425

Filed by Prosperity Bancshares, Inc.

Pursuant to Rule 425 under the Securities Act of 1933

Subject Companies: Community National Bank

Commission File No. 1-35388

East Texas Financial Services, Inc.

Commission File No. 333-179100

 

LOGO

 

PRESS RELEASE    For more information contact:
Prosperity Bancshares, Inc.®    Dan Rollins
Prosperity Bank Plaza    President and Chief Operating Officer
4295 San Felipe    281.269.7199
Houston, Texas 77027    dan.rollins@prosperitybanktx.com

FOR IMMEDIATE RELEASE

PROSPERITY BANCSHARES, INC.®

REPORTS STRONG

SECOND QUARTER EARNINGS

 

   

2Q12 Earnings Per Share of $0.78 (diluted) – an increase of 4.0%

 

   

2012 YTD loan growth of 4.9% (9.8% annualized)

 

   

2012 YTD deposit growth of 4.1% (8.3% annualized)

 

   

Tangible Common Equity Ratio of 7.08%

 

   

Non-Performing Assets remain low at 0.12% of 2Q12 Average Earning Assets

HOUSTON, July 27, 2012. Prosperity Bancshares, Inc.® (NYSE: PB), the parent company of Prosperity Bank®, reported net income for the quarter ended June 30, 2012 of $36.972 million or $0.78 per diluted common share, an increase in net income of $1.880 million or 5.4%, compared with $35.092 million or $0.75 per diluted common share for the same period in 2011.

“I am very pleased to be able to announce our outstanding results for the second quarter of 2012, particularly during the current economic environment when our industry is so challenged,” commented David Zalman, Chairman and Chief Executive Officer. “I am proud of our team of bankers and their ability to attract quality customers to our bank. In fact, over the past three months, our lenders produced more loans than we have ever produced during a calendar quarter in the history of our bank.”

“During the past quarter, we completed our merger with Billy and Cathy Allen’s team at The Bank Arlington. This additional location in the Dallas/Fort Worth CMSA will allow us to continue our growth in that market. On July 1, we completed our merger with American State Financial Corporation. W.R. Collier and his team provide us with an excellent platform for future growth in West Texas. We now have major operations in Lubbock, Midland/Odessa and Abilene and believe the American State Bank leadership team, including Mike Epps, Tony Whitehead, Mike Marshall and Gary Galbraith, brings vast knowledge of these markets to our team. Finally, we are excited about our recently announced, and fifth in the past year, merger agreement with Community National Bank in Bellaire, Texas, located in the heart of the Houston MSA. Randy Dobbs and John James along with their team will help us continue our growth in Houston,” continued Zalman.

“While we are excited about our recent mergers, our team remains focused on growing our bank by providing the highest level of service to our customers. We remain excited about our future and strive to continue building shareholder value,” concluded Zalman.

Prosperity’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity and the tangible equity to tangible assets ratio. Prosperity has included in this Earnings Release information relating to these non-GAAP financial measures for the applicable periods presented. Please refer to the “Notes to Selected Financial Data” at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures.

 

Page 1 of 21


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

For the three months ended June 30, 2012, net income was $36.972 million compared with $35.092 million for the same period in 2011. Net income per diluted common share was $0.78 for the three months ended June 30, 2012 and $0.75 for the same period in 2011. Returns on average assets, average common equity and average tangible common equity, each on an annualized basis, for the three months ended June 30, 2012 were 1.35%, 9.06% and 21.70%, respectively. Prosperity’s efficiency ratio (excluding net gains and losses on the sale of securities and assets) was 41.94% for the three months ended June 30, 2012.

Net interest income before provision for credit losses for the quarter ended June 30, 2012 increased 0.04% to $83.666 million compared with $83.630 million during the same period in 2011. The net interest margin on a tax equivalent basis decreased to 3.55% for the three months ended June 30, 2012 compared with 4.06% for the same period in 2011. On a linked quarter basis, the tax equivalent net interest margin decreased nine basis points to 3.55% for the three months ended June 30, 2012 from 3.64% reported for the three months ended March 31, 2012.

Non-interest income increased $126,000 or 0.9% to $13.656 million for the three months ended June 30, 2012 compared with $13.530 million during the same period in 2011. The change was due to an increase in debit card and ATM card income and a decrease in loss on sale of securities partially offset by a reduction in NSF fees.

Non-interest expense decreased $1.7 million or 4.1% to $40.788 million for the three months ended June 30, 2012 compared with $42.514 million during the same period in 2011. The decrease was primarily attributable to a reduction in regulatory assessments and FDIC insurance.

Average loans increased 7.8% or $283.096 million to $3.914 billion for the quarter ended June 30, 2012 compared with $3.631 billion for the same period of 2011. Linked quarter average loans increased 2.5% or $95.361 million from $3.819 billion at March 31, 2012.

Average deposits increased 8.8% or $683.271 million to $8.436 billion for the quarter ended June 30, 2012 compared with $7.752 billion for the same period of 2011. Linked quarter average deposits increased 0.09% or $7.160 million from $8.429 billion at March 31, 2012.

Loans at June 30, 2012 were $3.950 billion, an increase of $285.084 million or 7.8%, compared with $3.665 billion at June 30, 2011 and an increase of $184.426 million or 4.9% (9.8% annualized) compared with $3.766 billion at December 31, 2011. Linked quarter loans increased $75.470 million or 1.9% (7.8% annualized) at June 30, 2012 compared with loans of $3.875 billion at March 31, 2012. As reflected in the table below, loan growth was impacted by the acquisition of Texas Bankers, Inc. and The Bank Arlington. Excluding loans acquired in these acquisitions, year to date loan growth increased 7.1% on an annualized basis.

Deposits at June 30, 2012 were $8.395 billion, an increase of $726.890 million or 9.5%, compared with $7.668 billion at June 30, 2011 and an increase of $334.328 million or 4.1% (8.3% annualized) compared with $8.060 billion at December 31, 2011. Linked quarter deposits decreased $149.869 million or 1.8% at June 30, 2012 compared with deposits of $8.544 billion at March 31, 2012. As reflected in the table below, deposit growth was impacted by the acquisition of Texas Bankers, Inc. and The Bank Arlington. Excluding deposits assumed in these acquisitions, year to date deposit growth increased 5.9% on an annualized basis.

