Prosperity Bancshares, Inc.® Reports Third Quarter 2017 Earnings

|PR Newswire|About: PB

- Third quarter net income of $67.908 million

- Nonperforming assets remain low at 0.24% of third quarter average interest-earning assets

- Return (annualized) on third quarter average assets of 1.22%

- Returns (annualized) on third quarter average common equity of 7.20% and average tangible common equity of 14.83%‍(1)

- Loans increased 4.0% (annualized) as of September 30, 2017 (year-to-date)

- Increase in dividend of 5.9% to $0.36 per share for the fourth quarter 2017

PR Newswire

HOUSTON, Oct. 25, 2017 /PRNewswire/ -- Prosperity Bancshares, Inc.® (NYSE: PB), the parent company of Prosperity Bank® (collectively, "Prosperity"), reported net income for the quarter ended September 30, 2017 of $67.908 million or $0.98 per diluted common share. Additionally, nonperforming assets remain low at 0.24% of third quarter average interest-earning assets.

"Texas accounts for 8.8% of the U.S. GDP and 8.4% of the U.S. nonfarm employment.  It is the largest exporting state in the U.S. and is home to more than 50 Fortune 500 companies.  When a natural disaster such as Hurricane Harvey strikes several areas of the state, it can have a far-reaching impact," said David Zalman, Prosperity's Chairman and Chief Executive Officer. 

"Hurricane Harvey made landfall near Rockport, Texas on Friday, August 25 and continued to impact the Houston and Beaumont areas through much of the following week.   Within seven days after landfall, we had 91% of affected banking centers open (86 of 94) and today, every banking center except one is open for business," continued Zalman.

"Our lenders have visited with every loan relationship we have in the affected areas in excess of $1 million.  The vast majority of our customers affected had flood insurance and/or business interruption insurance.  We did however make a small provision this quarter given the increased risk on loan performance and the possibility of some adverse economic impact from the storm," added Zalman.

"During the first two quarters of  2017, we experienced approximately 5% annualized organic loan growth, however, given the distraction of the Hurricane and recovery process, organic loan growth for the third quarter was approximately 1.9% annualized.  Our fee income was also slightly impacted this quarter as we waived certain ATM, overdraft and late payment fees for customers in the affected areas," stated Zalman.

"We are pleased with our results for the third quarter considering the challenges in some of our areas.  The Federal Reserve Bank of Dallas expects that the fourth quarter will show a rebound in economic activity that will more than offset the economic decline in the third quarter.  We are excited about the opportunities we have for the fourth quarter," concluded Zalman.

Results of Operations for the Three Months Ended September 30, 2017

Net income was $67.908 million(2) for the three months ended September 30, 2017 compared with $68.651 million(3) for the same period in 2016. Net income per diluted common share was $0.98 for the three months ended September 30, 2017 compared with $0.99 for the same period in 2016. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended September 30, 2017 were 1.22%, 7.20% and 14.83%(1), respectively.  Prosperity's efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and taxes) was 41.92%(1) for the three months ended September 30, 2017.

Net interest income before provision for credit losses for the three months ended September 30, 2017 was $156.147 million compared with $154.064 million during the same period in 2016, an increase of $2.083 million or 1.4%. This change was primarily due to an increase in the average balance and yield on interest-earning assets, partially offset by an increase in the average rate on interest-bearing liabilities. Linked quarter net interest income before provision for credit losses increased $3.916 million or 2.6% to $156.147 million compared with $152.231 million during the three months ended June 30, 2017. This increase was primarily due to an increase in loan discount accretion of $3.415 million.

The net interest margin on a tax equivalent basis was 3.22% for the three months ended September 30, 2017 compared with 3.29% for the same period in 2016. This change was primarily due to an increase in the average rates on interest-bearing liabilities. On a linked quarter basis, the net interest margin was 3.22% compared with 3.14% for the three months ended June 30, 2017. This increase was primarily due to an increase in loan discount accretion.

Noninterest income was $28.809 million for the three months ended September 30, 2017 compared with $29.684 million for the same period in 2016, a decrease of $875 thousand or 2.9%. This change was primarily due to a decrease in mortgage income. On a linked quarter basis, noninterest income increased $1.029 million or 3.7% compared with the three months ended June 30, 2017. This change was primarily due to an increase in other noninterest income and NSF fees.

Noninterest expense was $77.509 million for the three months ended September 30, 2017 compared with $79.476 million for the same period in 2016, a decrease of $1.967 million or 2.5%. This change was primarily due to a decrease in amortization of core deposit intangibles and salaries and benefits. On a linked quarter basis, noninterest expense increased $1.067 million or 1.4% compared with the three months ended June 30, 2017. This increase was primarily due to an increase in salaries and benefits and other noninterest expense.

Results of Operations for the Nine Months Ended September 30, 2017

Net income was $205.027 million(4) for the nine months ended September 30, 2017 compared with $205.673 million(5) for the same period in 2016.  Net income per diluted common share was $2.95 for the nine months ended September 30, 2017 and 2016. Annualized returns on average assets, average common equity and average tangible common equity for the nine months ended September 30, 2017 were 1.22%, 7.34% and 15.34%(1), respectively.  Prosperity's efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and securities and taxes) was 42.42%(1) for the nine months ended September 30, 2017.

Net interest income before provision for credit losses for the nine months ended September 30, 2017 was $460.813 million compared with $478.788 million for the same period in 2016, a decrease of $17.975 million or 3.8%. This change was primarily due to a decrease in loan discount accretion of $14.308 million.

The net interest margin on a tax equivalent basis for the nine months ended September 30, 2017 was 3.18% compared with 3.38% for the same period in 2016. This change was primarily due to a decrease in loan discount accretion and an increase in the average rate on interest-bearing liabilities.

Noninterest income was $87.413 million for the nine months ended September 30, 2017 compared with $88.950 million for the same period in 2016, a decrease of $1.537 million or 1.7%. This change was primarily due to the net loss on sale of assets and a decrease in brokerage and mortgage income, partially offset by a gain on sale of securities and an increase in service charges on deposit accounts.

Noninterest expense was $232.013 million for the nine months ended September 30, 2017 compared with $239.239 million for the same period in 2016, a decrease of $7.226 million or 3.0%.  This change was primarily due to decreases in salaries and benefits, core deposit intangibles amortization and communications expense.










(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 $4.903 million, net of tax, primarily comprised of loan discount accretion of $7.886 million for the three months ended September 30, 2017.

(3)

Includes purchase accounting adjustments of $4.796 million, net of tax, primarily comprised of loan discount accretion of $7.620 million for the three months ended September 30, 2016.

