PR Newswire | Jul 29, 2020 06:31AM EDT

07/29 05:30 CDT

Prosperity Bancshares, Inc.(r) Reports Second Quarter 2020 Earnings- Second quarter earnings per share (diluted) of $1.41, an increase of 19.5% compared to the second quarter 2019- Second quarter net income of $130.9 million- Loans increased $1.898 billion or 9.9% during the second quarter 2020- Deposits increased $2.326 billion or 9.8% during the second quarter 2020- Allowance for credit losses on loans and off-balance sheet credit exposure was $354.2 million- Allowance for credit losses to total loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, of 1.90%(1)- Nonperforming assets remain low at 0.28% of second quarter average interest-earning assets- Return (annualized) on second quarter average assets of 1.61%- Returns (annualized) on second quarter average common equity of 8.84% and average tangible common equity of 19.98%(1)- Completed the operational conversion of LegacyTexas Bank HOUSTON, July 29, 2020

HOUSTON, July 29, 2020 /PRNewswire/ -- Prosperity Bancshares, Inc.(r) (NYSE: PB), the parent company of Prosperity Bank(r) (collectively, "Prosperity"), reported net income for the quarter ended June 30, 2020 of $130.9 million compared with $82.3 million for the same period in 2019. Net income per diluted common share was $1.41 compared with $1.18 for the same period in 2019. The second quarter of 2020 includes a tax benefit for net operating losses ("NOLs") of $20.1 million, or $0.22(1) per diluted common share, as a result of the enactment of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The CARES Act permits a five year carryback period for NOLs, which allowed Prosperity to generate an anticipated tax refund and income tax benefit resulting from the tax rate differential between the current statutory tax rate of 21% and the 35% statutory tax rate in prior years during the carryback period.

During the second quarter of 2020, Prosperity incurred merger related charges of $7.5 million, or $0.06(1) per diluted common share. Additionally, loans increased 9.9% during the second quarter 2020 and nonperforming assets remain low at 0.28% of second quarter average interest-earning assets. On November 1, 2019, LegacyTexas Financial Group, Inc. ("LegacyTexas") merged with Prosperity Bancshares and LegacyTexas Bank merged with Prosperity Bank (collectively, the "Merger"). During the second quarter of 2020, Prosperity completed the operational conversion of LegacyTexas Bank.

"We are pleased with our second quarter 2020 results and with completing the operational integration of Legacy on schedule in early June. The team members from Legacy "now Prosperity" have been excellent and we could not have achieved such a smooth integration without their commitment and efforts. I want to thank all of our team members who worked many hours to make this happen," said David Zalman, Prosperity's Senior Chairman and Chief Executive Officer. "The second quarter 2020 diluted earnings per share of $1.41 includes a $0.22 income tax benefit, a $0.06 charge for merger related expenses and a $0.03 charge for the write down of fixed assets related to the Merger and CRA funds," continued Zalman. "During the second quarter, we saw a $1.898 billion, or 9.9%, increase in loans, mostly related to loans made under the SBA Paycheck Protection Program (PPP). We approved 11,972 PPP loans for a total of $1.411 billion. These loans were important to our customers, enabling them to remain in business at a time they were either operating at a reduced capacity or temporarily shut down. Deposits increased $2.326 billion, or 9.8%, during the quarter, related to funds from the PPP loans and decreased customer spending," added Zalman. "We continue to provide relief to our loan customers through loan extensions and deferrals when possible. For the second quarter of 2020, net charge offs were $13.0 million. Of these charge-offs, $12.4 million were related to PCD loans with specific reserves of $28.5 million that we acquired in the Merger. Further, $16.1 million in specific reserves were released to the general reserve in addition to the $10.0 million provision for loan losses for the second quarter," stated Zalman. "The Blue-Chip Consensus forecast estimates that fourth quarter 2020 GDP will end at (5.6%) compared with fourth quarter 2019, however, they are forecasting a 4.8% GDP for fourth quarter 2021 compared with fourth quarter 2020. They are also forecasting an unemployment rate of 9.4% for the fourth quarter 2020 compared with an unemployment rate of 6.9% for fourth quarter 2021. Based on these estimates, 2021 looks brighter. We are positive about our company's future. While our operating environment and economy is changing frequently, we remain focused on addressing whatever comes our way and taking care of our customers and associates," concluded Zalman.

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

Net income was $130.9 million(2) for the three months ended June 30, 2020 compared with $82.3 million(3) for the same period in 2019, an increase of $48.6 million or 59.1%. Net income per diluted common share was $1.41 for the three months ended June 30, 2020 compared with $1.18 for the same period in 2019, an increase of 19.5%. Net income for the second quarter of 2020 includes a tax benefit for NOLs 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 June 30, 2020 were 1.61%, 8.84% and 19.98%(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 three months ended June 30, 2020 were 1.44%(1), 7.88%(1) and 17.81%(1), respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 46.56%(1) for the three months ended June 30, 2020. Excluding merger related expenses of $7.5 million, the efficiency ratio was 43.97%(1) for the three months ended June 30, 2020.

Net interest income before provision for credit losses for the three months ended June 30, 2020 was $259.0 million compared with $154.8 million for the same period in 2019, an increase of $104.1 million or 67.2%. The increase was primarily due to the Merger and the increase in loan discount accretion of $23.0 million. On a linked quarter basis, net interest income before provision for credit losses was $259.0 million compared with $256.0 million for the three months ended March 31, 2020, an increase of $2.9 million or 1.1%. The increase was primarily due to a decrease in interest expense partially offset by a decrease in loan discount accretion of $4.2 million and interest income on securities.

The net interest margin on a tax equivalent basis was 3.69% for the three months ended June 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 $23.0 million increase in loan discount accretion. On a linked quarter basis, the net interest margin on a tax equivalent basis was 3.69% for the three months ended June 30, 2020 compared with 3.81% for the three months ended March 31, 2020. The change was primarily due to a $4.2 million decrease in loan discount accretion.

Noninterest income was $25.7 million for the three months ended June 30, 2020 compared with $30.0 million for the same period in 2019, a decrease of $4.3 million or 14.3%. This decrease was primarily due to a loss on write-down of assets of $4.0 million and a decrease in nonsufficient funds ("NSF") fees, partially offset by an increase in mortgage income and credit card, debit card and ATM card income primarily due to the Merger. On a linked quarter basis, noninterest income decreased $8.7 million or 25.3% to $25.7 million compared with $34.4 million for the three months ended March 31, 2020. This decrease was primarily due to a loss on write-down of assets of $4.0 million and a decrease in NSF fees. NSF fees and credit card, debit card and ATM income were negatively impacted by the pandemic.

Noninterest expense was $134.4 million for the three months ended June 30, 2020 compared with $80.8 million for the same period in 2019, an increase of $53.5 million or 66.3%, primarily due to the Merger and merger related expenses of $7.5 million. On a linked quarter basis, noninterest expense increased $9.6 million or 7.7% to $134.4 million compared with $124.7 million for the three months ended March 31, 2020. The increase was primarily due to increases in merger related expenses and salaries and benefits.

