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Prosperity Bancshares, Inc.® Reports Second Quarter 2018 Earnings

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Prosperity Bancshares, Inc.® Reports Second Quarter 2018 Earnings

- Second quarter earnings per common share (diluted) increased 18.2% to $1.17 compared with the second quarter 2017

- Second quarter net income increased 19.0% to $81.597 million compared with the second quarter 2017

- Loans increased 5.4% (annualized) in the second quarter 2018

- Nonperforming assets remain low at 0.16% of second quarter average interest-earning assets

- Return (annualized) on second quarter average assets of 1.44%

- Returns (annualized) on second quarter average common equity of 8.33% and average tangible common equity of 16.48%‍(1)

PR Newswire

HOUSTON, July 25, 2018 /PRNewswire/ -- Prosperity Bancshares, Inc.® (NYSE:PB), the parent company of Prosperity Bank® (collectively, "Prosperity"), reported net income for the quarter ended June 30, 2018 of $81.597 million, an increase of $13.043 million or 19.0% compared with $68.554 million for the same period in 2017. Net income per diluted common share increased 18.2% to $1.17 compared with $0.99 for the same period in 2017. Additionally, loans increased 5.4% (annualized) during the second quarter of 2018 and nonperforming assets remain low at 0.16% of second quarter average interest-earning assets.

"For the second quarter of 2018, we showed impressive returns on second quarter average tangible common equity of 16.48% annualized and on second quarter average assets of 1.44% annualized," said David Zalman, Prosperity's Chairman and Chief Executive Officer.

"The Texas economy continues with vibrant growth helped by the diversity of businesses, no state income tax, a political climate friendly toward business and a strong tailwind from an ever improving energy industry.  In fact, Texas was recently named the Top State for Business in America by CNBC.  The Oklahoma economy is also boosted by its low state income tax, the improving energy industry and a 3.9% unemployment rate for June 2018," continued Zalman. 

"The Dallas Federal Reserve Bank projects 3.0% job growth for Texas in 2018, or 370,000 new jobs.  Houston is making a comeback with an expected 3.7% job growth in 2018, or 113,000 new jobs. Unemployment rates remain low in Texas and business continues to expand.  The Houston Port Authority reported that they are busier than they have ever been, processing 9,200 trucks in one day, and continue to purchase additional equipment, docks and cranes.  Further, car sales increased approximately 6.0% in Texas and more in Houston," added Zalman.

"Overall, we continue to see positive customer sentiment with the reductions in income taxes and in government oversight and regulatory burden.  Business people continue to tell me that for the first time in a number of years, they are able to spend their time growing their businesses," stated Zalman.

"I would like to thank all of our customers, associates, directors and shareholders for helping make such a successful Bank.  Prosperity Bank was rated by Forbes as one of the Best Banks In America again for 2018, and is the only Texas-based bank in the Top 10.  The Bank has been rated in the Top 10 for five consecutive years and was the highest rated Texas-based bank for the past five years," concluded Zalman.

Results of Operations for the Three Months Ended June 30, 2018

Net income was $81.597 million(2) for the three months ended June 30, 2018 compared with $68.554 million(3) for the same period in 2017, an increase of $13.043 million or 19.0%. Net income per diluted common share was $1.17 for the three months ended June 30, 2018 compared with $0.99 for the same period in 2017, an increase of 18.2%. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended June 30, 2018 were 1.44%, 8.33% and 16.48%(1), respectively.  Prosperity's efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and securities and taxes) was 43.95%(1) for the three months ended June 30, 2018.

Net interest income before provision for credit losses for the three months ended June 30, 2018 was $161.803 million compared with $152.231 million during the same period in 2017, an increase of $9.572 million or 6.3%. This change was primarily due to higher loan and investment yields and an increase in loan balances, partially offset by higher deposit rates. Linked quarter net interest income before provision for credit losses increased $8.580 million or 5.6% to $161.803 million compared with $153.223 million during the three months ended March 31, 2018. This increase was primarily due to higher loan yield and an increase in loan discount accretion, partially offset by higher deposit rates.

The net interest margin on a tax equivalent basis was 3.28% for the three months ended June 30, 2018 compared with 3.14% for the same period in 2017 and 3.16% for the three months ended March 31, 2018. The net interest margin for the three months ended June 30, 2018 was positively impacted by the collection of previously identified troubled assets.

