April 25, 2018 - 6:30 AM EDT
Print Email Article Font Down Font Up Charts

Prosperity Bancshares, Inc.® Reports First Quarter 2018 Earnings

- First quarter earnings per common share (diluted) increased 8.1% to $1.07 compared with the first quarter 2017 - First quarter net income increased 8.5% to $74.361 million compared with the first quarter 2017 - Nonperforming assets remain low at 0.17% of first quarter average interest-earning assets - Return (annualized) on first quarter average assets of 1.32% - Returns (annualized) on first quarter average common equity of 7.69% and average tangible common equity of 15.43%‍(1) - Noninterest-bearing deposits increased 6.0% (annualized) in the first quarter 2018

HOUSTON, April 25, 2018 /PRNewswire/ -- Prosperity Bancshares, Inc.® (NYSE: PB), the parent company of Prosperity Bank® (collectively, "Prosperity"), reported net income for the quarter ended March 31, 2018 of $74.361 million or $1.07 per diluted common share. Additionally, nonperforming assets remain low at 0.17% of first quarter average interest-earning assets.

"The Texas and Oklahoma economies continue to grow helped by the diversity of business, low or no state income tax, a business friendly climate and a strong tailwind from an improving energy industry.  The Dallas Federal Reserve Bank is projecting 3.4% job growth for Texas in 2018, or 418,000 new jobs.  Houston is making a comeback with 4.7% annualized job growth through February 2018, an expected 160,000 new jobs. Oklahoma's unemployment rate in February 2018 was 4.1% and remains unchanged since September 2017.  Employment growth has added jobs across most industries," said David Zalman, Prosperity's Chairman and Chief Executive Officer.

"We were excited to see earnings per share for the first quarter of 2018 increase 8.1% compared with the first quarter of 2017, first quarter net income increase 10.7% to $74.361 million compared with the fourth quarter of 2017 of $67.138 million and a return on tangible capital of 15.43%.  Despite the increase, earnings should have been better.  Net charge-offs for the quarter of $9.441 million were an anomaly.  Approximately two-thirds of this amount were previously identified problem credits inherited from our last acquisition in Oklahoma.  The charge-offs related to these credits represented a loss of seven cents per share. While disappointing, with respect to the largest charge-off, rather than continue to carry the problem asset for an unpredictable future period, we elected to accept a discounted offer and reduce our nonperforming assets," continued Zalman. 

"Loans at March 31, 2018 were $10.011 billion, an increase of $272.163 million or 2.8%, compared with $9.739 billion at March 31, 2017, and essentially flat compared with the fourth quarter of 2017.  We experienced a number of large pay downs in the quarter that impacted our overall growth.  However, the good news is that loan production was strong and given the expected funding of these new loans, we believe that we will achieve the 2018 organic loan growth guidance we gave earlier this year," added Zalman.

"We remain excited about 2018.  Although we have had large loan pay downs due to our customers selling their projects, converting completed projects to long term financing or using cash reserves to pay down debt because of more economic certainty, we believe that this increased certainty should result in businesses and individuals taking calculated risks and needing loan funding to do so," stated Zalman.

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

Results of Operations for the Three Months Ended March 31, 2018

Net income was $74.361 million(2) for the three months ended March 31, 2018 compared with $68.565 million(3) for the same period in 2017, an increase of $5.796 million or 8.5%. Net income per diluted common share was $1.07 for the three months ended March 31, 2018 compared with $0.99 for the same period in 2017, an increase of 8.1%. Net income and earnings per diluted common share for the three months ended March 31, 2018 reflect the reduction in corporate tax rate from 35% to 21% as a result of the Tax Cuts and Jobs Act of 2017. Additionally, net income and earnings per diluted common share were impacted by higher than normal net charge-offs of $9.441 million. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended March 31, 2018 were 1.32%, 7.69% and 15.43%(1), respectively.  Prosperity's efficiency ratio (excluding credit loss provisions and taxes) was 44.19%(1) for the three months ended March 31, 2018.

Net interest income before provision for credit losses for the three months ended March 31, 2018 was $153.223 million compared with $152.435 million during the same period in 2017, an increase of $788 thousand or 0.5%. This change was primarily due to an increase in income on loans, partially offset by an increase in the average rate on interest bearing deposits and a decrease in loan discount accretion. Linked quarter net interest income before provision for credit losses decreased $2.827 million or 1.8% to $153.223 million compared with $156.050 million during the three months ended December 31, 2017. This decrease was primarily due to an increase in the average rate on interest bearing deposits and a decrease in loan discount accretion.

The net interest margin on a tax equivalent basis was 3.16% for the three months ended March 31, 2018 compared with 3.20% for the same period in 2017 and for the three months ended December 31, 2017. The change during both periods was primarily due to a decrease in loan discount accretion.

Noninterest income was $27.938 million for the three months ended March 31, 2018 compared with $30.824 million for the same period in 2017, a decrease of $2.886 million or 9.4%. This change was primarily due to the net gain on sale of assets during the first quarter of 2017. On a linked quarter basis, noninterest income decreased $1.282 million or 4.4% primarily due to decreases in NSF fees and credit/debit card income.

Noninterest expense was $80.054 million for the three months ended March 31, 2018 compared with $78.062 million for the same period in 2017, an increase of $1.992 million or 2.6%. This change was primarily due to an increase in salaries and benefits. On a linked quarter basis, noninterest expense decreased $1.034 million or 1.3% compared with the three months ended December 31, 2017. This change primarily resulted from a write-down of other real estate of $3.380 million during the fourth quarter of 2017, partially offset by an increase in salaries and benefits.

