PROSPERITY BANCSHARES, INC. Prosperity Bank Plaza Chairman and Chief Executive Officer
4295 San Felipe 281.269.7199
Houston, Texas 77027 david.zalman@prosperitybankusa.com
FOR IMMEDIATE RELEASE
- Third quarter 2015 earnings per share (diluted) of $1.01
- Third quarter net income of $70.598 million
- Nonperforming assets remain low at 0.26% of third quarter average earning assets
- Return on third quarter average assets of 1.30%
- Third quarter efficiency ratio of 40.72%
- Increase in dividend of 10% to $0.30 per share for the fourth quarter 2015
- Received all regulatory approvals for the pending acquisition of Tradition Bancshares, Inc. headquartered in Houston, Texas
HOUSTON, October 23, 2015. Prosperity Bancshares, Inc.® (NYSE: PB), the parent company of Prosperity Bank® (collectively, 'Prosperity'), reported net income for the quarter ended September 30, 2015 of $70.598 million or $1.01 per diluted common share. Additionally, nonperforming assets remain low at 0.26% of third quarter average earning assets with an annualized return on third quarter average assets of 1.30%.
'I am excited to announce that the Prosperity Board of Directors has decided to increase the dividend payable to shareholders to $0.30 per share for the fourth quarter, representing a 10% increase. The Board and management appreciate our shareholders and are glad to be able to show our appreciation with this increase,' said David Zalman, Prosperity's Chairman and Chief Executive Officer.
'Prosperity enjoyed another successful quarter. Because of the acquisitions we completed over the last several years, our net income figures include purchase accounting adjustment income, which has been quickly declining. Excluding these purchase accounting adjustments, net income per diluted common share was $0.92 for the three months ended September 30, 2015 compared with $0.84 for the three months ended September 30, 2014, a 9.5% increase. Prosperity's return on average tangible common equity for the three months ended September 30, 2015 was 19.30%. The reconciliations of these non- GAAP financial measures are included below,' continued Zalman.
'Despite employment declines in the oil and gas extraction and the manufacturing sectors, the Texas unemployment rate fell in August to 4.1% and continues to be lower than the U.S. rate, which was 5.1%. Oklahoma's unemployment rate inched down slightly in September to 4.4% compared with 4.6% in August, according to data recently released by the U.S. Labor Department.'
'Although our loans decreased overall during the first nine months of 2015 primarily due to planned reductions at some of our acquired banks, our third quarter results showed loan growth of 1% (4% annualized) compared to the previous quarter ended June 30, 2015. Deposits have been flat for the first nine months of 2015, but, when comparing deposits as of September 30, 2015 to September 30, 2014, Prosperity has been successful in replacing over $500 million in higher cost time deposits at acquired banks with more traditional transactional accounts,' stated Zalman.
'Prosperity continues to be one of the best in class in asset quality with non-performing assets at 0.26% of third quarter average earning assets,' concluded Zalman.
Net income was $70.598 million for the three months ended September 30, 2015 compared with $76.570 million for the same period in 2014. Net income per diluted common share was $1.01 for the three months ended September 30, 2015 compared with $1.10 for the same period in 2014. Net income (excluding purchase accounting adjustments) was $64.154 million for the quarter ended September 30, 2015 compared with $58.635 million for the quarter ended September 30, 2014, an increase of 9.4%. Net income per diluted common share (excluding purchase accounting adjustments) was $0.92 for the three months ended September 30, 2015 compared with $0.84 for the three months ended September 30, 2014. The reconciliation of these non-GAAP financial measures is shown on page 12. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended September 30, 2015 were 1.30%, 8.31% and 19.30%, respectively. Prosperity's efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and taxes) was 40.72% for the three months ended September 30, 2015.
Net interest income before provision for credit losses for the quarter ended September 30, 2015 was $156.108 million compared with $175.657 million during the same period in 2014. This change was primarily due to a decrease in loan discount accretion of $17.424 million for the quarter ended September 30, 2015 compared with the quarter ended September 30, 2014. Linked quarter net interest income before provision for credit losses was $156.108 million for the three months ended September 30, 2015 compared with $158.239 million for the three months ended June 30, 2015. This change was primarily due to a decrease in loan discount accretion of $2.568 million for the quarter ended September 30, 2015 compared with the quarter ended June 30, 2015. The net interest margin on a tax equivalent basis was 3.30% for the three
months ended September 30, 2015, compared with 3.85% for the same period in 2014 and 3.39% for the three months ended June 30, 2015. This change was primarily due to the decrease in loan discount accretion and lower yields on average
interest-earning assets partially offset by lower rates paid on average interest-bearing liabilities for the three months ended September 30, 2015. Excluding purchase accounting adjustments, the net interest margin on a tax equivalent basis was 3.10% for the three months ended September 30, 2015, compared with 3.26% for the same period in 2014 and 3.13% for the three months ended June 30, 2015.
Noninterest income was $31.780 million for the three months ended September 30, 2015 compared with $30.191 million for the same period in 2014. This change was primarily due to an increase in mortgage income and other noninterest income. On a linked quarter basis, noninterest income increased $1.483 million or 4.9% compared with the quarter ended June 30, 2015. This was primarily due to an increase in NSF fees and service charges on deposit accounts.