 

Page 2 of 21


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

 

Balance Sheet Data (at period end)    June 30, 2012      Mar 31, 2012      Dec 31, 2011      June 30, 2011  
(In thousands)    (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)  

Loans:

           

Acquired with Texas Bankers, Inc.

   $ 28,421       $ 27,053       $ —         $ —     

Acquired with The Bank Arlington

     22,542         —           —           —     

All other

     3,899,369         3,847,809         3,765,906         3,665,248   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Loans

   $ 3,950,332       $ 3,874,862       $ 3,765,906       $ 3,665,248   
  

 

 

    

 

 

    

 

 

    

 

 

 

Deposits:

           

Assumed with Texas Bankers, Inc.

   $ 62,739       $ 63,681       $ —         $ —     

Assumed with The Bank Arlington

     33,505         —           —           —     

All other

     8,298,338         8,480,770         8,060,254         7,667,692   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Deposits

   $ 8,394,582       $ 8,544,451       $ 8,060,254       $ 7,667,692   
  

 

 

    

 

 

    

 

 

    

 

 

 

At June 30, 2012, Prosperity had $10.737 billion in total assets, $3.950 billion in loans and $8.395 billion in deposits. Assets, loans and deposits at June 30, 2012 increased 11.2%, 7.8% and 9.5%, respectively, compared with June 30, 2011.

Results of operations for the six months ended June 30, 2012

For the six months ended June 30, 2012, net income was $73.459 million compared with $68.970 million for the same period in 2011. Net income per diluted common share was $1.55 for the six months ended June 30, 2012 compared with $1.47 for the same period in 2011. Returns on average assets, average common equity and average tangible common equity, each on an annualized basis, for the six months ended June 30, 2012 were 1.37%, 9.10% and 22.12%, respectively. Prosperity’s efficiency ratio (excluding net gains and losses on the sale of securities and assets) was 42.09% for the six months ended June 30, 2012.

Net interest income before provision for credit losses for the six months ended June 30, 2012 increased $1.469 million or 0.9%, to $165.512 million compared with $164.043 million during the same period in 2011. The increase was attributable primarily to a 13.0% increase in average earning assets over the same period.

Non-interest income increased $204,000 or 0.7% to $27.601 million for the six months ended June 30, 2012 compared with $27.397 million for the same period in 2011. The increase was mainly due to an increase in ATM and debit card income and a decrease in net loss on the sale of other real estate and net loss on sale of securities partially offset by a decrease in NSF fees.

Non-interest expense decreased $2.962 million or 3.5% to $81.247 million for the six months ended June 30, 2012 compared with $84.209 million for the same period in 2011. The decrease was primarily attributable to a decrease in regulatory assessments and FDIC insurance, partially offset by an increase in other real estate expense.

Asset Quality

Non-performing assets totaled $11.873 million or 0.12% of average earning assets for the three months ended June 30, 2012 compared with $12.680 million or 0.15% of average earning assets for the three months ended June 30, 2011, and $14.873 million or 0.16% of average earnings assets for the three months March 31, 2012. The allowance for credit losses was 1.28% of total loans at June 30, 2012 compared with 1.42% at June 30, 2011 and 1.33% of total loans at March 31, 2012.

 

Page 3 of 21


Non-performing assets    June 30, 2012      Mar 31, 2012      Dec 31, 2011  
(Dollars in thousands)    Amount      #      Amount      #      Amount      #  

Commercial

   $ 394         12       $ 690         15       $ 767         17   

Construction

     4,056         30         4,116         26         4,649         28   

1-4 family (including home equity)

     2,284         28         3,207         35         3,689         38   

Commercial real estate (including multi-family)

     5,077         12         6,773         16         2,877         9   

Agriculture and agriculture real estate

     44         3         67         4         49         3   

Consumer

     18         3         20         5         21         4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 11,873         88       $ 14,873         101       $ 12,052         99   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Net charge-offs

(Dollars in thousands)

   Three Months Ended
June 30, 2012
    Three Months Ended
Mar 31, 2012
    Three Months Ended
Dec 31, 2011
 

Commercial

   $ 180      $ (15   $ 843   

Construction

     1,179        22        —     

1-4 family (including home equity)

     90        50        676   

Commercial real estate (including multi-family)

     296        18        218   

Agriculture and agriculture real estate

     (3     —          153   

Consumer

     118        27        179   
  

 

 

   

 

 

   

 

 

 

Total

   $ 1,860      $ 102      $ 2,069   
  

 

 

   

 

 

   

 

 

 

The provision for credit losses was $600,000 for the three months ended June 30, 2012 compared to $1.400 million for the three months ended June 30, 2011. Net charge offs were $1.860 million for the three months ended June 30, 2012 compared to $1.229 million for the three months ended June 30, 2011.

The provision for credit losses was $750,000 for the six months ended June 30, 2012 compared to $3.100 million for the six months ended June 30, 2011. Net charge offs were $1.962 million for the six months ended June 30, 2012 compared to $2.753 million for the six months ended June 30, 2011.

Conference Call

Prosperity’s management team will host a conference call on Friday, July 27, 2012 at 10:30 a.m. Eastern Daylight Time (9:30 a.m. Central Daylight Time) to discuss Prosperity’s second quarter earnings. Individuals and investment professionals may participate in the call by dialing 800-894-5910, the reference code is PBTX.

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

Pending Acquisition of Community National Bank

On June 27, 2012, Prosperity announced the signing of a definitive agreement to acquire Community National Bank, Bellaire, Texas. This is the fifth acquisition announced by Prosperity within the past nine months. Community National Bank operates one (1) banking office in Bellaire, Texas, in the Houston Metropolitan Area. As of June 30, 2012, Community National Bank reported total assets of $180.6 million, total loans of $68.6 million and total deposits of $162.6 million.

Under the terms of the definitive agreement, Prosperity will issue up to 372,396 shares of Prosperity common stock plus $11.4 million in cash for all outstanding shares of Community National Bank capital stock, subject to certain conditions and potential adjustments. The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval of the Community National Bank shareholders.

 

Page 4 of 21


Pending Acquisition of East Texas Financial Services, Inc.

