Exhibit 99.1

 

 

 

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	david.zalman@prosperitybankusa.com

 

FOR IMMEDIATE RELEASE

 

PROSPERITY BANCSHARES, INC.^®

REPORTS RECORD SECOND QUARTER

2014 EARNINGS

 

	●	Second quarter 2014 earnings per share (diluted) increased 21.3% to $1.08 compared with the second quarter 2013
	●	Net income increased $21.662 million or 40.2% compared with the second quarter 2013
	●	Nonperforming assets remain low at 0.15% of second quarter average earning assets
	●	Loans increased $3.136 billion or 50.8% compared with the second quarter 2013
	●	Deposits increased $4.772 billion or 38.2% compared with the second quarter 2013

 

HOUSTON, July 25, 2014. Prosperity Bancshares, Inc.^® (NYSE: PB), the parent company of Prosperity Bank^® (collectively, “Prosperity”), reported net income for the quarter ended June 30, 2014, of $75.506 million or $1.08 per diluted common share, an increase in net income of $21.662 million or 40.2%, compared with $53.844 million, and an increase in diluted earnings per share of 21.3%, compared with $0.89 per diluted common share for the same period in 2013.

 

“I am proud of the strong results our team has generated in the second quarter of 2014. We achieved diluted earnings per share of $1.08 for the quarter, an increase of 21.3% compared with the second quarter of 2013, and continued to see good organic loan growth with our legacy bank. Excluding loans acquired in acquisitions, loans at June 30, 2014 grew 8.4% compared with June 30, 2013 and 3.0% (11.8% annualized) on a linked quarter basis,” said David Zalman, Prosperity’s Chairman and Chief Executive Officer.

 

“We are finished with the operational integration of F&M Bank in Tulsa and look forward to building and growing strong relationships with customers and associates in the Tulsa and Dallas markets served by F&M. The F&M Bank associates have been great to work with and we look forward to them assuming leadership roles in our company and helping take us forward,” continued Zalman.

 

“I continue to see growth and prosperity for our company. Texas and Oklahoma continue to have some of the best economies in the United States and show positive economic and growth trends,” concluded Zalman.

 

Prosperity’s management uses certain non−GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity and the tangible equity to tangible assets ratio. As a result of acquisitions, and thus purchase accounting adjustments, 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 FASB Accounting Standards Codification (“ASC”) Topics 310-20, “Receivables-Nonrefundable Fees and Other Costs” and 310-30, “Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality”). Prosperity has included in this Earnings Release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to the “Notes to Selected Financial Data” at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures.

 

 

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

 

For the three months ended June 30, 2014, net income was $75.506 million compared with $53.844 million for the same period in 2013. Net income per diluted common share was $1.08 for the three months ended June 30, 2014, compared with $0.89 for the same period in 2013. Net income for the quarter includes one-time merger expenses of $2.026 million. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended June 30, 2014 were 1.42%, 9.75% and 24.06%, respectively. Prosperity’s efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and securities and taxes) was 42.90% for the three months ended June 30, 2014.

 

Net interest income before provision for credit losses for the quarter ended June 30, 2014 increased 46.6% to $174.055 million, compared with $118.742 million during the same period in 2013. The increase was primarily due to a 30.7% increase in average interest-earning assets for the same period. The net interest margin on a tax equivalent basis for the three months ended June 30, 2014 increased to 3.83%, compared with 3.43% for the same period in 2013 and increased from 3.62% for the three months ended March 31, 2014. Linked quarter net interest income before provision for credit losses increased 21.1% or $30.364 million to $174.055 million, compared with $143.691 million during the three months ended March 31, 2014, primarily due to the acquisition of F&M Bancorporation Inc. and its wholly-owned subsidiary, The F&M Bank and Trust Company (collectively, “F&M”) and an $11.877 million increase in purchase accounting adjustments from purchased loans. Excluding purchase accounting adjustments, the net interest margin on a tax equivalent basis decreased on a linked quarter basis from 3.33% for the quarter ended March 31, 2014 to 3.31% for the quarter ended June 30, 2014.

 

Noninterest income increased $8.727 million or 34.5% to $34.001 million for the three months ended June 30, 2014, compared with $25.274 million for the same period in 2013. This increase was primarily due to an increase in fees and service charges as a result of the additional accounts acquired from F&M and FVNB Corp. and its wholly-owned subsidiary, First Victoria National Bank (collectively, “FVNB”). Trust and brokerage income increased as a result of the additional products and services acquired through the acquisition of FVNB in 2013. These increases were partially offset by a decrease in debit card income as a result of the Durbin Amendment that became effective on July 1, 2013. As a result of this legislation, the Federal Reserve imposed limits on the amount of interchange, or swipe, fees that can be collected for financial institutions that have assets of $10 billion or more. On a linked quarter basis, noninterest income increased $5.397 million or 18.9% primarily due to gains on the sale of assets, including the sale of certain bank buildings, gains on other real estate owned, life insurance proceeds received and increased fees and service charges resulting from the additional accounts acquired in the F&M acquisition consummated during the second quarter of 2014.

 

Noninterest expense increased $27.396 million or 44.7% to $88.696 million for the three months ended June 30, 2014, compared with $61.300 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 increased 24.9% or $17.662 million primarily due to the additional salaries and benefits and other noninterest expenses associated with the F&M acquisition. Additionally, one-time pre-tax merger expenses of $2.026 million primarily related to the F&M acquisition were recorded during the second quarter of 2014.

 

Loans at June 30, 2014 were $9.308 billion, an increase of $3.136 billion or 50.8%, compared with $6.172 billion at June 30, 2013, primarily due to the acquisitions of FVNB and F&M. Linked quarter loans increased $1.556 billion or 20.1% from $7.752 billion at March 31, 2014 due mainly to the acquisition of F&M.

 

Deposits at June 30, 2014 were $17.281 billion, an increase of $4.772 billion or 38.2%, compared with $12.509 billion at June 30, 2013, primarily due to the acquisitions of FVNB and F&M. Linked quarter deposits increased $1.821 billion or 11.8% from $15.460 billion at March 31, 2014 due mainly to the acquisition of F&M.

 

Average loans increased 54.8% or $3.354 billion to $9.468 billion for the quarter ended June 30, 2014, compared with $6.115 billion for the same period in 2013. On a linked quarter basis, average loans increased 22.1% or $1.712 billion from $7.756 billion for the quarter ended March 31, 2014. Average deposits increased 35.3% or $4.483 billion to $17.164 billion for the quarter ended June 30, 2014, compared with $12.681 billion for the same period of 2013. On a linked quarter basis, average deposits increased 11.6% or $1.782 billion from $15.382 billion for the quarter ended March 31, 2014.

