October 24, 2012 at 06:05 AM EDT
Prosperity Bancshares, Inc.® Reports Strong Third Quarter Earnings
- 3Q12 Diluted EPS increases 6.5% to $0.82 compared with 3Q11

HOUSTON, Oct. 24, 2012 /PRNewswire/ -- Prosperity Bancshares, Inc.® (NYSE: PB), the parent company of Prosperity Bank®, reported net income for the quarter ended September 30, 2012 of $46.176 million or $0.82 per diluted common share, an increase in net income of $9.803 million or 27.0%, compared with $36.373  million or $0.77 per diluted common share for the same period in 2011.  Reported net income and earnings per share include the combined impact of preliminary purchase accounting adjustments and one-time merger expenses.

"I am proud to announce such positive results for the third quarter of 2012. We posted earnings of $46.2 million for the quarter, a 27% increase over the third quarter last year. Our diluted earnings per share for the quarter came in at $0.82 compared to $0.77 for the same period last year, representing a 6.5% increase," commented David Zalman, Chairman and Chief Executive Officer.  "While such earnings include adjustments related to our recent acquisitions, the performance of our core bank remains strong.  Additionally, our board of directors approved a 10.3% increase in our dividend to $0.86 per year or $0.215 per quarter for the next year.  We are pleased to reward our shareholders with increased dividends as we work to continue building shareholder value."

"During the past quarter, we closed our merger with American State Financial Corporation in West Texas which added thirty-seven (37) locations in three new market areas: Lubbock, Midland-Odessa and Abilene. We are very excited about our new relationships and working together with their entire team," continued Zalman.  "The team has worked diligently and tirelessly over the last month with the operational integration and we thank them for their dedication and hard work."

"We also recently completed our merger with Community National Bank, located in Bellaire, Texas in the Houston metropolitan area.  We are excited about the Bellaire team joining us and increasing our presence in an area we already service.  The management team and associates at Community National Bank will add to the already strong team we have in Houston," continued Zalman.  "We owe all of our success to our team of associates and board members who have helped grow the company in the right direction with their insight and efforts and for that I say "thank you"!  We would also like to thank all of our customers for their business and loyalty to our bank."

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.  In addition, due to the application of purchase accounting and related entries and one-time merger expenses, Prosperity uses certain non-GAAP measures and ratios that exclude the impact of these items to evaluate its performance, including yield on loans and securities, net income, diluted earnings per share, efficiency ratio and allowance for credit losses to total loans (excluding acquired loans).  Prosperity has included in this Earnings Release information relating to these non-GAAP financial measures for the applicable periods presented.  Please refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures.

Results of operations for the three months ended September 30, 2012

For the three months ended September 30, 2012, net income was $46.176 million compared with $36.373 million for the same period in 2011.  Net income per diluted common share was $0.82 for the three months ended September 30, 2012 and $0.77 for the same period in 2011.  Annualized returns on average assets, average common equity and average tangible common equity for the three months ended September 30, 2012 were 1.32%, 9.10% and 21.59%, respectively. 

Net interest income before provision for credit losses for the quarter ended September 30, 2012 increased 29.5% to $106.893 million compared with $82.538 million during the same period in 2011. The increase was attributable to a 49.7% increase in average earning assets during the same period.  Additionally, the average yield on interest earning assets decreased 69 basis points while the rate paid on interest bearing liabilities decreased 22 basis points for the same period. The net interest margin on a tax equivalent basis decreased to 3.52% for the three months ended September 30, 2012 compared with 4.02% for the same period in 2011.  On a linked quarter basis, the tax equivalent net interest margin decreased three basis points to 3.52% for the three months ended September 30, 2012 from 3.55% reported for the three months ended June 30, 2012. 

The yield on loans was impacted by the purchase accounting adjustments from recent acquisitions as described in the table below.  As a result of these purchase accounting adjustments, Prosperity recorded a discount on loans of $104.931 million, of which $27.116 million relates to loans accounted for under ASC Topic 310-30 (formerly SOP 03-03) and the remaining $77.815 million relates to loans accounted for under ASC Topic 310-20 (formerly SFAS No. 91).  All purchase accounting entries are preliminary and could be subject to change.


Three Months Ended

September 30, 2012


(In thousands, unaudited)

Adjustment to Loan Yield (1)

Interest on loans, as reported

$       80,587

   Less: Purchase accounting adjustment-loan discount accretion

(11,188)

Interest on loans without discount accretion

69,399

Average loans

$  5,169,101

Loan yield without discount accretion

5.34%

Loan yield, as reported

6.20%

(1) Non-GAAP financial measure.

The yield on securities was also impacted by the purchase accounting adjustments from recent acquisitions as described in the table below. Prosperity recorded a premium on securities of $34.540 million which resulted in increased amortization of $3.451 million and a decreased yield on securities. In addition, in connection with the acquisition, American State Financial Corporation ("ASB") sold $574.0 million in securities yielding approximately 3.61% prior to July 1, 2012 and Prosperity reinvested those funds after acquisition date at a yield of approximately 1.70%. ASB recorded a gain of $44.2 million related to the sale of these securities which resulted in a lower fair value of the securities portfolio acquired from ASB. The effect of this sale is included in the table below.


Three Months Ended
September 30, 2012


(In thousands, unaudited)

Adjustment to Securities Yield (1)

Interest on securities, as reported

$      37,025

     Add: Purchase accounting adjustment-securities amortization

3,451

     Add: Impact of sale of ASB securities prior to acquisition

2,741

Interest on securities including amortization and impact of securities sale

43,217

Average securities

$ 7,106,871

Securities yield including amortization and impact of securities sale

2.43%

Securities yield, as reported

2.08%

(1) Non-GAAP financial measure.


The following table shows the book value of the investment portfolio and related net amortization as of and for the three month periods indicated below.


Sept 30, 2012

June 30, 2012

Mar 31, 2012

Dec 31, 2011

Sept 30, 2011

Investment Portfolio

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(In thousands)






Period End Securities

$6,799,513

$5,400,044

$5,646,529

$4,658,936

$4,430,530

Quarterly Average Securities

7,106,871

5,635,810

5,192,257

4,596,017

4,524,213

Net Premium Amortization

21,423(1)

11,755

9,719

8,989

6,823

% of Average Quarterly Securities

0.30%

0.21%

0.19%

0.20%

0.15%


(1) Includes the purchased premium amortization of $3.451 million.

Non-interest income increased $9.247 million or 63.4% to $23.828 million for the three months ended September 30, 2012 compared with $14.581 million for the same period in 2011.  The change includes increases in NSF fees, debit card and ATM card income, service charges on deposit accounts and other income due to the acquisition of ASB on July 1, 2012. 

Non-interest expense increased $19.091 million or 46.4% to $60.242 million for the three months ended September 30, 2012 compared with $41.151 million for the same period in 2011.  The change is primarily due to the acquisition of ASB.  Prosperity's efficiency ratio (excluding net gains and losses on the sale of securities and assets) was 46.07% for the three months ended September 30, 2012.  Non-interest expense for the three months ended September 30, 2012 includes one-time merger expenses of approximately $5.404 million, pre-tax ($3.513 million after tax). Excluding these charges, the efficiency ratio would have been 41.93% for the three months ended September 30, 2012. Refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure.

Earnings per share and net income were also impacted by purchase accounting adjustments, one-time merger expenses of $5.404 million (pre-tax) and the sale of ASB securities prior to acquisition, as reflected in the table below.