Noninterest expense was $76.430 million for the three months ended September 30, 2015 compared with $85.540 million for the same period in 2014. This change was primarily due to a decrease in salary and benefits expense, other noninterest expense, net occupancy and equipment expense and regulatory assessments. On a linked quarter basis, noninterest expense decreased $3.305 million or 4.1% compared with the quarter ended June 30, 2015. This was primarily due to a decrease in salary and benefits expense, other noninterest expense and regulatory assessments for the three months ended September 30, 2015.
Net income was $216.171 million for the nine months ended September 30, 2015 compared with $219.213 million for the same period in 2014. Net income per diluted common share was $3.09 for the nine months ended September 30, 2015 compared with $3.19 for the same period in 2014. Net income (excluding purchase accounting adjustments) was $189.332 million for the nine months ended September 30, 2015 compared with $177.638 million for the nine months ended September 30, 2014. Net income per diluted common share (excluding purchase accounting adjustments) was $2.71 for the nine months ended September 30, 2015 compared with $2.59 for the nine months ended September 30, 2014. The reconciliation of these non-GAAP financial measures is shown on page 12. Returns on average assets, average common equity and average tangible common equity, each on an annualized basis, for the nine months ended September 30, 2015
were 1.33%, 8.63% and 20.51%, respectively. Prosperity's efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and securities and taxes) was 41.64% for the nine months ended September 30, 2015.
Net interest income before provision for credit losses for the nine months ended September 30, 2015 was $477.252 million compared with $493.403 million during the same period in 2014. The change was primarily due to a decrease of $23.002 million in loan discount accretion partially offset by lower rates paid on average interest-bearing liabilities for the nine months ended September 30, 2015. The net interest margin on a tax equivalent basis for the nine months ended
September 30, 2015 decreased to 3.42% compared with 3.77% for the same period in 2014. This was primarily due to a decrease in loan discount accretion and lower yields on average interest-earning assets partially offset by lower rates paid on average interest-bearing liabilities for the nine months ended September 30, 2015. Excluding purchase accounting adjustments, the net interest margin on a tax equivalent basis was 3.13% for the nine months ended September 30, 2015 compared with 3.30% for the same period in 2014.
Noninterest income was $90.498 million for the nine months ended September 30, 2015 compared with $91.452 million for the same period in 2014. This change was primarily due to a decrease in net gain on sale of assets and NSF fees partially offset by an increase in other noninterest income and mortgage income. Noninterest expense was $235.627 million for the nine months ended September 30, 2015 compared with $243.926 million for the same period in 2014. This change was primarily due to a decrease in salary and benefits expense and other noninterest expense partially offset by an increase in regulatory assessments and a net gain on sale of other real estate recorded in 2014.
At September 30, 2015, Prosperity had $21.567 billion in total assets, an increase of $449.922 million or 2.1%, compared with $21.117 billion at September 30, 2014.
Loans at September 30, 2015 were $9.205 billion, a decrease of $163.900 million or 1.7%, compared with $9.369 billion at September 30, 2014. Linked quarter loans increased $90.653 million or 1.0% (4.0% annualized) from $9.114 billion at June 30, 2015.
As part of its lending activities, Prosperity extends credit to oil and gas production and servicing companies. Oil and gas production loans are loans to companies directly involved in the exploration and or production of oil and gas. Oil and gas servicing loans are loans to companies that provide services for oil and gas production and exploration. At September 30, 2015, oil and gas loans totaled $405.176 million or 4.4% of total loans, of which $185.162 million were production loans and $220.014 million were servicing loans compared with total oil and gas loans of $500.409 million or 5.3% of total loans at December 31, 2014, of which $271.972 million were production loans and $228.437 million were servicing loans.
Deposits at September 30, 2015 were $16.940 billion, a decrease of $74.090 million or 0.4%, compared with $17.014 billion at September 30, 2014. Linked quarter deposits decreased $61.727 million or 0.4% from $17.002 billion at June 30, 2015.
Nonperforming assets totaled $48.628 million or 0.26% of quarterly average earning assets at September 30, 2015, compared with $50.082 million or 0.27% of quarterly average earning assets at September 30, 2014, and $35.119 million or 0.19% of quarterly average earning assets at June 30, 2015. The allowance for credit losses was 0.88% of total loans at September 30, 2015, 0.83% of total loans at September 30, 2014 and 0.89% of total loans at June 30, 2015. 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 1.06% of remaining loans as of September 30, 2015, compared with 1.14% at September 30, 2014 and 1.09% at June 30, 2015. Refer to the 'Notes to Selected Financial Data' at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure.
The provision for credit losses was $5.310 million for the three months ended September 30, 2015 compared with $5.000 million for the three months ended September 30, 2014 and $500 thousand for the three months ended June 30, 2015. The provision for credit losses was $7.060 million for the nine months ended September 30, 2015 compared with $11.925 million for the nine months ended September 30, 2014.