______________



(1)

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



(2)

Includes purchase accounting adjustments of $1.536 million, net of tax, primarily comprised of loan discount accretion of $2.326 million for the three months ended March 31, 2018.



(3)

Includes purchase accounting adjustments of $2.675 million, net of tax, primarily comprised of loan discount accretion of $4.753 million for the three months ended March 31, 2017.

Balance Sheet Information

At March 31, 2018, Prosperity had $22.472 billion in total assets compared with $22.477 billion at March 31, 2017.

Loans at March 31, 2018 were $10.011 billion, an increase of $272.163 million or 2.8%, compared with $9.739 billion at March 31, 2017. Linked quarter loans decreased $9.357 million or 0.1% from $10.021 billion at December 31, 2017.

As part of its commercial and industrial lending activities, Prosperity extends credit to oil and gas production and service companies. Oil and gas production loans are loans to companies directly involved in the exploration and/or production of oil and gas. Oil and gas service loans are loans to companies that provide services for oil and gas production and exploration. At March 31, 2018, oil and gas loans totaled $375.405 million or 3.7% of total loans, of which $168.883 million were to production companies and $206.522 million were to service companies. This compares with total oil and gas loans of $267.445 million or 2.8% of total loans at March 31, 2017, of which $108.267 million were to production companies and $159.178 million were to service companies. At December 31, 2017, oil and gas loans totaled $300.546 million or 3.0% of total loans, of which $112.246 million were production loans and $188.300 million were service loans.

Deposits at March 31, 2018 were $17.333 billion, an increase of $297.307 million or 1.7%, compared with $17.036 billion at March 31, 2017. Linked quarter deposits decreased $488.581 million or 2.7% from $17.821 billion at December 31, 2017. This change was primarily due to seasonality.

Asset Quality

Nonperforming assets totaled $33.217 million or 0.17% of quarterly average interest-earning assets at March 31, 2018, compared with $41.199 million or 0.21% of quarterly average interest-earning assets at March 31, 2017, and $37.455 million or 0.19% of quarterly average interest-earning assets at December 31, 2017.

The allowance for credit losses was $83.600 million or 0.84% of total loans at March 31, 2018, $84.095 million or 0.86% of total loans at March 31, 2017 and $84.041 million or 0.84% of total loans at December 31, 2017.  Excluding loans acquired that are accounted for under FASB Accounting Standards Codification ("ASC") Topics 310-20 and 310-30, the allowance for credit losses was 0.90%(1) of remaining loans as of March 31, 2018, compared with 0.96%(1) at March 31, 2017 and 0.91%(1) at December 31, 2017.

The provision for credit losses was $9.000 million for the three months ended March 31, 2018 compared with $2.675 million for the three months ended March 31, 2017 and $2.000 million for the three months ended December 31, 2017. 

Net charge-offs were $9.441 million for the three months ended March 31, 2018 compared with $3.906 million for the three months ended March 31, 2017 and $4.771 million for the three months ended December 31, 2017. Net charge-offs for the first quarter of 2018 were primarily comprised of three commercial and industrial loans, two of which were energy related. 

Dividend

Prosperity Bancshares, Inc. declared a second quarter cash dividend of $0.36 per share to be paid on July 2, 2018 to all shareholders of record as of June 15, 2018. 

Conference Call

Prosperity's management team will host a conference call on Wednesday, April 25, 2018 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss Prosperity's first quarter 2018 earnings. Individuals and investment professionals may participate in the call by dialing 877-883-0383. The elite entry number is 3655171.

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

Non-GAAP Financial Measures

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

Prosperity Bancshares, Inc. ®

As of March 31, 2018, Prosperity Bancshares, Inc. ® is a $22.472 billion Houston, Texas based regional financial holding company, formed in 1983. Operating under a community banking philosophy and seeking to develop broad customer relationships based on service and convenience, Prosperity offers a variety of traditional loan and deposit products to its customers, which consist primarily of small and medium sized businesses and consumers. In addition to established banking products, Prosperity offers a complete line of services including: Internet Banking services at www.prosperitybankusa.com, Retail Brokerage Services, Credit Cards, MasterMoney Debit Cards, 24 hour voice response banking, Trust and Wealth Management, Mortgage Services, Cash Management and Mobile Banking.

As of March 31, 2018, Prosperity operated 242 full-service banking locations: 65 in the Houston area, including The Woodlands; 29 in the South Texas area including Corpus Christi and Victoria; 33 in the Dallas/Fort Worth area; 22 in the East Texas area; 29 in the Central Texas area including Austin and San Antonio; 34 in the West Texas area including Lubbock, Midland-Odessa and Abilene; 16 in the Bryan/College Station area, 6 in the Central Oklahoma area and 8 in the Tulsa, Oklahoma area.

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

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by Prosperity's management on the conference call may contain, forward-looking statements within the meaning of the securities laws. Forward-looking statements include all statements other than statements of historical fact, including forecasts or trends, and are based on current expectations, assumptions, estimates and projections about Prosperity Bancshares and its subsidiaries.  These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperity's control, which may cause actual results to differ materially from those expressed or implied by the forward-looking statements.  These risks and uncertainties include but are not limited to whether Prosperity can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks; continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives.  Other risks include, but are not limited to: the possibility that credit quality could deteriorate; actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); a deterioration or downgrade in the credit quality and credit agency ratings of the securities in Prosperity's securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate, interest rate and commodity price fluctuations; and weather.  These and various other factors are discussed in Prosperity Bancshares' Annual Report on Form 10-K for the year ended December 31, 2017 and other reports and statements Prosperity Bancshares has filed with the SEC. Copies of the SEC filings for Prosperity Bancshares may be downloaded from the Internet at no charge from http://www.prosperitybankusa.com.