Results of Operations for the Six Months Ended June 30, 2020

Net income was $261.7 million(4) for the six months ended June 30, 2020 compared with $164.7 million(5) for the same period in 2019, an increase of $97.1 million or 59.0%. Net income per diluted common share was $2.80 for the six months ended June 30, 2020 compared with $2.36 for the same period in 2019, an increase of 18.6%. Net income for the six months ended June 30, 2020 includes a tax benefit for NOLs of $20.1 million and merger related expenses of $8.0 million. Annualized returns on average assets, average common equity and average tangible common equity for the six months ended June 30, 2020 were 1.64%, 8.85% and 20.07%(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 six months ended June 30, 2020 were 1.55%(1), 8.38%(1) and 19.01%(1), respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale of assets and taxes) was 44.72%(1) for the six months ended June 30, 2020. Excluding merger related expenses, the efficiency ratio was 43.34%(1) for the six months ended June 30, 2020.

Net interest income before provision for credit losses for the six months ended June 30, 2020 was $515.0 million compared with $309.7 million for the same period in 2019, an increase of $205.2 million or 66.3%. This change was primarily due to the Merger and the increase in loan discount accretion of $49.7 million.

The net interest margin on a tax equivalent basis for the six months ended June 30, 2020 was 3.75% compared with 3.18% 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 $49.7 million.

Noninterest income was $60.1 million for the six months ended June 30, 2020 compared with $58.1 million for the same period in 2019, an increase of $2.0 million or 3.4%. This increase was primarily due to an increase in credit card, debit card and ATM card income, mortgage income and service charges on deposit accounts due to the Merger, partially offset by a net loss on write-down of assets of $4.0 million.

Noninterest expense was $259.1 million for the six months ended June 30, 2020 compared with $159.4 million for the same period in 2019, an increase of $99.7 million or 62.6%. 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 June 30, 2020, Prosperity had $32.967 billion in total assets, an increase of $10.592 billion or 47.3% compared with $22.375 billion at June 30, 2019.

Loans at June 30, 2020 were $21.025 billion, an increase of $10.438 billion or 98.6%, compared with $10.587 billion at June 30, 2019. Linked quarter loans increased $1.898 billion or 9.9% from $19.127 billion at March 31, 2020, of which $1.392 billion were 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 June 30, 2020, oil and gas loans totaled $639.4 million (net of discount and excluding PPP loans totaling $118.6 million) or 3.0% of total loans, of which $394.4 million were production loans and $245.0 million were servicing loans, compared with total oil and gas loans of $367.0 million (net of discount) or 3.5% of total loans at June 30, 2019, of which $95.0 million were production loans and $272.0 million were servicing loans. In addition, as of June 30, 2020, Prosperity had total unfunded commitments to oil and gas companies of $276.9 million compared with total unfunded commitments to oil and gas companies of $220.4 million as of June 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 June 30, 2020, loans to hotels totaled $384.8 million (excluding PPP loans totaling $8.8 million) or 1.8% of total loans and loans to restaurants totaled $212.3 million (excluding PPP loans totaling $110.7 million) or 1.0% of total loans.

Deposits at June 30, 2020 were $26.153 billion, an increase of $9.265 billion or 54.9%, compared with $16.888 billion at June 30, 2019. Linked quarter deposits increased $2.326 billion or 9.8% from $23.826 billion at March 31, 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)

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

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

Loansacquired(includingnewproductionsinceacquisitiondate):

LegacyTexas:

Loans held $ 15,725 $ 54,229 $ 66,745 $ - $ -for sale

Loans heldfor 6,601,006 6,713,337 6,636,855 - -investment

Loans heldforinvestment - 2,557,183 1,713,762 1,552,762 - -WarehousePurchaseProgram

All other 11,851,259 10,645,867 10,588,984 10,673,345 10,587,375loans

Total loans $ 21,025,173 $ 19,127,195 $ 18,845,346 $ 10,673,345 $ 10,587,375

Depositsassumed(includingnew depositssinceacquisitiondate):

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

All other 20,155,293 18,220,371 18,058,186 16,929,920 16,887,629deposits

Total $ 26,152,688 $ 23,826,357 $ 24,199,732 $ 16,929,920 $ 16,887,629deposits

Excluding loans acquired in the Merger and new production by the acquired lending operations since November 1, 2019, loans at June 30, 2020 grew $1.264 billion or 11.9% compared with June 30, 2019 and grew $1.205 billion or 11.3% compared with March 31, 2020.

Excluding deposits assumed in the Merger and new deposits generated at the acquired banking centers since November 1, 2019, deposits at June 30, 2020 grew $3.268 billion or 19.3% compared with June 30, 2019 and grew $1.935 billion or 10.6% compared with March 31, 2020.

Asset Quality

Nonperforming assets totaled $77.9 million or 0.28% of quarterly average interest-earning assets at June 30, 2020, compared with $41.6 million or 0.21% of quarterly average interest-earning assets at June 30, 2019, and $67.2 million or 0.25% of quarterly average interest-earning assets at March 31, 2020.

The allowance for credit losses on loans was $324.2 million or 1.54% of total loans at June 30, 2020 compared to $327.2 million or 1.71% of total loans at March 31, 2020 and $87.0 million or 0.82% of total loans at June 30, 2019. The allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program and PPP loans, was 1.90%(1) at June 30, 2020 compared with 1.88%(1) at March 31, 2020 and 0.82%(1) at June 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 June 30, 2020 compared with $800 thousand for the three months ended June 30, 2019 and no provision for the three months ended March 31, 2020. The provision for credit losses was $10.0 million for the six months ended June 30, 2020 compared with $1.5 million for the six months ended June 30, 2019.

Net charge-offs were $13.0 million for the three months ended June 30, 2020 compared with net recoveries of $115 thousand for the three months ended June 30, 2019 and net charge-offs of $801 thousand for the three months ended March 31, 2020. Net charge-offs for the second quarter of 2020 were primarily due to $12.4 million related to PCD loans. These PCD loans had specific reserves of $28.5 million, of which $12.4 million was allocated to the charge-offs. Further, $16.1 million of PCD specific reserves was moved to the general reserve. Net charge-offs were $13.8 million for the six months ended June 30, 2020 compared with $934 thousand for the six months ended June 30, 2019.

Dividend

Prosperity Bancshares declared a third quarter cash dividend of $0.46 per share to be paid on October 1, 2020 to all shareholders of record as of September 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 zero shares of its common stock during the three months ended June 30, 2020 and 2.1 million shares of its common stock at an average weighted price of $52.59 per share during the six months ended June 30, 2020.

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, the U.S. President announced a national emergency relating to the pandemic and has since been extended. On July 10, the Texas governor 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. Prosperity Bank (the "Bank") is considered an essential business and is closely monitoring the latest developments regarding COVID-19. The health and safety of our associates, customers, and communities are of utmost importance, and the Bank remains committed to providing uninterrupted service. Additionally, the Bank has continuity plans in place to ensure critical operations are able to continue without disruption. The COVID-19 pandemic has resulted in significant economic uncertainties that could negatively impact Prosperity's operating income, financial condition and cash flows.

In response to the COVID-19 pandemic, the CARES Act was signed into law on March 27, 2020 by the President of the United States. The CARES Act provides assistance for American workers, families and small businesses. The Paycheck Protection Program ("PPP"), established by the CARES Act, is implemented by the Small Business Administration ("SBA") with support from the Department of the Treasury. This program 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 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. On July 4, 2020, the President amended the CARES Act to extend the PPP application period for an additional five weeks. 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. As of July 7, 2020, the Company has obtained SBA approvals on approximately 11,972 loans totaling $1.411 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 June 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, July 29, 2020 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity's second 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 5164054.

