Prosperity Bancshares, Inc.® Reports Fourth Quarter 2017 Earnings

Prosperity Bancshares, Inc.® Reports Fourth Quarter 2017 Earnings

PR Newswire (paid press release):

HOUSTON, Jan. 24, 2018  /PRNewswire/ –Prosperity Bancshares, Inc.® (NYSE: PB), the parent company of Prosperity Bank® (collectively, “Prosperity”), reported net income for the quarter ended December 31, 2017 of $67.138 million or $0.97 per diluted common share. Additionally, nonperforming assets remain low at 0.19% of fourth quarter average interest-earning assets. As a result of the Tax Cuts and Jobs Act passed in December 2017, the Company was required to recalculate its deferred tax assets and deferred tax liabilities to account for the future impact of lower corporate tax rates and lost deductions on these assets and liabilities. The recalculation negatively impacted the Company’s fourth quarter 2017 net income in the amount of $1.431 million or $0.02 per diluted common share (“Tax Act Charge”), but the reduction in corporate tax rates is expected to positively impact net income in the future. Excluding the Tax Act Charge, net income and diluted earnings per share for the fourth quarter 2017 were $68.569 million and $0.99, respectively.

Texas survived Hurricane Harvey and bounced back to robust growth of 2.6% – adding 286,000 jobs through November 2017.  The unemployment rate in Texas of 3.8% is the lowest since 1970 and higher oil prices continue to improve the energy sector,” said David Zalman, Prosperity’s Chairman and Chief Executive Officer. 

Oklahoma’s economy experienced a solid recovery in 2017.  The state’s energy sector led the initial stages of recovery, but most other sectors also improved in 2017.  The outlook in Oklahoma for 2018 is positive,” added Zalman.

“On December 22, 2017, the Tax Cuts and Jobs Act was enacted, which reduces the corporate tax rate from 35% to 21%.  The Act is expected to allow companies, such as Prosperity, to be more competitive, improve the lives of their employees and increase shareholder value,” stated Zalman. 

“At Prosperity, we communicate to our associates that they will be rewarded when the company does well.  Accordingly, given the expected positive financial impact of the lower tax rate, we are pleased to announce that we will provide the following to all associates at Prosperity Bank, other than the members of Prosperity Bank’s Executive Committee, whose compensation is reviewed and approved by Prosperity’s Compensation Committee:

  • a 5% salary or pay rate increase effective March 1, 2018; and
  • an increase in the pay rate for all hourly associates to a minimum of $11.00 per hour. 

We are excited that we are able to reward our associates for the many contributions they have made to Prosperity’s success,” continued Zalman. 

“Our customers are optimistic because of the reduced regulatory restrictions and the expected financial benefit from the reduced tax rates.  In the fourth quarter 2017, loans increased 4.4% annualized, and exceeded $10 billion for the first time in Prosperity’s history.  Deposits at December 31, 2017 increased $913.984 million or 5.4% from $16.907 billion at September 30, 2017,” added Zalman.

“We are excited going into 2018.  I would like to thank all of our customers, associates, directors and shareholders for helping build a successful bank.  Prosperity Bank was rated by Forbes as one of the Best Banks In America again for 2018 and we have been in the Top 10 for five consecutive years.  Further, Prosperity Bank is the only Texas-based bank in the Top 10 and has been the highest ranked Texas-based bank for the past five years,” concluded Zalman.

Results of Operations for the Three Months Ended December 31, 2017

Net income was $67.138 million(2) for the three months ended December 31, 2017 compared with $68.793 million(3) for the same period in 2016. Net income per diluted common share was $0.97 for the three months ended December 31, 2017 compared with $0.99 for the same period in 2016. Net income and earnings per diluted common share for the three months ended December 31, 2017 were impacted by the one-time non-cash Tax Act Charge of $1.431 million or $0.02 per diluted common share. Excluding the Tax Act Charge, net income and earnings per diluted common share for the three months ended December 31, 2017 were $68.569 million and $0.99, respectively. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended December 31, 2017 were 1.20%, 7.04% and 14.31%(1), respectively.  Excluding the Tax Act Charge, annualized returns on average assets, average common equity and average tangible common equity for the three months ended December 31, 2017 were 1.23%, 7.19% and 14.62%, respectively. Prosperity’s efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and taxes) was 43.78%(1) for the three months ended December 31, 2017.

Net interest income before provision for credit losses for the three months ended December 31, 2017 was $156.050 million compared with $153.832 million during the same period in 2016, an increase of $2.218 million or 1.4%. This change was primarily due to an increase in the average balance and yield on interest-earning assets, partially offset by an increase in the average rate on interest-bearing liabilities. Linked quarter net interest income before provision for credit losses decreased $97 thousand or 0.1% to $156.050 million compared with $156.147 million during the three months ended September 30, 2017. This decrease was primarily due to a decrease in loan discount accretion of $3.090 million.

The net interest margin on a tax equivalent basis was 3.20% for the three months ended December 31, 2017 compared with 3.26% for the same period in 2016. This change was primarily due to a decrease in loan discount accretion of $2.756 million. On a linked quarter basis, the net interest margin was 3.20% compared with 3.22% for the three months ended September 30, 2017. This decrease was primarily due to a decrease in loan discount accretion of $3.090 million.

Noninterest income was $29.220 million for the three months ended December 31, 2017 compared with $29.475 million for the same period in 2016, a decrease of $255 thousand or 0.9%. This change was primarily due to a decrease in mortgage income. On a linked quarter basis, noninterest income increased $411 thousand or 1.4% compared with the three months ended September 30, 2017.

Noninterest expense was $81.088 million for the three months ended December 31, 2017 compared with $79.148 million for the same period in 2016, an increase of $1.940 million or 2.5%. This change was primarily due to the write-down of other real estate, partially offset by a decrease in salaries and benefits. On a linked quarter basis, noninterest expense increased $3.579 million or 4.6% compared with the three months ended September 30, 2017. This increase was primarily due to the write-down of other real estate.

Results of Operations for the Year Ended December 31, 2017

Net income was $272.165 million(4) for the year ended December 31, 2017 compared with $274.466 million(5) for the same period in 2016.  Net income per diluted common share was $3.92 for the year ended December 31, 2017 compared with $3.94 for the same period in 2016. Annualized returns on average assets, average common equity and average tangible common equity for the year ended December 31, 2017 were 1.22%, 7.26% and 15.06%(1), respectively.  Prosperity’s efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and securities and taxes) was 42.76%(1) for the year ended December 31, 2017.

Net interest income before provision for credit losses for the year ended December 31, 2017 was $616.863 million compared with $632.620 million for the same period in 2016, a decrease of $15.757 million or 2.5%. This change was primarily due to a decrease in loan discount accretion of $17.064 million and an increase in the average rate on interest-bearing liabilities, partially offset by an increase in average interest-earnings assets.

