- 3Q09 Earnings Per Share of $0.63 (diluted) - 3Q09 Net Interest
Margin (tax equivalent) of 4.08% - Allowance for Credit Losses to
Total Loans increased to 1.39% - Tangible Common Equity Ratio
increased to 5.13% - Non-Performing Assets remain low at 0.29% of
Average Earning Assets HOUSTON, Oct. 16 /PRNewswire-FirstCall/ --
Prosperity Bancshares, Inc.(R) (NASDAQ:PRSP), the parent company of
Prosperity Bank(R), reported net income for the quarter ended
September 30, 2009 of $29.322 million or $0.63 per diluted common
share, an increase in net income of $13.875 million or 89.8%,
compared with $15.447 million or $0.33 per diluted common share for
the same period in 2008. Earnings for the three months ended
September 30, 2008 included a $9.116 million after-tax ($14.025
million pre-tax) impairment charge on Fannie Mae and Freddie Mac
perpetual preferred securities ("impairment charge on securities"
or "impairment charge"). Excluding the impairment charge, net
income for the quarter ended September 30, 2008 would have been
$24.563 million or $0.53 per diluted common share. Net income for
the quarter ended September 30, 2009 increased $4.759 million or
19.4% when compared to net income for the quarter ended September
30, 2008 excluding the impairment charge. "I am proud to report our
team's outstanding performance during the past quarter," commented
David Zalman, Chairman and Chief Executive Officer. "Our bankers
are competing well in all of our markets and we continue to believe
our strong asset quality and strong earnings capacity will lead to
future opportunities." "We continued to reduce our exposure to
construction and development loans while our team of professional
bankers continued to attract core deposit customers in our market
areas throughout Texas," continued Zalman. "While Texas is
certainly not immune to the economic ills affecting other parts of
the country, we are encouraged by the resilience of the Texas
economy." 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 and the
tangible equity to tangible assets ratio. Prosperity also reviewed
its net income, earnings per share, non-interest expense and
related performance ratios for the three and nine month periods
ending September 30, 2008 excluding the non-recurring impairment
charge on Fannie Mae and Freddie Mac perpetual preferred
securities. Prosperity has included in this Earnings Release
information relating to these non-GAAP financial measures for the
applicable periods presented. 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. Results of
operations for the three months ended September 30, 2009 For the
three months ended September 30, 2009, net income was $29.322
million compared with $15.447 million for the same period in 2008.
Net income per diluted common share was $0.63 for the three months
ended September 30, 2009 and $0.33 for the same period in 2008.
Earnings for the three months ended September 30, 2008 included a
$9.116 million after-tax ($14.025 million pre-tax) impairment
charge on Fannie Mae and Freddie Mac perpetual preferred
securities. Excluding the impairment charge, net income for the
quarter ended September 30, 2008 would have been $24.563 million or
$0.53 per diluted common share. Net income for the quarter ended
September 30, 2009 increased $4.759 million or 19.4% when compared
to net income for the quarter ended September 30, 2008 excluding
the impairment charge. Returns on average assets, average common
equity and average tangible common equity for the three months
ended September 30, 2009 were 1.32%, 8.93% and 29.34%,
respectively. Prosperity's efficiency ratio (excluding net gains
and losses on the sale of securities and assets and impairment
charge on securities) was 44.46% for the three months ended
September 30, 2009. Net interest income before provision for credit
losses for the quarter ended September 30, 2009 increased 33.9% to
$77.413 million compared with $57.806 million during the same
period in 2008. The increase was attributable primarily to a 35.7%
increase in average earning assets primarily due to the assumption
of certain deposits and acquisition of certain assets of Franklin
Bank from the FDIC. The net interest margin on a tax equivalent
basis decreased to 4.08% for the three months ended September 30,
2009 compared with 4.15% for the same period in 2008. On a linked
quarter basis, the tax equivalent net interest margin increased
four basis points to 4.08% for the three months ended September 30,
2009 from 4.04% reported for the three months ended June 30, 2009
as a result of multiple factors, including lower deposit pricing.
Non-interest income increased $2.119 million or 16.2% to $15.236
million for the three months ended September 30, 2009 compared with
$13.117 million for the same period in 2008. The increase was
mainly attributable to an increase in service charges on deposit
accounts related to accounts assumed from the FDIC as part of the
Franklin Bank transaction. Non-interest expense decreased $5.029
million or 10.9% to $41.201 million for the third quarter of 2009
compared with $46.230 million for the third quarter of 2008. The
decrease was attributable to a $14.025 million impairment charge on
securities during the three months ended September 30, 2008,
partially offset by increased expenses related to operating the
additional banking offices that were acquired in the Franklin Bank
transaction and increased FDIC insurance premiums. Excluding the
impairment charge, non-interest expense increased $8.996 million or
27.9%, primarily due to increases in staff and general operating
expenses related to the banking centers acquired in the Franklin
Bank transaction and increased FDIC deposit insurance assessments.
Prosperity's FDIC deposit insurance assessments for 2008 were
approximately $1.4 million. The expected full year 2009 FDIC
deposit insurance assessment (excluding any one-time assessments)
is currently projected to be between $8.0 million and $9.0 million
pre-tax based upon deposit balances at September 30, 2009.
Additionally, the FDIC imposed an emergency special assessment as
of June 30, 2009, which for Prosperity totaled approximately $4.3
million in pre-tax expense or $0.06 per diluted common share after
tax. Additionally, the FDIC has adopted a proposed rule to require
depository institutions to pre-pay, on December 30, 2009, estimated
quarterly risk-based assessments for the fourth quarter of 2009 and
all of 2010, 2011 and 2012. Comments to the proposed rule are due
to the FDIC by October 28, 2009 and a final rule will be adopted
after that date. Average loans increased 4.3% or $141.858 million
to $3.431 billion for the quarter ended September 30, 2009 compared
with $3.289 billion for the same period in 2008. Linked quarter
average loans decreased 1.2% or $41.388 million from $3.472 billion
at June 30, 2009. Average deposits increased 39.3% or $2.037
billion to $7.224 billion for the quarter ended September 30, 2009
compared with $5.187 billion for the same period in 2008. Linked
quarter average deposits decreased 0.3% or $22.541 million from
$7.246 billion at June 30, 2009. Loans at September 30, 2009 were
$3.406 billion, an increase of $157,520 million or 4.9%, compared
with $3.249 billion at September 30, 2008. Loans decreased 1.3% or
$45.182 million on a linked quarter basis compared with loans of
$3.451 billion at June 30, 2009. As reflected in the table below,
linked quarter loans for the third quarter of 2009 were impacted by
the loans acquired from the FDIC as a part of the Franklin Bank
transaction in November 2008. Excluding the loans acquired in this
transaction, linked quarter loans decreased 0.8%. Deposits at
September 30, 2009 were $7.118 billion, an increase of $2.013
billion or 39.4%, compared with $5.105 billion at September 30,
2008. Linked quarter deposits decreased $139.902 million or 1.9%
from $7.258 billion at June 30, 2009. As reflected in the table
below, linked quarter deposits for the third quarter of 2009 were
impacted by the deposits assumed from the FDIC as part of the
Franklin Bank transaction. Excluding the deposits assumed in this
transaction, linked quarter deposits increased 1.0% and 9.4% from
September 30, 2008. Balance Sheet Data (at period end) Sept 30,
2009 June 30, 2009 Sept 30, 2008 ------------- -------------
------------- (In thousands) (Unaudited) (Unaudited) (Unaudited)
Loans: Acquired from FDIC (related to Franklin Bank) $264,319
$282,733 $0 All other 3,141,818 3,168,586 3,248,617 ---------
--------- --------- Total Loans $3,406,137 $3,451,319 $3,248,617
========== ========== ========== Deposits: Assumed from FDIC
(related to Franklin Bank) $1,533,641 $1,729,657 $0 All other
5,584,352 5,528,238 5,104,842 --------- --------- --------- Total
Deposits $7,117,993 $7,257,895 $5,104,842 ========== ==========
========== At September 30, 2009, construction loans totaled
$564.106 million, consisting of approximately $152 million of
single family residential construction loans; $77 million of land
development loans; $84 million of raw land loans; $104 million of
residential lot loans; $48 million of commercial lot loans; and $99
million of commercial and other construction loans. This is a
decrease of $49.280 million from construction loans at June 30,
2009. At September 30, 2009, Prosperity had $8.957 billion in total
assets, $3.406 billion in loans, and $7.118 billion in deposits.