On December 9, 2011, Prosperity entered into a definitive agreement to acquire East Texas Financial Services, Inc. (OTC BB: FFBT) and its wholly-owned subsidiary, First Federal Bank Texas (“Firstbank”). Firstbank operates four (4) banking offices in the Tyler MSA, including three locations in Tyler, Texas and one location in Gilmer, Texas. As of June 30, 2012, Firstbank reported total assets of $196.2 million, total loans of $143.6 million and total deposits of $120.9 million.

Under the terms of the definitive agreement, Prosperity will issue up to 531,000 shares of Company common stock for all outstanding shares of East Texas Financial Services capital stock, subject to certain conditions and potential adjustments. The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval of the stockholders of East Texas Financial Services. On May 4, 2012, East Texas Financial Services and each of its directors were named defendants in a suit brought by East Texas Financial Corporation (“ETFC”), a shareholder of East Texas Financial Services, to block the proposed merger. The suit was dismissed on July 18, 2012. The closing date of the transaction is uncertain at this time.

Acquisition of American State Financial Corporation

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

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

Acquisition of The Bank Arlington

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

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

Acquisition of Texas Bankers, Inc.

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

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

Prosperity Bancshares, Inc.®

Prosperity Bancshares Inc.®, recently named “America’s Best Bank” by Forbes, is a $13.9 billion Houston, Texas based regional financial holding company, formed in 1983. Operating under a community banking philosophy and seeking to develop broad customer relationships based on service and convenience, Prosperity offers a variety of traditional loan and deposit products to its customers, which consist primarily of small and medium sized businesses and consumers. In addition to established banking products, Prosperity offers a complete line of services including: Internet Banking services at http://www.prosperitybanktx.com, Retail Brokerage Services, MasterMoney Debit Cards, and 24 hour voice response banking. Prosperity currently operates two hundred thirteen (213) full service banking locations; fifty-nine (59) in the Houston area; twenty (20) in the South Texas area including Corpus Christi and Victoria; thirty-five (35) in the Dallas/Fort Worth area; twenty-one (21) in the East Texas area; thirty-four (34) in the Central Texas area including Austin and San Antonio; thirty-four (34) in the West Texas area including Lubbock, Midland/Odessa and Abilene; and ten (10) in the Bryan/College Station area.

 

Page 5 of 21


Bryan/College Station Area -

Bryan

Bryan-East

Bryan-North

Caldwell

College Station

Greens Prairie

Madisonville

Navasota

Rock Prairie

Wellborn Road

 

Central Texas Area -

 

Austin -

183

Allandale

Cedar Park

Congress

Lakeway

Liberty Hill

Northland

Oak Hill

Parmer Lane

Research Blvd

Westlake

 

Other Central Texas Locations -

Bastrop

Cuero

Dime Box

Dripping Springs

Elgin

Flatonia

Georgetown

Gonzales

Hallettsville

Kingsland

La Grange

Lexington

New Braunfels

Pleasanton

Round Rock

San Antonio

Schulenburg

Seguin

Smithville

Thorndale

Weimar

Yoakum

Yorktown

 

Dallas/Fort Worth Area -

 

Dallas -

Abrams Centre

Balch Springs

Camp Wisdom

Cedar Hill

Central Expressway

East Renner

Frisco

Frisco-West

Independence

  

Kiest

McKinney

McKinney-Stonebridge

Midway

Preston Forest

Preston Road

Red Oak

Sachse

The Colony

Turtle Creek

Westmoreland

 

Fort Worth -

Haltom City

Keller

Roanoke

Stockyards

 

Other Dallas/Fort Worth Locations -

Arlington

Azle

Ennis

Gainesville

Glen Rose

Grandbury

Mesquite

Muenster

Sanger

Waxahachie

Weatherford

 

East Texas Area -

 

Athens

Athens-South

Blooming Grove

Canton

Carthage

Corsicana

Crockett

Eustace

Grapeland

Gun Barrel City

Jacksonville

Kerens

Longview

Mount Vernon

Palestine

Rusk

Seven Points

Teague

Tyler

Tyler-University

Winnsboro

 

Houston Area -

 

Houston -

Aldine

Allen Parkway

Bellaire

Beltway

Clear Lake

Copperfield

Cypress

  

Downtown

Eastex

Fairfield

First Colony

Gessner

Gladebrook

Harrisburg

Heights

Highway 6 West

Hillcroft

Little York

Medical Center

Memorial Drive

Northside

Pasadena

Pecan Grove

Piney Point

River Oaks

Royal Oaks

Sugar Land

SW Medical Center

Tanglewood

Uptown

Waugh Drive

West University

Woodcreek

 

Other Houston Area

Locations -

Angleton

Bay City

Beaumont

Cinco Ranch

Cleveland

East Bernard

El Campo

Dayton

Galveston

Groves

Hempstead

Hitchcock

Katy

Liberty

Magnolia

Mont Belvieu

Nederland

Needville

Shadow Creek

Sweeny

Tomball

Waller

West Columbia

Wharton

Winnie

Wirt

 

South Texas Area -

 

Corpus Christi -

Airline

Carmel

Northwest

Saratoga

Water Street

 

  

Other South Texas

Locations -

Alice

Aransas Pass

Beeville

Edna

Goliad

Kingsville

Mathis

Padre Island

Palacios

Port Lavaca

Portland

Rockport

Sinton

Victoria

Victoria-North

 

West Texas Area -

 

Abilene -

Antilley Road

Barrow Street

Cypress Street

Judge Ely

Mockingbird

 

Lubbock -

4th Street

66th Street

82nd Street

86th Street

98th Street

Avenue Q

North University

Texas Tech Student Union

 

Midland -

Wadley

Wall Street

 

Odessa -

Grandview

Grant

Kermit Highway

Parkway

 

Other West Texas Locations -

Big Spring

Brownfield

Brownwood

Cisco

Comanche

Early

Floydada

Gorman

Levelland

Littlefield

Merkel

Plainview

San Angelo

Slaton

Snyder

---

 

Page 6 of 21


In connection with the proposed merger of Community National Bank into Prosperity Bank, Prosperity will file with the Securities and Exchange Commission a registration statement on Form S-4 to register the shares of Prosperity’s common stock to be issued to the shareholders of Community National Bank. The registration statement will include a proxy statement/prospectus which will be sent to the shareholders of Community National Bank seeking their approval of the proposed transaction.

