

3,184

�

3,333

�

2,756

�

11,237

�

8,575

�

Regulatory assessments and FDIC insurance

�

4,051

�

3,886

�

2,726

�

2,771

�

2,516

�

10,663

�

7,490

�

Core deposit intangibles amortization

�

2,598

�

2,630

�

2,045

�

1,594

�

1,455

�

7,273

�

4,551

�

Depreciation

�

3,516

�

3,522

�

3,201

�

3,072

�

2,679

�

10,239

�

7,521

�

Communications

�

2,960

�

2,919

�

2,737

�

2,468

�

2,397

�

8,616

�

7,003

�

Other real estate expense

�

188

�

396

�

176

�

656

�

535

�

Other noninterest expense

�

9,289

�

11,420

�

7,998

�

9,652

�

7,430

�

28,707

�

21,027

�

Total noninterest expense

�

85,510

�

88,696

�

71,034

�

68,592

�

61,537

�

245,240

�

178,604

�

Income before income taxes

�

115,308

�

113,035

�

100,661

�

94,170

�

82,525

�

329,004

�

235,647

�

Provision for income taxes

�

38,738

�

37,529

�

33,524

�

31,199

�

27,247

�

109,791

�

77,220

�

Net income available to common shareholders

�

76,570

�

75,506

�

67,137

�

62,971

�

55,278

�

219,213

�

158,427

�

(C) Interest income on securities was reduced by net premium amortization of $13,531, $12,837, $12,280, $12,017 and $15,136 for the three month periods ended September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013 and September 30, 2013, respectively, and $38,648 and $56,685 for the nine month periods ended September 30, 2014 and September 30, 2013, respectively.

�

Page 9 of 19

�

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

�

Sep 30, 2014

�

Jun 30, 2014

�

Mar 31, 2014

�

Dec 31, 2013

�

Sep 30, 2013

�

Sep 30, 2014

�

Sep 30, 2013

�

Profitability

�

Net income

�

76,570

�

75,506

�

67,137

�

62,971

�

55,278

�

219,213

�

158,427

�

Basic earnings per share

�

1.10

�

1.08

�

1.01

�

0.98

�

0.92

�

3.20

�

2.68

�

Diluted earnings per share

�

1.10

�

1.08

�

1.01

�

0.98

�

0.91

�

3.19

�

2.67

�

Return on average assets^(D)

�

1.45

�

1.42

�

1.43

�

1.42

�

1.37

�

1.44

�

1.33

Return on average common equity^(D)

�

9.69

�

9.75

�

9.52

�

9.53

�

9.31

�

9.67

�

9.29

Return on average tangible common equity^{(D) (E)}

�

24.84

�

24.06

�

24.23

�

23.97

�

22.14

�

24.38

�

22.21

Tax equivalent net interest margin^(F)

�

3.85

�

3.83

�

3.62

�

3.82

�

3.59

�

3.77

�

3.48

Efficiency ratio^(G)

�

41.55

�

42.90

�

42.04

�

40.21

�

41.59

�

42.17

�

42.16

�

Liquidity and Capital Ratios

�

Equity to assets

�

15.07

�

14.69

�

15.02

�

14.95

�

14.88

�

15.07

�

14.88

Tier 1 risk-based capital

�

13.18

�

12.50

�

13.85

�

13.29

�

14.74

�

13.18

�

14.74

Total risk-based capital

�

13.90

�

13.18

�

14.59

�

14.03

�

15.55

�

13.90

�

15.55

Tier 1 leverage capital

�

7.40

�

6.98

�

7.30

�

7.44

�

7.37

�

7.40

�

7.37

Tangible equity to tangible assets^(E)

�

6.55

�

6.16

�

6.56

�

6.35

�

6.90

�

6.55

�

6.90

�

Other Data

�

Shares used in computed earnings per share

�

Basic

�

69,751

�

69,667

�

66,186

�

64,024

�

60,344

�

68,548

�

59,207

�

Diluted

�

69,791

�

69,728

�

66,280

�

64,173

�

60,504

�

68,614

�

59,362

�

Period end shares outstanding

�

69,756

�

69,744

�

66,261

�

66,048

�

60,383

�

69,756

�

60,383

�

Cash dividends paid per common share

�

0.240

�

0.240

�

0.240

�

0.240

�

0.215

�

0.720

�

0.645

�

Book value per share

�

45.63

�

44.74

�

42.87

�

42.19

�

39.57

�

45.63

�

39.57

�

Tangible book value per share^(E)

