PR Newswire | Oct 28, 2020 06:31AM EDT

10/28 05:30 CDT

Prosperity Bancshares, Inc.(r) Reports Third Quarter 2020 Earnings- Third quarter earnings per share (diluted) of $1.40, an increase of 17.6% compared to the third quarter 2019- Third quarter net income of $130.1 million- Deposits increased $306.5 million or 1.2% (4.7% annualized) during the third quarter 2020- Allowance for credit losses on loans and off-balance sheet credit exposure was $353.6 million- Allowance for credit losses to total loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, of 1.94%(1)- Nonperforming assets remain low at 0.24% of third quarter average interest-earning assets- Return (annualized) on third quarter average assets of 1.58%- Returns (annualized) on third quarter average common equity of 8.64% and average tangible common equity of 19.19%(1)- Third quarter efficiency ratio of 40.17%(1)- Increase in dividend of 6.5% to $0.49 for the fourth quarter 2020 HOUSTON, Oct. 28, 2020

HOUSTON, Oct. 28, 2020 /PRNewswire/ -- Prosperity Bancshares, Inc.(r) (NYSE: PB), the parent company of Prosperity Bank(r) (collectively, "Prosperity"), reported net income for the quarter ended September 30, 2020 of $130.1 million compared with $81.8 million for the same period in 2019. Net income per diluted common share was $1.40 compared with $1.19 for the same period in 2019. Additionally, deposits increased $306.5 million or 1.2% (4.7% annualized) during the third quarter 2020 and nonperforming assets remain low at 0.24% of third quarter average interest-earning assets with an annualized return on third quarter average assets of 1.58%. On November 1, 2019, LegacyTexas Financial Group, Inc. ("LegacyTexas") merged with Prosperity Bancshares and LegacyTexas Bank merged with Prosperity Bank (collectively, the "Merger").

"We are pleased with our third quarter 2020 results of $1.40 in earnings per share and annualized returns on average tangible equity of 19.19% and on average assets of 1.58%. Because of these metrics, our strong capital position and confidence in our business, Prosperity Bancshares' Board has approved a 6.5% increase in the fourth quarter dividend to $0.49 per share," said David Zalman, Prosperity's Senior Chairman and Chief Executive Officer. "Our asset quality remains sound, with nonperforming assets at $69.5 million or 0.24% of average interest earning assets for the third quarter, a decrease of $8.4 million compared with the second quarter 2020. Loans on forbearance decreased from 17.2% of total loans as of June 30, 2020 to 1.1% as of October 26, 2020. Our allowance for credit losses as a percent of total loans is higher than at any time in my banking career and equates to a coverage ratio of 5.6 times our nonperforming loans," continued Zalman.

"Linked quarter deposits increased $306.5 million or 1.2% (4.7% annualized) from $26.153 billion at June 30, 2020. Based on our experience, people are spending more money and generating more account activity than earlier this year. Mortgage production continues to be robust, with consumers taking advantage of the historically low interest rates," stated Zalman. "We are starting to see green shoots in the economy, with consumers and businesses feeling more confident. The unemployment numbers are better than predicted and we believe third quarter GDP will also be higher than predicted," concluded Zalman.

Results of Operations for the Three Months Ended September 30, 2020

Net income was $130.1 million(2) for the three months ended September 30, 2020 compared with $81.8 million(3) for the same period in 2019, an increase of $48.3 million or 59.1%, primarily due to the Merger. Net income per diluted common share was $1.40 for the three months ended September 30, 2020 compared with $1.19 for the same period in 2019, an increase of 17.6%. Net income was $130.1 million(2) for the three months ended September 30, 2020 compared with $130.9 million(4) for the three months ended June 30, 2020, a decrease of $837 thousand or 0.6%. Net income per diluted common share was $1.40 for the three months ended September 30, 2020 compared with $1.41 for the three months ended June 30, 2020, a decrease of 0.7%. Net income for the second quarter of 2020 included a tax benefit for net operating losses ("NOL") of $20.1 million and merger related expenses of $7.5 million. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended September 30, 2020 were 1.58%, 8.64% and 19.19%(1), respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 40.17%(1) for the three months ended September 30, 2020.

Net interest income before provision for credit losses for the three months ended September 30, 2020 was $258.1 million compared with $154.0 million for the same period in 2019, an increase of $104.1 million or 67.6%. The increase was primarily due to the Merger and the increase in loan discount accretion of $21.3 million. On a linked quarter basis, net interest income before provision for credit losses was $258.1 million compared with $259.0 million for the three months ended June 30, 2020, a decrease of $842 thousand or 0.3%. The decrease was primarily due to a decrease in loan discount accretion of $1.7 million and interest income on securities partially offset by decrease in interest expense.

The net interest margin on a tax equivalent basis was 3.57% for the three months ended September 30, 2020 compared with 3.16% for the same period in 2019. The change was primarily due to increased interest-earning assets related to the Merger and a $21.3 million increase in loan discount accretion. On a linked quarter basis, the net interest margin on a tax equivalent basis was 3.57% for the three months ended September 30, 2020 compared with 3.69% for the three months ended June 30, 2020. This change was primarily due to a $1.7 million decrease in loan discount accretion, higher net premium amortization on securities and higher cash balances due to excess liquidity.

Noninterest income was $34.9 million for the three months ended September 30, 2020 compared with $30.7 million for the same period in 2019, an increase of $4.3 million or 13.9%. This increase was primarily due to increases in mortgage income, which was primarily due to the Merger and increased activity, credit card, debit card and ATM card income and other noninterest income primarily due to the Merger, that was partially offset by a decrease in nonsufficient funds ("NSF") fees. On a linked quarter basis, noninterest income increased $9.2 million or 36.0% to $34.9 million compared with $25.7 million for the three months ended June 30, 2020. This increase was primarily due to a lower loss on write-down of assets and increases in NSF fees, other noninterest income, mortgage income and credit card, debit card and ATM income.

Noninterest expense was $117.9 million for the three months ended September 30, 2020 compared with $80.7 million for the same period in 2019, an increase of $37.2 million or 46.1%, primarily due to the Merger. On a linked quarter basis, noninterest expense decreased $16.4 million or 12.2% to $117.9 million compared with $134.4 million for the three months ended June 30, 2020. The decrease was primarily due to no merger related expenses in the third quarter and decreases in salaries and benefits, credit and debit card, data processing and software amortization and other noninterest expense due to efficiencies gained following the LegacyTexas system conversion.

Results of Operations for the Nine Months Ended September 30, 2020

Net income was $391.8 million(5) for the nine months ended September 30, 2020 compared with $246.4 million(6) for the same period in 2019, an increase of $145.4 million or 59.0%. Net income per diluted common share was $4.20 for the nine months ended September 30, 2020 compared with $3.55 for the same period in 2019, an increase of 18.3%. The increase in net income and earnings per diluted common share for the nine months ended September 30, 2020 was primarily due to the Merger and a tax benefit for NOLs of $20.1 million, partially offset by merger related expenses of $8.0 million. Annualized returns on average assets, average common equity and average tangible common equity for the nine months ended September 30, 2020 were 1.62%, 8.78% and 19.77%(1), respectively. Excluding merger related expenses, net of tax, and the NOL tax benefit, annualized returns on average assets, average common equity and average tangible common equity for the nine months ended September 30, 2020 were 1.56%(1), 8.47%(1) and 19.07%(1), respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale of assets and taxes) was 43.19%(1) for the nine months ended September 30, 2020. Excluding merger related expenses, the efficiency ratio was 42.27%(1) for the nine months ended September 30, 2020.

Net interest income before provision for credit losses for the nine months ended September 30, 2020 was $773.1 million compared with $463.7 million for the same period in 2019, an increase of $309.4 million or 66.7%. This change was primarily due to the Merger and the increase in loan discount accretion of $71.0 million.

The net interest margin on a tax equivalent basis for the nine months ended September 30, 2020 was 3.69% compared with 3.17% for the same period in 2019. This change was primarily due to increased interest-earning assets related to the Merger and the increase in loan discount accretion of $71.0 million.

Noninterest income was $95.0 million for the nine months ended September 30, 2020 compared with $88.8 million for the same period in 2019, an increase of $6.2 million or 7.0%. This increase was primarily due to increases in mortgage income, which was primarily due to the Merger and increased activity, credit card, debit card and ATM card income, other noninterest income and service charges on deposit accounts due to the Merger, partially offset by a net loss on write-down of assets of $4.9 million and decrease in NSF fees.

Noninterest expense was $377.0 million for the nine months ended September 30, 2020 compared with $240.1 million for the same period in 2019, an increase of $136.9 million or 57.0%. The change was primarily due to the increase in salaries and benefits, credit and debit card, data processing and software amortization, net occupancy and equipment and other noninterest expense due to the Merger and $8.0 million of merger related expenses.

Balance Sheet Information

At September 30, 2020, Prosperity had $33.198 billion in total assets, an increase of $11.105 billion or 50.3% compared with $22.093 billion at September 30, 2019.

Loans at September 30, 2020 were $20.796 billion, an increase of $10.122 billion or 94.8%, compared with $10.673 billion at September 30, 2019. Linked quarter loans decreased $229.5 million or 1.1% from $21.025 billion at June 30, 2020. At September 30, 2020, the Company had $1.394 billion of Paycheck Protection Program ("PPP") loans.