(4)

Includes purchase accounting adjustments of $10.138 million, net of tax, primarily comprised of loan discount accretion of $17.110 million for the nine months ended September 30, 2017.

(5)

Includes purchase accounting adjustments of $19.220 million, net of tax, primarily comprised of loan discount accretion of $31.418 million for the nine months ended September 30, 2016.

Balance Sheet Information

At September 30, 2017, Prosperity had $22.143 billion in total assets, an increase of $739.219 million or 3.5%, compared with $21.404 billion at September 30, 2016.

Loans at September 30, 2017 were $9.911 billion, an increase of $362.888 million or 3.8%, compared with $9.548 billion at September 30, 2016. Linked quarter loans increased $47.183 million or 0.5% (1.9% annualized) from $9.864 billion at June 30, 2017.

As part of its commercial and industrial lending activities, Prosperity extends credit to oil and gas production and service 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 service loans are loans to companies that provide services for oil and gas production and exploration. At September 30, 2017, oil and gas loans totaled $291.827 million or 2.9% of total loans, of which $106.524 million were to production companies and $185.303 million were to service companies. This compares with total oil and gas loans of $308.951 million or 3.2% of total loans at September 30, 2016, of which $139.913 million were to production companies and $169.038 million were to service companies. At June 30, 2017, oil and gas loans totaled $287.815 million or 2.9% of total loans, of which $115.358 million were production loans and $172.457 million were service loans.

Deposits at September 30, 2017 were $16.907 billion, a decrease of $13.933 million or 0.1%, compared with $16.921 billion at September 30, 2016. Linked quarter deposits decreased $163.054 million or 1.0% from $17.071 billion at June 30, 2017.

Asset Quality

Nonperforming assets totaled $45.823 million or 0.24% of quarterly average interest-earning assets at September 30, 2017, compared with $60.166 million or 0.32% of quarterly average interest-earning assets at September 30, 2016, and $47.618 million or 0.24% of quarterly average interest-earning assets at June 30, 2017.

The allowance for credit losses was $86.812 million or 0.88% of total loans at September 30, 2017, $85.585 million or 0.90% of total loans at September 30, 2016 and $83.783 million or 0.85% of total loans at June 30, 2017.  Excluding loans acquired that are accounted for under FASB Accounting Standards Codification ("ASC") Topics 310-20 and 310-30, the allowance for credit losses was 0.95%(1) of remaining loans as of September 30, 2017, compared with 1.03%(1) at September 30, 2016 and 0.93%(1) at June 30, 2017.

The provision for credit losses was $6.900 million for the three months ended September 30, 2017 compared with $2.000 million for the three months ended September 30, 2016 and $2.750 million for the three months ended June 30, 2017.  The provision for credit losses was $12.325 million for the nine months ended September 30, 2017 compared with $22.000 million for the nine months ended September 30, 2016.

Net charge-offs were $3.871 million for the three months ended September 30, 2017 compared with $241 thousand for the three months ended September 30, 2016 and $3.062 million for the three months ended June 30, 2017. Net charge-offs for the third quarter of 2017 were primarily comprised of two commercial and industrial loans.  Net charge-offs were $10.839 million for the nine months ended September 30, 2017 compared with $17.799 million for the nine months ended September 30, 2016.

Dividend

Prosperity Bancshares, Inc. (PB) declared a fourth quarter cash dividend of $0.36 per share, to be paid on January 2, 2018 to all shareholders of record as of December 15, 2017, an increase of 5.9% compared with the third quarter 2017 dividend.

Hurricane Harvey

On August 25, 2017, Hurricane Harvey came ashore in Rockport, Texas impacting numerous communities along the Texas Gulf coast. Prosperity Bank operates 94 banking centers in the Houston and South Texas areas, which include Beaumont, Corpus Christi and Victoria. All except one of those banking centers are currently operational. As of September 30, 2017, we have experienced manageable financial impact related to Hurricane Harvey.

Conference Call

Prosperity's management team will host a conference call on Wednesday, October 25, 2017 at 10:30 a.m. Eastern Time (9:30 a.m. Central Time) to discuss Prosperity's third quarter 2017 earnings. Individuals and investment professionals may participate in the call by dialing 877-883-0383. The elite entry number is 4077605.

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 & Calls" from the drop-down menu on the Investor Relations tab and following the instructions.

Non-GAAP Financial Measures

Prosperity's management uses certain non-GAAP financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity, tangible equity to tangible assets ratio and the efficiency ratio, excluding net gains and losses on the sale of assets and securities.  Further, as a result of acquisitions and the related purchase accounting adjustments, Prosperity uses certain non-GAAP measures and ratios that exclude the impact of these items to evaluate its allowance for credit losses to total loans (excluding acquired loans accounted for under ASC Topics 310-20, "Receivables-Nonrefundable Fees and Other Costs" and 310-30, "Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality").  Prosperity believes these non-GAAP financial measures provide information useful to investors in understanding Prosperity's financial results and that 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 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 September 30, 2017, Prosperity Bancshares, Inc. ® is a $22.143 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 www.prosperitybankusa.com, Retail Brokerage Services, Credit Cards, MasterMoney Debit Cards, 24 hour voice response banking, Trust and Wealth Management, Mortgage Services, Cash Management and Mobile Banking.

As of September 30, 2017, Prosperity operated 243 full-service banking locations: 65 in the Houston area, including The Woodlands; 29 in the South Texas area including Corpus Christi and Victoria; 34 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.

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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. 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 are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperity's control, which may cause actual results to differ materially from those expressed or implied by the forward-looking statements.  These risks and uncertainties include but are not limited to whether Prosperity can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks; continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives.  Other risks include, but are not limited to: the possibility that credit quality could deteriorate; actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); a deterioration or downgrade in the credit quality and credit agency ratings of the securities in Prosperity's securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate, interest rate and commodity price fluctuations; and weather.  These and various other factors are discussed in Prosperity Bancshares' Annual Report on Form 10-K for the year ended December 31, 2016 and other reports and statements Prosperity Bancshares has filed with the SEC. Copies of the SEC filings for Prosperity Bancshares may be downloaded from the Internet at no charge from http://www.prosperitybankusa.com.