Noninterest income was $28.371 million for the three months ended June 30, 2018 compared with $27.780 million for the same period in 2017, an increase of $591 thousand or 2.1%. On a linked quarter basis, noninterest income increased $433 thousand or 1.5% to $28.371 million compared with $27.938 million  during the three months ended March 31, 2018.

Noninterest expense was $83.602 million for the three months ended June 30, 2018 compared with $76.442 million for the same period in 2017, an increase of $7.160 million or 9.4%. On a linked quarter basis, noninterest expense increased $3.548 million or 4.4% to $83.602 million compared with $80.054 million during the three months ended March 31, 2018. The change during both of these periods was due to an increase in salaries and benefits. 

Results of Operations for the Six Months Ended June 30, 2018

Net income was $155.958 million(4) for the six months ended June 30, 2018 compared with $137.119 million(5) for the same period in 2017, an increase of $18.839 million or 13.7%.  Net income per diluted common share was $2.23 for the six months ended June 30, 2018 compared with $1.97 for the same period in 2017, an increase of 13.2%. Annualized returns on average assets, average common equity and average tangible common equity for the six months ended June 30, 2018 were 1.38%, 8.01% and 15.96%(1), respectively.  Prosperity's efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and securities and taxes) was 44.07%(1) for the six months ended June 30, 2018.

Net interest income before provision for credit losses for the six months ended June 30, 2018 was $315.026 million compared with $304.666 million for the same period in 2017, an increase of $10.360 million or 3.4%. This change was primarily due to higher loan and investment yields and an increase in loan balances, partially offset by higher deposit rates.

The net interest margin on a tax equivalent basis for the six months ended June 30, 2018 was 3.22% compared with 3.17% for the same period in 2017.

Noninterest income was $56.309 million for the six months ended June 30, 2018 compared with $58.604 million for the same period in 2017, a decrease of $2.295 million or 3.9%. This change was primarily due to the net gain on sale of securities during the six months ended June 30, 2017, partially offset by the net loss on sale of assets during the same period.

Noninterest expense was $163.656 million for the six months ended June 30, 2018 compared with $154.504 million for the same period in 2017, an increase of $9.152 million or 5.9%.  This change was primarily due to an increase in salaries and benefits.

__________

(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 $3.921 million, net of tax, primarily comprised of loan discount accretion of $5.223 million for the three months ended June 30, 2018.

(3)

Includes purchase accounting adjustments of $2.560 million, net of tax, primarily comprised of loan discount accretion of $4.471 million for the three months ended June 30, 2017.

(4)

Includes purchase accounting adjustments of $5.457 million, net of tax, primarily comprised of loan discount accretion of $7.549 million for the six months ended June 30, 2018.

(5)

Includes purchase accounting adjustments of $5.235 million, net of tax, primarily comprised of loan discount accretion of $9.224 million for the six months ended June 30, 2017.

Balance Sheet Information

At June 30, 2018, Prosperity had $22.571 billion in total assets compared with $22.297 billion at June 30, 2017.

Loans at June 30, 2018 were $10.147 billion, an increase of $282.546 million or 2.9%, compared with $9.864 billion at June 30, 2017. Linked quarter loans increased $135.149 million or 1.3% (5.4% annualized) from $10.011 billion at March 31, 2018.

Deposits at June 30, 2018 were $16.979 billion, a decrease of $91.926 million or 0.5%, compared with $17.071 billion at June 30, 2017. Linked quarter deposits decreased $354.275 million or 2.0% from $17.333 billion at March 31, 2018. This change was partially due to seasonality.

Asset Quality

Nonperforming assets totaled $31.585 million or 0.16% of quarterly average interest-earning assets at June 30, 2018, compared with $47.618 million or 0.24% of quarterly average interest-earning assets at June 30, 2017, and $33.217 million or 0.17% of quarterly average interest-earning assets at March 31, 2018.

The allowance for credit losses was $84.964 million or 0.84% of total loans at June 30, 2018, $83.783 million or 0.85% of total loans at June 30, 2017 and $83.600 million or 0.84% of total loans at March 31, 2018.  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 0.89%(1) of remaining loans as of June 30, 2018, compared with 0.93%(1) at June 30, 2017 and 0.90%(1) at March 31, 2018.