Assets, loans and deposits at September 30, 2009 increased by
32.0%, 4.9% and 39.4%, respectively, compared with their level at
September 30, 2008. Results of operations for the nine months ended
September 30, 2009 For the nine months ended September 30, 2009,
net income was $81.310 million compared with $61.822 million for
the same period in 2008. Net income per diluted common share was
$1.76 for the nine months ended September 30, 2009 compared with
$1.37 for the same period in 2008. Returns on average assets,
average common equity and average tangible common equity for the
nine months ended September 30, 2009 were 1.22%, 8.39% and 28.72%,
respectively. Prosperity's efficiency ratio was 47.60% for the nine
months ended September 30, 2009. Net interest income before
provision for credit losses for the nine months ended September 30,
2009 increased $63.240 million or 38.6%, to $227.012 million
compared with $163.772 million during the same period in 2008. The
increase was attributable primarily to a 40.5% increase in average
earning assets. Non-interest income increased $6.524 million or
16.8% to $45.386 million for the nine months ended September 30,
2009 compared with $38.862 million for the same period in 2008. The
increase was mainly attributable to an increase in service charges
on deposit accounts related to accounts assumed from the FDIC as
part of the Franklin Bank transaction and deposit accounts assumed
from the 1st Choice acquisition. Non-interest expense increased
$23.314 million or 22.0% to $129.524 million for the nine months
ended September 30, 2009 compared with $106.210 million for the
same period in 2008. The increase was attributable to the increased
expenses related to operating the additional banking offices that
were acquired in the Franklin Bank transaction, the 1st Choice
acquisition and FDIC deposit insurance assessments, partially
offset by a $14.025 million pre-tax impairment charge on securities
recognized in the third quarter of 2008. The provision for credit
losses was $20.275 million for the nine months ended September 30,
2009 compared to $3.867 million for the nine months ended September
30, 2008. Net charge offs were $9.932 million for the nine months
ended September 30, 2009 compared to $4.611 million for the nine
months ended September 30, 2008. Asset Quality Non-performing
assets totaled $21.920 million or 0.29% of average earning assets
at September 30, 2009 compared with $14.536 million or 0.26% of
average earning assets at September 30, 2008 and $19.587 million or
0.26% of average earnings assets at June 30, 2009. The allowance
for credit losses was 1.39% of total loans at September 30, 2009
compared with 1.05% at September 30, 2008 and 1.23% of total loans
at June 30, 2009. Non-performing assets Sept 30, 2009 June 30, 2009
Sept 30, 2008 (In thousands) ------------- -------------
------------- Amount # Amount # Amount # ------ --- ------ ---
------ --- Commercial $920 26 $955 28 $1,600 26 Construction 10,975
40 10,969 38 6,562 29 1-4 family (including home equity) 1,285 16
1,353 22 2,962 17 Commercial real estate (including multi-family)
8,592 13 6,157 9 2,886 8 Agriculture 0 0 0 0 400 2 Consumer 148 13
153 11 126 18 Other 0 0 0 0 0 0 --- --- --- --- --- --- Total
$21,920 108 $19,587 108 $14,536 100 ======= === ======= === =======
=== Net Charge-offs Three Months Three Months Three Months Ended
Ended Ended (In thousands) Sept 30, 2009 June 30, 2009 Sept 30,
2008 ------------- ------------- ------------- Commercial $712 $307
$223 Construction 780 1,185 1,043 1-4 family (including home
equity) 297 510 128 Commercial real estate (including multi-family)
215 1,091 (14) Agriculture 53 (1) 51 Consumer 492 434 373 --- ---
--- Total $2,549 $3,526 $1,804 ====== ====== ====== The provision
for credit losses was $7.250 million for the three months ended
September 30, 2009 and $1.700 million for the three months ended
September 30, 2008. Prosperity's loan loss reserve model called for
increased provisioning in the third quarter due to increased
charge-offs resulting from a general weakening of the economy. Net
charge offs were $2.549 million for the three months ended
September 30, 2009 and $1.804 million for the three months ended
September 30, 2008. Conference Call Prosperity's management team
will host a conference call on Friday, October 16, 2009 at 10:30
a.m. Eastern Daylight Time (9:30 a.m. Central Daylight Time) to
discuss Prosperity's third quarter earnings. Individuals and
investment professionals may participate in the call by dialing
1-800-895-4790, the reference code is PBTX. Alternatively,
individuals may listen to the live webcast of the presentation by
visiting Prosperity's website at http://www.prosperitybanktx.com/.