Net charge offs were $5.279 million for the three months ended September 30, 2015 compared with $653 thousand for the three months ended September 30, 2014 and $491 thousand for the three months ended June 30, 2015. This increase was primarily due to the charge off of three commercial and industrial loans during the third quarter of 2015. Net charge offs were $6.819 million for the nine months ended September 30, 2015 compared with $1.594 million for the nine months ended September 30, 2014.
Conference CallProsperity's management team will host a conference call on Friday, October 23, 2015 at 10:30 a.m. Eastern Time (9:30
Central Time) to discuss Prosperity's third quarter 2015 earnings. Individuals and investment professionals may participate in the call by dialing 877-883-0383. The elite entry number is 2554742.
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 directly from Prosperity's home page by clicking the 'Investor Relations' tab and then the 'Presentations & Calls' link.
Non-GAAP Financial MeasuresProsperity'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 and the tangible equity to tangible assets ratio. Further, as a result of acquisitions, and the related purchase accounting adjustments, Prosperity uses certain non- GAAP measures and ratios that exclude the impact of these items to evaluate its net income and earnings per share (excluding purchase accounting adjustments) and 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 has included in this Earnings Release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to page 12 and to the 'Notes to Selected Financial Data' at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures.
DividendProsperity Bancshares, Inc. ('Prosperity Bancshares') declared a fourth quarter cash dividend of $0.30 per share, to be paid on January 4, 2016 to all shareholders of record as of December 18, 2015.
Pending Acquisition of Tradition Bancshares, Inc.; Regulatory Approvals ReceivedOn August 6, 2015, Prosperity Bancshares announced the signing of a definitive merger agreement to acquire Tradition Bancshares, Inc. ('Tradition') and its wholly-owned subsidiary Tradition Bank headquartered in Houston, Texas. Tradition Bank operates 7 banking offices in the Houston, Texas area, including its main office in Bellaire, 3 banking centers in Katy and 1 banking center in The Woodlands. As of September 30, 2015, Tradition, on a consolidated basis, reported total assets of $540.565 million, total loans of $239.196 million, total deposits of $483.828 million and shareholder's equity of $46.288 million.
Under the terms of the definitive agreement, Prosperity Bancshares will issue approximately 679,679 shares of Prosperity Bancshares common stock plus $39.0 million in cash for all outstanding shares of Tradition capital stock, subject to potential adjustments. The transaction is subject to customary closing conditions and approval by Tradition's shareholders. Prosperity has received all necessary regulatory approvals for this acquisition and expects to close the transaction on December 31, 2015.
Prosperity Bancshares, Inc. ®As of September 30, 2015, Prosperity Bancshares, Inc. ® is a $21.567 billion Houston, Texas based regional financial holding company, formed in 1983. Operating under a community banking philosophy and seeking to develop broad customer relationships based on service and convenience, Prosperity offers a variety of traditional loan and deposit products to its customers, which consist primarily of small and medium sized businesses and consumers. In addition to established banking products, Prosperity offers a complete line of services including: Internet Banking services at www.prosperitybankusa.com, Retail Brokerage Services, Credit Cards, MasterMoney Debit Cards, 24 hour voice response banking, Trust and Wealth Management, Mortgage Services and Mobile Banking.
Prosperity currently operates 244 full-service banking locations: 61 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 37 in the Dallas/Fort Worth area; 22 in the East Texas area; 30 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.
Bryan/College Station Area -
Bryan
Sachse
The Colony
Sugar Land
Sinton
Bryan-29th Street
Turtle Creek
SW Medical Center
Taft
Bryan-East
Turtle Creek Loan Office
Tanglewood
Victoria
Bryan-North
Westmoreland
Uptown
Victoria-Navarro
Caldwell
Waugh Drive
Victoria-North
College Station
Fort Worth -
Westheimer
Yoakum
Crescent Point
Haltom City
West University
Yorktown
Hearne
Keller
Woodcreek
Huntsville
Roanoke
West Texas Area -
Madisonville
Stockyards
Other Houston Area
Abilene -
Navasota
Locations -
Antilley Road
New Waverly
Other Dallas/Fort Worth
Angleton
Barrow Street
Rock Prairie
Locations -
Bay City
Cypress Street
Southwest Parkway
Arlington
Beaumont
Judge Ely
Tower Point
Azle
Cinco Ranch
Mockingbird
Wellborn Road
Ennis
Cleveland
Central Texas Area -
Gainesville Glen Rose
East Bernard El Campo
Lubbock -
4th Street
Austin -
183
Allandale Cedar Park
Granbury Mesquite Muenster Sanger
Dayton Galveston Groves Hempstead
66th Street 82nd Street 86th Street 98th Street
Congress
Waxahachie
Hitchcock
Avenue Q
Lakeway
Weatherford
Katy
North University
Liberty Hill
Katy-Spring Green
Texas Tech Student Union
Northland