 

Bryan/College Station Area -


Fort Worth -


Waugh Drive


Taft

Bryan


Haltom City


Westheimer


Yoakum

Bryan-29th Street


Keller


West University


Yorktown

Bryan-East


Roanoke


Woodcreek



Bryan-North


Stockyards




West Texas Area -

Caldwell




Katy -


Abilene -

College Station


Other Dallas/Fort Worth Area


Cinco Ranch


Antilley Road

Crescent Point


Locations -


Katy-Spring Green


Barrow Street

Hearne


Arlington




Cypress Street

Huntsville


Azle


The Woodlands -


Judge Ely

Madisonville


Ennis


The Woodlands-College Park


Mockingbird

Navasota


Gainesville


The Woodlands-I-45



New Waverly


Glen Rose


The Woodlands-Research Forest


Lubbock -

Rock Prairie


Granbury




4th Street

Southwest Parkway


Mesquite


Other Houston Area


66th Street

Tower Point


Muenster


Locations -


82nd Street

Wellborn Road


Sanger


Angleton


86th Street



Waxahachie


Bay City


98th Street

Central Texas Area -


Weatherford


Beaumont


Avenue Q

Austin -




Cleveland


North University

Allandale


East Texas Area -


East Bernard


Texas Tech Student Union

Cedar Park


Athens


El Campo



Congress (CACOX)


Blooming Grove


Dayton


Midland -

Lakeway


Canton


Galveston


Wadley

Liberty Hill


Carthage


Groves


Wall Street

Northland


Corsicana


Hempstead



Oak Hill


Crockett


Hitchcock


Odessa -

Research Blvd


Eustace


Liberty


Grandview

Westlake


Gilmer


Magnolia


Grant



Grapeland


Magnolia Parkway


Kermit Highway

Other Central Texas Area


Gun Barrel City


Mont Belvieu


Parkway

Locations -


Jacksonville


Nederland



Bastrop


Kerens


Needville


Other West Texas Area

Canyon Lake


Longview


Rosenberg


Locations -

Dime Box


Mount Vernon


Shadow Creek


Big Spring

Dripping Springs


Palestine


Spring


Brownfield

Elgin


Rusk


Tomball


Brownwood

Flatonia


Seven Points


Waller


Cisco

Georgetown


Teague


West Columbia


Comanche

Gruene


Tyler-Beckham


Wharton


Early

Kingsland


Tyler-South Broadway


Winnie


Floydada

La Grange


Tyler-University


Wirt


Gorman

Lexington


Winnsboro




Levelland

New Braunfels




South Texas Area -


Littlefield

Pleasanton


Houston Area -


Corpus Christi -


Merkel

Round Rock


Houston -


Calallen


Plainview

San Antonio


Aldine


Carmel


San Angelo

Schulenburg


Alief


Northwest


Slaton

Seguin


Bellaire


Saratoga


Snyder

Smithville


Beltway


Timbergate



Thorndale


Clear Lake


Water Street


Oklahoma

Weimar


Copperfield




Central Oklahoma Area-



Cypress


Victoria -


Oklahoma City -

Dallas/Fort Worth Area -


Downtown


Victoria Main


23rd Street

Dallas -


Eastex


Victoria-Navarro


Expressway

Abrams Centre


Fairfield


Victoria-North


I-240

Balch Springs


First Colony




Memorial

Camp Wisdom


Fry Road


Other South Texas Area



Cedar Hill


Gessner


 Locations -


Other Central Oklahoma Area

DallasCentral Expressway


Gladebrook


Alice


 Locations -

Frisco


Grand Parkway


Aransas Pass


Edmond

Frisco-West


Heights


Beeville


Norman

Kiest


Highway 6 West


Colony Creek



McKinney


Little York


Cuero


Tulsa Area-

McKinney-Stonebridge


Medical Center


Edna


Tulsa -

Midway


Memorial Drive


Goliad


Garnett

Plano


Northside


Gonzales


Harvard

Preston Forest


Pasadena


Hallettsville


Memorial

Preston Road


Pecan Grove


Kingsville


Sheridan

Red Oak


Pin Oak


Mathis


S. Harvard

Sachse


River Oaks


Padre Island


Utica Tower

The Colony


Sugar Land


Palacios


Yale

Turtle Creek


SW Medical Center


Port Lavaca



Westmoreland


Tanglewood


Portland


Other Tulsa Area Locations -



The Plaza


Rockport


Owasso



Uptown


Sinton



 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(In thousands)




Sep 30, 2017



Jun 30, 2017



Mar 31, 2017



Dec 31, 2016



Sep 30, 2016


Balance Sheet Data (at period end)





















Loans


$

9,911,202



$

9,864,019



$

9,739,253



$

9,622,060



$

9,548,314


Investment securities(A)



9,410,522




9,582,195




9,854,120




9,726,086




8,988,021


Federal funds sold



1,007




757




945




1,178




630


Allowance for credit losses



(86,812)




(83,783)




(84,095)




(85,326)




(85,585)


Cash and due from banks



302,469




321,958




324,797




436,203




341,483


Goodwill



1,900,845




1,900,845




1,900,845




1,900,845




1,900,349


Core deposit intangibles, net



40,464




42,150




43,869




45,784




48,010


Other real estate owned



14,512




15,472




15,698




15,463




16,280


Fixed assets, net



256,011




256,511




257,558




262,083




270,386


Other assets



393,043




396,419




424,429




406,696




376,156


Total assets


$

22,143,263



$

22,296,543



$

22,477,419



$

22,331,072



$

21,404,044























Noninterest-bearing deposits


$

5,465,474



$

5,397,293



$

5,299,264



$

5,190,973



$

5,159,333


Interest-bearing deposits



11,442,002




11,673,237




11,736,308




12,116,329




11,762,076


Total deposits



16,907,476




17,070,530




17,035,572




17,307,302




16,921,409


Other borrowings



960,365




1,035,506




1,270,644




990,781




425,916


Securities sold under repurchase agreements



334,621




346,324




335,875




320,430




318,449


Other liabilities



159,443




107,995




146,246




70,248




143,458


Total liabilities



18,361,905




18,560,355




18,788,337




18,688,761




17,809,232


Shareholders' equity(B)



3,781,358




3,736,188




3,689,082




3,642,311




3,594,812


Total liabilities and equity


$

22,143,263



$

22,296,543



$

22,477,419



$

22,331,072



$

21,404,044




(A)

Includes $1,635, $2,871, $2,200, $2,171 and $2,310 in unrealized gains on available for sale securities for the quarterly periods ended September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, respectively.