The webcast may be accessed directly from Prosperity's Home page
under News and Events. Assumption of deposits and acquisition of
certain assets from the FDIC as receiver for Franklin Bank, SSB On
November 7, 2008, Prosperity Bank(R) paid a deposit premium of
approximately $60.918 million to assume approximately $3.6 billion
of deposits, including all uninsured deposits, from the FDIC,
acting in its capacity as receiver for Franklin Bank. The FDIC
entered into a purchase and assumption agreement with Prosperity
Bank, which paid a premium to ensure that all deposits of Franklin
Bank, both insured and uninsured, were transferred to Prosperity
Bank(R). Under the terms of the purchase and assumption agreement,
Prosperity Bank(R) acquired certain assets from the FDIC, including
approximately $350 million in US Treasury and Agency Securities and
approximately $350 million in performing loans. The remaining net
proceeds were predominately invested in US Agency Securities. While
Franklin Bank operated forty-five (45) full service banking
offices, Prosperity Bank continues to operate thirty-three (33) of
these locations and has consolidated the remainder with other
nearby Prosperity locations. Acquisition of 1st Choice Bancorp,
Inc. On June 1, 2008, Prosperity completed its previously announced
acquisition of 1st Choice Bancorp, Inc. and its wholly owned
subsidiary, 1st Choice Bank. 1st Choice Bancorp, Inc. operated two
(2) banking offices in Houston, Texas, with one location in South
Houston and another in the Heights area which was consolidated with
Prosperity's Heights location and is located in 1st Choice's
Heights banking office. As of May 31, 2008, 1st Choice Bancorp
reported total assets of approximately $314.9 million, loans of
approximately $192.7 million, deposits of approximately $285.2
million and stockholders' equity of approximately $26.4 million. In
connection with the acquisition, Prosperity issued 1,757,757 shares
of its common stock and paid approximately $18.758 million in cash
for all outstanding shares of 1st Choice Bancorp. Prosperity
Bancshares, Inc.(R) Prosperity Bancshares, Inc.(R), a $9.0 billion
Houston, Texas based regional financial holding company, formed in
1983, operates under a community banking philosophy and seeks to
develop broad customer relationships based on service and
convenience. Prosperity offers a variety of traditional loan and
deposit products to its customers, which consist primarily of small
and medium sized businesses and consumers. In addition to
established banking products, Prosperity offers a complete line of
services including: Internet Banking services at
http://www.prosperitybanktx.com/, Retail Brokerage Services,
MasterMoney Debit Cards, and 24 hour voice response banking.
Prosperity currently operates one hundred fifty-eight (158) full
service banking locations; fifty-one (51) in the Houston area;
twenty-seven (27) in the South Texas area including Corpus Christi
and Victoria; twenty-four (24) in the Dallas/Fort Worth area;
twenty (20) in the East Texas area; twenty-seven (27) in the
Central Texas area including Austin and San Antonio; and nine (9)
in the Bryan/College Station area. Bryan/College Station - Bryan
Bryan-East Bryan-North Caldwell College Station Greens Prairie
Navasota Rock Prairie Wellborn Road Central Texas Area - Austin -
Allandale Cedar Park Congress 183 Lakeway Liberty Hill Northland
Oak Hill Parmer Lane Research Blvd Rollingwood Slaughter Lane Other
Central Texas Locations - Bastrop Dime Box Dripping Springs Elgin
Flatonia Georgetown Kingsland La Grange Lexington New Braunfels
Round Rock San Antonio Schulenburg Smithville Weimar Dallas/Fort
Worth Area - Dallas - Abrams Centre Balch Springs Camp Wisdom Cedar
Hill Central Expressway Frisco Frisco-West Kiest Preston Road Red
Oak The Colony Turtle Creek Westmoreland Fort Worth - Haltom City
Keller Roanoke Stockyards Other Dallas/Fort Worth Locations - Azle
Ennis Gainesville Mesquite Muenster Sanger Waxahachie East Texas
Area - Athens Athens-South Blooming Grove Canton Carthage Corsicana
Crockett Eustace Grapeland Gun Barrel City Jacksonville Kerens
Longview Mount Vernon Palestine Rusk Seven Points Tyler
Tyler-University Winnsboro Houston Area - Houston - Aldine Bellaire
Clear Lake Copperfield Cypress Downtown Fairfield Gessner
Gladebrook Harrisburg Heights Highway 6 West Hillcroft Little York
Medical Center Memorial Drive Pasadena Pecan Grove River Oaks Sugar
Land SW Medical Center Tanglewood Uptown Waugh Drive Westheimer
Woodcreek Other Houston Area Locations - Angleton Beaumont Cinco
Ranch Cleveland East Bernard Edna El Campo Dayton Galveston Groves
Hempstead Hitchcock Katy Liberty Magnolia Mont Belvieu Nederland
Needville Sweeny Tomball Waller West Columbia Wharton Winnie Wirt
South Texas Area - Corpus Christi - Airline Carmel Northwest
Saratoga Water Street Other South Texas Locations - Alice Aransas
Pass Bay City Beeville Cuero Goliad Gonzales Hallettsville
Kingsville Mathis Padre Island Palacios Pleasanton Port Lavaca
Portland Rockport Seguin Sinton Victoria Victoria-North Yoakum
Yorktown "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 that are based on current expectations,
assumptions, estimates and projections about Prosperity and its
subsidiaries. These forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties,
many of which are outside of Prosperity's control that may cause
actual results to differ materially from those expressed or implied
by the forward-looking statements. These risks and uncertainties
include but are not limited to whether Prosperity can: successfully
identify acquisition targets and integrate the businesses of
acquired companies and banks; continue to sustain its current
internal growth rate or total growth rate; provide products and
services that appeal to its customers; continue to have access to
debt and equity capital markets; and achieve its sales objectives.
Other risks include, 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 fluctuations and interest rate fluctuations; weather; and the
stock price volatility associated with "small-cap" companies. These
and various other factors are discussed in Prosperity's Annual
Report on Form 10-K for the year ended December 31, 2008 and other
reports and statements we have filed with the SEC. Copies of the
SEC filings for Prosperity may be downloaded from the Internet at
no charge from http://www.prosperitybanktx.com/. Prosperity
Bancshares, Inc.(R) Financial Highlights (Dollars and share amounts
in thousands, except per share data) Three Months Ended Nine Months
Ended Sept 30, Sept 30, Sept 30, Sept 30, 2009 2008 2009 2008
----------- ----------- ----------- ----------- Selected Earnings
(Unaudited) (Unaudited) (Unaudited) (Unaudited) and Per Share Data
Total interest income $101,695 $84,846 $310,029 $251,290 Total
interest expense 24,282 27,040 83,017 87,518 ------ ------ ------
------ Net interest income 77,413 57,806 227,012 163,772 Provision
for credit losses 7,250 1,700 20,275 3,867 ----- ----- ------ -----
Net interest income after provision for credit losses 70,163 56,106
206,737 159,905 Total non-interest income 15,236 13,117 45,386
38,862 Total non-interest expense (A) 41,201 46,230 129,524 106,210
------ ------ ------- ------- Net income before taxes 44,198 22,993
122,599 92,557 Federal income taxes 14,876 7,546 41,289 30,735
------ ----- ------ ------ Net income (B) $29,322 $15,447 $81,310
$61,822 ======= ======= ======= ======= Basic earnings per share
(C) $0.64 $0.34 $1.76 $1.37 Diluted earnings per share (C) $0.63
$0.33 $1.76 $1.37 Period end shares outstanding 46,153 46,072
46,153 46,072 Weighted average shares outstanding (basic) 46,125
46,065 46,106 45,038 Weighted average shares outstanding (diluted)
46,347 46,302 46,243 45,217 (A) Total non-interest expense for the
three and nine months ended September 30, 2008 includes a $14.025
million pre-tax impairment charge on securities. (B) Earnings for
the three and nine months ended September 30, 2008 include a
$14.025 million pre-tax, or $9.116 million after-tax, impairment
charge on securities. (C) Earnings for the three and nine months
ended September 30, 2008 includes a $14.025 million pre-tax, or
$9.116 million after-tax, impairment charge on securities which
resulted in a $0.19 and $0.20 decrease in basic and diluted
earnings per share to $0.34 and $0.33, respectively, for the three
months ended September 30, 2008 and a $0.21 and $0.20 decrease in
basic and diluted earnings per share to $1.37 and $1.37,
respectively, for the nine months ended September 30, 2008.