East Texas Area -
Liberty
Oak Hill
Athens
Magnolia
Midland -
Research Blvd
Blooming Grove
Magnolia Parkway
Wadley
Westlake
Canton
Mont Belvieu
Wall Street
Carthage
Nederland
Other Central Texas Locations -
Corsicana
Needville
Odessa -
Bastrop
Crockett
Rosenberg
Grandview
Canyon Lake
Eustace
Shadow Creek
Grant
Dime Box
Gilmer
Spring
Kermit Highway
Dripping Springs
Grapeland
Sweeny
Parkway
Elgin
Gun Barrel City
The Woodlands-I-45
Flatonia
Jacksonville
The Woodlands-Research Forest
Other West Texas Locations -
Georgetown
Kerens
Tomball
Big Spring
Gruene
Longview
Waller
Brownfield
Kingsland
Mount Vernon
West Columbia
Brownwood
La Grange
Palestine
Wharton
Cisco
Lexington
Rusk
Winnie
Comanche
New Braunfels
Seven Points
Wirt
Early
Pleasanton
Teague
Floydada
Round Rock
Tyler-Beckham
South Texas Area -
Gorman
San Antonio
Tyler-South Broadway
Corpus Christi -
Levelland
Schulenburg
Tyler-University
Airline
Littlefield
Seguin
Winnsboro
Calallen
Merkel
Smithville
Carmel
Plainview
Thorndale
Houston Area -
Northwest
San Angelo
Weimar
Houston -
Saratoga
Slaton
Aldine
Timbergate
Snyder
Dallas/Fort Worth Area -
Bellaire
Water Street
Dallas -
Beltway
Oklahoma
Abrams Centre Balch Springs
Clear Lake Copperfield
Other South Texas Locations -
Central Oklahoma-
23rd Street
Camp Wisdom
Cypress
Alice
Edmond
Cedar Hill
Downtown
Aransas Pass
Expressway
Dallas - Central Expressway
Eastex
Beeville
I-240
Forest Park
Fairfield
Colony Creek
Memorial
Frisco
First Colony
Cuero
Norman
Frisco-West
Gessner
Edna
Kiest
Gladebrook
Goliad
Tulsa-
McKinney
Heights
Gonzales
Garnett
McKinney-Stonebridge
Highway 6 West
Hallettsville
Harvard
Midway
Little York
Kingsville
Memorial
Northwest Highway
Medical Center
Mathis
Owasso
Plano
Memorial Drive
Padre Island
Sheridan
Preston Forest
Northside
Palacios
S. Harvard
Preston Road
Pasadena
Port Lavaca
Utica Tower
Red Oak
Pecan Grove
Portland
Yale
River Oaks
Rockport
- - -
In connection with the proposed merger of Tradition Bancshares, Inc. into Prosperity Bancshares, Prosperity Bancshares has filed with the Securities and Exchange Commission a registration statement on Form S-4 to register the shares of Prosperity's common stock to be issued to the shareholders of Tradition Bancshares, Inc. The registration statement includes a proxy statement/prospectus which will be sent to the shareholders of Tradition Bancshares, Inc. seeking their approval of the proposed transaction.
WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT ON FORM S-4, THE PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH THE PROPOSED TRANSACTION BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT PROSPERITY BANCSHARES, TRADITION BANCSHARES, INC. AND THE PROPOSED TRANSACTION.
Investors and security holders may obtain free copies of these documents through the website maintained by the Securities and Exchange Commission at http://www.sec.gov. Documents filed with the SEC by Prosperity Bancshares will be available free of charge by directing a request by telephone or mail to Prosperity Bancshares, Inc., Prosperity Bank Plaza, 4295 San Felipe, Houston, Texas 77027 Attn: Investor Relations. Prosperity's telephone number is (281) 269-7199.
'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 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 fluctuations and interest rate 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, 2014 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.
Prosperity Bancshares, Inc.® Financial Highlights (Unaudited)
(In thousands)
Sep 30, 2015
Jun 30, 2015
Mar 31, 2015
Dec 31, 2014
Sep 30, 2014
Balance Sheet Data
(at period end)
Total loans
$ 9,204,988
$ 9,114,335
$ 9,166,005
$ 9,244,183
$ 9,368,888
Investment securities(A)
9,530,761
9,698,079
9,579,496
9,045,776
8,845,909
Federal funds sold
996
1,451
1,639
569
484
Allowance for credit losses
(81,003)
(80,972)
(80,963)
(80,762)
(77,613)
Cash and due from banks
300,230
353,047
352,642
677,285
330,952
Goodwill
1,881,955
1,881,955
1,881,955
1,874,191
1,892,255
Core deposit intangibles, net
51,712
54,068
56,458
58,947
34,474
Other real estate owned
3,271
2,806
3,010
3,237
5,504
Fixed assets, net
271,650
275,347
276,468
281,549
283,011
Other assets
402,676
386,171
370,149
402,758
433,450
Total assets
$ 21,567,236
$ 21,686,287
$ 21,606,859
$ 21,507,733
$ 21,117,314
Noninterest-bearing deposits
$ 5,093,175
$ 5,040,628
$ 5,038,436
$ 4,936,420
$ 4,968,867
Interest-bearing deposits
11,846,762
11,961,036
12,522,916
12,756,738
12,045,160
Total deposits
16,939,937
17,001,664
17,561,352
17,693,158
17,014,027
Other borrowings
786,571
886,741
331,914
8,724
289,972
Securities sold under repurchase agreements
310,038
334,189
318,418
315,523
358,053
Junior subordinated debentures
-
-
-
167,531
167,531
Other liabilities
119,451
106,408
93,314
77,971
104,781
Total liabilities
18,155,997
18,329,002
18,304,998
18,262,907
17,934,364
Shareholders' equity(B)
3,411,239
3,357,285
3,301,861
3,244,826
3,182,950
Total liabilities and equity
$ 21,567,236
$ 21,686,287
$ 21,606,859
$ 21,507,733
$ 21,117,314
Includes $3,788, $4,655, $5,296, $5,737 and $5,756 in unrealized gains on available for sale securities for the quarterly periods ended S eptember 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014 and S eptember 30, 2014, respectively.