Three Months Ended
September 30, 2012


(In thousands, unaudited)

Impact of Purchase Accounting Adjustments, One-time Merger Expenses and Securities Sale(1)


Net income, as reported

$    46,176

  Less: Purchase accounting adjustment-loan accretion

(11,188)

  Add: Purchase accounting adjustment-securities amortization

3,451

  Add: one-time merger expenses

5,404

  Add:  Impact of sale of ASB securities prior to acquisition

2,741

     Adjustment subtotal

408

  Tax effect at 35%

(143)

     Adjustment subtotal, after tax

265

  Net income adjusted for purchase accounting adjustments,
     one-time merger expenses and securities sale

$    46,441

  Weighted average diluted shares outstanding

56,093

  EPS (diluted) adjusted for purchase accounting adjustments,
     one-time merger expenses and securities sale

$        0.83

  EPS (diluted), as reported

$        0.82



(1) Non-GAAP financial measure. As illustrated in the table above, the impact of purchase accounting adjustments, one-time merger expenses and the sale of ASB securities prior to acquisition had a minimal combined impact on net income and EPS (diluted).


Average loans increased 39.9% or $1.475 billion to $5.169 billion for the quarter ended September 30, 2012 compared with $3.694 billion for the same period in 2011.  Average deposits increased 41.7% or $3.194 billion to $10.846 billion for the quarter ended September 30, 2012 compared with $7.653 billion for the same period in 2011. 

Loans at September 30, 2012 were $5.079 billion, an increase of $1.341 billion or 35.9%, compared with $3.738 billion at September 30, 2011 and an increase of $1.313 billion or 34.9% compared with $3.766 billion at December 31, 2011.  Linked quarter loans increased $1.129 billion or 28.6% at September 30, 2012 compared with loans of $3.950 billion at June 30, 2012.  As reflected in the table below, loan growth was impacted by the acquisition of Texas Bankers, Inc., The Bank Arlington and ASB.  Excluding loans acquired in these acquisitions and new production at the acquired banking centers since the respective acquisition dates, year over year loan growth increased 4.4%.

Deposits at September 30, 2012 were $10.955 billion, an increase of $3.156 billion or 40.5%, compared with $7.799 billion at September 30, 2011 and an increase of $2.894 billion or 35.9% compared with $8.060 billion at December 31, 2011.    Linked quarter deposits increased $2.560 billion or 30.5% at September 30, 2012 compared with deposits of $8.395 billion at June 30, 2012.  As reflected in the table below, deposit growth was impacted by the acquisition of Texas Bankers, Inc., The Bank Arlington and ASB.  Excluding deposits assumed and new deposits generated at the acquired banking centers since the respective acquisition dates, year over year deposit growth increased 6.9%.

The table below provides detail on loans acquired and deposits assumed in the Texas Bankers, Inc., The Bank Arlington and the ASB transactions completed on January 1, 2012, April 1, 2012 and July 1, 2012, respectively:

Balance Sheet Data (at period end)

Sept 30, 2012

June 30, 2012

Mar 31, 2012

Dec 31, 2011

Sept 30, 2011

(In thousands)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)


Loans (including new production since respective acquisition dates):






     Acquired with Texas Bankers, Inc.

$   24,229

$   28,421

$   27,053

$      --

$       --

     Acquired with The Bank Arlington

21,806

22,542

--

--

--

     Acquired with American State
          Financial Corp.

1,131,005

--

--

--

--

     All other

3,902,063

3,899,369

3,847,809

3,765,906

3,737,630

          Total Loans

$ 5,079,103

$ 3,950,332

$ 3,874,862

$ 3,765,906

$ 3,737,630

Deposits (including new deposits since respective acquisition dates):






     Assumed with Texas Bankers, Inc.

$   69,818

$   62,739

$   63,681

$      --

$       --

     Assumed with The Bank Arlington

33,609

33,505

--

--

--

     Assumed with American State  
          Financial Corp.

2,518,178

--

--

--

--

     All other

8,332,992

8,298,338

8,480,770

8,060,254

7,798,739

          Total Deposits

$ 10,954,597

$ 8,394,582

$ 8,544,451

$ 8,060,254

$ 7,798,739

At September 30, 2012, Prosperity had $13.712 billion in total assets, $5.079 billion in loans, and $10.955 billion in deposits. Assets, loans and deposits at September 30, 2012 increased by 43.3%, 35.9% and 40.5%, respectively, compared with levels at September 30, 2011.

Asset Quality

Non-performing assets totaled $14.051 million or 0.11% of average earning assets at September 30, 2012 compared with $13.363 million or 0.16% of average earning assets at September 30, 2011 and $11.873 million or 0.12% of average earnings assets at June 30, 2012.  The allowance for credit losses was 1.00% of total loans at September 30, 2012 compared with 1.40% at September 30, 2011 and 1.28% of total loans at June 30, 2012.  Excluding acquired loans from Texas Bankers, Inc., The Bank Arlington and the ASB transactions, the allowance for credit losses was 1.27% of remaining loans. Refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure.

Non-performing assets

(In thousands, unaudited)

Sept 30, 2012

June 30, 2012

Sept 30, 2011


Amount

#

Amount

#

Amount

#

Commercial

$       1,599

19

$        394

12

$        1,440

17

Construction

3,182

34

4,056

30

5,042

30

1-4 family (including home equity)

3,089

36

2,284

28

3,894

38

Commercial real estate (including multi-family)

4,671

15

5,077

12

2,885

11

Agriculture and agriculture real estate

1,476

9

44

3

51

3

Consumer

34

6

18

3

51

4

Total                                       

$      14,051

119

$      11,873

88

$      13,363

103




Net Charge-offs (Recoveries)

(In thousands, unaudited)

Three Months Ended

Sept 30, 2012

Three Months Ended

June 30, 2012

Three Months Ended

Sept 30, 2011

Commercial

$        (511)

$            180

$             7

Construction

155

1,179

(197)

1-4 family (including home equity)

251

90

134

Commercial real estate (including multi-family)

800

296

271

Agriculture and agriculture real estate

(30)

(3)

--

Consumer (including credit cards)

590

118

153

Total

$       1,255

$         1,860

$         368

The provision for credit losses was $1.800 million for the three months ended September 30, 2012 and $950,000 for the three months ended September 30, 2011.  Net charge offs were $1.255 million for the three months ended September 30, 2012 and $368,000 for the three months ended September 30, 2011.

The provision for credit losses was $2.550 million for the nine months ended September 30, 2012 compared to $4.050 million for the nine months ended September 30, 2011.  Net charge offs were $3.217 million for the nine months ended September 30, 2012 compared to $3.121 million for the nine months ended September 30, 2011.

Results of operations for the nine months ended September 30, 2012

For the nine months ended September 30, 2012, net income was $119.635 million compared with $105.343 million for the same period in 2011.  Net income per diluted common share was $2.37 for the nine months ended September 30, 2012 compared with $2.24 for the same period in 2011.  Annualized returns on average assets, average common equity and average tangible common equity for the nine months ended September 30, 2012 were 1.35%, 9.08% and 21.80%, respectively. 

Net interest income before provision for credit losses for the nine months ended September 30, 2012 increased $25.824 million or 10.5%, to $272.405 million compared with $246.581 million during the same period in 2011.  The increase was attributable primarily to a 25.3% increase in average earning assets during the same period.