�

18.01

�

17.05

�

17.04

�

16.27

�

16.76

�

18.01

�

16.76

�

Common Stock Market Price

�

High

�

63.73

�

67.49

�

67.68

�

65.49

�

62.00

�

67.68

�

61.99

�

Low

�

55.99

�

56.04

�

59.75

�

61.18

�

51.85

�

55.99

�

42.38

�

Period end closing price

�

57.17

�

62.60

�

66.15

�

63.39

�

61.84

�

57.17

�

61.84

�

Employees FTE

�

3,057

�

3,199

�

2,888

�

2,995

�

2,454

�

3,057

�

2,454

�

Number of banking centers

�

245

�

247

�

236

�

238

�

218

�

245

�

218

�

(D) Interim periods annualized.��

(E) Refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure.��

(F) Net interest margin for all periods presented is calculated on an actual 365 day basis.��

(G) 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 of assets and securities. Additionally, taxes are not part of this calculation. ��

�

Page 10 of 19

�

Prosperity Bancshares, Inc.�

Financial Highlights (Unaudited)

(Dollars in thousands)

�

YIELD ANALYSIS

�

Three Months Ended

�

Sep 30, 2014

�

Jun 30, 2014

�

Sep 30, 2013

�

Average Balance

�

Interest Earned/ Interest

Paid

�

Average

Yield/

Rate

�

Average Balance

�

Interest Earned/ Interest

Paid

�

Average

Yield/

Rate

�

Average Balance

�

Interest Earned/ Interest

Paid

�

Average

Yield/

Rate

�

Interest-Earning Assets:

�

Loans

�

9,381,248

�

140,521

�

5.94

�

9,468,136

�

138,655

�

5.87

�

6,173,394

�

94,236

�

6.06

�

Investment securities

�

8,836,309

�

46,910

�

2.11

�^(H)

�

8,748,322

�

47,670

�

2.19

�^(H)

�

8,015,221

�

41,961

�

2.08

�^(H)

Federal funds sold and other earning assets

�

95,378

�

0.15

�

234,302

�

178

�

0.30

�

27,451

�

0.22

�

Total interest-earning assets

�

18,312,935

�

187,466

�

4.06

�

18,450,760

�

186,503

�

4.05

�

14,216,066

�

136,213

�

3.80

�

Allowance for credit losses

�

(73,977

)

�

(72,587

)

�

(56,765

)

�

Noninterest-earning assets

�

2,881,762

�

2,939,375

�

2,034,968

�

Total assets

�

21,120,720

�

21,317,548

�

16,194,269

�

Interest-Bearing Liabilities:

�

Interest-bearing demand deposits

�

3,399,655

�

2,089

�

0.24

�

3,568,475

�

2,272

�

0.26

�

2,400,555

�

1,708

�

0.28

�

Savings and money market deposits

�

5,502,326

�

3,400

�

0.25

�

5,479,978

�

3,550

�

0.26

�

4,233,911

�

2,911

�

0.27

�

Certificates and other time deposits

�

3,235,185

�

4,751

�

0.58

�

3,379,819

�

5,096

�

0.60

�

2,489,848

�

3,695

�

0.59

�

Securities sold under repurchase agreements

�

389,726

�

245

�

0.25

�

382,692

�

254

�

0.27

�

455,276

�

317

�

0.28

�

Junior subordinated debentures

�

167,531

�

1,099

�

2.60

�

167,531

�

1,087

�

2.60

�

85,055

�

610

�

2.85

�

Other borrowings

�

215,222

�

225

�

0.42

�

140,906

�

189

�

0.54

�

772,083

�

439

�

0.23

�

Total interest-bearing liabilities

�

12,909,645

�

11,809

�

0.36

�^(I)

�

13,119,401

�

12,448

�

0.38

�^(I)

�

10,436,728

�

9,680

�

0.37

�^(I)

�

Noninterest-bearing liabilities:

�

Noninterest-bearing demand deposits

�

4,939,388

�

4,735,575

�

3,308,158

�

Other liabilities

�

109,287

�

365,169

�

73,571

�

Total liabilities

�

17,958,320

�

18,220,145

�

13,818,457

�

Shareholders' equity

�

3,162,400

�

3,097,403

�

2,375,812

�

Total liabilities and shareholders' equity

�

21,120,720

�

21,317,548

�

16,194,269

�

Net interest income and margin

�

175,657

�

3.81

�

174,055

�

3.78

�

126,533

�

3.53

�

Non-GAAP to GAAP reconciliation:

�

Tax equivalent adjustment

�

1,997

�

2,083

�

2,028

�

Net interest income and margin (tax equivalent basis)

�

177,654

�

3.85

�

176,138

�

3.83

�

128,561

�

3.59

�

(H) Yield on securities was impacted by net premium amortization of $13,531, $12,837 and $15,136 for the three month periods ended September 30, 2014, June 30, 2014 and

September 30, 2013, respectively.