Includes $2,462, $3,026, $3,442, $3,729 and $3,741 in after-tax unrealized gains on available for sale securities for the quarterly periods ended September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014 and September 30, 2014, respectively.
Prosperity Bancshares, Inc.® Financial Highlights (Unaudited)
(In thousands)
Three Months Ended
Year-to-Date
Sep 30, 2015 Jun 30, 2015 Mar 31, 2015 Dec 31, 2014 Sep 30, 2014 Sep 30, 2015 Sep 30, 2014
Income Statement Data
Interest income: Loans
$ 116,911
$ 119,404
$ 124,878
$ 139,396
$ 140,521
$ 361,193
$ 386,320
Securities(C) 48,610 48,530 48,562 47,108 46,910 145,702 141,636
Federal funds sold and other earning assets 22 47 165 74 35 234 261 Total interest income 165,543 167,981 173,605 186,578 187,466 507,129 528,217
Interest expense:
Deposits
8,753
9,169
9,577
7,326
10,240
27,499
30,545
Other borrowings
473
365
129
200
225
967
572
Securities sold under repurchase agreements
209
208
203
202
245
620
736
Junior subordinated debentures
-
-
791
1,099
1,099
791
2,961
Total interest expense
9,435
9,742
10,700
8,827
11,809
29,877
34,814
Net interest income
156,108
158,239
162,905
177,751
175,657
477,252
493,403
Provision for credit losses
5,310
500
1,250
6,350
5,000
7,060
11,925
Net interest income after provision for credit losses
150,798
157,739
161,655
171,401
170,657
470,192
481,478
Noninterest income:
Nonsufficient funds (NSF) fees
9,082
8,310
7,918
9,345
9,734
25,310
27,703
Credit card, debit card and ATM card income
5,955
6,003
5,638
5,786
5,921
17,596
17,103
Service charges on deposit accounts
4,438
4,189
4,179
4,263
4,255
12,806
12,189
Trust income
1,986
2,047
2,009
2,165
2,099
6,042
5,943
Mortgage income
1,770
1,513
1,148
1,049
1,414
4,431
3,215
Brokerage income
1,596
1,541
1,409
1,455
1,743
4,546
4,413
Bank owned life insurance income
1,384
1,390
1,380
1,392
1,404
4,154
3,797
Net gain on sale of assets
173
270
1,379
24
23
1,822
4,634
Other noninterest income
5,396
5,034
3,361
3,901
3,598
13,791
12,455
Total noninterest income
31,780
30,297
28,421
29,380
30,191
90,498
91,452
Noninterest expense:
Salaries and benefits
46,587
47,819
49,966
49,557
52,179
144,372
149,713
Net occupancy and equipment
6,088
5,812
5,964
6,620
6,801
17,864
18,136
Debit card, data processing and software amortization
3,924
4,045
3,817
4,553
4,044
11,786
11,237
Regulatory assessments and FDIC insurance
3,366
4,253
4,354
4,354
4,051
11,973
10,663
Core deposit intangibles amortization
2,356
2,390
2,489
2,667
2,598
7,235
7,273
Depreciation
3,313
3,420
2,916
3,491
3,516
9,649
10,239
Communications
2,663
2,835
2,809
2,993
2,960
8,307
8,616
Other real estate expense
123
129
132
363
72
384
656
Net (gain) loss on sale of other real estate
(68)
(32)
14
(726)
30
(86)
(1,314)
Other noninterest expense
8,078
9,064
7,001
10,164
9,289
24,143
28,707
Total noninterest expense
76,430
79,735
79,462
84,036
85,540
235,627
243,926
Income before income taxes
106,148
108,301
110,614
116,745
115,308
325,063
329,004
Provision for income taxes
35,550
36,369
36,973
38,517
38,738
108,892
109,791
Net income available to common shareholders
$ 70,598
$ 71,932
$ 73,641
$ 78,228
$ 76,570
$ 216,171
$ 219,213
Interest income on securities was reduced by net premium amortization of $14,845, $15,466, $14,144, $13,031 and $13,531 for the three month periods ended September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014 and September 30, 2014, respectively, and $44,455 and $38,648 for the nine month periods ended September 30, 2015 and September 30, 2014, 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
Sep 30, 2015 Jun 30, 2015 Mar 31, 2015 Dec 31, 2014 Sep 30, 2014 Sep 30, 2015 Sep 30, 2014
Profitability
Net income
$ 70,598
$ 71,932
$ 73,641
$ 78,228
$ 76,570
$ 216,171
$ 219,213
Basic earnings per share
$ 1.01
$ 1.03
$ 1.05
$ 1.12
$ 1.10
$ 3.09
$ 3.20
Diluted earnings per share
$ 1.01
$ 1.03
$ 1.05
$ 1.12
$ 1.10
$ 3.09
$ 3.19
Return on average assets (D)
1.30%
1.33%
1.37%
1.48%
1.45%
1.33%
1.44%
Return on average common equity (D)
8.31%
8.61%
8.98%
9.70%
9.69%
8.63%
9.67%
Return on average tangible common equity (D)(E)
19.30%
20.49%
21.84%
23.87%
24.84%
20.51%
24.38%
Taxequivalent net interest margin (F)
3.30%
3.39%
3.57%
3.89%
3.85%
3.42%
3.77%
Efficiency ratio(G)
40.72%
42.35%
41.83%
40.78%
41.55%
41.64%
42.17%
