Cision PR Newswire

PROSPERITY BANCSHARES, INC.® REPORTS FOURTH QUARTER 2022 EARNINGS

  • Fourth quarter net income of $137.9 million and earnings per share (diluted) of $1.51
  • Fourth quarter net income increased 8.7% compared to fourth quarter 2021
  • Loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, increased $518.5 million or 3.0% (11.8% annualized) during fourth quarter 2022
  • Loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, increased $1.422 billion or 8.5% during 2022
  • Allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, of 1.56%(1)
  • Nonperforming assets remain low at 0.08% of fourth quarter average interest-earning assets
  • Return (annualized) on fourth quarter average assets of 1.47%, average common equity of 8.26%, average tangible common equity of 16.26%(1), and efficiency ratio of 40.87%
  • Pending acquisitions of First Bancshares of Texas, Inc., Midland, Texas, and Lone Star State Bancshares, Inc., Lubbock, Texas
  • Approved 2023 Stock Repurchase Program covering up to 5% of outstanding common stock

HOUSTON, Jan. 25, 2023 /PRNewswire/ -- Prosperity Bancshares, Inc.® (NYSE: PB), the parent company of Prosperity Bank® (collectively, "Prosperity"), reported net income of $137.9 million for the quarter ended December 31, 2022 compared with $126.8 million for the same period in 2021. Net income per diluted common share was $1.51 for the quarter ended December 31, 2022 compared with $1.38 for the same period in 2021, an increase of 9.4%, and the annualized return on fourth quarter average assets was 1.47%. Additionally, loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program ("PPP") loans, increased $518.5 million or 3.0% (11.8% annualized) during the fourth quarter of 2022. Nonperforming assets remain low at 0.08% of fourth quarter average interest-earning assets.

"During the fourth quarter of 2022, Prosperity continued to see growth in loans, which we expect will continue in 2023. The growth comes from new loans as well as existing loans not paying off as fast as they did when rates were low and it was opportunistic for borrowers to repay or move the loans. Consumer spending remains strong, especially in the tourism, restaurant and hospitality sectors.  Real estate sales and pricing have been affected by the increase in rates, but we expect that because of inventory levels and population growth, the impact will be less in Texas and Oklahoma," said David Zalman, Prosperity's Senior Chairman and Chief Executive Officer.

"We believe that the economies in Texas and Oklahoma will outperform other states over the next several years as companies and individuals continue to move to the states because of lower tax rates and a business-friendly political environment. We expect that companies will need more infrastructure and buildings and consumers will need more housing and places to spend their money, and both will need banks to finance the growth," continued Zalman.

"While the net interest margin at some banks has improved immediately because of higher rates, we expect Prosperity's net interest margin to continue to increase over the next several years as our bond portfolio, which yielded 1.96% during the fourth quarter of 2022, reprices to higher yields assuming that rates normalize near the current rate," concluded Zalman.

Results of Operations for the Three Months Ended December 31, 2022

Net income was $137.9 million(2) for the three months ended December 31, 2022 compared with $126.8 million(3) for the same period in 2021, an increase of $11.1 million or 8.7%. The change was primarily due to an increase in loans and securities interest income, partially offset by a decrease in PPP fees and interest income of $8.5 million, a decrease in loan discount accretion of $4.5 million, and an increase in interest expense. Net income per diluted common share was $1.51 for the three months ended December 31, 2022 compared with $1.38 for the same period in 2021, an increase of 9.4%. On a linked quarter basis, net income was $137.9 million(2) for the three months ended December 31, 2022 compared with $135.8 million(4) for the three months ended September 30, 2022, an increase of $2.1 million or 1.5%. The change was primarily due to an increase in noninterest income and a decrease in noninterest expense, partially offset by a decrease in net interest income. Net income per diluted common share was $1.51 for the three months ended December 31, 2022 compared with $1.49 for the three months ended September 30, 2022, an increase of 1.3%. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended December 31, 2022 were 1.47%, 8.26% and 16.26%(1), respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and securities) was 40.87%(1) for the three months ended December 31, 2022.

Net interest income before provision for credit losses for the three months ended December 31, 2022 was $256.1 million compared with $244.8 million for the same period in 2021, an increase of $11.4 million or 4.6%. The change was primarily due to an increase in the average balances and average rates on loans held for investment and on investment securities, partially offset by a decrease in PPP fees and interest income of $8.5 million, a decrease in loan discount accretion of $4.5 million and an increase in the average rates on interest-bearing liabilities. On a linked quarter basis, net interest income before provision for credit losses was $256.1 million compared with $260.7 million for the three months ended September 30, 2022, a decrease of $4.5 million or 1.7%.

The net interest margin on a tax equivalent basis was 3.05% for the three months ended December 31, 2022 compared with 2.97% for the same period in 2021. The change was primarily due to an increase in the average balances and average rates on loans held for investment and on investment securities, partially offset by a decrease in PPP fees and interest income of $8.5 million, a decrease in loan discount accretion of $4.5 million and an increase in the average rates on interest-bearing liabilities. On a linked quarter basis, the net interest margin on a tax equivalent basis was 3.05% for the three months ended December 31, 2022 compared with 3.11% for the three months ended September 30, 2022. The linked quarter decrease was primarily due to an increase in the average rates on interest-bearing liabilities, partially offset by higher average balances and higher average rates on loans and average rates on investment securities.

Noninterest income was $37.7 million for the three months ended December 31, 2022 compared with $35.8 million for the same period in 2021, an increase of $2.0 million or 5.5%.  This change was primarily due to a higher net gain on sale or write-down of assets, an increase in trust income and an increase in other noninterest income.  On a linked quarter basis, noninterest income was $37.7 million compared with $34.7 million for the three months ended September 30, 2022, an increase of $3.0 million or 8.8%, primarily due to a higher net gain on the sale or write-down of assets and an increase in other noninterest income.

Noninterest expense was $119.2 million for the three months ended December 31, 2022 compared with $119.5 million for the same period in 2021, a decrease of $294 thousand.  On a linked quarter basis, noninterest expense decreased $3.0 million  or 2.4% to $119.2 million compared with $122.2 million for the three months ended September 30, 2022. This change was primarily due to a decrease in salaries and benefits, partially offset by an increase in other noninterest expense.

Results of Operations for the Year Ended December 31, 2022

Net income was $524.5 million(5) for the year ended December 31, 2022 compared with $519.3 million(6) for 2021, an increase of $5.2 million or 1.0%. Net income per diluted common share was $5.73 for the year ended December 31, 2022 compared with $5.60 for 2021, an increase of 2.3%. Annualized returns on average assets, average common equity and average tangible common equity for the year ended December 31, 2022 were 1.39%, 7.97% and 15.94%(1), respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and securities) was 42.23%(1) for the year ended December 31, 2022.

Net interest income before provision for credit losses for the year ended December 31, 2022 was $1.005 billion compared with $993.3 million for the prior year, an increase of $11.9 million or 1.2%.  The change was primarily due to an increase in average balances and average rates on investment securities, partially offset by a decrease in PPP fees and interest income of $44.6 million, a decrease in loan discount accretion of $31.9 million and an increase in the average rates on interest-bearing liabilities.

The net interest margin on a tax equivalent basis for the year ended December 31, 2022 was 3.00% compared with 3.14% for 2021. The change was primarily due to an increase in the average balances on investment securities, partially offset by a decrease in PPP fees and interest income of $44.6 million, a decrease in loan discount accretion of $31.9 million and an increase in the average rates on interest-bearing liabilities.

Noninterest income was $145.1 million for the year ended December 31, 2022 compared with $140.0 million for 2021, an increase of $5.2 million or 3.7%, primarily due to an increase in NSF income, a net gain on the sale or write-down of assets, an increase in trust income and an increase in other noninterest income, partially offset by a decrease in mortgage income.

