Filed by Prosperity Bancshares, Inc. |
Pursuant to Rule 425 under the Securities Act of 1933 |
Subject Company: First Bancshares of Texas, Inc. |
Commission File Number: 333-269187 |
SHAREHOLDER LETTER
A Message from Ken Burgess
It is amazing as I think back to when we started the bank in 1998. We raised $6.3 million from many of you who are still shareholders today. We have turned that initial investment into $275 million today, almost 25 years later. In fact, in the 4th quarter of 2022, the Company earned $11.1 million, almost double what our initial stake was. It has been a good run and we have contributed our Company’s resources, both monetarily and through the many service hours contributed by our team members to worthy projects in each of the communities we serve. Many people think only of money when they think of a bank. I think of people - the people we get to serve, the team members we become family with and the shareholders who support the vision of the Company.
There have been so many people on our team over the years who have given to this organization, to our communities, to the team members they work with and have lived the culture we have worked hard to create. There is no way I can recognize all that have played such a major role in our success. And our success is entirely the result of all these great people.
We are working to close our previously announced merger with Prosperity Bancshares, Inc. in the first half of 2023, although delays could occur. Much coordination is taking place between our team and the Prosperity team to ensure the transition goes as smoothly as possible for our customers, shareholders, and our team.
The Company saw a significant increase in earnings in 2022, with a return on average common equity of 13.94% vs. 9.52% in 2021. 2022 was by far the best year in our history.
For the 4th quarter of 2022, the Company saw a significant increase in earnings compared to the same quarter in 2021, with earnings per share coming in at $0.66 versus $0.25 in 2021. Earnings in the 4th quarter of 2022, were up to $11.01 million compared to $4.13 million in the fourth quarter of 2021. Full year 2022 earnings were $37.9 million compared to $24.9 million in the prior year.
We experienced good growth during 2022 in the balance sheet as well. Total assets grew $117 million, an increase of 5.7% from 2021. Compared with 2021, loans grew $112 million, a 7.4% increase and deposits grew $88 million, 5.1% increase.
We have scheduled a special shareholders’ meeting to be held virtually on March 3, 2023 at 10:00 a.m., Central Time to officially vote on the merger with Prosperity. If you were a record shareholder on January 25, 2023, you should have received a proxy statement/prospectus containing information regarding the merger and the special meeting.
This will likely be the last quarterly shareholder’s letter you receive from me. I want to thank all of you who have supported the FirstCapital Bank and our team members over the years.
Sincerely,
Ken L. Burgess, Jr.
CEO
SHAREHOLDER LETTER
Continued
Additional Information about the Merger and Where to Find It
In connection with the proposed merger of First Bancshares of Texas, Inc. into Prosperity Bancshares, Inc., Prosperity has filed with the SEC a registration statement on Form S-4 to register the shares of Prosperity common stock to be issued to the shareholders of First Bancshares. The registration statement includes a preliminary proxy statement/prospectus. The definitive proxy statement/prospectus has been sent to the shareholders of First Bancshares seeking their approval of the proposed transaction.
WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT ON FORM S-4, THE PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATE- MENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH THE PROPOSED TRANSACTION BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT PROSPERITY, FIRST BANCSHARES AND THE PROPOSED TRANSACTION.
Investors and security holders may obtain free copies of these documents through the website maintained by the SEC at http://www.sec.gov. You may also be able to obtain these documents, when they are filed, free of charge, from Prosperity at http://www.prosperitybankusa.com. Copies of the proxy statement/prospectus can also be obtained, free of charge, by directing a request by telephone or mail to Prosperity Bancshares, Inc., Prosperity Bank Plaza, 4295 San Felipe, Houston, Texas 77027 Attn: Investor Relations, (281) 269-7199 or to First Bancshares of Texas, Inc., 310 West Wall Street, Suite 1200, Midland, Texas 79701, Attention: Ken Burgess, (844) 322-8392.
First Bancshares of Texas, Inc.
Consolidated Statements of Financial Condition
(Dollar amounts in thousands except share and per share data)
| December 31, 2022 |
| December 31, 2021 |
| (Unaudited) |
| (Audited) |
Assets |
|
|
|
Cash and due from banks | $ 18,238 |
| $ 15,727 |
Interest-bearing deposits in banks | 96,389 |
| 261,657 |
Cash and cash equivalents | 114,627 |
| 277,384 |
Securities available for sale | 206,420 |
| 67,845 |
Securities held to maturity (fair value is $44,637 and $27,977 at December 31, 2022 and December 31, 2021, respectively) | 48,733 |
| 27,359 |
Equity securities (at fair value) | 421 |
| 597 |
Restricted investments carried at cost | 6,953 |
| 6,112 |
Loans held for sale | — |
| 572 |
Loans, net of allowance for loan losses of $22,206 and $22,552 at December 31, 2022 and December 31, 2021, respectively | 1,616,669 |
| 1,504,921 |
Premises and equipment, net | 19,727 |
| 21,627 |
Right of use asset, net | 5,639 |
| 7,239 |
Deferred tax asset, net | 9,805 |
| 6,758 |
Cash surrender value of life insurance | 55,981 |
| 48,509 |
Goodwill | 54,913 |
| 54,913 |
Core deposit intangible | �� 4,549 |
| 5,335 |
Other assets | 17,766 |
| 16,428 |
Total assets | $ 2,162,203 |
| $ 2,045,599 |
Liabilities and Shareholders' Equity |
|
|
|
Liabilities |
|
|
|
Noninterest-bearing | $ 804,907 |
| $ 682,846 |
Interest-bearing | 996,017 |
| 1,029,858 |
Total deposits | 1,800,924 |
| 1,712,704 |
Securities sold under agreements to repurchase | 69,308 |
| 53,586 |
Advances from Federal Home Loan Bank | 406 |
| 464 |
Subordinated debt | 3,093 |
| 3,093 |
Lease liability | 6,036 |
| 7,611 |
Accrued expenses and other liabilities | 7,549 |
| 6,413 |
Total liabilities | 1,887,316 |
| 1,783,871 |
Shareholders' Equity |
|
|
|
Common stock, $1 par value; 35,000,000 shares authorized; 16,912,060 and 16,819,019 shares issued at December 31, 2022 and December 31, 2021, respectively | 16,912 |
| 16,819 |
Capital surplus | 152,379 |
| 150,908 |
Treasury stock, at cost, 0 and 4,387 shares at December 31, 2022 and December 31, 2021, respectively | — |
| (77) |
Retained earnings | 115,975 |
| 94,156 |
Accumulated other comprehensive income (loss), net of tax | (10,379) |
| (78) |
Total shareholders' equity | 274,887 |
| 261,728 |
Total liabilities and shareholders' equity | $ 2,162,203 |
| $ 2,045,599 |
First Bancshares of Texas, Inc.