Liquidity and Capital Ratios
Equity to assets
15.82%
15.48%
15.28%
15.09%
15.07%
15.82%
15.07%
Common equity tier 1 capital(H)
13.37%
12.91%
12.40%
N/A
N/A
13.37%
N/A
Tier 1 risk-based capital
13.37% (I)
12.91% (I)
12.40% (I)
13.80%
13.18%
13.37% (I)
13.18%
Total risk-based capital
14.09% (I)
13.63% (I)
13.14% (I)
14.56%
13.90%
14.09% (I)
13.90%
Tier 1 leverage capital
7.65% (I)
7.35% (I)
6.96% (I)
7.69%
7.40%
7.65% (I)
7.40%
Period end tangible equity to period end tangible assets(E)
7.53%
7.20%
6.93%
6.70%
6.55%
7.53%
6.55%
Other Data
Shares used in computed earnings per share
Basic
70,041
70,037
70,034
69,768
69,751
70,037
68,548
Diluted
70,053
70,053
70,055
69,796
69,791
70,054
68,614
Period end shares outstanding
70,040
70,040
70,024
69,780
69,756
70,040
69,756
Cash dividends paid per common share
$ 0.2725
$ 0.2725
$ 0.2725
$ 0.2725
$ 0.2400
$ 0.8175
$ 0.7200
Book value per share
$ 48.70
$ 47.93
$ 47.15
$ 46.50
$ 45.63
$ 48.70
$ 45.63
Tangible book value per share(E)
$ 21.10
$ 20.29
$ 19.47
$ 18.80
$ 18.01
$ 21.10
$ 18.01
Common Stock Market Price
High
$ 59.97
$ 59.30
$ 55.88
$ 61.15
$ 63.73
$ 59.97
$ 67.68
Low
43.76
50.91
45.01
52.62
55.99
43.76
55.99
Period end closing price
49.11
57.74
52.48
55.36
57.17
49.11
57.17
Employees - FTE
3,051
3,065
3,081
3,096
3,057
3,051
3,057
Number of banking centers
244
245
244
245
245
244
245
Interim periods annualized.
Refer to the 'Notes to Selected Financial Data' at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure.
Net interest margin for all periods presented is calculated on an actual 365 day basis.
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. Additionally, taxes are not part of this calculation.
Common equity tier 1 capital ratio is a new ratio required under the Basel III Capital Rules effective January 1, 2015.
Calculated pursuant to the phase-in provisions of the Basel III Capital Rules.
Prosperity Bancshares, Inc.® Financial Highlights (Unaudited)
(Dollars in thousands)
YIELD ANALYSIS
Three Months Ended
Average
Sep 30, 2015
Interest Earned/ Interest
Average Yield/
Average
Jun 30, 2015
Interest Earned/ Interest
Average Yield/
Average
Sep 30, 2014
Interest Earned/ Interest
Average Yield/
Balance
Paid
Rate (L)
Balance Paid
Rate (L)
Balance
Paid
Rate (L)
Interest-Earning Assets: Loans
$ 9,156,679
$ 116,911
5.07%
$ 9,133,625
$ 119,404
5.24%
$ 9,381,248
$ 140,521
5.94%
Investment securities 9,706,373 48,610 1.99% (J ) 9,688,961 48,530 2.01% (J) 8,836,309 46,910 2.11% (J)
55,000
22
0.16%
79,659 47
0.24%
95,378
35
0.15%
18,918,052
$ 165,543
3.47%
18,902,245 $ 167,981
3.56%
18,312,935
$ 187,466
4.06%
Federal funds sold and other earning assets
Total interest-earning assets
Allowance for credit losses (80,793) (80,868) (73,977)
Noninterest-earning assets 2,819,150 2,817,644 2,881,762
Total assets
$ 21,656,409
$ 21,639,021
$ 21,120,720
Interest-Bearing Liabilities:
Interest-bearing demand deposits
$ 3,663,114
$ 1,961
0.21%
$ 3,891,682
$ 2,227
0.23%
$ 3,399,655
$ 2,089
0.24%
Savings and money market deposits
5,492,326
3,392
0.24%
5,476,931
3,374
0.25%
5,502,326
3,400
0.25%
Certificates and other time deposits
2,685,346
3,400
0.50%
2,821,058
3,568
0.51%
3,235,185
4,751
0.58%
Other borrowings
886,787
473
0.21%
684,371
365
0.21%
215,222
225
0.42%
Securities sold under repurchase agreements
331,286
209
0.25%
333,220
208
0.25%
389,726
245
0.25%
Junior subordinated debentures
-
-
-
-
-
-
167,531
1,099
2.60%
Total interest-bearing liabilities
13,058,859
9,435
0.29%
(K)
13,207,262
9,742
0.30%
(K)
12,909,645
11,809
0.36%
(K)
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 5,078,234 4,992,301 4,939,388
Other liabilities 121,360 98,133 109,287
Total liabilities 18,258,453 18,297,696 17,958,320
Shareholders' equity 3,397,956 3,341,325 3,162,400
Total liabilities and shareholders' equity
$ 21,656,409
$ 21,639,021
$ 21,120,720
Net interest income and margin
$ 156,108
3.27%
$ 158,239
3.36%
$ 175,657
3.81%
Non-GAAP to GAAP reconciliation:
Taxequivalent adjustment 1,463 1,563 1,997
Net interest income and margin (taxequivalent basis)
$ 157,571
3.30%
$ 159,802
3.39%
$ 177,654
3.85%
Yieldon securities was impactedby net premium amortization of $14,845, $15,466 and $13,531 for the three month periods ended September 30, 2015, June 30, 2015 and Septbember 30, 2014, respectively.