Non-interest income increased $9.451 million or 22.5% to $51.429 million for the nine months ended September 30, 2012 compared with $41.978 million for the same period in 2011.  The change was mainly attributable to an increase in debit and ATM card income, an increase in service charges on deposits accounts and an increase in other income, primarily due to the acquisition of ASB.

Non-interest expense increased $16.129 million or 12.9% to $141.489 million for the nine months ended September 30, 2012 compared with $125.360 million for the same period in 2011.  The change is primarily due to increases in salaries and employee benefits expense for the nine months ended September 30, 2012 compared to the same period in 2011 and is due to the acquisition of ASB. Prosperity's efficiency ratio was 43.69% for the nine months ended September 30, 2012. Non-interest expense for the nine months ended September 30, 2012 also includes one-time merger expenses of approximately $5.404 million, pre-tax ($3.513 million after tax). Excluding these charges, the efficiency ratio would have been 42.02% for the nine months ended September 30, 2012. Refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure.

Dividend

Prosperity Bancshares, Inc. declared a fourth quarter cash dividend of $0.215, an increase of 10.3% over the third quarter dividend of $0.195, to be paid on December 31, 2012 to all shareholders of record as of December 14, 2012.

Conference Call

Prosperity's management team will host a conference call on Wednesday, October 24, 2012 at 10:30 a.m. Eastern Daylight Time (9:30 a.m. Central Daylight Time) to discuss Prosperity's third quarter earnings. Individuals and investment professionals may participate in the call by dialing 800-862-9098, the reference code is PBTX.

Alternatively, individuals may listen to the live webcast of the presentation by visiting Prosperity's website at www.prosperitybanktx.com.  The webcast may be accessed directly from Prosperity's Home page under News and Events.

Acquisition of Community National Bank

On October 1, 2012, Prosperity completed the previously announced acquisition of Community National Bank, Bellaire, Texas.  Community National Bank operated one (1) banking office in Bellaire, Texas, in the Houston Metropolitan Area. As of September 30, 2012, Community National Bank reported total assets of $183.0 million, total loans of $68.0 million and total deposits of $164.6 million

Pursuant to the terms of the acquisition agreement, Prosperity issued 372,282 shares of Prosperity common stock plus $11.4 million in cash for all outstanding shares of Community National Bank capital stock which resulted in a premium of $10.6 million.

Acquisition of American State Financial Corporation

On July 1, 2012, Prosperity completed the previously announced acquisition of American State Financial Corporation and its wholly owned subsidiary American State Bank (collectively referred to as "ASB").  American State Bank operated thirty-seven (37) full service banking offices in eighteen (18) counties across West Texas. As of June 30, 2012, ASB, on a consolidated basis, reported total assets of $3.16 billion, total loans of $1.24 billion and total deposits of $2.51 billion.

Pursuant to the terms of the acquisition agreement, Prosperity issued 8,524,835 shares of Prosperity common stock plus $178.5 million in cash for all outstanding shares of American State Financial Corporation capital stock which resulted in a premium of $240.4 million.

Acquisition of The Bank Arlington

On April 1, 2012, Prosperity completed the previously announced acquisition of The Bank Arlington.  The Bank Arlington operated one (1) banking office in Arlington, Texas, in the Dallas/Fort Worth CMSA. As of March 31, 2012, The Bank Arlington reported total assets of $37.3 million, total loans of $22.8 million and total deposits of $33.2 million.

Pursuant to the terms of the acquisition agreement, Prosperity issued 135,389 shares of Prosperity common stock for all outstanding shares of The Bank Arlington capital stock which resulted in a premium of $2.8 million.

Acquisition of Texas Bankers, Inc.

On January 1, 2012, Prosperity completed the previously announced acquisition of Texas Bankers, Inc. and its wholly-owned subsidiary, Bank of Texas, Austin, Texas.  The three (3) Bank of Texas banking offices in the Austin, Texas CMSA consisted of a location in Rollingwood, which was consolidated with Prosperity's Westlake location and remains in Bank of Texas' Rollingwood banking office; one banking center in downtown Austin, which was consolidated into Prosperity's downtown Austin location; and another banking center in Thorndale. Prosperity now operates thirty-four (34) banking centers in the Central Texas area including Austin and San Antonio. Texas Bankers, Inc. reported, on a consolidated basis, total assets of $77.0 million, total loans of $27.6 million and total deposits of $70.4 million as of December 31, 2011.

Pursuant to the terms of the acquisition agreement, Prosperity issued 314,953 shares of Prosperity common stock for all outstanding shares of Texas Bankers capital stock which resulted in a premium of $5.2 million.

Pending Acquisition of East Texas Financial Services, Inc.

On December 9, 2011, Prosperity entered into a definitive agreement to acquire East Texas Financial Services, Inc. (OTC BB: FFBT) and its wholly-owned subsidiary, First Federal Bank Texas ("Firstbank"). Firstbank operates four (4) banking offices in the Tyler MSA, including three locations in Tyler, Texas and one location in Gilmer, Texas. As of September 30, 2012, Firstbank reported total assets of $191.1 million, total loans of $139.2 million and total deposits of $116.0 million.

Under the terms of the definitive agreement, Prosperity will issue up to 531,000 shares of Prosperity common stock for all outstanding shares of East Texas Financial Services capital stock, subject to certain conditions and potential adjustments. Pending the satisfaction of closing conditions, the closing is expected to occur in early 2013.

Prosperity Bancshares, Inc.®

Prosperity Bancshares Inc.®, recently named "America's Best Bank" by Forbes, is a $13.7 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.prosperitybanktx.com, Retail Brokerage Services, MasterMoney Debit Cards, 24 hour voice response banking, Trust and Wealth Management; and Mobile Banking.  Prosperity currently operates two hundred thirteen (213) full service banking locations; fifty-nine (59) in the Houston area; twenty (20) in the South Texas area including Corpus Christi and Victoria; thirty-five (35) in the Dallas/Fort Worth area; twenty-one (21) in the East Texas area; thirty-four (34) in the Central Texas area including Austin and San Antonio; thirty-four (34) in the West Texas area including Lubbock, Midland-Odessa and Abilene; and ten (10) in the Bryan/College Station area.

