Exhibit 99.1
PRESS RELEASE | For more information contact: |
| |
Prosperity Bancshares, Inc.® | Cullen Zalman |
Prosperity Bank Plaza | Vice President – Banking and Corporate Activities |
4295 San Felipe | 281.269.7199 |
Houston, Texas 77027 | cullen.zalman@prosperitybankusa.com |
FOR IMMEDIATE RELEASE
PROSPERITY BANCSHARES, INC.®
REPORTS SECOND QUARTER
2020 EARNINGS
| • | Second quarter earnings per share (diluted) of $1.41, an increase of 19.5% compared to the second quarter 2019 |
| • | Second quarter net income of $130.9 million |
| • | Loans increased $1.898 billion or 9.9% during the second quarter 2020 |
| • | Deposits increased $2.326 billion or 9.8% during the second quarter 2020 |
| • | Allowance for credit losses on loans and off-balance sheet credit exposure was $354.2 million |
| • | Allowance for credit losses to total loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, of 1.90%(1) |
| • | Nonperforming assets remain low at 0.28% of second quarter average interest-earning assets |
| • | Return (annualized) on second quarter average assets of 1.61% |
| • | Returns (annualized) on second quarter average common equity of 8.84% and average tangible common equity of 19.98%(1) |
| • | Completed the operational conversion of LegacyTexas Bank |
HOUSTON, July 29, 2020. Prosperity Bancshares, Inc.® (NYSE: PB), the parent company of Prosperity Bank® (collectively, “Prosperity”), reported net income for the quarter ended June 30, 2020 of $130.9 million compared with $82.3 million for the same period in 2019. Net income per diluted common share was $1.41 compared with $1.18 for the same period in 2019. The second quarter of 2020 includes a tax benefit for net operating losses (“NOLs”) of $20.1 million, or $0.22(1) per diluted common share, as a result of the enactment of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act permits a five year carryback period for NOLs, which allowed Prosperity to generate an anticipated tax refund and income tax benefit resulting from the tax rate differential between the current statutory tax rate of 21% and the 35% statutory tax rate in prior years during the carryback period.
During the second quarter of 2020, Prosperity incurred merger related charges of $7.5 million, or $0.06(1) per diluted common share. Additionally, loans increased 9.9% during the second quarter 2020 and nonperforming assets remain low at 0.28% of second quarter average interest-earning assets. On November 1, 2019, LegacyTexas Financial Group, Inc. (“LegacyTexas”) merged with Prosperity Bancshares and LegacyTexas Bank merged with Prosperity Bank (collectively, the “Merger”). During the second quarter of 2020, Prosperity completed the operational conversion of LegacyTexas Bank.
“We are pleased with our second quarter 2020 results and with completing the operational integration of Legacy on schedule in early June. The team members from Legacy “now Prosperity” have been excellent and we could not have achieved such a smooth integration without their commitment and efforts. I want to thank all of our team members who worked many hours to make this happen,” said David Zalman, Prosperity’s Senior Chairman and Chief Executive Officer.
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(1) | Refer to the “Notes to Selected Financial Data” at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure. |
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“The second quarter 2020 diluted earnings per share of $1.41 includes a $0.22 income tax benefit, a $0.06 charge for merger related expenses and a $0.03 charge for the write down of fixed assets related to the Merger and CRA funds,” continued Zalman.
“During the second quarter, we saw a $1.898 billion, or 9.9%, increase in loans, mostly related to loans made under the SBA Paycheck Protection Program (PPP). We approved 11,972 PPP loans for a total of $1.411 billion. These loans were important to our customers, enabling them to remain in business at a time they were either operating at a reduced capacity or temporarily shut down. Deposits increased $2.326 billion, or 9.8%, during the quarter, related to funds from the PPP loans and decreased customer spending,” added
Zalman.
“We continue to provide relief to our loan customers through loan extensions and deferrals when possible. For the second quarter of 2020, net charge offs were $13.0 million. Of these charge-offs, $12.4 million were related to PCD loans with specific reserves of $28.5 million that we acquired in the Merger. Further, $16.1 million in specific reserves were released to the general reserve in addition to the $10.0 million provision for loan losses for the second quarter,” stated Zalman.
“The Blue-Chip Consensus forecast estimates that fourth quarter 2020 GDP will end at (5.6%) compared with fourth quarter 2019, however, they are forecasting a 4.8% GDP for fourth quarter 2021 compared with fourth quarter 2020. They are also forecasting an unemployment rate of 9.4% for the fourth quarter 2020 compared with an unemployment rate of 6.9% for fourth quarter 2021. Based on these estimates, 2021 looks brighter. We are positive about our company’s future. While our operating environment and economy is changing frequently, we remain focused on addressing whatever comes our way and taking care of our customers and associates,” concluded Zalman.
Results of Operations for the Three Months Ended June 30, 2020
Net income was $130.9 million(2) for the three months ended June 30, 2020 compared with $82.3 million(3) for the same period in 2019, an increase of $48.6 million or 59.1%. Net income per diluted common share was $1.41 for the three months ended June 30, 2020 compared with $1.18 for the same period in 2019, an increase of 19.5%. Net income for the second quarter of 2020 includes a tax benefit for NOLs of $20.1 million and merger related expenses of $7.5 million. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended June 30, 2020 were 1.61%, 8.84% and 19.98%(1), respectively. Excluding merger related expenses, net of tax, and the NOL tax benefit, annualized returns on average assets, average common equity and average tangible common equity for the three months ended June 30, 2020 were 1.44%(1), 7.88%(1) and 17.81%(1), respectively. Prosperity’s efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 46.56%(1) for the three months ended June 30, 2020. Excluding merger related expenses of $7.5 million, the efficiency ratio was 43.97%(1) for the three months ended June 30, 2020.
Net interest income before provision for credit losses for the three months ended June 30, 2020 was $259.0 million compared with $154.8 million for the same period in 2019, an increase of $104.1 million or 67.2%. The increase was primarily due to the Merger and the increase in loan discount accretion of $23.0 million. On a linked quarter basis, net interest income before provision for credit losses was $259.0 million compared with $256.0 million for the three months ended March 31, 2020, an increase of $2.9 million or 1.1%. The increase was primarily due to a decrease in interest expense partially offset by a decrease in loan discount accretion of $4.2 million and interest income on securities.
The net interest margin on a tax equivalent basis was 3.69% for the three months ended June 30, 2020 compared with 3.16% for the same period in 2019. The change was primarily due to increased interest-earning assets related to the Merger and $23.0 million increase in loan discount accretion. On a linked quarter basis, the net interest margin on a tax equivalent basis was 3.69% for the three months ended June 30, 2020 compared with 3.81% for the three months ended March 31, 2020. The change was primarily due to a $4.2 million decrease in loan discount accretion.
Noninterest income was $25.7 million for the three months ended June 30, 2020 compared with $30.0 million for the same period in 2019, a decrease of $4.3 million or 14.3%. This decrease was primarily due to a loss on write-down of assets of $4.0 million and a decrease in nonsufficient funds (“NSF”) fees, partially offset by an increase in mortgage income and credit card, debit card and ATM card income primarily due to the Merger. On a linked quarter basis, noninterest income decreased $8.7 million or 25.3% to $25.7 million compared with $34.4 million for the three months ended March 31, 2020. This decrease was primarily due to a loss on write-down of assets of $4.0 million and a decrease in NSF fees. NSF fees and credit card, debit card and ATM income were negatively impacted by the pandemic.
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(2) | Includes purchase accounting adjustments of $20.4 million, net of tax, primarily comprised of loan discount accretion of $24.3 million, and merger related expenses of $7.5 million for the three months ended June 30, 2020. |
(3) | Includes purchase accounting adjustments of $776 thousand, net of tax, primarily comprised of loan discount accretion of $1.2 million for the three months ended June 30, 2019. |
(4) | Includes purchase accounting adjustments of $44.6 million, net of tax, primarily comprised of loan discount accretion of $52.7 million, and merger related expenses of $8.0 million for the six months ended June 30, 2020. |
(5) | Includes purchase accounting adjustments of $2.0 million, net of tax, primarily comprised of loan discount accretion of $3.0 million for the six months ended June 30, 2019. |
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Noninterest expense was $134.4 million for the three months ended June 30, 2020 compared with $80.8 million for the same period in 2019, an increase of $53.5 million or 66.3%, primarily due to the Merger and merger related expenses of $7.5 million. On a linked quarter basis, noninterest expense increased $9.6 million or 7.7% to $134.4 million compared with $124.7 million for the three months ended March 31, 2020. The increase was primarily due to increases in merger related expenses and salaries and benefits.
Results of Operations for the Six Months Ended June 30, 2020
Net income was $261.7 million(4) for the six months ended June 30, 2020 compared with $164.7 million(5) for the same period in 2019, an increase of $97.1 million or 59.0%. Net income per diluted common share was $2.80 for the six months ended June 30, 2020 compared with $2.36 for the same period in 2019, an increase of 18.6%. Net income for the six months ended June 30, 2020 includes a tax benefit for NOLs of $20.1 million and merger related expenses of $8.0 million. Annualized returns on average assets, average common equity and average tangible common equity for the six months ended June 30, 2020 were 1.64%, 8.85% and 20.07%(1), respectively. Excluding merger related expenses, net of tax, and the NOL tax benefit, annualized returns on average assets, average common equity and average tangible common equity for the six months ended June 30, 2020 were 1.55%(1), 8.38%(1) and 19.01%(1), respectively. Prosperity’s efficiency ratio (excluding net gains and losses on the sale of assets and taxes) was 44.72%(1) for the six months ended June 30, 2020. Excluding merger related expenses, the efficiency ratio was 43.34%(1) for the six months ended June 30, 2020.
Net interest income before provision for credit losses for the six months ended June 30, 2020 was $515.0 million compared with $309.7 million for the same period in 2019, an increase of $205.2 million or 66.3%. This change was primarily due to the Merger and the increase in loan discount accretion of $49.7 million.
The net interest margin on a tax equivalent basis for the six months ended June 30, 2020 was 3.75% compared with 3.18% for the same period in 2019. This change was primarily due to increased interest-earning assets related to the Merger and the increase in loan discount accretion of $49.7 million.
Noninterest income was $60.1 million for the six months ended June 30, 2020 compared with $58.1 million for the same period in 2019, an increase of $2.0 million or 3.4%. This increase was primarily due to an increase in credit card, debit card and ATM card income, mortgage income and service charges on deposit accounts due to the Merger, partially offset by a net loss on write-down of assets of $4.0 million.
Noninterest expense was $259.1 million for the six months ended June 30, 2020 compared with $159.4 million for the same period in 2019, an increase of $99.7 million or 62.6%. The change was primarily due to the increase in salaries and benefits, credit and debit card, data processing and software amortization, net occupancy and equipment and other noninterest expense due to the Merger and $8.0 million of merger related expenses.
Balance Sheet Information
At June 30, 2020, Prosperity had $32.967 billion in total assets, an increase of $10.592 billion or 47.3% compared with $22.375 billion at June 30, 2019.
Loans at June 30, 2020 were $21.025 billion, an increase of $10.438 billion or 98.6%, compared with $10.587 billion at June 30, 2019. Linked quarter loans increased $1.898 billion or 9.9% from $19.127 billion at March 31, 2020, of which $1.392 billion were Paycheck Protection Program (“PPP”) loans.
As part of its lending activities, Prosperity extends credit to oil and gas production and servicing companies. Oil and gas production loans are loans to companies directly involved in the exploration and or production of oil and gas. Oil and gas servicing loans are loans to companies that provide services for oil and gas production and exploration. At June 30, 2020, oil and gas loans totaled $639.4 million (net of discount and excluding PPP loans totaling $118.6 million) or 3.0% of total loans, of which $394.4 million were production loans and $245.0 million were servicing loans, compared with total oil and gas loans of $367.0 million (net of discount) or 3.5% of total loans at June 30, 2019, of which $95.0 million were production loans and $272.0 million were servicing loans. In addition, as of June 30, 2020, Prosperity had total unfunded commitments to oil and gas companies of $276.9 million compared with total unfunded commitments to oil and gas companies of $220.4 million as of June 30, 2019. Unfunded commitments to producers include letters of credit issued in lieu of oil well plugging bonds.
Additionally, Prosperity extends credit to hotels and restaurants. At June 30, 2020, loans to hotels totaled $384.8 million (excluding PPP loans totaling $8.8 million) or 1.8% of total loans and loans to restaurants totaled $212.3 million (excluding PPP loans totaling $110.7 million) or 1.0% of total loans.
Deposits at June 30, 2020 were $26.153 billion, an increase of $9.265 billion or 54.9%, compared with $16.888 billion at June 30, 2019. Linked quarter deposits increased $2.326 billion or 9.8% from $23.826 billion at March 31, 2020.