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; tangible book value per share, return on average tangible common equity, the tangible equity to tangible assets ratio and return on average tangible common equity, all excluding merger related expenses, net of tax, and NOL carryback; allowance for credit losses to total loans excluding Warehouse Purchase Program and PPP loans; 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 that their presentation, together with the accompanying reconciliations, provides a more complete understanding of factors and trends affecting Prosperity's business and allows investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. Further, Prosperity believes that these non-GAAP financial measures provide useful information by excluding certain items that may not be indicative of its core operating earnings and business outlook. These non-GAAP financial measures should not be considered a substitute for, nor of greater importance than, GAAP basis 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 June 30, 2020, Prosperity Bancshares, Inc.(r) is a $32.967 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 June 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 March 31, 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.

______________________

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

Includes purchase accounting adjustments of $20.4 million, net of tax,(2) 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 $776 thousand, net of tax,(3) primarily comprised of loan discount accretion of $1.2 million for the three months ended June 30, 2019.

Includes purchase accounting adjustments of $44.6 million, net of tax,(4) primarily comprised of loan discount accretion of $52.7 million, and merger related expenses of $8.0 million for the six months ended June 30, 2020.

Includes purchase accounting adjustments of $2.0 million, net of tax,(5) primarily comprised of loan discount accretion of $3.0 million for the six months ended June 30, 2019.

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

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 Grapevine Motor Rusk Magnolia Parkway

Caldwell Kiest Seven Points Mont Belvieu Midland

College Station Lake Highlands Teague Nederland Wadley

Crescent Point McKinney Tyler-Beckham Needville Wall Street

Hearne McKinney Eldorado Tyler-South Rosenberg Broadway

Huntsville McKinney Redbud Tyler-University Shadow Creek Odessa

Madisonville North Carrolton Winnsboro Spring Grandview

Navasota Oak Cliff Tomball Grant

New Waverly Park Cities Houston Area Waller Kermit Highway

Rock Prairie Plano Houston West Columbia Parkway

Southwest Parkway Plano-West Aldine Wharton

Tower Point Preston Forest Alief Winnie Other West Texas Area

Wellborn Road Preston Parker Bellaire Wirt Locations

Preston Royal Beltway Big Spring

Central Texas Area Red Oak Clear Lake South Texas Area - Brownfield

Austin Richardson Copperfield Corpus Christi Brownwood

Allandale Richardson-West Cypress Calallen Cisco

Cedar Park Rosewood Court Downtown Carmel Comanche

Congress The Colony Eastex Northwest Early

Lakeway Tollroad Fairfield Saratoga Floydada

Liberty Hill Trinity Mills First Colony Timbergate Gorman

Northland Turtle Creek Fry Road Water Street Levelland

Oak Hill West 15th Plano Gessner Littlefield

Research Blvd West Allen Gladebrook Victoria Merkel

Westlake Wylie Grand Parkway Victoria Main Plainview

Heights Victoria-Navarro San Angelo

Other Central Fort Worth Highway 6 West Victoria-North SlatonTexas Area

Locations Haltom City Little York Victoria Salem Snyder

Bastrop Hulen Medical Center

Canyon Lake Keller Memorial Drive Other South Texas Oklahoma Area

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 Sugar Land Cuero Memorial Worth Area

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 Sanger The Woodlands Yoakum Utica TowerArea

TheDallas Waxahachie Woodlands-College Yorktown Yale Park

14th Street Plano Weatherford The Woodlands-I-45

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

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)

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

Balance Sheet Data(at period end)

Loans held for sale $ 39,516 $ 65,035 $ 80,959 $ 20,284 $ 20,315

Loans held for 18,428,474 17,348,398 17,211,625 10,653,061 10,567,060investment

Loans held forinvestment - 2,557,183 1,713,762 1,552,762 - -Warehouse PurchaseProgram

Total loans 21,025,173 19,127,195 18,845,346 10,673,345 10,587,375

Investment 7,717,586 8,295,495 8,570,056 8,495,206 8,951,940securities^(A)

Federal funds sold 568 676 519 521 555

Allowance for (324,205) (327,206) (87,469) (87,061) (87,006)credit losses^(B)

Cash and due from 332,873 381,458 573,589 420,359 302,069banks

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

Core deposit 79,748 83,041 86,404 29,051 30,299intangibles, net

Other real estate 6,160 5,452 6,936 815 2,005owned

Fixed assets, net 324,975 327,293 326,832 263,703 262,479

Other assets 571,807 626,951 639,824 396,033 424,660

Total assets $ 32,966,649 $ 31,743,499 $ 32,185,708 $ 22,092,817 $ 22,375,221

Noninterest-bearing $ 9,040,257 $ 7,461,323 $ 7,763,894 $ 5,784,002 $ 5,691,236deposits

Interest-bearing 17,112,431 16,365,034 16,435,838 11,145,918 11,196,393deposits

Total deposits 26,152,688 23,826,357 24,199,732 16,929,920 16,887,629

Other borrowings 103,131 1,338,429 1,303,730 600,795 940,874

Securities soldunder repurchase 365,335 344,695 377,294 311,404 313,825agreements

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

Allowance forcredit losses onoff-balance sheet 29,947 29,947 5,599 - -credit exposures^(B)

Other liabilities 242,061 222,912 202,714 123,892 104,998

Total liabilities 27,018,527 25,887,925 26,214,873 17,966,011 18,247,326

Shareholders' 5,948,122 5,855,574 5,970,835 4,126,806 4,127,895equity^(C)

Total liabilities $ 32,966,649 $ 31,743,499 $ 32,185,708 $ 22,092,817 $ 22,375,221and equity

Includes $(1,767), $(3,421), $763, $49 and $1,611 in unrealized (losses)(A) gains on available for sale securities for the quarterly periods ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively.

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

Includes $(1,396), $(2,703), $602, $38 and $1,273 in after-tax unrealized(C) (losses) gains on available for sale securities for the quarterly periods ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(In thousands)

Three Months Ended Year-to-Date

Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Jun 30, Jun 30,

2020 2020 2019 2019 2019 2020 2019

IncomeStatement Data

Interestincome:

Loans $ 242,772 $ 247,243 $ 222,910 $ 134,943 $ 133,525 $ 490,015 $ 263,590

Securities^(D) 43,776 48,282 49,348 50,872 53,944 92,058 109,592

Federal fundssold and other 45 713 600 363 318 758 720earning assets

Total interest 286,593 296,238 272,858 186,178 187,787 582,831 373,902income

Interestexpense:

Deposits 25,269 35,018 32,759 26,939 26,562 60,287 51,690

Other 533 2,932 6,115 4,335 5,556 3,465 10,873borrowings

Securitiessold under 337 757 879 914 831 1,094 1,590repurchaseagreements

Subordinatednotes and 1,499 1,500 1,075 - - 2,999 -trustpreferred

Total interest 27,638 40,207 40,828 32,188 32,948 67,845 64,153expense

Net interest 258,955 256,031 232,030 153,990 154,838 514,986 309,749income

Provision for 10,000 - 1,700 1,100 800 10,000 1,500credit losses

Net interestincome after 248,955 256,031 230,330 152,890 154,038 504,986 308,249provision forcredit losses

Noninterestincome:

Nonsufficientfunds (NSF) 5,645 9,443 9,990 8,835 7,973 15,088 15,789fees

Credit card,debit card and 7,263 7,474 7,728 6,688 6,480 14,737 12,451ATM cardincome

Servicecharges on 5,790 6,104 5,597 5,020 4,989 11,894 9,987depositaccounts

Trust income 2,242 2,662 2,582 2,492 2,558 4,904 5,153

Mortgage 1,820 2,010 2,455 839 990 3,830 1,712income

Brokerage 584 650 625 522 541 1,234 1,214income

Bank ownedlife insurance 1,508 1,545 1,502 1,314 1,321 3,053 2,610income

Net (loss)gain on sale (3,945) (385) (1,870) (3) 2 (4,330) 60or write-downof assets