Bryan/College Station Area -


Keller


Westheimer


Taft

Bryan


Roanoke


West University


Yoakum

Bryan-29th Street


Stockyards


Woodcreek


Yorktown

Bryan-East







Bryan-North


Other Dallas/Fort Worth Area


Katy -


West Texas Area -

Caldwell


Locations -


Cinco Ranch


Abilene -

College Station


Arlington


Katy-Spring Green


Antilley Road

Crescent Point


Azle




Barrow Street

Hearne


Ennis


The Woodlands -


Cypress Street

Huntsville


Gainesville


The Woodlands-College Park


Judge Ely

Madisonville


Glen Rose


The Woodlands-I-45


Mockingbird

Navasota


Granbury


The Woodlands-Research Forest



New Waverly


Mesquite




Lubbock -

Rock Prairie


Muenster


Other Houston Area


4th Street

Southwest Parkway


Sanger


Locations -


66th Street

Tower Point


Waxahachie


Angleton


82nd Street

Wellborn Road


Weatherford


Bay City


86th Street





Beaumont


98th Street

Central Texas Area -


East Texas Area -


Cleveland


Avenue Q

Austin -


Athens


East Bernard


North University

Allandale


Blooming Grove


El Campo


Texas Tech Student Union

Cedar Park


Canton


Dayton



Congress


Carthage


Galveston


Midland -

Lakeway


Corsicana


Groves


Wadley

Liberty Hill


Crockett


Hempstead


Wall Street

Northland


Eustace


Hitchcock



Oak Hill


Gilmer


Liberty


Odessa -

Research Blvd


Grapeland


Magnolia


Grandview

Westlake


Gun Barrel City


Magnolia Parkway


Grant



Jacksonville


Mont Belvieu


Kermit Highway

Other Central Texas Area


Kerens


Nederland


Parkway

Locations -


Longview


Needville



Bastrop


Mount Vernon


Rosenberg


Other West Texas Area

Canyon Lake


Palestine


Shadow Creek


Locations -

Dime Box


Rusk


Spring


Big Spring

Dripping Springs


Seven Points


Tomball


Brownfield

Elgin


Teague


Waller


Brownwood

Flatonia


Tyler-Beckham


West Columbia


Cisco

Georgetown


Tyler-South Broadway


Wharton


Comanche

Gruene


Tyler-University


Winnie


Early

Kingsland


Winnsboro


Wirt


Floydada

La Grange






Gorman

Lexington


Houston Area -


South Texas Area -


Levelland

New Braunfels


Houston -


Corpus Christi -


Littlefield

Pleasanton


Aldine


Calallen


Merkel

Round Rock


Alief


Carmel


Plainview

San Antonio


Bellaire


Northwest


San Angelo

Schulenburg


Beltway


Saratoga


Slaton

Seguin


Clear Lake


Timbergate


Snyder

Smithville


Copperfield


Water Street



Thorndale


Cypress




Oklahoma

Weimar


Downtown


Victoria -


Central Oklahoma Area-



Eastex


Victoria Main


Oklahoma City -

Dallas/Fort Worth Area -


Fairfield


Victoria-Navarro


23rd Street

Dallas -


First Colony


Victoria-North


Expressway

Abrams Centre


Fry Road




I-240

Balch Springs


Gessner


Other South Texas Area


Memorial

Camp Wisdom


Gladebrook


 Locations -



Cedar Hill


Grand Parkway


Alice


Other Central Oklahoma Area

Frisco


Heights


Aransas Pass


 Locations -

Frisco-West


Highway 6 West


Beeville


Edmond

Kiest


Little York


Colony Creek


Norman

McKinney


Medical Center


Cuero



McKinney-Stonebridge


Memorial Drive


Edna


Tulsa Area-

Midway


Northside


Goliad


Tulsa -

Plano


Pasadena


Gonzales


Garnett

Preston Forest


Pecan Grove


Hallettsville


Harvard

Preston Road


Pin Oak


Kingsville


Memorial

Red Oak


River Oaks


Mathis


Sheridan

Sachse


Sugar Land


Padre Island


S. Harvard

The Colony


SW Medical Center


Palacios


Utica Tower

Turtle Creek


Tanglewood


Port Lavaca


Yale

Westmoreland


The Plaza


Portland





Uptown


Rockport


Other Tulsa Area Locations -

Fort Worth -


Waugh Drive


Sinton


Owasso

Haltom City







 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(In thousands)




Mar 31, 2018



Dec 31, 2017



Sep 30, 2017



Jun 30, 2017



Mar 31, 2017


Balance Sheet Data (at period end)





















Loans


$

10,011,416



$

10,020,773



$

9,911,202



$

9,864,019



$

9,739,253


Investment securities(A)



9,710,254




9,672,116




9,410,522




9,582,195




9,854,120


Federal funds sold



469




697




1,007




757




945


Allowance for credit losses



(83,600)




(84,041)




(86,812)




(83,783)




(84,095)


