Prosperity Bancshares (PB) 8-K Results of Operations and Financial Condition

Exhibit 99.1

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.^®

THIRD QUARTER EARNINGS UP 45.7%

• Record Quarterly Earnings

• 3Q07 Earnings Per Share Increased 10.2% to $0.54 (diluted)

• Annual Cash Dividend Increased by 11.1% to $0.50

HOUSTON, October 23, 2007. Prosperity Bancshares, Inc.^® NASDAQ: (PRSP), the parent company of Prosperity Bank^®, reported record earnings for the quarter ended September 30, 2007. Net income for the quarter was $23.848 million or $0.54 per diluted common share, an increase in net income of $7.484 million or 45.7%, compared with $16.364 million or $0.49 per diluted common share for the same period in the prior year.

Prosperity completed its acquisition of The Bank of Navasota on August 31, 2007. Prosperity also completed its acquisition of Texas United Bancshares, Inc. and its subsidiaries State Bank, Gateway National Bank, GNB Financial, n.a. and Northwest Bank (collectively, TXUI) on January 31, 2007. The results of operations for these acquisitions have been included in Prosperity’s consolidated financial statements since their respective purchase dates.

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“I am pleased to report another quarter of record earnings for our company,” said David Zalman, Prosperity’s Chairman and Chief Executive Officer. “Our performance can be attributed to the hard work and dedication of our team of bankers during this volatile time for financial companies such as ours.”

Results of operations for the three months ended September 30, 2007

For the three months ended September 30, 2007, net income was $ 23.848 million compared with $16.364 million for the same period in 2006. Net income per diluted common share was $0.54 for the three months ended September 30, 2007 compared with $0.49 for the same period in 2006. Returns on average assets, average common equity and average tangible common equity for the three months ended September 30, 2007 were 1.53%, 8.67% and 30.53%, respectively. Prosperity’s efficiency ratio was 46.41% for the three months ended September 30, 2007.

Net interest income before provision for credit losses for the quarter ended September 30, 2007 increased 42.8%, to $51.369 million compared with $35.967 million during the same period in 2006. The increase was attributable primarily to a 32.7% increase in average earning assets primarily due to the TXUI and Navasota acquisitions and internal growth.

Non-interest income increased $5.241 million or 58.8% to $14.159 million for the three months ended September 30, 2007 compared with $8.918 million for the same period in 2006. The increase was attributable primarily to deposit service charges on the increased number of deposit accounts as a result of the additional banking centers acquired in January and August 2007. Linked quarter non-interest income increased $314,000 or 2.3%.

Non-interest expense increased $10.258 million or 51.7% to $30.087 million for the third quarter of 2007 compared with $19.829 million for the third quarter of 2006. The increase was attributable primarily to the increased operating costs associated with the additional banking centers acquired as a part of the acquisitions completed in January and August 2007. Linked quarter non-interest expense increased $15,000 or 0.05%.

The annualized net interest margin (tax equivalent) was 4.07% for the quarter ended September 30, 2007 compared with 3.77% for the quarter ended September 30, 2006 and 4.09% for the quarter ended June 30, 2007.

Loans at September 30, 2007 were $3.128 billion, an increase of $913.2 million, or 41.2%, compared with $2.214 billion at September 30, 2006. As reflected in the table below, linked quarter loan growth for the third quarter of 2007 was impacted by the loans acquired as a part of the TXUI and Navasota acquisitions. Excluding the loans acquired as a part of these acquisitions, linked quarter loans decreased by $35.5 million or 1.66%.

Deposits at September 30, 2007 were $4.784 billion, an increase of $1.191 billion, or 33.1%, compared with $3.593 billion at September 30, 2006. As reflected in the table below, linked quarter deposit growth for the third quarter of 2007 was impacted by the deposits assumed as a part of the TXUI and Navasota acquisitions. Excluding deposits assumed as a part of these acquisitions, linked quarter deposits decreased by $6.4 million or 0.18%.

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Balance Sheet Data (at period end)	Sept 30, 2007		June 30, 2007		Sept 30, 2006
(In Thousands)	(Unaudited)		(Unaudited)		(Unaudited)
Loans:
Acquired with Texas United Bancshares, Inc.	$	989,705	$	1,038,596	$	0
Acquired with Bank of Navasota		30,800		0		0
All other		2,107,050		2,142,580		2,214,401
Total Loans	$	3,127,555	$	3,181,176	$	2,214,401
Deposits:
Assumed with Texas United Bancshares, Inc.		1,165,277		1,211,734	$	0
Assumed with Bank of Navasota		60,526		0		0
All other		3,558,211		3,564,648		3,593,145
Total Deposits	$	4,784,014	$	4,776,382	$	3,593,145

Average loans increased 42.1% or $931.8 million to $3.143 billion for the quarter ended September 30, 2007 compared with $2.211 billion for the same period of 2006. The provision for credit losses was $75 thousand for the three months ended September 30, 2007 and $120 thousand for the three months ended September 30, 2006. Average deposits increased 33.0% or $1.178 billion to $4.748 billion for the quarter ended September 30, 2007 compared with $3.569 billion for the same period of 2006.