Total cost of funds, including noninterest bearing deposits, was 0.21% , 0.21% and 0.26% for the three months ended September 30, 2015, June 30, 2015 and September 30,
2014, respectively.
Annualized andbasedon an actual/365 day basis.
Prosperity Bancshares, Inc.® Financial Highlights (Unaudited)
(Dollars in thousands)
YIELD ANALYSIS
Year-to-Date September 30, 2015 September 30, 2014
Average
Balance
Interest Earned/ Interest
Paid
Average Yield/
Rate
(O)
Average
Balance
Interest Earned/ Interest
Paid
Average Yield/
Rate
(O)
Interest-Earning Assets:
Loans
$ 9,159,775
$ 361,193
5.27%
$ 8,874,414
$ 386,320
5.82%
Investment securities
9,547,293
145,702
2.04%
(M )
8,685,212
141,636
2.18%
(M )
Federal funds sold and other
earning assets
133,331
234
0.23%
143,770
261
0.24%
Total interest-earning assets
18,840,399
$ 507,129
3.60%
17,703,396
$ 528,217
3.99%
Allowance for credit losses
(80,781)
(71,287)
Noninterest-earning assets
2,835,450
2,791,827
Total assets
$ 21,595,068
$ 20,423,936
Interest-Bearing Liabilities:
Interest-bearing demand deposits
$ 3,909,337
$ 6,771
0.23%
$ 3,506,932
$ 6,493
0.25%
Savings and money market deposits
5,503,597
10,171
0.25%
5,326,783
10,105
0.25%
Certificates and other time deposits
2,819,822
10,557
0.50%
3,145,435
13,947
0.59%
Other borrowings
550,743
967
0.23%
136,618
571
0.56%
Securities sold under repurchase agreements
334,958
620
0.25%
373,542
737
0.26%
Junior subordinated debentures
39,365
791
2.69%
150,692
2,961
2.63%
Total interest-bearing liabilities
13,157,822
29,877
0.30%
(N)
12,640,002
34,814
0.37%
(N)
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits
4,990,769
4,567,397
Other liabilities
106,782
185,838
Total liabilities
18,255,373
17,393,237
Shareholders' equity
3,339,695
3,030,699
Total liabilities and shareholders' equity
$ 21,595,068
$ 20,423,936
Net interest income and margin
$ 477,252
3.39%
$ 493,403
3.73%
Non-GAAP to GAAP reconciliation:
Taxequivalent adjustment
4,690
6,132
Net interest income and margin (taxequivalent basis)
$ 481,942
3.42%
$ 499,535
3.77%
Yield on securities was impacted by net premium amortization of $44,455 and $38,648 for the nine month periods ended September 30, 2015 and 2014, respectively.
Total cost of funds, including noninterest bearing deposits, was 0.22% and 0.27% for the nine month periods ended September 30, 2015 and 2014, respectively.
Annualized and based on an actual/365 day basis.