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The table below provides detail on the impact of loans acquired and deposits assumed in the Merger:
Balance Sheet Data (at period end) | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | | | | | | | | | | | | | | | | | | | |
| | Jun 30, 2020 | | | Mar 31, 2020 | | | Dec 31, 2019 | | | Sep 30, 2019 | | | Jun 30, 2019 | |
| | (Unaudited) | | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | |
Loans acquired (including new production since acquisition date): | | | | | | | | | | | | | | | | | | | | |
LegacyTexas: | | | | | | | | | | | | | | | | | | | | |
Loans held for sale | | $ | 15,725 | | | $ | 54,229 | | | $ | 66,745 | | | $ | — | | | $ | — | |
Loans held for investment | | | 6,601,006 | | | | 6,713,337 | | | | 6,636,855 | | | | — | | | | — | |
Loans held for investment - Warehouse Purchase Program | | | 2,557,183 | | | | 1,713,762 | | | | 1,552,762 | | | | — | | | | — | |
All other loans | | | 11,851,259 | | | | 10,645,867 | | | | 10,588,984 | | | | 10,673,345 | | | | 10,587,375 | |
Total loans | | $ | 21,025,173 | | | $ | 19,127,195 | | | $ | 18,845,346 | | | $ | 10,673,345 | | | $ | 10,587,375 | |
| | | | | | | | | | | | | | | | | | | | |
Deposits assumed (including new deposits since acquisition date): | | | | | | | | | | | | | | | | | | | | |
LegacyTexas | | $ | 5,997,395 | | | $ | 5,605,986 | | | $ | 6,141,546 | | | $ | — | | | $ | — | |
All other deposits | | | 20,155,293 | | | | 18,220,371 | | | | 18,058,186 | | | | 16,929,920 | | | | 16,887,629 | |
Total deposits | | $ | 26,152,688 | | | $ | 23,826,357 | | | $ | 24,199,732 | | | $ | 16,929,920 | | | $ | 16,887,629 | |
Excluding loans acquired in the Merger and new production by the acquired lending operations since November 1, 2019, loans at June 30, 2020 grew $1.264 billion or 11.9% compared with June 30, 2019 and grew $1.205 billion or 11.3% compared with March 31, 2020.
Excluding deposits assumed in the Merger and new deposits generated at the acquired banking centers since November 1, 2019, deposits at June 30, 2020 grew $3.268 billion or 19.3% compared with June 30, 2019 and grew $1.935 billion or 10.6% compared with March 31, 2020.
Asset Quality
Nonperforming assets totaled $77.9 million or 0.28% of quarterly average interest-earning assets at June 30, 2020, compared with $41.6 million or 0.21% of quarterly average interest-earning assets at June 30, 2019, and $67.2 million or 0.25% of quarterly average interest-earning assets at March 31, 2020.
The allowance for credit losses on loans was $324.2 million or 1.54% of total loans at June 30, 2020 compared to $327.2 million or 1.71% of total loans at March 31, 2020 and $87.0 million or 0.82% of total loans at June 30, 2019. The allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program and PPP loans, was 1.90%(1) at June 30, 2020 compared with 1.88%(1) at March 31, 2020 and 0.82%(1) at June 30, 2019. On January 1, 2020, Prosperity adopted the measurement of current expected credit losses (“CECL”). Upon adoption of CECL, Prosperity recognized an increase in allowance for credit losses on loans of $108.7 million, of which $102.5 million was related to LegacyTexas and an increase in allowance for credit losses on off-balance sheet credit exposures of $24.4 million, of which $6.3 million was related to LegacyTexas, with a corresponding decrease in retained earnings (pre-tax). Additionally, Prosperity recognized an increase in the allowance for credit losses on loans of $131.8 million, of which $130.3 million was related to LegacyTexas, due to the reclass of purchased credit deteriorated (“PCD”) discounts as a result of adopting CECL.
The provision for credit losses was $10.0 million for the three months ended June 30, 2020 compared with $800 thousand for the three months ended June 30, 2019 and no provision for the three months ended March 31, 2020. The provision for credit losses was $10.0 million for the six months ended June 30, 2020 compared with $1.5 million for the six months ended June 30, 2019.
Net charge-offs were $13.0 million for the three months ended June 30, 2020 compared with net recoveries of $115 thousand for the three months ended June 30, 2019 and net charge-offs of $801 thousand for the three months ended March 31, 2020. Net charge-offs for the second quarter of 2020 were primarily due to $12.4 million related to PCD loans. These PCD loans had specific reserves of $28.5 million, of which $12.4 million was allocated to the charge-offs. Further, $16.1 million of PCD specific reserves was moved to the general reserve. Net charge-offs were $13.8 million for the six months ended June 30, 2020 compared with $934 thousand for the six months ended June 30, 2019.
Dividend
Prosperity Bancshares declared a third quarter cash dividend of $0.46 per share to be paid on October 1, 2020 to all shareholders of record as of September 15, 2020.
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Stock Repurchase Program
On January 29, 2020, Prosperity Bancshares announced a stock repurchase program under which up to 5%, or approximately
4.7 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 28, 2021, at the discretion of management. Prosperity Bancshares repurchased zero shares of its common stock during the three months ended June 30, 2020 and 2.1 million shares of its common stock at an average weighted price of $52.59 per share during the six months ended June 30, 2020.
COVID-19 Pandemic
In December 2019, a novel strain of coronavirus disease (“COVID-19”) was first reported in Wuhan, Hubei Province, China. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. On March 13, the U.S. President announced a national emergency relating to the pandemic and has since been extended. On July 10, the Texas governor extended the proclamation certifying that COVID-19 poses an imminent threat of disaster in the state and declaring a state of disaster for all counties in Texas. Prosperity Bank (the “Bank”) is considered an essential business and is closely monitoring the latest developments regarding COVID-19. The health and safety of our associates, customers, and communities are of utmost importance, and the Bank remains committed to providing uninterrupted service. Additionally, the Bank has continuity plans in place to ensure critical operations are able to continue without disruption. The COVID-19 pandemic has resulted in significant economic uncertainties that could negatively impact Prosperity’s operating income, financial condition and cash flows.
In response to the COVID-19 pandemic, the CARES Act was signed into law on March 27, 2020 by the President of the United States. The CARES Act provides assistance for American workers, families and small businesses. The Paycheck Protection Program (“PPP”), established by the CARES Act, is implemented by the Small Business Administration (“SBA”) with support from the Department of the Treasury. This program provides small businesses with funds to pay payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act of 2020 (“PPP Flexibility Act”), which modified the covered expense period from eight weeks to 24 weeks, extended the maturity date of the loans out five years and gave greater flexibility to employers having difficulty hiring workers. PPP loans originated prior to June 5, 2020, have a two year term and earn interest at 1%. PPP loans originated on and after June 5, 2020, have a five year term. On July 4, 2020, the President amended the CARES Act to extend the PPP application period for an additional five weeks. The loans are eligible for early forgiveness by the SBA as provided by the CARES Act and the PPP Flexibility Act and related regulations and guidance. Additionally, the Bank is entitled to a per loan processing fee based on a tiered schedule ranging from 5% to 1% of the loan balance. As of July 7, 2020, the Company has obtained SBA approvals on approximately 11,972 loans totaling $1.411 billion. The Company has also provided relief to its loan customers through loan extensions and deferrals.
Merger with LegacyTexas Financial Group, Inc.
On November 1, 2019, Prosperity completed the merger with LegacyTexas and its wholly-owned subsidiary LegacyTexas Bank headquartered in Plano, Texas. LegacyTexas Bank operated 42 locations in 19 North Texas cities in and around the Dallas-Fort Worth area.
Pursuant to the terms of the merger agreement, Prosperity issued 26,228,148 shares of Prosperity common stock with a closing price of $69.02 per share plus $318.0 million in cash, made up of $308.6 million in cash and $9.4 million in cash for taxes withheld, for all outstanding shares of LegacyTexas. This resulted in goodwill of $1.331 billion as of June 30, 2020, which was subject to subsequent fair value adjustments. During the second quarter of 2020, Prosperity completed the operational conversion of LegacyTexas Bank.
Conference Call
Prosperity’s management team will host a conference call on Wednesday, July 29, 2020 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity’s second quarter 2020 earnings. Individuals and investment professionals may participate in the call by dialing 877-883-0383 for domestic participants, or 412-902-6506 for international participants. The participant elite entry number is 5164054.
Alternatively, individuals may listen to the live webcast of the presentation by visiting Prosperity’s website at www.prosperitybankusa.com. The webcast may be accessed from Prosperity’s home page by selecting “Presentations, Webcast & Calls” from the menu on the Investor Relations link and following the instructions.
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Non-GAAP Financial Measures
Prosperity’s management uses certain non-GAAP financial measures to evaluate its performance. Specifically, Prosperity reviews diluted earnings per share excluding merger related expenses, net of tax, and NOL carryback; return on average assets excluding merger related expenses, net of tax, and NOL carryback; return on average common equity excluding merger related expenses, net of tax, and NOL carryback; tangible book value per share, return on average tangible common equity, the tangible equity to tangible assets ratio and return on average tangible common equity, all excluding merger related expenses, net of tax, and NOL carryback; allowance for credit losses to total loans excluding Warehouse Purchase Program and PPP loans; and the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities and merger related expenses, for internal planning and forecasting purposes. Prosperity believes these non-GAAP financial measures provide information useful to investors in understanding Prosperity’s financial results and that their presentation, together with the accompanying reconciliations, provides a more complete understanding of factors and trends affecting Prosperity’s business and allows investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. Further, Prosperity believes that these non-GAAP financial measures provide useful information by excluding certain items that may not be indicative of its core operating earnings and business outlook. These non-GAAP financial measures should not be considered a substitute for, nor of greater importance than, GAAP basis financial measures and results; Prosperity strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. Please refer to the “Notes to Selected Financial Data” at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures to the nearest respective GAAP financial measures.
Prosperity Bancshares, Inc. ®
As of June 30, 2020, Prosperity Bancshares, Inc.® is a $32.967 billion Houston, Texas based regional financial holding company providing personal banking services and investments to consumers and businesses throughout Texas and Oklahoma. Founded in 1983, Prosperity believes in a community banking philosophy, taking care of customers, businesses and communities in the areas it serves by providing financial solutions to simplify everyday financial needs. In addition to offering traditional deposit and loan products, Prosperity offers digital banking solutions, credit and debit cards, mortgage services, retail brokerage services, trust and wealth management, and cash management.
As of June 30, 2020, Prosperity operated 275 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 65 in the Dallas/Fort Worth area; 22 in the East Texas area; 29 in the Central Texas area including Austin and San Antonio; 34 in the West Texas area including Lubbock, Midland-Odessa and Abilene; 16 in the Bryan/College Station area; 6 in the Central Oklahoma area; 8 in the Tulsa, Oklahoma area.
Cautionary Notes on Forward-Looking Statements
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by Prosperity’s management on the conference call may contain, forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are typically, but not exclusively, identified by the use in the statements of words or phrases such as “aim,” “anticipate,” “estimate,” “expect,” “goal,” “guidance,” “intend,” “is anticipated,” “is expected,” “is intended,” “objective,” “plan,” “projected,” “projection,” “will affect,” “will be,” “will continue,” “will decrease,” “will grow,” “will impact,” “will increase,” “will incur,” “will reduce,” “will remain,” “will result,” “would be,” variations of such words or phrases (including where the word “could,” “may,” or “would” is used rather than the word “will” in a phrase) and similar words and phrases indicating that the statement addresses some future result, occurrence, plan or objective. Forward-looking statements include all statements other than statements of historical fact, including forecasts or trends, and are based on current expectations, assumptions, estimates and projections about Prosperity Bancshares and its subsidiaries. These forward-looking statements may include information about Prosperity’s possible or assumed future economic performance or future results of operations, including future revenues, income, expenses, provision for loan losses, provision for taxes, effective tax rate, earnings per share and cash flows and Prosperity’s future capital expenditures and dividends, future financial condition and changes therein, including changes in Prosperity’s loan portfolio and allowance for loan losses, future capital structure or changes therein, as well as the plans and objectives of management for Prosperity’s future operations, future or proposed acquisitions, the future or expected effect of acquisitions on Prosperity’s operations, results of operations, financial condition, and future economic performance, statements about the anticipated benefits of the proposed transaction, and statements about the assumptions underlying any such statement, as well as expectations regarding the effects of the COVID-19 pandemic on the Bank’s operating income, financial condition and cash flows. These forward‑looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperity’s control, which may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include but are not limited to whether Prosperity can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks, including LegacyTexas; 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
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accounting standards); the possibility that the anticipated benefits of an acquisition transaction, including the LegacyTexas transaction, are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of two companies or as a result of the strength of the economy and competitive factors generally; a deterioration or downgrade in the credit quality and credit agency ratings of the securities in Prosperity’s securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate, interest rate and commodity price fluctuations; the effect, impact potential duration or other implications of the COVID-19 pandemic; and weather. These and various other factors are discussed in Prosperity Bancshares’ Annual Report on Form 10-K for the year ended December 31, 2019, Quarterly Report on Form 10-Q for the period ended March 31, 2020, and other reports and statements Prosperity Bancshares has filed with the Securities and Exchange Commission (“SEC”). Copies of the SEC filings for Prosperity Bancshares may be downloaded from the Internet at no charge from http://www.prosperitybankusa.com.