The net interest margin on a tax equivalent basis for the year ended December 31, 2017 was 3.19% compared with 3.35% for the same period in 2016. This change was primarily due to a decrease in loan discount accretion of $17.064 million and an increase in the average rate on interest-bearing liabilities.

Noninterest income was $116.633 million for the year ended December 31, 2017 compared with $118.425 million for the same period in 2016, a decrease of $1.792 million or 1.5%. This change was primarily due to the net loss on sale of assets and a decrease in brokerage and mortgage income, partially offset by a gain on sale of securities and an increase in service charges on deposit accounts.

Noninterest expense was $313.101 million for the year ended December 31, 2017 compared with $318.387 million for the same period in 2016, a decrease of $5.286 million or 1.7%.  This change was primarily due to a decrease in salaries and benefits and core deposit intangibles amortization, partially offset by the write-down of other real estate.

___________________________

(1)

Refer to the “Notes to Selected Financial Data” at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

(2)

Includes purchase accounting adjustments of $2.771 million, net of tax, primarily comprised of loan discount accretion of $4.796 million for the three months ended December 31, 2017.

(3)

Includes purchase accounting adjustments of $4.602 million, net of tax, primarily comprised of loan discount accretion of $7.552 million for the three months ended December 31, 2016.

(4)

Includes purchase accounting adjustments of $12.909 million, net of tax, primarily comprised of loan discount accretion of $21.906 million for the year ended December 31, 2017.

(5)

Includes purchase accounting adjustments of $23.822 million, net of tax, primarily comprised of loan discount accretion of $38.970 million for the year ended December 31, 2016.

Balance Sheet Information

At December 31, 2017, Prosperity had $22.587 billion in total assets, an increase of $256.220 million or 1.1%, compared with $22.331 billion at December 31, 2016.

Loans at December 31, 2017 were $10.021 billion, an increase of $398.713 million or 4.1%, compared with $9.622 billion at December 31, 2016. Linked quarter loans increased $109.571 million or 1.1% (4.4% annualized) from $9.911 billion at September 30, 2017.

As part of its commercial and industrial lending activities, Prosperity extends credit to oil and gas production and service companies. Oil and gas production loans are loans to companies directly involved in the exploration and/or production of oil and gas. Oil and gas service loans are loans to companies that provide services for oil and gas production and exploration. At December 31, 2017, oil and gas loans totaled $300.546 million or 3.0% of total loans, of which $112.246 million were to production companies and $188.300 million were to service companies. This compares with total oil and gas loans of $284.539 million or 3.0% of total loans at December 31, 2016, of which $119.934 million were to production companies and $164.605 million were to service companies. At September 30, 2017, oil and gas loans totaled $291.827 million or 2.9% of total loans, of which $106.524 million were production loans and $185.303 million were service loans.

Deposits at December 31, 2017 were $17.821 billion, an increase of $514.158 million or 3.0%, compared with $17.307 billion at December 31, 2016. Linked quarter deposits increased $913.984 million or 5.4% from $16.907 billion at September 30, 2017.

Asset Quality

Nonperforming assets totaled $37.455 million or 0.19% of quarterly average interest-earning assets at December 31, 2017, compared with $48.302 million or 0.25% of quarterly average interest-earning assets at December 31, 2016, and $45.823 million or 0.24% of quarterly average interest-earning assets at September 30, 2017.

The allowance for credit losses was $84.041 million or 0.84% of total loans at December 31, 2017, $85.326 million or 0.89% of total loans at December 31, 2016 and $86.812 million or 0.88% of total loans at September 30, 2017.  Excluding loans acquired that are accounted for under FASB Accounting Standards Codification (“ASC”) Topics 310-20 and 310-30, the allowance for credit losses was 0.91%(1) of remaining loans as of December 31, 2017, compared with 1.00%(1) at December 31, 2016 and 0.95%(1) at September 30, 2017.

The provision for credit losses was $2.000 million for the three months ended December 31, 2017 compared with $2.000 million for the three months ended December 31, 2016 and $6.900 million for the three months ended September 30, 2017.  The provision for credit losses was $14.325 million for the year ended December 31, 2017 compared with $24.000 million for the year ended December 31, 2016.

Net charge-offs were $4.771 million for the three months ended December 31, 2017 compared with $2.259 million for the three months ended December 31, 2016 and $3.871 million for the three months ended September 30, 2017. Net charge-offs for the fourth quarter of 2017 were primarily comprised of two commercial and industrial loans.  Net charge-offs were $15.610 million for the year ended December 31, 2017 compared with $20.058 million for the year ended December 31, 2016.

Dividend

Prosperity Bancshares, Inc. declared a first quarter cash dividend of $0.36 per share to be paid on April 2, 2018 to all shareholders of record as of March 16, 2018. 

Conference Call

Prosperity’s management team will host a conference call on Wednesday, January 24, 2018 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss Prosperity’s fourth quarter 2017 earnings. Individuals and investment professionals may participate in the call by dialing 877-883-0383. The elite entry number is 5067257.

Alternatively, individuals may listen to the live webcast of the presentation by visiting Prosperity’s website at www.prosperitybankusa.com.  The webcast may be accessed from Prosperity’s home page by selecting “Presentations & Calls” from the drop-down menu on the Investor Relations tab and following the instructions.

Non-GAAP Financial Measures

Prosperity’s management uses certain non-GAAP financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity, tangible equity to tangible assets ratio and the efficiency ratio, excluding net gains and losses on the sale of assets and securities.  Further, as a result of acquisitions and the related purchase accounting adjustments, Prosperity uses certain non-GAAP measures and ratios that exclude the impact of these items to evaluate its allowance for credit losses to total loans (excluding acquired loans accounted for under ASC Topics 310-20, “Receivables-Nonrefundable Fees and Other Costs” and 310-30, “Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality“).  Prosperity believes these non-GAAP financial measures provide information useful to investors in understanding Prosperity’s financial results and that their presentation, together with the accompanying reconciliations, provides a more complete understanding of factors and trends affecting Prosperity’s business and allows investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. Further, Prosperity believes that these non-GAAP financial measures provide useful information by excluding certain items that may not be indicative of its core operating earnings and business outlook.  These non-GAAP financial measures should not be considered a substitute for, nor of greater importance than, GAAP basis measures and results; Prosperity strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. Please refer to the “Notes to Selected Financial Data” at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures to the nearest respective GAAP financial measures.

Prosperity Bancshares, Inc. ®

As of December 31, 2017, Prosperity Bancshares, Inc. ® is a $22.587 billion Houston, Texas based regional financial holding company, formed in 1983. Operating under a community banking philosophy and seeking to develop broad customer relationships based on service and convenience, Prosperity offers a variety of traditional loan and deposit products to its customers, which consist primarily of small and medium sized businesses and consumers. In addition to established banking products, Prosperity offers a complete line of services including: Internet Banking services at www.prosperitybankusa.com, Retail Brokerage Services, Credit Cards, MasterMoney Debit Cards, 24 hour voice response banking, Trust and Wealth Management, Mortgage Services, Cash Management and Mobile Banking.