Prosperity Bancshares, Inc.(R) Financial Highlights (Dollars in
thousands) Three Months Ended Nine Months Ended Sept 30, Sept 30,
Sept 30, Sept 30, 2009 2008 2009 2008 ----------- -----------
----------- ----------- Balance Sheet Averages (Unaudited)
(Unaudited) (Unaudited) (Unaudited) Total loans $3,431,061
$3,289,203 3,477,972 $3,212,176 Investment securities 4,062,796
2,292,571 4,019,370 2,134,396 Federal funds sold and other
temporary investments 107,008 18,854 98,782 61,264 ------- ------
------ ------ Total earning assets 7,600,865 5,600,628 7,596,124
5,407,836 Allowance for credit losses (43,610) (33,746) (40,045)
(32,839) Cash and due from banks 126,659 134,849 139,017 137,177
Goodwill 875,176 811,726 875,450 785,853 Core deposit intangibles
(CDI) 39,027 46,240 39,217 44,840 Other real estate 13,910 6,972
11,508 8,984 Fixed assets, net 150,216 124,828 141,510 124,082
Other assets 105,304 109,952 106,204 112,720 ------- -------
------- ------- Total assets $8,867,547 $6,801,449 $8,868,985
$6,588,653 ========== ========== ========== ========== Non-interest
bearing deposits $1,475,878 $1,266,924 $1,490,911 $1,212,379
Interest bearing deposits 5,747,980 3,920,291 5,761,958 3,842,826
--------- --------- --------- --------- Total deposits 7,223,858
5,187,215 7,252,869 5,055,205 Securities sold under repurchase
agreements 109,961 95,533 95,488 81,390 Federal funds purchased and
other borrowings 49,539 146,172 53,733 106,572 Junior subordinated
debentures 92,265 92,265 92,265 101,429 Other liabilities 77,913
55,105 82,492 61,405 Shareholders' equity(D) 1,314,011 1,225,159
1,292,138 1,182,652 --------- --------- --------- --------- Total
liabilities and equity $8,867,547 $6,801,449 $8,868,985 $6,588,653
========== ========== ========== ========== (D) Includes $13,735
and ($3,643) in after tax unrealized gains (losses) on available
for sale securities for the three months ending September 30, 2009
and September 30, 2008, respectively, and $13,767 and ($1,109) for
the nine months ending September 30, 2009 and September 30, 2008,
respectively. Prosperity Bancshares, Inc.(R) Financial Highlights
(Dollars in thousands) Three Months Ended Nine Months Ended Sept
30, Sept 30, Sept 30, Sept 30, 2009 2008 2009 2008 -----------
----------- ----------- ----------- Income Statement Data
(Unaudited) (Unaudited) (Unaudited) (Unaudited) Interest on loans
$54,809 $56,925 $165,859 $171,393 Interest on securities 46,812
27,834 143,990 78,473 Interest on federal funds sold and other
temporary investments 74 87 180 1,424 --- --- --- ----- Total
interest income 101,695 84,846 310,029 251,290 ------- ------
------- ------- Interest expense - deposits 22,694 23,874 77,772
78,029 Interest expense - debentures 879 1,410 2,957 4,987 Interest
expense - other 709 1,756 2,288 4,502 --- ----- ----- ----- Total
interest expense 24,282 27,040 83,017 87,518 ------ ------ ------
------ Net interest income (E) 77,413 57,806 227,012 163,772
Provision for credit losses 7,250 1,700 20,275 3,867 ----- -----
------ ----- Net interest income after provision for credit losses
70,163 56,106 206,737 159,905 ------ ------ ------- ------- Service
charges on deposit accounts 13,554 11,348 38,789 32,581 Net (loss)
gain on sale of assets (20) 34 277 715 Net gain (loss) on sale of
ORE 115 (210) 552 (648) Brokered mortgage income 59 74 269 296 Net
gain on sale of held for sale loans 0 46 0 229 Other non-interest
income 1,528 1,825 5,499 5,689 ----- ----- ----- ----- Total
non-interest income 15,236 13,117 45,386 38,862 ------ ------
------ ------ Salaries and benefits (F) 21,507 17,526 64,649 50,407
CDI amortization 2,479 2,562 7,635 7,513 Net occupancy and
equipment 3,624 3,088 11,116 8,765 Depreciation 2,100 1,955 6,170
5,812 Data processing and software amortization 1,446 1,319 5,063
3,971 Impairment charge on securities 0 14,025 0 14,025 Other
non-interest expense 10,045 5,755 34,891 15,717 ------ ----- ------
------ Total non-interest expense 41,201 46,230 129,524 106,210
------ ------ ------- ------- Net income before taxes 44,198 22,993
122,599 92,557 Federal income taxes 14,876 7,546 41,289 30,735
------ ----- ------ ------ Net income available to common
shareholders(G) $29,322 $15,447 $81,310 $61,822 ======= =======
======= ======= (E) Net interest income on a tax equivalent basis
would be $78,111 and $58,471 for the three months ended September
30, 2009 and September 30, 2008, respectively, and $229,096 and
$165,995 for the nine months ended September 30, 2009 and September
30, 2008, respectively. (F) Salaries and benefits includes
stock-based compensation expense of $267 and $470 for the three
months ended September 30, 2009 and September 30, 2008,
respectively, and $887 and $1,111 for the nine months ended
September 30, 2009 and September 30, 2008, respectively. (G)
Earnings for the three and nine months ended September 30, 2008
includes a $14.025 million pre-tax, or $9.116 million after-tax,
impairment charge on securities. Prosperity Bancshares, Inc.(R)
Financial Highlights (Dollars and share amounts in thousands,
except per share data) Three Months Ended Nine Months Ended Sept
30, Sept 30, Sept 30, Sept 30, 2009 2008 2009 2008 -----------
----------- ----------- ----------- Common Share and Other
(Unaudited) (Unaudited) (Unaudited) (Unaudited) Data Employees -
FTE 1,608 1,366 1,608 1,366 Book value per share $28.75 $26.68
$28.75 $26.68 Tangible book value per share $8.93 $8.08 $8.93 $8.08
Period end shares outstanding 46,153 46,072 46,153 46,072 Weighted
average shares outstanding (basic) 46,125 46,065 46,106 45,038
Weighted average shares outstanding (diluted) 46,347 46,302 46,243
45,217 Non-accrual loans $2,878 $2,757 $2,878 $2,757 Accruing loans
90 or more days past due 5,938 4,083 5,938 4,083 Restructured loans
0 0 0 0 --- --- --- --- Total non-performing loans 8,816 6,840
8,816 6,840 Repossessed assets 366 158 366 158 Other real estate
12,738 7,538 12,738 7,538 ------ ----- ------ ----- Total
non-performing assets $21,920 $14,536 $21,920 $14,536 Allowance for
credit losses at end of period $47,312 $33,981 $47,312 $33,981 Net