Othernoninterest 4,768 4,885 6,897 4,966 5,104 9,653 9,126income

Totalnoninterest 25,675 34,388 35,506 30,673 29,958 60,063 58,102income

Noninterestexpense:

Salaries and 79,109 77,282 69,356 52,978 52,941 156,391 104,014benefits

Net occupancy 9,190 8,980 7,420 5,607 5,492 18,170 10,958and equipment

Credit anddebit card,data 11,690 11,421 9,158 4,989 4,904 23,111 9,477processing andsoftwareamortization

Regulatoryassessments 2,601 2,078 2,095 1,814 2,325 4,679 4,699and FDICinsurance

Core depositintangibles 3,293 3,363 2,705 1,248 1,265 6,656 2,584amortization

Depreciation 4,598 4,768 4,212 3,286 3,111 9,366 6,215

Communications 3,324 3,195 3,012 2,214 2,183 6,519 4,453

Other real 40 46 57 68 120 86 203estate expense

Net (gain)loss on saleor write-down 4 (130) (49) (115) (54) (126) (231)of other realestate

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

Othernoninterest 13,045 13,194 12,083 8,610 8,534 26,239 17,020expense

Totalnoninterest 134,368 124,741 156,451 80,699 80,821 259,109 159,392expense

Income before 140,262 165,678 109,385 102,864 103,175 305,940 206,959income taxes

Provision for 9,361 34,830 23,251 21,106 20,917 44,191 42,299income taxes

Net incomeavailable to $ 130,901 $ 130,848 $ 86,134 $ 81,758 $ 82,258 $ 261,749 $ 164,660commonshareholders

Interest income on securities was reduced by net premium amortization of $9,224, $8,005, $8,556, $8,027 and $7,607 for the three-month periods ended(D) June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively, and $17,229 and $14,196 for the six-month periods ended June 30, 2020 and June 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

Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Jun 30, Jun 30,

2020 2020 2019 2019 2019 2020 2019

Profitability

Net income ^(E) $ 130,901 $ 130,848 $ 86,134 $ 81,758 $ 82,258 $ 261,749 $ 164,660(F)

Basic earnings $ 1.41 $ 1.39 $ 1.01 $ 1.19 $ 1.18 $ 2.80 $ 2.36per share

Diluted earnings $ 1.41 $ 1.39 $ 1.01 $ 1.19 $ 1.18 $ 2.80 $ 2.36per share

Return onaverage assets ^ 1.61 % 1.67 % 1.19 % 1.47 % 1.46 % 1.64 % 1.46 %(G) (K)

Return onaverage common 8.84 % 8.86 % 6.33 % 7.89 % 7.92 % 8.85 % 7.99 %equity ^(G) (K)

Return onaverage tangible 19.98 % 20.16 % 12.50 % 14.77 % 14.82 % 20.07 % 15.03 %common equity ^(G)^ ^(H) (K)

Tax equivalentnet interest 3.69 % 3.81 % 3.66 % 3.16 % 3.16 % 3.75 % 3.18 %margin ^(E) (F)^ ^(I)

Efficiency ratio 46.56 % 42.90 % 58.07 % 43.70 % 43.74 % 44.72 % 43.34 %^(H) (J) (L)

Liquidity andCapital Ratios

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

Common equity 12.29 % 12.27 % 12.30 % 16.68 % 16.59 % 12.29 % 16.59 %tier 1 capital

Tier 1risk-based 12.29 % 12.27 % 12.30 % 16.68 % 16.59 % 12.29 % 16.59 %capital

Total risk-based 13.36 % 12.81 % 12.70 % 17.34 % 17.25 % 13.36 % 17.25 %capital

Tier 1 leverage 9.41 % 9.49 % 10.42 % 10.86 % 10.67 % 9.41 % 10.67 %capital

Period endtangible equityto period end 8.89 % 8.96 % 9.21 % 10.90 % 10.75 % 8.89 % 10.75 %tangible assets^(H)

Other Data

Weighted-averageshares used incomputingearnings percommon share

Basic 92,658 94,371 85,573 68,738 69,806 93,514 69,832

Diluted 92,658 94,371 85,573 68,738 69,806 93,514 69,832

Period endshares 92,660 92,652 94,746 68,397 69,261 92,660 69,261outstanding

Cash dividendspaid per common $ 0.46 $ 0.46 $ 0.46 $ 0.41 $ 0.41 $ 0.92 $ 0.82share

Book value per $ 64.19 $ 63.20 $ 63.02 $ 60.34 $ 59.60 $ 64.19 $ 59.60common share

Tangible bookvalue per common $ 28.45 $ 27.52 $ 28.08 $ 32.12 $ 31.72 $ 28.45 $ 31.72share ^(H)

Common StockMarket Price

High $ 72.95 $ 75.22 $ 74.35 $ 71.86 $ 74.50 $ 75.22 $ 75.36

Low $ 43.68 $ 42.02 $ 66.60 $ 62.17 $ 61.85 $ 42.02 $ 61.65

Period end $ 59.38 $ 48.25 $ 71.89 $ 70.63 $ 66.05 $ 59.38 $ 66.05closing price

Employees - FTE(excluding 3,793 3,801 3,867 3,019 3,026 3,793 3,026overtime)

Number of 275 285 285 243 243 275 243banking centers

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

Three Months Ended Year-to-Date

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

Loandiscountaccretion

ASC 310-20 $17,999 $22,463 $17,834 $1,006 $880 $40,462 $2,354

ASC 310-30 $6,267 $6,019 $5,908 $277 $347 $12,286 $666

Securitiesnet $203 $194 $201 $157 $255 $397 $489amortization

Timedeposits $1,793 $2,270 $1,709 - - $4,063 -amortization

Using effective tax rate of 6.7%, 21.0%, 21.3%, 20.5% and 20.3% for the three-month periods ended June 30, 2020, March 31, 2020, December 31, 2019,(F) September 30, 2019 and June 30, 2019, respectively, and 14.4% and 20.4% for the six-month periods ended June 30, 2020 and June 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 Earnings(H) 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 days 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.

Excluding merger related expenses, net of tax, and NOL carryback annualized returns on average assets, average common equity and average tangible(K) common equity were 1.44%^(H), 7.88%^(H) and 17.81%^(H) for the three months ended June 30, 2020 and 1.55%^(H), 8.38%^(H) and 19.01%^(H) for the six-month period ended June 30, 2020.