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Bryan/College Station Area | | Frisco-West | | Kerens | | Hempstead | | 98th Street |
Bryan | | Garland | | Longview | | Hitchcock | | Avenue Q |
Bryan-29th Street | | Grapevine | | Mount Vernon | | Liberty | | North University |
Bryan-East | | Grapevine Main | | Palestine | | Magnolia | | Texas Tech Student Union |
Bryan-North | | Grapevine Motor | | Rusk | | Magnolia Parkway | | |
Caldwell | | Kiest | | Seven Points | | Mont Belvieu | | Midland |
College Station | | Lake Highlands | | Teague | | Nederland | | Wadley |
Crescent Point | | McKinney | | Tyler-Beckham | | Needville | | Wall Street |
Hearne | | McKinney Eldorado | | Tyler-South Broadway | | Rosenberg | | |
Huntsville | | McKinney Redbud | | Tyler-University | | Shadow Creek | | Odessa |
Madisonville | | North Carrolton | | Winnsboro | | Spring | | Grandview |
Navasota | | Oak Cliff | | | | Tomball | | Grant |
New Waverly | | Park Cities | | Houston Area | | Waller | | Kermit Highway |
Rock Prairie | | Plano | | Houston | | West Columbia | | Parkway |
Southwest Parkway | | Plano-West | | Aldine | | Wharton | | |
Tower Point | | Preston Forest | | Alief | | Winnie | | Other West Texas Area |
Wellborn Road | | Preston Parker | | Bellaire | | Wirt | | Locations |
| | Preston Royal | | Beltway | | | | Big Spring |
Central Texas Area | | Red Oak | | Clear Lake | | South Texas Area - | | Brownfield |
Austin | | Richardson | | Copperfield | | Corpus Christi | | Brownwood |
Allandale | | Richardson-West | | Cypress | | Calallen | | Cisco |
Cedar Park | | Rosewood Court | | Downtown | | Carmel | | Comanche |
Congress | | The Colony | | Eastex | | Northwest | | Early |
Lakeway | | Tollroad | | Fairfield | | Saratoga | | Floydada |
Liberty Hill | | Trinity Mills | | First Colony | | Timbergate | | Gorman |
Northland | | Turtle Creek | | Fry Road | | Water Street | | Levelland |
Oak Hill | | West 15th Plano | | Gessner | | | | Littlefield |
Research Blvd | | West Allen | | Gladebrook | | Victoria | | Merkel |
Westlake | | Wylie | | Grand Parkway | | Victoria Main | | Plainview |
| | | | Heights | | Victoria-Navarro | | San Angelo |
Other Central Texas Area | | Fort Worth | | Highway 6 West | | Victoria-North | | Slaton |
Locations | | Haltom City | | Little York | | Victoria Salem | | Snyder |
Bastrop | | Hulen | | Medical Center | | | | |
Canyon Lake | | Keller | | Memorial Drive | | Other South Texas Area | | Oklahoma |
Dime Box | | Museum Place | | Northside | | Locations | | Central Oklahoma Area |
Dripping Springs | | Renaissance Square | | Pasadena | | Alice | | Oklahoma City |
Elgin | | Roanoke | | Pecan Grove | | Aransas Pass | | 23rd Street |
Flatonia | | Stockyards | | Pin Oak | | Beeville | | Expressway |
Georgetown | | | | River Oaks | | Colony Creek | | I-240 |
Gruene | | Other Dallas/Fort Worth Area | | Sugar Land | | Cuero | | Memorial |
Kingsland | | Locations | | SW Medical Center | | Edna | | |
La Grange | | Arlington | | Tanglewood | | Goliad | | Other Central Oklahoma Area |
Lexington | | Azle | | The Plaza | | Gonzales | | Locations |
New Braunfels | | Ennis | | Uptown | | Hallettsville | | Edmond |
Pleasanton | | Flower Mound | | Waugh Drive | | Kingsville | | Norman |
Round Rock | | Gainesville | | Westheimer | | Mathis | | |
San Antonio | | Glen Rose | | West University | | Padre Island | | Tulsa Area |
Schulenburg | | Granbury | | Woodcreek | | Palacios | | Tulsa |
Seguin | | Grand Prairie | | | | Port Lavaca | | Garnett |
Smithville | | Jacksboro | | Katy | | Portland | | Harvard |
Thorndale | | Mesquite | | Cinco Ranch | | Rockport | | Memorial |
Weimar | | Muenster | | Katy-Spring Green | | Sinton | | Sheridan |
| | Runaway Bay | | | | Taft | | S. Harvard |
Dallas/Fort Worth Area | | Sanger | | The Woodlands | | Yoakum | | Utica Tower |
Dallas | | Waxahachie | | The Woodlands-College Park | | Yorktown | | Yale |
14th Street Plano | | Weatherford | | The Woodlands-I-45 | | | | |
Abrams Centre | | | | The Woodlands-Research Forest | | West Texas Area | | Other Tulsa Area Locations |
Addison | | East Texas Area | | | | Abilene | | Owasso |
Allen | | Athens | | Other Houston Area | | Antilley Road | | |
Balch Springs | | Blooming Grove | | Locations | | Barrow Street | | |
Camp Wisdom | | Canton | | Angleton | | Cypress Street | | |
Carrollton | | Carthage | | Bay City | | Judge Ely | | |
Cedar Hill | | Corsicana | | Beaumont | | Mockingbird | | |
Coppell | | Crockett | | Cleveland | | | | |
East Plano | | Eustace | | East Bernard | | Lubbock | | |
Euless | | Gilmer | | El Campo | | 4th Street | | |
Frisco | | Grapeland | | Dayton | | 66th Street | | |
Frisco Gaylord | | Gun Barrel City | | Galveston | | 82nd Street | | |
Frisco Warren | | Jacksonville | | Groves | | 86th Street | | |
- - -
Page 8 of 21
Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(In thousands)
| | Jun 30, 2020 | | | Mar 31, 2020 | | | Dec 31, 2019 | | | Sep 30, 2019 | | | Jun 30, 2019 | |
Balance Sheet Data (at period end) | | | | | | | | | | | | | | | | | | | | |
Loans held for sale | | $ | 39,516 | | | $ | 65,035 | | | $ | 80,959 | | | $ | 20,284 | | | $ | 20,315 | |
Loans held for investment | | | 18,428,474 | | | | 17,348,398 | | | | 17,211,625 | | | | 10,653,061 | | | | 10,567,060 | |
Loans held for investment - Warehouse Purchase Program | | | 2,557,183 | | | | 1,713,762 | | | | 1,552,762 | | | | — | | | | — | |
Total loans | | | 21,025,173 | | | | 19,127,195 | | | | 18,845,346 | | | | 10,673,345 | | | | 10,587,375 | |
| | | | | | | | | | | | | | | | | | | | |
Investment securities(A) | | | 7,717,586 | | | | 8,295,495 | | | | 8,570,056 | | | | 8,495,206 | | | | 8,951,940 | |
Federal funds sold | | | 568 | | | | 676 | | | | 519 | | | | 521 | | | | 555 | |
Allowance for credit losses(B) | | | (324,205 | ) | | | (327,206 | ) | | | (87,469 | ) | | | (87,061 | ) | | | (87,006 | ) |
Cash and due from banks | | | 332,873 | | | | 381,458 | | | | 573,589 | | | | 420,359 | | | | 302,069 | |
Goodwill | | | 3,231,964 | | | | 3,223,144 | | | | 3,223,671 | | | | 1,900,845 | | | | 1,900,845 | |
Core deposit intangibles, net | | | 79,748 | | | | 83,041 | | | | 86,404 | | | | 29,051 | | | | 30,299 | |
Other real estate owned | | | 6,160 | | | | 5,452 | | | | 6,936 | | | | 815 | | | | 2,005 | |
Fixed assets, net | | | 324,975 | | | | 327,293 | | | | 326,832 | | | | 263,703 | | | | 262,479 | |
Other assets | | | 571,807 | | | | 626,951 | | | | 639,824 | | | | 396,033 | | | | 424,660 | |
Total assets | | $ | 32,966,649 | | | $ | 31,743,499 | | | $ | 32,185,708 | | | $ | 22,092,817 | | | $ | 22,375,221 | |
| | | | | | | | | | | | | | | | | | | | |
Noninterest-bearing deposits | | $ | 9,040,257 | | | $ | 7,461,323 | | | $ | 7,763,894 | | | $ | 5,784,002 | | | $ | 5,691,236 | |
Interest-bearing deposits | | | 17,112,431 | | | | 16,365,034 | | | | 16,435,838 | | | | 11,145,918 | | | | 11,196,393 | |
Total deposits | | | 26,152,688 | | | | 23,826,357 | | | | 24,199,732 | | | | 16,929,920 | | | | 16,887,629 | |
Other borrowings | | | 103,131 | | | | 1,338,429 | | | | 1,303,730 | | | | 600,795 | | | | 940,874 | |
Securities sold under repurchase agreements | | | 365,335 | | | | 344,695 | | | | 377,294 | | | | 311,404 | | | | 313,825 | |
Subordinated notes | | | 125,365 | | | | 125,585 | | | | 125,804 | | | | — | | | | — | |
Allowance for credit losses on off-balance sheet credit exposures(B) | | | 29,947 | | | | 29,947 | | | | 5,599 | | | | — | | | | — | |
Other liabilities | | | 242,061 | | | | 222,912 | | | | 202,714 | | | | 123,892 | | | | 104,998 | |
Total liabilities | | | 27,018,527 | | | | 25,887,925 | | | | 26,214,873 | | | | 17,966,011 | | | | 18,247,326 | |
Shareholders' equity(C) | | | 5,948,122 | | | | 5,855,574 | | | | 5,970,835 | | | | 4,126,806 | | | | 4,127,895 | |
Total liabilities and equity | | $ | 32,966,649 | | | $ | 31,743,499 | | | $ | 32,185,708 | | | $ | 22,092,817 | | | $ | 22,375,221 | |
(A) | Includes $(1,767), $(3,421), $763, $49 and $1,611 in unrealized (losses) gains on available for sale securities for the quarterly periods ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively. |
(B) | ASU 2016-13 became effective for Prosperity on January 1, 2020. |
(C) | Includes $(1,396), $(2,703), $602, $38 and $1,273 in after-tax unrealized (losses) gains on available for sale securities for the quarterly periods ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively. |
Page 9 of 21
Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(In thousands)
| | Three Months Ended | | | Year-to-Date | |
| | Jun 30, 2020 | | | Mar 31, 2020 | | | Dec 31, 2019 | | | Sep 30, 2019 | | | Jun 30, 2019 | | | Jun 30, 2020 | | | Jun 30, 2019 | |
Income Statement Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans | | $ | 242,772 | | | $ | 247,243 | | | $ | 222,910 | | | $ | 134,943 | | | $ | 133,525 | | | $ | 490,015 | | | $ | 263,590 | |
Securities(D) | | | 43,776 | | | | 48,282 | | | | 49,348 | | | | 50,872 | | | | 53,944 | | | | 92,058 | | | | 109,592 | |
Federal funds sold and other earning assets | | | 45 | | | | 713 | | | | 600 | | | | 363 | | | | 318 | | | | 758 | | | | 720 | |
Total interest income | | | 286,593 | | | | 296,238 | | | | 272,858 | | | | 186,178 | | | | 187,787 | | | | 582,831 | | | | 373,902 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits | | | 25,269 | | | | 35,018 | | | | 32,759 | | | | 26,939 | | | | 26,562 | | | | 60,287 | | | | 51,690 | |
Other borrowings | | | 533 | | | | 2,932 | | | | 6,115 | | | | 4,335 | | | | 5,556 | | | | 3,465 | | | | 10,873 | |
Securities sold under repurchase agreements | | | 337 | | | | 757 | | | | 879 | | | | 914 | | | | 831 | | | | 1,094 | | | | 1,590 | |
Subordinated notes and trust preferred | | | 1,499 | | | | 1,500 | | | | 1,075 | | | | — | | | | — | | | | 2,999 | | | | — | |
Total interest expense | | | 27,638 | | | | 40,207 | | | | 40,828 | | | | 32,188 | | | | 32,948 | | | | 67,845 | | | | 64,153 | |