charge-offs $2,549 $1,804 $9,932 $4,611 Basic earnings per share
(H) $0.64 $0.34 $1.76 $1.37 Diluted earnings per share (H) $0.63
$0.33 $1.76 $1.37 (H) Earnings for the three and nine months ended
September 30, 2008 includes a $14.025 million pre-tax, or $9.116
million after-tax, impairment charge on securities which resulted
in a $0.19 and $0.20 decrease in basic and diluted earnings per
share to $0.34 and $0.33, respectively, for the three months ended
September 30, 2008 and a $0.21 and $0.20 decrease in basic and
diluted earnings per share to $1.37 and $1.37, respectively, for
the nine months ended September 30, 2008. Prosperity Bancshares,
Inc.(R) Financial Highlights Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30, 2009 2008 2009 2008 -----------
----------- ----------- ----------- Performance Ratios (Unaudited)
(Unaudited) (Unaudited) (Unaudited) Return on average assets
(annualized) (I) 1.32% 0.91% 1.22% 1.25% Return on average common
equity (annualized) (I) 8.93% 5.04% 8.39% 6.97% Return on average
tangible common equity (annualized) (I) 29.34% 16.83% 28.72% 23.42%
Net interest margin (tax equivalent) (annualized) (J) 4.08% 4.15%
4.03% 4.10% Efficiency ratio (K) 44.46% 45.43% 47.60% 45.65% Asset
Quality Ratios Non-performing assets to average earning assets
0.29% 0.26% 0.29% 0.27% Non-performing assets to loans and other
real estate 0.64% 0.45% 0.64% 0.45% Net charge-offs to average
loans 0.07% 0.05% 0.29% 0.14% Allowance for credit losses to total
loans 1.39% 1.05% 1.39% 1.05% Common Stock Market Price High $37.36
$46.48 $37.36 $46.48 Low $28.13 $23.32 $20.04 $21.96 Period end
market price $34.79 $33.99 $34.79 $33.99 (I) Earnings for the three
and nine months ended September 30, 2008 includes a $14.025 million
pre-tax, or $9.116 million after-tax, impairment charge on
securities which resulted in a 53 and 19 basis point decrease in
return on average assets to 0.91% and 1.25%, respectively, a 298
and 103 basis point decrease in return on average equity to 5.04%
and 6.97%, respectively, and a 993 and 345 basis point decrease in
return on average tangible common equity to 16.83% and 23.42%,
respectively (J) Net interest margin for all periods presented is
calculated on an actual 365 or actual 366 day basis. (K) The
Company revised its efficiency ratio in the fourth quarter 2008 and
no longer excludes gains and losses on the sale of ORE. The
efficiency ratio is calculated by dividing total non-interest
expense (excluding provision for credit losses) by net interest
income plus non- interest income (excluding net gains and losses on
the sale of securities and assets and impairment charge on
securities). Prior period amounts have been restated to reflect the
current methodology. Additionally, taxes are not part of this
calculation. Prosperity Bancshares, Inc.(R) Financial Highlights
(Dollars in thousands) Sept 30, 2009 June 30, 2009 -------------
------------- Loan Portfolio (Unaudited) (Unaudited) Commercial
$439,848 12.92% $461,622 13.38% Construction 564,106 16.56% 613,386
17.77% 1-4 family residential 692,885 20.34% 675,702 19.58% Home
equity 116,873 3.43% 115,029 3.33% Commercial real estate 1,336,454
39.24% 1,318,489 38.20% Agriculture 145,176 4.26% 149,515 4.33%
Consumer 110,795 3.25% 117,576 3.41% ------- ------- Total Loans
$3,406,137 $3,451,319 ========== ========== Deposit Types
Non-interest bearing DDA $1,473,189 20.70% $1,476,378 20.34%
Interest bearing DDA 1,066,778 14.99% 1,060,965 14.62% Money Market
1,682,345 23.63% 1,614,874 22.25% Savings 320,078 4.50% 325,232
4.48% Time < $100 1,289,362 18.11% 1,418,375 19.54% Time >
$100 1,286,241 18.07% 1,362,071 18.77% --------- --------- Total
Deposits $7,117,993 $7,257,895 ========== ========== Loan to
Deposit Ratio 47.9% 47.6% Construction Loans Single family
residential construction $152,056 26.96% $177,632 28.96% Land
development 76,996 13.65% 86,363 14.08% Raw land 84,384 14.96%
96,157 15.67% Residential lots 103,565 18.36% 101,321 16.52%
Commercial lots 48,139 8.53% 49,614 8.09% Commercial construction
and other 98,966 17.54% 102,299 16.68% ------ ------- Total
Construction Loans $564,106 $613,386 ======== ======== March 31,
2009 Dec 31, 2008 -------------- ------------ Loan Portfolio
(Unaudited) (Unaudited) Commercial $461,514 13.18% $499,143 13.99%
Construction 643,151 18.37% 666,080 18.67% 1-4 family residential
667,392 19.06% 668,096 18.73% Home equity 112,053 3.20% 107,048
3.01% Commercial real estate 1,346,056 38.45% 1,343,401 37.66%
Agriculture 144,384 4.12% 145,649 4.08% Consumer 126,750 3.62%
137,640 3.86% ------- ------- Total Loans $3,501,300 $3,567,057
========== ========== Deposit Types Non-interest bearing DDA
$1,510,005 20.95% $1,522,983 20.85% Interest bearing DDA 1,030,826
14.30% 1,082,078 14.82% Money Market 1,495,724 20.76% 1,400,673
19.18% Savings 322,130 4.47% 309,938 4.24% Time < $100 1,491,380
20.69% 1,577,431 21.60% Time > $100 1,356,814 18.83% 1,410,194
19.31% --------- --------- Total Deposits $7,206,879 $7,303,297
========== ========== Loan to Deposit Ratio 48.6% 48.8%
Construction Loans Single family residential construction $214,034
33.28% $237,191 35.61% Land development 91,005 14.15% 90,846 13.64%
Raw land 89,003 13.84% 89,120 13.38% Residential lots 104,684
16.28% 106,869 16.04% Commercial lots 37,318 5.80% 39,374 5.91%
Commercial construction and other 107,107 16.65% 102,680 15.42%
------- ------- Total Construction Loans $643,151 $666,080 ========
======== Prosperity Bancshares, Inc.(R) Financial Highlights
(Dollars in thousands) Sept 30, June 30, Mar 31, Dec 31, Sept 30,
2009 2009 2009 2008 2008 --------- ----------- -----------
----------- ----------- Balance Sheet Data (at period end)
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Total
loans $3,406,137 $3,451,319 $3,501,300 $3,567,057 $3,248,617
Investment securities (L) 4,255,057 3,981,109 3,991,200 4,160,401
2,294,403 Federal funds sold and other temporary investments 35,930
128,451 14,930 16,404 25,748 ------ ------- ------ ------ ------
Total earning assets 7,697,124 7,560,879 7,507,430 7,743,862