 

 

Results of operations for the six months ended June 30, 2014

 

For the six months ended June 30, 2014, net income was $142.643 million, compared with $103.149 million for the same period in 2013. Net income per diluted common share was $2.10 for the six months ended June 30, 2014, compared with $1.76 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 six months ended June 30, 2014 were 1.43%, 9.72% and 24.12%, respectively. Prosperity’s efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and securities and taxes) was 42.51% for the six months ended June 30, 2014.

 

Net interest income before provision for credit losses for the six months ended June 30, 2014, increased 40.1% to $317.746 million, compared with $226.824 million during the same period in 2013. The increase was primarily due to a 28.0% increase in average interest-earning assets over the same period. The net interest margin on a tax equivalent basis for the six months ended June 30, 2014 increased to 3.73%, compared with 3.43% for the same period in 2013. Excluding purchase accounting adjustments, the net interest margin on a tax equivalent basis increased to 3.32% for the six months ended June 30, 2014 from 3.12% for the same period in 2013.

 

Noninterest income increased $13.890 million or 28.5% to $62.605 million for the six months ended June 30, 2014, compared with $48.715 million for the same period in 2013. This increase was primarily due to the effects of the additional accounts acquired in the acquisitions of Coppermark Bancshares Inc. and its wholly-owned subsidiary, Coppermark Bank (collectively, “Coppermark”), FVNB and F&M completed in 2013 and 2014. Additionally, 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 $4.8 million during the six months ended June 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.

 

Noninterest expense increased $42.663 million or 36.4% to $159.730 million for the six months ended June 30, 2014, compared with $117.067 million for the same period in 2013. This increase was primarily due to additional noninterest expenses associated with the acquisitions of Coppermark, FVNB and F&M. Additionally, total noninterest expense for the six months ended June 30, 2014 included one-time pre-tax merger expenses of $2.757 million related primarily to the F&M and FVNB acquisitions.

 

Average loans increased 51.4% or $2.925 billion to $8.617 billion for the six months ended June 30, 2014, compared with $5.692 billion for the same period in 2013. Average deposits increased 33.2% or $4.054 billion to $16.277 billion for the six months ended June 30, 2014, compared with $12.223 billion for the same period of 2013.

 

 

The table below provides detail on loans acquired and deposits assumed in the acquisitions of East Texas Financial Services Inc. and First Federal Bank Texas (collectively “East Texas Financial Services”), Coppermark, FVNB and F&M completed on January 1, 2013, April 1, 2013, November 1, 2013 and April 1, 2014, respectively:

 

Balance Sheet Data (at period end)
(In thousands)
		Jun 30, 2014				Mar 31, 2014				Dec 31, 2013				Sep 30, 2013				Jun 30, 2013
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Loans acquired (including new production since respective acquisition dates):
East Texas Financial Services		$	85,910			$	92,474			$	99,281			$	104,403			$	111,626
Coppermark			560,692				580,416				616,333				688,656				772,965
FVNB			1,424,395				1,509,927				1,588,238				-				-
F&M			1,502,836				-				-				-				-
All other			5,734,329				5,569,583				5,471,369				5,389,530				5,287,892
Total loans		$	9,308,162			$	7,752,400			$	7,775,221			$	6,182,589			$	6,172,483
Deposits assumed (including new deposits since respective acquisition dates):
East Texas Financial Services		$	71,696			$	76,734			$	81,200			$	90,649			$	88,289
Coppermark			987,074				1,014,436				1,031,993				1,073,567				1,087,137
FVNB			2,105,120				2,164,824				2,239,415				-				-
F&M			2,090,468				-				-				-				-
All other			12,026,697				12,204,063				11,938,663				11,291,583				11,333,224
Total deposits		$	17,281,055			$	15,460,057			$	15,291,271			$	12,455,799			$	12,508,650

 

As reflected in the table above, loan and deposit growth was impacted by the acquisitions of East Texas Financial Services, Coppermark, 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 June 30, 2014 grew $446.437 million or 8.4% compared with June 30, 2013 and increased $164.746 million or 3.0% (11.8% 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 June 30, 2014 grew $693.473 million or 6.1% compared with June 30, 2013 and decreased $177.366 million or 1.5% on a linked quarter basis.

 

At June 30, 2014, Prosperity had $21.2 billion in total assets, $9.308 billion in loans and $17.281 billion in deposits. Assets, loans and deposits at June 30, 2014 increased by 30.6%, 50.8% and 38.2%, respectively, compared with their respective levels at June 30, 2013.

 

Asset Quality

 

Nonperforming assets totaled $28.521 million or 0.15% of quarterly average earning assets at June 30, 2014, compared with $14.864 million or 0.11% of quarterly average earning assets at June 30, 2013, and $18.696 million or 0.11% of quarterly average earning assets at March 31, 2014. The allowance for credit losses was 0.79% of total loans at June 30, 2014, 0.91% of total loans at June 30, 2013 and 0.87% of total loans at March 31, 2014. Excluding loans acquired that are accounted for under ASC Topics 310-20 and 310-30, the allowance for credit losses was 1.15% of remaining loans as of June 30, 2014, compared with 1.18% at both June 30, 2013 and March 31, 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.

 

The provision for credit losses was $6.325 million for the three months ended June 30, 2014, compared with $600 thousand for the three months ended March 31, 2014 and $2.550 million for the three months ended June 30, 2013. The provision for credit losses was $6.925 million for the six months ended June 30, 2014, compared with $5.350 million for the six months ended June 30, 2013.

 

 

Net charge offs were $155 thousand for the three months ended June 30, 2014, compared with $786 thousand for the three months ended March 31, 2014 and $1.423 million for the three months ended June 30, 2013. Net charge offs were $941 thousand for the six months ended June 30, 2014, compared with $1.738 million for the six months ended June 30, 2013.

 

Conference Call

 

Prosperity’s management team will host a conference call on Friday, July 25, 2014 at 10:30 a.m. Eastern Time (9:30 a.m. Central Time) to discuss Prosperity’s second quarter 2014 earnings. Individuals and investment professionals may participate in the call by dialing 877-883-0383. The elite entry number is 8369040.

 

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

 

Acquisition of F&M Bancorporation

 

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”) 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.

 

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 $214.583 million as of June 30, 2014. The goodwill balance as of June 30, 2014 does not include subsequent fair value adjustments that are still being finalized.

 

Acquisition of FVNB Corp.

 

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, on a consolidated basis, reported total assets of $2.473 billion, total loans of $1.648 billion and total deposits of $2.195 billion.

 

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 $331.090 million as of June 30, 2014. Additionally, the Company recognized $18.411 million of core deposit intangibles as of June 30, 2014. These goodwill and core deposit intangible balances as of June 30, 2014 do not include subsequent fair value adjustments that are still being finalized.

 

Acquisition of Coppermark Bancshares, Inc.