Net charge-offs were 0.04% of average loans for the quarter ending September 30, 2007 and 0.01% of average loans for the quarter ending September 30, 2006. At September 30, 2007, the allowance for credit losses was 1.14% of total loans, compared with 1.09% at September 30, 2006 and 1.14% as of June 30, 2007.

Non-performing assets totaled $9.499 million or 0.19% of average earning assets at September 30, 2007 compared with $1.270 million or 0.03% of average earning assets at September 30, 2006. The non-performing assets at September 30, 2007 consisted of eighty-seven (87) separate credits or ORE properties. We continue to move quickly to resolve problem assets. As of today, twenty-seven (27) credits representing approximately $4.6 million of the non-performing assets as of September 30, 2007 have been sold, are under contract to be sold, have been paid off or are otherwise resolved.

Prosperity redeemed in full all outstanding junior subordinated debentures issued to First Capital Statutory Trust II on September 26, 2007 in the amount of $7.7 million. Outstanding junior subordinated debentures totaled $112.885 million at September 30, 2007.

Results of operations for the nine months ended September 30, 2007

For the nine months ended September 30, 2007, net income was $67.071 million compared with $45.123 million for the same period in 2006. Net income per diluted common share was $1.56 for the nine months ended September 30, 2007 compared with $1.43 for the same period in 2006. Returns on average assets, average common equity and average tangible common equity for the nine months ended September 30, 2007 were 1.47%, 8.62% and 30.92%, respectively. Prosperity’s efficiency ratio was 46.58% for the nine months ended September 30, 2007.

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Net interest income before provision for credit losses for the nine months ended September 30, 2007 increased $47.063 million or 46.3% to $148.802 million compared with $101.739 million during the same period in 2006. The increase was attributable primarily to a 38.1% increase in average earning assets due to the acquisitions completed in January and August 2007, and April 2006.

Non-interest income increased $13.934 million or 54.1% to $39.675 million for the nine months ended September 30, 2007 compared with $25.741 million for the same period in 2006. The increase was attributable primarily to deposit service charges on the increased number of deposit accounts as a result of the additional banking centers acquired in January and August 2007, and April 2006.

Non-interest expense increased $28.953 million or 49.5% to $87.430 million for the first nine months of 2007 compared with $58.477 million the same period in 2006. The increase in non-interest expense was attributable primarily to the increased operating costs associated with the additional banking centers acquired as a part of the acquisitions completed in January and August 2007, and April 2006.

At September 30, 2007, Prosperity had $6.171 billion in total assets, $3.128 billion in loans, $4.784 billion in deposits, and approximately 325,000 deposit and loan accounts. Assets, loans and deposits at September 30, 2007 grew by 38.5%, 41.2% and 33.1%, respectively, compared with September 30, 2006.

Dividend Increase

The Board of Directors of Prosperity Bancshares, Inc.^®, has declared a quarterly cash dividend of $0.1250 per share, an increase of 11.1%, payable on January 2, 2008 to all shareholders of record as of December 14, 2007.

Conference Call

Prosperity’s management team will host a conference call on Tuesday, October 23, 2007 at 10:30 a.m. Eastern Daylight Time (9:30 a.m. Central Daylight Time) to discuss Prosperity’s third quarter earnings. Individuals and investment professionals may participate in the call by dialing 1-800-909-5202. The reference code is PBTX.

Alternatively, individuals may listen to the live webcast of the presentation by visiting Prosperity’s website atwww.prosperitybanktx.com. The webcast may be accessed directly from Prosperity’s Investor Relations page by clicking on the “3^rd Quarter Results and Webcast” link.

Acquisition of Banco Popular’s Houston Branches

On October 22, 2007, Prosperity Bank^® announced that it had signed a definitive agreement with Banco Popular North America to purchase its six (6) Houston retail bank branches. The banking centers have an aggregate of approximately $140 million in combined deposits. Prosperity Bank intends to retain the branch-based employees at the Houston locations.

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Acquisition of The Bank of Navasota, N.A.