Net interest income | | | 258,955 | | | | 256,031 | | | | 232,030 | | | | 153,990 | | | | 154,838 | | | | 514,986 | | | | 309,749 | |
Provision for credit losses | | | 10,000 | | | | — | | | | 1,700 | | | | 1,100 | | | | 800 | | | | 10,000 | | | | 1,500 | |
Net interest income after provision for credit losses | | | 248,955 | | | | 256,031 | | | | 230,330 | | | | 152,890 | | | | 154,038 | | | | 504,986 | | | | 308,249 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Noninterest income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nonsufficient funds (NSF) fees | | | 5,645 | | | | 9,443 | | | | 9,990 | | | | 8,835 | | | | 7,973 | | | | 15,088 | | | | 15,789 | |
Credit card, debit card and ATM card income | | | 7,263 | | | | 7,474 | | | | 7,728 | | | | 6,688 | | | | 6,480 | | | | 14,737 | | | | 12,451 | |
Service charges on deposit accounts | | | 5,790 | | | | 6,104 | | | | 5,597 | | | | 5,020 | | | | 4,989 | | | | 11,894 | | | | 9,987 | |
Trust income | | | 2,242 | | | | 2,662 | | | | 2,582 | | | | 2,492 | | | | 2,558 | | | | 4,904 | | | | 5,153 | |
Mortgage income | | | 1,820 | | | | 2,010 | | | | 2,455 | | | | 839 | | | | 990 | | | | 3,830 | | | | 1,712 | |
Brokerage income | | | 584 | | | | 650 | | | | 625 | | | | 522 | | | | 541 | | | | 1,234 | | | | 1,214 | |
Bank owned life insurance income | | | 1,508 | | | | 1,545 | | | | 1,502 | | | | 1,314 | | | | 1,321 | | | | 3,053 | | | | 2,610 | |
Net (loss) gain on sale or write-down of assets | | | (3,945 | ) | | | (385 | ) | | | (1,870 | ) | | | (3 | ) | | | 2 | | | | (4,330 | ) | | | 60 | |
Other noninterest income | | | 4,768 | | | | 4,885 | | | | 6,897 | | | | 4,966 | | | | 5,104 | | | | 9,653 | | | | 9,126 | |
Total noninterest income | | | 25,675 | | | | 34,388 | | | | 35,506 | | | | 30,673 | | | | 29,958 | | | | 60,063 | | | | 58,102 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Noninterest expense: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Salaries and benefits | | | 79,109 | | | | 77,282 | | | | 69,356 | | | | 52,978 | | | | 52,941 | | | | 156,391 | | | | 104,014 | |
Net occupancy and equipment | | | 9,190 | | | | 8,980 | | | | 7,420 | | | | 5,607 | | | | 5,492 | | | | 18,170 | | | | 10,958 | |
Credit and debit card, data processing and software amortization | | | 11,690 | | | | 11,421 | | | | 9,158 | | | | 4,989 | | | | 4,904 | | | | 23,111 | | | | 9,477 | |
Regulatory assessments and FDIC insurance | | | 2,601 | | | | 2,078 | | | | 2,095 | | | | 1,814 | | | | 2,325 | | | | 4,679 | | | | 4,699 | |
Core deposit intangibles amortization | | | 3,293 | | | | 3,363 | | | | 2,705 | | | | 1,248 | | | | 1,265 | | | | 6,656 | | | | 2,584 | |
Depreciation | | | 4,598 | | | | 4,768 | | | | 4,212 | | | | 3,286 | | | | 3,111 | | | | 9,366 | | | | 6,215 | |
Communications | | | 3,324 | | | | 3,195 | | | | 3,012 | | | | 2,214 | | | | 2,183 | | | | 6,519 | | | | 4,453 | |
Other real estate expense | | | 40 | | | | 46 | | | | 57 | | | | 68 | | | | 120 | | | | 86 | | | | 203 | |
Net (gain) loss on sale or write-down of other real estate | | | 4 | | | | (130 | ) | | | (49 | ) | | | (115 | ) | | | (54 | ) | | | (126 | ) | | | (231 | ) |
Merger related expenses | | | 7,474 | | | | 544 | | | | 46,402 | | | | — | | | | — | | | | 8,018 | | | | — | |
Other noninterest expense | | | 13,045 | | | | 13,194 | | | | 12,083 | | | | 8,610 | | | | 8,534 | | | | 26,239 | | | | 17,020 | |
Total noninterest expense | | | 134,368 | | | | 124,741 | | | | 156,451 | | | | 80,699 | | | | 80,821 | | | | 259,109 | | | | 159,392 | |
Income before income taxes | | | 140,262 | | | | 165,678 | | | | 109,385 | | | | 102,864 | | | | 103,175 | | | | 305,940 | | | | 206,959 | |
Provision for income taxes | | | 9,361 | | | | 34,830 | | | | 23,251 | | | | 21,106 | | | | 20,917 | | | | 44,191 | | | | 42,299 | |
Net income available to common shareholders | | $ | 130,901 | | | $ | 130,848 | | | $ | 86,134 | | | $ | 81,758 | | | $ | 82,258 | | | $ | 261,749 | | | $ | 164,660 | |
(D) Interest income on securities was reduced by net premium amortization of $9,224, $8,005, $8,556, $8,027 and $7,607 for the three-month periods ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively, and $17,229 and $14,196 for the six-month periods ended June 30, 2020 and June 30, 2019, respectively.
Page 10 of 21
Prosperity Bancshares, Inc. ®
Financial Highlights (Unaudited)
(Dollars and share amounts in thousands, except per share data and market prices)
| | Three Months Ended | | | Year-to-Date | |
| | Jun 30, 2020 | | | Mar 31, 2020 | | | Dec 31, 2019 | | | Sep 30, 2019 | | | Jun 30, 2019 | | | Jun 30, 2020 | | | Jun 30, 2019 | |
Profitability | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (E) (F) | | $ | 130,901 | | | $ | 130,848 | | | $ | 86,134 | | | $ | 81,758 | | | $ | 82,258 | | | $ | 261,749 | | | $ | 164,660 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic earnings per share | | $ | 1.41 | | | $ | 1.39 | | | $ | 1.01 | | | $ | 1.19 | | | $ | 1.18 | | | $ | 2.80 | | | $ | 2.36 | |
Diluted earnings per share | | $ | 1.41 | | | $ | 1.39 | | | $ | 1.01 | | | $ | 1.19 | | | $ | 1.18 | | | $ | 2.80 | | | $ | 2.36 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Return on average assets (G) (K) | | | 1.61 | % | | | 1.67 | % | | | 1.19 | % | | | 1.47 | % | | | 1.46 | % | | | 1.64 | % | | | 1.46 | % |
Return on average common equity (G) (K) | | | 8.84 | % | | | 8.86 | % | | | 6.33 | % | | | 7.89 | % | | | 7.92 | % | | | 8.85 | % | | | 7.99 | % |
Return on average tangible common equity (G) (H) (K) | | | 19.98 | % | | | 20.16 | % | | | 12.50 | % | | | 14.77 | % | | | 14.82 | % | | | 20.07 | % | | | 15.03 | % |
Tax equivalent net interest margin (E) (F) (I) | | | 3.69 | % | | | 3.81 | % | | | 3.66 | % | | | 3.16 | % | | | 3.16 | % | | | 3.75 | % | | | 3.18 | % |
Efficiency ratio (H) (J) (L) | | | 46.56 | % | | | 42.90 | % | | | 58.07 | % | | | 43.70 | % | | | 43.74 | % | | | 44.72 | % | | | 43.34 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Liquidity and Capital Ratios | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Equity to assets | | | 18.04 | % | | | 18.45 | % | | | 18.55 | % | | | 18.68 | % | | | 18.45 | % | | | 18.04 | % | | | 18.45 | % |
Common equity tier 1 capital | | | 12.29 | % | | | 12.27 | % | | | 12.30 | % | | | 16.68 | % | | | 16.59 | % | | | 12.29 | % | | | 16.59 | % |
Tier 1 risk-based capital | | | 12.29 | % | | | 12.27 | % | | | 12.30 | % | | | 16.68 | % | | | 16.59 | % | | | 12.29 | % | | | 16.59 | % |
Total risk-based capital | | | 13.36 | % | | | 12.81 | % | | | 12.70 | % | | | 17.34 | % | | | 17.25 | % | | | 13.36 | % | | | 17.25 | % |
Tier 1 leverage capital | | | 9.41 | % | | | 9.49 | % | | | 10.42 | % | | | 10.86 | % | | | 10.67 | % | | | 9.41 | % | | | 10.67 | % |
Period end tangible equity to period end tangible assets (H) | | | 8.89 | % | | | 8.96 | % | | | 9.21 | % | | | 10.90 | % | | | 10.75 | % | | | 8.89 | % | | | 10.75 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted-average shares used in computing earnings per common share | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | 92,658 | | | | 94,371 | | | | 85,573 | | | | 68,738 | | | | 69,806 | | | | 93,514 | | | | 69,832 | |
Diluted | | | 92,658 | | | | 94,371 | | | | 85,573 | | | | 68,738 | | | | 69,806 | | | | 93,514 | | | | 69,832 | |
Period end shares outstanding | | | 92,660 | | | | 92,652 | | | | 94,746 | | | | 68,397 | | | | 69,261 | | | | 92,660 | | | | 69,261 | |
Cash dividends paid per common share | | $ | 0.46 | | | $ | 0.46 | | | $ | 0.46 | | | $ | 0.41 | | | $ | 0.41 | | | $ | 0.92 | | | $ | 0.82 | |
Book value per common share | | $ | 64.19 | | | $ | 63.20 | | | $ | 63.02 | | | $ | 60.34 | | | $ | 59.60 | | | $ | 64.19 | | | $ | 59.60 | |
Tangible book value per common share (H) | | $ | 28.45 | | | $ | 27.52 | | | $ | 28.08 | | | $ | 32.12 | | | $ | 31.72 | | | $ | 28.45 | | | $ | 31.72 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Common Stock Market Price | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
High | | $ | 72.95 | | | $ | 75.22 | | | $ | 74.35 | | | $ | 71.86 | | | $ | 74.50 | | | $ | 75.22 | | | $ | 75.36 | |
Low | | $ | 43.68 | | | $ | 42.02 | | | $ | 66.60 | | | $ | 62.17 | | | $ | 61.85 | | | $ | 42.02 | | | $ | 61.65 | |
Period end closing price | | $ | 59.38 | | | $ | 48.25 | | | $ | 71.89 | | | $ | 70.63 | | | $ | 66.05 | | | $ | 59.38 | | | $ | 66.05 | |
Employees – FTE (excluding overtime) | | | 3,793 | | | | 3,801 | | | | 3,867 | | | | 3,019 | | | | 3,026 | | | | 3,793 | | | | 3,026 | |
Number of banking centers | | | 275 | | | | 285 | | | | 285 | | | | 243 | | | | 243 | | | | 275 | | | | 243 | |
(E) Includes purchase accounting adjustments for the periods presented as follows:
| Three Months Ended | | Year-to-Date |
| Jun 30, 2020 | | Mar 31, 2020 | | Dec 31, 2019 | | Sep 30, 2019 | | Jun 30, 2019 | | Jun 30, 2020 | | Jun 30, 2019 |
Loan discount accretion | | | | | | | | | | | | | |
ASC 310-20 | $17,999 | | $22,463 | | $17,834 | | $1,006 | | $880 | | $40,462 | | $2,354 |
ASC 310-30 | $6,267 | | $6,019 | | $5,908 | | $277 | | $347 | | $12,286 | | $666 |
Securities net amortization | $203 | | $194 | | $201 | | $157 | | $255 | | $397 | | $489 |
Time deposits amortization | $1,793 | | $2,270 | | $1,709 | | — | | — | | $4,063 | | — |
(F) Using effective tax rate of 6.7%, 21.0%, 21.3%, 20.5% and 20.3% for the three-month periods ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively, and 14.4% and 20.4% for the six-month periods ended June 30, 2020 and June 30, 2019, respectively. Net income for the second quarter of 2020 includes a tax benefit for NOLs due to the CARES Act.
(G) Interim periods annualized.
(H) Refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.
(I) Net interest margin for all periods presented is based on average balances on an actual 365 day or 366 days basis.