The provision for credit losses was $4.000 million for the three months ended June 30, 2018 compared with $2.750 million for the three months ended June 30, 2017 and $9.000 million for the three months ended March 31, 2018. The provision for credit losses was $13.000 million for the six months ended June 30, 2018 compared with $5.425 million for the six months ended June 30, 2017.

Net charge-offs were $2.636 million for the three months ended June 30, 2018 compared with $3.062 million for the three months ended June 30, 2017 and $9.441 million for the three months ended March 31, 2018. Net charge-offs for the second quarter of 2018 were primarily comprised of one commercial and industrial loan and one commercial real estate loan. Net charge-offs were $12.077 million for the six months ended June 30, 2018 compared with $6.968 million for the six months ended June 30, 2017.

Dividend

Prosperity Bancshares, Inc. declared a third quarter cash dividend of $0.36 per share to be paid on October 1, 2018 to all shareholders of record as of September 15, 2018. 

Conference Call

Prosperity's management team will host a conference call on Wednesday, July 25, 2018 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity's second quarter 2018 earnings. Individuals and investment professionals may participate in the call by dialing 877-883-0383. The elite entry number is 9749565.

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 financial 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 June 30, 2018, Prosperity Bancshares, Inc. ® is a $22.571 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, Debit Cards, 24 hour voice response banking, Trust and Wealth Management, Mortgage Services, Cash Management and Mobile Banking.

As of June 30, 2018, 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, Midland-Odessa and Abilene; 16 in the Bryan/College Station area, 6 in the Central Oklahoma area and 8 in the Tulsa, Oklahoma area.

PROSPERITY BANCSHARES, INC. (PRNewsfoto/Prosperity Bancshares, Inc.)

"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, 2017 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)




Jun 30, 2018



Mar 31, 2018



Dec 31, 2017



Sep 30, 2017



Jun 30, 2017


Balance Sheet Data (at period end)





















Loans


$

10,146,565



$

10,011,416



$

10,020,773



$

9,911,202



$

9,864,019


Investment securities(A)



9,620,614




9,710,254




9,672,116




9,410,522




9,582,195


Federal funds sold



577




469




697




1,007




757


Allowance for credit losses



(84,964)




(83,600)




(84,041)




(86,812)




(83,783)


Cash and due from banks



274,902




243,514




391,616




302,469




321,958


Goodwill



1,900,845




1,900,845




1,900,845




1,900,845




1,900,845


Core deposit intangibles, net



35,773




37,274




38,842




40,464




42,150


Other real estate owned



10,316




10,538




11,152




14,512




15,472


Fixed assets, net



255,465




257,057




257,065




256,011




256,511


Other assets



410,647




384,547




378,227




393,043




396,419


Total assets


$

22,570,740



$

22,472,314



$

22,587,292



$

22,143,263



$

22,296,543























Noninterest-bearing deposits


$

5,657,589



$

5,707,994



$

5,623,322



$

5,465,474



$

5,397,293


Interest-bearing deposits



11,321,015




11,624,885




12,198,138




11,442,002




11,673,237


Total deposits



16,978,604




17,332,879




17,821,460




16,907,476




17,070,530


Other borrowings



1,254,849




820,079




505,223




960,365




1,035,506


Securities sold under repurchase agreements



293,039




339,576




324,154




334,621




346,324


Other liabilities



108,796




103,635




112,301




159,443




107,995


Total liabilities



18,635,288




18,596,169




18,763,138




18,361,905




18,560,355


Shareholders' equity(B)



3,935,452




3,876,145




3,824,154




3,781,358




3,736,188


Total liabilities and equity


$

22,570,740



$

22,472,314



$

22,587,292



$

22,143,263



$

22,296,543




(A)

Includes $436, $57, ($143), $1,635 and $2,871 in unrealized gains (losses) on available for sale securities for the quarterly periods ended June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively.