5,568,768 Allowance for credit losses (47,312) (42,611) (39,238)
(36,970) (33,981) Cash and due from banks 120,932 142,860 148,938
212,335 159,386 Goodwill 876,958 875,434 874,356 874,654 811,916
Core deposit intangibles 37,825 40,305 42,796 38,196 44,974 Other
real estate 12,738 11,101 9,134 4,450 7,538 Fixed assets, net
149,725 149,742 151,544 123,638 123,823 Other assets 109,342
101,241 104,237 112,199 105,485 ------- ------- ------- -------
------- Total assets $8,957,332 $8,838,951 $8,799,197 $9,072,364
$6,787,909 ========== ========== ========== ========== ==========
Demand deposits $1,473,189 $1,476,378 $1,510,005 $1,522,983
$1,263,407 Interest bearing deposits 5,644,804 5,781,517 5,696,874
5,780,314 3,841,435 --------- --------- --------- ---------
--------- Total deposits 7,117,993 7,257,895 7,206,879 7,303,297
5,104,842 Securities sold under repurchase agreements 100,636
96,732 81,773 96,017 100,310 Federal funds purchased and other
borrowings 253,855 28,170 28,441 229,395 219,671 Junior
subordinated debentures 92,265 92,265 92,265 92,265 92,265 Other
liabilities 65,548 64,794 109,291 96,284 41,641 ------ ------
------- ------ ------ Total liabilities 7,630,297 7,539,856
7,518,649 7,817,258 5,558,729 Shareholders' equity (M) 1,327,035
1,299,095 1,280,548 1,255,106 1,229,180 --------- ---------
--------- --------- --------- Total liabilities and equity
$8,957,332 $8,838,951 $8,799,197 $9,072,364 $6,787,909 ==========
========== ========== ========== ========== (L) Includes $26,688,
$20,153, $23,784, $15,158 and $1,220 in unrealized gains on
available for sale securities for the quarterly periods ending
September 30, 2009, June 30, 2009, March 31, 2009, December 31,
2008, and September 30, 2008, respectively. (M) Includes $17,347,
$13,099, $15,460, $9,853 and $793 in after-tax unrealized gains on
available for sale securities for the quarterly periods ending
September 30, 2009, June 30, 2009, March 31, 2009, December 31,
2008, and September 30, 2008, respectively. Prosperity Bancshares,
Inc.(R) Financial Highlights (Dollars in thousands) Three Months
Ended Sept 30, June 30, Mar 31, Dec 31, Sept 30, 2009 2009 2009
2008 2008 ----------- ----------- ----------- -----------
----------- Income Statement Data (Unaudited) (Unaudited)
(Unaudited) (Unaudited) (Unaudited) Interest on loans $54,809
$55,248 $55,802 $56,073 $56,925 Interest on securities 46,812
47,450 49,726 39,713 27,834 Interest on federal funds sold and
other earning assets 74 70 38 802 87 -- -- -- --- -- Total interest
income 101,695 102,768 105,566 96,588 84,846 ------- -------
------- ------ ------ Interest expense - deposits 22,694 25,621
29,457 29,663 23,874 Interest expense - debentures 879 959 1,119
1,452 1,410 Interest expense - other 709 667 912 1,516 1,756 ---
--- --- ----- ----- Total interest expense 24,282 27,247 31,488
32,631 27,040 ------ ------ ------ ------ ------ Net interest
income 77,413 75,521 74,078 63,957 57,806 Provision for credit
losses 7,250 6,900 6,125 6,000 1,700 ----- ----- ----- ----- -----
Net interest income after provision for credit losses 70,163 68,621
67,953 57,957 56,106 ------ ------ ------ ------ ------ Service
charges on deposits accounts 13,554 12,863 12,372 13,204 11,348 Net
(loss) gain on sale of assets (20) 200 97 130 34 Net gain (loss) on
sale of ORE 115 415 22 (1,684) (210) Brokered mortgage income 59
140 70 34 74 Net gain on sale of held for sale loans 0 0 0 0 46
Other non-interest income 1,528 1,515 2,456 1,824 1,825 ----- -----
----- ----- ----- Total non-interest income 15,236 15,133 15,017
13,508 13,117 ------ ------ ------ ------ ------ Salaries and
benefits 21,507 20,494 22,648 20,411 17,526 CDI amortization 2,479
2,492 2,664 2,284 2,562 Net occupancy and equipment 3,624 3,514
3,978 3,704 3,088 Depreciation 2,100 2,069 2,001 1,854 1,955 Data
processing and software amortization 1,446 1,562 2,055 1,609 1,319
Impairment charge on securities 0 0 0 0 14,025 Other non-interest
expense 10,045 14,169 10,677 7,724 5,755 ------ ------ ------ -----
----- Total non-interest expense 41,201 44,300 44,023 37,586 46,230
------ ------ ------ ------ ------ Net income before taxes 44,198
39,454 38,947 33,879 22,993 ------ ------ Federal income taxes
14,876 12,944 13,469 11,194 7,546 ------ ------ ------ ------ -----
Net income available to common share- holders(N) $29,322 $26,510
$25,478 $22,685 $15,447 ======= ======= ======= ======= ======= (N)
Earnings for the three months ended September 30, 2008 includes a
$14.025 million pre-tax, or $9.116 million after-tax, impairment
charge on securities. Prosperity Bancshares, Inc.(R) Financial
Highlights Three Months Ended Sept 30, June 30, Mar 31, Dec 31,
Sept 30, 2009 2009 2009 2008 2008 ----------- -----------
----------- ----------- ----------- Comparative Quarterly Asset
Quality, Performance & Capital Ratios (Unaudited) (Unaudited)
(Unaudited) (Unaudited) (Unaudited) Return on average assets
(annualized) (O) 1.32% 1.20% 1.15% 1.09% 0.91% Return on average
common equity (annualized) (O) 8.93% 8.18% 8.02% 7.30% 5.04% Return
on average tangible equity (annualized) (O) 29.34% 27.98% 28.52%
24.89% 16.83% Net interest margin (tax equivalent) (annualized)
4.08% 4.04% 3.98% 3.65% 4.15% Employees - FTE 1,608 1,634 1,684
1,734 1,366 Efficiency ratio 44.46% 48.98% 49.47% 48.60% 45.43%
Non-performing assets to average earning assets 0.29% 0.26% 0.16%
0.20% 0.26% Non-performing assets to loans and other real estate
0.64% 0.57% 0.36% 0.40% 0.45% Net charge-offs to average loans
0.07% 0.10% 0.11% 0.09% 0.05% Allowance for credit losses to total
loans 1.39% 1.23% 1.12% 1.04% 1.05% Book value per share $28.75
$28.17 $27.78 $27.24 $26.68 Tangible book value per share $8.93
$8.31 $7.88 $7.43 $8.08 Tier 1 risk- based capital 11.85% 11.24%
10.53% 9.89% 12.71% Total risk- based capital 13.01% 12.28% 11.48%
10.76% 13.65% Tier 1 leverage capital 6.09% 5.81% 5.48% 5.68% 7.75%
Tangible equity to tangible assets 5.13% 4.84% 4.61% 4.19% 6.28%
Equity to assets 14.82% 14.70% 14.55% 13.83% 18.11% (O) Earnings
for the three months ended September 30, 2008 includes a $14.025