(I) Total cost of funds, including noninterest-bearing deposits, was 0.26%, 0.28% and 0.28% for the three months ended September 30, 2014, June 30, 2014 and

September 30, 2013, respectively.

�

Page 11 of 19

�

��

Prosperity Bancshares, Inc.�

Financial Highlights (Unaudited)

(Dollars in thousands)

�

YIELD ANALYSIS

�

Year-to-Date

�

Sep 30, 2014

�

Sep 30, 2013

�

Average Balance

�

Interest Earned/ Interest Paid

�

Average Yield/ Rate

�

Average Balance

�

Interest Earned/ Interest Paid

�

Average Yield/ Rate

�

Interest-Earning Assets:

�

Loans

�

8,874,414

�

386,320

�

5.82

�

5,853,924

�

265,542

�

6.06

�

Investment securities

�

8,685,212

�

141,636

�

2.18

�^(J)

�

7,912,599

�

117,893

�

1.99

�^(J)

Federal funds sold and other earning assets

�

143,770

�

261

�

0.24

�

32,426

�

111

�

0.46

�

Total interest-earning assets

�

17,703,396

�

528,217

�

3.99

�

13,798,949

�

383,546

�

3.72

�

Allowance for credit losses

�

(71,287

)

�

(55,933

)

�

Noninterest-earning assets

�

2,791,827

�

2,000,425

�

Total assets

�

20,423,936

�

15,743,441

�

Interest-Bearing Liabilities:

�

Interest-bearing demand deposits

�

3,506,932

�

6,493

�

0.25

�

2,545,983

�

6,018

�

0.32

�

Savings and money market deposits

�

5,326,783

�

10,105

�

0.25

�

4,096,889

�

8,912

�

0.29

�

Certificates and other time deposits

�

3,145,435

�

13,947

�

0.59

�

2,468,518

�

11,244

�

0.61

�

Securities sold under repurchase agreements

�

373,542

�

737

�

0.26

�

458,441

�

921

�

0.27

�

Junior subordinated debentures

�

150,692

�

2,961

�

2.63

�

85,055

�

1,821

�

2.86

�

Other borrowings

�

136,618

�

571

�

0.56

�

558,594

�

1,273

�

0.30

�

Total interest bearing liabilities

�

12,640,002

�

34,814

�

0.37

�^(K)

�

10,213,480

�

30,189

�

0.40

�^(K)

�

Noninterest-bearing liabilities:

�

Noninterest-bearing demand deposits

�

4,567,397

�

3,182,349

�

Other liabilities

�

185,838

�

68,721

�

Total liabilities

�

17,393,237

�

13,464,550

�

Shareholders' equity

�

3,030,699

�

2,278,891

�

Total liabilities and shareholders' equity

�

20,423,936

�

15,743,441

�

Net interest income and margin

�

493,403

�

3.73

�

353,357

�

3.42

�

Non-GAAP to GAAP reconciliation:

�

Tax equivalent adjustment

�

6,132

�

6,216

�

Net interest income and margin (tax equivalent basis)

�

499,535

�

3.77

�

359,573

�

3.48

�

(J) Yield on securities was impacted by net premium amortization of $38,648 and $56,685 for the nine month periods ended September 30, 2014 and September 30, 2013, respectively.��

(K) Total cost of funds, including noninterest-bearing deposits, was 0.27% and 0.30% for the nine month periods ended September 30, 2014 and September 30, 2013, respectively.��

�

Page 12 of 19

�

Prosperity�Bancshares, Inc.�

Financial Highlights (Unaudited)

(Dollars�in thousands)

�

Three Months Ended

�

Year-to-Date

�

Sep 30, 2014

�

Jun 30, 2014

�

Mar 31, 2014

�

Dec 31, 2013

�

Sep 30, 2013

�

Sep 30, 2014

�

Sep 30, 2013

�

Adjustment to Loan Yield ^(L)

�

Interest on loans, as reported

�

140,521

�

138,655

�

107,144

�

110,575

�

94,236

�

386,320

�

265,542

�

Remove purchase accounting adjustment- loan discount accretion

�

(28,458

)

�

(25,352

)

�

(13,475

)

�

(19,979

)

�

(16,421

)

�

(67,285

)

�

(42,744

)