Excluding merger related expenses, net of tax, the efficiency ratio was(L) 43.97%^(H) for the three months ended June 30, 2020 and 43.34%^(H) for the six-month period ended June 30, 2020.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

YIELD ANALYSIS Three Months Ended

Jun 30, 2020 Mar 31, 2020 Jun 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 $ 63,338 $ 523 3.32% $ 66,917 $ 632 3.80% $ 20,315 $ 316 6.24%

Loans held for investment 18,135,226 228,062 5.06% 17,263,098 236,517 5.51% 10,500,110 133,209 5.09%

Loans held for investment- Warehouse Purchase 1,843,097 14,187 3.10% 1,120,324 10,094 3.62% - - -Program

Total Loans 20,041,661 242,772 4.87% 18,450,339 247,243 5.39% 10,520,425 133,525 5.09%

Investment securities 8,054,008 43,776 2.19% ^(N) 8,434,196 48,282 2.30% ^(N) 9,185,877 53,944 2.36% ^(N)

Federal funds sold and 172,761 45 0.10% 223,631 713 1.28% 64,335 318 1.98%other earning assets

Total interest-earning 28,268,430 286,593 4.08% 27,108,166 296,238 4.40% 19,770,637 187,787 3.81%assets

Allowance for credit (325,720) (328,005) (86,158)losses^(B)

Noninterest-earning 4,562,016 4,577,251 2,842,478assets

Total assets $ 32,504,726 $ 31,357,412 $ 22,526,957

Interest-bearingliabilities:

Interest-bearing demand $ 4,949,023 $ 4,621 0.38% $ 4,990,376 $ 7,096 0.57% $ 3,714,968 $ 5,813 0.63%deposits

Savings and money market 8,537,352 8,745 0.41% 7,965,440 14,122 0.71% 5,647,494 12,722 0.90%deposits

Certificates and other 3,224,196 11,903 1.48% 3,404,748 13,800 1.63% 2,057,033 8,027 1.57%time deposits

Other borrowings 474,867 533 0.45% 832,961 2,932 1.42% 883,557 5,556 2.52%

Securities sold under 365,077 337 0.37% 366,615 757 0.83% 288,666 831 1.15%repurchase agreements

Subordinated notes and 125,475 1,499 4.80% 125,694 1,500 4.80% - - -trust preferred

Total interest-bearing 17,675,990 27,638 0.63% ^(O) 17,685,834 40,207 0.91% ^(O) 12,591,718 32,949 1.05% ^(O)liabilities

Noninterest-bearingliabilities:

Noninterest-bearing 8,583,734 7,491,798 5,674,615demand deposits

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

Other liabilities 289,899 262,523 108,246

Total liabilities 26,579,570 25,453,164 18,374,579

Shareholders' equity 5,925,156 5,904,248 4,152,378

Total liabilities and $ 32,504,726 $ 31,357,412 $ 22,256,957shareholders' equity

Net interest income and $ 258,955 3.68% $ 256,031 3.80% $ 154,838 3.14%margin

Non-GAAP to GAAPreconciliation:

Tax equivalent adjustment 690 723 827

Net interest income andmargin (tax equivalent $ 259,645 3.69% $ 256,754 3.81% $ 155,665 3.16%basis)

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

Yield on securities was impacted by net premium amortization of $9,224,(N) $8,005 and $7,607 for the three-month periods ended June 30, 2020, March 31, 2020 and June 30, 2019, respectively.

Total cost of funds, including noninterest bearing deposits, was 0.42%,(O) 0.64% and 0.72% for the three-month periods ended June 30, 2020, March 31, 2020 and June 30, 2019, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

YIELD ANALYSIS Year-to-Date

Jun 30, 2020 Jun 30, 2019

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

Interest-earningassets:

Loans held for sale $ 65,128 $ 1,155 3.57% $ 20,315 $ 621 6.16%

Loans held for 17,699,162 464,579 5.28% 10,436,369 262,969 5.08%investment

Loans held forinvestment - Warehouse 1,481,710 24,281 3.30% - - -Purchase Program

Total loans 19,246,000 490,015 5.12% 10,456,684 263,590 5.08%

Investment securities 8,244,102 92,058 2.25% ^(Q) 9,242,605 109,592 2.39% ^(Q)

Federal funds sold and 198,196 758 0.77% 68,068 720 2.13%other earning assets

Total interest-earning 27,688,298 582,831 4.23% 19,767,357 373,902 3.81%assets

Allowance for credit (326,862) (86,332)losses

Noninterest-earning 4,569,631 2,853,199assets

Total assets $ 31,931,067 $ 22,534,224

Interest-bearingliabilities:

Interest-bearing $ 4,969,700 $ 11,717 0.47% $ 3,930,475 $ 12,625 0.65%demand deposits

Savings and money 8,251,396 22,867 0.56% 5,560,625 23,906 0.87%market deposits

Certificates and other 3,314,472 25,703 1.56% 2,059,877 15,159 1.48%time deposits

Other borrowings 653,914 3,465 1.07% 864,322 10,873 2.54%

Securities sold under 365,846 1,094 0.60% 280,692 1,590 1.14%repurchase agreements

Subordinated notes and 125,585 2,999 4.80% - - -trust preferred

Total interest-bearing 17,680,913 67,845 0.77% ^(R) 12,695,991 64,153 1.02% ^(R)liabilities

Noninterest-bearingliabilities:

Noninterest-bearing 8,037,767 5,616,541demand deposits

Allowance for creditlosses on off-balance 21,478 -sheet credit exposures^(B)

Other liabilities 276,211 97,610

Total liabilities 26,016,369 18,410,142

Shareholders' equity 5,914,698 4,124,082

Total liabilities and 31,931,067 $ 22,534,224shareholders' equity

Net interest income $ 514,986 3.74% $ 309,749 3.16%and margin

Non-GAAP to GAAPreconciliation:

Tax equivalent 1,413 1,690adjustment

Net interest incomeand margin (tax $ 516,399 3.75% $ 311,439 3.18%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 $17,229 and(Q) $14,196 for the six-month periods ended June 30, 2020 and 2019, respectively.

(R) Total cost of funds, including noninterest bearing deposits, was 0.53% and 0.71% for the six-month periods ended June 30, 2020 and 2019, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended

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

YIELD TREND ^(S)

Interest-EarningAssets:

Loans held for 3.32 % 3.80 % 3.96 % 5.01 % 6.25 %sale

Loans held for 5.06 % 5.51 % 5.52 % 5.05 % 5.09 %investment

Loans held forinvestment - 3.10 % 3.62 % 3.93 % - -Warehouse PurchaseProgram

Total loans 4.87 % 5.39 % 5.42 % 5.05 % 5.09 %

Investment 2.19 % 2.30 % 2.28 % 2.30 % 2.36 %securities ^(T)

Federal funds soldand other earning 0.10 % 1.28 % 0.78 % 1.93 % 1.98 %assets

Totalinterest-earning 4.08 % 4.40 % 4.29 % 3.80 % 3.81 %assets

Interest-BearingLiabilities:

Interest-bearing 0.38 % 0.57 % 0.54 % 0.62 % 0.63 %demand deposits

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

Certificates andother time 1.48 % 1.63 % 1.67 % 1.67 % 1.57 %deposits

Other borrowings 0.45 % 1.42 % 1.73 % 2.29 % 2.52 %

Securities soldunder repurchase 0.37 % 0.83 % 0.99 % 1.15 % 1.15 %agreements

Subordinated notesand trust 4.80 % 4.80 % 4.85 % - -preferred

Totalinterest-bearing 0.63 % 0.91 % 1.00 % 1.04 % 1.05 %liabilities

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

Net InterestMargin (tax 3.69 % 3.81 % 3.66 % 3.16 % 3.16 %equivalent)

(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 $9,224,(T) $8,005, $8,556, $8,027 and $7,607 for the three-month periods ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended

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

Balance SheetAverages

Loans held for sale $ 63,338 $ 66,917 $ 57,171 $ 21,077 $ 24,787

Loans held for 18,135,226 17,263,098 15,261,163 10,589,272 10,495,638investment

Loans held forinvestment - 1,843,097 1,120,324 996,903 - -Warehouse PurchaseProgram

Total Loans 20,041,661 18,450,339 16,315,237 10,610,349 10,520,425

Investment 8,054,008 8,434,196 8,598,736 8,758,056 9,185,877securities

Federal funds soldand other earning 172,761 223,631 305,596 74,751 64,335assets

Totalinterest-earning 28,268,430 27,108,166 25,219,569 19,443,156 19,770,637assets