On August 31, 2007, Prosperity completed its previously announced acquisition of The Bank of Navasota, N.A. Navasota is located between Hempstead and College Station and bridges the gap between Prosperity’s banking centers in northwest Houston, including Hempstead, and its five locations in Bryan-College Station. The Bank of Navasota operated one (1) banking office in Navasota, Grimes County, Texas, which became a full service banking center of Prosperity Bank. As of August 31, 2007, The Bank of Navasota reported total assets of approximately $72.3 million, loans of approximately $31.5 million, deposits of approximately $63.1 million and shareholders’ equity of approximately $8.9 million.

Acquisition of Texas United Bancshares, Inc.

On January 31, 2007, Prosperity completed its previously announced acquisition of Texas United Bancshares, Inc. Immediately following this acquisition, TXUI’s subsidiaries, State Bank, GNB Financial, n.a., Gateway National Bank and Northwest Bank, were merged into Prosperity Bank^®. At December 31, 2006, on a consolidated basis, TXUI had total assets of $1.806 billion, loans of $1.212 billion, deposits of $1.362 billion and shareholders’ equity of $161.9 million.

In conjunction with the acquisition, Prosperity issued approximately 10,770,000 shares of its common stock for all outstanding shares of Texas United common stock, and converted approximately 180,000 outstanding options to acquire TXUI common stock into options to acquire the same number of shares of PRSP common stock. All remaining options to acquire TXUI common stock were redeemed for cash.

Prosperity Bancshares, Inc.^®

Prosperity Bancshares, Inc.^®, a $6.2 billion Houston, Texas based regional financial holding company, formed in 1983, was named to the Keefe Bruyette & Woods, Inc. 2007 Honor Roll for achieving exceptional earnings per share growth for the past 10 years. Other recent honors include being named to the Sandler O’Neill & Partners 2005 Bank and Thrift Small All Stars, listed inUS Banker’sAugust 2005 Top 100 Publicly Traded Mid-Tier Banks, ranked #2 out of 195 publicly traded companies in the 2005 Stephens, Inc. Bank and Thrift Performance Matrix and listed on theHouston Chronicle’sHouston 100 list.

Operating under a community banking philosophy, Prosperity seeks 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 atwww.prosperitybanktx.com, Retail Brokerage Services, MasterMoney Debit Cards, and 24 hour voice response banking. Prosperity currently operates one hundred twenty-four (124) full service banking locations and one (1) loan production office; forty (40) in the Houston CMSA; thirty-three (33) in the South Texas area including Corpus Christi and Victoria; twenty-seven (27) in the Dallas/Fort Worth metroplex; two (2) in the East Texas area; twenty-two (22) in the Central Texas area including Austin and Bryan/College Station and one (1) loan production office in San Antonio.

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Prosperity Bank^® operates the following full service banking centers:

Central Texas	Dallas/Fort Worth	Houston Area -	South Texas Area -
Area -	Area -
		Houston -	Corpus Christi -
Austin -	Dallas -	Aldine	Airline
Allandale	Abrams Centre	Bellaire	Carmel
Cedar Park	Balch Springs	CityWest	Everhart
Congress	Camp Wisdom	Clear Lake	Northwest
183		Copperfield	Saratoga
Lakeway	Cedar Hill	Cypress	Woodlawn
Liberty Hill	Central Expressway	Downtown	Water Street
Oak Hill	Frisco	Fairfield
Research Blvd	Frisco - West	Gladebrook	Other South Texas
Round Rock	Kiest	Heights	Locations -
	Preston Road	Highway 6 West	Alice
Bryan / College	Red Oak	Holcombe	Aransas Pass
Station -	The Colony	Medical Center	Bay City
Bryan	Turtle Creek	Memorial Drive	Beeville
Bryan- East	Westmoreland	Pecan Grove	Cuero
Bryan- North		River Oaks	East Bernard
College Station	Fort Worth -	Sugar Land	Edna
Wellborn Road	Haltom City	SW Medical Center	El Campo
Navasota	Keller	Tanglewood	Goliad
	Roanoke	Uptown	Gonzales
Other Central	Stockyards	Waugh Drive	Hallettsville
Texas Locations -		Westheimer	Kingsville
Caldwell	Other Dallas/Fort	Woodcreek	Mathis
Dime Box	Worth Locations -		Palacios
Flatonia	Azle	Other Houston Area	Pleasanton
La Grange	Blooming Grove	Locations -	Port Aransas
Lexington	Corsicana	Angleton	Port Lavaca
New Braunfels	Ennis	Cinco Ranch	Portland
Schulenburg	Gainesville	Cleveland	Rockport
Weimar	Mesquite	Dayton	Seguin
	Muenster	Galveston	Sinton
	Sanger	Hempstead	Victoria
	Waxahachie	Hitchcock	Victoria - North
		Katy	Wharton
		Liberty	Yoakum
	East Texas Area -	Magnolia	Yorktown
	Crockett	Mont Belvieu
	Grapeland	Needville
		Sweeny
		Tomball
		Waller
		West Columbia
		Winnie

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“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by our 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 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, 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 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); 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 our most recent Annual Report on Form 10-K and other reports and statements we have filed with the SEC.