Cash and due from banks



243,514




391,616




302,469




321,958




324,797


Goodwill



1,900,845




1,900,845




1,900,845




1,900,845




1,900,845


Core deposit intangibles, net



37,274




38,842




40,464




42,150




43,869


Other real estate owned



10,538




11,152




14,512




15,472




15,698


Fixed assets, net



257,057




257,065




256,011




256,511




257,558


Other assets



384,547




378,227




393,043




396,419




424,429


Total assets


$

22,472,314



$

22,587,292



$

22,143,263



$

22,296,543



$

22,477,419























Noninterest-bearing deposits


$

5,707,994



$

5,623,322



$

5,465,474



$

5,397,293



$

5,299,264


Interest-bearing deposits



11,624,885




12,198,138




11,442,002




11,673,237




11,736,308


Total deposits



17,332,879




17,821,460




16,907,476




17,070,530




17,035,572


Other borrowings



820,079




505,223




960,365




1,035,506




1,270,644


Securities sold under repurchase agreements



339,576




324,154




334,621




346,324




335,875


Other liabilities



103,635




112,301




159,443




107,995




146,246


Total liabilities



18,596,169




18,763,138




18,361,905




18,560,355




18,788,337


Shareholders' equity(B)



3,876,145




3,824,154




3,781,358




3,736,188




3,689,082


Total liabilities and equity


$

22,472,314



$

22,587,292



$

22,143,263



$

22,296,543



$

22,477,419




(A)

Includes $57, ($143), $1,635, $2,871 and $2,200 in unrealized gains (losses) on available for sale securities for the quarterly periods ended March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017 and March 31, 2017, respectively.

(B)

Includes $45, ($113), $1,063, $1,866 and $1,430 in after-tax unrealized gains (losses) on available for sale securities for the quarterly periods ended March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017 and March 31, 2017, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(In thousands)




Three Months Ended




Mar 31, 2018



Dec 31, 2017



Sep 30, 2017



Jun 30, 2017



Mar 31, 2017


Income Statement Data





















Interest income:





















Loans


$

116,246



$

120,086



$

121,567



$

114,975



$

111,710


Securities(C)



54,457




51,510




50,610




52,912




53,157


Federal funds sold and other earning assets



315




243




242




160




183


Total interest income



171,018




171,839




172,419




168,047




165,050























Interest expense:





















Deposits



14,472




12,587




12,376




11,441




9,908


Other borrowings



2,973




2,852




3,540




4,040




2,476


Securities sold under repurchase agreements



350




350




356




335




231


Total interest expense



17,795




15,789




16,272




15,816




12,615


Net interest income



153,223




156,050




156,147




152,231




152,435


Provision for credit losses



9,000




2,000




6,900




2,750




2,675


Net interest income after provision for credit losses



144,223




154,050




149,247




149,481




149,760























Noninterest income:





















Nonsufficient funds (NSF) fees



7,827




8,110




8,350




7,805




8,089


Credit card, debit card and ATM card income



5,961




6,211




6,075




6,186




5,953


Service charges on deposit accounts



5,275




5,250




5,251




5,405




5,421


Trust income



2,728




2,734




2,040




2,271




2,155


Mortgage income



763




826




854




1,107




1,266


Brokerage income



625




574




461




427




488


Bank owned life insurance income



1,311




1,347




1,366




1,364




1,353


Net gain (loss) on sale of assets






41




62




(3,783)




1,759


Gain on sale of securities












3,270





Other noninterest income



3,448




4,127




4,350




3,728




4,340


Total noninterest income



27,938




29,220




28,809




27,780




30,824























Noninterest expense:





















Salaries and benefits



50,399




48,756




47,866




47,343




48,444


Net occupancy and equipment



5,609




5,748




5,691




5,460




5,503


Credit and debit card, data processing and software amortization



4,448




4,423




4,506




4,216




4,085


Regulatory assessments and FDIC insurance



3,575




3,759




3,455




3,548




3,549


Core deposit intangibles amortization



1,568




1,622




1,686




1,719




1,915


Depreciation



3,033




3,011




3,050




3,051




3,103


Communications



2,580




2,608




2,618




2,664




2,702


Other real estate expense



89




181




110




128




95


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



122




2,978




(140)




(71)




(10)


Other noninterest expense



8,631




8,002




8,667




8,384




8,676


Total noninterest expense



80,054




81,088




77,509




76,442




78,062


Income before income taxes



92,107




102,182




100,547




100,819




102,522


Provision for income taxes



17,746




35,044




32,639




32,265




33,957


Net income available to common shareholders


$

74,361



$

67,138



$

67,908



$

68,554



$

68,565




(C)

Interest income on securities was reduced by net premium amortization of $8,450, $9,521, $10,115, $9,403 and $9,883 for the three-month periods ended March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017 and March 31, 2017, respectively.

 

Prosperity Bancshares, Inc. ®

Financial Highlights (Unaudited)

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




Three Months Ended




Mar 31, 2018



Dec 31, 2017



Sep 30, 2017



Jun 30, 2017



Mar 31, 2017


Profitability





















Net income (D) (E)


$

74,361



$

67,138



$

67,908



$

68,554



$

68,565























Basic earnings per share


$

1.07



$

0.97



$

0.98



$

0.99



$

0.99


Diluted earnings per share


$

1.07



$

0.97



$

0.98



$

0.99



$

0.99























Return on average assets (F)



1.32

%



1.20

%



1.22

%



1.22

%



1.23

%

Return on average common equity (F)



7.69

%



7.04

%



7.20

%



7.36

%



7.45

%

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



15.43

%



14.31

%



14.83

%



15.39

%



15.82

%

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



3.16

%



3.20

%



3.22

%



3.14

%



3.20

%

Efficiency ratio (G) (I)