Allowance for (325,720) (328,005) (86,795) (86,996) (86,158)credit losses^(B)

Cash and due from 247,426 321,832 275,072 230,986 227,653banks

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

Core deposit 81,539 84,865 28,912 29,682 30,933intangibles, net

Other real estate 5,666 5,837 4,864 997 2,053

Fixed assets, net 327,811 325,337 308,692 263,495 260,054

Other assets 676,105 615,747 654,978 423,931 420,940

Total assets $ 32,504,726 $ 31,357,412 $ 29,063,425 $ 22,206,096 $ 22,526,957

Noninterest-bearing $ 8,583,734 $ 7,491,798 $ 7,066,878 $ 5,701,419 $ 5,674,615deposits

Interest-bearing 4,949,023 4,990,376 4,233,880 3,575,249 3,714,968demand deposits

Savings and money 8,537,352 7,965,440 7,109,754 5,524,277 5,647,494market deposits

Certificates and 3,224,196 3,404,748 3,044,843 2,083,803 2,057,033other time deposits

Total deposits 25,294,305 23,852,362 21,455,355 16,884,748 17,094,110

Other borrowings 474,867 832,961 1,403,686 749,814 883,557

Securities soldunder repurchase 365,077 366,615 351,580 315,277 288,666agreements

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

Allowance forcredit losses onoff-balance sheet 29,947 13,009 5,673 - -credit exposures^(B)

Other liabilities 289,899 262,523 320,855 111,526 108,246

Shareholders' 5,925,156 5,904,248 5,443,986 4,144,731 4,152,378equity

Total liabilities $ 32,504,726 $ 31,357,412 $ 29,063,425 $ 22,206,096 $ 22,526,957and equity

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

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

Period End Balances

Loan Portfolio

Commercial and $ 2,214,742 10.5 % $ 2,500,110 13.1 % $ 2,507,318 13.3 % $ 1,120,913 10.5 % $ 1,158,657 10.9 %industrial

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

Construction, landdevelopment and 2,033,037 9.7 % 2,051,021 10.7 % 2,064,167 11.0 % 1,764,648 16.5 % 1,739,308 16.4 %other land loans

1-4 family 4,184,972 19.9 % 3,993,138 20.9 % 3,880,382 20.6 % 2,472,907 23.2 % 2,456,506 23.2 %residential

Home equity 437,098 2.1 % 516,003 2.6 % 507,029 2.6 % 250,775 2.3 % 256,772 2.4 %

Commercial realestate (includes 6,550,086 31.2 % 6,576,213 34.4 % 6,556,285 34.9 % 3,652,176 34.3 % 3,551,668 33.6 %multi-familyresidential)

Agriculture 612,694 2.9 % 635,295 3.3 % 680,855 3.6 % 729,585 6.8 % 736,470 7.0 %(includes farmland)

Consumer and other 403,462 1.9 % 423,000 2.2 % 398,271 2.1 % 342,839 3.2 % 321,023 3.0 %

Energy 639,402 3.0 % 718,653 3.8 % 698,277 3.7 % 339,502 3.2 % 366,971 3.5 %

Paycheck Protection 1,392,497 6.6 % - - - - - - - -Program

Total loans $ 21,025,173 $ 19,127,195 $ 18,845,346 $ 10,673,345 $ 10,587,375

Deposit Types

Noninterest-bearing $ 9,040,257 34.6 % $ 7,461,323 31.3 % $ 7,763,894 32.1 % $ 5,784,002 34.2 % $ 5,691,236 33.7 %DDA

Interest-bearing 5,130,495 19.6 % 4,980,090 20.9 % 5,100,938 21.1 % 3,564,419 21.0 % 3,530,581 20.9 %DDA

Money market 6,148,206 23.5 % 5,341,525 22.4 % 5,099,024 21.1 % 3,457,728 20.4 % 3,438,164 20.3 %

Savings 2,722,718 10.4 % 2,716,247 11.4 % 2,756,297 11.3 % 2,027,621 12.0 % 2,158,159 12.8 %

Certificates and 3,111,012 11.9 % 3,327,172 14.0 % 3,479,579 14.4 % 2,096,150 12.4 % 2,069,489 12.3 %other time deposits

Total deposits $ 26,152,688 $ 23,826,357 $ 24,199,732 $ 16,929,920 $ 16,887,629

Loan to Deposit 80.4 % 80.3 % 77.9 % 63.0 % 62.7 %Ratio

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Construction Loans

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

Singlefamily $ 710,401 34.9 % $ 655,191 31.9 % $ 614,647 29.7 % $ 462,714 26.2 % $ 446,868 25.7 %residentialconstruction

Land 114,748 5.6 % 110,853 5.4 % 88,529 4.3 % 80,711 4.6 % 87,825 5.0 %development

Raw land 274,159 13.5 % 265,943 12.9 % 233,559 11.3 % 171,609 9.7 % 168,531 9.7 %

Residential 144,765 7.1 % 136,861 6.7 % 138,961 6.7 % 123,265 7.0 % 121,586 7.0 %lots

Commercial 103,267 5.1 % 106,036 5.2 % 101,960 4.9 % 102,084 5.8 % 105,633 6.1 %lots

Commercialconstruction 687,618 33.8 % 778,731 37.9 % 890,597 43.1 % 825,001 46.7 % 809,680 46.5 %and other

Netunaccreted (1,921) (2,594) (4,086) (736) (815)discount

Totalconstruction $ 2,033,037 $ 2,051,021 $ 2,064,167 $ 1,764,648 $ 1,739,308loans

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

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

CollateralType

Shoppingcenter/ $ 383,534 $ 302,358 $ 54,317 $ 15,821 $ 32,152 $ 279,800 $ 1,067,982retail

Commercialand 147,324 168,224 13,955 12,610 19,751 160,817 522,681industrialbuildings

Office 209,995 582,866 33,068 44,134 5,324 87,465 962,852buildings

Medical 38,561 50,941 12,817 22,393 25,529 45,135 195,376buildings

Apartment 425,883 681,116 33,444 14,199 19,165 209,404 1,383,211buildings

Hotel 64,530 76,375 34,101 30,037 - 147,004 352,047

Other 46,187 31,511 17,666 10,191 4,344 78,716 188,615

Total $ 1,316,014 $ 1,893,391 $ 199,368 $ 149,385 $ 106,265 $ 1,008,341 $ 4,672,764 ^ (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 Mar 31, Jun 30, Acquisition Mar 31, Jun 30, Acquisition Mar 31, Jun 30,

Date 2020 2020 Date 2020 2020 Date 2020 2020

Loan marks:

Acquired $ 229,080 $ 9,238 $ 7,436 $ 142,128 $ - $ - $ 371,208 $ 9,238 $ 7,436banks ^(W)

LegacyTexas 116,519 78,375 62,424 177,924 29,460 22,565 294,443 107,835 84,989merger^(X)

Total 345,599 87,613 69,860 320,052 29,460 ^(Z) 22,565 665,651 117,073 92,425

Acquiredportfolioloanbalances:

Acquired 5,690,998 350,738 308,692 275,221 7,548 6,952 5,966,219 358,286 315,644banks ^(W)

LegacyTexas 6,595,161 5,393,630 4,808,987 414,352 347,612 283,237 7,009,513 5,741,242 5,092,224merger^(X)