As of December 31, 2017, Prosperity operated 242 full-service banking locations: 65 in the Houston area, including The Woodlands; 29 in the South Texas area including Corpus Christi and Victoria; 33 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, MidlandOdessa and Abilene; 16 in the Bryan/College Station area, 6 in the Central Oklahoma area and 8 in the Tulsa, Oklahoma area.

Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by Prosperity’s management on the conference call may contain, forward-looking statements within the meaning of the securities laws. Forward-looking statements include all statements other than statements of historical fact, including forecasts or trends, and are based on current expectations, assumptions, estimates and projections about Prosperity Bancshares and its subsidiaries.  These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperity’s control, which may cause actual results to differ materially from those expressed or implied by the forward-looking statements.  These risks and uncertainties include but are not limited to whether Prosperity can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks; continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives.  Other risks include, but are not limited to: the possibility that credit quality could deteriorate; actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); a deterioration or downgrade in the credit quality and credit agency ratings of the securities in Prosperity’s securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate, interest rate and commodity price fluctuations; and weather.  These and various other factors are discussed in Prosperity Bancshares’ Annual Report on Form 10-K for the year ended December 31, 2016 and other reports and statements Prosperity Bancshares has filed with the SEC. Copies of the SEC filings for Prosperity Bancshares may be downloaded from the Internet at no charge from http://www.prosperitybankusa.com.

Bryan/College Station Area –

Keller

Westheimer

Taft

Bryan

Roanoke

West University

Yoakum

Bryan-29th Street

Stockyards

Woodcreek

Yorktown

Bryan-East

Bryan-North

Other Dallas/Fort Worth Area

Katy –

West Texas Area –

Caldwell

Locations –

Cinco Ranch

Abilene –

College Station

Arlington

Katy-Spring Green

Antilley Road

Crescent Point

Azle

Barrow Street

Hearne

Ennis

The Woodlands –

Cypress Street

Huntsville

Gainesville

The Woodlands-College Park

Judge Ely

Madisonville

Glen Rose

The Woodlands-I-45

Mockingbird

Navasota

Granbury

The Woodlands-Research Forest

New Waverly

Mesquite

Lubbock –

Rock Prairie

Muenster

Other Houston Area

4th Street

Southwest Parkway

Sanger

Locations –

66th Street

Tower Point

Waxahachie

Angleton

82nd Street

Wellborn Road

Weatherford

Bay City

86th Street

Beaumont

98th Street

Central Texas Area –

East Texas Area –

Cleveland

Avenue Q

Austin –

Athens

East Bernard

North University

Allandale

Blooming Grove

El Campo

Texas Tech Student Union

Cedar Park

Canton

Dayton

Congress

Carthage

Galveston

Midland –

Lakeway

Corsicana

Groves

Wadley

Liberty Hill

Crockett

Hempstead

Wall Street

Northland

Eustace

Hitchcock

Oak Hill

Gilmer

Liberty

Odessa –

Research Blvd

Grapeland

Magnolia

Grandview

Westlake

Gun Barrel City

Magnolia Parkway

Grant

Jacksonville

Mont Belvieu

Kermit Highway

Other Central Texas Area

Kerens

Nederland

Parkway

Locations –

Longview

Needville

Bastrop

Mount Vernon

Rosenberg

Other West Texas Area

Canyon Lake

Palestine

Shadow Creek

Locations –

Dime Box

Rusk

Spring

Big Spring

Dripping Springs

Seven Points

Tomball

Brownfield

Elgin

Teague

Waller

Brownwood

Flatonia

Tyler-Beckham

West Columbia

Cisco

Georgetown

Tyler-South Broadway

Wharton

Comanche

Gruene

Tyler-University

Winnie

Early

Kingsland

Winnsboro

Wirt

Floydada

La Grange

Gorman

Lexington

Houston Area –

South Texas Area –

Levelland

New Braunfels

Houston –

Corpus Christi –

Littlefield

Pleasanton

Aldine

Calallen

Merkel

Round Rock

Alief

Carmel

Plainview

San Antonio

Bellaire

Northwest

San Angelo

Schulenburg

Beltway

Saratoga

Slaton

Seguin

Clear Lake

Timbergate

Snyder

Smithville

Copperfield

Water Street

Thorndale

Cypress

Oklahoma

Weimar

Downtown

Victoria –

Central Oklahoma Area-

Eastex

Victoria Main

Oklahoma City –

Dallas/Fort Worth Area –

Fairfield

Victoria-Navarro

23rd Street

Dallas –

First Colony

Victoria-North

Expressway

Abrams Centre

Fry Road

I-240

Balch Springs

Gessner

Other South Texas Area

Memorial

Camp Wisdom

Gladebrook

 Locations –

Cedar Hill

Grand Parkway

Alice

Other Central Oklahoma Area

Frisco

Heights

Aransas Pass

 Locations –

Frisco-West

Highway 6 West

Beeville

Edmond

Kiest

Little York

Colony Creek

Norman

McKinney

Medical Center

Cuero

McKinney-Stonebridge

Memorial Drive

Edna

Tulsa Area-

Midway

Northside

Goliad

Tulsa –

Plano

Pasadena

Gonzales

Garnett

Preston Forest

Pecan Grove

Hallettsville

Harvard

Preston Road

Pin Oak

Kingsville

Memorial

Red Oak

River Oaks

Mathis

Sheridan

Sachse

Sugar Land

Padre Island

S. Harvard

The Colony

SW Medical Center

Palacios

Utica Tower

Turtle Creek

Tanglewood

Port Lavaca

Yale

Westmoreland

The Plaza

Portland

Uptown

Rockport

Other Tulsa Area Locations –

Fort Worth –

Waugh Drive

Sinton

Owasso

Haltom City

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(In thousands)

Dec 31, 2017

Sep 30, 2017

Jun 30, 2017

Mar 31, 2017

Dec 31, 2016

Balance Sheet Data (at period end)

Loans

$

10,020,773

$

9,911,202

$

9,864,019

$

9,739,253

$

9,622,060

Investment securities(A)

9,672,116

9,410,522

9,582,195

9,854,120

9,726,086

Federal funds sold

697

1,007

757

945

1,178

Allowance for credit losses

(84,041)

(86,812)

(83,783)

(84,095)

(85,326)