 

On April 1, 2013, Prosperity completed the acquisition of Coppermark Bancshares, Inc. and its wholly-owned subsidiary, Coppermark Bank headquartered in Oklahoma City, Oklahoma. Coppermark operated 9 full-service banking offices: 6 in Oklahoma City, Oklahoma and surrounding areas and 3 in the Dallas, Texas area. As of March 31, 2013, Coppermark reported, on a consolidated basis, total assets of $1.248 billion, total loans of $847.558 million and total deposits of $1.120 billion.

 

Pursuant to the terms of the acquisition agreement, Prosperity issued 3,258,718 shares of Prosperity common stock plus $60.0 million in cash for all outstanding shares of Coppermark Bancshares capital stock, which resulted in goodwill of $117.653 million. Additionally, the Company recognized $1.514 million of core deposit intangibles.

 

 

Acquisition of East Texas Financial Services, Inc.

 

On January 1, 2013, Prosperity completed the acquisition of East Texas Financial Services, Inc. (OTC BB: FFBT) and its wholly-owned subsidiary, First Federal Bank Texas (“Firstbank”). Firstbank operated 4 banking offices in the Tyler MSA, including 3 locations in Tyler, Texas and 1 location in Gilmer, Texas. As of December 31, 2012, East Texas Financial Services reported, on a consolidated basis, total assets of $165.955 million, total loans of $129.307 million and total deposits of $112.293 million.

 

Pursuant to the terms of the acquisition agreement, Prosperity issued 530,940 shares of Prosperity common stock for all outstanding shares of East Texas Financial Services capital stock, which resulted in goodwill of $15.007 million.

 

 

Prosperity Bancshares, Inc. ^®

 

As of June 30, 2014, Prosperity Bancshares Inc. ^®, named America’s Best Bank for 2014 by Forbes, is a $21.248 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 246 full-service banking locations: 62 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 37 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.

 

 

Bryan/College Station Area -	Fort Worth -	Other Houston Area	West Texas Area -
Bryan	Haltom City	Locations -	Abilene -
Bryan-29th Street	Keller	Angleton	Antilley Road
Bryan-East	Roanoke	Bay City	Barrow Street
Bryan-North	Stockyards	Beaumont	Cypress Street
Caldwell		Cinco Ranch	Judge Ely
College Station	Other Dallas/Fort Worth Locations -	Cleveland	Mockingbird
Crescent Point	Arlington	East Bernard
Hearne	Azle	El Campo	Lubbock -
Huntsville	Ennis	Dayton	4th Street
Madisonville	Gainesville	Galveston	66th Street
Navasota	Glen Rose	Groves	82nd Street
New Waverly	Granbury	Hempstead	86th Street
Rock Prairie	Mesquite	Hitchcock	98th Street
Southwest Parkway	Muenster	Katy	Avenue Q
Tower Point	Sanger	Katy-Spring Green	North University
Wellborn Road	Waxahachie	Liberty	Texas Tech Student Union
	Weatherford	Magnolia
Central Texas Area -		Magnolia Parkway	Midland -
Austin -	East Texas Area -	Mont Belvieu	Wadley
183	Athens	Nederland	Wall Street
Allandale	Blooming Grove	Needville
Cedar Park	Canton	Rosenberg	Odessa -
Congress	Carthage	Shadow Creek	Grandview
Lakeway	Corsicana	Spring	Grant
Liberty Hill	Crockett	Sweeny	Kermit Highway
Northland	Eustace	The Woodlands-I-45	Parkway
Oak Hill	Gilmer	The Woodlands-Research Forest
Research Blvd	Grapeland	Tomball	Other West Texas Locations -
Westlake	Gun Barrel City	Waller	Big Spring
	Jacksonville	West Columbia	Brownfield
Other Central Texas Locations -	Kerens	Wharton	Brownwood
Bastrop	Longview	Winnie	Cisco
Canyon Lake	Mount Vernon	Wirt	Comanche
Dime Box	Palestine		Early
Dripping Springs	Rusk	South Texas Area -	Floydada
Elgin	Seven Points	Corpus Christi -	Gorman
Flatonia	Teague	Airline	Levelland
Georgetown	Tyler-Beckham	Calallen	Littlefield
Gruene	Tyler-South Broadway	Carmel	Merkel
Kingsland	Tyler-University	Northwest	Plainview
La Grange	Winnsboro	Saratoga	San Angelo
Lexington		Timbergate	Slaton
New Braunfels	Houston Area -	Water Street	Snyder
Pleasanton	Houston -
Round Rock	Aldine	Other South Texas	Oklahoma
San Antonio	Allen Parkway	Locations -	Central Oklahoma-
Schulenburg	Bellaire	Alice	23rd Street
Seguin	Beltway	Aransas Pass	Edmond
Smithville	Clear Lake	Beeville	Expressway
Thorndale	Copperfield	Colony Creek	I-240
Weimar	Cypress	Cuero	Memorial
	Downtown	Edna	Norman
Dallas/Fort Worth Area -	Eastex	Goliad
Dallas -	Fairfield	Gonzales	Tulsa-
Abrams Centre	First Colony	Hallettsville	Garnett
Balch Springs	Gessner	Kingsville	Harvard
Camp Wisdom	Gladebrook	Mathis	Memorial
Cedar Hill	Heights	Padre Island	Owasso
Dallas – Central Expressway	Highway 6 West	Palacios	Sheridan
Forest Park	Little York	Port Lavaca	S. Harvard
Frisco	Medical Center	Portland	Utica Square
Frisco-West	Memorial Drive	Rockport	Utica Tower
Independence	Northside	Sinton	Yale
Kiest	Pasadena	Taft
McKinney	Pecan Grove	Victoria
McKinney-Stonebridge	River Oaks	Victoria-Navarro
Midway	Sugar Land	Victoria-North
Northwest Highway	SW Medical Center	Yoakum
Plano	Tanglewood	Yorktown
Preston Forest	Uptown
Preston Road	Waugh Drive
Red Oak	Westheimer
Sachse	West University
The Colony	Woodcreek
Turtle Creek
Westmoreland

 

- - -

 

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by Prosperity’s management on the conference call may contain, forward-looking statements within the meaning of the securities laws that are based on current expectations, assumptions, estimates and projections about Prosperity and its subsidiaries. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperity’s control, 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 Prosperity’s securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate fluctuations and interest rate fluctuations; and weather. These and various other factors are discussed in Prosperity’s 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.