Prosperity Bancshares, Inc.® Financial Highlights (Unaudited)
(Dollars in thousands, except per share data)
Adjustment to Loan Yield (P)
Three Months Ended Year -to-Date
Sep 30, 2015 Jun 30, 2015 Mar 31, 2015 Dec 31, 2014 Sep 30, 2014 Sep 30, 2015 Sep 30, 2014
Interest on loans, as reported
Purchase accounting adjustment- loan discount accretion
$ 116,911 $
119,404 $
124,878 $
139,396
$ 140,521 $
361,193 $
386,320
ASC 310-20
(7,060)
(10,388)
(10,714)
(14,857)
(19,122)
(28,162)
(50,789)
ASC 310-30
(3,974)
(3,214)
(8,933)
(13,733)
(9,336)
(16,121)
(16,496)
Total
(11,034)
(13,602)
(19,647)
(28,590)
(28,458)
(44,283)
(67,285)
Interest on loans excluding discount accretion $ 105,877 $ 105,802 $ 105,231 $ 110,806 $ 112,063 $ 316,910 $ 319,035
Average loans
$ 9,156,679
$ 9,133,625
$ 9,189,380
$ 9,325,330
$ 9,381,248
$ 9,159,775
$ 8,874,414
Loan yield excluding purchase accounting adjustment
4.59%
4.65%
4.64%
4.71%
4.74%
4.63%
4.81%
Loan yield, as reported
5.07%
5.24%
5.51%
5.93%
5.94%
5.27%
5.82%
Adjustment to Securities Yield (P)
Interest on securities, as reported
$ 48,610
$ 48,530
$ 48,562
$ 47,108
$ 46,910
$ 145,702
$ 141,636
Purchase accounting adjustment-
securities amortization 1,565 1,579 1,647 1,590 1,466 4,791 5,000
Interest on securities excluding amortization
$ 50,175 $ 50,109 $ 50,209
$ 48,698 $ 48,376 $ 150,493 $ 146,636
Average securities
$ 9,706,373
$ 9,688,961
$ 9,241,434
$ 8,835,176
$ 8,836,309
$ 9,547,293
$ 8,685,212
Securities yield excluding purchase accounting adjustment
2.05%
2.07%
2.20%
2.19%
2.17%
2.11%
2.26%
Securities yield, as reported
1.99%
2.01%
2.13%
2.12%
2.11%
2.04%
2.18%
Adjustment to Time Deposits Yield (P)
Interest on time deposits, as reported
$ 3,400
$ 3,568
$ 3,589
$ 1,957
$ 4,751
$ 10,557
$ 13,947
Purchase accounting adjustment-
time deposit amortization 220 220 420 2,443 16 860 113
Interest on time deposits excluding amortization Average time deposits
Time deposits yield excluding purchase accounting adjustment Time deposits yield, as reported
Net Interest Margin (tax equivalent basis, excluding purchase accounting adjustments to yield)
Net Interest Margin (tax equivalent basis), as reported Net income available to common shareholders,
$ 2,685,346
$ 2,821,058
$ 2,956,038
$ 3,083,047
$ 3,235,185
$ 2,819,822
$ 3,145,435
0.53%
0.54%
0.55%
0.57%
0.58%
0.54%
0.60%
0.50%
0.51%
0.49%
0.25%
0.58%
0.50%
0.59%
3.10%
3.13%
3.17%
3.25%
3.26%
3.13%
3.30%
3.30%
3.39%
3.57%
3.89%
3.85%
3.42%
3.77%
$ 3,620 $ 3,788 $ 4,009
$ 4,400 $ 4,767 $ 11,417 $ 14,060
as reported
Less: Purchase accounting adjustments, net of tax
(6,444)
(8,132)
(12,263)
(19,729) (17,935) (26,839) (41,575)
Net income available to common shareholders, excluding
$ 64,154
$ 63,800
$ 61,378
$ 58,499 $ 58,635 $ 189,332 $ 177,638
purchase accounting adjustments
(P)
(Q)
$ 70,598 $
71,932 $
73,641 $
78,228 $
76,570 $
216,171 $
219,213
Basic earnings per share, excluding purchase accounting adjusments Diluted earnings per share, excluding purchase accounting adjustments
$
(P )
$
0.92 $
0.92 $
0.91 $
0.91 $
0.88 $
0.88 $
0.84 $
0.84 $
0.84 $
0.84 $
2.71 $
2.71 $
2.59
2.59
Acquired Loans Accounted for Under ASC 310-20
Balance at
Acquired Loans Accountedfor Under ASC 310-30
Balance at
Total Loans Accountedfor Under ASC 310-20 and 310-30
Balance at
Loan marks:
(R)
Acquisition Date
Balance at Jun 30, 2015
Balance at Sep 30, 2015
Acquisition Date
Balance at Jun 30, 2015
Balance at Sep 30, 2015
Acquisition Date
Balance at Jun 30, 2015
Balance at Sep 30, 2015
Acquired banks
$ 225,589 $
67,895 $
60,819 $
131,906 $
48,277 $
41,814 $
357,495
$ 116,172
$ 102,633
Acquired portfolio loan balances:
(R)
Acquired banks
5,456,934 1,727,123 1,560,730 255,846 94,601 83,272 5,712,780
(S)
1,821,724 1,644,002
Acquired portfolio loan balances less loan marks
$ 5,231,345
$ 1,659,228
$ 1,499,911 $
123,940 $
46,324 $
41,458 $
5,355,285
$ 1,705,552
$ 1,541,369
Non-GAAP financial measure.
Using effective tax rate of 33.5%, 33.6%, 33.4%, 33.0% and 33.6% for the three month periods ended September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014 and September 30, 2014, respectively, and 33.5% and 33.4% for the nine month periods ended September 30, 2015 and 2014, respectively.
Includes Bank of Texas, Bank Arlington, American State Bank, Community National Bank, First Federal Bank Texas, Coppermark Bank, First Victoria National Bank and F&MBank.
Actual principal balances acquired.
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distributed by
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