As part of its lending activities, Prosperity extends credit to oil and gas production and servicing companies. Oil and gas production loans are loans to companies directly involved in the exploration and/or production of oil and gas. Oil and gas servicing loans are loans to companies that provide services for oil and gas production and exploration. At September 30, 2020, oil and gas loans totaled $604.7 million (net of discount and excluding PPP loans totaling $115.3 million) or 2.9% of total loans, of which $359.6 million were production loans and $245.1 million were servicing loans, compared with total oil and gas loans of $339.5 million (net of discount) or 3.2% of total loans at September 30, 2019, of which $82.4 million were production loans and $257.1 million were servicing loans. In addition, as of September 30, 2020, Prosperity had total unfunded commitments to oil and gas companies of $258.1 million compared with total unfunded commitments to oil and gas companies of $248.9 million as of September 30, 2019. Unfunded commitments to producers include letters of credit issued in lieu of oil well plugging bonds.

Additionally, Prosperity extends credit to hotels and restaurants. At September 30, 2020, loans to hotels totaled $386.3 million (excluding PPP loans totaling $8.8 million) or 1.9% of total loans and loans to restaurants totaled $215.1 million (excluding PPP loans totaling $110.9 million) or 1.0% of total loans.

Deposits at September 30, 2020 were $26.459 billion, an increase of $9.529 billion or 56.3%, compared with $16.930 billion at September 30, 2019. Linked quarter deposits increased $306.5 million or 1.2% from $26.153 billion at June 30, 2020.

The table below provides detail on the impact of loans acquired and deposits assumed in the Merger:

Balance Sheet Data (at period end)

(In thousands)

Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019

(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)

Loans acquired (including new production since acquisition date):

LegacyTexas:

Loans held for sale ^(1) $ - $ 15,725 $ 54,229 $ 66,745 $ -

Loans held for investment 6,349,251 6,601,006 6,713,337 6,636,855 -

Loans held for investment - Warehouse 2,730,614 2,557,183 1,713,762 1,552,762 - Purchase Program

All other loans 11,715,776 11,851,259 10,645,867 10,588,984 10,673,345

Total loans $ 20,795,641 $ 21,025,173 $ 19,127,195 $ 18,845,346 $ 10,673,345

Deposits assumed (including new deposits since acquisition date):

LegacyTexas $ 5,977,357 $ 5,997,395 $ 5,605,986 $ 6,141,546 $ -

All other deposits 20,481,849 20,155,293 18,220,371 18,058,186 16,929,920

Total deposits $ 26,459,206 $ 26,152,688 $ 23,826,357 $ 24,199,732 $ 16,929,920

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The LegacyTexas mortgage business was combined with the Prosperity Bank (1)mortgage business in the second quarter of 2020. Accordingly, all loans held for sale will be reported only for Prosperity Bank going forward and not separately tracked for LegacyTexas.

Excluding loans acquired in the Merger and new production by the acquired lending operations since November 1, 2019, loans at September 30, 2020 grew $1.042 billion or 9.8% compared with September 30, 2019 and decreased $135.5 million or 1.1% compared with June 30, 2020.

Excluding deposits assumed in the Merger and new deposits generated at the acquired banking centers since November 1, 2019, deposits at September 30, 2020 grew $3.552 billion or 21.0% compared with September 30, 2019 and grew $326.6 million or 1.6% compared with June 30, 2020.

Asset Quality

Nonperforming assets totaled $69.5 million or 0.24% of quarterly average interest-earning assets at September 30, 2020, compared with $51.2 million or 0.26% of quarterly average interest-earning assets at September 30, 2019, and $77.9 million or 0.28% of quarterly average interest-earning assets at June 30, 2020.

The allowance for credit losses on loans was $323.6 million or 1.56% of total loans at September 30, 2020 compared to $324.2 million or 1.54% of total loans at June 30, 2020 and $87.1 million or 0.82% of total loans at September 30, 2019. The allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program and PPP loans, was 1.94%(1) at September 30, 2020 compared with 1.90%(1) at June 30, 2020 and 0.82%(1) at September 30, 2019. On January 1, 2020, Prosperity adopted the measurement of current expected credit losses ("CECL"). Upon adoption of CECL, Prosperity recognized an increase in allowance for credit losses on loans of $108.7 million, of which $102.5 million was related to LegacyTexas and an increase in allowance for credit losses on off-balance sheet credit exposures of $24.4 million, of which $6.3 million was related to LegacyTexas, with a corresponding decrease in retained earnings (pre-tax). Additionally, Prosperity recognized an increase in the allowance for credit losses on loans of $131.8 million, of which $130.3 million was related to LegacyTexas, due to the reclass of purchased credit deteriorated ("PCD") discounts as a result of adopting CECL.

The provision for credit losses was $10.0 million for the three months ended September 30, 2020 compared with $1.1 million for the three months ended September 30, 2019 and $10.0 million for the three months ended June 30, 2020. The provision for credit losses was $20.0 million for the nine months ended September 30, 2020 compared with $2.6 million for the nine months ended September 30, 2019.

Net charge-offs were $10.6 million for the three months ended September 30, 2020 compared with net charge-offs of $1.0 million for the three months ended September 30, 2019 and net charge-offs of $13.0 million for the three months ended June 30, 2020. Net charge-offs for the third quarter of 2020 included $8.6 million related to resolved PCD loans. These PCD loans had specific reserves of $15.7 million, of which $8.6 million was allocated to the charge-offs and $7.1 million was moved to the general reserve. Additionally, $6.1 million of specific reserves on resolved PCD loans was released to the general reserve without taking any charge-off. Net charge-offs were $24.4 million for the nine months ended September 30, 2020 compared with $2.0 million for the nine months ended September 30, 2019. Net charge-offs for the nine months ended September 30, 2020 included $21.0 million related to resolved PCD loans. These PCD loans had specific reserves of $44.2 million, of which $21.0 million was allocated to the charge-offs and $23.2 million was moved to the general reserve.

Dividend

Prosperity Bancshares declared a fourth quarter cash dividend of $0.49 per share to be paid on January 4, 2021 to all shareholders of record as of December 15, 2020.

Stock Repurchase Program

On January 29, 2020, Prosperity Bancshares announced a stock repurchase program under which up to 5%, or approximately 4.7 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 28, 2021, at the discretion of management. Prosperity Bancshares repurchased 98.0 thousand shares of its common stock at an average weighted price of $49.99 during the three months ended September 30, 2020 and 2.2 million shares of its common stock at an average weighted price of $52.47 per share during the nine months ended September 30, 2020.

Planned Redemption of Outstanding Subordinated Notes

In September 2020, Prosperity Bancshares notified the Trustee of its intent to redeem $125.0 million in subordinated notes assumed in the Merger. The redemption will occur on December 1, 2020 and will be funded by dividends from Prosperity Bank.

COVID-19 Pandemic

In December 2019, a novel strain of coronavirus disease ("COVID-19") was first reported in Wuhan, Hubei Province, China. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. On March 13, 2020, the U.S. President announced a national emergency relating to the pandemic, which has since been extended. On August 8, 2020, the Governor of Texas extended the proclamation certifying that COVID-19 poses an imminent threat of disaster in the state and declaring a state of disaster for all counties in Texas and on September 17, 2020, signed an Executive Order that detailed the ongoing plan to open businesses and activities in Texas. On September 25, 2020, the Governor of Oklahoma extended the executive order that declared an emergency caused by the impending threat of COVID-19 to the people of Oklahoma. The Bank is considered an essential business and is closely monitoring the latest developments regarding COVID-19. The COVID-19 pandemic has resulted in significant economic uncertainties that have had, and could continue to have, an adverse impact on the Company's operating income, financial condition and cash flows. The extent to which the COVID-19 pandemic will impact the Company's operations and financial results during the remainder of 2020 cannot be reasonably or reliably estimated at this time.

The health and safety of the Bank's associates, customers, and communities are of utmost importance; and the Company has taken additional measures in an effort to ensure this safety, including restricting nonessential employee travel, expanding remote access availability, distancing work stations, professional cleaning of its facilities, and signs and distancing reminders for customers in the banking centers. Further, the Company remains committed to providing uninterrupted and reliable banking service and has business continuity plans and protocols in place to ensure critical operations are able to continue without disruption.

In response to the COVID-19 pandemic, on March 27, 2020 the President of the United States signed the CARES Act into law. The CARES Act provides assistance for American workers, families and small businesses. The Paycheck Protection Program ("PPP"), established by the CARES Act and implemented by the Small Business Administration ("SBA") with support from the Department of the Treasury, provides small businesses with funds to pay payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act of 2020 ("PPP Flexibility Act"), which modified the covered expense period from eight weeks to 24 weeks, extended the maturity date of the loans out to five years and gave greater flexibility to employers having difficulty hiring workers. PPP loans originated prior to June 5, 2020, have a two year term and earn interest at 1%. PPP loans originated on and after June 5, 2020, have a five year term. The loans are eligible for early forgiveness by the SBA as provided by the CARES Act and the PPP Flexibility Act and related regulations and guidance. Additionally, the Bank is entitled to a per loan processing fee based on a tiered schedule ranging from 5% to 1% of the loan balance.The PPP application period expired on August 8, 2020. As of September 30, 2020, the Company has obtained SBA approvals on approximately 11,948 loans totaling $1.394 billion. The Company has also provided relief to its loan customers through loan extensions and deferrals.