Bryan/College Station Area -

Kiest

Downtown

Other South Texas


McKinney

Eastex

 Locations -

Bryan

McKinney-Stonebridge

Fairfield

Alice

Bryan-East

Midway

First Colony

Aransas Pass

Bryan-North

Preston Forest

Gessner

Beeville

Caldwell

Preston Road

Gladebrook

Edna

College Station

Red Oak

Harrisburg

Goliad

Greens Prairie

Sachse

Heights

Kingsville

Madisonville

The Colony

Highway 6 West

Mathis

Navasota

Turtle Creek

Hillcroft

Padre Island

Rock Prairie

Westmoreland

Little York

Palacios

Wellborn Road


Medical Center

Port Lavaca


Fort Worth -

Memorial Drive

Portland

Central Texas Area -

Haltom City

Northside

Rockport


Keller

Pasadena

Sinton

Austin -

Roanoke

Pecan Grove

Victoria

183

Stockyards

Piney Point

Victoria-North

Allandale


River Oaks


Cedar Park

Other Dallas/Fort Worth Locations -

Royal Oaks

West Texas Area - 

Congress

Arlington

Sugar Land


Lakeway

Azle

SW Medical Center

Abilene -

Liberty Hill

Ennis

Tanglewood

Antilley Road

Northland

Gainesville

Uptown

Barrow Street

Oak Hill

Glen Rose

Waugh Drive

Cypress Street

Parmer Lane

Granbury

West University

Judge Ely

Research Blvd

Mesquite

Woodcreek

Mockingbird

Westlake

Muenster




Sanger

Other Houston Area

Lubbock -

Other Central Texas Locations -

Waxahachie

Locations -

4th Street

Bastrop

Weatherford

Angleton

66th Street

Cuero


Bay City

82nd Street

Dime Box

East Texas Area -

Beaumont

86th Street

Dripping Springs


Cinco Ranch

98th Street

Elgin

Athens

Cleveland

Avenue Q

Flatonia

Athens-South

East Bernard

North University

Georgetown

Blooming Grove

El Campo

Texas Tech Student Union

Gonzales

Canton

Dayton


Hallettsville

Carthage

Galveston

Midland -

Kingsland

Corsicana

Groves

Wadley

La Grange

Crockett

Hempstead

Wall Street

Lexington

Eustace

Hitchcock


New Braunfels

Grapeland

Katy

Odessa -

Pleasanton

Gun Barrel City

Liberty

Grandview

Round Rock

Jacksonville

Magnolia

Grant

San Antonio

Kerens

Mont Belvieu

Kermit Highway

Schulenburg

Longview

Nederland

Parkway

Seguin

Mount Vernon

Needville


Smithville

Palestine

Shadow Creek

Other West Texas Locations -

Thorndale

Rusk

Sweeny

Big Spring

Weimar

Seven Points

Tomball

Brownfield

Yoakum

Teague

Waller

Brownwood

Yorktown

Tyler

West Columbia

Cisco


Tyler-University

Wharton

Comanche

Dallas/Fort Worth Area -

Winnsboro

Winnie

Early



Wirt

Floydada

Dallas -

Houston Area -


Gorman

Abrams Centre


South Texas Area -

Levelland

Balch Springs

Houston -


Littlefield

Camp Wisdom

Aldine

Corpus Christi -

Merkel

Cedar Hill

Allen Parkway

Airline

Plainview

Central Expressway

Bellaire

Carmel 

San Angelo

East Renner

Beltway

Northwest 

Slaton

Frisco

Clear Lake

Saratoga

Snyder

Frisco-West

Copperfield

Water Street


Independence

Cypress



---


In connection with the proposed merger of East Texas Financial Services, Inc. into Prosperity, Prosperity has filed with the Securities and Exchange Commission a registration statement on Form S-4 to register the shares of Prosperity's common stock to be issued to the stockholders of East Texas Financial Services. The registration statement includes a proxy statement/prospectus which was sent to the stockholders of East Texas Financial Services seeking their approval of the proposed transaction.

WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT ON FORM S-4, THE PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH THE PROPOSED TRANSACTION BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT PROSPERITY, EAST TEXAS FINANCIAL SERVICES AND THE PROPOSED TRANSACTION.

Investors and security holders may obtain free copies of these documents through the website maintained by the Securities and Exchange Commission at http://www.sec.gov.  Documents filed with the SEC by Prosperity will be available free of charge by directing a request by telephone or mail to Prosperity Bancshares, Inc., Prosperity Bank Plaza, 4295 San Felipe, Houston, Texas 77027 Attn: Investor Relations. Prosperity's telephone number is (281) 269-7199.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by Prosperity's management on the conference call may contain, forward-looking statements within the meaning of the securities laws that are based on current expectations, assumptions, estimates and projections about Prosperity, and its subsidiaries.  These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperity's control, that may cause actual results to differ materially from those expressed or implied by the forward-looking statements.  These risks and uncertainties include but are not limited to whether Prosperity can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks;  continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives.  Other risks include, but are not limited to: the possibility that credit quality could deteriorate; actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); a deterioration or downgrade in the credit quality and credit agency ratings of the securities in Prosperity's securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate fluctuations and interest rate fluctuations; weather; and the stock price volatility associated with "small-cap" companies.  These and various other factors are discussed in Prosperity's Annual Report on Form 10-K for the year ended December 31, 2011 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 www.prosperitybanktx.com.

 

Prosperity Bancshares, Inc. ®

Financial Highlights

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



Three Months Ended

Nine Months Ended


Sept 30, 2012

Sept 30, 2011

Sept 30, 2012

Sept 30, 2011

Selected Earnings and Per

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Share Data










Total interest income

$          117,633

$          93,189

$         302,123

$         282,250

Total interest expense

10,740

10,651

29,718

35,669

Net interest income

106,893

82,538

272,405

246,581

Provision for credit losses

1,800

950

2,550

4,050

Net interest income after





     provision for credit losses

105,093

81,588

269,855

242,531






Total non-interest income

23,828

14,581

51,429

41,978

Total non-interest expense

60,242

41,151

141,489

125,360

Net income before taxes

68,679

55,018

179,795

159,149

Federal income taxes

22,503

18,645

60,160

53,806






Net income

$           46,176

$           36,373

$         119,635

$         105,343






Basic earnings per share

$0.83

$0.78

$2.38

$2.25






Diluted earnings per share

$0.82

$0.77

$2.37

$2.24






Period end shares outstanding

56,093

46,893

56,093

46,893

Weighted average shares





     outstanding (basic)

55,958

46,890

50,239

46,830

Weighted average shares





     outstanding (diluted)

56,093

47,033

50,393

47,013











 

Prosperity Bancshares, Inc.®

Financial Highlights

(Dollars in thousands)



Sept 30, 2012

June 30, 2012

Mar 31, 2012

Dec 31, 2011

Sept 30, 2011

Balance Sheet Data

 (at period end)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)







Total loans

$   5,079,103

$   3,950,332

$    3,874,862

$    3,765,906

$   3,737,630

Investment securities (A)

6,799,513

5,400,044

5,646,529

4,658,936

4,430,530

Federal funds sold

302

133

445

642

294

Allowance for credit losses

(50,927)

(50,382)

(51,642)

(51,594)

(52,513)

Cash and due from banks

207,650

152,678

151,467

212,800

211,261

Goodwill

1,200,098

932,965

929,161

924,537

924,537

Core deposit intangibles

28,092

17,706

19,301

20,996

22,874

Other real estate

8,846

10,236

7,718

8,328

8,216

Fixed assets, net

201,445

166,273

162,676

159,656

160,099

Other assets

237,997

157,366

149,438

122,464

124,159


$ 13,712,119

$   10,737,351

$    10,889,955

$    9,822,671

$   9,567,087







Demand deposits

$   2,827,748

$   2,083,910

$    2,088,749

$    1,972,226

$   1,861,907

Interest bearing deposits

8,126,849

6,310,672

6,455,702

6,088,028

5,936,832

Total deposits

10,954,597

8,394,582

8,544,451

8,060,254

7,798,739

Securities sold under






     repurchase agreements

443,856

122,743

58,481

54,883

66,166

Federal funds purchased and






     other borrowings

112,017

437,278

527,536

12,790

13,583

Junior subordinated






     debentures

85,055

85,055

85,055

85,055

85,055

Other liabilities

78,418

53,876

64,899

42,424

62,205

Total liabilities

11,673,943

9,093,534

9,280,422

8,255,406

8,025,748

Shareholders' equity (B)

2,038,176

1,643,817

1,609,533

1,567,265

1,541,339

Total liabilities and equity

$ 13,712,119

$   10,737,351

$    10,889,955

$   9,822,671

$   9,567,087







(A) Includes $16,991, $17,709, $19,542, $20,726 and $24,278 in unrealized gains on available for sale securities for the quarterly periods ending  September 30, 2012, June 30, 2012, March 31, 2012, December 31, 2011, and September 30, 2011,  respectively.