(B)

Includes $1,063, $1,866, $1,430, $1,411 and $1,502 in after-tax unrealized gains on available for sale securities for the quarterly periods ended September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(In thousands)




Three Months Ended



Year-to-Date




Sep 30, 2017



Jun 30, 2017



Mar 31, 2017



Dec 31, 2016



Sep 30, 2016



Sep 30, 2017



Sep 30, 2016


Income Statement Data





























Interest income:





























Loans


$

121,567



$

114,975



$

111,710



$

115,993



$

116,247



$

348,252



$

359,066


Securities(C)



50,610




52,912




53,157




48,573




48,132




156,679




151,802


Federal funds sold and other earning assets



242




160




183




103




81




585




242


Total interest income



172,419




168,047




165,050




164,669




164,460




505,516




511,110































Interest expense:





























Deposits



12,376




11,441




9,908




9,478




9,396




33,725




29,647


Other borrowings



3,540




4,040




2,476




1,121




752




10,056




1,944


Securities sold under repurchase agreements



356




335




231




238




248




922




694


Junior subordinated debentures





















37


Total interest expense



16,272




15,816




12,615




10,837




10,396




44,703




32,322


Net interest income



156,147




152,231




152,435




153,832




154,064




460,813




478,788


Provision for credit losses



6,900




2,750




2,675




2,000




2,000




12,325




22,000


Net interest income after provision for credit losses



149,247




149,481




149,760




151,832




152,064




448,488




456,788































Noninterest income:





























Nonsufficient funds (NSF) fees



8,350




7,805




8,089




8,552




8,764




24,244




24,984


Credit card, debit card and ATM card income



6,075




6,186




5,953




5,902




5,903




18,214




17,659


Service charges on deposit accounts



5,251




5,405




5,421




4,934




4,698




16,077




13,898


Trust income



2,040




2,271




2,155




2,480




1,851




6,466




5,640


Mortgage income



854




1,107




1,266




1,690




2,143




3,227




5,386


Brokerage income



461




427




488




782




1,213




1,376




3,789


Bank owned life insurance income



1,366




1,364




1,353




1,390




1,417




4,083




4,273


Net gain (loss) on sale of assets



62




(3,783)




1,759




475




37




(1,962)




1,389


Gain on sale of securities






3,270













3,270





Other noninterest income



4,350




3,728




4,340




3,270




3,658




12,418




11,932


Total noninterest income



28,809




27,780




30,824




29,475




29,684




87,413




88,950































Noninterest expense:





























Salaries and benefits



47,866




47,343




48,444




51,231




48,328




143,653




146,666


Net occupancy and equipment



5,691




5,460




5,503




5,696




5,997




16,654




17,362


Credit and debit card, data processing and software amortization



4,506




4,216




4,085




4,249




4,207




12,807




12,801


Regulatory assessments and FDIC insurance



3,455




3,548




3,549




2,424




3,434




10,552




10,311


Core deposit intangibles amortization



1,686




1,719




1,915




2,226




2,418




5,320




6,974


Depreciation



3,050




3,051




3,103




3,170




3,289




9,204




9,924


Communications



2,618




2,664




2,702




2,771




2,870




7,984




8,790


Other real estate expense



110




128




95




378




44




333




136


Net (gain) loss on sale of other real estate



(140)




(71)




(10)




(44)




(3)




(221)




330


Other noninterest expense



8,667




8,384




8,676




7,047




8,892




25,727




25,945


Total noninterest expense



77,509




76,442




78,062




79,148




79,476




232,013




239,239


Income before income taxes



100,547




100,819




102,522




102,159




102,272




303,888




306,499


Provision for income taxes



32,639




32,265




33,957




33,366




33,621




98,861




100,826


Net income available to common shareholders


$

67,908



$

68,554



$

68,565



$

68,793



$

68,651



$

205,027



$

205,673




(C)

Interest income on securities was reduced by net premium amortization of $10,115, $9,403, $9,883, $11,502 and $11,312 for the three-month periods ended September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, respectively, and $29,401 and $31,972 for the nine-month periods ended September 30, 2017 and September 30, 2016, 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




Sep 30, 2017



Jun 30, 2017



Mar 31, 2017



Dec 31, 2016



Sep 30, 2016



Sep 30, 2017



Sep 30, 2016


Profitability





























Net income (D) (E)


$

67,908



$

68,554



$

68,565



$

68,793



$

68,651



$

205,027



$

205,673































Basic earnings per share


$

0.98



$

0.99



$

0.99



$

0.99



$

0.99



$

2.95



$

2.95


Diluted earnings per share


$

0.98



$

0.99



$

0.99



$

0.99



$

0.99



$

2.95



$

2.95































Return on average assets (F)



1.22

%



1.22

%



1.23

%



1.26

%



1.27

%



1.22

%



1.25

%

Return on average common equity (F)



7.20

%



7.36

%



7.45

%



7.58

%



7.66

%



7.34

%



7.74

%

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



14.83

%



15.39

%



15.82

%



16.33

%



16.79

%



15.34

%



17.17

%

Tax equivalent net interest margin (D) (H)



3.22

%



3.14

%



3.20

%



3.26

%



3.29

%



3.18

%



3.38

%

Efficiency ratio (G) (I)



41.92

%



42.34

%



43.01

%



43.29

%



43.26

%



42.42

%



42.24

%






























Liquidity and Capital Ratios





























Equity to assets



17.08

%



16.76

%



16.41

%



16.31

%



16.80

%



17.08

%



16.80

%

Common equity tier 1 capital



15.10

%



14.80

%



14.45

%



14.48

%



14.41

%



15.10

%



14.41

%

Tier 1 risk-based capital



15.10

%



14.80

%



14.45

%



14.48

%



14.41

%



15.10

%



14.41

%

Total risk-based capital



15.81

%



15.49

%



15.14

%



15.20

%



15.14

%



15.81

%



15.14

%

Tier 1 leverage capital



9.15

%



8.82

%



8.62

%



8.68

%



8.50

%



9.15

%



8.50

%

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



9.11

%



8.81

%



8.50

%



8.32

%



8.46

%



9.11

%



8.46

%






























Other Data





























Weighted-average shares used in computing earnings per common share





























Basic



69,485




69,487




69,480




69,482




69,478




69,484




69,738


Diluted



69,485




69,487




69,482




69,486




69,484




69,485




69,745


Period end shares outstanding



69,484




69,488




69,480




69,491




69,478




69,484




69,478


Cash dividends paid per common share


$

0.3400



$

0.3400



$

0.3400



$

0.3400



$

0.3000



$

1.0200



$

0.9000


Book value per common share


$

54.42



$

53.77



$

53.10



$

52.41



$

51.74



$

54.42



$

51.74


Tangible book value per common share (G)