44.19

%



43.78

%



41.92

%



42.34

%



43.01

%






















Liquidity and Capital Ratios





















Equity to assets



17.25

%



16.93

%



17.08

%



16.76

%



16.41

%

Common equity tier 1 capital



15.31

%



15.08

%



15.10

%



14.80

%



14.45

%

Tier 1 risk-based capital



15.31

%



15.08

%



15.10

%



14.80

%



14.45

%

Total risk-based capital



15.97

%



15.74

%



15.81

%



15.49

%



15.14

%

Tier 1 leverage capital



9.40

%



9.31

%



9.15

%



8.82

%



8.62

%

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



9.44

%



9.13

%



9.11

%



8.81

%



8.50

%






















Other Data





















Weighted-average shares used in computing earnings per common share





















Basic



69,768




69,484




69,485




69,487




69,480


Diluted



69,768




69,484




69,485




69,487




69,482


Period end shares outstanding



69,819




69,491




69,484




69,488




69,480


Cash dividends paid per common share


$

0.3600



$

0.3600



$

0.3400



$

0.3400



$

0.3400


Book value per common share


$

55.52



$

55.03



$

54.42



$

53.77



$

53.10


Tangible book value per common share (G)


$

27.76



$

27.12



$

26.48



$

25.81



$

25.11























Common Stock Market Price





















High


$

79.20



$

73.00



$

66.75



$

71.97



$

77.87


Low


$

68.95



$

61.95



$

55.84



$

61.29



$

65.34


Period end closing price


$

72.63



$

70.07



$

65.73



$

64.24



$

69.71


Employees – FTE



3,027




3,017




2,993




3,037




3,033


Number of banking centers



242




242




243




243




244



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



Three Months Ended


Mar 31, 2018


Dec 31, 2017


Sep 30, 2017


Jun 30, 2017


Mar 31, 2017

Loan discount accretion










ASC 310-20

$1,640


$2,462


$6,361


$2,755


$3,270

ASC 310-30

$686


$2,334


$1,525


$1,716


$1,483

Securities net amortization

$477


$598


$667


$745


$852

Time deposits amortization

$53


$39


$40


$39


$99



(E)

Using effective tax rate of 19.3%, 34.3%, 32.5%, 32.0% and 33.1% for the three-month periods ended March 31, 2018, December 31, 2017, September 30, 2017,  June 30, 2017 and March 31, 2017, respectively.

(F)

Interim periods annualized.             

(G)

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

(H)

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

 (I)

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

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)


YIELD ANALYSIS


Three Months Ended





Mar 31, 2018



Dec 31, 2017



Mar 31, 2017





Average

Balance



Interest

Earned/

Interest

Paid



Average

Yield/

Rate


(J)

Average

Balance



Interest

Earned/

Interest

Paid



Average

Yield/

Rate


(J)

Average

Balance



Interest

Earned/

Interest

Paid



Average

Yield/

Rate


(J)

Interest-Earning Assets:






































Loans


$

9,990,319



$

116,246



4.72%



$

9,955,145



$

120,086



4.79%



$

9,642,877



$

111,710



4.70%



Investment securities



9,742,601




54,457



2.27%


(K)


9,521,081




51,510



2.15%


(K)


9,867,491




53,157



2.18%


(K)

Federal funds sold and other earning assets



81,779




315



1.56%




91,257




243



1.06%




80,150




183



0.92%



Total interest-earning assets



19,814,699




171,018



3.50%




19,567,483




171,839



3.48%




19,590,518




165,050



3.42%



Allowance for credit losses



(81,983)












(84,465)












(85,037)











Noninterest-earning assets



2,823,785












2,833,964












2,875,986











Total assets


$

22,556,501











$

22,316,982











$

22,381,467

















































Interest-Bearing Liabilities:






































Interest-bearing demand deposits


$

4,392,230



$

5,063



0.47%



$

3,787,421



$

3,365



0.35%



$

4,136,260



$

2,587



0.25%



Savings and money market deposits



5,478,411




5,242



0.39%




5,530,158




5,032



0.36%




5,537,355




3,587



0.26%



Certificates and other time deposits



2,168,951




4,167



0.78%




2,225,555




4,190



0.75%




2,366,857




3,734



0.64%



Other borrowings



731,500




2,973



1.65%




891,396




2,852



1.27%




1,123,396




2,476



0.89%



Securities sold under repurchase agreements



327,136




350



0.43%




337,690




350



0.41%




307,433




231



0.31%



Total interest-bearing liabilities



13,098,228




17,795



0.55%


(L)


12,772,220




15,789



0.49%


(L)


13,471,301




12,615



0.38%


(L)







































Noninterest-bearing liabilities:






































Noninterest-bearing demand deposits



5,510,320












5,598,345












5,140,010











Other liabilities



81,414












129,533












91,157











Total liabilities



18,689,962












18,500,098












18,702,468











Shareholders' equity



3,866,539












3,816,884












3,678,999











Total liabilities and shareholders' equity


$

22,556,501











$

22,316,982











$

22,381,467

















































Net interest income and margin






$

153,223



3.14%







$

156,050



3.16%







$

152,435



3.16%



Non-GAAP to GAAP reconciliation:






































Tax equivalent adjustment







941












1,921












1,995







Net interest income and margin (tax equivalent basis)






$

154,164



3.16%







$

157,971



3.20%







$

154,430



3.20%





(J)

Annualized and based on an actual 365 day basis.

(K)

Yield on securities was impacted by net premium amortization of $8,450, $9,521 and $9,883 for the three-month periods ended March 31, 2018, December 31, 2017 and March 31, 2017, respectively.