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

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

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

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

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by Prosperity’s management on the conference call may contain, forward-looking statements within the meaning of the securities laws that are based on current expectations, assumptions, estimates and projections about Prosperity, and its subsidiaries. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperity’s control, that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include but are not limited to whether Prosperity can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks; continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives. Other risks include, but are not limited to: the possibility that credit quality could deteriorate; actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); a deterioration or downgrade in the credit quality and credit agency ratings of the securities in Prosperity’s securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate fluctuations and interest rate fluctuations; weather; and the stock price volatility associated with “small-cap” companies. These and various other factors are discussed in Prosperity’s Annual Report on Form 10-K for the year ended December 31, 2011 and other reports and statements Prosperity has filed with the SEC. Copies of the SEC filings for Prosperity Bancshares® may be downloaded from the Internet at no charge from www.prosperitybanktx.com.

---

 

Page 7 of 21


Prosperity Bancshares, Inc. ®

Financial Highlights

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

 

     Three Months Ended  
     June 30,
2012
     Mar 31,
2012
     Dec 31,
2011
     Sept 30,
2011
 
Selected Earnings and Per Share Data    (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)  

Total interest income

   $ 92,874       $ 91,616       $ 89,658       $ 93,189   

Total interest expense

     9,208         9,770         9,571         10,651   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income

     83,666         81,846         80,087         82,538   

Provision for credit losses

     600         150         1,150         950   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income after provision for credit losses

     83,066         81,696         78,937         81,588   

Total non-interest income

     13,656         13,945         14,065         14,581   

Total non-interest expense

     40,788         40,459         38,385         41,151   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income before taxes

     55,934         55,182         54,617         55,018   

Federal income taxes

     18,962         18,695         18,211         18,645   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 36,972       $ 36,487       $ 36,406       $ 36,373   
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic earnings per share

   $ 0.78       $ 0.77       $ 0.78       $ 0.78   

Diluted earnings per share

   $ 0.78       $ 0.77       $ 0.77       $ 0.77   

Period end shares outstanding

     47,474         47,297         46,910         46,893   

Weighted average shares outstanding (basic)

     47,456         47,238         46,893         46,890   

Weighted average shares outstanding (diluted)

     47,608         47,411         47,028         47,033   

 

Page 8 of 21


Prosperity Bancshares, Inc. ®

Financial Highlights

(Dollars in thousands)

 

     Three Months Ended     Six Months Ended  
     June 30,
2012
    June 30,
2011
    June 30,
2012
    June 30,
2011
 
Balance Sheet Averages    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  

Total loans

   $ 3,914,352      $ 3,631,256      $ 3,866,672      $ 3,574,207   

Investment securities

     5,635,810        4,707,217        5,414,033        4,692,639   

Federal funds sold and other temporary investments

     20,916        13,218        73,536        13,200   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total earning assets

     9,571,078        8,351,691        9,354,241        8,280,046   

Allowance for credit losses

     (50,746     (51,861     (51,174     (51,780

Cash and due from banks

     134,055        125,150        146,016        131,445   

Goodwill

     932,112        924,537        930,265        924,475   

Core deposit intangibles (CDI)

     18,465        25,728        19,283        26,714   

Other real estate

     10,178        9,743        9,408        11,236   

Fixed assets, net

     165,784        159,919        164,487        159,592   

Other assets

     138,263        133,661        133,723        134,423   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 10,919,189      $ 9,678,568      $ 10,706,249      $ 9,616,151   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-interest bearing deposits

   $ 2,069,965      $ 1,770,664      $ 2,020,453      $ 1,721,967   

Interest bearing deposits

     6,365,796        5,981,826        6,411,728        6,003,693   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     8,435,761        7,752,490        8,432,181        7,725,660   

Securities sold under repurchase agreements

     98,968        68,413        76,136        60,058   

Federal funds purchased and other borrowings

     610,499        218,310        441,630        205,201   

Junior subordinated debentures

     85,055        85,055        85,055        88,059   

Other liabilities

     56,742        54,915        57,523        52,956   

Shareholders’ equity(A)

     1,632,164        1,499,385        1,613,724        1,484,217   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 10,919,189      $ 9,678,568      $ 10,706,249      $ 9,616,151   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(A)

Includes $12,599 and $14,337 in after-tax unrealized gains on available for sale securities for the three month periods ending June 30, 2012 and June 30, 2011, respectively, and $13,012 and $14,243 for the six months ending June 30, 2012 and June 30, 2011, respectively.

 

Page 9 of 21


Prosperity Bancshares, Inc. ®

Financial Highlights

(Dollars in thousands)

 

     Three Months Ended     Six Months Ended  
     June 30,
2012
    June 30,
2011
    June 30,
2012
     June 30,
2011
 
Income Statement Data    (Unaudited)     (Unaudited)     (Unaudited)      (Unaudited)  

Interest on loans

   $ 54,793      $ 53,703      $ 108,010       $ 105,903   

Interest on securities

     38,072        41,919        76,393         83,123   

Interest on federal funds sold and other temporary investments

     9        30        87         35   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total interest income

     92,874        95,652        184,490         189,061   
  

 

 

   

 

 

   

 

 

    

 

 

 

Interest expense - deposits

     8,083        11,064        16,874         22,576   

Interest expense - debentures

     648        598        1,311         1,745   

Interest expense - other

     477        360        793         697   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total interest expense

     9,208        12,022        18,978         25,018   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net interest income (B)

     83,666        83,630        165,512         164,043   

Provision for credit losses

     600        1,400        750         3,100   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net interest income after provision for credit losses

     83,066        82,230        164,762         160,943   
  

 

 

   

 

 

   

 

 

    

 

 

 

Non-sufficient funds (NSF) fees

     5,167        6,226        10,556         12,333   

Debit card and ATM card income

     4,292        3,809        8,128         7,261   

Service charges on deposit accounts

     2,432        2,511        4,873         4,994   

Net gain on sale of assets

     70        195        63         360   

Net (loss) gain on sale of ORE

     (165     (366     253         (526

Net loss on sale of securities

     —          (581     —           (581

Other non-interest income

     1,860        1,736        3,728         3,556   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total non-interest income

     13,656        13,530        27,601         27,397   
  

 

 