(B)

Includes $345, $45, ($113), $1,063 and $1,866 in after-tax unrealized gains (losses) on available for sale securities for the quarterly periods ended June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(In thousands)




Three Months Ended



Year-to-Date




Jun 30,
2018



Mar 31,
2018



Dec 31,
2017



Sep 30,
2017



Jun 30,

2017



Jun 30,
2018



Jun 30,
2017


Income Statement Data





























Interest income:





























Loans


$

128,445



$

116,246



$

120,086



$

121,567



$

114,975



$

244,691



$

226,685


Securities(C)



55,577




54,457




51,510




50,610




52,912




110,034




106,069


Federal funds sold and other earning assets



299




315




243




242




160




614




343


Total interest income



184,321




171,018




171,839




172,419




168,047




355,339




333,097































Interest expense:





























Deposits



16,061




14,472




12,587




12,376




11,441




30,533




21,349


Other borrowings



6,046




2,973




2,852




3,540




4,040




9,019




6,516


Securities sold under repurchase agreements



411




350




350




356




335




761




566


Total interest expense



22,518




17,795




15,789




16,272




15,816




40,313




28,431


Net interest income



161,803




153,223




156,050




156,147




152,231




315,026




304,666


Provision for credit losses



4,000




9,000




2,000




6,900




2,750




13,000




5,425


Net interest income after provision for credit losses



157,803




144,223




154,050




149,247




149,481




302,026




299,241































Noninterest income:





























Nonsufficient funds (NSF) fees



7,828




7,827




8,110




8,350




7,805




15,655




15,894


Credit card, debit card and ATM card income



6,335




5,961




6,211




6,075




6,186




12,296




12,139


Service charges on deposit accounts



5,150




5,275




5,250




5,251




5,405




10,425




10,826


Trust income



2,251




2,728




2,734




2,040




2,271




4,979




4,426


Mortgage income



1,109




763




826




854




1,107




1,872




2,373


Brokerage income



687




625




574




461




427




1,312




915


Bank owned life insurance income



1,317




1,311




1,347




1,366




1,364




2,628




2,717


Net (loss) gain on sale of assets



(44)







41




62




(3,783)




(44)




(2,024)


Net (loss) gain on sale of securities



(13)













3,270




(13)




3,270


Other noninterest income



3,751




3,448




4,127




4,350




3,728




7,199




8,068


Total noninterest income



28,371




27,938




29,220




28,809




27,780




56,309




58,604































Noninterest expense:





























Salaries and benefits



53,360




50,399




48,756




47,866




47,343




103,759




95,787


Net occupancy and equipment



5,692




5,609




5,748




5,691




5,460




11,301




10,963


Credit and debit card, data processing and software amortization



4,356




4,448




4,423




4,506




4,216




8,804




8,301


Regulatory assessments and FDIC insurance



3,575




3,575




3,759




3,455




3,548




7,150




7,097


Core deposit intangibles amortization



1,501




1,568




1,622




1,686




1,719




3,069




3,634


Depreciation



3,054




3,033




3,011




3,050




3,051




6,087




6,154


Communications



2,606




2,580




2,608




2,618




2,664




5,186




5,366


Other real estate expense



83




89




181




110




128




172




223


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



10




122




2,978




(140)




(71)




132




(81)


Other noninterest expense



9,365




8,631




8,002




8,667




8,384




17,996




17,060


Total noninterest expense



83,602




80,054




81,088




77,509




76,442




163,656




154,504


Income before income taxes



102,572




92,107




102,182




100,547




100,819




194,679




203,341


Provision for income taxes



20,975




17,746




35,044




32,639




32,265




38,721




66,222


Net income available to common shareholders


$

81,597



$

74,361



$

67,138



$

67,908



$

68,554



$

155,958



$

137,119




(C)

Interest income on securities was reduced by net premium amortization of $7,753, $8,450, $9,521, $10,115 and $9,403 for the three-month periods ended June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively, and $16,203 and $19,286 for the six-month periods ended June 30, 2018 and June 30, 2017, 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




Jun 30,
2018



Mar 31,
2018



Dec 31,
2017



Sep 30,
2017



Jun 30,
2017



Jun 30,
2018



Jun 30,
2017


Profitability





























Net income (D) (E)


$

81,597



$

74,361



$

67,138



$

67,908



$

68,554



$

155,958



$

137,119































Basic earnings per share


$

1.17



$

1.07



$

0.97



$

0.98



$

0.99



$

2.23



$

1.97


Diluted earnings per share


$

1.17



$

1.07



$

0.97



$

0.98



$

0.99



$

2.23



$

1.97































Return on average assets (F)



1.44

%



1.32

%



1.20

%



1.22

%



1.22

%



1.38

%



1.22

%

Return on average common equity (F)



8.33

%



7.69

%



7.04

%



7.20

%



7.36

%



8.01

%



7.41

%

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



16.48

%



15.43

%



14.31

%



14.83

%



15.39

%



15.96

%



15.60

%

Tax equivalent net interest margin (D) (E) (H)