$

26.48



$

25.81



$

25.11



$

24.40



$

23.70



$

26.48



$

23.70































Common Stock Market Price





























High


$

66.75



$

71.97



$

77.87



$

73.68



$

56.27



$

77.87



$

56.27


Low


$

55.84



$

61.29



$

65.34



$

52.81



$

45.94



$

55.84



$

33.57


Period end closing price


$

65.73



$

64.24



$

69.71



$

71.78



$

54.89



$

65.73



$

54.89


Employees – FTE



2,993




3,037




3,033




3,035




3,071




2,993




3,071


Number of banking centers



243




243




244




245




245




243




245


 



 (D)

Includes purchase accounting adjustments for the periods presented as follows:


Three Months Ended


Year-to-Date


Sep 30, 2017


Jun 30, 2017


Mar 31, 2017


Dec 31, 2016


Sep 30, 2016


Sep 30, 2017


Sep 30, 2016

Loan discount accretion














ASC 310-20

$6,361


$2,755


$3,270


$3,956


$5,296


$12,386


$17,792

ASC 310-30

$1,525


$1,716


$1,483


$3,596


$2,324


$4,724


$13,626

Securities amortization

$667


$745


$852


$950


$1,051


$2,264


$3,721

Time deposits amortization

$40


$39


$99


$232


$575


$178


$935


















(E)

Using effective tax rate of 32.5%, 32.0%, 33.1%, 32.7% and 32.9% for the three-month periods ended September 30, 2017,  June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, respectively and 32.5% and 32.9% for the nine-month periods ended September 30, 2017 and September 30, 2016, respectively.

(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.

(H)

Net interest margin for all periods presented is based on average balances on an actual 365 day or 366 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 of assets and securities.  Additionally, taxes are not part of this calculation.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)



YIELD ANALYSIS


Three Months Ended





Sep 30, 2017



Jun 30, 2017



Sep 30, 2016





Average

Balance



Interest

Earned/

Interest

Paid



Average

Yield/

Rate


(J)

Average

Balance



Interest

Earned/

Interest

Paid



Average

Yield/

Rate


(J)

Average

Balance



Interest

Earned/

Interest

Paid



Average

Yield/

Rate


(J)

Interest-Earning Assets:






































Loans


$

9,888,922



$

121,567




4.88%



$

9,797,793



$

114,975




4.71%



$

9,601,628



$

116,247




4.82%



Investment securities



9,526,215




50,610




2.11%


(K)


9,817,781




52,912




2.16%


(K)


9,203,253




48,132




2.08%


(K)

Federal funds sold and other earning assets



77,337




242




1.24%




84,497




160




0.76%




72,171




81




0.45%



Total interest-earning assets



19,492,474




172,419




3.51%




19,700,071




168,047




3.42%




18,877,052




164,460




3.47%



Allowance for credit losses



(84,047)












(84,100)












(84,476)











Noninterest-earning assets



2,801,852












2,838,242












2,804,773











Total assets


$

22,210,279











$

22,454,213











$

21,597,349

















































Interest-Bearing Liabilities:






































Interest-bearing demand deposits


$

3,601,116



$

3,003




0.33%



$

3,749,395



$

2,748




0.29%



$

3,858,821



$

2,280




0.24%



Savings and money market deposits



5,658,569




5,259




0.37%




5,520,346




4,827




0.35%




5,610,342




3,753




0.27%



Certificates and other time deposits



2,270,114




4,114




0.72%




2,296,425




3,866




0.68%




2,492,889




3,363




0.54%



Other borrowings



1,099,583




3,540




1.28%




1,460,238




4,040




1.11%




532,301




752




0.56%



Securities sold under repurchase agreements



344,177




356




0.41%




324,804




335




0.41%




331,254




248




0.30%



Total interest-bearing liabilities



12,973,559




16,272




0.50%


(L)


13,351,208




15,816




0.48%


(L)


12,825,607




10,396




0.32%


(L)







































Noninterest-bearing liabilities:






































Noninterest-bearing demand deposits



5,361,362












5,290,142












5,070,094











Other liabilities



102,046












87,074












118,881











Total liabilities



18,436,967












18,728,424












18,014,582











Shareholders' equity



3,773,312












3,725,789












3,582,767











Total liabilities and shareholders' equity


$

22,210,279











$

22,454,213











$

21,597,349

















































Net interest income and margin






$

156,147




3.18%







$

152,231




3.10%







$

154,064




3.25%



Non-GAAP to GAAP reconciliation:






































Tax equivalent adjustment







1,940












1,989












1,930







Net interest income and margin (tax equivalent basis)






$

158,087




3.22%







$

154,220




3.14%







$

155,994




3.29%





(J)

 Annualized and based on an actual 365 day or 366 day basis.

(K)

 Yield on securities was impacted by net premium amortization of $10,115, $9,403 and $11,312 for the three-month periods ended September 30, 2017, June 30, 2017 and September 30, 2016, respectively.

(L)

 Total cost of funds, including noninterest bearing deposits, was 0.35%, 0.34% and 0.23% for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

 (Dollars in thousands)



YIELD ANALYSIS


Year-to-Date





Sep 30, 2017



Sep 30, 2016





Average

Balance



Interest

Earned/

Interest

Paid



Average

Yield/

Rate


(M)

Average

Balance



Interest

Earned/

Interest

Paid



Average

Yield/

Rate


(M)

Interest-Earning Assets:


























Loans


$

9,777,432



$

348,252




4.76%



$

9,653,891



$

359,066




4.97%



Investment securities



9,735,912




156,679




2.15%


(N)


9,422,744




151,802




2.15%


(N)

Federal funds sold and other earning assets



80,651




585




0.97%




73,608




242




0.44%



Total interest-earning assets



19,593,995




505,516




3.45%




19,150,243




511,110




3.57%



Allowance for credit losses



(84,391)












(83,801)











Noninterest-earning assets



2,838,422












2,856,117











Total assets


$

22,348,026











$

21,922,559





































Interest-Bearing Liabilities:


























Interest-bearing demand deposits


$

3,826,963



$

8,338




0.29%



$

4,135,579



$

7,633




0.25%



Savings and money market deposits



5,572,534




13,673




0.33%




5,721,341




11,470




0.27%



Certificates and other time deposits



2,310,777




11,714




0.68%




2,529,353




10,544




0.56%



Other borrowings



1,227,652




10,056




1.10%




461,491




1,944




0.56%



Securities sold under repurchase agreements



325,606




922




0.38%




319,948




694




0.29%



Junior subordinated debentures











2,591




37




1.91%



Total interest-bearing liabilities



13,263,532




44,703




0.45%


(O)


13,170,303




32,322




0.33%


(O)



























Noninterest-bearing liabilities:


























Noninterest-bearing demand deposits



5,264,649












5,085,041











Other liabilities



93,463












122,076











Total liabilities



18,621,644












18,377,420











Shareholders' equity



3,726,382












3,545,139











Total liabilities and shareholders' equity


$

22,348,026











$

21,922,559





































Net interest income and margin






$

460,813




3.14%







$

478,788




3.34%



Non-GAAP to GAAP reconciliation:


























Tax equivalent adjustment







5,924












5,734







Net interest income and margin (tax equivalent basis)






$

466,737




3.18%







$

484,522




3.38%





(M)

Annualized and based on an actual 365 or 366 day basis.