 

 

Prosperity Bancshares, Inc.^®

Financial Highlights (Unaudited)

(In thousands)

 

		Jun 30, 2014				Mar 31, 2014				Dec 31, 2013				Sep 30, 2013				Jun 30, 2013
Balance Sheet Data (at period end)
Total loans		$	9,308,162			$	7,752,400			$	7,775,221			$	6,182,589			$	6,172,483
Investment securities(A)			8,851,235				8,561,337				8,224,448				7,771,345				8,017,884
Federal funds sold			3,630				382				400				1,121				606
Allowance for credit losses			(73,266	)			(67,096	)			(67,282	)			(59,913	)			(56,176	)
Cash and due from banks			509,853				349,860				380,990				269,987				250,542
Goodwill			1,894,270				1,672,004				1,671,520				1,351,782				1,350,834
Core deposit intangibles, net			37,072				39,702				42,049				25,233				26,688
Other real estate owned			5,093				7,372				7,299				7,432				10,244
Fixed assets, net			285,751				280,812				282,925				232,240				227,455
Other assets			426,306				316,360				324,458				272,463				270,158
Total assets		$	21,248,106			$	18,913,133			$	18,642,028			$	16,054,279			$	16,270,718
Noninterest-bearing deposits		$	4,921,398			$	4,142,042			$	4,108,835			$	3,368,357			$	3,283,082
Interest-bearing deposits			12,359,657				11,318,015				11,182,436				9,087,442				9,225,568
Total deposits			17,281,055				15,460,057				15,291,271				12,455,799				12,508,650
Securities sold under repurchase agreements			388,342				349,074				364,357				431,969				481,170
Other borrowings			200,210				40,451				10,689				605,951				781,215
Junior subordinated debentures			167,531				124,231				124,231				85,055				85,055
Other liabilities			90,374				98,566				64,662				86,393				69,346
Total liabilities			18,127,512				16,072,379				15,855,210				13,665,167				13,925,436
Shareholders' equity(B)			3,120,594				2,840,754				2,786,818				2,389,112				2,345,282
Total liabilities and equity		$	21,248,106			$	18,913,133			$	18,642,028			$	16,054,279			$	16,270,718

 

(A) Includes $6,706, $7,023, $7,512, $8,588 and $9,724 in unrealized gains on available for sale securities for the quarterly periods ending June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013 and June 30, 2013, respectively.

 

(B) Includes $4,359, $4,565, $4,883, $5,582 and $6,321 in after-tax unrealized gains on available for sale securities for the quarterly periods ending June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013 and June 30, 2013, respectively.

 

 

Prosperity Bancshares, Inc.^®

Financial Highlights (Unaudited)

(In thousands)

 

		Three Months Ended																				Year-to-Date
		Jun 30, 2014				Mar 31, 2014				Dec 31, 2013				Sep 30, 2013				Jun 30, 2013				Jun 30, 2014				Jun 30, 2013
Income Statement Data
Interest income:
Loans		$	138,655			$	107,144			$	110,575			$	94,236			$	89,842			$	245,799			$	171,306
Securities(C)			47,670				47,056				45,100				41,961				39,384				94,726				75,932
Federal funds sold and other earning assets			178				48				76				16				76				226				95
Total interest income			186,503				154,248				155,751				136,213				129,302				340,751				247,333
Interest expense:
Deposits			10,918				9,387				9,048				8,314				9,170				20,305				17,860
Securities sold under repurchase agreements			254				237				280				317				312				491				1,211
Junior subordinated debentures			1,087				775				730				610				606				1,862				604
Other borrowings			189				158				224				439				472				347				834
Total interest expense			12,448				10,557				10,282				9,680				10,560				23,005				20,509
Net interest income			174,055				143,691				145,469				126,533				118,742				317,746				226,824
Provision for credit losses			6,325				600				7,865				4,025				2,550				6,925				5,350
Net interest income after provision for credit losses			167,730				143,091				137,604				122,508				116,192				310,821				221,474
Noninterest income:
Nonsufficient funds (NSF) fees			9,099				8,870				9,669				8,649				8,346				17,969				16,855
Credit card, debit card and ATM card income			5,532				4,724				4,662				4,307				7,007				10,256				13,494
Service charges on deposit accounts			4,823				4,037				3,460				3,169				3,304				8,860				6,235
Trust income			2,044				1,800				1,542				901				896				3,844				1,913
Mortgage income			1,208				593				549				931				1,567				1,801				2,558
Brokerage income			1,401				1,269				719				233				263				2,670				566
Bank owned life insurance income			1,365				1,028				1,011				916				932				2,393				1,708
Net gain (loss) on sale of assets			1,301				3,310				40				126				(180	)			4,611				(179	)
Net gain (loss) on sale of other real estate			1,404				(60	)			196				(864	)			237				1,344				132
Other noninterest income			5,824				3,033				3,310				3,186				2,902				8,857				5,433
Total noninterest income			34,001				28,604				25,158				21,554				25,274				62,605				48,715
Noninterest expense:
Salaries and benefits			54,126				43,408				40,633				37,135				37,517				97,534				70,726
Net occupancy and equipment			5,996				5,339				4,893				5,094				4,669				11,335				8,947
Debit card, data processing and software amortization			4,009				3,184				3,333				2,756				3,249				7,193				5,819
Regulatory assessments and FDIC insurance			3,886				2,726				2,771				2,516				2,579				6,612				4,974
Core deposit intangibles amortization			2,630				2,045				1,594				1,455				1,341				4,675				3,096
Depreciation			3,522				3,201				3,072				2,679				2,464				6,723				4,842
Communications			2,919				2,737				2,468				2,397				2,410				5,656				4,606
Other real estate expense			188				396				176				75				237				584				460
Other noninterest expense			11,420				7,998				9,652				7,430				6,834				19,418				13,597
Total noninterest expense			88,696				71,034				68,592				61,537				61,300				159,730				117,067
Income before income taxes			113,035				100,661				94,170				82,525				80,166				213,696				153,122
Provision for income taxes			37,529				33,524				31,199				27,247				26,322				71,053				49,973
Net income available to common shareholders		$	75,506			$	67,137			$	62,971			$	55,278			$	53,844			$	142,643			$	103,149

 

(C) Interest income on securities was reduced by net premium amortization of $12,837, $12,280, $12,017, $15,136 and $18,838 for the three month periods ended June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013 and June 30, 2013, respectively, and $25,117 and $41,548 for the six month periods ended June 30, 2014 and June 30, 2013, respectively.