(J) | Calculated by dividing total noninterest expense, excluding credit loss provisions, by net interest income plus noninterest income, excluding net gains and losses on the sale or write down of assets and securities. Additionally, taxes are not part of this calculation. |
(K) | Excluding merger related expenses, net of tax, and NOL carryback annualized returns on average assets, average common equity and average tangible common equity were 1.44%(H), 7.88%(H) and 17.81%(H) for the three months ended June 30, 2020 and 1.55%(H), 8.38%(H) and 19.01%(H) for the six-month period ended June 30, 2020. |
(L) | Excluding merger related expenses, net of tax, the efficiency ratio was 43.97%(H) for the three months ended June 30, 2020 and 43.34%(H) for the six-month period ended June 30, 2020. |
Page 11 of 21
Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
YIELD ANALYSIS | | Three Months Ended | | |
| | Jun 30, 2020 | | | Mar 31, 2020 | | | Jun 30, 2019 | | |
| | Average Balance | | | Interest Earned/ Interest Paid | | | Average Yield/ Rate | | (M) | Average Balance | | | Interest Earned/ Interest Paid | | | Average Yield/ Rate | | (M) | Average Balance | | | Interest Earned/ Interest Paid | | | Average Yield/ Rate | | (M) |
Interest-earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans held for sale | | $ | 63,338 | | | $ | 523 | | | 3.32% | | | $ | 66,917 | | | $ | 632 | | | 3.80% | | | $ | 20,315 | | | $ | 316 | | | 6.24% | | |
Loans held for investment | | | 18,135,226 | | | | 228,062 | | | 5.06% | | | | 17,263,098 | | | | 236,517 | | | 5.51% | | | | 10,500,110 | | | | 133,209 | | | 5.09% | | |
Loans held for investment - Warehouse Purchase Program | | | 1,843,097 | | | | 14,187 | | | 3.10% | | | | 1,120,324 | | | | 10,094 | | | 3.62% | | | | — | | | | — | | | | — | | |
Total Loans | | | 20,041,661 | | | | 242,772 | | | 4.87% | | | | 18,450,339 | | | | 247,243 | | | 5.39% | | | | 10,520,425 | | | | 133,525 | | | 5.09% | | |
Investment securities | | | 8,054,008 | | | | 43,776 | | | 2.19% | | (N) | | 8,434,196 | | | | 48,282 | | | 2.30% | | (N) | | 9,185,877 | | | | 53,944 | | | 2.36% | | (N) |
Federal funds sold and other earning assets | | | 172,761 | | | | 45 | | | 0.10% | | | | 223,631 | | | | 713 | | | 1.28% | | | | 64,335 | | | | 318 | | | 1.98% | | |
Total interest-earning assets | | | 28,268,430 | | | | 286,593 | | | 4.08% | | | | 27,108,166 | | | | 296,238 | | | 4.40% | | | | 19,770,637 | | | | 187,787 | | | 3.81% | | |
Allowance for credit losses(B) | | | (325,720 | ) | | | | | | | | | | | (328,005 | ) | | | | | | | | | | | (86,158 | ) | | | | | | | | | |
Noninterest-earning assets | | | 4,562,016 | | | | | | | | | | | | 4,577,251 | | | | | | | | | | | | 2,842,478 | | | | | | | | | | |
Total assets | | $ | 32,504,726 | | | | | | | | | | | $ | 31,357,412 | | | | | | | | | | | $ | 22,526,957 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing demand deposits | | $ | 4,949,023 | | | $ | 4,621 | | | 0.38% | | | $ | 4,990,376 | | | $ | 7,096 | | | 0.57% | | | $ | 3,714,968 | | | $ | 5,813 | | | 0.63% | | |
Savings and money market deposits | | | 8,537,352 | | | | 8,745 | | | 0.41% | | | | 7,965,440 | | | | 14,122 | | | 0.71% | | | | 5,647,494 | | | | 12,722 | | | 0.90% | | |
Certificates and other time deposits | | | 3,224,196 | | | | 11,903 | | | 1.48% | | | | 3,404,748 | | | | 13,800 | | | 1.63% | | | | 2,057,033 | | | | 8,027 | | | 1.57% | | |
Other borrowings | | | 474,867 | | | | 533 | | | 0.45% | | | | 832,961 | | | | 2,932 | | | 1.42% | | | | 883,557 | | | | 5,556 | | | 2.52% | | |
Securities sold under repurchase agreements | | | 365,077 | | | | 337 | | | 0.37% | | | | 366,615 | | | | 757 | | | 0.83% | | | | 288,666 | | | | 831 | | | 1.15% | | |
Subordinated notes and trust preferred | | | 125,475 | | | | 1,499 | | | 4.80% | | | | 125,694 | | | | 1,500 | | | 4.80% | | | | — | | | | — | | | | — | | |
Total interest-bearing liabilities | | | 17,675,990 | | | | 27,638 | | | 0.63% | | (O) | | 17,685,834 | | | | 40,207 | | | 0.91% | | (O) | | 12,591,718 | | | | 32,949 | | | 1.05% | | (O) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Noninterest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Noninterest-bearing demand deposits | | | 8,583,734 | | | | | | | | | | | | 7,491,798 | | | | | | | | | | | | 5,674,615 | | | | | | | | | | |
Allowance for credit losses on off-balance sheet credit exposures(B) | | | 29,947 | | | | | | | | | | | | 13,009 | | | | | | | | | | | | — | | | | | | | | | | |
Other liabilities | | | 289,899 | | | | | | | | | | | | 262,523 | | | | | | | | | | | | 108,246 | | | | | | | | | | |
Total liabilities | | | 26,579,570 | | | | | | | | | | | | 25,453,164 | | | | | | | | | | | | 18,374,579 | | | | | | | | | | |
Shareholders' equity | | | 5,925,156 | | | | | | | | | | | | 5,904,248 | | | | | | | | | | | | 4,152,378 | | | | | | | | | | |
Total liabilities and shareholders' equity | | $ | 32,504,726 | | | | | | | | | | | $ | 31,357,412 | | | | | | | | | | | $ | 22,256,957 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net interest income and margin | | | | | | $ | 258,955 | | | 3.68% | | | | | | | $ | 256,031 | | | 3.80% | | | | | | | $ | 154,838 | | | 3.14% | | |
Non-GAAP to GAAP reconciliation: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Tax equivalent adjustment | | | | | | | 690 | | | | | | | | | | | | 723 | | | | | | | | | | | | 827 | | | | | | |
Net interest income and margin (tax equivalent basis) | | | | | | $ | 259,645 | | | 3.69% | | | | | | | $ | 256,754 | | | 3.81% | | | | | | | $ | 155,665 | | | 3.16% | | |
(M) Annualized and based on an actual 365 day or 366 day basis.
(N) Yield on securities was impacted by net premium amortization of $9,224, $8,005 and $7,607 for the three-month periods ended June 30, 2020, March 31, 2020 and June 30, 2019, respectively.
(O) Total cost of funds, including noninterest bearing deposits, was 0.42%, 0.64% and 0.72% for the three-month periods ended June 30, 2020, March 31, 2020 and June 30, 2019, respectively.
Page 12 of 21
Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
YIELD ANALYSIS | | Year-to-Date | | |
| | Jun 30, 2020 | | | Jun 30, 2019 | | |
| | Average Balance | | | Interest Earned/ Interest Paid | | | Average Yield/ Rate | | (P) | Average Balance | | | Interest Earned/ Interest Paid | | | Average Yield/ Rate | | (P) |
Interest-earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans held for sale | | $ | 65,128 | | | $ | 1,155 | | | 3.57% | | | $ | 20,315 | | | $ | 621 | | | 6.16% | | |
Loans held for investment | | | 17,699,162 | | | | 464,579 | | | 5.28% | | | | 10,436,369 | | | | 262,969 | | | 5.08% | | |
Loans held for investment - Warehouse Purchase Program | | | 1,481,710 | | | | 24,281 | | | 3.30% | | | | — | | | | — | | | | — | | |
Total loans | | | 19,246,000 | | | | 490,015 | | | 5.12% | | | | 10,456,684 | | | | 263,590 | | | 5.08% | | |
Investment securities | | | 8,244,102 | | | | 92,058 | | | 2.25% | | (Q) | | 9,242,605 | | | | 109,592 | | | 2.39% | | (Q) |
Federal funds sold and other earning assets | | | 198,196 | | | | 758 | | | 0.77% | | | | 68,068 | | | | 720 | | | 2.13% | | |
Total interest-earning assets | | | 27,688,298 | | | | 582,831 | | | 4.23% | | | | 19,767,357 | | | | 373,902 | | | 3.81% | | |
Allowance for credit losses | | | (326,862 | ) | | | | | | | | | | | (86,332 | ) | | | | | | | | | |
Noninterest-earning assets | | | 4,569,631 | | | | | | | | | | | | 2,853,199 | | | | | | | | | | |
Total assets | | $ | 31,931,067 | | | | | | | | | | | $ | 22,534,224 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing demand deposits | | $ | 4,969,700 | | | $ | 11,717 | | | 0.47% | | | $ | 3,930,475 | | | $ | 12,625 | | | 0.65% | | |
Savings and money market deposits | | | 8,251,396 | | | | 22,867 | | | 0.56% | | | | 5,560,625 | | | | 23,906 | | | 0.87% | | |
Certificates and other time deposits | | | 3,314,472 | | | | 25,703 | | | 1.56% | | | | 2,059,877 | | | | 15,159 | | | 1.48% | | |
Other borrowings | | | 653,914 | | | | 3,465 | | | 1.07% | | | | 864,322 | | | | 10,873 | | | 2.54% | | |
Securities sold under repurchase agreements | | | 365,846 | | | | 1,094 | | | 0.60% | | | | 280,692 | | | | 1,590 | | | 1.14% | | |
Subordinated notes and trust preferred | | | 125,585 | | | | 2,999 | | | 4.80% | | | | — | | | | — | | | | — | | |
Total interest-bearing liabilities | | | 17,680,913 | | | | 67,845 | | | 0.77% | | (R) | | 12,695,991 | | | | 64,153 | | | 1.02% | | (R) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Noninterest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | |
Noninterest-bearing demand deposits | | | 8,037,767 | | | | | | | | | | | | 5,616,541 | | | | | | | | | | |
Allowance for credit losses on off-balance sheet credit exposures(B) | | | 21,478 | | | | | | | | | | | | — | | | | | | | | | | |
Other liabilities | | | 276,211 | | | | | | | | | | | | 97,610 | | | | | | | | | | |
Total liabilities | | | 26,016,369 | | | | | | | | | | | | 18,410,142 | | | | | | | | | | |
Shareholders' equity | | | 5,914,698 | | | | | | | | | | | | 4,124,082 | | | | | | | | | | |
Total liabilities and shareholders' equity | | | 31,931,067 | | | | | | | | | | | $ | 22,534,224 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Net interest income and margin | | | | | | $ | 514,986 | | | 3.74% | | | | | | | $ | 309,749 | | | 3.16% | | |
Non-GAAP to GAAP reconciliation: | | | | | | | | | | | | | | | | | | | | | | | | | |
Tax equivalent adjustment | | | | | | | 1,413 | | | | | | | | | | | | 1,690 | | | | | | |
Net interest income and margin (tax equivalent basis) | | | | | | $ | 516,399 | | | 3.75% | | | | | | | $ | 311,439 | | | 3.18% | | |
(P) Annualized and based on an actual 365 day or 366 day basis.
(Q) Yield on securities was impacted by net premium amortization of $17,229 and $14,196 for the six-month periods ended June 30, 2020 and 2019, respectively.
(R) Total cost of funds, including noninterest bearing deposits, was 0.53% and 0.71% for the six-month periods ended June 30, 2020 and 2019, respectively.
Page 13 of 21
Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
| Three Months Ended | |
| Jun 30, 2020 | | | Mar 31, 2020 | | | Dec 31, 2019 | | | Sep 30, 2019 | | | Jun 30, 2019 | |
YIELD TREND (S) | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Interest-Earning Assets: | | | | | | | | | | | | | | | | | | | |
Loans held for sale | | 3.32 | % | | | 3.80 | % | | | 3.96 | % | | | 5.01 | % | | | 6.25 | % |
Loans held for investment | | 5.06 | % | | | 5.51 | % | | | 5.52 | % | | | 5.05 | % | | | 5.09 | % |
Loans held for investment - Warehouse Purchase Program | | 3.10 | % | | | 3.62 | % | | | 3.93 | % | | | — | | | | — | |
Total loans | | 4.87 | % | | | 5.39 | % | | | 5.42 | % | | | 5.05 | % | | | 5.09 | % |
Investment securities (T) | | 2.19 | % | | | 2.30 | % | | | 2.28 | % | | | 2.30 | % | | | 2.36 | % |
Federal funds sold and other earning assets | | 0.10 | % | | | 1.28 | % | | | 0.78 | % | | | 1.93 | % | | | 1.98 | % |
Total interest-earning assets | | 4.08 | % | | | 4.40 | % | | | 4.29 | % | | | 3.80 | % | | | 3.81 | % |
| | | | | | | | | | | | | | | | | | | |
Interest-Bearing Liabilities: | | | | | | | | | | | | | | | | | | | |
Interest-bearing demand deposits | | 0.38 | % | | | 0.57 | % | | | 0.54 | % | | | 0.62 | % | | | 0.63 | % |
Savings and money market deposits | | 0.41 | % | | | 0.71 | % | | | 0.79 | % | | | 0.90 | % | | | 0.90 | % |
Certificates and other time deposits | | 1.48 | % | | | 1.63 | % | | | 1.67 | % | | | 1.67 | % | | | 1.57 | % |
Other borrowings | | 0.45 | % | | | 1.42 | % | | | 1.73 | % | | | 2.29 | % | | | 2.52 | % |
Securities sold under repurchase agreements | | 0.37 | % | | | 0.83 | % | | | 0.99 | % | | | 1.15 | % | | | 1.15 | % |
Subordinated notes and trust preferred | | 4.80 | % | | | 4.80 | % | | | 4.85 | % | | | — | | | | — | |
Total interest-bearing liabilities | | 0.63 | % | | | 0.91 | % | | | 1.00 | % | | | 1.04 | % | | | 1.05 | % |
| | | | | | | | | | | | | | | | | | | |
Net Interest Margin | | 3.68 | % | | | 3.80 | % | | | 3.65 | % | | | 3.14 | % | | | 3.14 | % |
Net Interest Margin (tax equivalent) | | 3.69 | % | | | 3.81 | % | | | 3.66 | % | | | 3.16 | % | | | 3.16 | % |
(S) Annualized and based on average balances on an actual 365 day or 366 day basis.