Copies of the SEC filings for Prosperity Bancshares’s^®may be downloaded from the Internet at no charge fromwww.prosperitybanktx.com.

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Prosperity Bancshares, Inc.^®

Financial Highlights

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

	Three Months Ended				Nine Months Ended
	Sept 30, 2007		Sept 30, 2006		Sept 30, 2007		Sept 30, 2006
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Selected Earnings and Per Share Data
Total interest income	$	88,004	$	62,150	$	255,168	$	168,846
Total interest expense		36,635		26,183		106,366		67,107
Net interest income		51,369		35,967		148,802		101,739
Provision for credit losses		75		120		640		360
Net interest income after provision for credit losses		51,294		35,847		148,162		101,379
Total non-interest income		14,159		8,918		39,675		25,741
Total non-interest expense		30,087		19,829		87,430		58,477
Net income before taxes		35,366		24,936		100,407		68,643
Provision for federal income taxes		11,518		8,572		33,336		23,520
Net income	$	23,848	$	16,364	$	67,071	$	45,123
Basic earnings per share	$	0.54	$	0.50	$	1.58	$	1.45
Diluted earnings per share	$	0.54	$	0.49	$	1.56	$	1.43
Period end shares outstanding		44,110		32,787		44,110		32,787
Weighted average shares outstanding (basic)		43,910		32,771		42,521		31,053
Weighted average shares outstanding (diluted)		44,254		33,182		42,934		31,452

Prosperity Bancshares, Inc.^®

Financial Highlights

(Dollars in thousands)

	Three Months Ended						Nine Months Ended
	Sept 30, 2007			Sept 30, 2006			Sept 30, 2007			Sept 30, 2006
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Balance Sheet Averages
Total loans	$	3,143,076		$	2,211,306		$	3,078,065		$	1,981,411
Investment securities		1,892,030			1,605,597			1,865,847			1,624,270
Federal funds sold and other earning assets		51,880			16,488			58,117			15,185
Total earning assets		5,086,986			3,833,391			5,002,029			3,620,866
Allowance for credit losses		(35,862	)		(24,228	)		(34,742	)		(21,951	)
Cash and due from banks		144,822			85,817			142,965			90,012
Goodwill		739,422			423,799			707,644			369,548
Core deposit intangibles (CDI)		48,070			24,927			40,610			23,285
Other real estate		2,070			74			1,383			115
Fixed assets, net		121,067			64,323			115,778			61,385
Other assets		126,699			69,155			111,100			65,693
Total assets	$	6,233,274		$	4,477,258		$	6,086,767		$	4,208,953
Non-interest bearing deposits	$	1,170,352		$	806,110		$	1,123,452		$	769,021
Interest bearing deposits		3,577,406			2,763,336			3,578,165			2,615,714
Total deposits		4,747,758			3,569,446			4,701,617			3,384,735
Securities sold under repurchase agreements		82,973			44,733			72,724			44,857
Federal funds purchased and interest bearing liabilities		116,609			81,415			97,757			75,174
Junior subordinated debentures		119,328			100,519			128,522			89,522
Other liabilities		66,678			37,661			48,678			31,563
Shareholders’ equity(A)		1,099,928			643,484			1,037,469			583,102
Total liabilities and equity	$	6,233,274		$	4,477,258		$	6,086,767		$	4,208,953

^(A) Includes ($2,990) and ($5,048), in after tax unrealized (losses) on available for sale securities for the three month periods ending September 30, 2007 and September 30, 2006, respectively, and ($2,462) and ($4,459) for the nine month periods ending September 30, 2007 and September 30, 2006, respectively.