 

 

Prosperity Bancshares, Inc. ^®

Financial Highlights (Unaudited)

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

 

		Three Months Ended																				Year-to Date
		Jun 30, 2014				Mar 31, 2014				Dec 31, 2013				Sep 30, 2013				Jun 30, 2013				Jun 30, 2014				Jun 30, 2013
Profitability
Net income		$	75,506			$	67,137			$	62,971			$	55,278			$	53,844			$	142,643			$	103,149
Basic earnings per share		$	1.08			$	1.01			$	0.98			$	0.92			$	0.89			$	2.10			$	1.76
Diluted earnings per share		$	1.08			$	1.01			$	0.98			$	0.91			$	0.89			$	2.10			$	1.76
Return on average assets (D)			1.42	%			1.43	%			1.42	%			1.37	%			1.33	%			1.43	%			1.33	%
Return on average common equity (D)			9.75	%			9.52	%			9.53	%			9.31	%			9.27	%			9.72	%			9.25	%
Return on average tangible common equity (D) (E)			24.06	%			24.23	%			23.97	%			22.14	%			22.32	%			24.12	%			22.31	%
Tax equivalent net interest margin (F)			3.83	%			3.62	%			3.82	%			3.59	%			3.43	%			3.73	%			3.43	%
Efficiency ratio(G)			42.90	%			42.04	%			40.21	%			41.59	%			42.51	%			42.51	%			42.46	%
Liquidity and Capital Ratios
Equity to assets			14.69	%			15.02	%			14.95	%			14.88	%			14.41	%			14.69	%			14.41	%
Tier 1 risk-based capital			12.50	%			13.85	%			13.29	%			14.74	%			14.15	%			12.50	%			14.15	%
Total risk-based capital			13.18	%			14.59	%			14.03	%			15.55	%			14.91	%			13.18	%			14.91	%
Tier 1 leverage capital			6.98	%			7.30	%			7.44	%			7.37	%			7.07	%			6.98	%			7.07	%
Tangible equity to tangible assets(E)			6.16	%			6.56	%			6.35	%			6.90	%			6.50	%			6.16	%			6.50	%
Other Data
Shares used in computed earnings per share
Basic			69,667				66,186				64,024				60,344				60,250				67,936				58,629
Diluted			69,728				66,280				64,173				60,504				60,394				68,014				58,774
Period end shares outstanding			69,744				66,261				66,048				60,383				60,315				69,744				60,315
Cash dividends paid per common share		$	0.240			$	0.240			$	0.240			$	0.215			$	0.215			$	0.480			$	0.430
Book value per share		$	44.74			$	42.87			$	42.19			$	39.57			$	38.88			$	44.74			$	38.88
Tangible book value per share(E)		$	17.05			$	17.04			$	16.27			$	16.76			$	16.05			$	17.05			$	16.05
Common Stock Market Price
High		$	67.49			$	67.68			$	65.49			$	62.00			$	52.40			$	67.68			$	52.38
Low			56.04				59.75				61.18				51.85				44.33				56.04				42.38
Period end closing price			62.60				66.15				63.39				61.84				51.79				62.60				51.79
Employees – FTE			3,199				2,888				2,995				2,454				2,496				3,199				2,496
Number of banking centers			247				236				238				218				219				247				219

 

(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.

 

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)

 

YIELD ANALYSIS		Three Months Ended
		Jun 30, 2014													Mar 31, 2014													Jun 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		$	9,468,136			$	138,655				5.87	%			$	7,755,997			$	107,144				5.60	%			$	6,114,598			$	89,842				5.89	%
Investment securities			8,748,322				47,670				2.19	%	(H)			8,466,946				47,056				2.25	%	(H)			7,964,157				39,384				1.98	%	(H)
Federal funds sold and other earning assets			234,302				178				0.30	%				101,700				48				0.19	%				35,113				76				0.87	%
Total interest-earning assets			18,450,760			$	186,503				4.05	%				16,324,643			$	154,248				3.83	%				14,113,868			$	129,302				3.67	%
Allowance for credit losses			(72,587	)												(67,222	)												(57,754	)
Noninterest-earning assets			2,939,375													2,550,893													2,114,816
Total assets		$	21,317,548												$	18,808,314												$	16,170,930
Interest-Bearing Liabilities:
Interest-bearing demand deposits		$	3,568,475			$	2,272				0.26	%			$	3,554,366			$	2,132				0.24	%			$	2,580,750			$	2,100				0.33	%
Savings and money market deposits			5,479,978				3,550				0.26	%				4,992,442				3,155				0.26	%				4,261,466				3,172				0.30	%
Certificates and other time deposits			3,379,819				5,096				0.60	%				2,816,701				4,100				0.59	%				2,543,895				3,898				0.61	%
Securities sold under repurchase agreements			382,692				254				0.27	%				347,747				237				0.28	%				471,430				312				0.27	%
Junior subordinated debentures			167,531				1,087				2.60	%				124,231				775				2.53	%				85,055				606				2.86	%
Other borrowings			140,906				189				0.54	%				51,932				158				1.23	%				541,034				472				0.35	%
Total interest-bearing liabilities			13,119,401			$	12,448				0.38	%	(I)			11,887,419			$	10,557				0.36	%	(I)			10,483,630			$	10,560				0.40	%	(I)
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits			4,735,575													4,018,094													3,295,211
Other liabilities			365,169													82,288													69,741
Total liabilities			18,220,145													15,987,801													13,848,582
Shareholders' equity			3,097,403													2,820,513													2,322,348
Total liabilities and shareholders' equity		$	21,317,548												$	18,808,314												$	16,170,930
Net interest income and margin						$	174,055				3.78	%							$	143,691				3.57	%							$	118,742				3.37	%
Non-GAAP to GAAP reconciliation:
Tax equivalent adjustment							2,083													2,052													2,063
Net interest income and margin (tax equivalent basis)						$	176,138				3.83	%							$	145,743				3.62	%							$	120,805				3.43	%

 

(H) Yield on securities was impacted by net premium amortization of $12,837, $12,280 and $18,838 for the three month periods ended June 30, 2014, March 31, 2014 and June 30, 2013, respectively.

(I) Total cost of funds, including noninterest-bearing deposits, was 0.28%, 0.27% and 0.31% for the three months ended June 30, 2014, March 31, 2014 and June 30, 2013, respectively.

 

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)

 

YIELD ANALYSIS		Year-to-Date
		Jun 30, 2014													Jun 30, 2013
		Average Balance				Interest Earned/ Interest Paid				Average Yield/ Rate					Average Balance				Interest Earned/ Interest Paid				Average Yield/ Rate
Interest-Earning Assets:
Loans		$	8,616,796			$	245,799				5.75	%			$	5,691,541			$	171,306				6.07	%
Investment securities			8,608,411				94,726				2.22	%	(J)			7,860,438				75,932				1.95	%	(J)
Federal funds sold and other earning assets			168,368				226				0.27	%				34,954				95				0.55	%
Total interest-earning assets			17,393,575			$	340,751				3.95	%				13,586,933			$	247,333				3.67	%
Allowance for credit losses			(69,919	)												(55,513	)
Noninterest-earning assets			2,746,112													1,982,871
Total assets		$	20,069,768												$	15,514,291
Interest-Bearing Liabilities:
Interest-bearing demand deposits		$	3,561,460			$	4,404				0.25	%			$	2,619,902			$	4,309				0.33	%
Savings and money market deposits			5,237,557				6,705				0.26	%				4,027,242				6,001				0.30	%
Certificates and other time deposits			3,099,815				9,196				0.60	%				2,457,676				7,550				0.62	%
Securities sold under repurchase agreements			365,316				491				0.27	%				460,049				604				0.26	%
Junior subordinated debentures			145,881				1,862				2.57	%				85,055				1,211				2.87	%
Other borrowings			96,666				347				0.72	%				450,082				834				0.37	%
Total interest bearing liabilities			12,506,695			$	23,005				0.37	%	(K)			10,100,006			$	20,509				0.41	%	(K)
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits			4,378,471													3,118,400
Other liabilities			224,497													66,251
Total liabilities			17,109,663													13,284,657
Shareholders' equity			2,960,105													2,229,634
Total liabilities and shareholders' equity		$	20,069,768												$	15,514,291
Net interest income and margin						$	317,746				3.68	%							$	226,824				3.37	%
Non-GAAP to GAAP reconciliation:
Tax equivalent adjustment							4,135													4,188
Net interest income and margin (tax equivalent basis)						$	321,881				3.73	%							$	231,012				3.43	%