Merger with LegacyTexas Financial Group, Inc.

On November 1, 2019, Prosperity completed the merger with LegacyTexas and its wholly-owned subsidiary LegacyTexas Bank headquartered in Plano, Texas. LegacyTexas Bank operated 42 locations in 19 North Texas cities in and around the Dallas-Fort Worth area.

Pursuant to the terms of the merger agreement, Prosperity issued 26,228,148 shares of Prosperity common stock with a closing price of $69.02 per share plus $318.0 million in cash, made up of $308.6 million in cash and $9.4 million in cash for taxes withheld, for all outstanding shares of LegacyTexas. This resulted in goodwill of $1.331 billion as of September 30, 2020, which was subject to subsequent fair value adjustments. During the second quarter of 2020, Prosperity completed the operational conversion of LegacyTexas Bank.

Conference Call

Prosperity's management team will host a conference call on Wednesday, October 28, 2020 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity's third quarter 2020 earnings. Individuals and investment professionals may participate in the call by dialing 877-883-0383 for domestic participants, or 412-902-6506 for international participants. The participant elite entry number is 6937658.

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, Webcast & Calls" from the menu on the Investor Relations link and following the instructions.

Non-GAAP Financial Measures

Prosperity's management uses certain non-GAAP financial measures to evaluate its performance. Specifically, Prosperity reviews diluted earnings per share excluding merger related expenses, net of tax, and NOL carryback; return on average assets excluding merger related expenses, net of tax, and NOL carryback; return on average common equity excluding merger related expenses, net of tax, and NOL carryback; return on average tangible common equity; return on average tangible common equity excluding merger related expenses, net of tax, and NOL carryback; tangible book value per share; the tangible equity to tangible assets ratio; allowance for credit losses to total loans excluding Warehouse Purchase Program and PPP loans; the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities; and the efficiency ratio, excluding net gains and losses on the sale or write down of assets and securities and merger related expenses, for internal planning and forecasting purposes. Prosperity believes these non-GAAP financial measures provide information useful to investors in understanding Prosperity's financial results and 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 financial 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. (r)

As of September 30, 2020, Prosperity Bancshares, Inc.(r) is a $33.198 billionHouston, Texas based regional financial holding company providing personal banking services and investments to consumers and businesses throughout Texas and Oklahoma. Founded in 1983, Prosperity believes in a community banking philosophy, taking care of customers, businesses and communities in the areas it serves by providing financial solutions to simplify everyday financial needs. In addition to offering traditional deposit and loan products, Prosperity offers digital banking solutions, credit and debit cards, mortgage services, retail brokerage services, trust and wealth management, and cash management.

As of September 30, 2020, Prosperity operated 275 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 65 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; 8 in the Tulsa, Oklahoma area.

Cautionary Notes on Forward-Looking Statements

"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 federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are typically, but not exclusively, identified by the use in the statements of words or phrases such as "aim," "anticipate," "estimate," "expect," "goal," "guidance," "intend," "is anticipated," "is expected," "is intended," "objective," "plan," "projected," "projection," "will affect," "will be," "will continue," "will decrease," "will grow," "will impact," "will increase," "will incur," "will reduce," "will remain," "will result," "would be," variations of such words or phrases (including where the word "could," "may," or "would" is used rather than the word "will" in a phrase) and similar words and phrases indicating that the statement addresses some future result, occurrence, plan or objective. 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 may include information about Prosperity's possible or assumed future economic performance or future results of operations, including future revenues, income, expenses, provision for loan losses, provision for taxes, effective tax rate, earnings per share and cash flows and Prosperity's future capital expenditures and dividends, future financial condition and changes therein, including changes in Prosperity's loan portfolio and allowance for loan losses, future capital structure or changes therein, as well as the plans and objectives of management for Prosperity's future operations, future or proposed acquisitions, the future or expected effect of acquisitions on Prosperity's operations, results of operations, financial condition, and future economic performance, statements about the anticipated benefits of the proposed transaction, and statements about the assumptions underlying any such statement, as well as expectations regarding the effects of the COVID-19 pandemic on the Bank's operating income, financial condition and cash flows. 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, including LegacyTexas; 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); the possibility that the anticipated benefits of an acquisition transaction, including the LegacyTexas transaction, are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of two companies or as a result of the strength of the economy and competitive factors generally; 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; the effect, impact potential duration or other implications of the COVID-19 pandemic; and weather. These and various other factors are discussed in Prosperity Bancshares' Annual Report on Form 10-K for the year ended December 31, 2019, Quarterly Report on Form 10-Q for the period ended June 30, 2020, and other reports and statements Prosperity Bancshares has filed with the Securities and Exchange Commission ("SEC"). Copies of the SEC filings for Prosperity Bancshares may be downloaded from the Internet at no charge from http://www.prosperitybankusa.com.

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Refer to the "Notes to Selected Financial Data" at the end of this (1)Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

Includes purchase accounting adjustments of $18.7 million, net of tax, (2)primarily comprised of loan discount accretion of $22.5 million for the three months ended September 30, 2020.

Includes purchase accounting adjustments of $895 thousand, net of tax, (3)primarily comprised of loan discount accretion of $1.3 million for the three months ended September 30, 2019.

Includes purchase accounting adjustments of $20.4 million, net of tax, (4)primarily comprised of loan discount accretion of $24.3 million, and merger related expenses of $7.5 million for the three months ended June 30, 2020.

Includes purchase accounting adjustments of $63.3 million, net of tax, (5)primarily comprised of loan discount accretion of $75.3 million, and merger related expenses of $8.0 million for the nine months ended September 30, 2020.

Includes purchase accounting adjustments of $2.9 million, net of tax, (6)primarily comprised of loan discount accretion of $4.3 million for the nine months ended September 30, 2019.

Bryan/College Station Area Frisco-West Kerens Hempstead 98^th Street

Bryan Garland Longview Hitchcock Avenue Q

Bryan-29^th Street Grapevine Mount Vernon Liberty North University

Bryan-East Grapevine Main Palestine Magnolia Texas Tech Student Union

Bryan-North Kiest Rusk Magnolia Parkway

Caldwell Lake Highlands Seven Points Mont Belvieu Midland

College Station McKinney Teague Nederland Wadley

Crescent Point McKinney Eldorado Tyler-Beckham Needville Wall Street

Hearne McKinney Redbud Tyler-South Broadway Rosenberg

Huntsville North Carrolton Tyler-University Shadow Creek Odessa

Madisonville Oak Cliff Winnsboro Spring Grandview

Navasota Park Cities Tomball Grant

New Waverly Plano Houston Area Waller Kermit Highway

Rock Prairie Plano-West Houston West Columbia Parkway

Southwest Parkway Preston Forest Aldine Wharton

Tower Point Preston Parker Alief Winnie Other West Texas Area

Wellborn Road Preston Royal Bellaire Wirt Locations

Red Oak Beltway Big Spring

Central Texas Area Richardson Clear Lake South Texas Area - Brownfield

Austin Richardson-West Copperfield Corpus Christi Brownwood

Allandale Rosewood Court Cypress Calallen Cisco

Cedar Park The Colony Downtown Carmel Comanche

Congress Tollroad Eastex Northwest Early

Lakeway Trinity Mills Fairfield Saratoga Floydada

Liberty Hill Turtle Creek First Colony Timbergate Gorman

Northland West 15th Plano Fry Road Water Street Levelland

Oak Hill West Allen Gessner Littlefield

Research Blvd Westmoreland Gladebrook Victoria Merkel

Westlake Wylie Grand Parkway Victoria Main Plainview

Heights Victoria-Navarro San Angelo

Other Central Texas Area Fort Worth Highway 6 West Victoria-North Slaton

Locations Haltom City Little York Victoria Salem Snyder

Bastrop Hulen Medical Center

Canyon Lake Keller Memorial Drive Other South Texas Area Oklahoma

Dime Box Museum Place Northside Locations Central Oklahoma Area

Dripping Springs Renaissance Square Pasadena Alice Oklahoma City

Elgin Roanoke Pecan Grove Aransas Pass 23^rd Street

Flatonia Stockyards Pin Oak Beeville Expressway

Georgetown River Oaks Colony Creek I-240

Gruene Other Dallas/Fort Worth Area Sugar Land Cuero Memorial

Kingsland Locations SW Medical Center Edna

La Grange Arlington Tanglewood Goliad Other Central Oklahoma Area

Lexington Azle The Plaza Gonzales Locations

New Braunfels Ennis Uptown Hallettsville Edmond

Pleasanton Flower Mound Waugh Drive Kingsville Norman

Round Rock Gainesville Westheimer Mathis

San Antonio Glen Rose West University Padre Island Tulsa Area

Schulenburg Granbury Woodcreek Palacios Tulsa

Seguin Grand Prairie Port Lavaca Garnett

Smithville Jacksboro Katy Portland Harvard

Thorndale Mesquite Cinco Ranch Rockport Memorial

Weimar Muenster Katy-Spring Green Sinton Sheridan

Runaway Bay Taft S. Harvard

Dallas/Fort Worth Area Sanger The Woodlands Yoakum Utica Tower

Dallas Waxahachie The Woodlands-College Park Yorktown Yale

14th Street Plano Weatherford The Woodlands-I-45

Abrams Centre The Woodlands-Research Forest West Texas Area Other Tulsa Area Locations

Addison East Texas Area Abilene Owasso

Allen Athens Other Houston Area Antilley Road

Balch Springs Blooming Grove Locations Barrow Street

Camp Wisdom Canton Angleton Cypress Street

Carrollton Carthage Bay City Judge Ely

Cedar Hill Corsicana Beaumont Mockingbird

Coppell Crockett Cleveland

East Plano Eustace East Bernard Lubbock

Euless Gilmer El Campo 4th Street

Frisco Grapeland Dayton 66th Street

Frisco Gaylord Gun Barrel City Galveston 82nd Street

Frisco Warren Jacksonville Groves 86th Street

- - -

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(In thousands)

Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019

Balance Sheet Data (at period end)

Loans held for sale $ 51,694 $ 39,516 $ 65,035 $ 80,959 $ 20,284

Loans held for investment 18,013,333 18,428,474 17,348,398 17,211,625 10,653,061

Loans held for investment - Warehouse Purchase 2,730,614 2,557,183 1,713,762 1,552,762 - Program

Total loans 20,795,641 21,025,173 19,127,195 18,845,346 10,673,345

Investment securities^(A) 7,431,495 7,717,586 8,295,495 8,570,056 8,495,206

Federal funds sold 56,469 568 676 519 521

Allowance for credit losses^(B) (323,635) (324,205) (327,206) (87,469) (87,061)

Cash and due from banks 1,031,193 332,873 381,458 573,589 420,359

Goodwill 3,231,692 3,231,964 3,223,144 3,223,671 1,900,845

Core deposit intangibles, net 76,478 79,748 83,041 86,404 29,051

Other real estate owned 11,548 6,160 5,452 6,936 815

Fixed assets, net 325,994 324,975 327,293 326,832 263,703

Other assets 560,724 571,807 626,951 639,824 396,033

Total assets $ 33,197,599 $ 32,966,649 $ 31,743,499 $ 32,185,708 $ 22,092,817

Noninterest-bearing deposits $ 8,998,328 $ 9,040,257 $ 7,461,323 $ 7,763,894 $ 5,784,002

Interest-bearing deposits 17,460,878 17,112,431 16,365,034 16,435,838 11,145,918

Total deposits 26,459,206 26,152,688 23,826,357 24,199,732 16,929,920

Other borrowings 2,570 103,131 1,338,429 1,303,730 600,795

Securities sold under repurchase agreements 380,274 365,335 344,695 377,294 311,404

Subordinated notes 125,146 125,365 125,585 125,804 -

Allowance for credit losses on off-balance sheet 29,947 29,947 29,947 5,599 - credit exposures^(B)

Other liabilities 165,579 242,061 222,912 202,714 123,892

Total liabilities 27,162,722 27,018,527 25,887,925 26,214,873 17,966,011

Shareholders' equity^(C) 6,034,877 5,948,122 5,855,574 5,970,835 4,126,806

Total liabilities and equity $ 33,197,599 $ 32,966,649 $ 31,743,499 $ 32,185,708 $ 22,092,817



Includes $(442), $(1,767), $(3,421), $763 and $49 in unrealized (losses) (A)gains on available for sale securities for the quarterly periods ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively.

(B)ASU 2016-13 became effective for Prosperity on January 1, 2020.

Includes $(349), $(1,396), $(2,703), $602 and $38 in after-tax unrealized(C)(losses) gains on available for sale securities for the quarterly periods ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(In thousands)

Three Months Ended Year-to-Date

Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Sep 30, Sep 30, 2020 2019 2020 2019 2020 2020 2019

Income Statement Data

Interest income:

Loans $ 244,255 $ 242,772 $ 247,243 $ 222,910 $ 134,943 $ 734,270 $ 398,533

Securities^(D) 38,033 43,776 48,282 49,348 50,872 130,091 160,464

Federal funds sold and other earning assets 144 45 713 600 363 902 1,083

Total interest income 282,432 286,593 296,238 272,858 186,178 865,263 560,080

Interest expense:

Deposits 22,458 25,269 35,018 32,759 26,939 82,745 78,629

Other borrowings 52 533 2,932 6,115 4,335 3,517 15,208

Securities sold under repurchase agreements 309 337 757 879 914 1,403 2,504

Subordinated notes and trust preferred 1,500 1,499 1,500 1,075 - 4,499 -

Total interest expense 24,319 27,638 40,207 40,828 32,188 92,164 96,341

Net interest income 258,113 258,955 256,031 232,030 153,990 773,099 463,739

Provision for credit losses 10,000 10,000 - 1,700 1,100 20,000 2,600

Net interest income after provision for credit losses 248,113 248,955 256,031 230,330 152,890 753,099 461,139

Noninterest income:

Nonsufficient funds (NSF) fees 7,156 5,645 9,443 9,990 8,835 22,244 24,624

Credit card, debit card and ATM card income 8,315 7,263 7,474 7,728 6,688 23,052 19,139

Service charges on deposit accounts 5,920 5,790 6,104 5,597 5,020 17,814 15,007

Trust income 2,502 2,242 2,662 2,582 2,492 7,406 7,645

Mortgage income 2,958 1,820 2,010 2,455 839 6,788 2,551

Brokerage income 628 584 650 625 522 1,862 1,736

Bank owned life insurance income 1,449 1,508 1,545 1,502 1,314 4,502 3,924

Net (loss) gain on sale or write-down of assets (528) (3,945) (385) (1,870) (3) (4,858) 57

Other noninterest income 6,524 4,768 4,885 6,897 4,966 16,177 14,092

Total noninterest income 34,924 25,675 34,388 35,506 30,673 94,987 88,775

Noninterest expense:

Salaries and benefits 75,068 79,109 77,282 69,356 52,978 231,459 156,992

Net occupancy and equipment 8,644 9,190 8,980 7,420 5,607 26,814 16,565

Credit and debit card, data processing and 8,776 11,690 11,421 9,158 4,989 31,887 14,466 software amortization

Regulatory assessments and FDIC insurance 2,512 2,601 2,078 2,095 1,814 7,191 6,513

Core deposit intangibles amortization 3,270 3,293 3,363 2,705 1,248 9,926 3,832

Depreciation 4,605 4,598 4,768 4,212 3,286 13,971 9,501

Communications 3,027 3,324 3,195 3,012 2,214 9,546 6,667

Other real estate expense 258 40 46 57 68 344 271

Net (gain) loss on sale or write-down of other (137) 4 (130) (49) (115) (263) (346) real estate

Merger related expenses - 7,474 544 46,402 - 8,018 -

Other noninterest expense 11,896 13,045 13,194 12,083 8,610 38,135 25,630

Total noninterest expense 117,919 134,368 124,741 156,451 80,699 377,028 240,091

Income before income taxes 165,118 140,262 165,678 109,385 102,864 471,058 309,823

Provision for income taxes 35,054 9,361 34,830 23,251 21,106 79,245 63,405

Net income available to common shareholders $ 130,064 $ 130,901 $ 130,848 $ 86,134 $ 81,758 $ 391,813 $ 246,418



Interest income on securities was reduced by net premium amortization of $10,089, $9,224, $8,005, $8,556 and $8,027 for the three-month periods (D)ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively, and $27,318 and $22,223 for the nine-month periods ended September 30, 2020 and September 30, 2019, respectively.

Prosperity Bancshares, Inc.^ (r)

Financial Highlights (Unaudited)

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

Three Months Ended Year-to-Date

Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Sep 30, Sep 30, 2020 2019 2019 2020 2020 2019 2020

Profitability

Net income ^(E) (F) $ 130,064 $ 130,901 $ 130,848 $ 86,134 $ 81,758 $ 391,813 $ 246,418

Basic earnings per share $ 1.40 $ 1.41 $ 1.39 $ 1.01 $ 1.19 $ 4.20 $ 3.55

Diluted earnings per share $ 1.40 $ 1.41 $ 1.39 $ 1.01 $ 1.19 $ 4.20 $ 3.55

Return on average assets ^(G) 1.58 % 1.61 % ^(K) 1.67 % ^(K) 1.19 % ^(K) 1.47 % 1.62 % ^(K) 1.47 %

Return on average common equity ^(G) 8.64 % 8.84 % ^(K) 8.86 % ^(K) 6.33 % ^(K) 7.89 % 8.78 % ^(K) 7.95 %

Return on average tangible common equity ^(G)^ ^(H) 19.19 % 19.98 % ^(K) 20.16 % ^(K) 12.50 % ^(K) 14.77 % 19.77 % ^(K) 14.94 %

Tax equivalent net interest margin ^(E) (F)^ ^(I) 3.57 % 3.69 % 3.81 % 3.66 % 3.16 % 3.69 % 3.17 %

Efficiency ratio ^(H) (J) 40.17 % 46.56 % ^(L) 42.90 % ^(L) 58.07 % ^(L) 43.70 % 43.19 % ^(L) 43.46 %

Liquidity and Capital Ratios

Equity to assets 18.18 % 18.04 % 18.45 % 18.55 % 18.68 % 18.18 % 18.68 %

Common equity tier 1 capital 13.17 % 12.29 % 12.27 % 12.30 % 16.68 % 13.17 % 16.68 %

Tier 1 risk-based capital 13.17 % 12.29 % 12.27 % 12.30 % 16.68 % 13.17 % 16.68 %

Total risk-based capital 14.28 % 13.36 % 12.81 % 12.70 % 17.34 % 14.28 % 17.34 %

Tier 1 leverage capital 9.57 % 9.41 % 9.49 % 10.42 % 10.86 % 9.57 % 10.86 %

Period end tangible equity to period end tangible 9.12 % 8.89 % 8.96 % 9.21 % 10.90 % 9.12 % 10.90 % assets ^(H)

Other Data

Weighted-average shares used in computing earnings per common share

Basic 92,656 92,658 94,371 85,573 68,738 93,226 69,463

Diluted 92,656 92,658 94,371 85,573 68,738 93,226 69,463

Period end shares outstanding 92,562 92,660 92,652 94,746 68,397 92,562 68,397

Cash dividends paid per common share $ 0.46 $ 0.46 $ 0.46 $ 0.46 $ 0.41 $ 1.38 $ 1.23

Book value per common share $ 65.20 $ 64.19 $ 63.20 $ 63.02 $ 60.34 $ 65.20 $ 60.34

Tangible book value per common share ^(H) $ 29.46 $ 28.45 $ 27.52 $ 28.08 $ 32.12 $ 29.46 $ 32.12

Common Stock Market Price

High $ 60.63 $ 72.95 $ 75.22 $ 74.35 $ 71.86 $ 75.22 $ 75.36

Low $ 48.80 $ 43.68 $ 42.02 $ 66.60 $ 62.17 $ 42.02 $ 61.65

Period end closing price $ 51.83 $ 59.38 $ 48.25 $ 71.89 $ 70.63 $ 51.83 $ 70.63

Employees - FTE (excluding overtime) 3,716 3,793 3,801 3,867 3,019 3,716 3,044

Number of banking centers 275 275 285 285 243 275 243

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

Three Months Ended Year-to-Date

Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Sep 30, 2020 Sep 30, 2019

Loan discount accretion

ASC 310-20 $16,729 $17,999 $22,463 $17,834 $1,006 $57,191 $3,360

ASC 310-30 $5,805 $6,267 $6,019 $5,908 $277 $18,091 $943

Securities net amortization $116 $203 $194 $201 $157 $513 $646

Time deposits amortization $1,240 $1,793 $2,270 $1,709 - $5,303 -

Using effective tax rate of 21.2%, 6.7%, 21.0%, 21.3% and 20.5% for the three-month periods ended September 30, 2020, June 30, 2020, March 31, (F)2020, December 31, 2019 and September 30, 2019, respectively, and 16.8% and 20.5% for the nine-month periods ended September 30, 2020 and September 30, 2019, respectively. Net income for the second quarter of 2020 includes a tax benefit for NOLs due to the CARES Act.

(G)Interim periods annualized.

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

(I)Net interest margin for all periods presented is based on average balances on an actual 365 day or 366 day basis.

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

For calculations of the annualized returns on average assets, average common equity and average tangible common equity excluding merger related(K)expenses, net of tax, and NOL carryback, 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.

For calculations of the efficiency ratio excluding merger related (L)expenses, net of tax, 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.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

YIELD ANALYSIS Three Months Ended

Sep 30, 2020 Jun 30, 2020 Sep 30, 2019

Interest Interest Interest Average Average Average Average Earned/ Average Earned/ Average Earned/ Yield/ ^(M) Yield/ ^(M) Yield/ ^(M) Balance Interest Balance Interest Balance Interest Rate Rate Rate Paid Paid Paid

Interest-earning assets:

Loans held for sale $ 50,606 $ 420 3.30% $ 63,338 $ 523 3.32% $ 21,077 $ 266 5.01%

Loans held for investment 18,267,559 225,596 4.91% 18,135,226 228,062 5.06% 10,589,272 134,677 5.05%

Loans held for investment - Warehouse 2,279,461 18,239 3.18% 1,843,097 14,187 3.10% - - - Purchase Program

Total Loans 20,597,626 244,255 4.72% 20,041,661 242,772 4.87% 10,610,349 134,943 5.05%

Investment securities 7,603,762 38,033 1.99% ^(N) 8,054,008 43,776 2.19% ^(N) 8,758,056 50,872 2.30% ^(N)

Federal funds sold and other earning assets 618,228 144 0.09% 172,761 45 0.10% 74,751 363 1.93%

Total interest-earning assets 28,819,616 282,432 3.90% 28,268,430 286,593 4.08% 19,443,156 186,178 3.80%

Allowance for credit losses^(B) (321,424) (325,720) (86,996)

Noninterest-earning assets 4,482,646 4,562,016 2,849,936

Total assets $ 32,980,838 $ 32,504,726 $ 22,206,096

Interest-bearing liabilities:

Interest-bearing demand deposits $ 5,221,722 $ 5,028 0.38% $ 4,949,023 $ 4,621 0.38% $ 3,575,249 $ 5,602 0.62%

Savings and money market deposits 8,937,751 7,833 0.35% 8,537,352 8,745 0.41% 5,524,277 12,588 0.90%

Certificates and other time deposits 3,103,290 9,597 1.23% 3,224,196 11,903 1.48% 2,083,803 8,749 1.67%

Other borrowings 13,898 52 1.49% 474,867 533 0.45% 749,814 4,335 2.29%

Securities sold under repurchase agreements 378,888 309 0.32% 365,077 337 0.37% 315,277 914 1.15%

Subordinated notes and trust preferred 125,256 1,500 4.76% 125,475 1,499 4.80% - - -

Total interest-bearing liabilities 17,780,805 24,319 0.54% ^(O) 17,675,990 27,638 0.63% ^(O) 12,248,420 32,188 1.04% ^(O)

Noninterest-bearing liabilities:

Noninterest-bearing demand deposits 8,980,814 8,583,734 5,701,419

Allowance for credit losses on off-balance 29,947 29,947 - sheet credit exposures^(B)

Other liabilities 167,532 289,899 111,526

Total liabilities 26,959,098 26,579,570 18,061,365

Shareholders' equity 6,021,740 5,925,156 4,144,731

Total liabilities and shareholders' equity $ 32,980,838 $ 32,504,726 $ 22,206,096

Net interest income and margin $ 258,113 3.56% $ 258,955 3.68% $ 153,990 3.14%

Non-GAAP to GAAP reconciliation:

Tax equivalent adjustment 658 690 791

Net interest income and margin (tax $ 258,771 3.57% $ 259,645 3.69% $ 154,781 3.16% equivalent basis)

(M)Annualized and based on an actual 365 day or 366 day basis.

Yield on securities was impacted by net premium amortization of $10,089, (N)$9,224 and $8,027 for the three-month periods ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively.

Total cost of funds, including noninterest bearing deposits, was 0.36%, (O)0.42% and 0.71% for the three-month periods ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

YIELD ANALYSIS Year-to-Date

Sep 30, 2020 Sep 30, 2019

Interest Interest Average Average Average Earned/ Average Earned/ Yield/ ^(P) Yield/ ^(P) Balance Interest Balance Interest Rate Rate Paid Paid

Interest-earning assets:

Loans held for sale $ 60,256 $ 1,575 3.49% $ 23,605 $ 887 5.02%

Loans held for investment 17,890,010 690,175 5.15% 10,484,864 397,646 5.07%

Loans held for investment - Warehouse 1,749,568 42,520 3.25% - - - Purchase Program

Total loans 19,699,834 734,270 4.98% 10,508,469 398,533 5.07%

Investment securities 8,029,097 130,091 2.16% ^(Q) 9,079,314 160,464 2.36% ^(Q)

Federal funds sold and other earning assets 339,229 902 0.36% 70,320 1,083 2.06%

Total interest-earning assets 28,068,160 865,263 4.12% 19,658,103 560,080 3.81%

Allowance for credit losses^(B) (325,036) (86,556)

Noninterest-earning assets 4,540,440 2,852,098

Total assets $ 32,283,564 $ 22,423,645

Interest-bearing liabilities:

Interest-bearing demand deposits $ 5,054,320 $ 16,745 0.44% $ 3,810,765 $ 18,227 0.64%

Savings and money market deposits 8,481,852 30,700 0.48% 5,548,375 36,494 0.88%

Certificates and other time deposits 3,243,564 35,300 1.45% 2,067,940 23,908 1.55%

Other borrowings 439,018 3,517 1.07% 825,733 15,208 2.46%

Securities sold under repurchase agreements 370,225 1,403 0.51% 292,347 2,504 1.15%

Subordinated notes and trust preferred 125,475 4,499 4.79% - - -

Total interest-bearing liabilities 17,714,454 92,164 0.69% ^(R) 12,545,160 96,341 1.03% ^(R)

Noninterest-bearing liabilities:

Noninterest-bearing demand deposits 8,354,410 5,645,145

Allowance for credit losses on off-balance 24,321 - sheet credit exposures^(B)

Other liabilities 239,747 102,299

Total liabilities 26,332,932 18,292,604

Shareholders' equity 5,950,632 4,131,041

Total liabilities and shareholders' equity 32,283,564 $ 22,423,645

Net interest income and margin $ 773,099 3.68% $ 463,739 3.15%

Non-GAAP to GAAP reconciliation:

Tax equivalent adjustment 2,071 2,481

Net interest income and margin (tax $ 775,170 3.69% $ 466,220 3.17% equivalent basis)

(P)Annualized and based on an actual 365 day or 366 day basis.