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Prosperity Bancshares, Inc.^®

Financial Highlights

(Dollars in thousands)

	Three Months Ended				Nine Months Ended
	Sept 30, 2007		Sept 30, 2006		Sept 30, 2007		Sept 30, 2006
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Income Statement Data
Interest on loans	$	64,036	$	43,625	$	185,919	$	113,685
Interest on securities		23,316		18,302		67,021		54,598
Interest on federal funds sold and other earning assets		652		223		2,228		563
Total interest income		88,004		62,150		255,168		168,846
Interest expense - deposits		31,794		22,519		92,328		57,487
Interest expense - debentures		2,358		2,106		7,852		5,497
Interest expense - other		2,483		1,558		6,186		4,123
Total interest expense		36,635		26,183		106,366		67,107
Net interest income(B)		51,369		35,967		148,802		101,739
Provision for credit losses		75		120		640		360
Net interest income after provision for credit losses		51,294		35,847		148,162		101,379
Service charges on deposit accounts		10,785		7,079		29,908		20,610
Net gain on sale of assets		640		132		734		578
Brokered mortgage income		188		233		574		661
Net gain on sale of securities		58		0		58		0
Net gain on sale of held for sale loans		269		0		1,202		0
Other non-interest income		2,219		1,474		7,199		3,892
Total non-interest income		14,159		8,918		39,675		25,741
Salaries and benefits(C)		16,365		10,268		48,163		31,195
CDI amortization		2,586		1,191		7,297		3,616
Net occupancy and equipment		2,665		2,166		7,759		5,814
Depreciation		1,895		1,265		5,656		3,767
Data processing and software amortization		1,290		928		3,447		2,728
Other non-interest expense		5,286		4,011		15,108		11,357
Total non-interest expense		30,087		19,829		87,430		58,477
Net income before taxes		35,366		24,936		100,407		68,643
Federal income taxes		11,518		8,572		33,336		23,520
Net income available to common shareholders	$	23,848	$	16,364	$	67,071	$	45,123

^(B) Net interest income on a tax equivalent basis would be $52,182 and $36,469 for the three months ended September 30, 2007 and September 30, 2006, respectively, and $151,088 and $103,070 for the nine months ended September 30, 2007 and September 30, 2006, respectively.

^(C) Salaries and benefits includes equity compensation expenses of $534 and $223 for the three months ended September 30, 2007 and September 30, 2006, respectively, and $1,491 and $606 for the nine months ended September 30, 2007 and September 30, 2006, respectively.

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Prosperity Bancshares, Inc.^®

Financial Highlights

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

	Three Months Ended as of				Nine Months Ended as of
	Sept 30, 2007		Sept 30, 2006		Sept 30, 2007		Sept 30, 2006
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Common Share and Other Data
Employees - FTE		1,369		914		1,369		914
Book value per share	$	25.19	$	19.83	$	25.19	$	19.83
Tangible book value per share	$	7.18	$	6.12	$	7.18	$	6.12
Period end shares outstanding		44,110		32,787		44,110		32,787
Weighted average shares outstanding (basic)		43,910		32,771		42,521		31,053
Weighted average shares outstanding (diluted)		44,254		33,182		42,934		31,452
Non-accrual loans	$	1,645	$	187	$	1,645	$	187
Accruing loans 90 or more days past due		6,273		995		6,273		995
Restructured loans		0		0		0		0
Total non-performing loans		7,918		1,182		7,918		1,182
Repossessed assets		121		29		121		29
Other real estate		1,460		59		1,460		59
Total non-performing assets	$	9,499	$	1,270	$	9,499	$	1,270
Allowance for credit losses at end of period	$	35,536	$	24,093	$	35,536	$	24,093
Net charge-offs	$	1,313	$	307	$	2,480	$	524
Basic earnings per share	$	0.54	$	0.50	$	1.58	$	1.45
Diluted earnings per share	$	0.54	$	0.49	$	1.56	$	1.43

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Prosperity Bancshares, Inc.^®

Financial Highlights

	Three Months Ended						Nine Months Ended
	Sept 30, 2007			Sept 30, 2006			Sept 30, 2007			Sept 30, 2006
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Performance Ratios
Return on average assets (annualized)		1.53	%		1.46	%		1.47	%		1.43	%
Return on average common equity (annualized)		8.67	%		10.17	%		8.62	%		10.32	%
Return on average tangible common equity (annualized)		30.53	%		33.61	%		30.92	%		31.62	%
Net interest margin (tax equivalent) (annualized)		4.07	%		3.77	%		4.04	%		3.81	%
Efficiency ratio(D)		46.41	%		44.31	%		46.58	%		46.08	%
Asset Quality Ratios
Non-performing assets to average earning assets		0.19	%		0.03	%		0.19	%		0.04	%
Non-performing assets to loans and other real estate		0.30	%		0.06	%		0.30	%		0.06	%
Net charge-offs to average loans		0.04	%		0.01	%		0.08	%		0.03	%
Allowance for credit losses to total loans		1.14	%		1.09	%		1.14	%		1.09	%
Common Stock Market Price
High	$	36.00		$	36.16		$	37.11		$	36.16
Low	$	27.70		$	31.64		$	27.70		$	28.50
Period end market price	$	33.16		$	34.04		$	33.16		$	34.04

^(D) Calculated by dividing total non-interest expense (excluding credit loss provisions) 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.