 

(J) Yield on securities was impacted by net premium amortization of $25,117 and $41,548 for the six month periods ended June 30, 2014 and June 30, 2013, respectively.

(K) Total cost of funds, including noninterest-bearing deposits, was 0.27% and 0.31% for the six month periods ended June 30, 2014 and June 30, 2013, respectively.

 

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)

 

		Three Months Ended																				Year-to-Date
		Jun 30, 2014				Mar 31, 2014				Dec 31, 2013				Sep 30, 2013				Jun 30, 2013				Jun 30, 2014				Jun 30, 2013
Adjustment to Loan Yield (L)
Interest on loans, as reported		$	138,655			$	107,144			$	110,575			$	94,236			$	89,842			$	245,799			$	171,306
Remove purchase accounting adjustment- loan discount accretion			(25,352	)			(13,475	)			(19,979	)			(16,421	)			(12,031	)			(38,827	)			(26,323	)
Interest on loans without discount accretion		$	113,303			$	93,669			$	90,596			$	77,815			$	77,811			$	206,972			$	144,983
Average loans		$	9,468,136			$	7,755,997			$	7,238,438			$	6,173,394			$	6,114,598			$	8,616,796			$	5,691,541
Loan yield without discount accretion			4.80	%			4.90	%			4.97	%			5.00	%			5.10	%			4.84	%			5.14	%
Loan yield, as reported			5.87	%			5.60	%			6.06	%			6.06	%			5.89	%			5.75	%			6.07	%
Adjustment to Securities Yield (L)
Interest on securities, as reported		$	47,670			$	47,056			$	45,100			$	41,961			$	39,384			$	94,726			$	75,932
Remove purchase accounting adjustment- securities amortization			1,570				1,964				1,892				2,275				2,599				3,534				5,705
Interest on securities including amortization		$	49,240			$	49,020			$	46,992			$	44,236			$	41,983			$	98,260			$	81,637
Average securities		$	8,748,322			$	8,466,946			$	7,992,673			$	8,015,221			$	7,964,157			$	8,608,411			$	7,860,438
Securities yield without purchase accounting adjustment			2.26	%			2.35	%			2.33	%			2.19	%			2.11	%			2.30	%			2.09	%
Securities yield, as reported			2.19	%			2.25	%			2.24	%			2.08	%			1.98	%			2.22	%			1.95	%
Net Interest Margin (tax equivalent basis, excluding purchase accounting adjustments to yield)			3.31	%			3.33	%			3.35	%			3.19	%			3.09	%			3.32	%			3.12	%
Net Interest Margin (tax equivalent basis), as reported			3.83	%			3.62	%			3.82	%			3.59	%			3.43	%			3.73	%			3.43	%
Net income available to common shareholders, as reported		$	75,506			$	67,137			$	62,971			$	55,278			$	53,844			$	142,643			$	103,149
Less: Purchase accounting adjustments, net of tax (M)			(15,886	)			(7,677	)			(12,095	)			(9,476	)			(6,335	)			(23,556	)			(13,925	)
Net income available to common shareholders, adjusted		$	59,620			$	59,460			$	50,876			$	45,802			$	47,509			$	119,087			$	89,224

 

		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 Mar 31, 2014				Balance at Jun 30, 2014				Balance at Acquisition Date				Balance at Mar 31, 2014				Balance at Jun 30, 2014				Balance at Acquisition Date					Balance at Mar 31, 2014				Balance at Jun 30, 2014
Loan marks:
Previously acquired banks (N)		$	159,627			$	77,163			$	67,578			$	63,547			$	42,025			$	32,450			$	223,174				$	119,188			$	100,028
2014 acquisition (O)			65,962				-				55,749				68,359				-				68,359				134,321					-				124,108
Total		$	225,589			$	77,163			$	123,327			$	131,906			$	42,025			$	100,809			$	357,495				$	119,188			$	224,136
Acquired portfolio loan balances:
Previously acquired banks (N)		$	3,839,648			$	2,123,805			$	1,863,751			$	135,279			$	82,127			$	70,292			$	3,974,927				$	2,205,932			$	1,934,043
2014 acquisition (O)			1,617,287				-				1,128,510				120,567				-				110,582				1,737,854					-				1,239,092
Total		$	5,456,935			$	2,123,805			$	2,992,261			$	255,846			$	82,127			$	180,874			$	5,712,781		(P)		$	2,205,932			$	3,173,135

 

(L)	Non-GAAP financial measure.

(M)	Using effective tax rate of 33.2%, 33.3%, 33.1%, 33.0% and 32.8% for the three month periods ended June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013 and June 30, 2013, respectively, and 33.2% and 32.6% for the six month periods ended June 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, 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.

 

 

		Three Months Ended
		Jun 30, 2014				Mar 31, 2014				Dec 31, 2013				Sep 30, 2013				Jun 30, 2013
YIELD TREND
Interest-Earning Assets:
Loans			5.87	%			5.60	%			6.06	%			6.06	%			5.89	%
Investment securities (Q)			2.19	%			2.25	%			2.24	%			2.08	%			1.98	%
Federal funds sold and other earning assets			0.30	%			0.19	%			0.29	%			0.22	%			0.87	%
Total interest-earning assets			4.05	%			3.83	%			4.03	%			3.80	%			3.67	%
Interest-Bearing Liabilities:
Interest-bearing demand deposits			0.26	%			0.24	%			0.25	%			0.28	%			0.33	%
Savings and money market deposits			0.26	%			0.26	%			0.26	%			0.27	%			0.30	%
Certificates and other time deposits			0.60	%			0.59	%			0.60	%			0.59	%			0.61	%
Securities sold under repurchase agreements			0.27	%			0.28	%			0.28	%			0.28	%			0.27	%
Other borrowings			0.54	%			1.23	%			0.42	%			0.23	%			0.35	%
Junior subordinated debentures			2.60	%			2.53	%			2.61	%			2.85	%			2.86	%
Total interest-bearing liabilities			0.38	%			0.36	%			0.37	%			0.37	%			0.40	%
Net Interest Margin			3.78	%			3.57	%			3.76	%			3.53	%			3.37	%
Net Interest Margin (tax equivalent)			3.83	%			3.62	%			3.82	%			3.59	%			3.43	%

 

(Q) Yield on securities was impacted by net premium amortization of $12,837, $12,280, $12,017, $15,136 and $18,838 for the three month periods ended June 30, 2014, March 31, 2014, December 31, 2013, September 30, 2013 and June 30, 2013, respectively.