   

 

 

   

 

 

    

 

 

 

Salaries and benefits (C)

     23,572        23,994        46,824         47,198   

CDI amortization

     1,595        1,943        3,290         3,977   

Net occupancy and equipment

     3,492        3,547        7,049         7,195   

Depreciation

     2,028        2,037        4,063         4,058   

Data processing and software amortization

     1,906        1,780        3,438         3,452   

Regulatory assessments and FDIC insurance

     1,659        2,894        3,207         5,895   

Other real estate

     383        294        1,074         586   

Other non-interest expense

     6,153        6,025        12,302         11,848   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total non-interest expense

     40,788        42,514        81,247         84,209   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income before taxes

     55,934        53,246        111,116         104,131   

Federal income taxes

     18,962        18,154        37,657         35,161   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income available to common shareholders

   $ 36,972      $ 35,092      $ 73,459       $ 68,970   
  

 

 

   

 

 

   

 

 

    

 

 

 

 

(B) 

Net interest income on a tax equivalent basis would be $84,498 and $84,603 for the three months ended June 30, 2012 and June 30, 2011, respectively, and $167,240 and $165,905 for the six months ended June 30, 2012 and June 30, 2011, respectively.

(C) 

Salaries and benefits includes stock-based compensation expense of $946 and $936 for the three months ended June 30, 2012 and June 30, 2011, respectively, and $2,161 and $1,643 for the six months ended June 30, 2012 and June 30, 2011, respectively.

 

Page 10 of 21


Prosperity Bancshares, Inc.®

Financial Highlights

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

 

    

As of and for the

Three Months Ended

    

As of and for the

Six Months Ended

 
     June 30,
2012
     June 30,
2011
     June 30,
2012
     June 30,
2011
 
     (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)  

Common Share and Other Data

           

Employees - FTE

     1,666         1,675         1,666         1,675   

Book value per share

   $ 34.63       $ 32.24       $ 34.63       $ 32.24   

Tangible book value per share

   $ 14.60       $ 11.99       $ 14.60       $ 11.99   

Period end shares outstanding

     47,474         46,888         47,474         46,888   

Weighted average shares outstanding (basic)

     47,456         46,864         47,347         46,799   

Weighted average shares outstanding (diluted)

     47,608         47,057         47,508         47,001   

Non-performing Assets (at period end)

           

Non-accrual loans

   $ 1,624       $ 3,518       $ 1,624       $ 3,518   

Accruing loans 90 or more days past due

     —           306         —           306   

Restructured loans

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-performing loans

     1,624         3,824         1,624         3,824   

Repossessed assets

     13         15         13         15   

Other real estate

     10,236         8,841         10,236         8,841   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-performing assets

   $ 11,873       $ 12,680       $ 11,873       $ 12,680   

Allowance for credit losses at end of period

   $ 50,382       $ 51,932       $ 50,382       $ 51,932   

Net charge-offs

   $ 1,860       $ 1,229       $ 1,962       $ 2,753   

Basic earnings per share

   $ 0.78       $ 0.75       $ 1.55       $ 1.47   

Diluted earnings per share

   $ 0.78       $ 0.75       $ 1.55       $ 1.47   

 

Page 11 of 21


Prosperity Bancshares, Inc.®

Financial Highlights

 

     Three Months Ended     Six Months Ended  
     June 30,
2012
    June 30,
2011
    June 30,
2012
    June 30,
2011
 
     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  

Performance Ratios

        

Return on average assets (annualized)

     1.35     1.45     1.37     1.43

Return on average common equity (annualized)

     9.06     9.36     9.10     9.29

Return on average tangible common equity (annualized)

     21.70     25.56     22.12     25.88

Net interest margin (D) (tax equivalent) (annualized)

     3.55     4.06     3.60     4.04

Efficiency ratio (E)

     41.94     43.58     42.09     43.94

Asset Quality Ratios

        

Non-performing assets to average earning assets

     0.12     0.15     0.13     0.15

Non-performing assets to loans and other real estate

     0.30     0.35     0.30     0.35

Net charge-offs to average loans

     0.05     0.03     0.05     0.08

Allowance for credit losses to total loans

     1.28     1.42     1.28     1.42

Common Stock Market Price

        

High

   $ 47.31      $ 46.75      $ 47.66      $ 46.75   

Low

   $ 39.87      $ 40.83      $ 39.66      $ 38.23   

Period end market price

   $ 42.03      $ 43.82      $ 42.03      $ 43.82   

 

(D) 

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

(E) 

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

 

Page 12 of 21


Prosperity Bancshares, Inc.®

Financial Highlights

(Dollars in thousands)

 

    June 30, 2012     Mar 31, 2012     Dec 31, 2011     Sept 30, 2011     June 30, 2011  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  

Loan Portfolio

                   

Commercial

  $ 491,907        12.5   $ 475,860        12.3   $ 439,854        11.7   $ 451,541        12.1   $ 455,791        12.9

Construction

    466,884        11.8     484,295        12.5     482,140        12.8     490,193        13.1     483,581        13.2

1-4 family residential

    1,084,936        27.4     1,036,318        26.7     1,007,266        26.8     981,388        26.3     941,250        25.7

Home equity

    154,147        3.9     149,597        3.9     146,999        3.8     139,553        3.7     131,213        3.6

Commercial real estate

    1,484,787        37.6     1,473,925        38.0     1,441,226        38.3     1,426,704        38.2     1,411,501        38.5

Agriculture (includes agriculture real estate)

    192,462        4.9     178,474        4.6     170,234        4.5     168,011        4.5     160,780        4.4

Consumer

    75,209        1.9     76,393        2.0     78,187        2.1     80,240        2.1     81,132        2.2
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total Loans

  $ 3,950,332        $ 3,874,862        $ 3,765,906        $ 3,737,630        $ 3,665,248     
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Deposit Types

                   

Non-interest bearing DDA

  $ 2,083,910        24.8   $ 2,088,749        24.4   $ 1,972,226        24.5   $ 1,861,907        23.9   $ 1,788,756        23.3

Interest bearing DDA

    1,684,492        20.1     1,671,760        19.6     1,532,701        19.0     1,332,914        17.1     1,358,649        17.7

Money Market

    2,206,220        26.3     2,312,107        27.1     2,042,243        25.3     1,995,248        25.6     1,878,679        24.5