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Prosperity Bancshares, Inc.^®

Financial Highlights

(Dollars in thousands)

	Sept 30, 2007					June 30, 2007					Mar 31, 2007					Dec 31, 2006
	(Unaudited)					(Unaudited)					(Unaudited)					(Unaudited)
Balance Sheet Data (at period end)
Loan Portfolio
Commercial	$	445,132		14.2	%	$	473,526		14.9	%	$	474,127		14.6	%	$	297,677		13.7	%
Construction		708,355		22.7	%		715,385		22.5	%		752,790		23.2	%		433,178		19.9	%
1-4 family residential		527,176		16.9	%		527,233		16.5	%		519,532		16.0	%		376,996		17.3	%
Home equity		94,861		3.0	%		94,960		3.0	%		93,348		2.9	%		63,427		2.9	%
Commercial real estate		1,108,254		35.4	%		1,127,304		35.4	%		1,166,638		35.9	%		881,125		40.5	%
Agriculture		115,619		3.7	%		117,043		3.7	%		109,521		3.4	%		57,429		2.6	%
Consumer		128,158		4.1	%		125,725		4.0	%		131,752		4.0	%		66,675		3.1	%
Total Loans	$	3,127,555				$	3,181,176				$	3,247,708				$	2,176,507
Deposit Types
Non-interest bearing DDA	$	1,165,089		24.4	%	$	1,184,172		24.8	%	$	1,188,741		24.1	%	$	835,876		22.4	%
Interest bearing DDA		809,459		16.9	%		804,961		16.8	%		868,481		17.6	%		736,962		19.8	%
Money Market		997,250		20.9	%		992,091		20.8	%		1,037,960		21.1	%		825,510		22.2	%
Savings		225,831		4.7	%		227,679		4.8	%		233,505		4.7	%		168,677		4.5	%
Time < $100		800,400		16.7	%		786,578		16.5	%		806,295		16.4	%		584,360		15.7	%
Time > $100		785,985		16.4	%		780,901		16.3	%		793,258		16.1	%		574,293		15.4	%
Total Deposits	$	4,784,014				$	4,776,382				$	4,928,240				$	3,725,678
Loan to Deposit Ratio		65.4	%				66.6	%				65.9	%				58.4	%

Page 12 of 18

Prosperity Bancshares, Inc.^®

Financial Highlights

(Dollars in thousands)

	Sept 30, 2007			June 30, 2007			Mar 31, 2007			Dec 31, 2006			Sep 30, 2006
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Balance Sheet Data (at period end)
Total loans	$	3,127,555		$	3,181,176		$	3,247,708		$	2,176,507		$	2,214,401
Investment securities(E)		1,804,326			1,818,723			1,886,294			1,590,303			1,566,478
Federal funds sold and other earning assets		101,173			32,243			66,457			154,040			31,471
Total earning assets		5,033,054			5,032,142			5,200,459			3,920,850			3,812,350
Allowance for credit losses		(35,536	)		(36,129	)		(36,341	)		(23,990	)		(24,093	)
Cash and due from banks		141,662			153,854			135,497			116,078			85,106
Goodwill		745,650			736,624			739,328			424,339			425,073
Core deposit intangibles		48,689			49,317			51,883			23,032			24,285
Other real estate		1,460			3,637			2,138			140			59
Fixed assets, net		120,794			120,810			118,287			63,057			63,118
Other assets		114,751			124,659			115,448			63,263			69,818
Total assets	$	6,170,524		$	6,184,914		$	6,326,699		$	4,586,769		$	4,455,716
Non-Interest bearing deposits	$	1,165,089		$	1,184,172		$	1,188,741		$	835,876		$	809,836
Interest bearing deposits		3,618,925			3,592,210			3,739,499			2,889,802			2,783,309
Total deposits		4,784,014			4,776,382			4,928,240			3,725,678			3,593,145
Securities sold under repurchase agreements		79,484			86,035			73,916			47,225			48,459
Federal funds purchased and other interest bearing liabilities		31,988			59,499			65,621			26,408			31,484
Junior subordinated debentures		112,885			120,617			145,360			100,519			100,519
Other liabilities		50,908			60,805			46,993			22,528			31,956
Total liabilities		5,059,279			5,103,338			5,260,130			3,922,358			3,805,563
Shareholders’ equity(F)		1,111,245			1,081,576			1,066,569			664,411			650,153
Total liabilities and equity	$	6,170,524		$	6,184,914		$	6,326,699		$	4,586,769		$	4,455,716

^(E) Includes ($2,924), ($5,111), ($2,435), ($4,538), and ($6,202) in unrealized (losses) on available for sale securities for the quarterly periods ending September 30, 2007 June 30, 2007, March 31, 2007, December 31, 2006, and September 30, 2006, respectively.