3.28

%



3.16

%



3.20

%



3.22

%



3.14

%



3.22

%



3.17

%

Efficiency ratio (G) (I)



43.95

%



44.19

%



43.78

%



41.92

%



42.34

%



44.07

%



42.68

%






























Liquidity and Capital Ratios





























Equity to assets



17.44

%



17.25

%



16.93

%



17.08

%



16.76

%



17.44

%



16.76

%

Common equity tier 1 capital



15.65

%



15.31

%



15.08

%



15.10

%



14.80

%



15.65

%



14.80

%

Tier 1 risk-based capital



15.65

%



15.31

%



15.08

%



15.10

%



14.80

%



15.65

%



14.80

%

Total risk-based capital



16.32

%



15.97

%



15.74

%



15.81

%



15.49

%



16.32

%



15.49

%

Tier 1 leverage capital



9.68

%



9.40

%



9.31

%



9.15

%



8.82

%



9.68

%



8.82

%

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



9.69

%



9.44

%



9.13

%



9.11

%



8.81

%



9.69

%



8.81

%






























Other Data





























Weighted-average shares used in computing earnings per common share





























Basic



69,839




69,768




69,484




69,485




69,487




69,803




69,483


Diluted



69,839




69,768




69,484




69,485




69,487




69,803




69,484


Period end shares outstanding



69,838




69,819




69,491




69,484




69,488




69,838




69,488


Cash dividends paid per common share


$

0.3600



$

0.3600



$

0.3600



$

0.3400



$

0.3400



$

0.7200



$

0.6800


Book value per common share


$

56.35



$

55.52



$

55.03



$

54.42



$

53.77



$

56.35



$

53.77


Tangible book value per common share (G)


$

28.62



$

27.76



$

27.12



$

26.48



$

25.81



$

28.62



$

25.81































Common Stock Market Price





























High


$

76.92



$

79.20



$

73.00



$

66.75



$

71.97



$

79.20



$

77.87


Low


$

67.30



$

68.95



$

61.95



$

55.84



$

61.29



$

67.30



$

61.29


Period end closing price


$

68.36



$

72.63



$

70.07



$

65.73



$

64.24



$

68.36



$

64.24


Employees – FTE



3,044




3,027




3,017




2,993




3,037




3,044




3,037


Number of banking centers



242




242




242




243




243




242




243


 

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


Three Months Ended


Year-to-Date


Jun 30, 2018


Mar 31, 2018


Dec 31, 2017


Sep 30, 2017


Jun 30, 2017


Jun 30, 2018


Jun 30, 2017

Loan discount accretion














ASC 310-20

$1,452


$1,640


$2,462


$6,361


$2,755


$3,092


$6,025

ASC 310-30

$3,771


$686


$2,334


$1,525


$1,716


$4,457


$3,199

Securities net amortization

$366


$477


$598


$667


$745


$843


$1,597

Time deposits amortization

$53


$53


$39


$40


$39


$106


$138



(E)

Using effective tax rate of 20.4%, 19.3%, 34.3%, 32.5% and 32.0% for the three-month periods ended June 30, 2018,  March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively, and 19.9% and 32.6% for the six-month periods ended June 30, 2018 and June 30, 2017, 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 to the nearest GAAP financial measure.

(H)

Net interest margin for all periods presented is based on average balances on an actual 365 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





Jun 30, 2018



Mar 31, 2018



Jun 30, 2017





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


$

10,044,064



$

128,445



5.13%



$

9,990,319



$

116,246



4.72%



$

9,797,793



$

114,975



4.71%



Investment securities



9,770,963




55,577



2.28%


(K)


9,742,601




54,457



2.27%


(K)


9,817,781




52,912



2.16%


(K)

Federal funds sold and other earning assets



79,947




299



1.50%




81,779




315



1.56%




84,497




160



0.76%



Total interest-earning assets



19,894,974




184,321



3.72%




19,814,699




171,018



3.50%




19,700,071




168,047



3.42%



Allowance for credit losses



(84,285)












(81,983)












(84,100)











Noninterest-earning assets



2,809,197












2,823,785












2,838,242











Total assets


$

22,619,886











$

22,556,501











$

22,454,213

















































Interest-Bearing Liabilities:






