Noninterest expense was $484.2 million for the year ended December 31, 2022 compared with $473.6 million for 2021, an increase of $10.6 million or 2.2%. The change was primarily due to an increase in salaries and benefits, an increase in credit and debit card and data processing expense and the change in net loss (gain) on sale or write-down of other real estate.

Balance Sheet Information

At December 31, 2022, Prosperity had $37.690 billion in total assets, a decrease of $144.1 million or 0.4%, compared with $37.834 billion at December 31, 2021.

Loans at December 31, 2022 were $18.840 billion, an increase of $223.7 million or 1.2%, compared with $18.616 billion at December 31, 2021, primarily due to increases in 1-4 family residential and construction, land development and other land loans, partially offset by decreases in Warehouse Purchase Program, PPP and commercial real estate loans. Linked quarter loans increased $333.5 million or 1.8% (7.2% annualized) from $18.506 billion at September 30, 2022. Excluding Warehouse Purchase Program and PPP loans, loans at December 31, 2022 were $18.093 billion compared to $16.671 billion at December 31, 2021, an increase of $1.422 billion or 8.5%. Linked quarter loans, excluding Warehouse Purchase Program and PPP loans, increased $518.5 million or 3.0% (11.8% annualized) from $17.575 billion at September 30, 2022.

As part of its lending activities, Prosperity extends credit to oil and gas production and servicing companies. Oil and gas production loans are loans to companies directly involved in the exploration and/or production of oil and gas. Oil and gas servicing loans are loans to companies that provide services for oil and gas production and exploration. At December 31, 2022, oil and gas loans totaled $429.5 million (net of discount and excluding PPP loans totaling $3.4 million) or 2.3% of total loans, of which $209.0 million were production loans and $220.5 million were servicing loans, compared with total oil and gas loans of $491.3 million (net of discount and excluding PPP loans totaling $27.9 million) or 2.6% of total loans at December 31, 2021, of which $294.1 million were production loans and $197.2 million were servicing loans. In addition, as of December 31, 2022, Prosperity had total unfunded commitments to oil and gas companies of $453.4 million compared with total unfunded commitments to oil and gas companies of $419.0 million as of December 31, 2021. Unfunded commitments to producers include letters of credit issued in lieu of oil well plugging bonds.

Deposits at December 31, 2022 were $28.534 billion, a decrease of $2.238 billion or 7.3%, compared with $30.772 billion at December 31, 2021, primarily due to a decrease in public fund deposits. Linked quarter deposits decreased $766.6 million or 2.6% from $29.300 billion at September 30, 2022.

Asset Quality

Nonperforming assets totaled $27.5 million or 0.08% of quarterly average interest-earning assets at December 31, 2022 compared with $28.1 million or 0.09% of quarterly average interest-earning assets at December 31, 2021 and $19.9 million or 0.06% of quarterly average interest-earning assets at September 30, 2022.

The allowance for credit losses on loans and off-balance sheet credit exposures was $311.5 million at December 31, 2022 compared with $316.3 million at December 31, 2021 and $312.1 million at September 30, 2022. There was no provision for credit losses for the three months and years ended December 31, 2022  and 2021.

The allowance for credit losses on loans was $281.6 million or 1.49% of total loans at December 31, 2022 compared with $286.4 million or 1.54% of total loans at December 31, 2021 and $282.2 million or 1.52% of total loans at September 30, 2022. Excluding Warehouse Purchase Program and PPP loans, the allowance for credit losses on loans to total loans was 1.56%(1) at December 31, 2022 compared with 1.72%(1) at December 31, 2021 and 1.61%(1) at September 30, 2022.

Net charge-offs were $603 thousand for the three months ended December 31, 2022 compared with net charge-offs of $807 thousand for the three months ended December 31, 2021 and net charge-offs of $1.8 million for the three months ended September 30, 2022. During the fourth quarter of 2022, net charge-offs did not include any purchased credit deteriorated ("PCD") loans and $6.2 million of specific reserves on resolved PCD loans was released to the general reserve.

Net charge-offs were $4.8 million for the year ended December 31, 2022 compared with $29.7 million for the year ended December 31, 2021. Net charge-offs for the year ended December 31, 2022 did not include any PCD loans and $8.2 million of specific reserves on resolved PCD loans was released to the general reserve during the period.

Dividend

Prosperity Bancshares declared a first quarter 2023 cash dividend of $0.55 per share to be paid on April 3, 2023, to all shareholders of record as of March 15, 2023.

Stock Repurchase Program

On January 17, 2023, Prosperity Bancshares announced a stock repurchase program under which up to 5%, or approximately 4.6 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 17, 2024, at the discretion of management. Under its 2022 stock repurchase program, Prosperity Bancshares repurchased zero shares of its common stock during the three months ended December 31, 2022 and 981,884 shares of its common stock at an average weighted price of $66.90 per share during the year ended December 31, 2022.

Pending Acquisition of First Bancshares of Texas, Inc.

On October 11, 2022, Prosperity Bancshares and First Bancshares of Texas, Inc. ("First Bancshares") jointly announced the signing of a definitive merger agreement whereby First Bancshares, the parent company of FirstCapital Bank of Texas, N.A. ("FirstCapital Bank") will merge with and into Prosperity. FirstCapital Bank operates 16 full-service banking offices in 6 different markets in West, North and Central Texas areas, including its main office in Midland, and banking offices in Midland, Lubbock, Amarillo, Wichita Falls, Burkburnett, Byers, Henrietta, Dallas, Horseshoe Bay, Marble Falls and Fredericksburg, Texas.  As of September 30, 2022, First Bancshares, on a consolidated basis, reported total assets of $2.203 billion, total loans of $1.631 billion and total deposits of $1.842 billion.

Under the terms of the merger agreement, Prosperity will issue 3,583,370 shares of Prosperity common stock plus $93.4 million in cash for all outstanding shares of First Bancshares capital stock, subject to certain conditions and potential adjustments. Based on Prosperity's closing price of $69.27 on October 7, 2022, the total consideration was valued at approximately $341.6 million. The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval of the shareholders of First Bancshares. The transaction is expected to close during the first half of 2023, although delays could occur.

Pending Acquisition of Lone Star State Bancshares, Inc.

On October 11, 2022, Prosperity Bancshares and Lone Star State Bancshares, Inc. ("Lone Star") jointly announced the signing of a definitive merger agreement whereby Lone Star, the parent company of Lone Star State Bank of West Texas ("Lone Star Bank") will merge with and into Prosperity. Lone Star Bank operates 5 banking offices in the West Texas area, including its main office in Lubbock, and 1 banking center in each of Brownfield, Midland, Odessa and Big Spring, Texas.  As of September 30, 2022, Lone Star, on a consolidated basis, reported total assets of $1.387 billion, total loans of $940.5 million and total deposits of $1.249 billion.

Under the terms of the merger agreement, Prosperity will issue 2,376,182 shares of Prosperity common stock plus $64.1 million in cash for all outstanding shares of Lone Star capital stock, subject to certain conditions and potential adjustments. Based on Prosperity's closing price of $69.27 on October 7, 2022, the total consideration was valued at approximately $228.7 million. The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval of the shareholders of Lone Star. The transaction is expected to close during the first half of 2023, although delays could occur.

Conference Call

Prosperity's management team will host a conference call on Wednesday, January 25, 2023, at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity's fourth quarter 2022 earnings. Individuals and investment professionals may participate in the call by dialing 877-883-0383 for domestic participants, or 412-902-6506 for international participants. The participant elite entry number is 6262776.

Alternatively, individuals may listen to the live webcast of the presentation by visiting Prosperity's website at www.prosperitybankusa.com. The webcast may be accessed from Prosperity's home page by selecting "Presentations, Webcasts & Calls" from the menu on the Investor Relations link and following the instructions.