Interest on loans without discount accretion

�

112,063

�

113,303

�

93,669

�

90,596

�

77,815

�

319,035

�

222,798

�

Average loans

�

9,381,248

�

9,468,136

�

7,755,997

�

7,238,438

�

6,173,394

�

8,874,414

�

5,853,924

�

Loan yield without discount accretion

�

4.74

�

4.80

�

4.90

�

4.97

�

5.00

�

4.81

�

5.09

Loan yield, as reported

�

5.94

�

5.87

�

5.60

�

6.06

�

6.06

�

5.82

�

6.06

�

Adjustment to Securities Yield ^(L)

�

Interest on securities, as reported

�

46,910

�

47,670

�

47,056

�

45,100

�

41,961

�

141,636

�

117,893

�

Add purchase accounting adjustment- securities amortization

�

1,466

�

1,570

�

1,964

�

1,892

�

2,275

�

5,000

�

7,980

�

Interest on securities including amortization

�

48,376

�

49,240

�

49,020

�

46,992

�

44,236

�

146,636

�

125,873

�

Average securities

�

8,836,309

�

8,748,322

�

8,466,946

�

7,992,673

�

8,015,221

�

8,685,212

�

7,912,599

�

Securities yield without purchase accounting adjustment

�

2.17

�

2.26

�

2.35

�

2.33

�

2.19

�

2.26

�

2.13

Securities yield, as reported

�

2.11

�

2.19

�

2.25

�

2.24

�

2.08

�

2.18

�

1.99

�

Net Interest Margin (tax equivalent basis, excluding purchase accounting adjustments to yield)

�

3.26

�

3.31

�

3.33

�

3.35

�

3.19

�

3.30

�

3.13

�

Net Interest Margin (tax equivalent basis), as reported

�

3.85

�

3.83

�

3.62

�

3.82

�

3.59

�

3.77

�

3.48

�

Net income available to common shareholders, as reported

�

76,570

�

75,506

�

67,137

�

62,971

�

55,278

�

219,213

�

158,427

�

Less: Purchase accounting adjustments, net of tax ^(M)

�

(17,924

)

�

(15,886

)

�

(7,677

)

�

(12,095

)

�

(9,476

)

�

(41,487

)

�

(23,371

)

Net income available to common shareholders, adjusted

�

58,646

�

59,620

�

59,460

�

50,876

�

45,802

�

177,726

�

135,056

�

Acquired Loans Accounted for Under ASC 310-20

�

Acquired Loans Accounted for Under ASC 310-30

�

Total Loans Accounted for Under ASC 310-20 and 310-30

�

Balance at Acquisition Date

�

Balance at

Jun 30,

2014

�

Balance at

Sep 30,

2014

�

Balance at Acquisition Date

�

Balance at

Jun 30,

2014

�

Balance at

Sep 30,

2014

�

Balance at Acquisition Date

�

Balance at

Jun 30,

2014

�

Balance at

Sep 30,

2014

�

Loan marks:

�

Previously acquired banks ^(N)

�

159,627

�

67,578

�

59,738

�

63,547

�

32,450

�

31,180

�

223,174

�

100,028

�

90,918

�

2014 acquisition ^(O)

�

65,962

�

55,749

�

44,458

�

68,359

�

68,359

�

59,514

�

134,321

�

124,108

�

103,972

�

Total

�

225,589

�

123,327

�

104,196

�

131,906

�

100,809

�

90,694

�

357,495

�

224,136

�

194,890

�

Acquired portfolio loan balances:

�

Previously acquired banks ^(N)

�

3,839,647

�

1,863,751

�

1,628,791

�

135,279

�

70,292

�

65,880

�

3,974,926

�

1,934,043

�

1,694,671

�

2014 acquisition ^(O)

�

1,617,287

�

1,128,510

�

940,532

�

120,567

�

110,582

�

96,120

�

1,737,854

�

1,239,092

�

1,036,652

�

Total

�

5,456,934

�

2,992,261

�

2,569,323

�

255,846

�

180,874

�

162,000

�

5,712,780

^(P)

�

3,173,135

�

2,731,323

�

(L) Non-GAAP financial measure.

(M) Using effective tax rate of 33.6%, 33.2%, 33.3%, 33.1% and 33.0% for the three month periods ended September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013 and September 30, 2013,

respectively, and 33.4% and 32.8% for the nine month periods ended September 30-, 2014 and 2013, respectively.

(N) Includes Bank of Texas, Bank Arlington, American State Bank, Community National Bank, East Texas Financial Services, Coppermark and FVNB.

(O) F&M was acquired on April 1, 2014. During the second quarter of 2014, the acquisition of F&M added $1.738 billion in loans with related purchase accounting adjustments of $134.321 million at acquisition date.

(P) Actual principal balances acquired.