Interest-bearing demand deposits


$

3,971,356



$

4,983



0.50%



$

4,392,230



$

5,063



0.47%



$

3,749,395



$

2,748



0.29%



Savings and money market deposits



5,342,323




6,709



0.50%




5,478,411




5,242



0.39%




5,520,346




4,827



0.35%



Certificates and other time deposits



2,094,065




4,369



0.84%




2,168,951




4,167



0.78%




2,296,425




3,866



0.68%



Other borrowings



1,272,032




6,046



1.91%




731,500




2,973



1.65%




1,460,238




4,040



1.11%



Securities sold under repurchase agreements



300,471




411



0.55%




327,136




350



0.43%




324,804




335



0.41%



Total interest-bearing liabilities



12,980,247




22,518



0.70%


(L)


13,098,228




17,795



0.55%


(L)


13,351,208




15,816



0.48%


(L)







































Noninterest-bearing liabilities:






































Noninterest-bearing demand deposits



5,646,114












5,510,320












5,290,142











Other liabilities



75,161












81,414












87,074











Total liabilities



18,701,522












18,689,962












18,728,424











Shareholders' equity



3,918,364












3,866,539












3,725,789











Total liabilities and shareholders' equity


$

22,619,886











$

22,556,501











$

22,454,213

















































Net interest income and margin






$

161,803



3.26%







$

153,223



3.14%







$

152,231



3.10%



Non-GAAP to GAAP reconciliation:






































Tax equivalent adjustment







903












941












1,989







Net interest income and margin (tax equivalent basis)






$

162,706



3.28%







$

154,164



3.16%







$

154,220



3.14%





(J)

Annualized and based on an actual 365 day basis.

(K)

Yield on securities was impacted by net premium amortization of $7,753, $8,450 and $9,403 for the three-month periods ended June 30, 2018, March 31, 2018 and June 30, 2017, respectively.

(L)

Total cost of funds, including noninterest bearing deposits, was 0.48%, 0.39% and 0.34% for the three months ended June 30, 2018, March 31, 2018 and June 30, 2017, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)


YIELD ANALYSIS


Year-to-Date





Jun 30, 2018



Jun 30, 2017





Average

Balance



Interest

Earned/

Interest

Paid



Average

Yield/

Rate


(M)

Average

Balance



Interest

Earned/

Interest

Paid



Average

Yield/

Rate


(M)

Interest-Earning Assets:


























Loans


$

10,017,340



$

244,691



4.93%



$

9,720,763



$

226,685



4.70%



Investment securities



9,756,861




110,034



2.27%


(N)


9,842,498




106,069



2.17%


(N)

Federal funds sold and other earning assets



80,858




614



1.53%




82,336




343



0.84%



Total interest-earning assets



19,855,059




355,339



3.61%




19,645,597




333,097



3.42%



Allowance for credit losses



(83,140)












(84,566)











Noninterest-earning assets



2,816,449












2,857,010











Total assets


$

22,588,368











$

22,418,041





































Interest-Bearing Liabilities:


























Interest-bearing demand deposits


$

4,180,631



$

10,046



0.48%



$

3,941,759



$

5,335



0.27%



Savings and money market deposits



5,409,991




11,951



0.45%




5,528,803




8,414



0.31%



Certificates and other time deposits



2,131,301




8,536



0.81%




2,331,446




7,600



0.66%



Other borrowings



1,003,259




9,019



1.81%




1,292,748




6,516



1.02%



Securities sold under repurchase agreements



313,730




761



0.49%




316,167




566



0.36%



Total interest-bearing liabilities



13,038,912




40,313



0.62%


(O)


13,410,923




28,431



0.43%


(O)



























Noninterest-bearing liabilities:


























Noninterest-bearing demand deposits



5,578,592












5,215,491











Other liabilities



78,270












89,100











Total liabilities



18,695,774












18,715,514











Shareholders' equity



3,892,594












3,702,527











Total liabilities and shareholders' equity


$

22,588,368











$

22,418,041





































Net interest income and margin






$

315,026



3.20%







$

304,666



3.13%



Non-GAAP to GAAP reconciliation:


























Tax equivalent adjustment







1,844












3,984







Net interest income and margin (tax equivalent basis)






$

316,870



3.22%







$

308,650



3.17%





(M)

Annualized and based on an actual 365 day basis.