(T) Yield on securities was impacted by net premium amortization of $9,224, $8,005, $8,556, $8,027 and $7,607 for the three-month periods ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively.
Page 14 of 21
Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
| | Three Months Ended | |
| | Jun 30, 2020 | | | Mar 31, 2020 | | | Dec 31, 2019 | | | Sep 30, 2019 | | | Jun 30, 2019 | |
Balance Sheet Averages | | | | | | | | | | | | | | | | | | | | |
Loans held for sale | | $ | 63,338 | | | $ | 66,917 | | | $ | 57,171 | | | $ | 21,077 | | | $ | 24,787 | |
Loans held for investment | | | 18,135,226 | | | | 17,263,098 | | | | 15,261,163 | | | | 10,589,272 | | | | 10,495,638 | |
Loans held for investment - Warehouse Purchase Program | | | 1,843,097 | | | | 1,120,324 | | | | 996,903 | | | | — | | | | — | |
Total Loans | | | 20,041,661 | | | | 18,450,339 | | | | 16,315,237 | | | | 10,610,349 | | | | 10,520,425 | |
| | | | | | | | | | | | | | | | | | | | |
Investment securities | | | 8,054,008 | | | | 8,434,196 | | | | 8,598,736 | | | | 8,758,056 | | | | 9,185,877 | |
Federal funds sold and other earning assets | | | 172,761 | | | | 223,631 | | | | 305,596 | | | | 74,751 | | | | 64,335 | |
Total interest-earning assets | | | 28,268,430 | | | | 27,108,166 | | | | 25,219,569 | | | | 19,443,156 | | | | 19,770,637 | |
Allowance for credit losses(B) | | | (325,720 | ) | | | (328,005 | ) | | | (86,795 | ) | | | (86,996 | ) | | | (86,158 | ) |
Cash and due from banks | | | 247,426 | | | | 321,832 | | | | 275,072 | | | | 230,986 | | | | 227,653 | |
Goodwill | | | 3,223,469 | | | | 3,223,633 | | | | 2,658,133 | | | | 1,900,845 | | | | 1,900,845 | |
Core deposit intangibles, net | | | 81,539 | | | | 84,865 | | | | 28,912 | | | | 29,682 | | | | 30,933 | |
Other real estate | | | 5,666 | | | | 5,837 | | | | 4,864 | | | | 997 | | | | 2,053 | |
Fixed assets, net | | | 327,811 | | | | 325,337 | | | | 308,692 | | | | 263,495 | | | | 260,054 | |
Other assets | | | 676,105 | | | | 615,747 | | | | 654,978 | | | | 423,931 | | | | 420,940 | |
Total assets | | $ | 32,504,726 | | | $ | 31,357,412 | | | $ | 29,063,425 | | | $ | 22,206,096 | | | $ | 22,526,957 | |
| | | | | | | | | | | | | | | | | | | | |
Noninterest-bearing deposits | | $ | 8,583,734 | | | $ | 7,491,798 | | | $ | 7,066,878 | | | $ | 5,701,419 | | | $ | 5,674,615 | |
Interest-bearing demand deposits | | | 4,949,023 | | | | 4,990,376 | | | | 4,233,880 | | | | 3,575,249 | | | | 3,714,968 | |
Savings and money market deposits | | | 8,537,352 | | | | 7,965,440 | | | | 7,109,754 | | | | 5,524,277 | | | | 5,647,494 | |
Certificates and other time deposits | | | 3,224,196 | | | | 3,404,748 | | | | 3,044,843 | | | | 2,083,803 | | | | 2,057,033 | |
Total deposits | | | 25,294,305 | | | | 23,852,362 | | | | 21,455,355 | | | | 16,884,748 | | | | 17,094,110 | |
Other borrowings | | | 474,867 | | | | 832,961 | | | | 1,403,686 | | | | 749,814 | | | | 883,557 | |
Securities sold under repurchase agreements | | | 365,077 | | | | 366,615 | | | | 351,580 | | | | 315,277 | | | | 288,666 | |
Subordinated notes and trust preferred | | | 125,475 | | | | 125,694 | | | | 87,963 | | | | — | | | | — | |
Allowance for credit losses on off-balance sheet credit exposures(B) | | | 29,947 | | | | 13,009 | | | | 5,673 | | | | — | | | | — | |
Other liabilities | | | 289,899 | | | | 262,523 | | | | 320,855 | | | | 111,526 | | | | 108,246 | |
Shareholders' equity | | | 5,925,156 | | | | 5,904,248 | | | | 5,443,986 | | | | 4,144,731 | | | | 4,152,378 | |
Total liabilities and equity | | $ | 32,504,726 | | | $ | 31,357,412 | | | $ | 29,063,425 | | | $ | 22,206,096 | | | $ | 22,526,957 | |
Page 15 of 21
Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
| | Jun 30, 2020 | | | Mar 31, 2020 | | | Dec 31, 2019 | | | Sep 30, 2019 | | | Jun 30, 2019 | |
Period End Balances | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loan Portfolio | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 2,214,742 | | | 10.5 | % | | $ | 2,500,110 | | | 13.1 | % | | $ | 2,507,318 | | | 13.3 | % | | $ | 1,120,913 | | | 10.5 | % | | $ | 1,158,657 | | | 10.9 | % |
Warehouse purchase program | | | 2,557,183 | | | 12.2 | % | | | 1,713,762 | | | 9.0 | % | | | 1,552,762 | | | 8.2 | % | | | — | | | — | | | | — | | | — | |
Construction, land development and other land loans | | | 2,033,037 | | | 9.7 | % | | | 2,051,021 | | | 10.7 | % | | | 2,064,167 | | | 11.0 | % | | | 1,764,648 | | | 16.5 | % | | | 1,739,308 | | | 16.4 | % |
1-4 family residential | | | 4,184,972 | | | 19.9 | % | | | 3,993,138 | | | 20.9 | % | | | 3,880,382 | | | 20.6 | % | | | 2,472,907 | | | 23.2 | % | | | 2,456,506 | | | 23.2 | % |
Home equity | | | 437,098 | | | 2.1 | % | | | 516,003 | | | 2.6 | % | | | 507,029 | | | 2.6 | % | | | 250,775 | | | 2.3 | % | | | 256,772 | | | 2.4 | % |
Commercial real estate (includes multi-family residential) | | | 6,550,086 | | | 31.2 | % | | | 6,576,213 | | | 34.4 | % | | | 6,556,285 | | | 34.9 | % | | | 3,652,176 | | | 34.3 | % | | | 3,551,668 | | | 33.6 | % |
Agriculture (includes farmland) | | | 612,694 | | | 2.9 | % | | | 635,295 | | | 3.3 | % | | | 680,855 | | | 3.6 | % | | | 729,585 | | | 6.8 | % | | | 736,470 | | | 7.0 | % |
Consumer and other | | | 403,462 | | | 1.9 | % | | | 423,000 | | | 2.2 | % | | | 398,271 | | | 2.1 | % | | | 342,839 | | | 3.2 | % | | | 321,023 | | | 3.0 | % |
Energy | | | 639,402 | | | 3.0 | % | | | 718,653 | | | 3.8 | % | | | 698,277 | | | 3.7 | % | | | 339,502 | | | 3.2 | % | | | 366,971 | | | 3.5 | % |
Paycheck Protection Program | | | 1,392,497 | | | 6.6 | % | | | — | | | — | | | | — | | | — | | | | — | | | — | | | | — | | | — | |
Total loans | | $ | 21,025,173 | | | | | | $ | 19,127,195 | | | | | | $ | 18,845,346 | | | | | | $ | 10,673,345 | | | | | | $ | 10,587,375 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposit Types | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Noninterest-bearing DDA | | $ | 9,040,257 | | | 34.6 | % | | $ | 7,461,323 | | | 31.3 | % | | $ | 7,763,894 | | | 32.1 | % | | $ | 5,784,002 | | | 34.2 | % | | $ | 5,691,236 | | | 33.7 | % |
Interest-bearing DDA | | | 5,130,495 | | | 19.6 | % | | | 4,980,090 | | | 20.9 | % | | | 5,100,938 | | | 21.1 | % | | | 3,564,419 | | | 21.0 | % | | | 3,530,581 | | | 20.9 | % |
Money market | | | 6,148,206 | | | 23.5 | % | | | 5,341,525 | | | 22.4 | % | | | 5,099,024 | | | 21.1 | % | | | 3,457,728 | | | 20.4 | % | | | 3,438,164 | | | 20.3 | % |
Savings | | | 2,722,718 | | | 10.4 | % | | | 2,716,247 | | | 11.4 | % | | | 2,756,297 | | | 11.3 | % | | | 2,027,621 | | | 12.0 | % | | | 2,158,159 | | | 12.8 | % |
Certificates and other time deposits | | | 3,111,012 | | | 11.9 | % | | | 3,327,172 | | | 14.0 | % | | | 3,479,579 | | | 14.4 | % | | | 2,096,150 | | | 12.4 | % | | | 2,069,489 | | | 12.3 | % |
Total deposits | | $ | 26,152,688 | | | | | | $ | 23,826,357 | | | | | | $ | 24,199,732 | | | | | | $ | 16,929,920 | | | | | | $ | 16,887,629 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loan to Deposit Ratio | | | 80.4 | % | | | | | | 80.3 | % | | | | | | 77.9 | % | | | | | | 63.0 | % | | | | | | 62.7 | % | | | |
Page 16 of 21
Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
Construction Loans
| | Jun 30, 2020 | | | Mar 31, 2020 | | | Dec 31, 2019 | | | Sep 30, 2019 | | | Jun 30, 2019 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Single family residential construction | | $ | 710,401 | | | 34.9 | % | | $ | 655,191 | | | 31.9 | % | | $ | 614,647 | | | 29.7 | % | | $ | 462,714 | | | 26.2 | % | | $ | 446,868 | | | 25.7 | % |
Land development | | | 114,748 | | | 5.6 | % | | | 110,853 | | | 5.4 | % | | | 88,529 | | | 4.3 | % | | | 80,711 | | | 4.6 | % | | | 87,825 | | | 5.0 | % |
Raw land | | | 274,159 | | | 13.5 | % | | | 265,943 | | | 12.9 | % | | | 233,559 | | | 11.3 | % | | | 171,609 | | | 9.7 | % | | | 168,531 | | | 9.7 | % |
Residential lots | | | 144,765 | | | 7.1 | % | | | 136,861 | | | 6.7 | % | | | 138,961 | | | 6.7 | % | | | 123,265 | | | 7.0 | % | | | 121,586 | | | 7.0 | % |
Commercial lots | | | 103,267 | | | 5.1 | % | | | 106,036 | | | 5.2 | % | | | 101,960 | | | 4.9 | % | | | 102,084 | | | 5.8 | % | | | 105,633 | | | 6.1 | % |
Commercial construction and other | | | 687,618 | | | 33.8 | % | | | 778,731 | | | 37.9 | % | | | 890,597 | | | 43.1 | % | | | 825,001 | | | 46.7 | % | | | 809,680 | | | 46.5 | % |
Net unaccreted discount | | | (1,921 | ) | | | | | | (2,594 | ) | | | | | | (4,086 | ) | | | | | | (736 | ) | | | | | | (815 | ) | | | |
Total construction loans | | $ | 2,033,037 | | | | | | $ | 2,051,021 | | | | | | $ | 2,064,167 | | | | | | $ | 1,764,648 | | | | | | $ | 1,739,308 | | | | |
Non-Owner Occupied Commercial Real Estate Loans by Metropolitan Statistical Area (MSA) as of June 30, 2020
| Houston | | | Dallas | | | Austin | | | OK City | | | Tulsa | | | Other (U) | | | Total | | |
Collateral Type | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shopping center/retail | $ | 383,534 | | | $ | 302,358 | | | $ | 54,317 | | | $ | 15,821 | | | $ | 32,152 | | | $ | 279,800 | | | $ | 1,067,982 | | |
Commercial and industrial buildings | | 147,324 | | | | 168,224 | | | | 13,955 | | | | 12,610 | | | | 19,751 | | | | 160,817 | | | | 522,681 | | |
Office buildings | | 209,995 | | | | 582,866 | | | | 33,068 | | | | 44,134 | | | | 5,324 | | | | 87,465 | | | | 962,852 | | |
Medical buildings | | 38,561 | | | | 50,941 | | | | 12,817 | | | | 22,393 | | | | 25,529 | | | | 45,135 | | | | 195,376 | | |
Apartment buildings | | 425,883 | | | | 681,116 | | | | 33,444 | | | | 14,199 | | | | 19,165 | | | | 209,404 | | | | 1,383,211 | | |
Hotel | | 64,530 | | | | 76,375 | | | | 34,101 | | | | 30,037 | | | | — | | | | 147,004 | | | | 352,047 | | |
Other | | 46,187 | | | | 31,511 | | | | 17,666 | | | | 10,191 | | | | 4,344 | | | | 78,716 | | | | 188,615 | | |
Total | $ | 1,316,014 | | | $ | 1,893,391 | | | $ | 199,368 | | | $ | 149,385 | | | $ | 106,265 | | | $ | 1,008,341 | | | $ | 4,672,764 | | (V) |
Acquired Loans
| | Non-PCD Loans | | | PCD Loans | | | Total Acquired Loans | |
| | Balance at Acquisition Date | | | Balance at Mar 31, 2020 | | | Balance at Jun 30, 2020 | | | Balance at Acquisition Date | | | Balance at Mar 31, 2020 | | | Balance at Jun 30, 2020 | | | Balance at Acquisition Date | | | Balance at Mar 31, 2020 | | | Balance at Jun 30, 2020 | |
Loan marks: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Acquired banks (W) | | $ | 229,080 | | | $ | 9,238 | | | $ | 7,436 | | | $ | 142,128 | | | $ | — | | | $ | — | | | $ | 371,208 | | | $ | 9,238 | | | $ | 7,436 | |
LegacyTexas merger(X) | | | 116,519 | | | | 78,375 | | | | 62,424 | | | | 177,924 | | | | 29,460 | | | | 22,565 | | | | 294,443 | | | | 107,835 | | | | 84,989 | |
Total | | | 345,599 | | | | 87,613 | | | | 69,860 | | | | 320,052 | | | | 29,460 | | (Z) | | 22,565 | | | | 665,651 | | | | 117,073 | | | | 92,425 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Acquired portfolio loan balances: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Acquired banks (W) | | | 5,690,998 | | | | 350,738 | | | | 308,692 | | | | 275,221 | | | | 7,548 | | | | 6,952 | | | | 5,966,219 | | | | 358,286 | | | | 315,644 | |
LegacyTexas merger(X) | | | 6,595,161 | | | | 5,393,630 | | | | 4,808,987 | | | | 414,352 | | | | 347,612 | | | | 283,237 | | | | 7,009,513 | | | | 5,741,242 | | | | 5,092,224 | |
Total | | | 12,286,159 | | | | 5,744,368 | | | | 5,117,679 | | | | 689,573 | | | | 355,160 | | | | 290,189 | | | | 12,975,732 | | (Y) | | 6,099,528 | | | | 5,407,868 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Acquired portfolio loan balances less loan marks | | $ | 11,940,560 | | | $ | 5,656,755 | | | $ | 5,047,819 | | | $ | 369,521 | | | $ | 325,700 | | | $ | 267,624 | | | $ | 12,310,081 | | | $ | 5,982,455 | | | $ | 5,315,443 | |
(U) Includes other MSA and non-MSA regions.
(V) Represents a portion of total commercial real estate loans of $6.550 billion as of June 30, 2020.
(W) Includes Bank of Texas, Bank Arlington, American State Bank, Community National Bank, First Federal Bank Texas, Coppermark Bank, First Victoria National Bank, The F&M Bank & Trust Company and Tradition Bank.
(X) The LegacyTexas merger was completed on November 1, 2019. During the fourth quarter of 2019, LegacyTexas added $7.010 billion in loans with related purchase accounting adjustments of $294.4 million at acquisition date.
(Y) Actual principal balances acquired.
(Z) ASU 2016-13 became effective for Prosperity on January 1, 2020.
Page 17 of 21
Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(Dollars in thousands)
| Three Months Ended | | | Year-to-Date | |
| Jun 30, 2020 | | | Mar 31, 2020 | | | Dec 31, 2019 | | | Sep 30, 2019 | | | Jun 30, 2019 | | | Jun 30, 2020 | | | Jun 30, 2019 | |
Asset Quality | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nonaccrual loans | $ | 62,904 | | | $ | 58,194 | | | $ | 55,243 | | | $ | 49,973 | | | $ | 37,289 | | | $ | 62,904 | | | $ | 37,289 | |
Accruing loans 90 or more days past due | | 8,691 | | | | 3,255 | | | | 441 | | | | 341 | | | | 1,594 | | | | 8,691 | | | | 1,594 | |
Total nonperforming loans | | 71,595 | | | | 61,449 | | | | 55,684 | | | | 50,314 | | | | 38,883 | | | | 71,595 | | | | 38,883 | |
Repossessed assets | | 187 | | | | 278 | | | | 324 | | | | 28 | | | | 670 | | | | 187 | | | | 670 | |
Other real estate | | 6,160 | | | | 5,452 | | | | 6,935 | | | | 815 | | | | 2,005 | | | | 6,160 | | | | 2,005 | |
Total nonperforming assets | $ | 77,942 | | | $ | 67,179 | | | $ | 62,943 | | | $ | 51,157 | | | $ | 41,558 | | | $ | 77,942 | | | $ | 41,558 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nonperforming assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial (includes energy) | $ | 15,238 | | | $ | 15,987 | | | $ | 17,086 | | | $ | 15,974 | | | $ | 17,592 | | | $ | 15,238 | | | $ | 17,592 | |
Construction, land development and other land loans | | 10,530 | | | | 1,125 | | | | 1,177 | | | | 874 | | | | 2,296 | | | | 10,530 | | | | 2,296 | |
1-4 family residential (includes home equity) | | 29,812 | | | | 28,996 | | | | 26,453 | | | | 19,600 | | | | 16,641 | | | | 29,812 | | | | 16,641 | |
Commercial real estate (includes multi-family residential) | | 20,748 | | | | 20,155 | | | | 18,031 | | | | 14,384 | | | | 4,352 | | | | 20,748 | | | | 4,352 | |
Agriculture (includes farmland) | | 1,501 | | | | 896 | | | | 101 | | | | 285 | | | | 616 | | | | 1,501 | | | | 616 | |
Consumer and other | | 113 | | | | 20 | | | | 95 | | | | 40 | | | | 61 | | | | 113 | | | | 61 | |
Total | $ | 77,942 | | | $ | 67,179 | | | $ | 62,943 | | | $ | 51,157 | | | $ | 41,558 | | | $ | 77,942 | | | $ | 41,558 | |
Number of loans/properties | | 213 | | | | 198 | | | | 236 | | | | 89 | | | | 92 | | | | 213 | | | | 92 | |
Allowance for credit losses at end of period | $ | 324,205 | | | $ | 327,206 | | | $ | 87,469 | | | $ | 87,061 | | | $ | 87,006 | | | $ | 324,205 | | | $ | 87,006 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net charge-offs (recoveries): | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial (includes energy) | $ | 12,206 | | | $ | (28 | ) | | $ | 76 | | | $ | (83 | ) | | $ | (828 | ) | | $ | 12,178 | | | $ | 891 | |
Construction, land development and other land loans | | (6 | ) | | | (12 | ) | | | (6 | ) | | | (6 | ) | | | 7 | | | | (18 | ) | | | 7 | |
1-4 family residential (includes home equity) | | 51 | | | | 5 | | | | 20 | | | | (9 | ) | | | 11 | | | | 56 | | | | 8 | |
Commercial real estate (includes multi-family residential) | | — | | | | (81 | ) | | | 254 | | | | (1 | ) | | | (1 | ) | | | (81 | ) | | | (2 | ) |
Agriculture (includes farmland) | | (3 | ) | | | (1 | ) | | | (18 | ) | | | 278 | | | | 46 | | | | (4 | ) | | | (1,232 | ) |
Consumer and other | | 753 | | | | 918 | | | | 965 | | | | 867 | | | | 650 | | | | 1,671 | | | | 1,262 | |
Total | $ | 13,001 | | | $ | 801 | | | $ | 1,291 | | | $ | 1,046 | | | $ | (115 | ) | | $ | 13,802 | | | $ | 934 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Asset Quality Ratios | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nonperforming assets to average interest-earning assets | | 0.28 | % | | | 0.25 | % | | | 0.25 | % | | | 0.26 | % | | | 0.21 | % | | | 0.28 | % | | | 0.21 | % |
Nonperforming assets to loans and other real estate | | 0.37 | % | | | 0.35 | % | | | 0.33 | % | | | 0.48 | % | | | 0.39 | % | | | 0.37 | % | | | 0.39 | % |
Net charge-offs to average loans (annualized) | | 0.26 | % | | | 0.02 | % | | | 0.03 | % | | | 0.04 | % | | — | | | | 0.14 | % | | | 0.02 | % |
Allowance for credit losses to total loans(AA) | | 1.54 | % | | | 1.71 | % | | | 0.46 | % | | | 0.82 | % | | | 0.82 | % | | | 1.54 | % | | | 0.82 | % |
Allowance for credit losses to total loans, excluding Warehouse Purchase Program loans and Paycheck Protection Program loans (H)(AA) | | 1.90 | % | | | 1.88 | % | | | 0.51 | % | | | 0.82 | % | | | 0.82 | % | | | 1.90 | % | | | 0.82 | % |
(AA) ASU 2016-13 became effective for Prosperity on January 1, 2020.
Page 18 of 21
Prosperity Bancshares, Inc.®
Notes to Selected Financial Data (Unaudited)
(Dollars and share amounts in thousands, except per share data)
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 diluted earnings per share excluding merger related expenses, net of tax, and NOL carryback; return on average assets excluding merger related expenses, net of tax, and NOL carryback; return on average common equity excluding merger related expenses, net of tax, and NOL carryback; tangible book value per share, return on average tangible common equity, the tangible equity to tangible assets ratio and return on average tangible common equity, all excluding merger related expenses, net of tax, and NOL carryback; allowance for credit losses to total loans excluding Warehouse Purchase Program and PPP loans; and the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities and merger related expenses, for internal planning and forecasting purposes. In addition, due to the application of purchase accounting, Prosperity uses certain non-GAAP financial measures and ratios that exclude the impact of these items to evaluate its allowance for credit losses to total loans (excluding Warehouse Purchase Program loans and PPP loans). Prosperity has included information below relating to these non-GAAP financial measures for the applicable periods presented.
| | Three Months Ended | | | Year-to-Date | |
| | Jun 30, 2020 | | | Mar 31, 2020 | | | Dec 31, 2019 | | | Sep 30, 2019 | | | Jun 30, 2019 | | | Jun 30, 2020 | | | Jun 30, 2019 | |
Reconciliation of diluted earnings per share to diluted earnings per share, excluding merger related expenses, net of tax, and net operating losses carryback: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 130,901 | | | $ | 130,848 | | | $ | 86,134 | | | $ | 81,758 | | | $ | 82,258 | | | $ | 261,749 | | | $ | 164,660 | |
Add: merger related expenses, net of tax(AB) | | | 5,904 | | | | 430 | | | | 36,658 | | | | — | | | | — | | | | 6,334 | | | | — | |
Less: net operating losses carryback (AC) | | | (20,145 | ) | | | — | | | | — | | | | — | | | | — | | | | (20,145 | ) | | | — | |
Net income, excluding merger related expenses, net of tax, and net operating losses carryback (AB) (AC) | | $ | 116,660 | | | $ | 131,278 | | | $ | 122,792 | | | $ | 81,758 | | | $ | 82,258 | | | $ | 247,938 | | | $ | 164,660 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted average diluted shares outstanding | | | 92,658 | | | | 94,371 | | | | 85,573 | | | | 68,738 | | | | 69,806 | | | | 93,514 | | | | 69,832 | |
Merger related expenses per diluted share, net of tax(AB) | | $ | 0.06 | | | $ | — | | | $ | 0.43 | | | $ | — | | | $ | — | | | $ | 0.07 | | | | — | |
Net operating losses carryback per diluted share (AB) | | $ | (0.22 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (0.22 | ) | | $ | — | |
Diluted earnings per share, excluding merger related expenses, net of tax, and net operating losses carryback (AB) (AC) | | $ | 1.25 | | | $ | 1.39 | | | $ | 1.44 | | | $ | 1.19 | | | $ | 1.18 | | | $ | 2.65 | | | $ | 2.36 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of return on average assets to return on average assets excluding merger related expenses, net of tax, and net operating losses carryback: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income, excluding merger related expenses, net of tax, and net operating losses carryback (AB) (AC) | | $ | 116,660 | | | $ | 131,278 | | | $ | 122,792 | | | $ | 81,758 | | | $ | 82,258 | | | $ | 247,938 | | | $ | 164,660 | |
Average total assets | | $ | 32,504,726 | | | $ | 31,357,412 | | | $ | 29,063,425 | | | $ | 22,206,096 | | | $ | 22,526,957 | | | $ | 31,931,067 | | | $ | 22,526,957 | |
Return on average assets excluding merger related expenses, net of tax, and net operating losses carryback (G) (AB) (AC) | | | 1.44 | % | | | 1.67 | % | | | 1.69 | % | | | 1.47 | % | | | 1.46 | % | | | 1.55 | % | | | 1.46 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of return on average common equity to return on average common equity excluding merger related expenses, net of tax, and net operating losses carryback: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income, excluding merger related expenses, net of tax, and net operating losses carryback (AB) (AC) | | $ | 116,660 | | | $ | 131,278 | | | $ | 122,792 | | | $ | 81,758 | | | $ | 82,258 | | | $ | 247,938 | | | $ | 164,660 | |
Average shareholders' equity | | $ | 5,925,156 | | | $ | 5,904,248 | | | $ | 5,443,986 | | | $ | 4,144,731 | | | $ | 4,152,378 | | | $ | 5,914,698 | | | $ | 4,124,082 | |
Return on average common equity excluding merger related expenses, net of tax, and net operating losses carryback (G) (AB) (AC) | | | 7.88 | % | | | 8.89 | % | | | 9.02 | % | | | 7.89 | % | | | 7.92 | % | | | 8.38 | % | | | 7.99 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of return on average common equity to return on average tangible common equity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 130,901 | | | $ | 130,848 | | | $ | 86,134 | | | $ | 81,758 | | | $ | 82,258 | | | $ | 261,749 | | | $ | 164,660 | |
Average shareholders' equity | | $ | 5,925,156 | | | $ | 5,904,248 | | | $ | 5,443,986 | | | $ | 4,144,731 | | | $ | 4,152,378 | | | $ | 5,914,698 | | | $ | 4,124,082 | |
Less: Average goodwill and other intangible assets | | | (3,305,008 | ) | | | (3,308,498 | ) | | | (2,687,045 | ) | | | (1,930,527 | ) | | | (1,931,778 | ) | | | (3,306,753 | ) | | | (1,932,429 | ) |
Average tangible shareholders’ equity | | $ | 2,620,148 | | | $ | 2,595,750 | | | $ | 2,756,941 | | | $ | 2,214,204 | | | $ | 2,220,600 | | | $ | 2,607,945 | | | $ | 2,191,653 | |
Return on average tangible common equity (G) | | | 19.98 | % | | | 20.16 | % | | | 12.50 | % | | | 14.77 | % | | | 14.82 | % | | | 20.07 | % | | | 15.03 | % |
(AB) Calculated assuming a federal tax rate of 21.0%.
(AC) Net income for the second quarter of 2020 includes a tax benefit for NOLs due to the CARES Act.
Page 19 of 21
| | Three Months Ended | | | Year-to-Date | |
| | Jun 30, 2020 | | | Mar 31, 2020 | | | Dec 31, 2019 | | | Sep 30, 2019 | | | Jun 30, 2019 | | | Jun 30, 2020 | | | Jun 30, 2019 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of return on average common equity to return on average tangible common equity excluding merger related expenses, net of tax, and net operating losses carryback: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income, excluding merger related expenses, net of tax, and net operating losses carryback (AB) (AC) | | $ | 116,660 | | | $ | 131,278 | | | $ | 122,792 | | | $ | 81,758 | | | $ | 82,258 | | | $ | 247,938 | | | $ | 164,660 | |
Average shareholders' equity | | $ | 5,925,156 | | | $ | 5,904,248 | | | $ | 5,443,986 | | | $ | 4,144,731 | | | $ | 4,152,378 | | | $ | 5,914,698 | | | $ | 4,124,082 | |
Less: Average goodwill and other intangible assets | | | (3,305,008 | ) | | | (3,308,498 | ) | | | (2,687,045 | ) | | | (1,930,527 | ) | | | (1,931,778 | ) | | | (3,306,753 | ) | | | (1,932,429 | ) |
Average tangible shareholders’ equity | | $ | 2,620,148 | | | $ | 2,595,750 | | | $ | 2,756,941 | | | $ | 2,214,204 | | | $ | 2,220,600 | | | $ | 2,607,945 | | | $ | 2,191,653 | |
Return on average tangible common equity excluding merger related expenses, net of tax, and net operating losses carryback (F) (AB) (AC) | | | 17.81 | % | | | 20.23 | % | | | 17.82 | % | | | 14.77 | % | | | 14.82 | % | | | 19.01 | % | | | 15.03 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of book value per share to tangible book value per share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shareholders’ equity | | $ | 5,948,122 | | | $ | 5,855,574 | | | $ | 5,970,835 | | | $ | 4,126,806 | | | $ | 4,127,895 | | | $ | 5,948,122 | | | $ | 4,127,895 | |
Less: Goodwill and other intangible assets | | | (3,311,712 | ) | | | (3,306,185 | ) | | | (3,310,075 | ) | | | (1,929,896 | ) | | | (1,931,144 | ) | | | (3,311,712 | ) | | | (1,931,144 | ) |
Tangible shareholders’ equity | | $ | 2,636,410 | | | $ | 2,549,389 | | | $ | 2,660,760 | | | $ | 2,196,910 | | | $ | 2,196,751 | | | $ | 2,636,410 | | | $ | 2,196,751 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Period end shares outstanding | | | 92,660 | | | | 92,652 | | | | 94,746 | | | | 68,397 | | | | 69,261 | | | | 92,660 | | | | 69,261 | |
Tangible book value per share: | | $ | 28.45 | | | $ | 27.52 | | | $ | 28.08 | | | $ | 32.12 | | | $ | 31.72 | | | $ | 28.45 | | | | 31.72 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of equity to assets ratio to period end tangible equity to period end tangible assets ratio: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Tangible shareholders’ equity | | $ | 2,636,410 | | | $ | 2,549,389 | | | $ | 2,660,760 | | | $ | 2,196,910 | | | $ | 2,196,751 | | | $ | 2,636,410 | | | $ | 2,196,751 | |
Total assets | | $ | 32,966,649 | | | $ | 31,743,499 | | | $ | 32,185,708 | | | $ | 22,092,817 | | | $ | 22,375,221 | | | $ | 32,966,649 | | | $ | 22,375,221 | |
Less: Goodwill and other intangible assets | | | (3,311,712 | ) | | | (3,306,185 | ) | | | (3,310,075 | ) | | | (1,929,896 | ) | | | (1,931,144 | ) | | | (3,311,712 | ) | | | (1,931,144 | ) |
Tangible assets | | $ | 29,654,937 | | | $ | 28,437,314 | | | $ | 28,875,633 | | | $ | 20,162,921 | | | $ | 20,444,077 | | | $ | 29,654,937 | | | $ | 20,444,077 | |
Period end tangible equity to period end tangible assets ratio: | | | 8.89 | % | | | 8.96 | % | | | 9.21 | % | | | 10.90 | % | | | 10.75 | % | | | 8.89 | % | | | 10.75 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of allowance for credit losses to total loans to allowance for credit losses to total loans, excluding Warehouse Purchase Program and Paycheck Protection Program loans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Allowance for credit losses (AA) | | $ | 324,205 | | | $ | 327,206 | | | $ | 87,469 | | | $ | 87,061 | | | $ | 87,006 | | | $ | 324,205 | | | $ | 87,006 | |
Total loans | | $ | 21,025,173 | | | $ | 19,127,195 | | | $ | 18,845,346 | | | $ | 10,673,345 | | | $ | 10,587,375 | | | $ | 21,025,173 | | | $ | 10,587,375 | |
Less: Warehouse Purchase Program loans | | | 2,557,183 | | | | 1,713,762 | | | | 1,552,762 | | | | — | | | | — | | | | 2,557,183 | | | | — | |
Less: Paycheck Protection Program loans | | | 1,392,497 | | | | — | | | | — | | | | — | | | | — | | | | 1,392,497 | | | | — | |
Total loans less Warehouse Purchase Program and Paycheck Protection Program loans | | $ | 17,075,493 | | | $ | 17,413,433 | | | $ | 17,292,584 | | | $ | 10,673,345 | | | $ | 10,587,375 | | | $ | 17,075,493 | | | $ | 10,587,375 | |
Allowance for credit losses to total loans, excluding Warehouse Purchase Program and Paycheck Protection Program loans | | | 1.90 | % | | | 1.88 | % | | | 0.51 | % | | | 0.82 | % | | | 0.82 | % | | | 1.90 | % | | | 0.82 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of efficiency ratio to efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Noninterest expense | | $ | 134,368 | | | $ | 124,741 | | | $ | 156,451 | | | $ | 80,699 | | | $ | 80,821 | | | $ | 259,109 | | | $ | 159,392 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net interest income | | $ | 258,955 | | | $ | 256,031 | | | $ | 232,030 | | | $ | 153,990 | | | $ | 154,838 | | | $ | 514,986 | | | $ | 309,749 | |
Noninterest income | | | 25,675 | | | | 34,388 | | | | 35,506 | | | | 30,673 | | | | 29,958 | | | | 60,063 | | | | 58,102 | |
Less: net (loss) gain on sale or write down of assets | | | (3,945 | ) | | | (385 | ) | | | (1,870 | ) | | | (3 | ) | | | 2 | | | | (4,330 | ) | | | 60 | |
Noninterest income excluding net gains and losses on the sale or write down of assets and securities | | | 29,620 | | | | 34,773 | | | | 37,376 | | | | 30,676 | | | | 29,956 | | | | 64,393 | | | | 58,042 | |
Total income excluding net gains and losses on the sale or write down of assets and securities | | $ | 288,575 | | | $ | 290,804 | | | $ | 269,406 | | | $ | 184,666 | | | $ | 184,794 | | | $ | 579,379 | | | $ | 367,791 | |
Efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities | | | 46.56 | % | | | 42.90 | % | | | 58.07 | % | | | 43.70 | % | | | 43.74 | % | | | 44.72 | % | | | 43.34 | % |
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| | Three Months Ended | | | Year-to-Date | |
| | Jun 30, 2020 | | | Mar 31, 2020 | | | Dec 31, 2019 | | | Sep 30, 2019 | | | Jun 30, 2019 | | | Jun 30, 2020 | | | Jun 30, 2019 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reconciliation of efficiency ratio to efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities and merger related expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Noninterest expense | | $ | 134,368 | | | $ | 124,741 | | | $ | 156,451 | | | $ | 80,699 | | | $ | 80,821 | | | $ | 259,109 | | | $ | 159,392 | |
Less: merger related expenses | | | 7,474 | | | | 544 | | | | 46,402 | | | | — | | | | — | | | | 8,018 | | | | — | |
Noninterest expense excluding merger related expenses | | $ | 126,894 | | | $ | 124,197 | | | $ | 110,049 | | | $ | 80,699 | | | $ | 80,821 | | | $ | 251,091 | | | $ | 159,392 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net interest income | | $ | 258,955 | | | $ | 256,031 | | | $ | 232,030 | | | $ | 153,990 | | | $ | 154,838 | | | $ | 514,986 | | | $ | 309,749 | |
Noninterest income | | | 25,675 | | | | 34,388 | | | | 35,506 | | | | 30,673 | | | | 29,958 | | | | 60,063 | | | | 58,102 | |
Less: net (loss) gain on sale or write down of assets | | | (3,945 | ) | | | (385 | ) | | | (1,870 | ) | | | (3 | ) | | | 2 | | | | (4,330 | ) | | | 60 | |
Noninterest income excluding net gains and losses on the sale or write down of assets and securities | | | 29,620 | | | | 34,773 | | | | 37,376 | | | | 30,676 | | | | 29,956 | | | | 64,393 | | | | 58,042 | |
Total income excluding net gains and losses on the sale or write down of assets and securities | | $ | 288,575 | | | $ | 290,804 | | | $ | 269,406 | | | $ | 184,666 | | | $ | 184,794 | | | $ | 579,379 | | | $ | 367,791 | |
Efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities and merger related expenses | | | 43.97 | % | | | 42.71 | % | | | 40.85 | % | | | 43.70 | % | | | 43.74 | % | | | 43.34 | % | | | 43.34 | % |
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