Cash and due from banks

391,616

302,469

321,958

324,797

436,203

Goodwill

1,900,845

1,900,845

1,900,845

1,900,845

1,900,845

Core deposit intangibles, net

38,842

40,464

42,150

43,869

45,784

Other real estate owned

11,152

14,512

15,472

15,698

15,463

Fixed assets, net

257,065

256,011

256,511

257,558

262,083

Other assets

378,227

393,043

396,419

424,429

406,696

Total assets

$

22,587,292

$

22,143,263

$

22,296,543

$

22,477,419

$

22,331,072

Noninterest-bearing deposits

$

5,623,322

$

5,465,474

$

5,397,293

$

5,299,264

$

5,190,973

Interest-bearing deposits

12,198,138

11,442,002

11,673,237

11,736,308

12,116,329

Total deposits

17,821,460

16,907,476

17,070,530

17,035,572

17,307,302

Other borrowings

505,223

960,365

1,035,506

1,270,644

990,781

Securities sold under repurchase agreements

324,154

334,621

346,324

335,875

320,430

Other liabilities

112,301

159,443

107,995

146,246

70,248

Total liabilities

18,763,138

18,361,905

18,560,355

18,788,337

18,688,761

Shareholders’ equity(B)

3,824,154

3,781,358

3,736,188

3,689,082

3,642,311

Total liabilities and equity

$

22,587,292

$

22,143,263

$

22,296,543

$

22,477,419

$

22,331,072

(A)

Includes ($143), $1,635, $2,871, $2,200 and $2,171 in unrealized (losses) gains on available for sale securities for the quarterly periods ended December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017 and December 31, 2016, respectively.

(B)

Includes ($113), $1,063, $1,866, $1,430 and $1,411 in after-tax unrealized (losses) gains on available for sale securities for the quarterly periods ended December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017 and December 31, 2016, respectively.

Prosperity Bancshares, Inc.®
Financial Highlights (Unaudited)
(In thousands)

Three Months Ended

Year-to-Date

Dec 31,
2017

Sep 30,

2017

Jun 30,

2017

Mar 31,
2017

Dec 31,

2016

Dec 31,

2017

Dec 31,

2016

Income Statement Data

Interest income:

Loans

$

120,086

$

121,567

$

114,975

$

111,710

$

115,993

$

468,338

$

475,059

Securities(C)

51,510

50,610

52,912

53,157

48,573

208,189

200,375

Federal funds sold and other earning assets

243

242

160

183

103

828

345

Total interest income

171,839

172,419

168,047

165,050

164,669

677,355

675,779

Interest expense:

Deposits

12,587

12,376

11,441

9,908

9,478

46,312

39,125

Other borrowings

2,852

3,540

4,040

2,476

1,121

12,908

3,065

Securities sold under repurchase agreements

350

356

335

231

238

1,272

932

Junior subordinated debentures

37

Total interest expense

15,789

16,272

15,816

12,615

10,837

60,492

43,159

Net interest income

156,050

156,147

152,231

152,435

153,832

616,863

632,620

Provision for credit losses

2,000

6,900

2,750

2,675

2,000

14,325

24,000

Net interest income after provision for credit losses

154,050

149,247

149,481

149,760

151,832

602,538

608,620

Noninterest income:

Nonsufficient funds (NSF) fees

8,110

8,350

7,805

8,089

8,552

32,354

33,536

Credit card, debit card and ATM card income

6,211

6,075

6,186

5,953

5,902

24,425

23,561

Service charges on deposit accounts

5,250

5,251

5,405

5,421

4,934

21,327

18,832

Trust income

2,734

2,040

2,271

2,155

2,480

9,200

8,120

Mortgage income

826

854

1,107

1,266

1,690

4,053

7,076

Brokerage income

574

461

427

488

782

1,950

4,571

Bank owned life insurance income

1,347

1,366

1,364

1,353

1,390

5,430

5,663

Net gain (loss) on sale of assets

41

62

(3,783)

1,759

475

(1,921)

1,864

Gain on sale of securities

3,270

3,270

Other noninterest income

4,127

4,350

3,728

4,340

3,270

16,545

15,202

Total noninterest income

29,220

28,809

27,780

30,824

29,475

116,633

118,425

Noninterest expense:

Salaries and benefits

48,756

47,866

47,343

48,444

51,231

192,409

197,897

Net occupancy and equipment

5,748

5,691

5,460

5,503

5,696

22,402

23,058

Credit and debit card, data processing and software amortization

4,423

4,506

4,216

4,085

4,249

17,230

17,050

Regulatory assessments and FDIC insurance

3,759

3,455

3,548

3,549

2,424

14,311

12,735

Core deposit intangibles amortization

1,622

1,686

1,719

1,915

2,226

6,942

9,200

Depreciation

3,011

3,050

3,051

3,103

3,170

12,215

13,094

Communications

2,608

2,618

2,664

2,702

2,771

10,592

11,561

Other real estate expense

181

110

128

95

378

514

514

Net loss (gain) on sale or write-down of other real estate

2,978

(140)

(71)

(10)

(44)

2,757

286

Other noninterest expense

8,002

8,667

8,384

8,676

7,047

33,729

32,992

Total noninterest expense

81,088

77,509

76,442

78,062

79,148

313,101

318,387

Income before income taxes

102,182

100,547

100,819

102,522

102,159

406,070

408,658

Provision for income taxes

35,044

32,639

32,265

33,957

33,366

133,905

134,192

Net income available to common shareholders

$

67,138

$

67,908

$

68,554

$

68,565

$

68,793

$

272,165

$

274,466

(C)

Interest income on securities was reduced by net premium amortization of $9,521, $10,115, $9,403, $9,883 and $11,502 for the three-month periods ended December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017 and December 31, 2016, respectively, and $38,922 and $43,474 for the years ended December 31, 2017 and December 31, 2016, respectively.

Prosperity Bancshares, Inc. ®
Financial Highlights (Unaudited)
(Dollars and share amounts in thousands, except per share data and market prices)

Three Months Ended

Year-to-Date

Dec 31,

2017

Sep 30,

2017

Jun 30,

2017

Mar 31,
2017

Dec 31,

2016

Dec 31,

2017

Dec 31,
2016

Profitability

Net income (D) (E)

$

67,138

$

67,908

$

68,554

$

68,565

$

68,793

$

272,165

$

274,466

Basic earnings per share

$

0.97

$

0.98

$

0.99

$

0.99

$

0.99

$

3.92

$

3.94

Diluted earnings per share

$

0.97

$

0.98

$

0.99

$

0.99

$

0.99

$

3.92

$

3.94

Return on average assets (F)

1.20

%

1.22

%

1.22

%

1.23

%

1.26

%

1.22

%

1.25

%

Return on average common equity (F)

7.04

%

7.20

%

7.36

%

7.45

%

7.58

%

7.26

%

7.69

%

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

14.31

%

14.83

%

15.39

%

15.82

%

16.33

%

15.06

%

16.95

%

Tax equivalent net interest margin (D) (H)