(N)

Yield on securities was impacted by net premium amortization of $16,203 and $19,286 for the six-month periods ended June 30, 2018 and 2017, respectively.

(O)

Total cost of funds, including noninterest bearing deposits, was 0.44% and 0.31% for the six-month periods ended June 30, 2018 and 2017, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)



Three Months Ended



Jun 30, 2018



Mar 31, 2018



Dec 31, 2017



Sep 30, 2017



Jun 30, 2017


YIELD TREND (P)








































Interest-Earning Assets:




















Loans


5.13

%



4.72

%



4.79

%



4.88

%



4.71

%

Investment securities (Q)


2.28

%



2.27

%



2.15

%



2.11

%



2.16

%

Federal funds sold and other earning assets


1.50

%



1.56

%



1.06

%



1.24

%



0.76

%

Total interest-earning assets


3.72

%



3.50

%



3.48

%



3.51

%



3.42

%





















Interest-Bearing Liabilities:




















Interest-bearing demand deposits


0.50

%



0.47

%



0.35

%



0.33

%



0.29

%

Savings and money market deposits


0.50

%



0.39

%



0.36

%



0.37

%



0.35

%

Certificates and other time deposits


0.84

%



0.78

%



0.75

%



0.72

%



0.68

%

Other borrowings


1.91

%



1.65

%



1.27

%



1.28

%



1.11

%

Securities sold under repurchase agreements


0.55

%



0.43

%



0.41

%



0.41

%



0.41

%

Total interest-bearing liabilities


0.70

%



0.55

%



0.49

%



0.50

%



0.48

%





















Net Interest Margin


3.26

%



3.14

%



3.16

%



3.18

%



3.10

%

Net Interest Margin (tax equivalent)


3.28

%



3.16

%



3.20

%



3.22

%



3.14

%



(P)

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

(Q)

Yield on securities was impacted by net premium amortization of $7,753, $8,450, $9,521, $10,115 and $9,403 for the three-month periods ended June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)




Three Months Ended




Jun 30, 2018



Mar 31, 2018



Dec 31, 2017



Sep 30, 2017



Jun 30, 2017


Balance Sheet Averages





















Loans


$

10,044,064



$

9,990,319



$

9,955,145



$

9,888,922



$

9,797,793


Investment securities



9,770,963




9,742,601




9,521,081




9,526,215




9,817,781


Federal funds sold and other earning assets



79,947




81,779




91,257




77,337




84,497


Total interest-earning assets



19,894,974




19,814,699




19,567,483




19,492,474




19,700,071


Allowance for credit losses



(84,285)




(81,983)




(84,465)




(84,047)




(84,100)


Cash and due from banks



234,856




269,917




257,462




225,574




228,518


Goodwill



1,900,845




1,900,845




1,900,845




1,900,845




1,900,845


Core deposit intangibles, net



36,550




38,064




39,650




41,314




42,957


Other real estate



10,386




10,758




14,177




15,262




15,871


Fixed assets, net



256,281




257,465




256,657




256,809




257,229


Other assets



370,279




346,736




365,173




362,048




392,822


Total assets


$

22,619,886



$

22,556,501



$

22,316,982



$

22,210,279



$

22,454,213























Noninterest-bearing deposits


$

5,646,114



$

5,510,320



$

5,598,345



$

5,361,362



$

5,290,142


Interest-bearing demand deposits



3,971,356




4,392,230




3,787,421




3,601,116




3,749,395


Savings and money market deposits



5,342,323




5,478,411




5,530,158




5,658,569




5,520,346


Certificates and other time deposits



2,094,065




2,168,951




2,225,555




2,270,114




2,296,425


Total deposits



17,053,858




17,549,912




17,141,479




16,891,161




16,856,308


Other borrowings



1,272,032




731,500




891,396




1,099,583




1,460,238


Securities sold under repurchase agreements



300,471




327,136




337,690




344,177




324,804


Other liabilities



75,161




81,414




129,533




102,046




87,074


Shareholders' equity



3,918,364




3,866,539




3,816,884




3,773,312




3,725,789


Total liabilities and equity


$

22,619,886



$

22,556,501



$

22,316,982



$

22,210,279



$

22,454,213


 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)




Jun 30, 2018



Mar 31, 2018



Dec 31, 2017



Sep 30, 2017



Jun 30, 2017


Period End Balances








































































Loan Portfolio




































Commercial and industrial


$

1,168,892



11.5

%