(B) Includes $11,044, $11,511, $12,702, $13,472 and $15,781 in after-tax unrealized gains on available for sale securities for the quarterly periods ending September 30, 2012, June 30, 2012, March 31, 2012, December 31, 2011, and September 30, 2011, respectively.



 

Prosperity Bancshares, Inc. ®

Financial Highlights

(Dollars in thousands)




Three Months Ended

Nine Months Ended


Sept 30, 2012

Sept 30, 2011

Sept 30, 2012

Sept 30, 2011

Income Statement Data

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)






Interest on loans

$   80,587

$   54,471

$  188,597

$  160,374

Interest on securities

37,025

38,714

113,418

121,861

Interest on federal funds sold and





     other temporary investments

21

4

108

15

     Total interest income

117,633

93,189

302,123

282,250

Interest expense – deposits

9,395

9,717

26,269

32,293

Interest expense – debentures

651

607

1,962

2,352

Interest expense – other

694

327

1,487

1,024

Total interest expense

10,740

10,651

29,718

35,669

Net interest income (C)

106,893

82,538

272,405

246,581

Provision for credit losses

1,800

950

2,550

4,050

Net interest income after





provision for credit losses

105,093

81,588

269,855

242,531

Non-sufficient funds (NSF) fees

8,494

6,249

19,050

18,582

Debit card and ATM card income

6,246

3,941

14,374

11,202

Service charges on deposit accounts

4,133

2,472

9,006

7,466

Trust income

831

--

831

--

Mortgage origination income

1,350

--

1,350

--

Bank Owned Life Insurance

736

355

1,430

1,035

Net (loss)/gain on sale of assets

(50)

17

13

377

Net (loss)/gain on sale of ORE

(597)

95

(344)

(431)

Net loss on sale of securities

--

--

--

(581)

Other non-interest income

2,685

1,452

5,719

4,328

Total non-interest income 

23,828

14,581

51,429

41,978

Salaries and benefits (D)

36,701

23,601

83,525

70,799

CDI amortization

2,007

1,924

5,297

5,901

Net occupancy and equipment

4,614

3,784

11,663

10,979

Depreciation

2,369

2,041

6,432

6,099

Debit card, data processing





 and software amortization

2,901

1,954

6,339

5,406

Regulatory assessments and





     FDIC insurance

2,107

1,488

5,314

7,383

Communications (includes telephone, courier and postage)

2,226

1,749

5,777

5,188

ORE expense

1,545

235

2,619

821

Other non-interest expense

5,772

4,375

14,523

12,784

Total non-interest expense

60,242

41,151

141,489

125,360

Net income before taxes    

68,679

55,018

179,795

159,149

Federal income taxes

22,503

18,645

60,160

53,806

Net income available





to common shareholders

$  46,176

$  36,373

$  119,635

$  105,343






(C) Net interest income on a tax equivalent basis would be $109,031 and $83,440 for the three months ended September 30, 2012 and September 30, 2011, respectively, and $276,271 and $249,345 for the nine months ended September 30, 2012 and September 30, 2011, respectively.


(D) Salaries and benefits includes stock-based compensation expense of $1,057 and $961 for the three months ended September 30, 2012 and September 30, 2011, respectively, and $3,218 and $2,604 for the nine months ended September 30, 2012 and September 30, 2011, respectively.

 

 

 

Prosperity Bancshares, Inc.®

Financial Highlights

(Dollars in thousands)



Three Months Ended


Sept 30, 2012

June 30, 2012

Mar 31, 2012

Dec 31, 2011

Sept 30, 2011

Income Statement Data

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)







Interest on loans

$   80,587

$   54,793

$   53,217

$   53,899

$   54,471

Interest on securities

37,025

38,072

38,321

35,719

38,714

Interest on federal funds






     sold and other earning assets

21

9

78

40

4

    Total interest income

117,633

92,874

91,616

89,658

93,189

Interest expense - deposits

9,395

8,083

8,791

8,682

9,717

Interest expense - debentures

651

648

663

632

607

Interest expense - other

694

477

316

257

327

    Total interest expense

10,740

9,208

9,770

9,571

10,651

    Net interest income

106,893

83,666

81,846

80,087

82,538

Provision for credit losses

1,800

600

150

1,150

950

    Net interest income after






        provision for credit losses

105,093

83,066

81,696

78,937

81,588

Non-sufficient funds (NSF) fees

8,494

5,167

5,389

5,860

6,249

Debit card and ATM card income

6,246

4,292

3,836

4,189

3,941

Service charges on deposit accounts

4,133

2,432

2,441

2,515

2,472

Trust income

831

--

--

--

--

Mortgage origination income

1,350

--

--

--

--

Bank Owned Life Insurance

736

345

350

347

355

Net (loss)/gain on sale of assets

(50)

70

(7)

--

17

Net (loss)/gain on sale of  ORE                        

(597)

(165)

418

(473)

95

Other non-interest income

2,685

1,515

1,518

1,627

1,452

    Total non-interest income

23,828

13,656

13,945

14,065

14,581

Salaries and benefits

36,701

23,572

23,252

21,258

23,601

CDI amortization

2,007

1,595

1,695

1,879

1,924

Net occupancy and equipment

4,614

3,492

3,557

3,655

3,784

Depreciation

2,369

2,028

2,035

2,051

2,041

Debit card, data processing and






     software  amortization

2,901

1,906

1,532

1,417

1,954

Regulatory assessments and






     FDIC insurance

2,107

1,659

1,548

1,518

1,488

Communications (includes 
   telephone, courier and postage)

2,226

1,802

1,748

1,758

1,749

ORE expense

1,545

383

691

680

235

Other non-interest expense

5,772

4,351

4,401

4,169

4,375

    Total non-interest expense

60,242

40,788

40,459

38,385

41,151

    Net income before taxes

68,679

55,934

55,182

54,617

55,018

Federal income taxes

22,503

18,962

18,695

18,211

18,645

    Net income available






        to common shareholders

$   46,176

$   36,972

$   36,487

$   36,406

$   36,373













 

 

 

Prosperity Bancshares, Inc.®

Supplemental Financial Data (Unaudited)

(Dollars in thousands)



Three Months Ended September 30, 2012

Three Months Ended September 30, 2011

YIELD ANALYSIS

Average

Interest Earned

Average

Average

Interest Earned

Average


Balance

/ Interest Paid

Yield/Rate

Balance

/ Interest Paid

Yield/Rate








Interest Earning Assets:







Loans

$  5,169,101

$   80,587

6.20%

$  3,694,039

$   54,471

5.85%

Investment securities

7,106,871

37,025

2.08%

4,524,213

38,714

3.42%

Federal funds sold and other







     temporary investments

53,111

21

0.16%

18,636

4

0.09%

  Total interest earning assets

12,329,083

$  117,633

3.80%

8,236,888

$   93,189

4.49%

Allowance for credit losses

(53,944)



(52,208)



Non-interest earning assets

1,730,120



1,375,394



  Total assets

$ 14,005,259



$  9,560,074










Interest Bearing Liabilities:







Interest bearing demand deposits

$  2,181,928

$    2,273

0.41%

$  1,319,800

$    1,667

0.50%

Savings and money market deposits

3,516,601

2,987

0.34%

2,369,745

2,702

0.45%

Certificates and other time deposits

2,387,279

4,135

0.69%

2,134,082

5,348

0.99%

Securities sold under repurchase agreements           

438,410

315

0.29%

90,821

127

0.55%

Federal funds purchased and other borrowings

512,739

379

0.29%

135,336

200

0.59%

Junior subordinated debentures

85,055

651

3.04%

85,055

607

2.83%

  Total interest bearing liabilities

9,122,012

$   10,740

0.47%

6,134,839

$   10,651

0.69%

Non-interest bearing liabilities:







Non-interest bearing demand deposits

2,760,405



1,828,957



Other liabilities

92,873



66,560



  Total liabilities

11,975,290



8,030,356



Shareholders' equity

2,029,969



1,529,718



  Total liabilities and shareholders' equity

$ 14,005,259



$  9,560,074










Net Interest Income & Margin


$   106,893

3.45%


$   82,538

3.98%








Net Interest Income & Margin







     (tax equivalent)


$   109,031

3.52%


$   83,440

4.02%








 

 

 

Prosperity Bancshares, Inc.®

Supplemental Financial Data (Unaudited)

(Dollars in thousands)



Nine Months Ended September 30, 2012

Nine Months Ended September 30, 2011

YIELD ANALYSIS

Average

Interest Earned

Average

Average

Interest Earned

Average


Balance

/ Interest Paid

Yield/Rate

Balance

/ Interest Paid

Yield/Rate








Interest Earning Assets:







Loans

$  4,303,984

$   188,597

5.85%

$  3,614,590

$   160,374

5.93%

Investment securities

5,983,102

113,418

2.53%

4,635,880

121,861

3.50%

Federal funds sold and other







     temporary investments

66,771

108

0.22%

15,031

15

0.13%

  Total interest earning assets

10,353,857

$   302,123

3.90%

8,265,501

$   282,250

4.57%

Allowance for credit losses

(52,104)



(51,924)



Non-interest earning assets

1,498,332



1,388,905



  Total assets

$ 11,800,085



$  9,602,482










Interest Bearing Liabilities:







Interest bearing demand deposits

$  1,861,954

$    6,425

0.46%

$  1,403,477

$    5,966

0.57%

Savings and money market deposits

3,031,269

8,020

0.35%

2,377,423

9,386

0.53%

Certificates and other time deposits

2,080,606

11,824

0.76%

2,162,112

16,941

1.05%

Securities sold under repurchase agreements           

197,775

411

0.28%

70,425

306

0.58%

Federal funds purchased and other borrowings

465,505

1,076

0.31%

181,656

718

0.53%

Junior subordinated debentures

85,055

1,962

3.08%

87,058

2,352

3.61%

  Total interest bearing liabilities

7,722,164

$   29,718

0.51%

6,282,151

$   35,669

0.76%

Non-interest bearing liabilities:







Non-interest bearing demand deposits

2,267,876



1,758,182



Other liabilities

53,320



62,765



  Total liabilities

10,043,366



8,103,098



Shareholders' equity

1,756,725



1,499,384



  Total liabilities and shareholders' equity

$ 11,800,085



$  9,602,482










Net Interest Income & Margin


$   272,405

3.51%


$   246,581

3.99%








Net Interest Income & Margin







     (tax equivalent)


$  276,271

3.56%


$   249,345

4.03%

















Prosperity Bancshares, Inc.®

Supplemental Financial Data (Unaudited)

(Dollars in thousands)



Three Months Ended June 30, 2012

Three Months Ended June 30, 2011

YIELD ANALYSIS

Average

Interest Earned

Average

Average

Interest Earned

Average


Balance

/ Interest Paid

Yield/Rate

Balance

/ Interest Paid

Yield/Rate








Interest Earning Assets:







Loans

$  3,914,352

$    54,793

5.63%

$  3,631,256

$    53,703

5.93%

Investment securities

5,635,810

38,072

2.70%

4,707,217

41,919

3.56%

Federal funds sold and other







   earning assets

20,916

9

0.17%

13,218

30

0.91%

  Total interest earning assets

9,571,078

$    92,874

3.90%

8,351,691

$    95,652

4.59%

Allowance for credit losses

(50,746)



(51,861)



Non-interest earning assets

1,398,857



1,378,738



  Total assets

$ 10,919,189



$  9,678,568










Interest Bearing Liabilities:







Interest bearing demand deposits

$  1,706,176

$     2,089

0.49%

$  1,403,331

$     2,061

0.59%

Savings and money market deposits

2,779,524

2,444

0.35%

2,403,330

3,348

0.56%

Certificates and other time deposits

1,880,096

3,550

0.76%

2,175,165

5,655

1.04%

Securities sold under repurchase agreements           

98,968

59

0.24%

68,413

110

0.64%

Federal funds purchased and other borrowings

610,499

418

0.28%

218,310

250

0.46%

Junior subordinated debentures

85,055

648

3.06%

85,055

598

2.82%

  Total interest bearing liabilities

$ 7,160,318

$     9,208

0.52%

$  6,353,604

$    12,022

0.76%

Non-interest bearing liabilities:







Non-interest bearing demand deposits

$ 2,069,965



$ 1,770,664



Other liabilities

56,742



54,915



  Total liabilities

$ 9,287,025



$ 8,179,183



Shareholders' equity

$ 1,632,164



$ 1,499,385



  Total liabilities and shareholders' equity

$ 10,919,189



$  9,678,568










Net Interest Income & Margin


$    83,666

3.52%


$    83,630

4.02%








Net Interest Income & Margin







     (tax equivalent)


$    84,498

3.55%


$    84,603

4.06%















 

 

Prosperity Bancshares, Inc.®

Financial Highlights





Three Months Ended

Nine Months Ended


Sept 30, 2012

Sept 30, 2011

Sept 30, 2012

Sept 30, 2011

Performance Ratios

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)






Return on average assets (annualized)

1.32%

1.52%

1.35%

1.46%

Return on average common





     equity (annualized) 

9.10%

9.51%

9.08%

9.37%

Return on average tangible





     common equity (annualized) (G)

21.59%

25.03%

21.80%

25.58%

Net interest margin





     (tax equivalent) (annualized) (E)

3.52%

4.02%

3.56%

4.03%

Efficiency ratio(F)

46.07%

42.38%

43.69%

43.41%






Asset Quality Ratios










Non-performing assets to





     average earning assets

0.11%

0.16%

0.14%

0.16%

Non-performing assets to loans





     and other real estate

0.28%

0.36%

0.28%

0.36%

Net charge-offs  to average loans

0.02%

0.01%

0.07%

0.09%

Allowance for credit losses to





     total loans

1.00%

1.40%

1.00%

1.40%

Allowance for credit losses to total





     loans (excluding acquired loans) (G)

1.27%

1.40%

1.27%

1.40%






Common Stock Market Price










High

$45.40

$46.87

$47.66

$46.87

Low

$38.90

$30.91

$38.90

$30.91

Period end market price

$42.62

$32.68

$42.62

$32.68






(E) Net interest margin for all periods presented is calculated on an actual 365 day or 366 day basis.


(F)The efficiency ratio is calculated by dividing total non-interest expense (excluding provision for credit losses) by net interest income plus non-interest income (excluding net gains and losses on the sale of securities and assets). Additionally, taxes are not part of this calculation.


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

 

 

Prosperity Bancshares, Inc.®

Financial Highlights


Comparative Quarterly

Three Months Ended

Asset Quality, Performance

Sept 30, 2012

June 30, 2012

Mar 31, 2012

Dec 31, 2011

Sept 30, 2011

     & Capital Ratios

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Return on average






     assets (annualized)

1.32%

1.35%

1.39%

1.50%

1.52%

Return on average common






     equity (annualized)

9.10%

9.06%

9.15%

9.35%

9.51%

Return on average tangible






     common equity (annualized)(G)

21.59%

21.70%

22.57%

23.86%

25.03%

Net interest margin






     (tax equivalent) (annualized)(E)

3.52%

3.55%

3.64%

3.82%

4.02%







Employees – FTE

2,260

1,666

1,690

1,664

1,678







Efficiency ratio(F)

46.07%

41.94%

42.23%

40.77%

42.38%

Non-performing assets to






     average earning assets

0.11%

0.12%

0.16%

0.14%

0.16%

Non-performing assets to loans






     and other real estate

0.28%

0.30%

0.38%

0.32%

0.36%

Net charge-offs to






     average loans

0.02%

0.05%

0.00%

0.06%

0.01%

Allowance for credit losses to






     total loans

1.00%

1.28%

1.33%

1.37%

1.40%

Allowance for credit losses to






total loans (excluding acquired loans)(G)

1.27%

    N/A

     N/A

     N/A

     N/A







Book value per share

$36.36

$34.63

$34.03

$33.41

$32.87







Tangible book value per share(G)

$14.45

$14.60

$13.98

$13.25

$12.67







Tier 1 risk-based capital

14.43%

16.42%

15.70%

15.90%

15.47%







Total risk-based capital

15.26%

17.49%

16.80%

17.09%

16.69%







Tier 1 leverage capital

6.92%

7.69%

7.68%

7.89%

7.70%







Tangible equity to tangible






     assets(G)

6.49%

7.08%

6.65%

7.00%

6.89%







Equity to assets

14.86%

15.31%

14.78%

15.96%

16.11%







 

Prosperity Bancshares, Inc.®

Financial Highlights

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



Three Months Ended

Nine Months Ended


Sept 30, 2012

Sept 30, 2011

Sept 30, 2012

Sept 30, 2011

Common Share and

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

     Other Data





Employees - FTE

2,260

1,678

2,260

1,678






Book value per share

$     36.36

$     32.87

$     36.36

$     32.87

Tangible book value per share(G)

$     14.45

$     12.67

$     14.45

$     12.67











Period end shares outstanding

56,058

46,893

56,058

46,893

Weighted average shares





     outstanding (basic)

55,958

46,890

50,239

46,830

Weighted average shares





     outstanding (diluted)

56,093

47,033

50,393

47,013






Non-accrual loans

$    5,063

$   5,105

$    5,063

$     5,105

Restructured loans

--

--

--

--

Accruing loans 90 or more





     days past due

132

20

132

20

Total non-performing loans

5,195

5,125

5,195

5,125

Repossessed assets

10

22

10

22

Other real estate

8,846

8,216

8,846

8,216

  Total non-performing assets

$    14,051

$  13,363

$    14,051

$     13,363






Allowance for credit losses at





     end of period

$    50,927

$  52,513

$    50,927

$     52,513






Net charge-offs

$     1,255

$      368

$     3,217

$     3,121






Basic earnings per share

$      0.83

$      0.78

$      2.38

$     2.25






Diluted earnings per share

$      0.82

$      0.77

$      2.37

$     2.24

 

 

Prosperity Bancshares, Inc. ®

Financial Highlights

(Dollars in thousands)




Three Months Ended

Nine Months Ended


Sept 30, 2012

Sept 30, 2011

Sept 30, 2012

Sept 30, 2011

Balance Sheet Averages

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)






Total loans

$  5,169,101

$  3,694,039

4,303,984

3,614,590

Investment securities

7,106,871

4,524,213

5,983,102

4,635,880

Federal funds sold and





     other temporary





     investments

53,111

18,636

66,771

15,031

Total earning assets

12,329,083

8,236,888

10,353,857

8,265,501

Allowance for credit losses

(53,944)

(52,208)

(52,104)

(51,924)

Cash and due from banks

206,124

125,750

166,105

129,526

Goodwill

1,157,330

924,537

1,006,506

924,496

Core deposit intangibles (CDI)

17,280

23,814

18,610

25,737

Other real estate (ORE)

11,600

8,637

10,144

10,360

Fixed assets, net

192,542

160,476

173,907

159,890

Other assets

145,244

132,180

123,060

138,896

Total assets

$ 14,005,259

$  9,560,074

$ 11,800,085

$  9,602,482






Non-interest bearing deposits

$  2,760,405

$  1,828,957

$  2,267,876

$  1,758,182

Interest bearing deposits

8,085,808

5,823,627

6,973,829

5,943,012

Total deposits

10,846,213

7,652,584

9,241,705

7,701,194

Securities sold under





     repurchase agreements

438,410

90,821

197,775

70,425

Federal funds purchased and





     other borrowings

512,739

135,336

465,505

181,656

Junior subordinated





     debentures

85,055

85,055

85,055

87,058

Other liabilities

92,873

66,560

53,320

62,765

Shareholders' equity(H)

2,029,969

1,529,718

1,756,725

1,499,384

Total liabilities and equity

$ 14,005,259

$  9,560,074

$ 11,800,085

$  9,602,482






(H) Includes $11,821 and $15,702 in after tax unrealized gains on available for sale securities for the three months ending September 30, 2012 and September 30, 2011, respectively, and $12,612 and $14,735 for the nine months ending September 30, 2012 and September 30, 2011, respectively.

 

 

Prosperity Bancshares, Inc.®

Financial Highlights

(Dollars in thousands)




Sept 30, 2012

June 30, 2012

March 31, 2012

Dec 31, 2011


(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Loan Portfolio









Commercial

$   792,247

15.6%

$   491,907

12.5%

$    475,860

12.3%

$   439,854

11.7%

Construction

496,417

9.8%

466,884

11.8%

484,295

12.5%

482,140

12.8%

1-4 family residential

1,213,872

23.9%

1,084,936

27.4%

1,036,318

26.7%

1,007,266

26.8%

Home equity

183,844

3.6%

154,147

3.9%

149,597

3.9%

146,999

3.8%

Commercial real estate

1,976,112

38.9%

1,484,787

37.6%

1,473,925

38.0%

1,441,226

38.3%

Agriculture

304,134

6.0%

192,462

4.9%

178,474

4.6%

170,234

4.5%

Consumer

112,477

2.2%

75,209

1.9%

76,393

2.0%

78,187

2.1%

Total Loans

$5,079,103


$3,950,332


$ 3,874,862


$3,765,906











Deposit Types









Non-interest bearing DDA

$2,827,748

25.8%

$2,083,910

24.8%

$ 2,088,749

24.4%

$ 1,972,226

24.5%

Interest bearing DDA

2,208,568

20.2%

1,684,492

20.1%

1,671,760

19.6%

1,532,701

19.0%

Money Market

2,303,680

21.0%

2,206,220

26.3%

2,312,107

27.1%

2,042,243

25.3%

Savings

1,276,271

11.6%

581,480

6.9%

554,211

6.5%

514,780

6.4%

Time < $100

1,103,108

10.1%

909,616

10.8%

938,911

11.0%

968,806

12.0%

Time > $100

1,235,222

11.3%

928,864

11.1%

978,713

11.5%

1,029,498

12.8%

Total Deposits

$10,954,597


$8,394,582


$ 8,544,451


$8,060,254











Loan to Deposit Ratio

46.4%


47.1%


45.3%


46.7%











Construction Loans









Single family residential     

     construction

$   150,959

30.1%

$   143,600

30.8%

$   142,584

29.4%

$   136,030

28.2%

Land development

38,075

7.6%

39,704

8.5%

41,177

8.5%

43,084

8.9%

Raw land

47,620

9.5%

51,070

10.9%

63,006

13.0%

61,177

12.7%

Residential lots

97,445

19.4%

86,201

18.5%

88,054

18.2%

86,848

18.0%

Commercial lots

63,418

12.7%

49,454

10.6%

51,642

10.7%

49,645

10.3%

Commercial









     construction and other

103,677

20.7%

96,855

20.7%

97,832

20.2%

105,356

21.9%

Net unaccreted discount

(4,777)