3.20

%

3.22

%

3.14

%

3.20

%

3.26

%

3.19

%

3.35

%

Efficiency ratio (G) (I)

43.78

%

41.92

%

42.34

%

43.01

%

43.29

%

42.76

%

42.50

%

Liquidity and Capital Ratios

Equity to assets

16.93

%

17.08

%

16.76

%

16.41

%

16.31

%

16.93

%

16.31

%

Common equity tier 1 capital

15.08

%

15.10

%

14.80

%

14.45

%

14.48

%

15.08

%

14.48

%

Tier 1 risk-based capital

15.08

%

15.10

%

14.80

%

14.45

%

14.48

%

15.08

%

14.48

%

Total risk-based capital

15.74

%

15.81

%

15.49

%

15.14

%

15.20

%

15.74

%

15.20

%

Tier 1 leverage capital

9.31

%

9.15

%

8.82

%

8.62

%

8.68

%

9.31

%

8.68

%

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

9.13

%

9.11

%

8.81

%

8.50

%

8.32

%

9.13

%

8.32

%

Other Data

Weighted-average shares used in computing earnings per common share

Basic

69,484

69,485

69,487

69,480

69,482

69,484

69,674

Diluted

69,484

69,485

69,487

69,482

69,486

69,484

69,680

Period end shares outstanding

69,491

69,484

69,488

69,480

69,491

69,491

69,491

Cash dividends paid per common share

$

0.3600

$

0.3400

$

0.3400

$

0.3400

$

0.3400

$

1.3800

$

1.2400

Book value per common share

$

55.03

$

54.42

$

53.77

$

53.10

$

52.41

$

55.03

$

52.41

Tangible book value per common share (G)

$

27.12

$

26.48

$

25.81

$

25.11

$

24.40

$

27.12

$

24.40

Common Stock Market Price

High

$

73.00

$

66.75

$

71.97

$

77.87

$

73.68

$

73.00

$

73.68

Low

$

61.95

$

55.84

$

61.29

$

65.34

$

52.81

$

55.84

$

33.57

Period end closing price

$

70.07

$

65.73

$

64.24

$

69.71

$

71.78

$

70.07

$

71.78

Employees – FTE

3,017

2,993

3,037

3,033

3,035

3,017

3,035

Number of banking centers

242

243

243

244

245

242

245

 (D)  Includes purchase accounting adjustments for the periods presented as follows:

Three Months Ended

Year-to-Date

Dec 31, 2017

Sep 30, 2017

Jun 30, 2017

Mar 31, 2017

Dec 31, 2016

Dec 31, 2017

Dec 31, 2016

Loan discount accretion

ASC 310-20

$2,462

$6,361

$2,755

$3,270

$3,956

$14,848

$21,748

ASC 310-30

$2,334

$1,525

$1,716

$1,483

$3,596

$7,058

$17,222

Securities net amortization

$598

$667

$745

$852

$950

$2,862

$4,671

Time deposits amortization

$39

$40

$39

$99

$232

$217

$1,167

(E)

Using effective tax rate of 34.3%, 32.5%, 32.0%, 33.1% and 32.7% for the three-month pds ended December 31, 2017, September 30, 2017,  June 30, 2017, March 31, 2017 and December 31, 2016, respectively, and 33.0% and 32.8% for the years ended December 31, 2017 and December 31, 2016, respectively.

(F)

Interim periods annualized.             

(G)

Refer to the “Notes to Selected Financial Data” at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure.

(H)

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

(I)

Calculated by dividing total noninterest expense, excluding credit loss provisions, by net interest income plus noninterest income, excluding net gains and losses on the sale of assets and securities.  Additionally, taxes are not part of this calculation.

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)

YIELD ANALYSIS

Three Months Ended

Dec 31, 2017

Sep 30, 2017

Dec 31, 2016

Average

Balance

Interest

Earned/

Interest

Paid

Average

Yield/

Rate

(J)

Average

Balance

Interest

Earned/

Interest

Paid

Average

Yield/

Rate

(J)

Average

Balance

Interest

Earned/

Interest

Paid

Average

Yield/

Rate

(J)

Interest-Earning Assets:

Loans

$

9,955,145

$

120,086

4.79%

$

9,888,922

$

121,567

4.88%

$

9,557,712

$

115,993

4.83%

Investment securities

9,521,081

51,510

2.15%

(K)

9,526,215

50,610

2.11%

(K)

9,338,903

48,573

2.07%

(K)

Federal funds sold and other earning assets

91,257

243

1.06%

77,337

242

1.24%

106,214

103

0.39%

Total interest-earning assets

19,567,483

171,839

3.48%

19,492,474

172,419

3.51%

19,002,829

164,669

3.45%

Allowance for credit losses

(84,465)

(84,047)

(85,347)

Noninterest-earning assets

2,833,964

2,801,852

2,838,778

Total assets

$

22,316,982

$

22,210,279

$

21,756,260

Interest-Bearing Liabilities:

Interest-bearing demand deposits

$

3,787,421

$

3,365

0.35%

$

3,601,116

$

3,003

0.33%

$

3,861,952

$

2,210

0.23%

Savings and money market deposits

5,530,158

5,032

0.36%

5,658,569

5,259

0.37%

5,471,109

3,546

0.26%

Certificates and other time deposits

2,225,555

4,190

0.75%

2,270,114

4,114

0.72%

2,434,565

3,722

0.61%

Other borrowings

891,396

2,852

1.27%

1,099,583

3,540

1.28%

712,126

1,121

0.63%

Securities sold under repurchase agreements

337,690

350

0.41%

344,177

356

0.41%

318,367

238

0.30%

Total interest-bearing liabilities

12,772,220

15,789

0.49%

(L)

12,973,559

16,272

0.50%

(L)

12,798,119

10,837

0.34%

(L)

Noninterest-bearing liabilities:

Noninterest-bearing demand deposits

5,598,345

5,361,362

5,214,656

Other liabilities

129,533

102,046

111,083

Total liabilities

18,500,098

18,436,967

18,123,858

Shareholders’ equity

3,816,884

3,773,312

3,632,402

Total liabilities and shareholders’ equity

$

22,316,982

$

22,210,279

$

21,756,260

Net interest income and margin

$

156,050

3.16%

$

156,147

3.18%

$

153,832

3.22%

Non-GAAP to GAAP reconciliation:

Tax equivalent adjustment

1,921

1,940

1,931

Net interest income and margin (tax equivalent basis)

$

157,971

3.20%

$

158,087

3.22%

$

155,763

3.26%

(J)

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

(K)

Yield on securities was impacted by net premium amortization of $9,521, $10,115 and $11,502 for the three-month periods ended December 31, 2017, September 30, 2017 and December 31, 2016, respectively.