(L)

Total cost of funds, including noninterest bearing deposits, was 0.39%, 0.34% and 0.27% for the three months ended March 31, 2018, December 31, 2017 and March 31, 2018, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)



Three Months Ended



Mar 31, 2018



Dec 31, 2017



Sep 30, 2017



Jun 30, 2017



Mar 31, 2017


YIELD TREND (M)








































Interest-Earning Assets:




















Loans


4.72

%



4.79

%



4.88

%



4.71

%



4.70

%

Investment securities (N)


2.27

%



2.15

%



2.11

%



2.16

%



2.18

%

Federal funds sold and other earning assets


1.56

%



1.06

%



1.24

%



0.76

%



0.92

%

Total interest-earning assets


3.50

%



3.48

%



3.51

%



3.42

%



3.42

%





















Interest-Bearing Liabilities:




















Interest-bearing demand deposits


0.47

%



0.35

%



0.33

%



0.29

%



0.25

%

Savings and money market deposits


0.39

%



0.36

%



0.37

%



0.35

%



0.26

%

Certificates and other time deposits


0.78

%



0.75

%



0.72

%



0.68

%



0.64

%

Other borrowings


1.65

%



1.27

%



1.28

%



1.11

%



0.89

%

Securities sold under repurchase agreements


0.43

%



0.41

%



0.41

%



0.41

%



0.31

%

Total interest-bearing liabilities


0.55

%



0.49

%



0.50

%



0.48

%



0.38

%





















Net Interest Margin


3.14

%



3.16

%



3.18

%



3.10

%



3.16

%

Net Interest Margin (tax equivalent)


3.16

%



3.20

%



3.22

%



3.14

%



3.20

%



(M) 

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

(N)

Yield on securities was impacted by net premium amortization of $8,450, $9,521, $10,115, $9,403 and $9,883 for the three-month periods ended March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017 and March 31, 2017, respectively.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)




Three Months Ended




Mar 31, 2018



Dec 31, 2017



Sep 30, 2017



Jun 30, 2017



Mar 31, 2017


Balance Sheet Averages





















Loans


$

9,990,319



$

9,955,145



$

9,888,922



$

9,797,793



$

9,642,877


Investment securities



9,742,601




9,521,081




9,526,215




9,817,781




9,867,491


Federal funds sold and other earning assets



81,779




91,257




77,337




84,497




80,150


Total interest-earning assets



19,814,699




19,567,483




19,492,474




19,700,071




19,590,518


Allowance for credit losses



(81,983)




(84,465)




(84,047)




(84,100)




(85,037)


Cash and due from banks



269,917




257,462




225,574




228,518




262,794


Goodwill



1,900,845




1,900,845




1,900,845




1,900,845




1,900,845


Core deposit intangibles, net



38,064




39,650




41,314




42,957




44,762


Other real estate



10,758




14,177




15,262




15,871




15,669


Fixed assets, net



257,465




256,657




256,809




257,229




260,716


Other assets



346,736




365,173




362,048




392,822




391,200


Total assets


$

22,556,501



$

22,316,982



$

22,210,279



$

22,454,213



$

22,381,467























Noninterest-bearing deposits


$

5,510,320



$

5,598,345



$

5,361,362



$

5,290,142



$

5,140,010


Interest-bearing demand deposits



4,392,230




3,787,421




3,601,116




3,749,395




4,136,260


Savings and money market deposits



5,478,411




5,530,158




5,658,569




5,520,346




5,537,355


Certificates and other time deposits



2,168,951




2,225,555




2,270,114




2,296,425




2,366,857


Total deposits



17,549,912




17,141,479




16,891,161




16,856,308




17,180,482


Other borrowings



731,500




891,396




1,099,583




1,460,238




1,123,396


Securities sold under repurchase agreements



327,136




337,690




344,177




324,804




307,433


Other liabilities



81,414




129,533




102,046




87,074




91,157


Shareholders' equity



3,866,539




3,816,884




3,773,312




3,725,789




3,678,999


Total liabilities and equity


$

22,556,501



$

22,316,982



$

22,210,279



$

22,454,213



$

22,381,467


 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)  




Mar 31, 2018



Dec 31, 2017



Sep 30, 2017



Jun 30, 2017



Mar 31, 2017


Period End Balances








































































Loan Portfolio




































Commercial and industrial


$

1,148,980



11.5

%


$

1,179,364



11.8

%


$

1,180,570



11.9

%


$

1,201,748



12.2

%


$

1,287,216



13.2

%

Construction, land development and other land loans



1,502,393



15.0

%



1,509,137



15.1

%



1,453,535



14.7

%



1,383,539



14.0

%



1,326,685



13.6

%

1-4 family residential



2,438,224



24.4

%



2,454,548



24.5

%



2,449,051



24.7

%



2,432,348



24.7

%



2,424,533



24.9

%

Home equity



284,339



2.8

%



285,312



2.8

%



284,076



2.9

%



283,729



2.9

%



281,298



2.9

%

Commercial real estate (includes multi-family residential)



3,330,860



33.3

%



3,315,627



33.1

%



3,295,001



33.2

%



3,309,227



33.5

%



3,226,978



33.1

%

Agriculture (includes farmland)