Non-GAAP Financial Measures

Prosperity's management uses certain non-GAAP financial measures to evaluate its performance. Specifically, Prosperity reviews return on average tangible common equity; tangible book value per share; the tangible equity to tangible assets ratio; allowance for credit losses on loans to total loans excluding Warehouse Purchase Program and PPP loans; and the efficiency ratio excluding net gains and losses on the sale or write down of assets and securities, for internal planning and forecasting purposes. Prosperity believes these non-GAAP financial measures provide information useful to investors in understanding Prosperity's financial results and their presentation, together with the accompanying reconciliations, provides a more complete understanding of factors and trends affecting Prosperity's business and allows investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. Further, Prosperity believes that these non-GAAP financial measures provide useful information by excluding certain items that may not be indicative of its core operating earnings and business outlook. These non-GAAP financial measures should not be considered a substitute for, nor of greater importance than, GAAP basis financial measures and results; Prosperity strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. Please refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures to the nearest respective GAAP financial measures.

Prosperity Bancshares, Inc. ®

As of December 31, 2022, Prosperity Bancshares, Inc.® is a $37.690 billion Houston, Texas based regional financial holding company providing personal banking services and investments to consumers and businesses throughout Texas and Oklahoma.  Founded in 1983, Prosperity believes in a community banking philosophy, taking care of customers, businesses and communities in the areas it serves by providing financial solutions to simplify everyday financial needs. In addition to offering traditional deposit and loan products, Prosperity offers digital banking solutions, credit and debit cards, mortgage services, retail brokerage services, trust and wealth management, and treasury management.

Prosperity currently operates 272 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 62 in the Dallas/Fort Worth area; 22 in the East Texas area; 29 in the Central Texas area including Austin and San Antonio; 34 in the West Texas area including Lubbock, Midland-Odessa and Abilene; 16 in the Bryan/College Station area; 6 in the Central Oklahoma area; and 8 in the Tulsa, Oklahoma area.

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

Cautionary Notes on Forward-Looking Statements

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by Prosperity's management on the conference call may contain, forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, oral or written forward-looking statements may also be included in other information released to the public.  Such forward-looking statements are typically, but not exclusively, identified by the use in the statements of words or phrases such as "aim," "anticipate," "believe," "estimate," "expect," "goal," "guidance," "intend," "is anticipated," "is expected," "is intended," "objective," "plan," "projected," "projection," "will affect," "will be," "will continue," "will decrease," "will grow," "will impact," "will increase," "will incur," "will reduce," "will remain," "will result," "would be," variations of such words or phrases (including where the word "could," "may," or "would" is used rather than the word "will" in a phrase) and similar words and phrases indicating that the statement addresses some future result, occurrence, plan or objective. Forward-looking statements include all statements other than statements of historical fact, including forecasts or trends, and are based on current expectations, assumptions, estimates and projections about Prosperity Bancshares and its subsidiaries. These forward-looking statements may include information about Prosperity's possible or assumed future economic performance or future results of operations, including future revenues, income, expenses, provision for loan losses, provision for taxes, effective tax rate, earnings per share and cash flows and Prosperity's future capital expenditures and dividends, future financial condition and changes therein, including changes in Prosperity's loan portfolio and allowance for loan losses, future capital structure or changes therein, as well as the plans and objectives of management for Prosperity's future operations, future or proposed acquisitions, including the proposed transactions with First Bancshares and Lone Star, the future or expected effect of acquisitions on Prosperity's operations, results of operations, financial condition, and future economic performance, statements about the anticipated benefits of each of the proposed transactions, and statements about the assumptions underlying any such statement, as well as expectations regarding the effects of the COVID-19 pandemic on Prosperity's operating income, financial condition and cash flows. These forward–looking statements are not guarantees of future performance and are based on expectations and assumptions Prosperity currently believes to be valid.  Because forward-looking statements relate to future results and occurrences, many of which are outside of Prosperity's control, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Many possible events or factors could adversely affect the future financial results and performance of Prosperity, First Bancshares, Lone Star or the combined company and could cause those results or performance to differ materially from those expressed in or implied by the forward-looking statements. Such risks and uncertainties include, among others: the occurrence of any event, change or other circumstance that could give rise to the right of a party to terminate the merger agreement with First Bancshares or Lone Star, as applicable, the outcome of any legal proceedings that may be instituted against Prosperity, First Bancshares or Lone Star, delays in completing either of the transactions, the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of each of the transactions) or First Bancshares shareholder approval or Lone Star shareholder approval or to satisfy any of the other conditions to the transactions on a timely basis or at all, the possibility that the anticipated benefits of the transactions are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors generally, or specifically in the West Texas area and the West, North and Central Texas area where First Bancshares and Lone Star, respectively, do a majority of their respective business and Prosperity has a significant presence, the possibility that the transactions may be more expensive to complete than anticipated, including as a result of unexpected factors or events, diversion of management's attention from ongoing business operations and opportunities, potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transactions, Prosperity's ability to complete the acquisition and integration of First Bancshares and of Lone Star successfully, and the dilution caused by Prosperity's issuance of additional shares of its common stock in connection with the transactions. Prosperity disclaims any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments. These and various other factors are discussed in Prosperity's Annual Report on Form 10-K for the year ended December 31, 2021, and other reports and statements Prosperity has filed with the Securities and Exchange Commission ("SEC"). Copies of the SEC filings for Prosperity may be downloaded from the Internet at no charge from http://www.prosperitybankusa.com.

Additional Information about the First Bancshares Merger and Where to Find It

In connection with the proposed merger of First Bancshares into Prosperity, Prosperity has filed with the SEC a registration statement on Form S-4 to register the shares of Prosperity common stock to be issued to the shareholders of First Bancshares. The registration statement includes a preliminary proxy statement/prospectus. The definitive proxy statement/prospectus will be sent to the shareholders of First Bancshares 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 TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH THE PROPOSED TRANSACTION BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT PROSPERITY, FIRST BANCSHARES AND THE PROPOSED TRANSACTION.

Investors and security holders may obtain free copies of these documents through the website maintained by the SEC at http://www.sec.gov. You will also be able to obtain these documents, when they are filed, free of charge, from Prosperity at http://www.prosperitybankusa.com. Copies of the proxy statement/prospectus can also be obtained, when it becomes 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, (281) 269-7199 or to First Bancshares of Texas, Inc., 310 West Wall Street, Suite 1200, Midland, Texas 79701, Attention: Ken Burgess, (844) 322-8392.

Additional Information about the Lone Star Merger and Where to Find It

In connection with the proposed merger of Lone Star into Prosperity, Prosperity has filed with the SEC a registration statement on Form S-4 to register the shares of Prosperity common stock to be issued to the shareholders of Lone Star. The registration statement includes a preliminary proxy statement/prospectus. The definitive proxy statement/prospectus will be sent to the shareholders of Lone Star 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 TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH THE PROPOSED TRANSACTION BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT PROSPERITY, LONE STAR AND THE PROPOSED TRANSACTION.

Investors and security holders may obtain free copies of these documents through the website maintained by the SEC at http://www.sec.gov. You will also be able to obtain these documents, when they are filed, free of charge, from Prosperity at http://www.prosperitybankusa.com. Copies of the proxy statement/prospectus can also be obtained, when it becomes 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, (281) 269-7199 or to Lone Star State Bancshares, Inc., 6220 Milwaukee Avenue, Lubbock, Texas 79424, Attention: Alan Lackey, (806) 771-7717.

Participants in the Solicitation

Prosperity, First Bancshares and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of First Bancshares in connection with the proposed transaction. Certain information regarding the interests of these participants and a description of their direct and indirect interests, by security holdings or otherwise, is included in the registration statement and proxy statement/prospectus regarding the proposed transaction and other relevant materials to be filed with the SEC when they become available. 

Prosperity, Lone Star and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Lone Star in connection with the proposed transaction. Certain information regarding the interests of these participants and a description of their direct and indirect interests, by security holdings or otherwise, is included in the registration statement and proxy statement/prospectus regarding the proposed transaction and other relevant materials to be filed with the SEC when they become available.  

Additional information about Prosperity and its directors and executive officers may be found in the definitive proxy statement of Prosperity relating to its 2022 Annual Meeting of Shareholders filed with the SEC on March 14, 2022, and other documents filed by Prosperity with the SEC. These documents can be obtained free of charge from the sources described above.

No Offer or Solicitation

This communication is for informational purposes only and is not intended to and does not constitute an offer to subscribe for, buy or sell, or the solicitation of an offer to subscribe for, buy or sell, or an invitation to subscribe for, buy or sell any securities or a solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, invitation, sale or solicitation would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law.

______________

(1)

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

(2)

Includes purchase accounting adjustments of $758 thousand, net of tax, primarily comprised of loan discount accretion of $913 thousand for the three months ended December 31, 2022.

(3)

Includes purchase accounting adjustments of $4.2 million, net of tax, primarily comprised of loan discount accretion of $5.4 million for the three months ended December 31, 2021.

(4)

Includes purchase accounting adjustments of $997 thousand, net of tax, primarily comprised of loan discount accretion of $1.2 million for the three months ended September 30, 2022.

(5)

Includes purchase accounting adjustments of $6.0 million, net of tax, primarily comprised of loan discount accretion of $7.4 million for the year ended December 31, 2022.

(6)

Includes purchase accounting adjustments of $31.5 million, net of tax, primarily comprised of loan discount accretion of $39.3 million for the year ended December 31, 2021.

 

Bryan/College Station Area


Garland


Palestine


Magnolia


Texas Tech Student Union

Bryan


Grapevine


Rusk


Magnolia Parkway



Bryan-29th Street


Grapevine Main


Seven Points


Mont Belvieu


Midland

Bryan-East


Kiest


Teague


Nederland


Wadley

Bryan-North


Lake Highlands


Tyler-Beckham


Needville


Wall Street

Caldwell


McKinney


Tyler-South Broadway


Rosenberg



College Station


McKinney Eldorado


Tyler-University


Shadow Creek


Odessa

Crescent Point


McKinney Redbud


Winnsboro


Spring


Grandview

Hearne


North Carrolton




Tomball


Grant

Huntsville


Park Cities


Houston Area


Waller


Kermit Highway

Madisonville


Plano


Houston


West Columbia


Parkway

Navasota


Plano-West


Aldine


Wharton



New Waverly


Preston Forest


Alief


Winnie


Other West Texas Area

Rock Prairie


Preston Parker


Bellaire


Wirt


Locations

Southwest Parkway


Preston Royal


Beltway




Big Spring

Tower Point


Red Oak


Clear Lake


South Texas Area -


Brownfield

Wellborn Road


Richardson


Copperfield


Corpus Christi


Brownwood



Richardson-West


Cypress


Calallen


Cisco

Central Texas Area


Rosewood Court


Downtown


Carmel


Comanche

Austin


The Colony


Eastex


Northwest


Early

Allandale


Tollroad


Fairfield


Saratoga


Floydada

Cedar Park


Trinity Mills


First Colony


Timbergate


Gorman

Congress


Turtle Creek


Fry Road


Water Street


Levelland

Lakeway


West 15th Plano


Gessner




Littlefield

Liberty Hill


West Allen


Gladebrook


Victoria


Merkel

Northland


Westmoreland


Grand Parkway


Victoria Main


Plainview

Oak Hill


Wylie


Heights


Victoria-Navarro


San Angelo

Research Blvd




Highway 6 West


Victoria-North


Slaton

Westlake


Fort Worth


Little York


Victoria Salem


Snyder



Haltom City


Medical Center





Other Central Texas Area


Hulen


Memorial Drive


Other South Texas Area


Oklahoma

Locations


Keller


Northside


 Locations


Central Oklahoma Area

Bastrop


Museum Place


Pasadena


Alice


Oklahoma City

Canyon Lake


Renaissance Square


Pecan Grove


Aransas Pass


23rd Street

Dime Box


Roanoke


Pin Oak


Beeville


Expressway

Dripping Springs


Stockyards


River Oaks


Colony Creek


I-240

Elgin




Sugar Land


Cuero


Memorial

Flatonia


Other Dallas/Fort Worth Area


SW Medical Center


Edna



Georgetown


Locations


Tanglewood


Goliad


Other Central Oklahoma Area

Gruene


Arlington


The Plaza


Gonzales


 Locations

Kingsland


Azle


Uptown


Hallettsville


Edmond

La Grange


Ennis


Waugh Drive


Kingsville


Norman

Lexington


Gainesville


Westheimer


Mathis



New Braunfels


Glen Rose


West University


Padre Island


Tulsa Area

Pleasanton


Granbury


Woodcreek


Palacios


Tulsa

Round Rock


Grand Prairie




Port Lavaca


Garnett

San Antonio


Jacksboro


Katy


Portland


Harvard

Schulenburg


Mesquite


Cinco Ranch


Rockport


Memorial

Seguin


Muenster


Katy-Spring Green


Sinton


Sheridan

Smithville


Runaway Bay




Taft


S. Harvard

Thorndale


Sanger


The Woodlands


Yoakum


Utica Tower

Weimar


Waxahachie


The Woodlands-College Park


Yorktown


Yale



Weatherford


The Woodlands-I-45





Dallas/Fort Worth Area




The Woodlands-Research Forest


West Texas Area


Other Tulsa Area Locations

Dallas


East Texas Area




Abilene


Owasso

14th Street Plano


Athens


Other Houston Area


Antilley Road



Abrams Centre


Blooming Grove


Locations


Barrow Street



Addison


Canton


Angleton


Cypress Street



Allen


Carthage


Bay City


Judge Ely



Balch Springs


Corsicana


Beaumont


Mockingbird



Camp Wisdom


Crockett


Cleveland





Carrollton


Eustace


East Bernard


Lubbock



Cedar Hill


Gilmer


El Campo


4th Street



Coppell


Grapeland


Dayton


66th Street



East Plano


Gun Barrel City


Galveston


82nd Street



Euless


Jacksonville


Groves


86th Street



Frisco


Kerens


Hempstead


98th Street



Frisco Warren


Longview


Hitchcock


Avenue Q



Frisco-West


Mount Vernon


Liberty


North University



 - - -

 

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(In thousands)




Dec 31, 2022



Sep 30, 2022



Jun 30, 2022



Mar 31, 2022



Dec 31, 2021


Balance Sheet Data (at period end)
















Loans held for sale


$

554



$

2,871



$

3,350



$

2,810



$

7,274


Loans held for investment



18,098,653




17,580,653




17,067,871




16,720,173




16,833,171


Loans held for investment - Warehouse Purchase Program



740,620




922,764




1,137,623




1,344,541




1,775,699


Total loans



18,839,827




18,506,288




18,208,844




18,067,524




18,616,144


















Investment securities(A)



14,476,005




14,806,487




14,912,313




14,798,127




12,818,901


Federal funds sold



301




244




201




274




241


Allowance for credit losses on loans



(281,576)




(282,179)




(283,959)




(285,163)




(286,380)


Cash and due from banks



423,832




602,152




393,716




1,560,321




2,547,739


Goodwill



3,231,636




3,231,636




3,231,636




3,231,636




3,231,636


Core deposit intangibles, net



51,348




53,906




56,483




59,064




61,684


Other real estate owned



1,963




1,758




1,555




1,705




622


Fixed assets, net



339,453




337,099




335,939




336,075




319,799


Other assets



607,040




586,111




530,528




501,623




523,584


Total assets


$

37,689,829



$

37,843,502



$

37,387,256



$

38,271,186



$

37,833,970


















Noninterest-bearing deposits


$

10,915,448



$

11,154,143



$

11,032,184



$

10,776,652



$

10,750,034


Interest-bearing deposits



17,618,083




18,145,952




18,833,434




20,291,658




20,021,728


Total deposits



28,533,531




29,300,095




29,865,618




31,068,310




30,771,762


Other borrowings



1,850,000




1,165,000




300,000








Securities sold under repurchase agreements



428,134




454,304




481,785




440,891




448,099


Allowance for credit losses on off-balance sheet credit exposures



29,947




29,947




29,947




29,947




29,947


Other liabilities



148,843




282,514




188,079




227,614




156,926


Total liabilities



30,990,455




31,231,860




30,865,429




31,766,762




31,406,734


Shareholders' equity(B)



6,699,374




6,611,642




6,521,827




6,504,424




6,427,236


Total liabilities and equity


$

37,689,829



$

37,843,502



$

37,387,256



$

38,271,186



$

37,833,970




(A)

Includes $(4,396), $(296), $1,517, $2,115 and $2,290 in unrealized (losses) gains on available for sale securities for the quarterly periods ended December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively.

(B)

Includes $(3,473), $(234), $1,198 $1,671 and $1,809 in after-tax unrealized (losses) gains on available for sale securities for the quarterly periods ended December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(In thousands)




Three Months Ended



Year-to-Date




Dec 31, 2022



Sep 30, 2022



Jun 30, 2022



Mar 31, 2022



Dec 31, 2021



Dec 31,
2022



Dec 31,
2021


Income Statement Data






















Interest income:






















Loans


$

235,126



$

210,268



$

192,770



$

193,025



$

206,209



$

831,189



$

869,908


Securities(C)



72,533




68,761




64,111




55,011




46,857




260,416




175,459


Federal funds sold and other earning
assets



933




525




925




847




563




3,230




1,556


Total interest income



308,592




279,554




257,806




248,883




253,629




1,094,835




1,046,923
























Interest expense:






















Deposits



36,048




14,669




8,641




8,754




8,685




68,112




52,913


Other borrowings



14,682




3,719




450










18,851





Securities sold under repurchase agreements



1,725




487




244




185




184




2,641




702


Total interest expense



52,455




18,875




9,335




8,939




8,869




89,604




53,615


Net interest income



256,137




260,679




248,471




239,944




244,760




1,005,231




993,308


Provision for credit losses






















Net interest income after provision for credit losses



256,137




260,679




248,471




239,944




244,760




1,005,231




993,308
























Noninterest income:






















Nonsufficient funds (NSF) fees



8,519




8,887




8,484




8,124




8,401




34,014




29,610


Credit card, debit card and ATM card income



8,816




8,889




8,880




8,179




8,894




34,764




34,680


Service charges on deposit accounts



5,932




6,222




6,365




6,211




6,237




24,730




24,392


Trust income



3,498




3,174




2,875




2,703




2,698




12,250




10,278


Mortgage income



102




340




502




455




685




1,399




8,302


Brokerage income



905




940




917




892




953




3,654




3,320


Bank owned life insurance income



1,329




1,214




1,293




1,283




1,317




5,119




5,228


Net gain (loss) on sale or write-down of assets



2,087




50




1,108




689




1,165




3,934




1,097


Other noninterest income



6,536




4,972




7,170




6,586




5,407




25,264




23,059


Total noninterest income



37,724




34,688




37,594




35,122




35,757




145,128




139,966
























Noninterest expense:






















Salaries and benefits



75,353




79,578




80,371




79,411




76,496




314,713




310,556


Net occupancy and equipment



8,147




8,412




8,039




7,848




8,140




32,446




32,184


Credit and debit card, data processing and software amortization



9,716




9,516




9,246




8,849




9,050




37,327




35,104


Regulatory assessments and FDIC insurance



2,873




2,807




2,851




2,850




2,801




11,381




10,638


Core deposit intangibles amortization



2,558




2,577




2,581




2,620




2,855




10,336




11,551


Depreciation



4,438




4,436




4,539




4,547




4,518




17,960




18,095


Communications



3,506




3,374




3,206




2,919




3,134




13,005




12,028


Other real estate expense



154




198




195




214




24




761




496


Net loss (gain) on sale or write-down of other real estate



(63)




(213)




14




(621)




2




(883)




(2,720)


Merger related expenses



272
















272





Other noninterest expense



12,290




11,529




11,836




11,213




12,518




46,868




45,688


Total noninterest expense



119,244




122,214




122,878




119,850




119,538




484,186




473,620


Income before income taxes



174,617




173,153




163,187




155,216




160,979




666,173




659,654


Provision for income taxes



36,737




37,333




34,697




32,890




34,192




141,657




140,357


Net income available to common shareholders


$

137,880



$

135,820



$

128,490



$

122,326



$

126,787



$

524,516



$

519,297




(C)

Interest income on securities was reduced by net premium amortization of $8,703, $9,947, $11,450, $12,857 and $16,006 for the three months ended December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively, and $42,957 and $58,427 for the years ended December 31, 2022 and December 31, 2021, respectively.

 

Prosperity Bancshares, Inc. ®

Financial Highlights (Unaudited)

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




Three Months Ended



Year-to-Date





Dec 31, 2022



Sep 30, 2022



Jun 30, 2022



Mar 31, 2022



Dec 31, 2021



Dec 31, 2022



Dec 31, 2021


























Profitability























Net income (D) (E)


$

137,880



$

135,820



$

128,490



$

122,326



$

126,787



$

524,516



$

519,297


























Basic earnings per share


$

1.51



$

1.49



$

1.40



$

1.33



$

1.38



$

5.73



$

5.60



Diluted earnings per share


$

1.51



$

1.49



$

1.40



$

1.33



$

1.38



$

5.73



$

5.60


























Return on average assets (F)



1.47

%



1.45

%



1.36

%



1.29

%



1.37

%



1.39

%



1.44

%


Return on average common equity (F)



8.26

%



8.24

%



7.84

%



7.54

%



7.91

%



7.97

%



8.21

%


Return on average tangible common equity (F) (G)



16.26

%



16.44

%



15.73

%



15.30

%



16.26

%



15.94

%



17.18

%


Tax equivalent net interest margin (D) (E) (H)



3.05

%



3.11

%



2.97

%



2.88

%



2.97

%



3.00

%



3.14

%


Efficiency ratio (G) (I)



40.87

%



41.38

%



43.12

%



43.68

%



42.79

%



42.23

%



41.83

%

























Liquidity and Capital Ratios























Equity to assets



17.78

%



17.47

%



17.44

%



17.00

%



16.99

%



17.78

%



16.99

%


Common equity tier 1 capital



15.88

%

(J)


15.44

%

(J)


15.26

%

(J)


15.32

%

(J)


15.10

%



15.88

%

(J)


15.10

%


Tier 1 risk-based capital



15.88

%

(J)


15.44

%

(J)


15.26

%

(J)


15.32

%

(J)


15.10

%



15.88

%

(J)


15.10

%


Total risk-based capital



16.51

%

(J)


16.09

%

(J)


15.91

%

(J)


15.99

%

(J)


15.45

%



16.51

%

(J)


15.45

%


Tier 1 leverage capital



10.16

%

(J)


9.94

%

(J)


9.58

%

(J)


9.44

%

(J)


9.62

%



10.16

%

(J)


9.62

%


Period end tangible equity to period end tangible assets (G)



9.93

%



9.62

%



9.48

%



9.19

%



9.07

%



9.93

%



9.07

%

























Other Data























Weighted-average shares used in computing earnings per common share























Basic



91,287




91,209




91,772




92,161




92,162




91,604




92,657



Diluted



91,287




91,209




91,772




92,161




92,162




91,604




92,657



Period end shares outstanding



91,314




91,210




91,196




92,160




92,170




91,314




92,170



Cash dividends paid per common share


$

0.55



$

0.52



$

0.52



$

0.52



$

0.52



$

2.11



$

1.99



Book value per common share


$

73.37



$

72.49



$

71.51



$

70.58



$

69.73



$

73.37



$

69.73



Tangible book value per common share (G)


$

37.41



$

36.47



$

35.46



$

34.87



$

34.00



$

37.41



$

34.00


























Common Stock Market Price























High


$

76.32



$

77.93



$

73.50



$

80.46



$

78.67



$

80.46



$

83.02



Low


$

66.71



$

65.37



$

64.69



$

69.08



$

68.53



$

64.69



$

64.40



Period end closing price


$

72.68



$

66.68



$

68.27



$

69.38



$

72.35



$

72.68



$

72.35



Employees – FTE (excluding overtime)



3,633




3,592




3,576




3,595




3,704




3,633




3,704



Number of banking centers



272




272




272




272




273




272




273




(D) Includes purchase accounting adjustments for the periods presented as follows:


Three Months Ended


Year-to-Date


Dec 31,

2022


Sep 30,

2022


Jun 30,

2022


Mar 31,

2022


Dec 31,

2021


Dec 31,

2022


Dec 31,

2021

Loan discount accretion














ASC 310-20

$603


$912


$(265)


$4,674


$4,635


$5,924


$31,440

ASC 310-30

$310


$322


$324


$521


$731


$1,477


$7,838

Securities net amortization

$12


$40


$12


$52


$139


$116


$557

Time deposits amortization

$59


$68


$84


$100


$127


$311


$1,162



(E)

Using effective tax rate of 21.0%, 21.6%, 21.3%, 21.2% and 21.2% for the three months ended December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively, and 21.3% for the years ended December 31, 2022 and December 31, 2021.

(F)

Interim periods annualized.

(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 to the nearest GAAP financial measure.

(H)

Net interest margin for all periods presented is based on average balances on an actual 365-day basis.

(I)

Calculated by dividing total noninterest expense, excluding credit loss provisions, by net interest income plus noninterest income, excluding net gains and losses on the sale or write down of assets and securities. Additionally, taxes are not part of this calculation.

(J)

Beginning on January 1, 2022, the cumulative amount of the current expected credit loss ("CECL") transition adjustments is being phased in over a three-year transition period.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)

 


YIELD ANALYSIS


Three Months Ended





Dec 31, 2022


Sep 30, 2022


Dec 31, 2021





Average
Balance



Interest
Earned/
Interest
Paid



Average
Yield/
Rate

(K)

Average
Balance



Interest
Earned/
Interest
Paid



Average
Yield/
Rate

(K)

Average
Balance



Interest
Earned/
Interest
Paid



Average
Yield/
Rate


(K)

Interest-earning assets:



























Loans held for sale


$

1,758



$

27



6.09 %


$

4,136



$

57



5.47 %


$

8,794



$

71



3.20 %



Loans held for investment



17,818,769




223,768



4.98 %



17,275,866




199,417



4.58 %



16,830,163




192,200



4.53 %



Loans held for investment - Warehouse Purchase Program



747,007




11,331



6.02 %



938,589




10,794



4.56 %



1,772,971




13,938



3.12 %



Total Loans



18,567,534




235,126



5.02 %



18,218,591




210,268



4.58 %



18,611,928




206,209



4.40 %



Investment securities



14,715,516




72,533



1.96 %

(L)


14,962,847




68,761



1.82 %

(L)


12,751,857




46,857



1.46 %


(L)

Federal funds sold and other earning assets



101,986




933



3.63 %



87,859




525



2.37 %



1,393,859




563



0.16 %



Total interest-earning assets



33,385,036




308,592



3.67 %



33,269,297




279,554



3.33 %



32,757,644




253,629



3.07 %



Allowance for credit losses on loans



(282,546)









(283,244)









(287,191)









Noninterest-earning assets



4,515,412









4,480,512









4,476,582









Total assets


$

37,617,902








$

37,466,565








$

36,947,035




































Interest-bearing liabilities:



























Interest-bearing demand deposits


$

5,843,672



$

3,224



0.22 %


$

6,155,511



$

2,345



0.15 %


$

6,196,283



$

2,187



0.14 %



Savings and money market deposits



9,805,024




27,929



1.13 %



10,172,986




9,479



0.37 %



10,286,650




3,817



0.15 %



Certificates and other time deposits



2,066,085




4,895



0.94 %



2,185,529




2,845



0.52 %



2,766,123




2,681



0.38 %



Other borrowings



1,465,533




14,682



3.97 %



577,828




3,719



2.55 %











Securities sold under repurchase agreements



441,405




1,725



1.55 %



473,584




487



0.41 %



432,981




184



0.17 %



Total interest-bearing liabilities



19,621,719




52,455



1.06 %

(M)


19,565,438




18,875



0.38 %

(M)


19,682,037




8,869



0.18 %


(M)




























Noninterest-bearing liabilities:



























Noninterest-bearing demand deposits



11,064,714









11,048,856









10,587,441









Allowance for credit losses on off-balance sheet credit exposures



29,947









29,947









29,947









Other liabilities



224,512









231,812









234,746









Total liabilities



30,940,892









30,876,053









30,534,171









Shareholders' equity



6,677,010









6,590,512









6,412,864









Total liabilities and shareholders' equity


$

37,617,902








$

37,466,565








$

36,947,035




































Net interest income and margin





$

256,137



3.04 %





$

260,679



3.11 %





$

244,760



2.96 %



Non-GAAP to GAAP reconciliation:



























Tax equivalent adjustment






440









458









457






Net interest income and margin
     (tax equivalent basis)





$

256,577



3.05 %





$

261,137



3.11 %





$

245,217



2.97 %







































(K)

Annualized and based on an actual 365-day basis.

(L)

Yield on securities was impacted by net premium amortization of $8,703, $9,947 and $16,006 for the three months ended December 31, 2022, September 30 and December 31, 2021, respectively.

(M)

Total cost of funds, including noninterest bearing deposits, was 0.68%, 0.24% and 0.12% for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)

 


YIELD ANALYSIS


Year-to-Date





Dec 31, 2022


Dec 31, 2021





Average
Balance



Interest
Earned/
Interest
Paid



Average
Yield/
Rate

(N)

Average
Balance



Interest
Earned/
Interest
Paid



Average
Yield/
Rate


(N)

Interest-earning assets:



















Loans held for sale


$

3,420



$

164



4.80 %


$

16,807



$

510



3.03 %



Loans held for investment



17,155,082




788,504



4.60 %



17,128,069




806,012



4.71 %



Loans held for investment - Warehouse Purchase Program



1,051,237




42,521



4.04 %



1,988,724




63,386



3.19 %



Total loans



18,209,739




831,189



4.56 %



19,133,600




869,908



4.55 %



Investment securities



14,613,799




260,416



1.78 %

(O)


11,328,903




175,459



1.55 %


(O)

Federal funds sold and other earning assets



709,270




3,230



0.46 %



1,212,698




1,556



0.13 %



Total interest-earning assets



33,532,808




1,094,835



3.26 %



31,675,201




1,046,923



3.31 %



Allowance for credit losses on loans



(283,997)









(302,381)









Noninterest-earning assets



4,475,434









4,602,458









Total assets


$

37,724,245








$

35,975,278




























Interest-bearing liabilities:



