(L)

Total cost of funds, including noninterest bearing deposits, was 0.34%, 0.35% and 0.24% for the three months ended December 31, 2017, September 30, 2017 and December 31, 2016, respectively.

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

 (Dollars in thousands)

YIELD ANALYSIS

Year-to-Date

Dec 31, 2017

Dec 31, 2016

Average

Balance

Interest

Earned/

Interest

Paid

Average

Yield/

Rate

(M)

Average

Balance

Interest

Earned/

Interest

Paid

Average

Yield/

Rate

(M)

Interest-Earning Assets:

Loans

$

9,822,225

$

468,338

4.77%

$

9,629,714

$

475,059

4.93%

Investment securities

9,681,763

208,189

2.15%

(N)

9,401,669

200,375

2.13%

(N)

Federal funds sold and other earning assets

83,324

828

0.99%

81,804

345

0.42%

Total interest-earning assets

19,587,312

677,355

3.46%

19,113,187

675,779

3.54%

Allowance for credit losses

(84,410)

(84,189)

Noninterest-earning assets

2,837,299

2,851,764

Total assets

$

22,340,201

$

21,880,762

Interest-Bearing Liabilities:

Interest-bearing demand deposits

$

3,816,996

$

11,703

0.31%

$

4,066,799

$

9,843

0.24%

Savings and money market deposits

5,561,853

18,705

0.34%

5,658,441

15,016

0.27%

Certificates and other time deposits

2,289,296

15,904

0.69%

2,505,526

14,266

0.57%

Other borrowings

1,142,897

12,908

1.13%

524,492

3,065

0.58%

Securities sold under repurchase agreements

328,652

1,272

0.39%

319,551

932

0.29%

Junior subordinated debentures

2,081

37

1.78%

Total interest-bearing liabilities

13,139,694

60,492

0.46%

(O)

13,076,890

43,159

0.33%

(O)

Noninterest-bearing liabilities:

Noninterest-bearing demand deposits

5,347,227

5,117,621

Other liabilities

102,553

119,320

Total liabilities

18,589,474

18,313,831

Shareholders’ equity

3,750,727

3,566,931

Total liabilities and shareholders’ equity

$

22,340,201

$

21,880,762

Net interest income and margin

$

616,863

3.15%

$

632,620

3.31%

Non-GAAP to GAAP reconciliation:

Tax equivalent adjustment

7,844

7,665

Net interest income and margin (tax equivalent basis)

$

624,707

3.19%

$

640,285

3.35%

(M)

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

(N)

Yield on securities was impacted by net premium amortization of $38,922 and $43,474 for the years ended December 31, 2017 and 2016, respectively.

(O)

Total cost of funds, including noninterest bearing deposits, was 0.33% and 0.24% for the years ended December 31, 2017 and 2016, respectively.

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended

Dec 31, 2017

Sep 30, 2017

Jun 30, 2017

Mar 31, 2017

Dec 31, 2016

YIELD TREND (P)

Interest-Earning Assets:

Loans

4.79

%

4.88

%

4.71

%

4.70

%

4.83

%

Investment securities (Q)

2.15

%

2.11

%

2.16

%

2.18

%

2.07

%

Federal funds sold and other earning assets

1.06

%

1.24

%

0.76

%

0.92

%

0.39

%

Total interest-earning assets

3.48

%

3.51

%

3.42

%

3.42

%

3.45

%

Interest-Bearing Liabilities:

Interest-bearing demand deposits

0.35

%

0.33

%

0.29

%

0.25

%

0.23

%

Savings and money market deposits

0.36

%

0.37

%

0.35

%

0.26

%

0.26

%

Certificates and other time deposits

0.75

%

0.72

%

0.68

%

0.64

%

0.61

%

Other borrowings

1.27

%

1.28

%

1.11

%

0.89

%

0.63

%

Securities sold under repurchase agreements

0.41

%

0.41

%

0.41

%

0.31

%

0.30

%

Total interest-bearing liabilities

0.49

%

0.50

%

0.48

%

0.38

%

0.34

%

Net Interest Margin

3.16

%

3.18

%

3.10

%

3.16

%

3.22

%

Net Interest Margin (tax equivalent)

3.20

%

3.22

%

3.14

%

3.20

%

3.26

%

(P) 

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

(Q)

Yield on securities was impacted by net premium amortization of $ 9,521, $10,115, $9,403, $9,883 and $11,502 for the three-month periods ended December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017 and December 31, 2016, respectively.

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended

Dec 31, 2017

Sep 30, 2017

Jun 30, 2017

Mar 31, 2017

Dec 31, 2016

Balance Sheet Averages

Loans

$

9,955,145

$

9,888,922

$

9,797,793

$

9,642,877

$

9,557,712

Investment securities

9,521,081

9,526,215

9,817,781

9,867,491

9,338,903

Federal funds sold and other earning assets

91,257

77,337

84,497

80,150

106,214

Total interest-earning assets

19,567,483

19,492,474

19,700,071

19,590,518

19,002,829

Allowance for credit losses

(84,465)

(84,047)

(84,100)

(85,037)

(85,347)

Cash and due from banks

257,462

225,574

228,518

262,794

248,735

Goodwill

1,900,845

1,900,845

1,900,845

1,900,845

1,900,337

Core deposit intangibles, net

39,650

41,314

42,957

44,762

46,895

Other real estate

14,177

15,262

15,871

15,669

15,826

Fixed assets, net

256,657

256,809

257,229

260,716

267,952

Other assets

365,173

362,048

392,822

391,200

359,033

Total assets

$

22,316,982

$

22,210,279

$

22,454,213

$

22,381,467

$

21,756,260

Noninterest-bearing deposits

$

5,598,345

$

5,361,362

$

5,290,142

$

5,140,010

$

5,214,656

Interest-bearing demand deposits

3,787,421

3,601,116

3,749,395

4,136,260

3,861,952

Savings and money market deposits

5,530,158

5,658,569

5,520,346

5,537,355

5,471,109

Certificates and other time deposits

2,225,555

2,270,114

2,296,425

2,366,857

2,434,565

Total deposits

17,141,479

16,891,161

16,856,308

17,180,482

16,982,282

Other borrowings

891,396

1,099,583

1,460,238

1,123,396

712,126

Securities sold under repurchase agreements

337,690

344,177

324,804

307,433

318,367

Other liabilities

129,533

102,046

87,074

91,157

111,083

Shareholders’ equity

3,816,884

3,773,312

3,725,789

3,678,999

3,632,402

Total liabilities and equity

$

22,316,982

$

22,210,279

$

22,454,213

$

22,381,467

$

21,756,260

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)  