million pre-tax, or $9.116 million after-tax, impairment charge on
securities, which resulted in a 53 basis point decrease in return
on average assets to 0.91%, a 298 basis point decrease in return on
average equity to 5.04% and a 993 basis point decrease in return on
average tangible common equity to 16.83%. Prosperity Bancshares,
Inc.(R) Supplemental Financial Data (Unaudited) (Dollars in
thousands) Three Months Ended September 30, 2009 YIELD ANALYSIS
Average Interest Earned Average Balance / Interest Paid Yield/Rate
------- --------------- ------------ Interest Earning Assets: Loans
$3,431,061 $54,809 6.34% Investment securities 4,062,796 46,812
4.61% Federal funds sold and other temporary investments 107,008 74
0.27% ------- -- Total interest earning assets 7,600,865 $101,695
5.31% -------- Allowance for credit losses (43,610) Non-interest
earning assets 1,310,292 --------- Total assets $8,867,547
========== Interest Bearing Liabilities: Interest bearing demand
deposits $1,092,719 $2,253 0.82% Savings and money market deposits
1,969,427 4,579 0.92% Certificates and other time deposits
2,685,834 15,862 2.34% Securities sold under repurchase agreements
109,961 320 1.15% Federal funds purchased and other borrowings
49,539 389 3.12% Junior subordinated debentures 92,265 879 3.78%
------ --- Total interest bearing liabilities $5,999,745 $24,282
1.61% ------- Non-interest bearing liabilities: Non-interest
bearing demand deposits $1,475,878 Other liabilities 77,913 ------
Total liabilities $7,553,536 ---------- Shareholders' equity
$1,314,011 ---------- Total liabilities and shareholders' equity
$8,867,547 ========== Net Interest Income & Margin $77,413
4.04% ======= Net Interest Income & Margin (tax equivalent)
$78,111 4.08% ======= Prosperity Bancshares, Inc.(R) Supplemental
Financial Data (Unaudited) (Dollars in thousands) Three Months
Ended September 30, 2008 YIELD ANALYSIS Interest Earned Average
/Interest Average Balance Paid Yield/Rate ---------- ---------
---------- Interest Earning Assets: Loans $3,289,203 $56,925 6.89%
Investment securities 2,292,571 27,834 4.86% Federal funds sold and
other temporary investments 18,854 87 1.84% ------ -- Total
interest earning assets 5,600,628 $84,846 6.03% ------- Allowance
for credit losses (33,746) Non-interest earning assets 1,234,567
--------- Total assets $6,801,449 ========== Interest Bearing
Liabilities: Interest bearing demand deposits $712,741 $1,565 0.87%
Savings and money market deposits 1,439,838 6,783 1.87%
Certificates and other time deposits 1,767,712 15,526 3.49%
Securities sold under repurchase agreements 95,533 631 2.63%
Federal funds purchased and other borrowings Securities sold under
repurchase agreements 146,172 1,125 3.06% Junior subordinated
debentures 92,265 1,410 6.08% ------ ----- Total interest bearing
liabilities 4,254,261 $27,040 2.53% ------- Non-interest bearing
liabilities: Non-interest bearing demand deposits 1,266,924 Other
liabilities 55,105 ------ Total liabilities 5,576,290 Shareholders'
equity 1,225,159 --------- Total liabilities and shareholders'
equity $6,801,449 ========== Net Interest Income & Margin
$57,806 4.11% ======= Net Interest Income & Margin (tax
equivalent) $58,471 4.15% ======= Prosperity Bancshares, Inc.(R)
Supplemental Financial Data (Unaudited) (Dollars in thousands) Nine
Months Ended September 30, 2009 YIELD ANALYSIS Interest Earned
Average /Interest Average Balance Paid Yield/Rate -------
---------- ---------- Interest Earning Assets: Loans $3,477,972
$165,859 6.38% Investment securities 4,019,370 143,990 4.78%
Federal funds sold and other temporary investments 98,782 180 0.24%
------ --- Total interest earning assets 7,596,124 $310,029 5.46%
-------- Allowance for credit losses (40,045) Non-interest earning
assets 1,312,906 --------- Total assets $8,868,985 ==========
Interest Bearing Liabilities: Interest bearing demand deposits
$1,069,884 $6,557 0.82% Savings and money market deposits 1,884,542
15,255 1.08% Certificates and other time deposits 2,807,532 55,960
2.66% Securities sold under repurchase agreements 95,488 948 1.33%
Federal funds purchased and other borrowings Securities sold under
repurchase agreements 53,733 1,340 3.33% Junior subordinated
debentures 92,265 2,957 4.28% ------ ----- Total interest bearing
liabilities 6,003,444 $83,017 1.85% ------- Non-interest bearing
liabilities: Non-interest bearing demand deposits 1,490,911 Other
liabilities 82,492 ------ Total liabilities 7,567,847 Shareholders'
equity 1,292,138 --------- Total liabilities and shareholders'
equity $8,868,985 ========== Net Interest Income & Margin
$227,012 4.00% ======== Net Interest Income & Margin (tax
equivalent) $229,096 4.03% ======== Prosperity Bancshares, Inc.(R)
Supplemental Financial Data (Unaudited) (Dollars in thousands) Nine
Months Ended September 30, 2008 YIELD ANALYSIS Average Interest
Earned Average Balance /Interest Paid Yield/Rate -------
--------------- ----------- Interest Earning Assets: Loans
$3,212,176 $171,393 7.13% Investment securities 2,134,396 78,473
4.90% Federal funds sold and other temporary investments 61,264
1,424 3.10% ------ ----- Total interest earning assets $5,407,836
$251,290 6.21% -------- Allowance for credit losses (32,839)
Non-interest earning assets 1,213,656 --------- Total assets
$6,588,653 ========== Interest Bearing Liabilities: Interest
bearing demand deposits $775,730 $6,338 1.09% Savings and money
market deposits 1,354,694 20,875 2.06% Certificates and other time
deposits 1,712,402 50,816 3.96% Securities sold under repurchase
agreements 81,390 1,809 2.97% Federal funds purchased and other
borrowings 106,572 2,693 3.38% Junior subordinated debentures
101,429 $4,987 6.57% ------- ------ Total interest bearing
liabilities $4,132,217 $87,518 2.83% ------- Non-interest bearing
liabilities: Non-interest bearing demand deposits $1,212,379 Other
liabilities 61,405 ------ Total liabilities $5,406,001
Shareholders' equity 1,182,652 --------- Total liabilities and
shareholders' equity $6,588,653 ========== Net Interest Income
& Margin $163,772 4.05% ======== Net Interest Income &