^(F) Includes ($1,901), ($3,322), ($1,583), ($2,950), and ($4,032) in after tax unrealized (losses) on available for sale securities for the quarterly periods ending September 30, 2007, June 30, 2007, March 31, 2007, December 31, 2006, and September 30, 2006, respectively.

Page 13 of 18

Prosperity Bancshares, Inc.^®

Financial Highlights

	Three Months Ended
	Sept 30, 2007		June 30, 2007		Mar 31, 2007		Dec 31, 2006		Sept 30, 2006
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Comparative Quarterly Asset Quality, Performance & Capital Ratios
Return on average assets (annualized)	1.53	%	1.47	%	1.40	%	1.47	%	1.46	%
Return on average common equity (annualized)	8.67	%	8.54	%	8.71	%	10.08	%	10.17	%
Return on average tangible equity (annualized)	30.53	%	32.04	%	31.24	%	31.64	%	33.61	%
Net interest common margin (tax equivalent) (annualized)	4.07	%	4.09	%	3.93	%	3.79	%	3.77	%
Employees-FTE	1,369		1,408		1,432		908		914
Efficiency ratio	46.41	%	46.19	%	47.23	%	43.03	%	44.31	%
Non-performing assets to average earning assets	0.19	%	0.22	%	0.09	%	0.03	%	0.03	%
Non-performing assets to loans and other real estate	0.30	%	0.35	%	0.13	%	0.05	%	0.06	%
Net charge-offs to average loans	0.04	%	0.02	%	0.02	%	0.01	%	0.01	%
Allowance for credit losses to total loans	1.14	%	1.14	%	1.12	%	1.10	%	1.09	%
Tier 1 risk-based capital	13.03	%	12.36	%	12.08	%	13.55	%	13.11	%
Total risk-based capital	14.11	%	14.18	%	13.13	%	14.58	%	14.16	%
Tier 1 leverage capital	7.83	%	7.57	%	8.31	%	7.76	%	7.44	%
Tangible equity to tangible assets	5.89	%	5.48	%	4.97	%	5.24	%	5.01	%
Equity to assets	18.01	%	17.49	%	16.86	%	14.49	%	14.59	%

Page 14 of 18

Prosperity Bancshares, Inc.^®

Supplemental Financial Data (Unaudited)

(Dollars in thousands)

	Three Months Ended September 30, 2007
YIELD ANALYSIS	Average Balance			Interest Earned / Interest Paid		Average Yield/Rate
Interest Earning Assets:
Loans	$	3,143,076		$	64,036	8.08	%
Investment securities		1,892,030			23,316	4.93	%
Federal funds sold and other temporary investments		51,880			652	4.99	%
Total interest earning assets		5,086,986		$	88,004	6.86	%
Allowance for credit losses		(35,862	)
Non-interest earning assets		1,182,150
Total assets	$	6,233,274
Interest Bearing Liabilities:
Interest bearing demand deposits	$	795,016		$	3,880	1.94	%
Savings and money market deposits		1,214,542			9,503	3.10	%
Certificates and other time deposits		1,567,848			18,411	4.66	%
Junior subordinated debentures		119,328			2,358	7.84	%
Federal funds purchased and other borrowings		116,609			1,548	5.27	%
Securities sold under repurchase		82,973			935	4.47	%
Total interest bearing liabilities		3,896,316		$	36,635	3.73	%
Non-Interest Bearing Liabilities:
Non-interest bearing demand deposits		1,170,352
Other liabilities		66,678
Total liabilities		5,133,346
Shareholders’ equity		1,099,928
Total liabilities and shareholders’ equity	$	6,233,274
Net Interest Income & Margin				$	51,369	4.01	%
Net Interest Income & Margin (tax equivalent)				$	52,182	4.07	%

Page 15 of 18

Prosperity Bancshares, Inc.^®

Supplemental Financial Data (Unaudited)

(Dollars in thousands)