�

Page 13 of 19

�

Prosperity Bancshares, Inc.�

Financial Highlights (Unaudited)

�

Three Months Ended

�

Sep 30, 2014

�

Jun 30, 2014

�

Mar 31, 2014

�

Dec 31, 2013

�

Sep 30, 2013

�

YIELD TREND

�

Interest-Earning Assets:

�

Loans

�

5.94

�

5.87

�

5.60

�

6.06

�

6.06

Investment securities ^(Q)

�

2.11

�

2.19

�

2.25

�

2.24

�

2.08

Federal funds sold and other earning assets

�

0.15

�

0.30

�

0.19

�

0.29

�

0.22

Total interest-earning assets

�

4.06

�

4.05

�

3.83

�

4.03

�

3.80

�

Interest-Bearing Liabilities:

�

Interest-bearing demand deposits

�

0.24

�

0.26

�

0.24

�

0.25

�

0.28

Savings and money market deposits

�

0.25

�

0.26

�

0.26

�

0.26

�

0.27

Certificates and other time deposits

�

0.58

�

0.60

�

0.59

�

0.60

�

0.59

Securities sold under repurchase agreements

�

0.25

�

0.27

�

0.28

�

0.28

�

0.28

Other borrowings

�

0.42

�

0.54

�

1.23

�

0.42

�

0.23

Junior subordinated debentures

�

2.60

�

2.60

�

2.53

�

2.61

�

2.85

Total interest-bearing liabilities

�

0.36

�

0.38

�

0.36

�

0.37

�

0.37

�

Net Interest Margin

�

3.81

�

3.78

�

3.57

�

3.76

�

3.53

Net Interest Margin (tax equivalent)

�

3.85

�

3.83

�

3.62

�

3.82

�

3.59

�

(Q) Yield on securities was impacted by net premium amortization of $13,531, $12,837, $12,280, $12,017 and $15,136 for the three month periods ended September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013 and September 30, 2013 respectively.

�

Page 14 of 19

�

Prosperity Bancshares, Inc.�

Financial Highlights (Unaudited)

(In thousands)

�

Three Months Ended

�

Sep 30, 2014

�

Jun 30, 2014

�

Mar 31, 2014

�

Dec 31, 2013

�

Sep 30, 2013

�

Balance Sheet Averages

�

Total loans

�

9,381,248

�

9,468,136

�

7,755,997

�

7,238,438

�

6,173,394

�

Investment securities

�

8,836,309

�

8,748,322

�

8,466,946

�

7,992,673

�

8,015,221

�

Federal funds sold and other earning assets

�

95,378

�

234,302

�

101,700

�

103,413

�

27,451

�

Total interest-earning assets

�

18,312,935

�

18,450,760

�

16,324,643

�

15,334,524

�

14,216,066

�

Allowance for credit losses

�

(73,977

)

�

(72,587

)

�

(67,222

)

�

(60,170

)

�

(56,765

)

Cash and due from banks

�

267,389

�

284,432

�

255,297

�

232,666

�

189,082

�

Goodwill

�

1,893,667

�

1,803,534

�

1,673,216

�

1,560,905

�

1,351,236

�

Core deposit intangibles, net

�

35,753

�

38,469

�

38,754

�

30,641

�

25,938

�

Other real estate

�

5,405

�

8,562

�

7,885

�

7,254

�

9,494

�

Fixed assets, net

�

285,039

�

292,075

�

282,411

�

251,688

�

231,480

�

Other assets

�

394,509

�

512,303

�

293,330

�

419,122

�

227,738

�

Total assets

�

21,120,720

�

21,317,548

�

18,808,314

�

17,776,630

�

16,194,269

�

Noninterest-bearing deposits

�

4,939,388

�

4,735,575

�

4,018,094

�

3,860,296

�

3,308,158

�

Interest-bearing demand deposits

�

3,399,655

�

3,568,475

�

3,554,366

�

2,963,899

�

2,400,555

�

Savings and money market deposits

�

5,502,326

�

5,479,978

�

4,992,442

�

4,654,044

�

4,233,911

�

Certificates and other time deposits

�

3,235,185

�

3,379,819

�

2,816,701

�

2,712,699

�

2,489,848

�

Total deposits

�

17,076,554

�

17,163,847

�

15,381,603

�

14,190,938

�

12,432,472

�

Securities sold under repurchase agreements

�

389,726

�

382,692

�

347,747

�

398,100

�

455,276

�

Other borrowings

�

215,222

�

140,906

�

51,932

�

210,492

�

772,083

�

Junior subordinated debentures

�

167,531

�

167,531

�

124,231

�

111,172

�

85,055

�

Other liabilities

�

109,287

�

365,169

�

82,288

�

223,394

�

73,571

�

Shareholders' equity

�

3,162,400

�

3,097,403

�

2,820,513

�

2,642,534

�

2,375,812

�

Total liabilities and equity

�

21,120,720

�

21,317,548

�

18,808,314

�

17,776,630

�

16,194,269

�

Page 15 of 19

�

Prosperity Bancshares, Inc.^�

Financial Highlights (Unaudited)