Interest-bearing demand deposits


$

6,299,924



$

10,175



0.16 %


$

6,169,864



$

17,215



0.28 %



Savings and money market deposits



10,384,178




45,907



0.44 %



9,883,549




19,582



0.20 %



Certificates and other time deposits



2,322,754




12,030



0.52 %



2,917,976




16,116



0.55 %



Other borrowings



543,107




18,851



3.47 %











Securities sold under repurchase agreements



457,553




2,641



0.58 %



410,747




702



0.17 %



Total interest-bearing liabilities



20,007,516




89,604



0.45 %

(P)


19,382,136




53,615



0.28 %


(P)




















Noninterest-bearing liabilities:



















Noninterest-bearing demand deposits



10,903,539









10,036,519









Allowance for credit losses on off-balance sheet credit exposures



29,947









29,947









Other liabilities



204,574









204,522









Total liabilities



31,145,576









29,653,124









Shareholders' equity



6,578,669









6,322,154









Total liabilities and shareholders' equity



37,724,245








$

35,975,278




























Net interest income and margin





$

1,005,231



3.00 %





$

993,308



3.14 %



Non-GAAP to GAAP reconciliation:



















Tax equivalent adjustment






1,815









2,229






Net interest income and margin (tax equivalent basis)





$

1,007,046



3.00 %





$

995,537



3.14 %





























(N)

Annualized and based on an actual 365-day basis.

(O)

Yield on securities was impacted by net premium amortization of $42,957 and $58,427 for the years ended December 31, 2022 and 2021, respectively.

(P)

Total cost of funds, including noninterest bearing deposits, was 0.29% and 0.18% for the years ended December 31, 2022 and 2021, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)



Three Months Ended



Dec 31, 2022



Sep 30, 2022



Jun 30, 2022



Mar 31, 2022



Dec 31, 2021


YIELD TREND (Q)






























Interest-Earning Assets:















Loans held for sale


6.09

%



5.47

%



5.02

%



3.52

%



3.20

%

Loans held for investment


4.98

%



4.58

%



4.35

%



4.44

%



4.53

%

Loans held for investment - Warehouse Purchase Program


6.02

%



4.56

%



3.33

%



3.18

%



3.12

%

Total loans


5.02

%



4.58

%



4.28

%



4.35

%



4.40

%

Investment securities (R)


1.96

%



1.82

%



1.72

%



1.62

%



1.46

%

Federal funds sold and other earning assets


3.63

%



2.37

%



0.69

%



0.16

%



0.16

%

Total interest-earning assets


3.67

%



3.33

%



3.08

%



2.98

%



3.07

%
















Interest-Bearing Liabilities:















Interest-bearing demand deposits


0.22

%



0.15

%



0.13

%



0.15

%



0.14

%

Savings and money market deposits


1.13

%



0.37

%



0.17

%



0.15

%



0.15

%

Certificates and other time deposits


0.94

%



0.52

%



0.34

%



0.35

%



0.38

%

Other borrowings


3.97

%



2.55

%



1.60

%







Securities sold under repurchase agreements


1.55

%



0.41

%



0.21

%



0.17

%



0.17

%

Total interest-bearing liabilities


1.06

%



0.38

%



0.19

%



0.17

%



0.18

%
















Net Interest Margin


3.04

%



3.11

%



2.97

%



2.87

%



2.96

%

Net Interest Margin (tax equivalent)


3.05

%



3.11

%



2.97

%



2.88

%



2.97

%



(Q)

Annualized and based on average balances on an actual 365-day basis.

(R)

Yield on securities was impacted by net premium amortization of $8,703, $9,947, $11,450, $12,857 and $16,006 for the three months ended December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)




Three Months Ended




Dec 31, 2022



Sep 30, 2022



Jun 30, 2022



Mar 31, 2022



Dec 31, 2021


Balance Sheet Averages
















Loans held for sale


$

1,758



$

4,136



$

3,199



$

4,611



$

8,794


Loans held for investment



17,818,769




17,275,866




16,799,609




16,712,690




16,830,163


Loans held for investment - Warehouse Purchase Program



747,007




938,589




1,257,521




1,268,715




1,772,971


Total Loans



18,567,534




18,218,591




18,060,329




17,986,016




18,611,928


















Investment securities



14,715,516




14,962,847




14,989,666




13,772,974




12,751,857


Federal funds sold and other earning assets



101,986




87,859




540,907




2,135,503




1,393,859


Total interest-earning assets



33,385,036




33,269,297




33,590,902




33,894,493




32,757,644


Allowance for credit losses on loans



(282,546)




(283,244)




(284,550)




(285,692)




(287,191)


Cash and due from banks



306,235




302,479




309,223




326,552




329,406


Goodwill



3,231,637




3,231,637




3,231,637




3,231,637




3,231,637


Core deposit intangibles, net



52,591




55,158




57,728




60,346




63,091


Other real estate



2,075




1,652




1,639




1,893




321


Fixed assets, net



338,572




336,657




336,242




327,297




321,524


Other assets



584,302




552,929




511,591




510,944




530,603


Total assets


$

37,617,902



$

37,466,565



$

37,754,412



$

38,067,470



$

36,947,035


















Noninterest-bearing deposits


$

11,064,714



$

11,048,856



$

10,855,802



$

10,636,624



$

10,587,441


Interest-bearing demand deposits



5,843,672




6,155,511




6,437,614




6,775,114




6,196,283


Savings and money market deposits



9,805,024




10,172,986




10,702,273




10,870,461




10,286,650


Certificates and other time deposits



2,066,085




2,185,529




2,409,663




2,637,529




2,766,123


Total deposits



28,779,495




29,562,882




30,405,352




30,919,728




29,836,497


Other borrowings



1,465,533




577,828




112,582








Securities sold under repurchase agreements



441,405




473,584




463,108




452,054




432,981


Allowance for credit losses on off-balance sheet credit exposures



29,947




29,947




29,947




29,947




29,947


Other liabilities



224,512




231,812




186,344




176,360




234,746


Shareholders' equity



6,677,010




6,590,512




6,557,079




6,489,381




6,412,864


Total liabilities and equity


$

37,617,902



$

37,466,565



$

37,754,412



$

38,067,470



$

36,947,035


 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)




Dec 31, 2022


Sep 30, 2022


Jun 30, 2022


Mar 31, 2022


Dec 31, 2021

Period End Balances
































Loan Portfolio
















Commercial and industrial


$2,159,057

11.5 %


$2,188,029

11.8 %


$2,155,727

11.8 %


$2,007,783

11.1 %


$2,050,631

11.0 %

Warehouse purchase program


740,620

3.9 %


922,764

5.0 %


1,137,623

6.2 %


1,344,541

7.4 %


1,775,699

9.5 %

Construction, land development and other land loans


2,805,438

14.9 %


2,659,552

14.4 %


2,460,526

13.5 %


2,327,837

12.9 %


2,299,715

12.4 %

1-4 family residential


5,774,814

30.6 %


5,447,993

29.4 %


5,156,200

28.3 %


4,970,620

27.5 %


4,860,419

26.1 %

Home equity


966,410

5.1 %


943,197

5.1 %


932,725

5.1 %


870,130

4.8 %


808,289

4.4 %

Commercial real estate (includes multi-family residential)


4,986,211

26.5 %


4,966,243

26.8 %


4,967,662

27.3 %


5,150,555

28.5 %


5,251,368

28.2 %

Agriculture (includes farmland)