 

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(In thousands)

 

		Three Months Ended
		Jun 30, 2014				Mar 31, 2014				Dec 31, 2013				Sep 30, 2013				June 30, 2013
Balance Sheet Averages
Total loans		$	9,468,136			$	7,755,997			$	7,238,438			$	6,173,394			$	6,114,598
Investment securities			8,748,322				8,466,946				7,992,673				8,015,221				7,964,157
Federal funds sold and other earning assets			234,302				101,700				103,413				27,451				35,113
Total interest-earning assets			18,450,760				16,324,643				15,334,524				14,216,066				14,113,868
Allowance for credit losses			(72,587	)			(67,222	)			(60,170	)			(56,765	)			(57,754	)
Cash and due from banks			284,432				255,297				232,666				189,082				279,271
Goodwill			1,803,534				1,673,216				1,560,905				1,351,236				1,331,568
Core deposit intangibles, net			38,469				38,754				30,641				25,938				25,893
Other real estate			8,562				7,885				7,254				9,494				19,605
Fixed assets, net			292,075				282,411				251,688				231,480				223,769
Other assets			512,303				293,330				419,122				227,738				234,710
Total assets		$	21,317,548			$	18,808,314			$	17,776,630			$	16,194,269			$	16,170,930
Noninterest-bearing deposits		$	4,735,575			$	4,018,094			$	3,860,296			$	3,308,158			$	3,295,211
Interest-bearing demand deposits			3,568,475				3,554,366				2,963,899				2,400,555				2,580,750
Savings and money market deposits			5,479,978				4,992,442				4,654,044				4,233,911				4,261,466
Certificates and other time deposits			3,379,819				2,816,701				2,712,699				2,489,848				2,543,895
Total deposits			17,163,847				15,381,603				14,190,938				12,432,472				12,681,322
Securities sold under repurchase agreements			382,692				347,747				398,100				455,276				471,430
Other borrowings			140,906				51,932				210,492				772,083				541,034
Junior subordinated debentures			167,531				124,231				111,172				85,055				85,055
Other liabilities			365,169				82,288				223,394				73,571				69,741
Shareholders' equity			3,097,403				2,820,513				2,642,534				2,375,812				2,322,348
Total liabilities and equity		$	21,317,548			$	18,808,314			$	17,776,630			$	16,194,269			$	16,170,930

 

 

Prosperity Bancshares, Inc.^®

Financial Highlights (Unaudited)

(Dollars in thousands)

 

		Jun 30, 2014								Mar 31, 2014								Dec 31, 2013								Sep 30, 2013								Jun 30, 2013
Period End Balances
Loan Portfolio
Commercial and other		$	2,139,983				23.0	%		$	1,312,405				16.9	%		$	1,322,975				17.0	%		$	1,028,799				16.6	%		$	999,677				16.2	%
Construction, land development and other land loans			1,005,099				10.8	%			888,985				11.5	%			865,511				11.1	%			703,193				11.4	%			694,585				11.2	%
1-4 family residential			2,153,801				23.1	%			1,906,480				24.7	%			1,870,365				24.2	%			1,503,771				24.4	%			1,452,268				23.7	%
Home equity			267,759				2.9	%			263,966				3.4	%			261,355				3.4	%			211,742				3.4	%			208,739				3.4	%
Commercial real estate			3,027,945				32.6	%			2,709,386				34.9	%			2,753,797				35.3	%			2,304,862				37.2	%			2,390,820				38.6	%
Agriculture (including farmland)			542,360				5.8	%			512,857				6.6	%			531,258				6.8	%			321,518				5.2	%			314,945				5.1	%
Consumer and other			171,215				1.8	%			158,321				2.0	%			169,960				2.2	%			108,704				1.8	%			111,449				1.8	%
Total loans		$	9,308,162							$	7,752,400							$	7,775,221							$	6,182,589							$	6,172,483
Deposit Types
Noninterest-bearing DDA		$	4,921,398				28.5	%		$	4,142,042				26.9	%		$	4,108,835				26.9	%		$	3,368,357				27.0	%		$	3,283,082				26.0	%
Interest-bearing DDA			3,467,826				20.1	%			3,446,375				22.3	%			3,470,316				22.7	%			2,366,997				19.0	%			2,483,428				19.9	%
Money market			3,861,339				22.3	%			3,468,016				22.4	%			3,320,062				21.7	%			2,834,172				22.8	%			2,868,880				23.0	%
Savings			1,707,645				9.9	%			1,630,395				10.5	%			1,571,504				10.3	%			1,413,153				11.3	%			1,371,214				11.0	%
Certificates and other time deposits			3,322,847				19.2	%			2,773,229				17.9	%			2,820,554				18.4	%			2,473,120				19.9	%			2,502,046				20.1	%
Total deposits		$	17,281,055							$	15,460,057							$	15,291,271							$	12,455,799							$	12,508,650
Loan to Deposit Ratio			53.9	%							50.1	%							50.8	%							49.6	%							49.3	%
Construction Loans
Single family residential construction		$	316,579				31.2	%		$	292,137				32.6	%		$	271,491				30.9	%		$	239,980				33.5	%		$	234,257				32.9	%
Land development			88,947				8.8	%			73,974				8.2	%			83,820				9.6	%			60,927				8.6	%			63,857				9.0	%
Raw land			62,731				6.2	%			55,384				6.2	%			48,996				5.6	%			52,789				7.4	%			59,701				8.4	%
Residential lots			138,769				13.7	%			118,733				13.2	%			122,449				14.0	%			95,361				13.4	%			91,018				12.8	%
Commercial lots			93,200				9.2	%			99,300				11.1	%			103,878				11.9	%			58,085				8.2	%			60,960				8.6	%
Commercial construction and other			312,870				30.9	%			257,942				28.7	%			244,124				28.0	%			204,940				28.9	%			200,633				28.3	%
Net unaccreted discount			(7,997	)							(8,485	)							(9,247	)							(8,889	)							(15,841	)
Total construction loans		$	1,005,099							$	888,985							$	865,511							$	703,193							$	694,585

 

 

Prosperity Bancshares, Inc.^®

Financial Highlights (Unaudited)

(Dollars in thousands)