(N)

Yield on securities was impacted by net premium amortization of $29,401 and $31,972 for the nine-month periods ended September 30, 2017 and 2016, respectively.

(O)

Total cost of funds, including noninterest bearing deposits, was 0.32% and 0.24% for the nine-month periods ended September 30, 2017 and 2016, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)



Three Months Ended



Sep 30, 2017



Jun 30, 2017



Mar 31, 2017



Dec 31, 2016



Sep 30, 2016


YIELD TREND (P)








































Interest-Earning Assets:




















Loans


4.88

%



4.71

%



4.70

%



4.83

%



4.82

%

Investment securities (Q)


2.11

%



2.16

%



2.18

%



2.07

%



2.08

%

Federal funds sold and other earning assets


1.24

%



0.76

%



0.92

%



0.39

%



0.45

%

Total interest-earning assets


3.51

%



3.42

%



3.42

%



3.45

%



3.47

%





















Interest-Bearing Liabilities:




















Interest-bearing demand deposits


0.33

%



0.29

%



0.25

%



0.23

%



0.24

%

Savings and money market deposits


0.37

%



0.35

%



0.26

%



0.26

%



0.27

%

Certificates and other time deposits


0.72

%



0.68

%



0.64

%



0.61

%



0.54

%

Other borrowings


1.28

%



1.11

%



0.89

%



0.63

%



0.56

%

Securities sold under repurchase agreements


0.41

%



0.41

%



0.31

%



0.30

%



0.30

%

Total interest-bearing liabilities


0.50

%



0.48

%



0.38

%



0.34

%



0.32

%





















Net Interest Margin


3.18

%



3.10

%



3.16

%



3.22

%



3.25

%

Net Interest Margin (tax equivalent)


3.22

%



3.14

%



3.20

%



3.26

%



3.29

%



(P) 

Annualized and based on average balances on an actual 365 day or 366 day basis.

(Q)

Yield on securities was impacted by net premium amortization of $10,115, $9,403, $9,883, $11,502 and $11,312 for the three-month periods ended September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)




Three Months Ended




Sep 30, 2017



Jun 30, 2017



Mar 31, 2017



Dec 31, 2016



Sep 30, 2016


Balance Sheet Averages





















Loans


$

9,888,922



$

9,797,793



$

9,642,877



$

9,557,712



$

9,601,628


Investment securities



9,526,215




9,817,781




9,867,491




9,338,903




9,203,253


Federal funds sold and other earning assets



77,337




84,497




80,150




106,214




72,171


Total interest-earning assets



19,492,474




19,700,071




19,590,518




19,002,829




18,877,052


Allowance for credit losses



(84,047)




(84,100)




(85,037)




(85,347)




(84,476)


Cash and due from banks



225,574




228,518




262,794




248,735




226,621


Goodwill



1,900,845




1,900,845




1,900,845




1,900,337




1,903,418


Core deposit intangibles, net



41,314




42,957




44,762




46,895




43,790


Other real estate



15,262




15,871




15,669




15,826




16,041


Fixed assets, net



256,809




257,229




260,716




267,952




272,058


Other assets



362,048




392,822




391,200




359,033




342,845


Total assets


$

22,210,279



$

22,454,213



$

22,381,467



$

21,756,260



$

21,597,349























Noninterest-bearing deposits


$

5,361,362



$

5,290,142



$

5,140,010



$

5,214,656



$

5,070,094


Interest-bearing demand deposits



3,601,116




3,749,395




4,136,260




3,861,952




3,858,821


Savings and money market deposits



5,658,569




5,520,346




5,537,355




5,471,109




5,610,342


Certificates and other time deposits



2,270,114




2,296,425




2,366,857




2,434,565




2,492,889


Total deposits



16,891,161




16,856,308




17,180,482




16,982,282




17,032,146


Other borrowings



1,099,583




1,460,238




1,123,396




712,126




532,301


Securities sold under repurchase agreements



344,177




324,804




307,433




318,367




331,254


Other liabilities



102,046




87,074




91,157




111,083




118,881


Shareholders' equity



3,773,312




3,725,789




3,678,999




3,632,402




3,582,767


Total liabilities and equity


$

22,210,279



$

22,454,213



$

22,381,467



$

21,756,260



$

21,597,349


 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)  




Sep 30, 2017



Jun 30, 2017



Mar 31, 2017



Dec 31, 2016



Sep 30, 2016


Period End Balances








































































Loan Portfolio




































Commercial and industrial


$

1,180,570



11.9

%


$

1,201,748



12.2

%


$

1,287,216



13.2

%


$

1,254,900



13.0

%


$

1,233,108



12.9

%

Construction, land development and other land loans



1,453,535



14.7

%



1,383,539



14.0

%



1,326,685



13.6

%



1,263,923



13.1

%



1,205,820



12.6

%

1-4 family residential



2,449,051



24.7

%



2,432,348



24.7

%



2,424,533



24.9

%



2,439,348



25.3

%



2,427,616



25.5

%

Home equity



284,076



2.9

%



283,729



2.9

%



281,298



2.9

%



278,483



2.9

%



279,836



2.9

%

Commercial real estate (includes multi-family residential)



3,295,001



33.2

%



3,309,227



33.5

%



3,226,978



33.1

%



3,162,109



32.9

%



3,158,569



33.1

%

Agriculture (includes farmland)