Consolidated Statements of Income
(Dollar amounts in thousands)
| Three Months Ended December 31, |
| Twelve Months Ended December 31, | ||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| (Unaudited) |
| (Unaudited) |
| (Unaudited) |
| (Audited) |
Interest Income |
|
|
|
|
|
|
|
Loans, including fees | $ 25,357 |
| $ 20,793 |
| $ 89,747 |
| $ 84,570 |
Debt securities: |
|
|
|
|
|
|
|
Taxable | 1,251 |
| 297 |
| 4,343 |
| 1,262 |
Tax-exempt | 85 |
| 107 |
| 375 |
| 494 |
Deposits in other banks | 1,078 |
| 107 |
| 2,094 |
| 440 |
Federal Funds sold Interest | — |
| — |
| — |
| — |
Other interest | 97 |
| 95 |
| 395 |
| 370 |
Total interest income | 27,868 |
| 21,399 |
| 96,954 |
| 87,136 |
Interest Expense |
|
|
|
|
|
|
|
Deposits | 3,036 |
| 814 |
| 6,577 |
| 3,624 |
Subordinated debentures | 51 |
| 24 |
| 147 |
| 95 |
Repurchase agreements | 314 |
| 75 |
| 765 |
| 242 |
Advances & other borrowings | 2 |
| 3 |
| 18 |
| 13 |
Total interest expense | 3,403 |
| 916 |
| 7,507 |
| 3,974 |
Net Interest Income | 24,465 |
| 20,483 |
| 89,447 |
| 83,162 |
Provision for Loan Losses | 50 |
| 282 |
| 650 |
| 2,957 |
Net Interest Income After Provision for Loan Losses | 24,415 |
| 20,201 |
| 88,797 |
| 80,205 |
Noninterest Income |
|
|
|
|
|
|
|
Service charges on deposit accounts | 330 |
| 335 |
| 1,331 |
| 1,243 |
Other service charges and fees | 788 |
| 702 |
| 2,956 |
| 2,711 |
Gain on sales of loans | 78 |
| 75 |
| 395 |
| 398 |
Trust department income | 393 |
| 196 |
| 1,227 |
| 666 |
Net gain (loss) on securities transactions | 22 |
| 6 |
| (176) |
| 211 |
Other income | 571 |
| 586 |
| 4,112 |
| 1,463 |
Total noninterest income | 2,182 |
| 1,900 |
| 9,845 |
| 6,692 |
Noninterest Expense |
|
|
|
|
|
|
|
Salaries and employee benefits | 6,674 |
| 6,987 |
| 28,564 |
| 28,388 |
Occupancy and equipment | 1,531 |
| 1,592 |
| 6,465 |
| 6,655 |
Professional fees | 1,275 |
| 918 |
| 3,174 |
| 3,889 |
IT and data processing | 756 |
| 548 |
| 2,735 |
| 2,253 |
Advertising | 324 |
| 297 |
| 1,300 |
| 1,230 |
FDIC assessment | 241 |
| 176 |
| 1,009 |
| 740 |
Other expenses | 2,152 |
| 6,496 |
| 8,140 |
| 12,520 |
Total noninterest expense | 12,953 |
| 17,014 |
| 51,387 |
| 55,675 |
Income Before Income Taxes | 13,644 |
| 5,087 |
| 47,255 |
| 31,222 |
Provision for Income Taxes | 2,554 |
| 955 |
| 9,403 |
| 6,310 |
Net Income | $ 11,090 |
| $ 4,132 |
| $ 37,852 |
| $ 24,912 |
First Bancshares of Texas, Inc.
Consolidated Statements of Income (Continued)
(Dollar amounts in thousands except per share data)
| Three Months Ended December 31, |
| Twelve Months Ended December 31, | ||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| (Unaudited) |
| (Unaudited) |
| (Unaudited) |
| (Audited) |
Per Share Data: |
|
|
|
|
|
|
|
Basic earnings per common share | 0.66 |
| 0.25 |
| 2.25 |
| 1.48 |
Diluted earnings per common share | 0.65 |
| 0.24 |
| 2.24 |
| 1.47 |
Dividends per share | 0.80 |
| 0.05 |
| 0.95 |
| 0.95 |