Yield on securities was impacted by net premium amortization of $27,318 (Q)and $22,223 for the nine-month periods ended September 30, 2020 and 2019, respectively.

Total cost of funds, including noninterest bearing deposits, was 0.47% (R)and 0.71% for the nine-month periods ended September 30, 2020 and 2019, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended

Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019

YIELD TREND ^(S)

Interest-Earning Assets:

Loans held for sale 3.30 % 3.32 % 3.80 % 3.96 % 5.01 %

Loans held for investment 4.91 % 5.06 % 5.51 % 5.52 % 5.05 %

Loans held for investment - Warehouse 3.18 % 3.10 % 3.62 % 3.93 % - Purchase Program

Total loans 4.72 % 4.87 % 5.39 % 5.42 % 5.05 %

Investment securities ^(T) 1.99 % 2.19 % 2.30 % 2.28 % 2.30 %

Federal funds sold and other earning assets 0.09 % 0.10 % 1.28 % 0.78 % 1.93 %

Total interest-earning assets 3.90 % 4.08 % 4.40 % 4.29 % 3.80 %

Interest-Bearing Liabilities:

Interest-bearing demand deposits 0.38 % 0.38 % 0.57 % 0.54 % 0.62 %

Savings and money market deposits 0.35 % 0.41 % 0.71 % 0.79 % 0.90 %

Certificates and other time deposits 1.23 % 1.48 % 1.63 % 1.67 % 1.67 %

Other borrowings 1.49 % 0.45 % 1.42 % 1.73 % 2.29 %

Securities sold under repurchase agreements 0.32 % 0.37 % 0.83 % 0.99 % 1.15 %

Subordinated notes and trust preferred 4.76 % 4.80 % 4.80 % 4.85 % -

Total interest-bearing liabilities 0.54 % 0.63 % 0.91 % 1.00 % 1.04 %

Net Interest Margin 3.56 % 3.68 % 3.80 % 3.65 % 3.14 %

Net Interest Margin (tax equivalent) 3.57 % 3.69 % 3.81 % 3.66 % 3.16 %

(S)Annualized and based on average balances on an actual 365 day or 366 day basis.

Yield on securities was impacted by net premium amortization of $10,089, (T)$9,224, $8,005, $8,556 and $8,027 for the three-month periods ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended

Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019

Balance Sheet Averages

Loans held for sale $ 50,606 $ 63,338 $ 66,917 $ 57,171 $ 21,077

Loans held for investment 18,267,559 18,135,226 17,263,098 15,261,163 10,589,272

Loans held for investment - Warehouse 2,279,461 1,843,097 1,120,324 996,903 - Purchase Program

Total Loans 20,597,626 20,041,661 18,450,339 16,315,237 10,610,349

Investment securities 7,603,762 8,054,008 8,434,196 8,598,736 8,758,056

Federal funds sold and other earning assets 618,228 172,761 223,631 305,596 74,751

Total interest-earning assets 28,819,616 28,268,430 27,108,166 25,219,569 19,443,156

Allowance for credit losses^(B) (321,424) (325,720) (328,005) (86,795) (86,996)

Cash and due from banks 267,887 247,426 321,832 275,072 230,986

Goodwill 3,231,976 3,223,469 3,223,633 2,658,133 1,900,845

Core deposit intangibles, net 78,269 81,539 84,865 28,912 29,682

Other real estate 8,061 5,666 5,837 4,864 997

Fixed assets, net 325,958 327,811 325,337 308,692 263,495

Other assets 570,495 676,105 615,747 654,978 423,931

Total assets $ 32,980,838 $ 32,504,726 $ 31,357,412 $ 29,063,425 $ 22,206,096

Noninterest-bearing deposits $ 8,980,814 $ 8,583,734 $ 7,491,798 $ 7,066,878 $ 5,701,419

Interest-bearing demand deposits 5,221,722 4,949,023 4,990,376 4,233,880 3,575,249

Savings and money market deposits 8,937,751 8,537,352 7,965,440 7,109,754 5,524,277

Certificates and other time deposits 3,103,290 3,224,196 3,404,748 3,044,843 2,083,803

Total deposits 26,243,577 25,294,305 23,852,362 21,455,355 16,884,748

Other borrowings 13,898 474,867 832,961 1,403,686 749,814

Securities sold under repurchase agreements 378,888 365,077 366,615 351,580 315,277

Subordinated notes and trust preferred 125,256 125,475 125,694 87,963 -

Allowance for credit losses on off-balance 29,947 29,947 13,009 5,673 - sheet credit exposures^(B)

Other liabilities 167,532 289,899 262,523 320,855 111,526

Shareholders' equity 6,021,740 5,925,156 5,904,248 5,443,986 4,144,731

Total liabilities and equity $ 32,980,838 $ 32,504,726 $ 31,357,412 $ 29,063,425 $ 22,206,096

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019

Period End Balances

Loan Portfolio

Commercial and industrial $ 2,171,302 10.5 % $ 2,214,742 10.5 % $ 2,500,110 13.1 % $ 2,507,318 13.3 % $ 1,120,913 10.5 %

Warehouse purchase program 2,730,614 13.1 % 2,557,183 12.2 % 1,713,762 9.0 % 1,552,762 8.2 % - -

Construction, land development and 2,081,762 10.0 % 2,033,037 9.7 % 2,051,021 10.7 % 2,064,167 11.0 % 1,764,648 16.5 % other land loans

1-4 family residential 4,189,852 20.1 % 4,184,972 19.9 % 3,993,138 20.9 % 3,880,382 20.6 % 2,472,907 23.2 %

Home equity 477,552 2.3 % 437,098 2.1 % 516,003 2.6 % 507,029 2.6 % 250,775 2.3 %

Commercial real estate (includes 6,179,901 29.7 % 6,550,086 31.2 % 6,576,213 34.4 % 6,556,285 34.9 % 3,652,176 34.3 % multi-family residential)

Agriculture (includes farmland) 598,972 2.9 % 612,694 2.9 % 635,295 3.3 % 680,855 3.6 % 729,585 6.8 %

Consumer and other 367,231 1.8 % 403,462 1.9 % 423,000 2.2 % 398,271 2.1 % 342,839 3.2 %

Energy 604,698 2.9 % 639,402 3.0 % 718,653 3.8 % 698,277 3.7 % 339,502 3.2 %

Paycheck Protection Program 1,393,757 6.7 % 1,392,497 6.6 % - - - - - -

Total loans $ 20,795,641 $ 21,025,173 $ 19,127,195 $ 18,845,346 $ 10,673,345

Deposit Types

Noninterest-bearing DDA $ 8,998,328 34.0 % $ 9,040,257 34.6 % $ 7,461,323 31.3 % $ 7,763,894 32.1 % $ 5,784,002 34.2 %

Interest-bearing DDA 5,297,802 20.0 % 5,130,495 19.6 % 4,980,090 20.9 % 5,100,938 21.1 % 3,564,419 21.0 %

Money market 6,324,127 23.9 % 6,148,206 23.5 % 5,341,525 22.4 % 5,099,024 21.1 % 3,457,728 20.4 %

Savings 2,772,492 10.5 % 2,722,718 10.4 % 2,716,247 11.4 % 2,756,297 11.3 % 2,027,621 12.0 %

Certificates and other time deposits 3,066,457 11.6 % 3,111,012 11.9 % 3,327,172 14.0 % 3,479,579 14.4 % 2,096,150 12.4 %

Total deposits $ 26,459,206 $ 26,152,688 $ 23,826,357 $ 24,199,732 $ 16,929,920

Loan to Deposit Ratio 78.6 % 80.4 % 80.3 % 77.9 % 63.0 %

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Construction Loans

Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019

Single family residential construction $ 654,933 31.5 % $ 710,401 34.9 % $ 655,191 31.9 % $ 614,647 29.7 % $ 462,714 26.2 %

Land development 114,937 5.5 % 114,748 5.6 % 110,853 5.4 % 88,529 4.3 % 80,711 4.6 %

Raw land 240,154 11.5 % 274,159 13.5 % 265,943 12.9 % 233,559 11.3 % 171,609 9.7 %

Residential lots 137,615 6.6 % 144,765 7.1 % 136,861 6.7 % 138,961 6.7 % 123,265 7.0 %

Commercial lots 109,569 5.3 % 103,267 5.1 % 106,036 5.2 % 101,960 4.9 % 102,084 5.8 %