--


--


--


Total Construction Loans

$   496,417


$   466,884


$   484,295


$   482,140


Prosperity Bancshares, Inc.®
Notes to Selected Financial Data (Unaudited)
(Dollars in thousands)

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 and related entries and one-time merger expenses, Prosperity uses certain non-GAAP measures and ratios that exclude the impact of these items to evaluate its performance, including yield on loans and securities, net income, diluted earnings per share, efficiency ratio and allowance for credit losses to total loans (excluding acquired loans).  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


Sept 30,
2012

June 30,
2012

Mar 31, 2012

Dec 31, 2011

Sept 30, 2011

Return on average tangible common equity:

Net income

$    46,176

$     36,972

$     36,487

$     36,406

$     36,373

Average shareholders' equity

2,029,969

1,632,164

1,595,284

1,556,845

1,529,718

Less: Average goodwill and other intangible assets

(1,174,610)

(950,577)

(948,519)

(946,427)

(948,351)

       Average tangible shareholders' equity

$   855,359

$    681,587

$  646,765

$   610,418

$   581,367

       Return on average tangible common  equity:

21.59%

21.70%

22.57%

23.86%

25.03%







Tangible book value per share:




Shareholders' equity

$2,038,176

$ 1,643,817

$ 1,609,533

$1,567,265

$1,541,339

Less: Goodwill and other intangible assets

(1,228,190)

(950,671)

(948,462)

(945,533)

(947,411)

         Tangible shareholders' equity

$   809,986

$    693,146

$   661,071

$   621,732

$   593,928







Period end shares outstanding

56,058

47,474

47,297

46,910

46,893

Tangible book value per share:

$       14.45

$        14.60

$       13.98

$       13.25

$       12.67







Tangible equity to tangible assets ratio:



Tangible shareholders' equity

$  809,986

$    693,146

$    661,071

$  621,732

$   593,928

Total assets

$13,712,119

$10,737,351

$10,889,955

$9,822,671

$9,567,087

Less: Goodwill and other intangible assets

(1,228,190)

(950,671)

(948,462)

(945,533)

(947,411)

       Tangible assets

$12,483,929

$ 9,786,680

$9,941,493

$8,877,138

$8,619,676







Tangible equity to tangible assets ratio:

6.49%

7.08%

6.65%

7.00%

6.89%












 

 

Prosperity Bancshares, Inc.®

Notes to Selected Financial Data (Unaudited)

(Dollars and share amounts in thousands)



Nine Months Ended


Sept 30, 2012

Sept 30, 2011

Return on average tangible common equity:



Net income

$     119,635

$    105,343

Average shareholders' equity

1,756,725

1,499,384

Less: Average goodwill and other intangible assets

(1,025,116)

(950,233)

         Average tangible shareholders' equity

$     731,609

$    549,151

         Return on average tangible common equity:

21.80%

25.58%




Tangible book value per share:



Shareholders' equity

$  2,038,176

$   1,541,339

Less: Goodwill and other intangible assets

(1,228,190)

(947,411)

         Tangible shareholders' equity

$    809,986

$    593,928




Period end shares outstanding

56,058

46,893

Tangible book value per share:

$        14.45

$       12.67




Tangible equity to tangible assets ratio:


Tangible shareholders' equity

$      809,986

$     593,928

Total assets

$  13,712,119

$    9,567,087

Less: Goodwill and other intangible assets

(1,228,190)

(947,411)

       Tangible assets

$  12,483,929

$    8,619,676




Tangible equity to tangible assets ratio:

6.49%

6.89%

 

 

Prosperity Bancshares, Inc.®

Notes to Selected Financial Data (Unaudited)

(Dollars in thousands)




 

Adjustment to loan yield:

Three Months Ended Sept 30, 2012

Nine Months Ended Sept 30, 2012

  Interest on loans, as reported

$            80,587

$           188,597

  Less: Purchase accounting adjustment-loan discount accretion

(11,188)

(11,889)

        Interest on loans less discount accretion

$            69,399

$           176,708

  Average loans

$       5,169,101

$        4,303,984

  Loan yield without discount accretion (non-GAAP basis)

5.34%

5.48%

  Loan yield, as reported

6.20%

5.85%

Adjustment to securities yield:



  Interest on securities

$             37,025

$            113,418

  Add: Purchase accounting adjustment-securities amortization

3,451

3,451

  Add: Impact of sale of ASB securities prior to acquisition

2,741

2,741

   Interest on securities including amortization and impact of
     securities sale

$             43,217

$            119,610

  Average investment securities

$        7,106,871

$         5,983,102

  Securities yield including amortization and impact of securities sales 
     (non-GAAP basis)

2.43%

2.67%

  Securities yield, as reported

2.08%

2.53%

Adjustment to net income and diluted EPS for purchase accounting adjustments, one-time merger expenses and securities sale:



  Net income, as reported

$          46,176

$          119,635

  Less: Purchase accounting adjustment-loan discount accretion

(11,188)

(11,889)

  Add: Purchase accounting adjustment-securities premium amortization

3,451

3,451

  Add: one-time merger expenses

5,404

5,404

  Add: Impact of sale of ASB securities prior to acquisition

2,741

2,741

       Adjustment subtotal

408

(293)

  Tax effect at 35.0%

(143)

103

  Adjustment subtotal, after tax

265

(190)

  Net income adjusted for purchase accounting adjustments, one-time merger expenses and securities sale

46,441

119,445

  Weighted average shares outstanding (diluted)

56,093

50,393

  EPS (diluted) adjusted for purchase accounting adjustments, one-time merger expenses and securities sale (non-GAAP basis)

$                0.83

$                 2.37

  EPS (diluted), as reported

$                0.82

$                 2.37

Adjustment to efficiency ratio for one-time merger expenses:



  Net income, as reported

$              46,176

$             119,635

  Non-interest expense

60,242

141,489

  Less: one-time merger expenses

(5,404)

(5,404)

  Non-interest expense less one-time merger expenses

54,838

136,085

  Non-interest income (excluding gains and losses on assets)

23,878

51,416

  Net interest income before allowance for credit losses

106,893

272,405

Efficiency ratio adjusted for one-time merger expenses (non-GAAP basis)

41.93%

42.02%

Efficiency ratio, as reported

46.07%

43.69%

 

 

Prosperity Bancshares, Inc.®

Notes to Selected Financial Data (Unaudited)

(Dollars in thousands)


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

Three Months Ended Sept 30, 2012

Nine Months Ended Sept 30, 2012

Allowance for credit losses

$            50,927

$             50,927

Total loans

5,079,103

5,079,103

Less: acquired loans (does not include new production)

1,066,567

1,066,567

        Total loans less acquired loans

$       4,012,536

$        4,012,536

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

1.27%

1.27%

 

SOURCE Prosperity Bancshares, Inc.

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