Savings

    581,480        6.9     554,211        6.5     514,780        6.4     498,451        6.4     471,082        6.1

Time < $100

    909,616        10.8     938,911        11.0     968,806        12.0     1,005,672        12.9     1,037,492        13.6

Time > $100

    928,864        11.1     978,713        11.5     1,029,498        12.8     1,104,547        14.1     1,133,034        14.8
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total Deposits

  $ 8,394,582        $ 8,544,451        $ 8,060,254        $ 7,798,739        $ 7,667,692     
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Loan to Deposit Ratio

    47.1       45.3       46.7       47.9       47.8  

Construction Loans

                   

Single family residential construction

  $ 143,600        30.8   $ 142,584        29.4   $ 136,030        28.2   $ 126,926        25.9   $ 124,995        25.8

Land development

    39,704        8.5     41,177        8.5     43,084        8.9     44,400        9.1     46,405        9.6

Raw land

    51,070        10.9     63,006        13.0     61,177        12.7     64,178        13.1     69,769        14.4

Residential lots

    86,201        18.5     88,054        18.2     86,848        18.0     88,600        18.1     86,515        17.9

Commercial lots

    49,454        10.6     51,642        10.7     49,645        10.3     54,016        11.0     54,419        11.3

Commercial construction and other

    96,854        20.7     97,832        20.2     105,356        21.9     112,073        22.8     101,478        21.0
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total Construction Loans

  $ 466,884        $ 484,295        $ 482,140        $ 490,193        $ 483,581     
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

 

Page 13 of 21


Prosperity Bancshares, Inc.®

Financial Highlights

(Dollars in thousands)

 

     June 30,
2012
    Mar 31,
2012
    Dec 31,
2011
    Sept 30,
2011
    June 30,
2011
 

Balance Sheet Data

(at period end)

   (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  

Total loans

   $ 3,950,332      $ 3,874,862      $ 3,765,906      $ 3,737,630      $ 3,665,248   

Investment securities (F)

     5,400,044        5,646,529        4,658,936        4,430,530        4,641,664   

Federal funds sold

     133        445        642        294        350   

Allowance for credit losses

     (50,382     (51,642     (51,594     (52,513     (51,932

Cash and due from banks

     152,678        151,467        212,800        211,261        145,910   

Goodwill

     932,965        929,161        924,537        924,537        924,537   

Core deposit intangibles

     17,706        19,301        20,996        22,874        24,799   

Other real estate

     10,236        7,718        8,328        8,216        8,841   

Fixed assets, net

     166,273        162,676        159,656        160,099        160,119   

Other assets

     157,366        149,438        122,464        124,159        137,611   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 10,737,351      $ 10,889,955      $ 9,822,671      $ 9,567,087      $ 9,657,147   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Demand deposits

   $ 2,083,910      $ 2,088,749      $ 1,972,226      $ 1,861,907      $ 1,788,756   

Interest bearing deposits

     6,310,672        6,455,702        6,088,028        5,936,832        5,878,936   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     8,394,582        8,544,451        8,060,254        7,798,739        7,667,692   

Securities sold under repurchase agreements

     122,743        58,481        54,883        66,166        91,288   

Federal funds purchased and other borrowings

     437,278        527,536        12,790        13,583        248,839   

Junior subordinated debentures

     85,055        85,055        85,055        85,055        85,055   

Other liabilities

     53,876        64,899        42,424        62,205        52,625   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     9,093,534        9,280,422        8,255,406        8,025,748        8,145,499   

Shareholders’ equity (G)

     1,643,817        1,609,533        1,567,265        1,541,339        1,511,648   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 10,737,351      $ 10,889,955      $ 9,822,671      $ 9,567,087      $ 9,657,147   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(F) Includes $17,709, $19,542, $20,726, $24,278 and $23,647 in unrealized gains on available for sale securities for the quarterly periods ending June 30, 2012, March 31, 2012, December 31, 2011, September 30, 2011 and June 30, 2011, respectively.
(G) Includes $11,511, $12,702, $13,472, $15,781 and $15,371 in after-tax unrealized gains on available for sale securities for the quarterly periods ending June 30, 2012, March 31, 2012, December 31, 2011, September 30, 2011 and June 30, 2011, respectively.

 

Page 14 of 21


Prosperity Bancshares, Inc.®

Financial Highlights

(Dollars in thousands)

 

     Three Months Ended  
     June 30,
2012
    Mar 31,
2012
    Dec 31,
2011
    Sept 30,
2011
     June 30,
2011
 
Income Statement Data    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)      (Unaudited)  

Interest on loans

   $ 54,793      $ 53,217      $ 58,899      $ 54,471       $ 53,703   

Interest on securities

     38,072        38,321        35,719        38,714         41,943   

Interest on federal funds sold and other earning assets

     9        78        40        4         6   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total interest income

     92,874        91,616        89,658        93,189         95,652   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Interest expense - deposits

     8,083        8,791        8,682        9,717         11,064   

Interest expense - debentures

     648        663        632        607         598   

Interest expense - other

     477        316        257        327         360   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total interest expense

     9,208        9,770        9,571        10,651         12,022   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net interest income

     83,666        81,846        80,087        82,538         83,630   

Provision for credit losses

     600        150        1,150        950         1,400   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net interest income after provision for credit losses

     83,066        81,696        78,937        81,588         82,230   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Non-sufficient funds (NSF) fees

     5,167        5,389        5,860        6,249         6,226   

Debit card and ATM card income

     4,292        3,836        4,189        3,941         3,809   

Service charges on deposit accounts

     2,432        2,441        2,515        2,472         2,511   

Net gain (loss) on sale of assets

     70        (7     —          17         195   

Net (loss) gain on sale of ORE

     (165     418        (473     95         (366

Net loss on sale of securities

     —          —          —          —           (581

Other non-interest income

     1,860        1,868        1,974        1,807         1,736   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total non-interest income

     13,656        13,945        14,065        14,581         13,530   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Salaries and benefits