Commercial construction and other 825,053 39.6 % 687,618 33.8 % 778,731 37.9 % 890,597 43.1 % 825,001 46.7 %

Net unaccreted discount (499) (1,921) (2,594) (4,086) (736)

Total construction loans $ 2,081,762 $ 2,033,037 $ 2,051,021 $ 2,064,167 $ 1,764,648

Non-Owner Occupied Commercial Real Estate Loans by Metropolitan StatisticalArea (MSA) as of September 30, 2020

Houston Dallas Austin OK City Tulsa Other ^(U) Total

Collateral Type

Shopping center/retail $ 376,417 $ 284,715 $ 50,127 $ 16,920 $ 31,641 $ 272,171 $ 1,031,991

Commercial and industrial buildings 147,107 156,806 19,927 14,835 19,419 164,408 522,502

Office buildings 190,334 542,135 31,465 74,651 5,218 82,444 926,247

Medical buildings 37,367 40,855 14,234 25,179 25,107 57,283 200,025

Apartment buildings 404,936 512,803 22,666 15,619 19,070 177,745 1,152,839

Hotel 63,380 73,942 43,343 28,996 - 138,579 348,240

Other 57,229 55,436 23,033 11,522 2,486 82,171 231,877

Total $ 1,276,770 $ 1,666,692 $ 204,795 $ 187,722 $ 102,941 $ 974,801 $ 4,413,721 ^(V)

Acquired Loans

Non-PCD Loans PCD Loans Total Acquired Loans

Balance at Balance at Balance at Balance at Balance at Balance at Balance at Balance at Balance at

Acquisition Jun 30, Sep 30, Acquisition Jun 30, Sep 30, Acquisition Jun 30, Sep 30, 2020 2020 2020 2020 2020 2020 Date Date Date

Loan marks:

Acquired banks ^(W) $ 229,080 $ 7,436 $ 6,622 $ 142,128 $ - $ - $ 371,208 $ 7,436 $ 6,622

LegacyTexas merger^(X) 116,519 62,424 46,493 177,924 22,565 16,760 294,443 84,989 63,253

Total 345,599 69,860 53,115 320,052 22,565 ^(Z) 16,760 665,651 92,425 69,875

Acquired portfolio loan balances:

Acquired banks ^(W) 5,690,998 308,692 281,766 275,221 6,952 4,061 5,966,219 315,644 285,827

LegacyTexas merger^(X) 6,595,161 4,808,987 4,187,077 414,352 283,237 222,019 7,009,513 5,092,224 4,409,096

Total 12,286,159 5,117,679 4,468,843 689,573 290,189 226,080 12,975,732 ^(Y) 5,407,868 4,694,923

Acquired portfolio loan balances less loan $ 11,940,560 $ 5,047,819 $ 4,415,728 $ 369,521 $ 267,624 $ 209,320 $ 12,310,081 $ 5,315,443 $ 4,625,048 marks

(U)Includes other MSA and non-MSA regions.

(V)Represents a portion of total commercial real estate loans of $6.180 billion as of September 30, 2020.

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

The LegacyTexas merger was completed on November 1, 2019. During the (X)fourth quarter of 2019, LegacyTexas added $7.010 billion in loans with related purchase accounting adjustments of $294.4 million at acquisition date.

(Y)Actual principal balances acquired.

(Z)ASU 2016-13 became effective for Prosperity on January 1, 2020.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended Year-to-Date

Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Sep 30, Sep 30, 2020 2019 2020 2019 2020 2020 2019

Asset Quality

Nonaccrual loans $ 57,412 $ 62,904 $ 58,194 $ 55,243 $ 49,973 $ 57,412 $ 49,973

Accruing loans 90 or more days past due 462 8,691 3,255 441 341 462 341

Total nonperforming loans 57,874 71,595 61,449 55,684 50,314 57,874 50,314

Repossessed assets 120 187 278 324 28 120 28

Other real estate 11,548 6,160 5,452 6,935 815 11,548 815

Total nonperforming assets $ 69,542 $ 77,942 $ 67,179 $ 62,943 $ 51,157 $ 69,542 $ 51,157

Nonperforming assets:

Commercial and industrial (includes energy) $ 17,273 $ 15,238 $ 15,987 $ 17,086 $ 15,974 $ 17,273 $ 15,974

Construction, land development and other land 2,633 10,530 1,125 1,177 874 2,633 874 loans

1-4 family residential (includes home equity) 29,953 29,812 28,996 26,453 19,600 29,953 19,600

Commercial real estate (includes multi-family 16,069 20,748 20,155 18,031 14,384 16,069 14,384 residential)

Agriculture (includes farmland) 1,931 1,501 896 101 285 1,931 285

Consumer and other 1,683 113 20 95 40 1,683 40

Total $ 69,542 $ 77,942 $ 67,179 $ 62,943 $ 51,157 $ 69,542 $ 51,157

Number of loans/properties 198 213 198 236 89 198 89

Allowance for credit losses at end of period $ 323,635 $ 324,205 $ 327,206 $ 87,469 $ 87,061 $ 323,635 $ 87,061

Net charge-offs (recoveries):

Commercial and industrial (includes energy) $ 8,344 $ 12,206 $ (28) $ 76 $ (83) $ 20,522 $ 808

Construction, land development and other land 478 (6) (12) (6) (6) 460 1loans

1-4 family residential (includes home equity) 252 51 5 20 (9) 308 (1)

Commercial real estate (includes multi-family 676 - (81) 254 (1) 595 (3) residential)

Agriculture (includes farmland) (17) (3) (1) (18) 278 (21) (954)

Consumer and other 837 753 918 965 867 2,508 2,129

Total $ 10,570 $ 13,001 $ 801 $ 1,291 $ 1,046 $ 24,372 $ 1,980

Asset Quality Ratios

Nonperforming assets to average interest-earning 0.24 % 0.28 % 0.25 % 0.25 % 0.26 % 0.25 % 0.26 % assets

Nonperforming assets to loans and other real estate 0.33 % 0.37 % 0.35 % 0.33 % 0.48 % 0.33 % 0.48 %

Net charge-offs to average loans (annualized) 0.21 % 0.26 % 0.02 % 0.03 % 0.04 % 0.17 % 0.03 %

Allowance for credit losses to total loans^(AA) 1.56 % 1.54 % 1.71 % 0.46 % 0.82 % 1.56 % 0.82 %

Allowance for credit losses to total loans, excluding Warehouse Purchase Program loans and 1.94 % 1.90 % 1.88 % 0.51 % 0.82 % 1.94 % 0.82 % Paycheck Protection Program loans ^(H)(AA)

(AA) ASU 2016-13 became effective for Prosperity on January 1, 2020.

Prosperity Bancshares, Inc.^(r)

Notes to Selected Financial Data (Unaudited)

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

NOTES TO SELECTED FINANCIAL DATA

Prosperity's management uses certain non-GAAP (generally accepted accountingprinciples) financial measures to evaluate its performance. Specifically,Prosperity reviews diluted earnings per share excluding merger relatedexpenses, net of tax, and NOL carryback; return on average assets excludingmerger related expenses, net of tax, and NOL carryback; return on averagecommon equity excluding merger related expenses, net of tax, and NOL carryback;return on average tangible common equity; return on average tangible commonequity excluding merger related expenses, net of tax, and NOL carryback;tangible book value per share; the tangible equity to tangible assets ratio;allowance for credit losses to total loans excluding Warehouse Purchase Programand PPP loans; the efficiency ratio, excluding net gains and losses on the saleor write down of assets and securities; and the efficiency ratio, excluding netgains and losses on the sale or write down of assets and securities and mergerrelated expenses, for internal planning and forecasting purposes. In addition,due to the application of purchase accounting, Prosperity uses certain non-GAAPfinancial measures and ratios that exclude the impact of these items toevaluate its allowance for credit losses to total loans (excluding WarehousePurchase Program loans and PPP loans). Prosperity has included informationbelow relating to these non-GAAP financial measures for the applicable periodspresented.