 

		Three Months Ended																				Year-to-Date
		Jun 30, 2014				Mar 31, 2014				Dec 31, 2013				Sep 30, 2013				Jun 30, 2013				Jun 30, 2014				Jun 30, 2013
Asset Quality
Nonaccrual loans		$	23,082			$	7,714			$	10,231			$	4,954			$	4,295			$	23,082			$	4,295
Accruing loans 90 or more days past due			335				3,519				4,947				283				325				335				325
Total nonperforming loans			23,417				11,233				15,178				5,237				4,620			$	23,417				4,620
Repossessed assets			11				91				27				18				-				11				-
Other real estate			5,093				7,372				7,299				7,432				10,244				5,093				10,244
Total nonperforming assets		$	28,521			$	18,696			$	22,504			$	12,687			$	14,864			$	28,521			$	14,864
Nonperforming assets:
Commercial and industrial		$	14,434			$	4,748			$	3,153			$	1,223			$	1,191			$	14,434			$	1,191
Construction, land development and other land loans			2,449				4,053				4,558				4,611				5,898				2,449				5,898
1-4 family residential (including home equity)			6,909				5,435				6,279				2,441				2,112				6,909				2,112
Commercial real estate (including multi-family residential)			3,970				4,196				8,033				4,233				4,330				3,970				4,330
Agriculture (including farmland)			140				104				279				23				1,213				140				1,213
Consumer and other			619				160				202				156				120				619				120
Total		$	28,521			$	18,696			$	22,504			$	12,687			$	14,864			$	28,521			$	14,864
Number of loans/properties			179				164				203				128				123				179				123
Allowance for credit losses at end of period		$	73,266			$	67,096			$	67,282			$	59,913			$	56,176			$	73,266			$	56,176
Net charge-offs:
Commercial and industrial		$	(64	)		$	81			$	7			$	119			$	148			$	17			$	207
Construction, land development and other land loans			115				(17	)			(12	)			(30	)			124				98				68
1-4 family residential (including home equity)			406				131				21				15				35				537				137
Commercial real estate (including multi-family residential)			5				60				(311	)			(471	)			801				65				744
Agriculture (including farmland)			(843	)			(81	)			(85	)			13				13				(924	)			6
Consumer and other			536				612				876				642				302				1,148				576
Total		$	155			$	786			$	496			$	288			$	1,423			$	941			$	1,738
Asset Quality Ratios
Nonperforming assets to average earning assets			0.15	%			0.11	%			0.15	%			0.09	%			0.11	%			0.16	%			0.11	%
Nonperforming assets to loans and other real estate			0.31	%			0.24	%			0.29	%			0.20	%			0.24	%			0.31	%			0.24	%
Net charge-offs to average loans (annualized)			0.01	%			0.04	%			0.03	%			0.02	%			0.09	%			0.02	%			0.06	%
Allowance for credit losses to total loans			0.79	%			0.87	%			0.87	%			0.97	%			0.91	%			0.79	%			0.91	%
Allowance for credit losses to total loans (excluding acquired loans accounted for under ASC Topics 310-20 and 310-30) (E)			1.15	%			1.18	%			1.25	%			1.20	%			1.18	%			1.15	%			1.18	%

 

 

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

 

Prosperity’s management uses certain non−GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity and the tangible equity to tangible assets ratio 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 Prosperity’s financial results and Prosperity believes that its presentation, together with the accompanying reconciliations, provides a 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 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
		Jun 30, 2014				Mar 31, 2014				Dec 31, 2013				Sep 30, 2013				Jun 30, 2013				Jun 30, 2014				Jun 30, 2013
Return on average tangible common equity:
Net income		$	75,506			$	67,137			$	62,971			$	55,278			$	53,844			$	142,643			$	103,149
Average shareholders' equity		$	3,097,403			$	2,820,513			$	2,642,534			$	2,375,812			$	2,322,348			$	2,960,105			$	2,229,634
Less: Average goodwill and other intangible assets			(1,842,003	)			(1,711,970	)			(1,591,546	)			(1,377,174	)			(1,357,461	)			(1,777,346	)			(1,304,811	)
Average tangible shareholders’ equity		$	1,255,400			$	1,108,543			$	1,050,988			$	998,638			$	964,887			$	1,182,759			$	924,823
Return on average tangible common equity (D)			24.06	%			24.23	%			23.97	%			22.14	%			22.32	%			24.12	%			22.31	%
Tangible book value per share:
Shareholders’ equity		$	3,120,594			$	2,840,754			$	2,786,818			$	2,389,112			$	2,345,282			$	3,120,594			$	2,345,282
Less: Goodwill and other intangible assets			(1,931,342	)			(1,711,706	)			(1,712,121	)			(1,377,015	)			(1,377,522	)			(1,931,342	)			(1,377,522	)
Tangible shareholders’ equity		$	1,189,252			$	1,129,048			$	1,074,697			$	1,012,097			$	967,760			$	1,189,252			$	967,760
Period end shares outstanding			69,744				66,261				66,048				60,383				60,315				69,744				60,315
Tangible book value per share:		$	17.05			$	17.04			$	16.27			$	16.76			$	16.05			$	17.05			$	16.05
Tangible equity to tangible assets ratio:
Tangible shareholders’ equity		$	1,189,252			$	1,129,048			$	1,074,697			$	1,012,097			$	967,760			$	1,189,252			$	967,760
Total assets		$	21,248,106			$	18,913,133			$	18,642,028			$	16,054,279			$	16,270,718			$	21,248,106			$	16,270,718
Less: Goodwill and other intangible assets			(1,931,342	)			(1,711,706	)			(1,712,121	)			(1,377,015	)			(1,377,522	)			(1,931,342	)			(1,377,522	)
Tangible assets		$	19,316,764			$	17,201,427			$	16,929,907			$	14,677,264			$	14,893,196			$	19,316,764			$	14,893,196
Tangible equity to tangible assets ratio			6.16	%			6.56	%			6.35	%			6.90	%			6.50	%			6.16	%			6.50	%

 

 

Prosperity Bancshares, Inc.^®

Notes to Selected Financial Data (Unaudited)

(Dollars in thousands)

 

		Jun 30, 2014				Mar 31, 2014				Jun 30, 2013
Allowance for credit losses to total loans, excluding acquired loans:
Allowance for credit losses		$	73,266			$	67,096			$	56,176
Total loans		$	9,308,162			$	7,752,400			$	6,172,483
Less: Fair value of acquired loans accounted for under ASC
Topics 310-20 and 310-30 (does not include new production)		$	2,948,999			$	2,086,744			$	1,418,489
Total loans less acquired loans		$	6,359,163			$	5,665,656			$	4,753,994
Allowance for credit losses to total loans, excluding acquired loans (non-GAAP basis)			1.15	%			1.18	%			1.18	%

 

 

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