(Dollars in thousands)

�

Sep 30, 2014

�

Jun 30, 2014

�

Mar 31, 2014

�

Dec 31, 2013

�

Sep 30, 2013

�

Period End Balances

�

Loan Portfolio

�

Commercial and other

�

2,058,217

�

22.0

�

2,139,983

�

23.0

�

1,312,405

�

16.9

�

1,322,975

�

17.0

�

1,028,799

�

16.6

Construction, land development and other land loans

�

1,041,300

�

11.1

�

1,005,099

�

10.8

�

888,985

�

11.5

�

865,511

�

11.1

�

703,193

�

11.4

1-4 family residential

�

2,210,141

�

23.6

�

2,153,801

�

23.1

�

1,906,480

�

24.7

�

1,870,365

�

24.2

�

1,503,771

�

24.4

Home equity

�

269,850

�

2.9

�

267,759

�

2.9

�

263,966

�

3.4

�

261,355

�

3.4

�

211,742

�

3.4

Commercial real estate

�

3,091,090

�

33.1

�

3,027,945

�

32.6

�

2,709,386

�

34.9

�

2,753,797

�

35.3

�

2,304,862

�

37.2

Agriculture (including farmland)

�

534,672

�

5.7

�

542,360

�

5.8

�

512,857

�

6.6

�

531,258

�

6.8

�

321,518

�

5.2

Consumer and other

�

163,618

�

1.7

�

171,215

�

1.8

�

158,321

�

2.0

�

169,960

�

2.2

�

108,704

�

1.8

Total loans

�

9,368,888

�

9,308,162

�

7,752,400

�

7,775,221

�

6,182,589

�

Deposit Types

�

Noninterest-bearing DDA

�

4,968,867

�

29.2

�

4,921,398

�

28.5

�

4,142,042

�

26.9

�

4,108,835

�

26.9

�

3,368,357

�

27.0

Interest-bearing DDA

�

3,359,606

�

19.7

�

3,467,826

�

20.1

�

3,446,375

�

22.3

�

3,470,316

�

22.7

�

2,366,997

�

19.0

Money market

�

3,788,358

�

22.3

�

3,861,339

�

22.3

�

3,468,016

�

22.4

�

3,320,062

�

21.7

�

2,834,172

�

22.8

Savings

�

1,728,676

�

10.2

�

1,707,645

�

9.9

�

1,630,395

�

10.5

�

1,571,504

�

10.3

�

1,413,153

�

11.3

Certificates and other time deposits

�

3,168,520

�

18.6

�

3,322,847

�

19.2

�

2,773,229

�

17.9

�

2,820,554

�

18.4

�

2,473,120

�

19.9

Total deposits

�

17,014,027

�

17,281,055

�

15,460,057

�

15,291,271

�

12,455,799

�

Loan to Deposit Ratio

�

55.1

�

53.9

�

50.1

�

50.8

�

49.6

�

Construction Loans

�

Single family residential construction

�

317,307

�

30.3

�

316,579

�

31.2

�

292,137

�

32.6

�

271,491

�

30.9

�

239,980

�

33.5

Land development

�

89,553

�

8.5

�

88,947

�

8.8

�

73,974

�

8.2

�

83,820

�

9.6

�

60,927

�

8.6

Raw land

�

83,013

�

7.9

�

62,731

�

6.2

�

55,384

�

6.2

�

48,996

�

5.6

�

52,789

�

7.4

Residential lots

�

154,027

�

14.7

�

138,769

�

13.7

�

118,733

�

13.2

�

122,449

�

14.0

�

95,361

�

13.4

Commercial lots

�

86,991

�

8.3

�

93,200

�

9.2

�

99,300

�

11.1

�

103,878

�

11.9

�

58,085

�

8.2

Commercial construction and other

�

317,355

�

30.3

�

312,870

�

30.9

�

257,942

�

28.7

�

244,124

�

28.0

�

204,940

�

28.9

Net unaccreted discount

�

(6,946

)

�

(7,997

)

�

(8,485

)

�

(9,247

)

�

(8,889

)

�

Total construction loans

�

1,041,300

�

1,005,099

�

888,985

�

865,511

�

703,193

�

Page 16 of 19

�

Prosperity Bancshares, Inc.^�

Financial Highlights (Unaudited)