671,319



6.7

%



690,118



6.9

%



692,516



7.0

%



699,228



7.1

%



662,797



6.8

%

Consumer and other



259,896



2.6

%



286,121



2.8

%



264,626



2.7

%



266,385



2.7

%



262,301



2.7

%

Energy



375,405



3.7

%



300,546



3.0

%



291,827



2.9

%



287,815



2.9

%



267,445



2.8

%

Total loans


$

10,011,416






$

10,020,773






$

9,911,202






$

9,864,019






$

9,739,253









































Deposit Types




































Noninterest-bearing DDA


$

5,707,994



32.9

%


$

5,623,322



31.5

%


$

5,465,474



32.3

%


$

5,397,293



31.6

%


$

5,299,264



31.1

%

Interest-bearing DDA



4,106,255



23.7

%



4,501,394



25.3

%



3,645,754



21.6

%



3,702,910



21.7

%



3,845,061



22.6

%

Money market



3,062,999



17.7

%



3,200,763



18.0

%



3,273,110



19.4

%



3,451,803



20.2

%



3,370,055



19.8

%

Savings



2,314,112



13.3

%



2,300,450



12.9

%



2,264,959



13.4

%



2,240,126



13.1

%



2,189,822



12.8

%

Certificates and other time deposits



2,141,519



12.4

%



2,195,531



12.3

%



2,258,179



13.3

%



2,278,398



13.4

%



2,331,370



13.7

%

Total deposits


$

17,332,879






$

17,821,460






$

16,907,476






$

17,070,530






$

17,035,572









































Loan to Deposit Ratio



57.8

%






56.2

%






58.6

%






57.8

%






57.2

%




 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)


Construction Loans




Mar 31, 2018



Dec 31, 2017



Sep 30, 2017



Jun 30, 2017



Mar 31, 2017






































Single family residential construction


$

417,302



27.7

%


$

388,966



25.7

%


$

386,891



26.6

%


$

410,164



29.6

%


$

411,553



30.9

%

Land development



88,609



5.9

%



86,122



5.7

%



77,202



5.3

%



79,641



5.8

%



83,475



6.3

%

Raw land



128,771



8.5

%



131,022



8.7

%



191,563



13.1

%



200,122



14.4

%



183,453



13.8

%

Residential lots



113,813



7.6

%



117,080



7.7

%



128,109



8.8

%



130,919



9.4

%



129,389



9.7

%

Commercial lots



91,653



6.1

%



91,624



6.1

%



113,692



7.8

%



83,104



6.0

%



84,705



6.4

%

Commercial construction and other



664,437



44.2

%



696,763



46.1

%



558,649



38.4

%



482,347



34.8

%



437,083



32.9

%

Net unaccreted discount



(2,192)







(2,440)







(2,571)







(2,758)







(2,973)





Total construction loans


$

1,502,393






$

1,509,137






$

1,453,535






$

1,383,539






$

1,326,685





 

Non-Owner Occupied Commercial Real Estate Loans by Metropolitan Statistical Area (MSA) as of March 31, 2018



Houston



Dallas



Austin



OK City



Tulsa



Other (O)



Total



Collateral Type





























Shopping center/retail

$

230,112



$

56,103



$

29,949



$

15,479



$

24,511



$

142,289



$

498,443



Commercial and industrial buildings


123,256




29,216




12,192




20,390




22,079




73,320




280,453



Office buildings


72,664




118,160




23,701




43,027




10,920




68,977




337,449



Medical buildings


53,311




8,486




41




5,589




10,942




65,659




144,028



Apartment buildings


38,405




12,297




43,854




11,090




6,079




55,978




167,703



Hotel


42,548




54,658




13,117




29,904







113,461




253,688



Other


46,884




8,052




16,027




11,571




5,548




57,488




145,570



Total

$

607,180



$

286,972



$

138,881



$

137,050



$

80,079



$

577,172



$

1,827,334


(P)

 

Acquired Loans




Acquired Loans Accounted for

Under ASC 310-20



Acquired Loans Accounted for

Under ASC 310-30



Total Loans Accounted for

Under ASC 310-20 and 310-30




Balance at

Acquisition

Date



Balance at

Dec 31, 2017



Balance at

Mar 31, 2018



Balance at

Acquisition

Date



Balance at

Dec 31, 2017



Balance at

Mar 31, 2018



Balance at

Acquisition

Date



Balance at

Dec 31, 2017



Balance at

Mar 31, 2018


Loan marks:





































Acquired banks (Q)


$

229,080



$

20,533



$

18,885



$

142,128



$

14,215



$

10,386



$

371,208



$

34,748



$

29,271


Acquired portfolio loan balances:





































Acquired banks (Q)



5,690,998




738,706




680,656




275,221




36,199




30,503




5,966,219


(R)


774,905




711,159


Acquired portfolio loan balances less loan marks


$

5,461,918



$

718,173



$

661,771



$

133,093



$

21,984



$

20,117



$

5,595,011



$

740,157



$

681,888




(O)

Includes other MSA and non-MSA regions.

(P)

Represents a portion of total commercial real estate loans of $3.331 billion as of March 31, 2018.

(Q)

Includes Bank of Texas, Bank Arlington, American State Bank, Community National Bank, First Federal Bank Texas, Coppermark Bank, First Victoria National Bank, The F&M Bank & Trust Company and Tradition Bank.

(R)

Actual principal balances acquired.

 

Prosperity Bancshares, Inc.®

Financial Highlights (Unaudited)

(Dollars in thousands)



Three Months Ended



Mar 31, 2018



Dec 31, 2017



Sep 30, 2017



Jun 30, 2017



Mar 31, 2017


Asset Quality




















Nonaccrual loans

$

22,572



$

25,264



$

26,267



$

30,517



$

24,360


Accruing loans 90 or more days past due


107




1,004




4,934




1,613




880


Total nonperforming loans


22,679




26,268




31,201




32,130




25,240


Repossessed assets





35




110




16




261


Other real estate


10,538




11,152




14,512




15,472




15,698


Total nonperforming assets

$

33,217



$

37,455



$

45,823



$

47,618



$

41,199






















Nonperforming assets:




















Commercial and industrial (includes energy)

$

13,558



$

15,533



$

22,241



$

25,628



$

18,743


Construction, land development and other land loans


1,019




1,888




847




1,572




1,461


1-4 family residential (includes home equity)


5,440




5,845




3,781




4,156




4,070


Commercial real estate (includes multi-family residential)


12,992




13,533




18,208




15,454




16,235


Agriculture (includes farmland)


128




550




635




676




534


Consumer and other


80




106




111




132




156


Total

$

33,217



$

37,455



$

45,823



$

47,618



$

41,199


Number of loans/properties


95




99




113




121




139


Allowance for credit losses at end of period

$

83,600



$

84,041



$

86,812



$

83,783



$

84,095






















Net charge-offs:




















Commercial and industrial (includes energy)

$

8,016



$

3,822



$

3,225



$

2,531



$

3,495


Construction, land development and other land loans


123




(1)




(2)




(60)




(65)


1-4 family residential (includes home equity)


257




61




12




95




(95)


Commercial real estate (includes multi-family residential)


502




22




(3)







133


Agriculture (includes farmland)


(61)




(63)







(29)




(65)


Consumer and other


604




930




639




525




503


Total

$

9,441



$

4,771



$

3,871



$

3,062



$

3,906






















Asset Quality Ratios




















Nonperforming assets to average interest-earning assets


0.17

%



0.19

%



0.24

%



0.24

%



0.21

%

Nonperforming assets to loans and other real estate


0.33

%



0.37

%



0.46

%



0.48

%



0.42

%

Net charge-offs to average loans (annualized)


0.38

%



0.19

%



0.16

%



0.13

%



0.16

%

Allowance for credit losses to total loans


0.84

%



0.84

%



0.88

%



0.85

%



0.86

%

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


0.90

%



0.91

%



0.95

%



0.93

%



0.96

%

 

Prosperity Bancshares, Inc.®

Notes to Selected Financial Data (Unaudited)

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


Consolidated Financial Highlights


NOTES TO SELECTED FINANCIAL DATA

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




Three Months Ended




Mar 31, 2018



Dec 31, 2017



Sep 30, 2017



Jun 30, 2017



Mar 31, 2017


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





















Net income


$

74,361



$

67,138



$

67,908



$

68,554



$

68,565


Average shareholders' equity


$

3,866,539



$

3,816,884



$

3,773,312



$

3,725,789



$

3,678,999


Less: Average goodwill and other intangible assets



(1,938,909)




(1,940,495)




(1,942,159)




(1,943,802)




(1,945,607)


Average tangible shareholders' equity


$

1,927,630



$

1,876,389



$

1,831,153



$

1,781,987



$

1,733,392


Return on average tangible common equity (F)



15.43

%



14.31

%



14.83

%



15.39

%



15.82

%






















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





















Shareholders' equity


$

3,876,145



$

3,824,154



$

3,781,358



$

3,736,188



$

3,689,082


Less: Goodwill and other intangible assets



(1,938,119)




(1,939,687)




(1,941,309)




(1,942,995)




(1,944,714)


Tangible shareholders' equity


$

1,938,026



$

1,884,467



$

1,840,049



$

1,793,193



$

1,744,368























Period end shares outstanding



69,819




69,491




69,484




69,488




69,480


Tangible book value per share:


$

27.76



$

27.12



$

26.48



$

25.81



$

25.11























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





















Tangible shareholders' equity


$

1,938,026



$

1,884,467



$

1,840,049



$

1,793,193



$

1,744,368


Total assets


$

22,472,314



$

22,587,292



$

22,143,263



$

22,296,543



$

22,477,419


Less: Goodwill and other intangible assets



(1,938,119)




(1,939,687)




(1,941,309)




(1,942,995)




(1,944,714)


Tangible assets


$

20,534,195



$

20,647,605



$

20,201,954



$

20,353,548



$

20,532,705


Period end tangible equity to period end tangible assets ratio:



9.44

%



9.13

%



9.11

%



8.81

%



8.50

%






















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





















Allowance for credit losses


$

83,600



$

84,041



$

86,812



$

83,783



$

84,095


Total loans


$

10,011,416



$

10,020,773



$

9,911,202



$

9,864,019



$

9,739,253


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


$

681,888



$

740,157



$

796,807



$

888,172



$

991,894


Total loans less acquired loans


$

9,329,528



$

9,280,616



$

9,114,395



$

8,975,847



$

8,747,359


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



0.90

%



0.91

%



0.95

%



0.93

%



0.96

%






















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





















Noninterest expense


$

80,054



$

81,088



$

77,509



$

76,442



$

78,062























Net interest income


$

153,223



$

156,050



$

156,147



$

152,231



$

152,435


Noninterest income



27,938




29,220




28,809




27,780




30,824


Less: net gain (loss) on sale of assets






41




62




(3,783)




1,759


Less: gain on sale of securities












3,270





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



27,938




29,179




28,747




28,293




29,065


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


$

181,161



$

185,229



$

184,894



$

180,524



$

181,500


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



44.19

%



43.78

%



41.92

%



42.34

%



43.01

%

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/prosperity-bancshares-inc-reports-first-quarter-2018-earnings-300636089.html

SOURCE Prosperity Bancshares, Inc.


Source: PR Newswire (April 25, 2018 - 6:30 AM EDT)

News by QuoteMedia
www.quotemedia.com

Legal Notice