Total 12,286,159 5,744,368 5,117,679 689,573 355,160 290,189 12,975,732 ^(Y) 6,099,528 5,407,868

Acquiredportfolioloan $ 11,940,560 $ 5,656,755 $ 5,047,819 $ 369,521 $ 325,700 $ 267,624 $ 12,310,081 $ 5,982,455 $ 5,315,443balancesless loanmarks

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

(V) Represents a portion of total commercial real estate loans of $6.550 billion as of June 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

Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Jun 30, Jun 30,

2020 2020 2019 2019 2019 2020 2019

Asset Quality

Nonaccrual loans $ 62,904 $ 58,194 $ 55,243 $ 49,973 $ 37,289 $ 62,904 $ 37,289

Accruing loans90 or more days 8,691 3,255 441 341 1,594 8,691 1,594past due

Totalnonperforming 71,595 61,449 55,684 50,314 38,883 71,595 38,883loans

Repossessed 187 278 324 28 670 187 670assets

Other real 6,160 5,452 6,935 815 2,005 6,160 2,005estate

Totalnonperforming $ 77,942 $ 67,179 $ 62,943 $ 51,157 $ 41,558 $ 77,942 $ 41,558assets

Nonperformingassets:

Commercial andindustrial $ 15,238 $ 15,987 $ 17,086 $ 15,974 $ 17,592 $ 15,238 $ 17,592(includesenergy)

Construction,land development 10,530 1,125 1,177 874 2,296 10,530 2,296and other landloans

1-4 familyresidential 29,812 28,996 26,453 19,600 16,641 29,812 16,641(includes homeequity)

Commercial realestate (includes 20,748 20,155 18,031 14,384 4,352 20,748 4,352multi-familyresidential)

Agriculture(includes 1,501 896 101 285 616 1,501 616farmland)

Consumer and 113 20 95 40 61 113 61other

Total $ 77,942 $ 67,179 $ 62,943 $ 51,157 $ 41,558 $ 77,942 $ 41,558

Number of loans/ 213 198 236 89 92 213 92properties

Allowance forcredit losses at $ 324,205 $ 327,206 $ 87,469 $ 87,061 $ 87,006 $ 324,205 $ 87,006end of period

Net charge-offs(recoveries):

Commercial andindustrial $ 12,206 $ (28) $ 76 $ (83) $ (828) $ 12,178 $ 891(includesenergy)

Construction,land development (6) (12) (6) (6) 7 (18) 7and other landloans

1-4 familyresidential 51 5 20 (9) 11 56 8(includes homeequity)

Commercial realestate (includes - (81) 254 (1) (1) (81) (2)multi-familyresidential)

Agriculture(includes (3) (1) (18) 278 46 (4) (1,232)farmland)

Consumer and 753 918 965 867 650 1,671 1,262other

Total $ 13,001 $ 801 $ 1,291 $ 1,046 $ (115) $ 13,802 $ 934

Asset QualityRatios

Nonperformingassets toaverage 0.28 % 0.25 % 0.25 % 0.26 % 0.21 % 0.28 % 0.21 %interest-earningassets

Nonperformingassets to loans 0.37 % 0.35 % 0.33 % 0.48 % 0.39 % 0.37 % 0.39 %and other realestate

Net charge-offsto average loans 0.26 % 0.02 % 0.03 % 0.04 % - 0.14 % 0.02 %(annualized)

Allowance forcredit losses to 1.54 % 1.71 % 0.46 % 0.82 % 0.82 % 1.54 % 0.82 %total loans^(AA)

Allowance forcredit losses tototal loans,excludingWarehousePurchase Program 1.90 % 1.88 % 0.51 % 0.82 % 0.82 % 1.90 % 0.82 %loans andPaycheckProtectionProgram 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 accounting principles) 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; tangible book value per share, return on average tangible common equity, the tangible equity to tangible assets ratio and return on average tangible common equity, all excluding merger related expenses, net of tax, and NOL carryback; allowance for credit losses to total loans excluding Warehouse Purchase Program and PPP loans; 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. In addition, due to the application of purchase accounting, Prosperity uses certain non-GAAP financial measures and ratios that exclude the impact of these items to evaluate its allowance for credit losses to total loans (excluding Warehouse Purchase Program loans and PPP loans). Prosperity has included information below relating to these non-GAAP financial measures for the applicable periods presented.

Three Months Ended Year-to-Date

Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Jun 30, Jun 30,

2020 2020 2019 2019 2019 2020 2019

Reconciliationof dilutedearnings pershare todilutedearnings pershare,excludingmerger relatedexpenses, netof tax, andnet operatinglossescarryback:

Net income $ 130,901 $ 130,848 $ 86,134 $ 81,758 $ 82,258 $ 261,749 $ 164,660

Add: mergerrelated 5,904 430 36,658 - - 6,334 -expenses, netof tax^(AB)

Less: netoperatinglosses (20,145) - - - - (20,145) -carryback ^(AC)

Net income,excludingmerger relatedexpenses, netof tax, and $ 116,660 $ 131,278 $ 122,792 $ 81,758 $ 82,258 $ 247,938 $ 164,660net operatinglossescarryback ^(AB) (AC)

Weightedaverage 92,658 94,371 85,573 68,738 69,806 93,514 69,832diluted sharesoutstanding

Merger relatedexpenses perdiluted share, $ 0.06 $ - $ 0.43 $ - $ - $ 0.07 -net of tax^(AB)

Net operatinglossescarryback per $ (0.22) $ - $ - $ - $ - $ (0.22) $ -diluted share^(AB)

Dilutedearnings pershare,excludingmerger relatedexpenses, net $ 1.25 $ 1.39 $ 1.44 $ 1.19 $ 1.18 $ 2.65 $ 2.36of tax, andnet operatinglossescarryback ^(AB) (AC)

Reconciliationof return onaverage assetsto return onaverage assetsexcludingmerger relatedexpenses, netof tax, andnet operatinglossescarryback:

Net income,excludingmerger relatedexpenses, netof tax, and $ 116,660 $ 131,278 $ 122,792 $ 81,758 $ 82,258 $ 247,938 $ 164,660net operatinglossescarryback ^(AB) (AC)

Average total $ 32,504,726 $ 31,357,412 $ 29,063,425 $ 22,206,096 $ 22,526,957 $ 31,931,067 $ 22,526,957assets

Return onaverage assetsexcludingmerger relatedexpenses, net 1.44 % 1.67 % 1.69 % 1.47 % 1.46 % 1.55 % 1.46 %of tax, andnet operatinglossescarryback^ (G)(AB) (AC)

Reconciliationof return onaverage commonequity toreturn onaverage commonequityexcludingmerger relatedexpenses, netof tax, andnet operatinglossescarryback:

Net income,excludingmerger relatedexpenses, netof tax, and $ 116,660 $ 131,278 $ 122,792 $ 81,758 $ 82,258 $ 247,938 $ 164,660net operatinglossescarryback ^(AB) (AC)

Averageshareholders' $ 5,925,156 $ 5,904,248 $ 5,443,986 $ 4,144,731 $ 4,152,378 $ 5,914,698 $ 4,124,082equity

Return onaverage commonequityexcludingmerger relatedexpenses, net 7.88 % 8.89 % 9.02 % 7.89 % 7.92 % 8.38 % 7.99 %of tax, andnet operatinglossescarryback^ (G)(AB) (AC)

Reconciliationof return onaverage commonequity toreturn onaveragetangiblecommon equity:

Net income $ 130,901 $ 130,848 $ 86,134 $ 81,758 $ 82,258 $ 261,749 $ 164,660

Averageshareholders' $ 5,925,156 $ 5,904,248 $ 5,443,986 $ 4,144,731 $ 4,152,378 $ 5,914,698 $ 4,124,082equity

Less: Averagegoodwill andother (3,305,008) (3,308,498) (2,687,045) (1,930,527) (1,931,778) (3,306,753) (1,932,429)intangibleassets

Averagetangible $ 2,620,148 $ 2,595,750 $ 2,756,941 $ 2,214,204 $ 2,220,600 $ 2,607,945 $ 2,191,653shareholders'equity

Return onaveragetangible 19.98 % 20.16 % 12.50 % 14.77 % 14.82 % 20.07 % 15.03 %common equity ^(G)

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

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

Three Months Ended Year-to-Date

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

Reconciliationof return onaverage commonequity toreturn onaveragetangiblecommon equityexcludingmerger relatedexpenses, netof tax, andnet operatinglossescarryback:

Net income,excludingmerger related $expenses, netof tax, and $ 116,660 $ 131,278 $ 122,792 $ 81,758 $ 82,258 $ 247,938 164,660net operatinglossescarryback ^(AB) (AC)

Average $shareholders' $ 5,925,156 $ 5,904,248 $ 5,443,986 $ 4,144,731 $ 4,152,378 $ 5,914,698equity 4,124,082

Less: Averagegoodwill andother (3,305,008) (3,308,498) (2,687,045) (1,930,527) (1,931,778) (3,306,753) (1,932,429)intangibleassets

Average $tangible $ 2,620,148 $ 2,595,750 $ 2,756,941 $ 2,214,204 $ 2,220,600 $ 2,607,945shareholders' 2,191,653equity

Return onaveragetangiblecommon equityexcludingmerger related 17.81 % 20.23 % 17.82 % 14.77 % 14.82 % 19.01 % 15.03expenses, netof tax, and %net operatinglossescarryback^ (F)(AB) (AC)

Reconciliationof book valueper share totangible bookvalue pershare:

$Shareholders' $ 5,948,122 $ 5,855,574 $ 5,970,835 $ 4,126,806 $ 4,127,895 $ 5,948,122equity 4,127,895

Less: Goodwilland other (3,311,712) (3,306,185) (3,310,075) (1,929,896) (1,931,144) (3,311,712) (1,931,144)intangibleassets

Tangible $shareholders' $ 2,636,410 $ 2,549,389 $ 2,660,760 $ 2,196,910 $ 2,196,751 $ 2,636,410equity 2,196,751

Period endshares 92,660 92,652 94,746 68,397 69,261 92,660 69,261outstanding

Tangible bookvalue per $ 28.45 $ 27.52 $ 28.08 $ 32.12 $ 31.72 $ 28.45 31.72share:

Reconciliationof equity toassets ratioto period endtangibleequity toperiod endtangibleassets ratio:

Tangible $shareholders' $ 2,636,410 $ 2,549,389 $ 2,660,760 $ 2,196,910 $ 2,196,751 $ 2,636,410equity 2,196,751

$Total assets $ 32,966,649 $ 31,743,499 $ 32,185,708 $ 22,092,817 $ 22,375,221 $ 32,966,649 22,375,221

Less: Goodwilland other (3,311,712) (3,306,185) (3,310,075) (1,929,896) (1,931,144) (3,311,712) (1,931,144)intangibleassets

$Tangible $ 29,654,937 $ 28,437,314 $ 28,875,633 $ 20,162,921 $ 20,444,077 $ 29,654,937assets 20,444,077

Period endtangibleequity to 8.89 % 8.96 % 9.21 % 10.90 % 10.75 % 8.89 % 10.75period endtangible %assets ratio:

Reconciliationof allowancefor creditlosses tototal loans toallowance forcredit lossesto totalloans,excludingWarehousePurchaseProgram andPaycheckProtectionProgram loans:

Allowance for $credit losses $ 324,205 $ 327,206 $ 87,469 $ 87,061 $ 87,006 $ 324,205^(AA) 87,006

$Total loans $ 21,025,173 $ 19,127,195 $ 18,845,346 $ 10,673,345 $ 10,587,375 $ 21,025,173 10,587,375

Less:Warehouse 2,557,183 1,713,762 1,552,762 - - 2,557,183 -PurchaseProgram loans

Less: PaycheckProtection 1,392,497 - - - - 1,392,497 -Program loans

Total loansless Warehouse $PurchaseProgram and $ 17,075,493 $ 17,413,433 $ 17,292,584 $ 10,673,345 $ 10,587,375 $ 17,075,493 10,587,375PaycheckProtectionProgram loans

Allowance forcredit lossesto totalloans,excluding 0.82Warehouse 1.90 % 1.88 % 0.51 % 0.82 % 0.82 % 1.90 %Purchase %Program andPaycheckProtectionProgram loans

Reconciliationof efficiencyratio toefficiencyratio,excluding netgains andlosses on thesale or writedown of assetsandsecurities:

$Noninterest $ 134,368 $ 124,741 $ 156,451 $ 80,699 $ 80,821 $ 259,109expense 159,392

$Net interest $ 258,955 $ 256,031 $ 232,030 $ 153,990 $ 154,838 $ 514,986income 309,749

Noninterestincome 25,675 34,388 35,506 30,673 29,958 60,063 58,102

Less: net(loss) gain on (3,945) (385) (1,870) (3) 2 (4,330) 60sale or writedown of assets

Noninterestincomeexcluding netgains and 29,620 34,773 37,376 30,676 29,956 64,393 58,042losses on thesale or writedown of assetsand securities

Total incomeexcluding net $gains andlosses on the $ 288,575 $ 290,804 $ 269,406 $ 184,666 $ 184,794 $ 579,379 367,791sale or writedown of assetsand securities

Efficiencyratio,excluding netgains and 46.56 % 42.90 % 58.07 % 43.70 % 43.74 % 44.72 % 43.34losses on thesale or write %down of assetsand securities

Three Months Ended Year-to-Date

Sep Jun Jun Jun 30, Mar 31, Dec 31, 30, 30, 30, Jun 30,

2020 2020 2019 2019 2019 2020 2019

Reconciliation ofefficiency ratio toefficiency ratio,excluding net gainsand losses on thesale or write downof assets andsecurities andmerger relatedexpenses:

$Noninterest expense $ 134,368 $ 124,741 $ 156,451 $ 80,699 $ 80,821 $ 259,109 159,392

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

Noninterest expense $excluding merger $ 126,894 $ 124,197 $ 110,049 $ 80,699 $ 80,821 $ 251,091related expenses 159,392

$Net interest income $ 258,955 $ 256,031 $ 232,030 $ 153,990 $ 154,838 $ 514,986 309,749

Noninterest income 25,675 34,388 35,506 30,673 29,958 60,063 58,102

Less: net (loss)gain on sale or (3,945) (385) (1,870) (3) 2 (4,330)write down of 60assets

Noninterest incomeexcluding net gainsand losses on the 29,620 34,773 37,376 30,676 29,956 64,393sale or write down 58,042of assets andsecurities

Total incomeexcluding net gains $and losses on the $ 288,575 $ 290,804 $ 269,406 $ 184,666 $ 184,794 $ 579,379sale or write down 367,791of assets andsecurities

Efficiency ratio,excluding net gainsand losses on thesale or write down 43.97 % 42.71 % 40.85 % 43.70 % 43.74 % 43.34 % 43.34of assets andsecurities and %merger relatedexpenses

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SOURCE Prosperity Bancshares, Inc.