     23,572        23,252        21,258        23,601         23,994   

CDI amortization

     1,595        1,695        1,879        1,924         1,943   

Net occupancy and equipment

     3,492        3,557        3,655        3,784         3,547   

Depreciation

     2,028        2,035        2,051        2,041         2,037   

Data processing and software amortization

     1,906        1,532        1,417        1,954         1,780   

Regulatory assessments and FDIC insurance

     1,659        1,548        1,518        1,488         2,894   

ORE expense

     383        691        680        235         294   

Other non-interest expense

     6,153        6,149        5,927        6,124         6,025   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total non-interest expense

     40,788        40,459        38,385        41,151         42,514   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net income before taxes

     55,934        55,182        54,617        55,018         53,246   

Federal income taxes

     18,962        18,695        18,211        18,645         18,154   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net income available to common shareholders

   $ 36,972      $ 36,487      $ 36,406      $ 36,373       $ 35,092   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

Page 15 of 21


Prosperity Bancshares, Inc.®

Financial Highlights

 

     Three Months Ended  
     June 30,
2012
    Mar 31,
2012
    Dec 31,
2011
    Sept 30,
2011
    June 30,
2011
 
Comparative Quarterly Asset Quality, Performance & Capital Ratios    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  

Return on average assets (annualized)

     1.35     1.39     1.50     1.52     1.45

Return on average common equity (annualized)

     9.06     9.15     9.35     9.51     9.36

Return on average tangible equity (annualized)

     21.70     22.57     23.86     25.03     25.56

Net interest margin (tax equivalent) (annualized)

     3.55     3.64     3.82     4.02     4.06

Employees - FTE

     1,666        1,690        1,664        1,678        1,675   

Efficiency ratio

     41.94     42.23     40.77     42.38     43.58

Non-performing assets to average earning assets

     0.12     0.16     0.14     0.16     0.15

Non-performing assets to loans and other real estate

     0.30     0.38     0.32     0.36     0.35

Net charge-offs to average loans

     0.05     0.00     0.06     0.01     0.03

Allowance for credit losses to total loans

     1.28     1.33     1.37     1.40     1.42

Book value per share

   $ 34.63      $ 34.03      $ 33.41      $ 32.87      $ 32.24   

Tangible book value per share

   $ 14.60      $ 13.98      $ 13.25      $ 12.67      $ 11.99   

Tier 1 risk-based capital

     16.42     15.70     15.90     15.47     14.72

Total risk-based capital

     17.49     16.80     17.09     16.69     15.93

Tier 1 leverage capital

     7.69     7.68     7.89     7.70     7.24

Tangible equity to tangible assets

     7.08     6.65     7.00     6.89     6.46

Equity to assets

     15.31     14.78     15.96     16.11     15.65

 

Page 16 of 21


Prosperity Bancshares, Inc.®

Supplemental Financial Data (Unaudited)

(Dollars in thousands)

 

     Three Months Ended June 30, 2012     Three Months Ended June 30, 2011  
YIELD ANALYSIS    Average
Balance
    Interest
Earned /
Interest
Paid
     Average
Yield/
Rate
    Average
Balance
    Interest
Earned /
Interest
Paid
     Average
Yield/
Rate
 

Interest Earning Assets:

              

Loans

   $ 3,914,352      $ 54,793         5.63   $ 3,631,256      $ 53,703         5.93

Investment securities

     5,635,810        38,072         2.70     4,707,217        41,919         3.56

Federal funds sold and other earning assets

     20,916        9         0.17     13,218        30         0.91
  

 

 

   

 

 

      

 

 

   

 

 

    

Total interest earning assets

     9,571,078      $ 92,874         3.90     8,351,691      $ 95,652         4.59
    

 

 

        

 

 

    

Allowance for credit losses

     (50,746          (51,861     

Non-interest earning assets

     1,398,857             1,378,738        
  

 

 

        

 

 

      

Total assets

   $ 10,919,189           $ 9,678,568        
  

 

 

        

 

 

      

Interest Bearing Liabilities:

              

Interest bearing demand deposits

   $ 1,706,176      $ 2,089         0.49   $ 1,403,331      $ 2,061         0.59

Savings and money market deposits

     2,779,524        2,444         0.35     2,403,330        3,348         0.56

Certificates and other time deposits

     1,880,096        3,550         0.76     2,175,165        5,655         1.04

Securities sold under repurchase agreements

     98,968        59         0.24     68,413        110         0.64

Federal funds purchased and other borrowings

     610,499        418         0.28     218,310        250         0.46

Junior subordinated debentures

     85,055        648         3.06     85,055        598         2.82
  

 

 

   

 

 

      

 

 

   

 

 

    

Total interest bearing liabilities

   $ 7,160,318      $ 9,208         0.52   $ 6,353,604      $ 12,022         0.76
    

 

 

        

 

 

    

Non-interest bearing liabilities:

              

Non-interest bearing demand deposits

   $ 2,069,965           $ 1,770,664        

Other liabilities

     56,742             54,915        
  

 

 

        

 

 

      

Total liabilities

   $ 9,287,025           $ 8,179,183        
  

 

 

        

 

 

      

Shareholders’ equity

   $ 1,632,164           $ 1,499,385        
  

 

 

        

 

 

      

Total liabilities and shareholders’ equity

   $ 10,919,189           $ 9,678,568        
  

 

 

        

 

 

      

Net Interest Income & Margin

     $ 83,666         3.52     $ 83,630         4.02
    

 

 

        

 

 

    

Net Interest Income & Margin (tax equivalent)

     $ 84,498         3.55     $ 84,603         4.06
    

 

 

        

 

 

    

 

Page 17 of 21


Prosperity Bancshares, Inc.®

Supplemental Financial Data (Unaudited)

(Dollars in thousands)

 

     Six Months Ended June 30, 2012     Six Months Ended June 30, 2011  
YIELD ANALYSIS    Average
Balance
    Interest
Earned /
Interest
Paid
     Average
Yield/
Rate
    Average
Balance
    Interest
Earned /
Interest
Paid
     Average
Yield/
Rate
 

Interest Earning Assets:

              

Loans

   $ 3,866,672      $ 108,010         5.62   $ 3,574,207      $ 105,903         5.98

Investment securities

     5,414,033        76,393         2.82     4,692,639        83,123         3.54

Federal funds sold and other earning assets

     73,536        87         0.24     13,200        35         0.53
  

 

 

   

 

 

      

 

 

   

 

 

    