Dec 31, 2017

Sep 30, 2017

Jun 30, 2017

Mar 31, 2017

Dec 31, 2016

Period End Balances

Loan Portfolio

Commercial and industrial

$

1,179,364

11.8

%

$

1,180,570

11.9

%

$

1,201,748

12.2

%

$

1,287,216

13.2

%

$

1,254,900

13.0

%

Construction, land development and other land loans

1,509,137

15.1

%

1,453,535

14.7

%

1,383,539

14.0

%

1,326,685

13.6

%

1,263,923

13.1

%

1-4 family residential

2,454,548

24.5

%

2,449,051

24.7

%

2,432,348

24.7

%

2,424,533

24.9

%

2,439,348

25.3

%

Home equity

285,312

2.8

%

284,076

2.9

%

283,729

2.9

%

281,298

2.9

%

278,483

2.9

%

Commercial real estate (includes multi-family residential)

3,315,627

33.1

%

3,295,001

33.2

%

3,309,227

33.5

%

3,226,978

33.1

%

3,162,109

32.9

%

Agriculture (includes farmland)

690,118

6.9

%

692,516

7.0

%

699,228

7.1

%

662,797

6.8

%

672,336

7.0

%

Consumer and other

286,121

2.8

%

264,626

2.7

%

266,385

2.7

%

262,301

2.7

%

266,422

2.8

%

Energy

300,546

3.0

%

291,827

2.9

%

287,815

2.9

%

267,445

2.8

%

284,539

3.0

%

Total loans

$

10,020,773

$

9,911,202

$

9,864,019

$

9,739,253

$

9,622,060

Deposit Types

Noninterest-bearing DDA

$

5,623,322

31.5

%

$

5,465,474

32.3

%

$

5,397,293

31.6

%

$

5,299,264

31.1

%

$

5,190,973

30.0

%

Interest-bearing DDA

4,501,394

25.3

%

3,645,754

21.6

%

3,702,910

21.7

%

3,845,061

22.6

%

4,215,671

24.3

%

Money market

3,200,763

18.0

%

3,273,110

19.4

%

3,451,803

20.2

%

3,370,055

19.8

%

3,368,599

19.5

%

Savings

2,300,450

12.9

%

2,264,959

13.4

%

2,240,126

13.1

%

2,189,822

12.8

%

2,125,854

12.3

%

Certificates and other time deposits

2,195,531

12.3

%

2,258,179

13.3

%

2,278,398

13.4

%

2,331,370

13.7

%

2,406,205

13.9

%

Total deposits

$

17,821,460

$

16,907,476

$

17,070,530

$

17,035,572

$

17,307,302

Loan to Deposit Ratio

56.2

%

58.6

%

57.8

%

57.2

%

55.6

%

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)

Construction Loans

Dec 31, 2017

Sep 30, 2017

Jun 30, 2017

Mar 31, 2017

Dec 31, 2016

Single family residential construction

$

388,966

25.7

%

$

386,891

26.6

%

$

410,164

29.6

%

$

411,553

30.9

%

$

396,794

31.3

%

Land development

86,122

5.7

%

77,202

5.3

%

79,641

5.8

%

83,475

6.3

%

76,275

6.0

%

Raw land

131,022

8.7

%

191,563

13.1

%

200,122

14.4

%

183,453

13.8

%

194,267

15.3

%

Residential lots

117,080

7.7

%

128,109

8.8

%

130,919

9.4

%

129,389

9.7

%

130,096

10.3

%

Commercial lots

91,624

6.1

%

113,692

7.8

%

83,104

6.0

%

84,705

6.4

%

75,625

6.0

%

Commercial construction and other

696,763

46.1

%

558,649

38.4

%

482,347

34.8

%

437,083

32.9

%

394,040

31.1

%

Net unaccreted discount

(2,440)

(2,571)

(2,758)

(2,973)

(3,174)

Total construction loans

$

1,509,137

$

1,453,535

$

1,383,539

$

1,326,685

$

1,263,923

Non-Owner Occupied Commercial Real Estate Loans by Metropolitan Statistical Area (MSA) as of December 31, 2017

Houston

Dallas

Austin

OK City

Tulsa

Other (R)

Total

Collateral Type

Shopping center/retail

$

231,494

$

44,190

$

35,510

$

16,456

$

26,544

$

143,774

$

497,968

Commercial and industrial buildings

124,318

24,842

15,275

17,504

22,804

71,696

276,439

Office buildings

67,133

119,217

24,387

43,914

10,899

73,654

339,204

Medical buildings

54,142

8,633

44

5,400

11,160

67,479

146,858

Apartment buildings

23,175

12,836

19,150

11,387

5,054

84,200

155,802

Hotel

43,210

41,733

13,269

25,735

110,392

234,339

Other

49,066

8,358

15,536

11,700

4,565

51,997

141,222

Total

$

592,538

$

259,809

$

123,171

$

132,096

$

81,026

$

603,192

$

1,791,832

(S)

Acquired Loans

Acquired Loans Accounted for

Under ASC 310-20

Acquired Loans Accounted for

Under ASC 310-30

Total Loans Accounted for

Under ASC 310-20 and 310-30

Balance at

Acquisition

Date

Balance at

Sep 30, 2017

Balance at

Dec 31, 2017

Balance at

Acquisition

Date

Balance at

Sep 30, 2017

Balance at

Dec 31, 2017

Balance at

Acquisition

Date

Balance at

Sep 30, 2017

Balance at

Dec 31, 2017

Loan marks:

Acquired banks (T)

$

229,080

$

22,997

$

20,533

$

142,128

$

17,040

$

14,215

$

371,208

$

40,037

$

34,748

Acquired portfolio loan balances:

Acquired banks (T)

5,690,998

796,477

738,706

275,221

40,367

36,199

5,966,219

(U)

836,844

774,905

Acquired portfolio loan balances less loan marks

$

5,461,918

$

773,480

$

718,173

$

133,093

$

23,327

$

21,984

$

5,595,011

$

796,807

$

740,157

(R)

Includes other MSA and non-MSA regions.

(S)

Represents a portion of total commercial real estate loans of $3.316 billion as of December 31, 2017.

(T)

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.

(U)

Actual principal balances acquired.