Margin (tax equivalent) $165,995 4.10% ======== Prosperity
Bancshares, Inc.(R) Notes to Selected Financial Data (Unaudited)
(Dollars in thousands) 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 and the tangible equity to tangible assets ratio for
internal planning and forecasting purposes. Prosperity also
reviewed its net income, earnings per share, non-interest expense
and related performance ratios for the three and nine month periods
ended September 30, 2008 excluding the non-recurring impairment
charge on Fannie Mae and Freddie Mac perpetual preferred
securities. Prosperity has included in this Earnings Release
information relating to these non-GAAP financial measures for the
applicable periods presented. Prosperity believes these non-GAAP
financial measures provide information useful to investors in
understanding Prosperity's financial results and Prosperity
believes that its presentation, together with the accompanying
reconciliations, provides a 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 measures provide useful
information by excluding certain items that may not be indicative
of its core operating earnings and business outlook. These non-GAAP
measures should not be considered a substitute for GAAP basis
measures and results and 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. Prosperity
Bancshares, Inc.(R) Notes to Selected Financial Data (Unaudited)
(Dollars and share amounts in thousands) Three months ended
----------------------------------------------------- Sept 30, June
30, Mar 31, Dec 31, Sept 30, 2009 2009 2009 2008 2008 Return on
average tangible common equity: Net income $29,322 $26,510 $25,478
$22,685 $15,447
----------------------------------------------------- Average
shareholders' equity 1,314,011 1,295,737 1,270,380 1,242,491
1,225,159 Less: Average goodwill and other intangible assets
(914,203) (916,754) (913,010) (877,985) (857,966)
----------------------------------------------------- Average
tangible shareholders' equity $399,808 $378,983 $357,370 $364,506
$367,193 Return on average tangible common equity: 29.34% 27.98%
28.52% 24.89% 16.83% Tangible book value per share: Shareholders'
equity $1,327,035 $1,299,095 $1,280,548 $1,255,106 $1,229,180 Less:
Goodwill and other intangible assets (914,783) (915,739) (917,152)
(912,850) (856,890)
------------------------------------------------------ Tangible
shareholders' equity $412,252 $383,356 $363,396 $342,256 $372,290
Period end shares outstanding 46,153 46,109 46,100 46,080 46,072
Tangible book value per share: $8.93 $8.31 $7.88 $7.43 $8.08
Tangible equity to tangible assets ratio: Tangible shareholders'
equity $412,252 $383,356 $363,396 $342,256 $372,290 Total assets
$8,957,332 $8,838,951 $8,799,197 $9,072,364 $6,787,909 Less:
Goodwill and other intangible assets (914,783) (915,739) (917,152)
(912,850) (856,890)
------------------------------------------------------ Tangible
assets $8,042,549 $7,923,212 $7,882,045 $8,159,514 $5,931,019
Tangible equity to tangible assets ratio: 5.13% 4.84% 4.61% 4.19%
6.28% Prosperity Bancshares, Inc.(R) Notes to Selected Financial
Data (Unaudited) (Dollars and share amounts in thousands) Nine
Months Ended Sept 30, 2009 Sept 30, 2008 -------------
------------- Return on average tangible common equity: Net income
$81,310 $61,822 ------- ------- Average shareholders' equity
1,292,138 1,225,159 Less: Average goodwill and other intangible
assets (914,667) (857,966) -------- -------- Average tangible
shareholders' equity $377,471 $367,193 Return on average tangible
common equity: 28.72% 22.45% Tangible book value per share:
Shareholders equity $1,327,035 $1,229,180 Less: Goodwill and other
intangible assets (914,783) (856,890) -------- -------- Tangible
shareholders' equity $412,252 $372,290 Period end shares
outstanding 46,153 46,072 Tangible book value per share: $8.93
$8.08 Tangible equity to tangible assets ratio: Tangible
shareholders' equity $412,252 $372,290 Total assets $8,957,332
$6,787,909 Less: Goodwill and other intangible assets (914,783)
(856,890) -------- -------- Tangible assets $8,042,549 $5,931,019
Tangible equity to tangible assets ratio: 5.13% 6.28% Prosperity
Bancshares, Inc.(R) Notes to Selected Financial Data (Unaudited)
(Dollars and share amounts in thousands) Results of operations
before impairment charge in the third quarter of 2008 The following
results illustrate the effect of the $14.025 million pre- tax
($9.116 million after-tax) impairment charge on Fannie Mae and
Freddie Mac perpetual preferred securities which was recognized in
the third quarter of 2008(1): 3 Months Ended 9 Months Ended
September 30, September 30, 2008 2008 ---------- -----------
Adjusted non-interest expense: Non-interest expense (GAAP) $46,230
$106,210 Less: Impairment charge on securities (14,025) (14,025)
------- ------- Adjusted non-interest expense $32,205 $92,185
Adjusted net income: Net income (GAAP) $15,447 $61,822 Add:
Impairment charge on securities 14,025 14,025 Less: Tax effect of
impairment charge on securities (4,909) (4,909) ------ ------
Adjusted net income $24,563 $70,938 Adjusted earnings per share:
Adjusted net income $24,563 $70,938 Weighted average shares
outstanding-basic 46,065 45,039 Adjusted earnings per share (basic)
$0.53 $1.58 Weighted average shares outstanding-diluted 46,302
45,217 Adjusted earnings per share (diluted) $0.53 $1.57 Adjusted
return on average assets: Adjusted net income $24,563 $70,938
Average assets $6,801,449 $6,588,653 Adjusted return on average
assets 1.44% 1.44% Adjusted return on average common equity:
Adjusted net income $24,563 $70,938 Average equity $1,225,159
$1,182,652 Adjusted return on average common equity 8.02% 8.00% (1)
Total non-interest income, net interest income and shareholders'
equity were not affected by the impairment charge. DATASOURCE:
Prosperity Bancshares, Inc. CONTACT: Dan Rollins, President and
Chief Operating Officer of Prosperity Bancshares, Inc.,
+1-281-269-7199, Web Site: http://www.prosperitybanktx.com/
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