Total interest earning assets

     9,354,241      $ 184,490         3.97     8,280,046      $ 189,061         4.60
    

 

 

        

 

 

    

Allowance for credit losses

     (51,174          (51,780     

Non-interest earning assets

     1,403,182             1,387,885        
  

 

 

        

 

 

      

Total assets

   $ 10,706,249           $ 9,616,151        
  

 

 

        

 

 

      

Interest Bearing Liabilities:

              

Interest bearing demand deposits

   $ 1,700,208      $ 4,152         0.49   $ 1,446,008      $ 4,299         0.60

Savings and money market deposits

     2,785,936        5,033         0.36     2,381,326        6,684         0.57

Certificates and other time deposits

     1,925,584        7,689         0.80     2,176,359        11,593         1.07

Securities sold under repurchase agreements

     76,136        96         0.25     60,058        179         0.60

Federal funds purchased and other borrowings

     441,630        697         0.32     205,201        518         0.51

Junior subordinated debentures

     85,055        1,311         3.10     88,059        1,745         4.00
  

 

 

   

 

 

      

 

 

   

 

 

    

Total interest bearing liabilities

   $ 7,014,549      $ 18,978         0.54   $ 6,357,011      $ 25,018         0.79
    

 

 

        

 

 

    

Non-interest bearing liabilities:

              

Non-interest bearing demand deposits

   $ 2,020,453           $ 1,721,967        

Other liabilities

     57,523             52,956        
  

 

 

        

 

 

      

Total liabilities

   $ 9,092,525           $ 8,131,934        
  

 

 

        

 

 

      

Shareholders’ equity

   $ 1,613,724           $ 1,484,217        
  

 

 

        

 

 

      

Total liabilities and shareholders’ equity

   $ 10,706,249           $ 9,616,151        
  

 

 

        

 

 

      

Net Interest Income & Margin

     $ 165,512         3.56     $ 164,043         4.00
    

 

 

        

 

 

    

Net Interest Income & Margin (tax equivalent)

     $ 167,240         3.60     $ 165,905         4.04
    

 

 

        

 

 

    

 

Page 18 of 21


Prosperity Bancshares, Inc.®

Notes to Selected Financial Data (Unaudited)

(Dollars in thousands)

Consolidated Financial Highlights

NOTES TO SELECTED FINANCIAL DATA

Prosperity’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity and the tangible equity to tangible assets ratio for internal planning and forecasting purposes. Prosperity has included in this Earnings Release information relating to these non-GAAP financial measures for the applicable periods presented. Prosperity believes these non-GAAP financial measures provide information useful to investors in understanding Prosperity’s financial results and Prosperity believes that its presentation, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting Prosperity’s business and allows investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results and Prosperity strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.

 

Page 19 of 21


Prosperity Bancshares, Inc.®

Notes to Selected Financial Data (Unaudited)

(Dollars and share amounts in thousands)

 

     Three Months Ended  
     Jun 30,
2012
    Mar 31,
2012
    Dec 31,
2011
    Sept 30,
2011
    June 30,
2011
 

Return on average tangible common equity:

  

     

Net income

   $ 36,972      $ 36,487      $ 36,406      $ 36,373      $ 35,092   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average shareholders’ equity

     1,632,164        1,595,284        1,556,845        1,529,718        1,499,385   

Less: Average goodwill and other intangible assets

     (950,577     (948,519     (946,427     (948,351     (950,265
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible shareholders’ equity

   $ 681,587      $ 646,765      $ 610,418      $ 581,367      $ 549,120   

Return on average tangible common equity (annualized):

     21.70     22.57     23.86     25.03     25.56

Tangible book value per share:

          

Shareholders’ equity

   $ 1,643,817      $ 1,609,533      $ 1,567,265      $ 1,541,339      $ 1,511,648   

Less: Goodwill and other intangible assets

     (950,671     (948,462     (945,533     (947,411     (949,336
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible shareholders’ equity

   $ 693,146      $ 661,071      $ 621,732      $ 593,928      $ 562,312   

Period end shares outstanding

     47,474        47,297        46,910        46,893        46,888   

Tangible book value per share:

   $ 14.60      $ 13.98      $ 13.25      $ 12.67      $ 11.99   

Tangible equity to tangible assets ratio:

          

Tangible shareholders’ equity

   $ 693,146      $ 661,071      $ 621,732      $ 593,928      $ 562,312   

Total assets

   $ 10,737,351      $ 10,889,955      $ 9,822,671      $ 9,567,087      $ 9,657,147   

Less: Goodwill and other intangible assets

     (950,671     (948,462     (945,533     (947,411     (949,336
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tangible assets

   $ 9,786,680      $ 9,941,493      $ 8,877,138      $ 8,619,676      $ 8,707,811   

Tangible equity to tangible assets ratio:

     7.08     6.65     7.00     6.89     6.46

 

Page 20 of 21


Prosperity Bancshares, Inc.®

Notes to Selected Financial Data (Unaudited)

(Dollars in thousands)

 

     Six Months Ended  
     June 30, 2012     June 30, 2011  

Return on average tangible common equity:

    

Net income

   $ 73,459      $ 68,970   
  

 

 

   

 

 

 

Average shareholders’ equity

     1,613,724        1,484,217   

Less: Average goodwill and other intangible assets

     (949,548     (951,189
  

 

 

   

 

 

 

Average tangible shareholders’ equity

   $ 664,176      $ 533,028   

Return on average tangible common equity (annualized):

     22.12     25.88

Tangible book value per share:

    

Shareholders’ equity

   $ 1,643,817      $ 1,511,648   

Less: Goodwill and other intangible assets

     (950,671     (949,336
  

 

 

   

 

 

 

Tangible shareholders’ equity

   $ 693,146      $ 562,312   

Period end shares outstanding

     47,474        46,888   

Tangible book value per share:

   $ 14.60      $ 11.99   

Tangible equity to tangible assets ratio:

    

Tangible shareholders’ equity

   $ 693,146      $ 562,312   

Total assets

   $ 10,737,351      $ 9,657,147   

Less: Goodwill and other intangible assets

     (950,671     (949,336
  

 

 

   

 

 

 

Tangible assets

   $ 9,786,680      $ 8,707,811   

Tangible equity to tangible assets ratio:

     7.08     6.46

 

Page 21 of 21