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended

Year-to-Date

Dec 31, 2017

Sep 30, 2017

Jun 30, 2017

Mar 31, 2017

Dec 31, 2016

Dec 31, 2017

Dec 31, 2016

Asset Quality

Nonaccrual loans

$

25,264

$

26,267

$

30,517

$

24,360

$

31,642

$

25,264

$

31,642

Accruing loans 90 or more days past due

1,004

4,934

1,613

880

956

1,004

956

Total nonperforming loans

26,268

31,201

32,130

25,240

32,598

26,268

32,598

Repossessed assets

35

110

16

261

241

35

241

Other real estate

11,152

14,512

15,472

15,698

15,463

11,152

15,463

Total nonperforming assets

$

37,455

$

45,823

$

47,618

$

41,199

$

48,302

$

37,455

$

48,302

Nonperforming assets:

Commercial and industrial (includes energy)

$

15,533

$

22,241

$

25,628

$

18,743

$

24,537

$

15,533

$

24,537

Construction, land development and other land loans

1,888

847

1,572

1,461

1,766

1,888

1,766

1-4 family residential (includes home equity)

5,845

3,781

4,156

4,070

4,119

5,845

4,119

Commercial real estate (includes multi-family residential)

13,533

18,208

15,454

16,235

17,167

13,533

17,167

Agriculture (includes farmland)

550

635

676

534

542

550

542

Consumer and other

106

111

132

156

171

106

171

Total

$

37,455

$

45,823

$

47,618

$

41,199

$

48,302

$

37,455

$

48,302

Number of loans/properties

99

113

121

139

158

99

158

Allowance for credit losses at end of period

$

84,041

$

86,812

$

83,783

$

84,095

$

85,326

$

84,041

$

85,326

Net charge-offs:

Commercial and industrial (includes energy)

$

3,822

$

3,225

$

2,531

$

3,495

$

3,161

$

13,073

$

11,559

Construction, land development and other land loans

(1)

(2)

(60)

(65)

(1,922)

(128)

(2,501)

1-4 family residential (includes home equity)

61

12

95

(95)

(82)

73

(82)

Commercial real estate (includes multi-family residential)

22

(3)

133

41

152

296

Agriculture (includes farmland)

(63)

(29)

(65)

305

(157)

6,567

Consumer and other

930

639

525

503

756

2,597

4,219

Total

$

4,771

$

3,871

$

3,062

$

3,906

$

2,259

$

15,610

$

20,058

Asset Quality Ratios

Nonperforming assets to average interest-earning assets

0.19

%

0.24

%

0.24

%

0.21

%

0.25

%

0.19

%

0.25

%

Nonperforming assets to loans and other real estate

0.37

%

0.46

%

0.48

%

0.42

%

0.50

%

0.37

%

0.50

%

Net charge-offs to average loans (annualized)

0.19

%

0.16

%

0.13

%

0.16

%

0.09

%

0.16

%

0.21

%

Allowance for credit losses to total loans

0.84

%

0.88

%

0.85

%

0.86

%

0.89

%

0.84

%

0.89

%

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

0.91

%

0.95

%

0.93

%

0.96

%

1.00

%

0.91

%

1.00

%

  

Prosperity Bancshares, Inc.®

Notes to Selected Financial Data (Unaudited)

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

Consolidated Financial Highlights

NOTES TO SELECTED FINANCIAL DATA

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

Three Months Ended

Year-to-Date

Dec 31, 2017

Sep 30, 2017

Jun 30, 2017

Mar 31, 2017

Dec 31, 2016

Dec 31, 2017

Dec 31, 2016

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

Net income

$

67,138

$

67,908

$

68,554

$

68,565

$

68,793

$

272,165

$

274,466

Average shareholders’ equity

$

3,816,884

$

3,773,312

$

3,725,789

$

3,678,999

$

3,632,402

$

3,750,727

$

3,566,931

Less: Average goodwill and other intangible assets

(1,940,495)

(1,942,159)

(1,943,802)

(1,945,607)

(1,947,232)

(1,942,999)

(1,947,979)

Average tangible shareholders’ equity

$

1,876,389

$

1,831,153

$

1,781,987

$

1,733,392

$

1,685,170

$

1,807,728

$

1,618,952

Return on average tangible common equity (F)

14.31

%

14.83

%

15.39

%

15.82

%

16.33

%

15.06

%

16.95

%

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

Shareholders’ equity

$

3,824,154

$

3,781,358

$

3,736,188

$

3,689,082

$

3,642,311

$

3,824,154

$

3,642,311

Less: Goodwill and other intangible assets

(1,939,687)

(1,941,309)

(1,942,995)

(1,944,714)

(1,946,629)

(1,939,687)

(1,946,629)

Tangible shareholders’ equity

$

1,884,467

$

1,840,049

$

1,793,193

$

1,744,368

$

1,695,682

$

1,884,467

$

1,695,682

Period end shares outstanding

69,491

69,484

69,488

69,480

69,491

69,491

69,491

Tangible book value per share:

$

27.12

$

26.48

$

25.81

$

25.11

$

24.40

$

27.12

$

24.40

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

Tangible shareholders’ equity

$

1,884,467

$

1,840,049

$

1,793,193

$

1,744,368

$

1,695,682

$

1,884,467

$

1,695,682

Total assets

$

22,587,292

$

22,143,263

$

22,296,543

$

22,477,419

$

22,331,072

$

22,587,292

$

22,331,072

Less: Goodwill and other intangible assets

(1,939,687)

(1,941,309)

(1,942,995)

(1,944,714)

(1,946,629)

(1,939,687)

(1,946,629)

Tangible assets

$

20,647,605

$

20,201,954

$

20,353,548

$

20,532,705

$

20,384,443

$

20,647,605

$

20,384,443

Period end tangible equity to period end tangible assets ratio:

9.13

%

9.11

%

8.81

%

8.50

%

8.32

%

9.13

%

8.32

%

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

Allowance for credit losses

$

84,041

$

86,812

$

83,783

$

84,095

$

85,326

$

84,041

$

85,326

Total loans

$

10,020,773

$

9,911,202

$

9,864,019

$

9,739,253

$

9,622,060

$

10,020,773

$

9,622,060

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

$

740,157

$

796,807

$

888,172

$

991,894

$

1,107,293

$

740,157

$

1,107,293

Total loans less acquired loans

$

9,280,616

$

9,114,395

$

8,975,847

$

8,747,359

$

8,514,767

$

9,280,616

$

8,514,767

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

0.91

%

0.95

%

0.93

%

0.96

%

1.00

%

0.91

%

1.00

%

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

Noninterest expense

$

81,088

$

77,509

$

76,442

$

78,062

$

79,148

$

313,101

$

318,387

Net interest income

$

156,050

$

156,147

$

152,231

$

152,435

$

153,832

$

616,863

$

632,620

Noninterest income

29,220

28,809

27,780

30,824

29,475

116,633

118,425

Less: net gain (loss) on sale of assets

41

62

(3,783)

1,759

475

(1,921)

1,864

Less: gain on sale of securities

3,270

3,270

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

29,179

28,747

28,293

29,065

29,000

115,284

116,561

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

$

185,229

$

184,894

$

180,524

$

181,500

$

182,832

$

732,147

$

749,180

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

43.78

%

41.92

%

42.34

%

43.01

%

43.29

%

42.76

%

42.50

%

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/prosperity-bancshares-inc-reports-fourth-quarter-2017-earnings-300587323.html

SOURCE Prosperity Bancshares, Inc.

Related Links

http://www.prosperitybankusa.com

Click here to read the full article.

%d bloggers like this: