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Press release from PR Newswire

Prosperity Bancshares, Inc.® Reports Strong Second Quarter Earnings

Friday, July 27, 2012

Prosperity Bancshares, Inc.® Reports Strong Second Quarter Earnings06:02 EDT Friday, July 27, 2012- 2Q12 Earnings Per Share of $0.78 (diluted) - an increase of 4.0% - 2012 YTD loan growth of 4.9% (9.8% annualized) - 2012 YTD deposit growth of 4.1% (8.3% annualized) - Tangible Common Equity Ratio of 7.08% - Non-Performing Assets remain low at 0.12% of 2Q12 Average Earning AssetsHOUSTON, July 27, 2012 /PRNewswire/ -- Prosperity Bancshares, Inc.® (NYSE: PB), the parent company of Prosperity Bank®, reported net income for the quarter ended June 30, 2012 of $36.972 million or $0.78 per diluted common share, an increase in net income of $1.880 million or 5.4%, compared with $35.092 million or $0.75 per diluted common share for the same period in 2011."I am very pleased to be able to announce our outstanding results for the second quarter of 2012, particularly during the current economic environment when our industry is so challenged," commented David Zalman, Chairman and Chief Executive Officer.  "I am proud of our team of bankers and their ability to attract quality customers to our bank.  In fact, over the past three months, our lenders produced more loans than we have ever produced during a calendar quarter in the history of our bank.""During the past quarter, we completed our merger with Billy and Cathy Allen's team at The Bank Arlington.  This additional location in the Dallas/Fort Worth CMSA will allow us to continue our growth in that market.  On July 1, we completed our merger with American State Financial Corporation.  W.R. Collier and his team provide us with an excellent platform for future growth in West Texas.  We now have major operations in Lubbock, Midland/Odessa and Abilene and believe the American State Bank leadership team, including Mike Epps, Tony Whitehead, Mike Marshall and Gary Galbraith, brings vast knowledge of these markets to our team. Finally, we are excited about our recently announced, and fifth in the past year, merger agreement with Community National Bank in Bellaire, Texas, located in the heart of the Houston MSA.  Randy Dobbs and John James along with their team will help us continue our growth in Houston," continued Zalman."While we are excited about our recent mergers, our team remains focused on growing our bank by providing the highest level of service to our customers.  We remain excited about our future and strive to continue building shareholder value," concluded Zalman.Prosperity's management uses certain non?GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity and the tangible equity to tangible assets ratio. Prosperity has included in this Earnings Release information relating to these non-GAAP financial measures for the applicable periods presented.  Please refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures.Results of operations for the three months ended June 30, 2012For the three months ended June 30, 2012, net income was $36.972 million compared with $35.092 million for the same period in 2011.  Net income per diluted common share was $0.78 for the three months ended June 30, 2012 and $0.75 for the same period in 2011. Returns on average assets, average common equity and average tangible common equity, each on an annualized basis, for the three months ended June 30, 2012 were 1.35%, 9.06% and 21.70%, respectively.  Prosperity's efficiency ratio (excluding net gains and losses on the sale of securities and assets) was 41.94% for the three months ended June 30, 2012.Net interest income before provision for credit losses for the quarter ended June 30, 2012 increased 0.04% to $83.666 million compared with $83.630 million during the same period in 2011. The net interest margin on a tax equivalent basis decreased to 3.55% for the three months ended June 30, 2012 compared with 4.06% for the same period in 2011.  On a linked quarter basis, the tax equivalent net interest margin decreased nine basis points to 3.55% for the three months ended June 30, 2012 from 3.64% reported for the three months ended March 31, 2012.Non-interest income increased $126,000 or 0.9% to $13.656 million for the three months ended June 30, 2012 compared with $13.530 million during the same period in 2011.  The change was due to an increase in debit card and ATM card income and a decrease in loss on sale of securities partially offset by a reduction in NSF fees.Non-interest expense decreased $1.7 million or 4.1% to $40.788 million for the three months ended June 30, 2012 compared with $42.514 million during the same period in 2011.  The decrease was primarily attributable to a reduction in regulatory assessments and FDIC insurance.Average loans increased 7.8% or $283.096 million to $3.914 billion for the quarter ended June 30, 2012 compared with $3.631 billion for the same period of 2011.  Linked quarter average loans increased 2.5% or $95.361 million from $3.819 billion at March 31, 2012. Average deposits increased 8.8% or $683.271 million to $8.436 billion for the quarter ended June 30, 2012 compared with $7.752 billion for the same period of 2011.  Linked quarter average deposits increased 0.09% or $7.160 million from $8.429 billion at March 31, 2012. Loans at June 30, 2012 were $3.950 billion, an increase of $285.084 million or 7.8%, compared with $3.665 billion at June 30, 2011 and an increase of $184.426 million or 4.9% (9.8% annualized) compared with $3.766 billion at December 31, 2011.     Linked quarter loans increased $75.470 million or 1.9% (7.8% annualized) at June 30, 2012 compared with loans of $3.875 billion at March 31, 2012.  As reflected in the table below, loan growth was impacted by the acquisition of Texas Bankers, Inc. and The Bank Arlington.  Excluding loans acquired in these acquisitions, year to date loan growth increased 7.1% on an annualized basis.Deposits at June 30, 2012 were $8.395 billion, an increase of $726.890 million or 9.5%, compared with $7.668 billion at June 30, 2011 and an increase of $334.328 million or 4.1% (8.3% annualized) compared with $8.060 billion at December 31, 2011.    Linked quarter deposits decreased $149.869 million or 1.8% at June 30, 2012 compared with deposits of $8.544 billion at March 31, 2012.  As reflected in the table below, deposit growth was impacted by the acquisition of Texas Bankers, Inc. and The Bank Arlington.  Excluding deposits assumed in these acquisitions, year to date deposit growth increased 5.9% on an annualized basis.The table below provides detail on loans acquired and deposits assumed in the Texas Bankers, Inc. and The Bank Arlington transactions completed on January 1, 2012 and April 1, 2012, respectively:Balance Sheet Data (at period end)June 30, 2012Mar 31, 2012Dec 31, 2011June 30, 2011(In thousands)(Unaudited)(Unaudited)(Unaudited)(Unaudited)Loans:Acquired with Texas Bankers, Inc.$          28,421$          27,053$               --$                 --Acquired with The Bank Arlington22,542------All other3,899,3693,847,8093,765,9063,665,248Total Loans$     3,950,332$     3,874,862$   3,765,906$     3,665,248Deposits:Assumed with Texas Bankers, Inc.$          62,739$          63,681$                --$                 --Assumed with The Bank Arlington33,505------All other8,298,3388,480,7708,060,2547,667,692Total Deposits$     8,394,582$     8,544,451$   8,060,254$     7,667,692At June 30, 2012, Prosperity had $10.737 billion in total assets, $3.950 billion in loans and $8.395 billion in deposits.  Assets, loans and deposits at June 30, 2012 increased 11.2%, 7.8% and 9.5%, respectively, compared with June 30, 2011.Results of operations for the six months ended June 30, 2012For the six months ended June 30, 2012, net income was $73.459 million compared with $68.970 million for the same period in 2011.  Net income per diluted common share was $1.55 for the six months ended June 30, 2012 compared with $1.47 for the same period in 2011.  Returns on average assets, average common equity and average tangible common equity, each on an annualized basis, for the six months ended June 30, 2012 were 1.37%, 9.10% and 22.12%, respectively.  Prosperity's efficiency ratio (excluding net gains and losses on the sale of securities and assets) was 42.09% for the six months ended June 30, 2012.Net interest income before provision for credit losses for the six months ended June 30, 2012 increased $1.469 million or 0.9%, to $165.512 million compared with $164.043 million during the same period in 2011.  The increase was attributable primarily to a 13.0% increase in average earning assets over the same period.Non-interest income increased $204,000 or 0.7% to $27.601 million for the six months ended June 30, 2012 compared with $27.397 million for the same period in 2011.  The increase was mainly due to an increase in ATM and debit card income and a decrease in net loss on the sale of other real estate and net loss on sale of securities partially offset by a decrease in NSF fees.Non-interest expense decreased $2.962 million or 3.5% to $81.247 million for the six months ended June 30, 2012 compared with $84.209 million for the same period in 2011.  The decrease was primarily attributable to a decrease in regulatory assessments and FDIC insurance, partially offset by an increase in other real estate expense.Asset QualityNon-performing assets totaled $11.873 million or 0.12% of average earning assets for the three months ended June 30, 2012 compared with $12.680 million or 0.15% of average earning assets for the three months ended June 30, 2011, and $14.873 million or 0.16% of average earnings assets for the three months March 31, 2012.  The allowance for credit losses was 1.28% of total loans at June 30, 2012 compared with 1.42% at June 30, 2011 and 1.33% of total loans at March 31, 2012. Non-performing assets(Dollars in thousands)June 30, 2012Mar 31, 2012Dec 31, 2011Amount#Amount#Amount#Commercial$      39412$    69015$      76717Construction4,056304,116264,649281-4 family (including home equity)2,284283,207353,68938Commercial real estate (including multi-family)5,077126,773162,8779Agriculture and agriculture real estate443674493Consumer183205214Total $ 11,87388$ 14,873_ 101$ 12,05299Net charge-offs (Dollars in thousands)Three Months EndedJune 30, 2012Three Months EndedMar 31, 2012Three Months EndedDec 31, 2011Commercial$            180$           (15)$            843Construction1,17922--1-4 family (including home equity)9050676Commercial real estate (including multi-family)29618218Agriculture and agriculture real estate(3)--153Consumer 11827179Total $         1,860$         102$         2,069The provision for credit losses was $600,000 for the three months ended June 30, 2012 compared to $1.400 million for the three months ended June 30, 2011.  Net charge offs were $1.860 million for the three months ended June 30, 2012 compared to $1.229 million for the three months ended June 30, 2011.The provision for credit losses was $750,000 for the six months ended June 30, 2012 compared to $3.100 million for the six months ended June 30, 2011.  Net charge offs were $1.962 million for the six months ended June 30, 2012 compared to $2.753 million for the six months ended June 30, 2011.Conference CallProsperity's management team will host a conference call on Friday, July 27, 2012 at 10:30 a.m. Eastern Daylight Time (9:30 a.m. Central Daylight Time) to discuss Prosperity's second quarter earnings. Individuals and investment professionals may participate in the call by dialing 800-894-5910, the reference code is PBTX.Alternatively, individuals may listen to the live webcast of the presentation by visiting Prosperity's website at www.prosperitybanktx.com.  The webcast may be accessed directly from Prosperity's home page under News and Events. Pending Acquisition of Community National BankOn June 27, 2012, Prosperity announced the signing of a definitive agreement to acquire Community National Bank, Bellaire, Texas. This is the fifth acquisition announced by Prosperity within the past nine months.  Community National Bank operates one (1) banking office in Bellaire, Texas, in the Houston Metropolitan Area. As of June 30, 2012, Community National Bank reported total assets of $180.6 million, total loans of $68.6 million and total deposits of $162.6 million.  Under the terms of the definitive agreement, Prosperity will issue up to 372,396 shares of Prosperity common stock plus $11.4 million in cash for all outstanding shares of Community National Bank capital stock, subject to certain conditions and potential adjustments.  The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval of the Community National Bank shareholders.Pending Acquisition of East Texas Financial Services, Inc. On December 9, 2011, Prosperity entered into a definitive agreement to acquire East Texas Financial Services, Inc. (OTC BB: FFBT) and its wholly-owned subsidiary, First Federal Bank Texas ("Firstbank"). Firstbank operates four (4) banking offices in the Tyler MSA, including three locations in Tyler, Texas and one location in Gilmer, Texas. As of June 30, 2012, Firstbank reported total assets of $196.2 million, total loans of $143.6 million and total deposits of $120.9 million. Under the terms of the definitive agreement, Prosperity will issue up to 531,000 shares of Company common stock for all outstanding shares of East Texas Financial Services capital stock, subject to certain conditions and potential adjustments. The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval of the stockholders of East Texas Financial Services. On May 4, 2012, East Texas Financial Services and each of its directors were named defendants in a suit brought by East Texas Financial Corporation ("ETFC"), a shareholder of East Texas Financial Services, to block the proposed merger.  The suit was dismissed on July 18, 2012.  The closing date of the transaction is uncertain at this time. Acquisition of American State Financial CorporationOn July 1, 2012, Prosperity completed the previously announced acquisition of American State Financial Corporation and its wholly owned subsidiary American State Bank (collectively referred to as "ASB").  American State Bank operated thirty-seven (37) full service banking offices in eighteen (18) counties across West Texas. As of June 30, 2012, ASB, on a consolidated basis, reported total assets of $3.16 billion, total loans of $1.24 billion and total deposits of $2.51 billion.Under the terms of the agreement, Prosperity issued 8,524,835 shares of Prosperity common stock plus $178.5 million in cash for all outstanding shares of American State Financial Corporation capital stock which resulted in a premium of $240.4 million. Acquisition of The Bank Arlington On April 1, 2012, Prosperity completed the previously announced acquisition of The Bank Arlington.  The Bank Arlington operated one (1) banking office in Arlington, Texas, in the Dallas/Fort Worth CMSA. As of March 31, 2012, The Bank Arlington reported total assets of $37.3 million, total loans of $22.8 million and total deposits of $33.2 million.Under the terms of the agreement, Prosperity issued 135,389 shares of Prosperity common stock for all outstanding shares of The Bank Arlington capital stock which resulted in a premium of $2.8 million.Acquisition of Texas Bankers, Inc. On January 1, 2012, Prosperity completed the previously announced acquisition of Texas Bankers, Inc. and its wholly-owned subsidiary, Bank of Texas, Austin, Texas.  The three (3) Bank of Texas banking offices in the Austin, Texas CMSA consisted of a location in Rollingwood, which was consolidated with Prosperity's Westlake location and remains in Bank of Texas' Rollingwood banking office; one banking center in downtown Austin, which was consolidated into Prosperity's downtown Austin location; and another banking center in Thorndale. Prosperity now operates thirty-four (34) banking centers in the Central Texas area including Austin and San Antonio. Texas Bankers, Inc. reported, on a consolidated basis, total assets of $77.0 million, total loans of $27.6 million and total deposits of $70.4 million as of December 31, 2011.Under the terms of the agreement, Prosperity issued 314,953 shares of Prosperity common stock for all outstanding shares of Texas Bankers capital stock which resulted in a premium of $5.2 million. Prosperity Bancshares, Inc.®Prosperity Bancshares Inc.®, recently named "America's Best Bank" by Forbes, is a $13.9 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 http://www.prosperitybanktx.com, Retail Brokerage Services, MasterMoney Debit Cards, and 24 hour voice response banking.  Prosperity currently operates two hundred thirteen (213) full service banking locations; fifty-nine (59) in the Houston area; twenty (20) in the South Texas area including Corpus Christi and Victoria; thirty-five (35) in the Dallas/Fort Worth area; twenty-one (21) in the East Texas area; thirty-four (34) in the Central Texas area including Austin and San Antonio; thirty-four (34) in the West Texas area including Lubbock, Midland/Odessa and Abilene; and ten (10) in the Bryan/College Station area. Bryan/College Station Area - Kiest Downtown Other South Texas Locations - Bryan McKinney Eastex AliceBryan-East McKinney-Stonebridge Fairfield Aransas PassBryan-North Midway First ColonyBeevilleCaldwell Preston Forest Gessner EdnaCollege Station Preston Road GladebrookGoliadGreens Prairie Red Oak HarrisburgKingsvilleMadisonville Sachse HeightsMathisNavasota The Colony Highway 6 WestPadre IslandRock Prairie Turtle Creek HillcroftPalaciosWellborn Road Westmoreland Little YorkPort Lavaca Central Texas Area - Fort Worth - Medical Center PortlandAustin - Haltom City Memorial Drive Rockport183Keller Northside Sinton Allandale Roanoke Pasadena VictoriaCedar Park Stockyards Pecan Grove Victoria-NorthCongress Other Dallas/Fort Worth Locations - Piney Point West Texas Area - Lakeway Arlington River Oaks Abilene -Liberty Hill Azle Royal Oaks Antilley RoadNorthland Ennis Sugar Land Barrow StreetOak Hill Gainesville SW Medical Center Cypress StreetParmer Lane Glen Rose Tanglewood Judge ElyResearch Blvd Grandbury Uptown MockingbirdWestlake Mesquite Waugh Drive Other Central Texas Locations - Muenster West University Lubbock -Bastrop Sanger Woodcreek 4th StreetCuero Waxahachie 66th StreetDime Box Weatherford Other Houston Area Locations - 82nd StreetDripping Springs Angleton86th StreetElgin East Texas Area - 98th StreetFlatonia Bay City Avenue QGeorgetown Athens Beaumont North UniversityGonzales Athens-South Cinco Ranch Texas Tech Student UnionHallettsville Blooming Grove Cleveland Midland -Kingsland Canton East Bernard WadleyLa Grange Carthage El Campo Wall StreetLexington Corsicana Dayton Odessa -New Braunfels Crockett Galveston GrandviewPleasanton Eustace Groves GrantRound Rock Grapeland Hempstead Kermit HighwaySan Antonio Gun Barrel City Hitchcock ParkwaySchulenburg Jacksonville Katy Other West Texas Locations - Seguin Kerens Liberty Big SpringSmithville Longview Magnolia BrownfieldThorndale Mount Vernon Mont Belvieu BrownwoodWeimar Palestine Nederland CiscoYoakum Rusk Needville ComancheYorktown Seven Points Shadow Creek EarlyDallas/Fort Worth Area - Teague Sweeny EarlyDallas - Tyler Tomball Abrams Centre Tyler-University Waller FloydadaBalch Springs Winnsboro West Columbia GormanCamp Wisdom Wharton LevellandCedar Hill Houston Area - Winnie LittlefieldCentral Expressway Houston - Wirt East Renner Aldine South Texas Area - MerkelFrisco Allen Parkway Corpus Christi - PlainviewFrisco-West Bellaire Airline San AngeloIndependence Beltway Carmel SlatonClear Lake Northwest SnyderCopperfield Saratoga Cypress Water Street   In connection with the proposed merger of Community National Bank into Prosperity Bank, Prosperity will file 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 Community National Bank. The registration statement will include a proxy statement/prospectus which will be sent to the shareholders of Community National Bank 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, COMMUNITY NATIONAL BANK AND THE PROPOSED TRANSACTION. In connection with the proposed merger of East Texas Financial Services, Inc. into Prosperity, Prosperity 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 stockholders of East Texas Financial Services. The registration statement includes a proxy statement/prospectus which was sent to the stockholders of East Texas Financial Services 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, EAST TEXAS FINANCIAL SERVICES 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 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, and its subsidiaries.  These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperity's control, that may cause actual results to differ materially from those expressed or implied by the forward-looking statements.  These risks and uncertainties include but are not limited to whether Prosperity can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks;  continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives.  Other risks include, but are not limited to: the possibility that credit quality could deteriorate; actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); a deterioration or downgrade in the credit quality and credit agency ratings of the securities in Prosperity's securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate fluctuations and interest rate fluctuations; weather; and the stock price volatility associated with "small-cap" companies.  These and various other factors are discussed in Prosperity's Annual Report on Form 10-K for the year ended December 31, 2011 and other reports and statements Prosperity has filed with the SEC. Copies of the SEC filings for Prosperity Bancshares® may be downloaded from the Internet at no charge from www.prosperitybanktx.com.Prosperity Bancshares, Inc. ®Financial Highlights(Dollars and share amounts in thousands, except per share data)Three Months EndedJune 30, 2012Mar 31, 2012Dec 31, 2011Sept 30, 2011Selected Earnings and Per(Unaudited)(Unaudited)(Unaudited)(Unaudited)Share DataTotal interest income$          92,874$       91,616$         89,658$          93,189Total interest expense9,2089,7709,57110,651Net interest income83,66681,84680,08782,538Provision for credit losses6001501,150950Net interest income after     provision for credit losses83,06681,69678,93781,588Total non-interest income13,65613,94514,06514,581Total non-interest expense40,78840,45938,38541,151Net income before taxes55,93455,18254,61755,018Federal income taxes18,96218,69518,21118,645Net income$             36,972$         36,487$         36,406$           36,373Basic earnings per share$0.78$0.77$0.78$0.78Diluted earnings per share $0.78$0.77$0.77$0.77Period end shares outstanding47,47447,29746,91046,893Weighted average shares     outstanding (basic)47,45647,23846,89346,890Weighted average shares     outstanding (diluted)47,60847,41147,02847,033 Prosperity Bancshares, Inc. ®Financial Highlights(Dollars in thousands)                Three Months Ended                                         Six Months Ended              June 30, 2012June 30, 2011June 30, 2012June 30, 2011Balance Sheet Averages(Unaudited)(Unaudited)(Unaudited)(Unaudited)Total loans$        3,914,352$        3,631,256$      3,866,672$      3,574,207Investment securities5,635,8104,707,2175,414,0334,692,639Federal funds sold and other     other temporary investments20,91613,21873,53613,200Total earning assets9,571,0788,351,6919,354,2418,280,046Allowance for credit losses(50,746)(51,861)(51,174)(51,780)Cash and due from banks134,055125,150146,016131,445Goodwill932,112924,537930,265924,475Core deposit intangibles  (CDI)18,46525,72819,28326,714Other real estate10,1789,7439,40811,236Fixed assets, net165,784159,919164,487159,592Other assets138,263133,661133,723134,423Total assets$        10,919,189$        9,678,568$      10,706,249$      9,616,151Non-interest bearing deposits$        2,069,965$        1,770,664$      2,020,453$      1,721,967Interest bearing deposits6,365,7965,981,8266,411,7286,003,693Total deposits8,435,7617,752,4908,432,1817,725,660Securities sold under     repurchase agreements98,96868,41376,13660,058Federal funds purchased and     other borrowings610,499218,310441,630205,201Junior subordinated     debentures85,05585,05585,05588,059Other liabilities56,74254,91557,52352,956Shareholders' equity(A)1,632,1641,499,3851,613,7241,484,217Total liabilities and equity$        10,919,189$        9,678,568$      10,706,249$      9,616,151(A)  Includes $12,599 and $14,337 in after-tax unrealized gains on available for sale securities for the three month periods ending June 30, 2012 and June 30, 2011, respectively, and $13,012 and $14,243 for the six months ending June 30, 2012 and June 30, 2011, respectively. Prosperity Bancshares, Inc. ®Financial Highlights(Dollars in thousands)                Three Months Ended                                        Six Months Ended              June 30, 2012June 30, 2011June 30, 2012June 30, 2011Income Statement Data(Unaudited)(Unaudited)(Unaudited)(Unaudited)Interest on loans$            54,793$            53,703$         108,010$         105,903Interest on securities38,07241,91976,39383,123Interest on federal funds sold      and other temporary      investments9308735Total interest income92,87495,652184,490189,061Interest expense - deposits8,08311,06416,87422,576Interest expense - debentures6485981,3111,745Interest expense - other477360793697Total interest expense9,20812,02218,97825,018Net interest income (B)83,66683,630165,512164,043Provision for credit losses6001,4007503,100Net interest income after     provision for credit losses83,06682,230164,762160,943Non-sufficient funds (NSF) fees5,1676,22610,55612,333Debit card and ATM card income4,2923,8098,1287,261Service charges on deposit accounts2,4322,5114,8734,994Net gain on sale of assets7019563360Net (loss) gain on sale of ORE(165)(366)253(526)Net loss on sale of securities--(581)--(581)Other non-interest income1,8601,7363,7283,556Total non-interest income13,65613,53027,60127,397Salaries and benefits (C)23,57223,99446,82447,198CDI amortization1,5951,9433,2903,977Net occupancy and equipment3,4923,5477,0497,195Depreciation2,0282,0374,0634,058Data processing and software amortization1,9061,7803,4383,452Regulatory assessments and FDIC    insurance1,6592,8943,2075,895Other real estate3832941,074586Other non-interest expense6,1536,02512,30211,848Total non-interest expense40,78842,51481,24784,209Net income before taxes55,93453,246111,116104,131Federal income taxes18,96218,15437,65735,161Net income available    to common shareholders$           36,972$           35,092$            73,459$            68,970(B) Net interest income on a tax equivalent basis would be $84,498 and $84,603 for the three months ended June 30, 2012 and June 30, 2011, respectively, and $167,240 and $165,905 for the six months ended June 30, 2012 and June 30, 2011, respectively. (C) Salaries and benefits includes stock-based compensation expense of $946 and $936 for the three months ended June 30, 2012 and June 30, 2011, respectively, and $2,161 and $1,643 for the six months ended June 30, 2012 and June 30, 2011, respectively. Prosperity Bancshares, Inc.®Financial Highlights(Dollars and share amounts in thousands, except per share data)As of and for theThree Months EndedAs of and for theSix Months EndedJune 30, 2012June 30, 2011June 30, 2012June 30, 2011Common Share and(Unaudited)(Unaudited)(Unaudited)(Unaudited)     Other DataEmployees - FTE1,6661,6751,6661,675Book value per share$              34.63$            32.24$            34.63$            32.24Tangible book value per share$              14.60$              11.99$            14.60$            11.99Period end shares outstanding47,47446,88847,47446,888Weighted average shares     outstanding (basic)47,45646,86447,34746,799Weighted average shares     outstanding (diluted) 47,60847,05747,50847,001Non-performing Assets (at period end)Non-accrual  loans$            1,624$               3,518$               1,624$               3,518Accruing loans 90 or more     days past due--306--306Restructured loans--------Total non-performing loans1,6243,8241,6243,824Repossessed assets13151315Other real estate10,2368,84110,2368,841  Total non-performing assets$           11,873$           12,680$           11,873$           12,680Allowance for credit losses at     end of period$           50,382$           51,932$        50,382$        51,932Net charge-offs$             1,860$             1,229$          1,962$          2,753Basic earnings per share$               0.78$               0.75$            1.55$            1.47Diluted earnings per share$               0.78$               0.75$            1.55$            1.47 Prosperity Bancshares, Inc.®Financial HighlightsThree Months EndedSix Months EndedJune 30, 2012June 30, 2011June 30, 2012June 30, 2011Performance Ratios(Unaudited)(Unaudited)(Unaudited)(Unaudited)Return on average     assets (annualized)   1.35%1.45%1.37%1.43%Return on average common     equity (annualized)   9.06%9.36%9.10%9.29%Return on average tangible     common equity (annualized)21.70%25.56%22.12%25.88%Net interest margin (D)     (tax equivalent) (annualized)3.55%4.06%3.60%4.04%Efficiency ratio(E)41.94%43.58%42.09%43.94%Asset Quality RatiosNon-performing assets to     average earning assets0.12%0.15%0.13%0.15%Non-performing assets to loans     and other real estate0.30%0.35%0.30%0.35%Net charge-offs     to average loans0.05%0.03%0.05%0.08%Allowance for credit losses to     total loans1.28%1.42%1.28%1.42%Common Stock Market PriceHigh$47.31$46.75$47.66$46.75Low$39.87$40.83$39.66$38.23Period end market price$42.03$43.82$42.03$43.82(D) Net interest margin for all periods presented is calculated on an actual 365 day or 366 day basis. (E) The efficiency ratio is calculated by dividing total non-interest expense (excluding provision for credit losses) by net interest income plus non-interest income (excluding net gains and losses on the sale of securities and assets).  Additionally, taxes are not part of this calculation.  Prosperity Bancshares, Inc.®Financial Highlights(Dollars in thousands)June 30, 2012Mar 31, 2012Dec 31, 2011Sept 30, 2011June 30, 2011Loan Portfolio(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)Commercial$   491,90712.5%$    475,86012.3%$   439,85411.7%$    451,54112.1%$   455,79112.9%Construction466,88411.8%484,29512.5%482,14012.8%490,19313.1%483,58113.2%1-4 family residential1,084,93627.4%1,036,31826.7%1,007,26626.8%981,38826.3%941,25025.7%Home equity154,1473.9%149,5973.9%146,9993.8%139,5533.7%131,2133.6%Commercial real estate1,484,78737.6%1,473,92538.0%1,441,22638.3%1,426,70438.2%1,411,50138.5%Agriculture (includes agriculture real estate)192,4624.9%178,4744.6%170,2344.5%168,0114.5%160,7804.4%Consumer75,2091.9%76,3932.0%78,1872.1%80,2402.1%81,1322.2%Total Loans$3,950,332$ 3,874,862$3,765,906$ 3,737,630$3,665,248Deposit TypesNon-interest bearing DDA$2,083,91024.8%$ 2,088,74924.4%$ 1,972,22624.5%$ 1,861,90723.9%$1,788,75623.3%Interest bearing DDA1,684,49220.1%1,671,76019.6%1,532,70119.0%1,332,91417.1%1,358,64917.7%Money Market2,206,22026.3%2,312,10727.1%2,042,24325.3%1,995,24825.6%1,878,67924.5%Savings581,4806.9%554,2116.5%514,7806.4%498,4516.4%471,0826.1%Time < $100909,61610.8%938,91111.0%968,80612.0%1,005,67212.9%1,037,49213.6%Time > $100928,86411.1%978,71311.5%1,029,49812.8%1,104,54714.1%1,133,03414.8%Total Deposits$8,394,582$ 8,544,451$8,060,254$ 7,798,739$7,667,692Loan to Deposit Ratio47.1%45.3%46.7%47.9%47.8%Construction LoansSingle family residential    construction$   143,60030.8%$   142,58429.4%$   136,03028.2%$    126,92625.9%$   124,99525.8%Land development39,7048.5%41,1778.5%43,0848.9%44,4009.1%46,4059.6%Raw land51,07010.9%63,00613.0%61,17712.7%64,17813.1%69,76914.4%Residential lots86,20118.5%88,05418.2%86,84818.0%88,60018.1%86,51517.9%Commercial lots49,45410.6%51,64210.7%49,64510.3%54,01611.0%54,41911.3%Commercial construction and other96,85420.7%97,83220.2%105,35621.9%112,07322.8%101,47821.0%Total Construction Loans$   466,884$   484,295$   482,140$   490,193$   483,581 Prosperity Bancshares, Inc.®Financial Highlights(Dollars in thousands)June 30, 2012Mar 31, 2012Dec 31, 2011Sept 30, 2011June 30, 2011Balance Sheet Data (at period end)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)Total loans$    3,950,332$    3,874,862$    3,765,906$   3,737,630$   3,665,248Investment securities (F)5,400,0445,646,5294,658,9364,430,5304,641,664Federal funds sold 133445642294350Allowance for credit losses(50,382)(51,642)(51,594)(52,513)(51,932)Cash and due from banks152,678151,467212,800211,261145,910Goodwill932,965929,161924,537924,537924,537Core deposit intangibles17,70619,30120,99622,87424,799Other real estate10,2367,7188,3288,2168,841Fixed assets, net166,273162,676159,656160,099160,119Other assets157,366149,438122,464124,159137,611Total assets$  10,737,351$  10,889,955$    9,822,671$   9,567,087$   9,657,147Demand deposits$    2,083,910$    2,088,749$    1,972,226$   1,861,907$   1,788,756Interest bearing deposits6,310,6726,455,7026,088,0285,936,8325,878,936Total deposits8,394,5828,544,4518,060,2547,798,7397,667,692Securities sold under      repurchase agreements122,74358,48154,88366,16691,288Federal funds purchased and      other borrowings437,278527,53612,79013,583248,839Junior subordinated      debentures85,05585,05585,05585,05585,055Other liabilities53,87664,89942,42462,20552,625Total liabilities9,093,5349,280,4228,255,4068,025,7488,145,499Shareholders' equity (G)1,643,8171,609,5331,567,2651,541,3391,511,648Total liabilities and equity$  10,737,351$   10,889,955$   9,822,671$   9,567,087$   9,657,147(F) Includes $17,709, $19,542, $20,726, $24,278 and $23,647 in unrealized gains on available for sale securities for the quarterly periods ending June 30, 2012, March 31, 2012, December 31, 2011, September 30, 2011 and June 30, 2011, respectively.(G) Includes $11,511, $12,702, $13,472, $15,781 and $15,371 in after-tax unrealized gains on available for sale securities for the quarterly periods ending June 30, 2012, March 31, 2012, December 31, 2011, September 30, 2011 and June 30, 2011, respectively. Prosperity Bancshares, Inc.®Financial Highlights(Dollars in thousands)Three Months EndedJune 30, 2012Mar 31, 2012Dec 31, 2011Sept 30, 2011June 30, 2011Income Statement Data(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)Interest on loans$            54,793$        53,217$        58,899$        54,471$        53,703Interest on securities38,07238,32135,71938,71441,943Interest on federal funds     sold and other earning      assets9784046    Total interest income92,87491,61689,65893,18995,652Interest expense - deposits8,0838,7918,6829,71711,064Interest expense - debentures648663632607598Interest expense - other477316257327360    Total interest expense9,2089,7709,57110,65112,022    Net interest income83,66681,84680,08782,53883,630Provision for credit losses6001501,1509501,400    Net interest income after     provision for credit losses83,06681,69678,93781,58882,230Non-sufficient funds (NSF) fees5,1675,3895,8606,2496,226Debit card and ATM card income4,2923,8364,1893,9413,809Service charges on deposit accounts2,4322,4412,5152,4722,511Net gain (loss) on sale of assets70(7)--17195Net (loss) gain on sale of  ORE (165)418(473)95(366)Net loss on sale of  securities --------(581)Other non-interest income1,8601,8681,9741,8071,736    Total non-interest income13,65613,94514,06514,58113,530Salaries and benefits23,57223,25221,25823,60123,994CDI amortization1,5951,6951,8791,9241,943Net occupancy and equipment3,4923,5573,6553,7843,547Depreciation2,0282,0352,0512,0412,037Data processing and     software  amortization1,9061,5321,4171,9541,780Regulatory assessments and     FDIC insurance1,6591,5481,5181,4882,894ORE expense383691680235294Other non-interest expense6,1536,1495,9276,1246,025    Total non-interest expense40,78840,45938,38541,15142,514    Net income before taxes55,93455,18254,61755,01853,246Federal income taxes18,96218,69518,21118,64518,154    Net income available      to common shareholders$          36,972$         36,487$        36,406$        36,373$           35,092 Prosperity Bancshares, Inc.®Financial HighlightsComparative QuarterlyThree Months EndedAsset Quality, Performance June 30, 2012Mar 31, 2012Dec 31, 2011Sept 30, 2011June 30, 2011     & Capital Ratios(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)Return on average     assets (annualized) 1.35%1.39%1.50%1.52%1.45%Return on average common     equity (annualized)9.06%9.15%9.35%9.51%9.36%Return on average tangible     equity (annualized)21.70%22.57%23.86%25.03%25.56%Net interest margin     (tax equivalent) (annualized)3.55%3.64%3.82%4.02%4.06%Employees - FTE1,6661,6901,6641,6781,675Efficiency ratio41.94%42.23%40.77%42.38%43.58%Non-performing assets to     average earning assets0.12%0.16%0.14%0.16%0.15%Non-performing assets to loans     and other real estate0.30%0.38%0.32%0.36%0.35%Net charge-offs to     average loans0.05%0.00%0.06%0.01%0.03%Allowance for credit losses to     total loans1.28%1.33%1.37%1.40%1.42%Book value per share$34.63$34.03$33.41$32.87$32.24Tangible book value per share$14.60$13.98$13.25$12.67$11.99Tier 1 risk-based capital16.42%15.70%15.90%15.47%14.72%Total risk-based capital17.49%16.80%17.09%16.69%15.93%Tier 1 leverage capital7.69%7.68%7.89%7.70%7.24%Tangible equity to tangible      assets7.08%6.65%7.00%6.89%6.46%Equity to assets15.31%14.78%15.96%16.11%15.65% Prosperity Bancshares, Inc.®Supplemental Financial Data (Unaudited)(Dollars in thousands)Three Months Ended June 30, 2012Three Months Ended June 30, 2011YIELD ANALYSIS AverageInterest EarnedAverageAverageInterest EarnedAverageBalance/ Interest PaidYield/RateBalance/ Interest PaidYield/RateInterest Earning Assets: Loans$      3,914,352$          54,7935.63%$    3,631,256$          53,7035.93%Investment securities5,635,81038,0722.70%4,707,21741,9193.56%Federal funds sold and other   earning assets20,91690.17%13,218300.91%  Total interest earning assets 9,571,078$          92,8743.90%8,351,691$          95,6524.59%Allowance for credit losses (50,746)(51,861)Non-interest earning assets 1,398,8571,378,738  Total assets$      10,919,189$      9,678,568Interest Bearing Liabilities: Interest bearing demand deposits$     1,706,176$             2,0890.49%$     1,403,331$             2,0610.59%Savings and money market deposits2,779,5242,4440.35%2,403,3303,3480.56%Certificates and other time deposits 1,880,0963,5500.76%2,175,1655,6551.04%Securities sold under repurchase agreements           98,968590.24%68,4131100.64%Federal funds purchased and other   borrowings 610,4994180.28%218,3102500.46%Junior subordinated debentures 85,0556483.06%85,0555982.82%  Total interest bearing     liabilities $     7,160,318$           9,2080.52%$     6,353,604$           12,0220.76%Non-interest bearing liabilities: Non-interest bearing demand deposits$     2,069,965$     1,770,664Other liabilities 56,74254,915  Total liabilities$     9,287,025$     8,179,183Shareholders' equity $     1,632,164$     1,499,385  Total liabilities and     shareholders' equity $     10,919,189$     9,678,568Net Interest Income & Margin $         83,6663.52%$         83,6304.02%Net Interest Income & Margin     (tax equivalent)$         84,4983.55%$         84,6034.06% Prosperity Bancshares, Inc.®Supplemental Financial Data (Unaudited)(Dollars in thousands)Six Months Ended June 30, 2012Six Months Ended June 30, 2011YIELD ANALYSIS AverageInterest EarnedAverageAverageInterest EarnedAverageBalance/ Interest PaidYield/RateBalance/ Interest PaidYield/RateInterest Earning Assets: Loans$      3,866,672$          108,0105.62%$   3,574,207$          105,9035.98%Investment securities5,414,03376,3932.82%4,692,63983,1233.54%Federal funds sold and other   earning assets73,536870.24%13,200350.53%  Total interest earning assets 9,354,241$          184,4903.97%8,280,046$          189,0614.60%Allowance for credit losses (51,174)(51,780)Non-interest earning assets 1,403,1821,387,885  Total assets$      10,706,249$    9,616,151Interest Bearing Liabilities: Interest bearing demand deposits$     1,700,208$             4,1520.49%$     1,446,008$             4,2990.60%Savings and money market deposits2,785,9365,0330.36%2,381,3266,6840.57%Certificates and other time deposits 1,925,5847,6890.80%2,176,35911,5931.07%Securities sold under repurchase agreements           76,136960.25%60,0581790.60%Federal funds purchased and other  borrowings 441,6306970.32%205,2015180.51%Junior subordinated debentures 85,0551,3113.10%88,0591,7454.00%  Total interest bearing liabilities $     7,014,549$           18,9780.54%$     6,357,011$           25,0180.79%Non-interest bearing liabilities: Non-interest bearing demand deposits$     2,020,453$     1,721,967Other liabilities 57,52352,956  Total liabilities$     9,092,525$     8,131,934Shareholders' equity $     1,613,724$     1,484,217  Total liabilities and shareholders' equity $     10,706,249$     9,616,151Net Interest Income & Margin $         165,5123.56%$         164,0434.00%Net Interest Income & Margin     (tax equivalent)$         167,2403.60%$         165,9054.04%Prosperity Bancshares, Inc.®Notes to Selected Financial Data (Unaudited)(Dollars in thousands)Consolidated Financial HighlightsNOTES TO SELECTED FINANCIAL DATAProsperity's management uses certain non?GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity and the tangible equity to tangible assets ratio for internal planning and forecasting purposes. Prosperity has included in this Earnings Release information relating to these non-GAAP financial measures for the applicable periods presented.  Prosperity believes these non-GAAP financial measures provide information useful to investors in understanding Prosperity's financial results and Prosperity believes that its presentation, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting Prosperity's business and allows investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results and Prosperity strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. Prosperity Bancshares, Inc.®Notes to Selected Financial Data (Unaudited)(Dollars and share amounts in thousands)Three Months EndedJun 30, 2012Mar 31, 2012Dec 31, 2011Sept 30, 2011June 30, 2011Return on average tangible common equity:Net income$       36,972$      36,487$     36,406$      36,373$     35,092Average shareholders' equity1,632,1641,595,2841,556,8451,529,7181,499,385Less: Average goodwill and other intangible assets(950,577)(948,519)(946,427)(948,351)(950,265)       Average tangible shareholders' equity$     681,587$    646,765$   610,418$    581,367$   549,120Return on average tangible common equity (annualized):21.70%22.57%23.86%25.03%25.56%Tangible book value per share:Shareholders' equity$  1,643,817$ 1,609,533$1,567,265$  1,541,339$1,511,648Less: Goodwill and other intangible assets(950,671)(948,462)(945,533)(947,411)(949,336)         Tangible shareholders' equity$     693,146$     661,071$   621,732$    593,928$   562,312Period end shares outstanding47,47447,29746,91046,89346,888Tangible book value per share:$         14.60$         13.98$       13.25$        12.67$       11.99Tangible equity to tangible assets ratio:Tangible shareholders' equity$    693,146$     661,071$  621,732$   593,928$  562,312Total assets$10,737,351$10,889,955$9,822,671$9,567,087$9,657,147Less: Goodwill and other intangible assets(950,671)(948,462)(945,533)(947,411)(949,336)       Tangible assets$ 9,786,680$  9,941,493$8,877,138$8,619,676$8,707,811Tangible equity to tangible assets ratio:7.08%6.65%7.00%6.89%6.46% Prosperity Bancshares, Inc.®Notes to Selected Financial Data (Unaudited)(Dollars in thousands)Six Months EndedJune 30, 2012June 30, 2011Return on average tangible common equity:Net income$       73,459$     68,970Average shareholders' equity1,613,7241,484,217Less: Average goodwill and other intangible assets(949,548)(951,189)       Average tangible shareholders' equity$     664,176$   533,028Return on average tangible common equity (annualized):22.12%25.88%Tangible book value per share:Shareholders' equity$  1,643,817$1,511,648Less: Goodwill and other intangible assets(950,671)(949,336)         Tangible shareholders' equity$     693,146$   562,312Period end shares outstanding47,47446,888Tangible book value per share:$         14.60$        11.99Tangible equity to tangible assets ratio:Tangible shareholders' equity$     693,146$    562,312Total assets$10,737,351$9,657,147Less: Goodwill and other intangible assets(950,671)(949,336)       Tangible assets$  9,786,680$8,707,811Tangible equity to tangible assets ratio:7.08%6.46%SOURCE Prosperity Bancshares, Inc.For further information: Dan Rollins, President and Chief Operating Officer, +1-281-269-7199, dan.rollins@prosperitybanktx.com