688,033

3.6 %


670,603

3.6 %


665,960

3.7 %


617,418

3.4 %


620,338

3.3 %

Consumer and other


283,559

1.5 %


288,834

1.6 %


274,532

1.5 %


246,433

1.4 %


288,496

1.6 %

Energy


429,479

2.3 %


410,069

2.2 %


430,339

2.4 %


445,949

2.5 %


491,305

2.6 %

Paycheck Protection Program


6,206

0.1 %


9,004

0.1 %


27,550

0.2 %


86,258

0.5 %


169,884

0.9 %

Total loans


$18,839,827



$18,506,288



$18,208,844



$18,067,524



$18,616,144


















Deposit Types
















Noninterest-bearing DDA


$10,915,448

38.2 %


$11,154,143

38.1 %


$11,032,184

36.9 %


$10,776,652

34.7 %


$10,750,034

34.9 %

Interest-bearing DDA


5,986,203

21.0 %


6,027,157

20.6 %


6,331,314

21.2 %


6,603,934

21.2 %


6,741,092

21.9 %

Money market


6,164,025

21.6 %


6,438,787

22.0 %


6,646,726

22.3 %


7,603,329

24.5 %


7,178,904

23.3 %

Savings


3,471,970

12.2 %


3,563,776

12.1 %


3,597,820

12.0 %


3,543,300

11.4 %


3,401,727

11.1 %

Certificates and other time deposits


1,995,885

7.0 %


2,116,232

7.2 %


2,257,574

7.6 %


2,541,095

8.2 %


2,700,005

8.8 %

Total deposits


$28,533,531



$29,300,095



$29,865,618



$31,068,310



$30,771,762


















Loan to Deposit Ratio


66.0 %



63.2 %



61.0 %



58.2 %



60.5 %


 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)

 


Construction Loans



Dec 31, 2022



Sep 30, 2022



Jun 30, 2022



Mar 31, 2022



Dec 31, 2021




























Single family residential construction


$

1,097,176



39.1

%


$

1,004,000



37.8

%


$

911,443



37.0

%


$

816,072



35.0

%


$

728,393



31.7

%

Land development



181,747



6.5

%



145,303



5.5

%



133,398



5.4

%



103,853



4.5

%



99,099



4.3

%

Raw land



332,603



11.9

%



343,066



12.9

%



316,750



12.9

%



310,987



13.4

%



322,673



14.0

%

Residential lots



243,942



8.7

%



237,714



8.9

%



223,703



9.1

%



212,029



9.1

%



206,978



9.0

%

Commercial lots



177,378



6.3

%



181,679



6.8

%



184,794



7.5

%



183,760



7.9

%



184,901



8.0

%

Commercial construction and other



772,606



27.5

%



747,803



28.1

%



690,453



28.1

%



701,148



30.1

%



757,687



33.0

%

Net unaccreted discount



(14)






(13)






(15)






(12)






(16)




Total construction loans


$

2,805,438





$

2,659,552





$

2,460,526





$

2,327,837





$

2,299,715






























 

Non-Owner Occupied Commercial Real Estate Loans by Metropolitan Statistical Area (MSA) as of December 31, 2022



Houston



Dallas



Austin



OK City



Tulsa



Other (S)



Total



Collateral Type






















Shopping center/retail

$

404,150



$

242,437



$

49,492



$

18,421



$

20,660



$

279,922



$

1,015,082



Commercial and industrial buildings


161,356




76,607




20,912




32,365




14,092




207,638




512,970



Office buildings


90,430




258,544




32,174




68,116




4,289




65,188




518,741



Medical buildings


76,168




18,964




3,795




26,252




37,882




55,653




218,714



Apartment buildings


128,858




58,075




13,579




14,615




8,174




151,494




374,795



Hotel


108,718




68,012




34,065




28,058







129,254




368,107



Other


74,426




79,556




43,939




8,841




1,812




76,637




285,211



Total

$

1,044,106



$

802,195



$

197,956



$

196,668



$

86,909



$

965,786



$

3,293,620


(T)

 

Acquired Loans


Non-PCD Loans



PCD Loans



Total Acquired Loans



Balance at
Acquisition
Date



Balance at
Sep 30,
2022



Balance at
Dec 31,
2022



Balance at
Acquisition
Date



Balance at
Sep 30,
2022



Balance at
Dec 31,
2022



Balance at
Acquisition
Date



Balance at
Sep 30,
2022



Balance at
Dec 31,
2022


Loan marks:



























Acquired banks (U)

$

345,599



$

2,836



$

2,233



$

320,052



$

3,671



$

3,361



$

665,651



$

6,507



$

5,594





























Acquired portfolio loan
balances:



























Acquired banks (U)


12,286,159




1,410,748




1,319,507




689,573




66,613




63,383




12,975,732


 (V)


1,477,361




1,382,890





























Acquired portfolio loan
balances less loan marks

$

11,940,560



$

1,407,912



$

1,317,274



$

369,521



$

62,942



$

60,022



$

12,310,081



$

1,470,854



$

1,377,296




(S)

Includes other MSA and non-MSA regions.

(T)

Represents a portion of total commercial real estate loans of $4.986 billion as of December 31, 2022.

(U)

Includes Bank Arlington, American State Bank, Community National Bank, First Federal Bank Texas, Coppermark Bank, First Victoria
National Bank, The F&M Bank & Trust Company, Tradition Bank and LegacyTexas Bank.

(V)

Actual principal balances acquired.

  

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)



Three Months Ended



Year-to-Date



Dec 31,
2022



Sep 30,
2022



Jun 30,
2022



Mar 31,
2022



Dec 31,
2021



Dec 31,
2022



Dec 31,
2021


Asset Quality





















Nonaccrual loans

$

19,614



$

17,729



$

20,619



$

21,765



$

26,269



$

19,614



$

26,269


Accruing loans 90 or more days past due


5,917




378




13




3,695




887




5,917




887


Total nonperforming loans


25,531




18,107




20,632




25,460




27,156




25,531




27,156


Repossessed assets





13







19




310







310


Other real estate


1,963




1,758




1,555




1,705




622




1,963




622


Total nonperforming assets

$

27,494



$

19,878



$

22,187



$

27,184



$

28,088



$

27,494



$

28,088























Nonperforming assets:





















Commercial and industrial (includes energy)

$

3,921



$

2,376



$

2,964



$

4,403



$

6,150



$

3,921



$

6,150


Construction, land development and other land loans


6,166




1,712




1,866




1,761




1,841




6,166




1,841


1-4 family residential (includes home equity)


15,326




13,986




14,335




11,899




11,990




15,326




11,990


Commercial real estate (includes multi-family residential)


1,649




1,364




2,448




7,685




7,276




1,649




7,276


Agriculture (includes farmland)


421




434




567




1,402




816




421




816


Consumer and other


11




6




7




34




15




11




15


Total

$

27,494



$

19,878



$

22,187



$

27,184



$

28,088



$

27,494



$

28,088


Number of loans/properties


170




150




160




147




157




170




157


Allowance for credit losses on loans

$

281,576



$

282,179



$

283,959



$

285,163



$

286,380



$

281,576



$

286,380























Net charge-offs (recoveries):





















Commercial and industrial (includes energy)

$

(643)



$

(15)



$

(197)



$

14



$

177



$

(841)



$

9,053


Construction, land development and other land loans


(5)




(4)




(5)




430




(162)




416




(276)


1-4 family residential (includes home equity)


(55)




(202)




(32)




87




(72)




(202)




35


Commercial real estate (includes multi-family residential)


74




757




395




(366)




(10)




860




18,276


Agriculture (includes farmland)


(14)




119




(9)




(103)




(102)




(7)




(141)


Consumer and other


1,246




1,125




1,052




1,155




976




4,578




2,741


Total

$

603



$

1,780



$

1,204



$

1,217



$

807



$

4,804



$

29,688























Asset Quality Ratios





















Nonperforming assets to average interest-earning assets


0.08

%



0.06

%



0.07

%



0.08

%



0.09

%



0.08

%



0.09

%

Nonperforming assets to loans and other real estate