692,516



7.0

%



699,228



7.1

%



662,797



6.8

%



672,336



7.0

%



664,080



7.0

%

Consumer and other



264,626



2.7

%



266,385



2.7

%



262,301



2.7

%



266,422



2.8

%



270,334



2.8

%

Energy



291,827



2.9

%



287,815



2.9

%



267,445



2.8

%



284,539



3.0

%



308,951



3.2

%

Total loans


$

9,911,202






$

9,864,019






$

9,739,253






$

9,622,060






$

9,548,314









































Deposit Types




































Noninterest-bearing DDA


$

5,465,474



32.3

%


$

5,397,293



31.6

%


$

5,299,264



31.1

%


$

5,190,973



30.0

%


$

5,159,333



30.5

%

Interest-bearing DDA



3,645,754



21.6

%



3,702,910



21.7

%



3,845,061



22.6

%



4,215,671



24.3

%



3,749,018



22.1

%

Money market



3,273,110



19.4

%



3,451,803



20.2

%



3,370,055



19.8

%



3,368,599



19.5

%



3,468,639



20.5

%

Savings



2,264,959



13.4

%



2,240,126



13.1

%



2,189,822



12.8

%



2,125,854



12.3

%



2,074,169



12.3

%

Certificates and other time deposits



2,258,179



13.3

%



2,278,398



13.4

%



2,331,370



13.7

%



2,406,205



13.9

%



2,470,250



14.6

%

Total deposits


$

16,907,476






$

17,070,530






$

17,035,572






$

17,307,302






$

16,921,409









































Loan to Deposit Ratio



58.6

%






57.8

%






57.2

%






55.6

%






56.4

%








































 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)


Construction Loans



Sep 30, 2017



Jun 30, 2017



Mar 31, 2017



Dec 31, 2016



Sep 30, 2016






































Single family residential construction


$

386,891



26.6

%


$

410,164



29.6

%


$

411,553



30.9

%


$

396,794



31.3

%


$

390,397



32.3

%

Land development



77,202



5.3

%



79,641



5.8

%



83,475



6.3

%



76,275



6.0

%



77,789



6.4

%

Raw land



191,563



13.1

%



200,122



14.4

%



183,453



13.8

%



194,267



15.3

%



170,640



14.1

%

Residential lots



128,109



8.8

%



130,919



9.4

%



129,389



9.7

%



130,096



10.3

%



131,589



10.9

%

Commercial lots



113,692



7.8

%



83,104



6.0

%



84,705



6.4

%



75,625



6.0

%



84,862



7.0

%

Commercial construction and other



558,649



38.4

%



482,347



34.8

%



437,083



32.9

%



394,040



31.1

%



353,942



29.3

%

Net unaccreted discount



(2,571)







(2,758)







(2,973)







(3,174)







(3,399)





Total construction loans


$

1,453,535






$

1,383,539






$

1,326,685






$

1,263,923






$

1,205,820





 

Non-Owner Occupied Commercial Real Estate Loans by Metropolitan Statistical Area (MSA) as of September 30, 2017



Houston



Dallas



Austin



OK City



Tulsa



Other (R)



Total



Collateral Type





























Shopping center/retail

$

204,773



$

45,312



$

43,688



$

17,104



$

26,848



$

147,194



$

484,919



Commercial and industrial buildings


114,851




31,259




13,732




11,897




22,817




72,087




266,643



Office buildings


67,660




125,295




22,912




44,935




12,294




75,298




348,394



Medical buildings


54,878




8,884




45




12,058




7,984




68,686




152,535



Apartment buildings


23,697




12,144




17,957




20,987




5,570




81,590




161,945



Hotel


42,700




31,599




13,322




28,817







111,617




228,055



Other


46,830




7,911




14,407




11,903




4,670




58,803




144,524



Total

$

555,389



$

262,404



$

126,063



$

147,701



$

80,183



$

615,275



$

1,787,015


(S)

 

Acquired Loans




Acquired Loans Accounted for

Under ASC 310-20



Acquired Loans Accounted for

Under ASC 310-30



Total Loans Accounted for

Under ASC 310-20 and 310-30




Balance at

Acquisition

Date



Balance at

Jun 30, 2017



Balance at

Sep 30, 2017



Balance at

Acquisition

Date



Balance at

Jun 30, 2017



Balance at

Sep 30, 2017



Balance at

Acquisition

Date



Balance at

Jun 30, 2017



Balance at

Sep 30, 2017


Loan marks:





































Acquired banks (T)


$

229,080



$

29,359



$

22,997



$

142,128



$

18,580



$

17,040



$

371,208



$

47,939



$

40,037


Acquired portfolio loan balances:





































Acquired banks (T)



5,690,998




892,604




796,477




275,221




43,507




40,367




5,966,219


(U)


936,111




836,844


Acquired portfolio loan balances less loan marks


$

5,461,918



$

863,245



$

773,480



$

133,093



$

24,927



$

23,327



$

5,595,011



$

888,172



$

796,807




(R)

 Includes other MSA and non-MSA regions.

(S)

 Represents a portion of total commercial real estate loans of $3.295 billion as of September 30, 2017.

(T)

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

(U)

 Actual principal balances acquired.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)



Three Months Ended



Year-to-Date



Sep 30, 2017



Jun 30, 2017



Mar 31, 2017



Dec 31, 2016



Sep 30, 2016



Sep 30, 2017



Sep 30, 2016


Asset Quality




























Nonaccrual loans

$

26,267



$

30,517



$

24,360



$

31,642



$

43,451



$

26,267



$

43,451


Accruing loans 90 or more days past due


4,934




1,613




880




956




399




4,934




399


Total nonperforming loans


31,201




32,130




25,240




32,598




43,850




31,201




43,850


Repossessed assets


110




16




261




241




36




110




36


Other real estate


14,512




15,472




15,698




15,463




16,280




14,512




16,280


Total nonperforming assets

$

45,823



$

47,618



$

41,199



$

48,302



$

60,166



$

45,823



$

60,166






























Nonperforming assets:




























Commercial and industrial (includes energy)

$

22,241



$

25,628



$

18,743



$

24,537



$

26,848



$

22,241



$

26,848


Construction, land development and other land loans


847




1,572




1,461




1,766




1,711




847




1,711


1-4 family residential (includes home equity)


3,781




4,156




4,070




4,119




4,450




3,781




4,450


Commercial real estate (includes multi-family residential)


18,208




15,454




16,235




17,167




26,680




18,208




26,680


Agriculture (includes farmland)


635




676




534




542




248




635




248


Consumer and other


111




132




156




171




229




111




229


Total

$

45,823



$

47,618



$

41,199



$

48,302



$

60,166



$

45,823



$

60,166


Number of loans/properties


113




121




139




158




158




113




158


Allowance for credit losses at end of period

$

86,812



$

83,783



$

84,095



$

85,326



$

85,585



$

86,812



$

85,585






























Net charge-offs:




























Commercial and industrial (includes energy)

$

3,225



$

2,531



$

3,495



$

3,161



$

(107)



$

9,251



$

8,398


Construction, land development and other land loans


(2)




(60)




(65)




(1,922)




(368)




(127)




(579)


1-4 family residential (includes home equity)