Three Months Ended Year-to-Date

Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Sep 30, Sep 30, 2020 2019 2019 2019 2020 2020 2020

Reconciliation of diluted earnings per share todiluted earnings per share, excluding merger relatedexpenses, net of tax, and net operating lossescarryback:

Net income $ 130,064 $ 130,901 $ 130,848 $ 86,134 $ 81,758 $ 391,813 $ 246,418

Add: merger related expenses, net of tax^(AB) - 5,904 430 36,658 - 6,334 -

Less: net operating losses carryback ^(AC) - (20,145) - - - (20,145) -

Net income, excluding merger related expenses, net of $ 130,064 $ 116,660 $ 131,278 $ 122,792 $ 81,758 $ 378,002 $ 246,418tax, and net operating losses carryback ^(AB) (AC)

Weighted average diluted shares outstanding 92,656 92,658 94,371 85,573 68,738 93,226 68,397

Merger related expenses per diluted share, net of tax $ - $ 0.06 $ - $ 0.43 $ - $ 0.07 -^(AB)

Net operating losses carryback per diluted share ^ $ - $ (0.22) $ - $ - $ - $ (0.22) $ -(AB)

Diluted earnings per share, excluding merger relatedexpenses, net of tax, and net operating losses $ 1.40 $ 1.25 $ 1.39 $ 1.44 $ 1.19 $ 4.05 $ 3.60carryback ^(AB) (AC)

Reconciliation of return on average assets to returnon average assets excluding merger related expenses,net of tax, and net operating losses carryback:

Net income, excluding merger related expenses, net of $ 130,064 $ 116,660 $ 131,278 $ 122,792 $ 81,758 $ 378,002 $ 246,418tax, and net operating losses carryback ^(AB) (AC)

Average total assets $ 32,980,838 $ 32,504,726 $ 31,357,412 $ 29,063,425 $ 22,206,096 $ 32,283,564 $ 22,206,096

Return on average assets excluding merger relatedexpenses, net of tax, and net operating losses 1.58 % 1.44 % 1.67 % 1.69 % 1.47 % 1.56 % 1.48 %carryback^ (G) (AB) (AC)

Reconciliation of return on average common equity toreturn on average common equity excluding mergerrelated expenses, net of tax, and net operatinglosses carryback:

Net income, excluding merger related expenses, net of $ 130,064 $ 116,660 $ 131,278 $ 122,792 $ 81,758 $ 378,002 $ 246,418tax, and net operating losses carryback ^(AB) (AC)

Average shareholders' equity $ 6,021,740 $ 5,925,156 $ 5,904,248 $ 5,443,986 $ 4,144,731 $ 5,950,632 $ 4,131,041

Return on average common equity excluding mergerrelated expenses, net of tax, and net operating 8.64 % 7.88 % 8.89 % 9.02 % 7.89 % 8.47 % 7.95 %losses carryback^ (G) (AB) (AC)

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

Net income $ 130,064 $ 130,901 $ 130,848 $ 86,134 $ 81,758 $ 391,813 $ 246,418

Average shareholders' equity $ 6,021,740 $ 5,925,156 $ 5,904,248 $ 5,443,986 $ 4,144,731 $ 5,950,632 $ 4,131,041

Less: Average goodwill and other intangible assets (3,310,245) (3,305,008) (3,308,498) (2,687,045) (1,930,527) (3,307,925) (1,931,788)

Average tangible shareholders' equity $ 2,711,495 $ 2,620,148 $ 2,595,750 $ 2,756,941 $ 2,214,204 $ 2,642,707 $ 2,199,253

Return on average tangible common equity ^(G) 19.19 % 19.98 % 20.16 % 12.50 % 14.77 % 19.77 % 14.94 %

(AB) Calculated assuming a federal tax rate of 21.0%.

(AC) Net income for the second quarter of 2020 includes a tax benefit for NOLsdue to the CARES Act.

Three Months Ended Year-to-Date

Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Sep 30, Sep 30, 2020 2019 2019 2020 2019 2020 2020

Reconciliation of return on average common equity toreturn on average tangible common equity excludingmerger related expenses, net of tax, and netoperating losses carryback:

Net income, excluding merger related expenses, net of $ 130,064 $ 116,660 $ 131,278 $ 122,792 $ 81,758 $ 378,002 $ 246,418tax, and net operating losses carryback ^(AB) (AC)

Average shareholders' equity $ 6,021,740 $ 5,925,156 $ 5,904,248 $ 5,443,986 $ 4,144,731 $ 5,950,632 $ 4,131,041

Less: Average goodwill and other intangible assets (3,310,245) (3,305,008) (3,308,498) (2,687,045) (1,930,527) (3,307,925) (1,931,788)

Average tangible shareholders' equity $ 2,711,495 $ 2,620,148 $ 2,595,750 $ 2,756,941 $ 2,214,204 $ 2,642,707 $ 2,199,253

Return on average tangible common equity excludingmerger related expenses, net of tax, and net 19.19 % 17.81 % 20.23 % 17.82 % 14.77 % 19.07 % 14.94 %operating losses carryback^ (G) (AB) (AC)

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

Shareholders' equity $ 6,034,877 $ 5,948,122 $ 5,855,574 $ 5,970,835 $ 4,126,806 $ 6,034,877 $ 4,126,806

Less: Goodwill and other intangible assets (3,308,170) (3,311,712) (3,306,185) (3,310,075) (1,929,896) (3,308,170) (1,929,896)

Tangible shareholders' equity $ 2,726,707 $ 2,636,410 $ 2,549,389 $ 2,660,760 $ 2,196,910 $ 2,726,707 $ 2,196,910

Period end shares outstanding 92,562 92,660 92,652 94,746 68,397 92,562 68,397

Tangible book value per share: $ 29.46 $ 28.45 $ 27.52 $ 28.08 $ 32.12 $ 29.46 32.12

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

Tangible shareholders' equity $ 2,726,707 $ 2,636,410 $ 2,549,389 $ 2,660,760 $ 2,196,910 $ 2,726,707 $ 2,196,910

Total assets $ 33,197,599 $ 32,966,649 $ 31,743,499 $ 32,185,708 $ 22,092,817 $ 33,197,599 $ 22,092,817

Less: Goodwill and other intangible assets (3,308,170) (3,311,712) (3,306,185) (3,310,075) (1,929,896) (3,308,170) (1,929,896)

Tangible assets $ 29,889,429 $ 29,654,937 $ 28,437,314 $ 28,875,633 $ 20,162,921 $ 29,889,429 $ 20,162,921

Period end tangible equity to period end tangible 9.12 % 8.89 % 8.96 % 9.21 % 10.90 % 9.12 % 10.90 %assets ratio:

Reconciliation of allowance for credit losses tototal loans to allowance for credit losses to totalloans, excluding Warehouse Purchase Program andPaycheck Protection Program loans:

Allowance for credit losses ^(AA) $ 323,635 $ 324,205 $ 327,206 $ 87,469 $ 87,061 $ 323,635 $ 87,061

Total loans $ 20,795,641 $ 21,025,173 $ 19,127,195 $ 18,845,346 $ 10,673,345 $ 20,795,641 $ 10,673,345

Less: Warehouse Purchase Program loans (2,730,614) (2,557,183) (1,713,762) (1,552,762) - (2,730,614) -

Less: Paycheck Protection Program loans (1,393,757) (1,392,497) - - - (1,393,757) -

Total loans less Warehouse Purchase Program and $ 16,671,270 $ 17,075,493 $ 17,413,433 $ 17,292,584 $ 10,673,345 $ 16,671,270 $ 10,673,345Paycheck Protection Program loans

Allowance for credit losses to total loans, excludingWarehouse Purchase Program and Paycheck Protection 1.94 % 1.90 % 1.88 % 0.51 % 0.82 % 1.94 % 0.82 %Program loans

Reconciliation of efficiency ratio to efficiencyratio, excluding net gains and losses on the sale ofassets and taxes:

Noninterest expense $ 117,919 $ 134,368 $ 124,741 $ 156,451 $ 80,699 $ 377,028 $ 240,091

Net interest income $ 258,113 $ 258,955 $ 256,031 $ 232,030 $ 153,990 $ 773,099 $ 463,739

Noninterest income 34,924 25,675 34,388 35,506 30,673 94,987 88,775

Less: net (loss) gain on sale or write down of assets (528) (3,945) (385) (1,870) (3) (4,858) 57

Noninterest income excluding net gains and losses on 35,452 29,620 34,773 37,376 30,676 99,845 88,718the sale or write down of assets and taxes

Total income excluding net gains and losses on the $ 293,565 $ 288,575 $ 290,804 $ 269,406 $ 184,666 $ 872,944 $ 552,457sale or write down of assets and taxes

Efficiency ratio, excluding net gains and losses on 40.17 % 46.56 % 42.90 % 58.07 % 43.70 % 43.19 % 43.46 %the sale or write down of assets and taxes

Three Months Ended Year-to-Date

Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Sep 30, Sep 30, 2020 2019 2020 2020 2019 2020 2019

Reconciliation of efficiency ratio to efficiencyratio, excluding net gains and losses on the sale ofassets, taxes and merger related expenses:

Noninterest expense $ 117,919 $ 134,368 $ 124,741 $ 156,451 $ 80,699 $ 377,028 $ 240,091

Less: merger related expenses - 7,474 544 46,402 - 8,018 -

Noninterest expense excluding merger related expenses $ 117,919 $ 126,894 $ 124,197 $ 110,049 $ 80,699 $ 369,010 $ 240,091

Net interest income $ 258,113 $ 258,955 $ 256,031 $ 232,030 $ 153,990 $ 773,099 $ 463,739

Noninterest income 34,924 25,675 34,388 35,506 30,673 94,987 88,775

Less: net (loss) gain on sale or write down of assets (528) (3,945) (385) (1,870) (3) (4,858) 57

Noninterest income excluding net gains and losses on 35,452 29,620 34,773 37,376 30,676 99,845 88,718the sale or write down of assets and taxes

Total income excluding net gains and losses on the $ 293,565 $ 288,575 $ 290,804 $ 269,406 $ 184,666 $ 872,944 $ 552,457sale or write down of assets and taxes

Efficiency ratio, excluding net gains and losses onthe sale or write down of assets, taxes and merger 40.17 % 43.97 % 42.71 % 40.85 % 43.70 % 42.27 % 43.46 %related expenses

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SOURCE Prosperity Bancshares, Inc.