(Dollars in thousands)

�

Three Months Ended

�

Year-to-Date

�

Sep 30, 2014

�

Jun 30, 2014

�

Mar 31, 2014

�

Dec 31, 2013

�

Sep 30, 2013

�

Sep 30, 2014

�

Sep 30, 2013

�

Asset Quality

�

Nonaccrual loans

�

26,804

�

23,082

�

7,714

�

10,231

�

4,954

�

26,804

�

4,954

�

Accruing loans 90 or more days past due

�

17,753

�

335

�

3,519

�

4,947

�

283

�

17,753

�

283

�

Total nonperforming loans

�

44,557

�

23,417

�

11,233

�

15,178

�

5,237

�

44,557

�

5,237

�

Repossessed assets

�

Other real estate

�

5,504

�

5,093

�

7,372

�

7,299

�

7,432

�

5,504

�

7,432

�

Total nonperforming assets

�

50,082

�

28,521

�

18,696

�

22,504

�

12,687

�

50,082

�

12,687

�

Nonperforming assets:

�

Commercial and industrial

�

26,172

�

14,434

�

4,748

�

3,153

�

1,223

�

26,172

�

1,223

�

Construction, land development and other land loans

�

5,998

�

2,449

�

4,053

�

4,558

�

4,611

�

5,998

�

4,611

�

1-4 family residential (including home equity)

�

7,559

�

6,909

�

5,435

�

6,279

�

2,441

�

7,559

�

2,441

�

Commercial real estate (including multi-family residential)

�

9,686

�

3,970

�

4,196

�

8,033

�

4,233

�

9,686

�

4,233

�

Agriculture (including farmland)

�

182

�

140

�

104

�

279

�

182

�

Consumer and other

�

485

�

619

�

160

�

202

�

156

�

485

�

156

�

Total

�

50,082

�

28,521

�

18,696

�

22,504

�

12,687

�

50,082

�

12,687

�

Number of loans/properties

�

194

�

179

�

164

�

203

�

128

�

194

�

128

�

Allowance for credit losses at end of period

�

77,613

�

73,266

�

67,096

�

67,282

�

59,913

�

77,613

�

59,913

�

Net charge-offs:

�

Commercial and industrial

�

(64

)

�

119

�

326

�

Construction, land development and other land loans

�

(28

)

�

115

�

(17

)

�

(12

)

�

(30

)

�

1-4 family residential (including home equity)

�

406

�

131

�

607

�

152

�

Commercial real estate (including multi-family residential)

�

)

�

(311

)

�

(471

)

�

273

�

Agriculture (including farmland)

�

(53

)

�

(843

)

�

(81

)

�

(85

)

�

(977

)

�

Consumer and other

�

653

�

536

�

612

�

876

�

642

�

1,801

�

1,218

�

Total

�

653

�

155

�

786

�

496

�

288

�

1,594

�

2,026

�

Asset Quality Ratios

�

Nonperforming assets to average earning assets

�

0.27

�

0.15

�

0.11

�

0.15

�

0.09

�

0.28

�

0.09

Nonperforming assets to loans and other real estate

�

0.53

�

0.31

�

0.24

�

0.29

�

0.20

�

0.53

�

0.20

Net charge-offs to average loans (annualized)

�

0.03

�

0.01

�

0.04

�

0.03

�

0.02

�

0.02

�

0.05

Allowance for credit losses to total loans

�

0.83

�

0.79

�

0.87

�

0.87

�

0.97

�

0.83

�

0.97

Allowance for credit losses to total loans (excluding acquired loans accounted for under ASC Topics 310-20 and 310-30) ^(E)

�

1.14

�

1.15

�

1.18

�

1.25

�

1.20

�

1.14

�

1.20

�

Page 17 of 19

�

Prosperity Bancshares, Inc.^�

Notes to Selected Financial Data (Unaudited)

(Dollars and share amounts in thousands, except per share data)

�

Consolidated Financial Highlights

�

NOTES TO SELECTED FINANCIAL DATA

�

Prosperitys management uses certain nonGAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity and the tangible equity to tangible assets ratio for internal planning and forecasting purposes. In addition, due to the application of purchase accounting, Prosperity uses certain non-GAAP measures and ratios that exclude the impact of these items to evaluate its allowance for credit losses to total loans (excluding acquired loans accounted for under ASC Topics 310-20 and 310-30). Prosperity has included in this Earnings Release information relating to these non-GAAP financial measures for the applicable periods presented. Prosperity believes these non-GAAP financial measures provide information useful to investors in understanding Prosperitys financial results and Prosperity believes that its presentation, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting Prosperitys 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 measures provide useful information by excluding certain items that may not be indicative of its core operating earnings and business outlook. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results and 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.

�

Three Months Ended

�

Year-to-Date

�

Sep 30, 2014

�

Jun 30, 2014

�

Mar 31, 2014

�

Dec 31, 2013

�

Sep 30, 2013

�

Sep 30, 2014

�

Sep 30, 2013

�

Return on average tangible common equity:

�

Net income

�

76,570

�

75,506

�

67,137

�

62,971

�

55,278

�

219,213

�

158,427

�

Average shareholders' equity

�

3,162,400

�

3,097,403

�

2,820,513

�

2,642,534

�

2,375,812

�

3,030,699

�

2,278,891

�

Less:��Average goodwill and other intangible assets

�

(1,929,420

)

�

(1,842,003

)

�

(1,711,970

)

�

(1,591,546

)

�

(1,377,174

)

�

(1,828,594

)

�

(1,325,214

)

Average tangible shareholders equity

�

1,232,980

�

1,255,400

�

1,108,543

�

1,050,988

�

998,638

�

1,202,105

�

953,677

�

Return on average tangible common equity

�

24.84

�

24.06

�

24.23

�

23.97

�

22.14

�

24.38

�

22.21

�

Tangible book value per share:

�

Shareholders equity

�

3,182,950

�

3,120,594

�

2,840,754

�

2,786,818

�

2,389,112

�

3,182,950

�

2,389,112

�

Less:�� Goodwill and other intangible assets

�

(1,926,729

)

�

(1,931,342

)

�

(1,711,706

)

�

(1,712,121

)

�

(1,377,015

)

�

(1,926,729

)

�

(1,377,015

)

Tangible shareholders equity

�

1,256,221

�

1,189,252

�

1,129,048

�

1,074,697

�

1,012,097

�

1,256,221

�

1,012,097

�

Period end shares outstanding

�

69,756

�

69,744

�

66,261

�

66,048

�

60,383

�

69,756

�

60,383

�

Tangible book value per share:

�

18.01

�

17.05

�

17.04

�

16.27

�

16.76

�

18.01

�

16.76

�

Tangible equity to tangible assets ratio:

�

Tangible shareholders equity

�

1,256,221

�

1,189,252

�

1,129,048

�

1,074,697

�

1,012,097

�

1,256,221

�

1,012,097

�

Total assets

�

21,117,314

�

21,248,106

�

18,913,133

�

18,642,028

�

16,054,279

�

21,117,314

�

16,054,279

�

Less:�� Goodwill and other intangible assets

�

(1,926,729

)

�

(1,931,342

)

�

(1,711,706

)

�

(1,712,121

)

�

(1,377,015

)

�

(1,926,729

)

�

(1,377,015

)

Tangible assets

�

19,190,585

�

19,316,764

�

17,201,427

�

16,929,907

�

14,677,264

�

19,190,585

�

14,677,264

�

Tangible equity to tangible assets ratio

�

6.55

�

6.16

�

6.56

�

6.35

�

6.90

�

6.55

�

6.90

�

Page 18 of 19

�

Prosperity Bancshares, Inc.^�

Notes to Selected Financial Data (Unaudited)

(Dollars in thousands)

�

Three Months Ended

�

Year-to-Date

�

Sep 30,

2014

�

Jun 30,

2014

�

Mar 31,

2014

�

Dec 31,

2013

�

Sep 30,

2013

�

Sep 30,

2014

�

Sep 30,

2013

�

Allowance for credit losses to total loans, excluding acquired loans:

�

Allowance for credit losses

�

77,613

�

73,266

�

67,096

�

67,282

�

59,913

�

77,613

�

59,913

�

Total loans

�

9,368,888

�

9,308,162

�

7,752,400

�

7,775,221

�

6,182,589

�

9,368,888

�

6,182,589

�

Less: Fair value of acquired loans accounted for under ASC

�

Topics 310-20 and 310-30 (does not include new production)

�

2,536,433

�

2,948,999

�

2,086,744

�

2,412,660

�

1,181,559

�

2,536,433

�

1,181,559

�

Total loans less acquired loans

�

6,832,455

�

6,359,163

�

5,665,656

�

5,362,561

�

5,001,030

�

6,832,455

�

5,001,030

�

Allowance for credit losses to total loans, excluding acquired loans (non-GAAP basis)

�

1.14

�

1.15

�

1.18

�

1.25

�

1.20

�

1.14

�

1.20

�

Page 19 of 19

�

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Form 8-K PROSPERITY BANCSHARES For: Oct 29

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