 

12




95




(95)




(82)




48




12




Commercial real estate (includes multi-family residential)


(3)







133




41




(1)




130




255


Agriculture (includes farmland)





(29)




(65)




305




(45)




(94)




6,262


Consumer and other


639




525




503




756




714




1,667




3,463


Total

$

3,871



$

3,062



$

3,906



$

2,259



$

241



$

10,839



$

17,799






























Asset Quality Ratios




























Nonperforming assets to average interest-earning assets


0.24

%



0.24

%



0.21

%



0.25

%



0.32

%



0.23

%



0.31

%

Nonperforming assets to loans and other real estate


0.46

%



0.48

%



0.42

%



0.50

%



0.63

%



0.46

%



0.63

%

Net charge-offs to average loans (annualized)


0.16

%



0.13

%



0.16

%



0.09

%



0.01

%



0.15

%



0.25

%

Allowance for credit losses to total loans


0.88

%



0.85

%



0.86

%



0.89

%



0.90

%



0.88

%



0.90

%

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


0.95

%



0.93

%



0.96

%



1.00

%



1.03

%



0.95

%



1.03

%

 

Prosperity Bancshares, Inc.®

Notes to Selected Financial Data (Unaudited)

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


Consolidated Financial Highlights


NOTES TO SELECTED FINANCIAL DATA

Prosperity's management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity, the tangible equity to tangible assets ratio and the efficiency ratio, excluding net gains and losses on the sale of assets and securities, for internal planning and forecasting purposes. In addition, due to the application of purchase accounting, Prosperity uses certain non-GAAP measures and ratios that exclude the impact of these items to evaluate its allowance for credit losses to total loans (excluding acquired loans accounted for under ASC Topics 310-20 and 310-30). Prosperity has included information below relating to these non-GAAP financial measures for the applicable periods presented.




Three Months Ended



Year-to-Date




Sep 30, 2017



Jun 30, 2017



Mar 31, 2017



Dec 31, 2016



Sep 30, 2016



Sep 30, 2017



Sep 30, 2016


Reconciliation of return on average common equity to return on average tangible common equity:





























Net income


$

67,908



$

68,554



$

68,565



$

68,793



$

68,651



$

205,027



$

205,673


Average shareholders' equity


$

3,773,312



$

3,725,789



$

3,678,999



$

3,632,402



$

3,582,767



$

3,726,382



$

3,545,139


Less: Average goodwill and other intangible assets



(1,942,159)




(1,943,802)




(1,945,607)




(1,947,232)




(1,947,208)




(1,943,843)




(1,948,229)


Average tangible shareholders' equity


$

1,831,153



$

1,781,987



$

1,733,392



$

1,685,170



$

1,635,559



$

1,782,539



$

1,596,910


Return on average tangible common equity (F)



14.83

%



15.39

%



15.82

%



16.33

%



16.79

%



15.34

%



17.17

%






























Reconciliation of book value per share to tangible book value per share:





























Shareholders' equity


$

3,781,358



$

3,736,188



$

3,689,082



$

3,642,311



$

3,594,812



$

3,781,358



$

3,594,812


Less: Goodwill and other intangible assets



(1,941,309)




(1,942,995)




(1,944,714)




(1,946,629)




(1,948,359)




(1,941,309)




(1,948,359)


Tangible shareholders' equity


$

1,840,049



$

1,793,193



$

1,744,368



$

1,695,682



$

1,646,453



$

1,840,049



$

1,646,453































Period end shares outstanding



69,484




69,488




69,480




69,491




69,478




69,484




69,478


Tangible book value per share:


$

26.48



$

25.81



$

25.11



$

24.40



$

23.70



$

26.48



$

23.70































Reconciliation of equity to assets ratio to period end tangible equity to period end tangible assets ratio:





























Tangible shareholders' equity


$

1,840,049



$

1,793,193



$

1,744,368



$

1,695,682



$

1,646,453



$

1,840,049



$

1,646,453


Total assets


$

22,143,263



$

22,296,543



$

22,477,419



$

22,331,072



$

21,404,044



$

22,143,263



$

21,404,044


Less: Goodwill and other intangible assets



(1,941,309)




(1,942,995)




(1,944,714)




(1,946,629)




(1,948,359)




(1,941,309)




(1,948,359)


Tangible assets


$

20,201,954



$

20,353,548



$

20,532,705



$

20,384,443



$

19,455,685



$

20,201,954



$

19,455,685


Period end tangible equity to period end tangible assets ratio:



9.11

%



8.81

%



8.50

%



8.32

%



8.46

%



9.11

%



8.46

%






























Reconciliation of allowance for credit losses to total loans to allowance for credit losses to total loans, excluding acquired loans:





























Allowance for credit losses


$

86,812



$

83,783



$

84,095



$

85,326



$

85,585



$

86,812



$

85,585


Total loans


$

9,911,202



$

9,864,019



$

9,739,253



$

9,622,060



$

9,548,314



$

9,911,202



$

9,548,314


Less: Fair value of acquired loans (acquired portfolio loan balances less loan marks)


$

796,807



$

888,172



$

991,894



$

1,107,293



$

1,230,466



$

796,807



$

1,230,466


Total loans less acquired loans


$

9,114,395



$

8,975,847



$

8,747,359



$

8,514,767



$

8,317,848



$

9,114,395



$

8,317,848


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



0.95

%



0.93

%



0.96

%



1.00

%



1.03

%



0.95

%



1.03

%






























Reconciliation of efficiency ratio to efficiency ratio, excluding net gains and losses on the sale of assets and securities:





























Noninterest expense


$

77,509



$

76,442



$

78,062



$

79,148



$

79,476



$

232,013



$

239,239































Net interest income


$

156,147



$

152,231



$

152,435



$

153,832



$

154,064



$

460,813



$

478,788


Noninterest income



28,809




27,780




30,824




29,475




29,684




87,413




88,950


Less: net gain (loss) on sale of assets



62




(3,783)




1,759




475




37




(1,962)




1,389


Less: gain on sale of securities






3,270













3,270





Noninterest income, excluding net gains and losses on the sale of assets and securities



28,747




28,293




29,065




29,000




29,647




86,105




87,561


Total income, excluding net gains and losses on the sale of assets and securities


$

184,894



$

180,524



$

181,500



$

182,832



$

183,711



$

546,918



$

566,349


Efficiency ratio, excluding net gains and losses on the sale of assets and securities



41.92

%



42.34

%



43.01

%



43.29

%



43.26

%



42.42

%



42.24

%

 

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SOURCE Prosperity Bancshares, Inc.