	Three Months Ended September 30, 2006
YIELD ANALYSIS	Average Balance			Interest Earned / Interest Paid		Average Yield/Rate
Interest Earning Assets:
Loans	$	2,211,306		$	43,625	7.83	%
Investment securities		1,605,597			18,302	4.56	%
Federal funds sold and other temporary investments		16,488			223	5.37	%
Total interest earning assets		3,833,391		$	62,150	6.43	%
Allowance for credit losses		(24,228	)
Non-interest earning assets		668,095
Total assets	$	4,477,258
Interest Bearing Liabilities:
Interest bearing demand deposits	$	618,606		$	3,252	2.09	%
Savings and money market deposits		942,692			6,832	2.88	%
Certificates and other time deposits		1,202,038			12,435	4.10	%
Junior subordinated debentures		100,519			2,106	8.31	%
Securities sold under repurchase agreements		44,733			497	4.41	%
Federal funds purchased and other borrowings		81,415			1,061	5.17	%
Total Interest Bearing liabilities		2,990,003		$	26,183	3.47	%
Non-Interest Bearing Liabilities:
Non-interest bearing demand deposits		806,110
Other liabilities		37,661
Total liabilities		3,833,774
Shareholders’ equity		643,484
Total liabilities and shareholders’ equity	$	4,477,258
Net Interest Income & Margin				$	35,967	3.72	%
Net Interest Income & Margin (tax equivalent)				$	36,469	3.77	%

Page 16 of 18

Prosperity Bancshares, Inc.^®

Supplemental Financial Data (Unaudited)

(Dollars in thousands)

	Nine Months Ended September 30, 2007
YIELD ANALYSIS	Average Balance			Interest Earned / Interest Paid		Average Yield /Rate
Interest Earning Assets:
Loans	$	3,078,065		$	185,919	8.08	%
Investment securities		1,865,847			67,021	4.79	%
Federal funds sold and other temporary investments		58,117			2,228	5.13	%
Total interest earning assets		5,002,029		$	255,168	6.82	%
Allowance for credit losses		(34,742	)
Non-interest earning assets		1,119,480
Total assets	$	6,086,767
Interest Bearing Liabilities:
Interest bearing demand deposits	$	830,770		$	12,803	2.06	%
Savings and money market deposits		1,211,118			26,800	2.96	%
Certificates and other time deposits		1,536,277			52,725	4.59	%
Junior subordinated debentures		128,522			7,852	8.17	%
Federal funds purchased and other borrowings		97,757			3,867	5.29	%
Securities sold under repurchase agreements		72,724			2,319	4.26	%
Total interest bearing liabilities		3,877,168		$	106,366	3.67	%
Non-Interest Bearing Liabilities:
Non-interest bearing demand deposits		1,123,452
Other liabilities		48,678
Total liabilities		5,049,298
Shareholders’ equity		1,037,469
Total liabilities and shareholders’ equity	$	6,086,767
Net Interest Income & Margin				$	148,802	3.98	%
Net Interest Income & Margin (tax equivalent)				$	151,088	4.04	%

Page 17 of 18

Prosperity Bancshares, Inc.^®

Supplemental Financial Data (Unaudited)

(Dollars in thousands)

	Nine Months Ended September 30, 2006
YIELD ANALYSIS	Average Balance			Interest Earned / Interest Paid		Average Yield /Rate
Interest Earning Assets:
Loans	$	1,981,411		$	113,685	7.67	%
Investment securities		1,624,270			54,598	4.48	%
Federal funds sold and other temporary investments		15,185			563	4.96	%
Total interest earning assets		3,620,866		$	168,846	6.23	%
Allowance for credit losses		(21,951	)
Non-interest earning assets		610,038
Total assets	$	4,208,953
Interest Bearing Liabilities:
Interest bearing demand deposits	$	588,097		$	7,950	1.81	%
Savings and money market deposits		866,724			16,391	2.53	%
Certificates and other time deposits		1,160,893			33,146	3.82	%
Junior subordinated debentures		89,522			5,497	8.21	%
Securities sold under repurchase agreements		44,857			1,292	3.85	%
Federal funds purchased and other borrowings		75,174			2,831	5.04	%
Total interest bearing liabilities		2,825,267		$	67,107	3.18	%
Non-Interest Bearing Liabilities:
Non-interest bearing demand deposits		769,021
Other liabilities		31,563
Total liabilities		3,625,851
Shareholders’ equity		583,102
Total liabilities and shareholders’ equity	$	4,208,953
Net Interest Income & Margin				$	101,739	3.76	%
Net Interest Income & Margin (tax equivalent)				$	103,070	3.81	%

Page 18 of 18