PR Newswire | Jul 28, 2021 06:31AM EDT

07/28 05:30 CDT

Prosperity Bancshares, Inc.(r) Reports Second Quarter 2021 Earnings- Second quarter earnings per share (diluted) of $1.41- Second quarter net income of $130.6 million- Loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, increased $148.8 million or 0.9% (3.7% annualized) during the second quarter 2021- Deposits increased $347.1 million or 1.2% (4.8% annualized) during the second quarter 2021- Allowance for credit losses to total loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, of 1.85%(1)- Nonperforming assets remain low at 0.11% of second quarter average interest-earning assets- Return (annualized) on second quarter average assets of 1.45%- Returns (annualized) on second quarter average common equity of 8.31% and average tangible common equity of 17.49%(1)- Second quarter efficiency ratio of 40.96%(1) HOUSTON, July 28, 2021

HOUSTON, July 28, 2021 /PRNewswire/ -- Prosperity Bancshares, Inc.(r) (NYSE: PB), the parent company of Prosperity Bank(r) (collectively, "Prosperity"), reported net income of $130.6 million for the quarter ended June 30, 2021 compared with $130.9 million for the same period in 2020. Net income per diluted common share was $1.41 for the quarter ended June 30, 2021, unchanged from the same period in 2020, and the annualized return on second quarter average assets was 1.45%. The second quarter of 2020 includes a tax benefit for net operating losses ("NOL") 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"). Additionally, loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program ("PPP") loans, increased $148.8 million or 0.9% (3.7% annualized) and deposits increased $347.1 million or 1.2% (4.8% annualized) during the second quarter of 2021. Nonperforming assets remain low at 0.11% of second quarter average interest-earning assets.

"For the second quarter of 2021, Prosperity had strong earnings, core loan growth, deposit growth, continued sound asset quality, impressive cost controls, a return on average tangible common equity of 17.49% and remains well reserved," said David Zalman, Prosperity's Senior Chairman and Chief Executive Officer.

"Unemployment rates continue to decrease and GDP growth continues at a high level, as forecasted last year with the re-opening of the economy. We are seeing increased oil and gas prices as well as increased farm commodity prices, both of which are positive for the Texas and Oklahoma economies. Further, businesses and individuals continue to move to Texas for lower tax rates and a better quality of life," continued Zalman.

"We believe that Prosperity is well positioned to grow along with the Texas and Oklahoma economies. For 2021, Prosperity Bank was ranked the 2nd Best Bank in America by Forbes and has been ranked in the Top 10 of Forbes America's Best Banks since 2010. We have a deep bench of associates with a passion to help Prosperity and our customers succeed," concluded Zalman.

Results of Operations for the Three Months Ended June 30, 2021

Net income was $130.6 million(2) for the three months ended June 30, 2021 compared with $130.9 million(3) for the same period in 2020, a decrease of $290 thousand or 0.2%. Net income per diluted common share was $1.41 for the three months ended June 30, 2021 and 2020. Net income for the second quarter of 2020 includes a tax benefit for NOL of $20.1 million and merger related expenses of $7.5 million. Net income was $130.6 million(2) for the three months ended June 30, 2021 compared with $133.3 million(4) for the three months ended March 31, 2021, a decrease of $2.7 million or 2.0%. The change was primarily due to a decrease in PPP fee income and a decrease in loan discount accretion of $4.1 million, partially offset by an increase in securities income. Net income per diluted common share was $1.41 for the three months ended June 30, 2021 compared with $1.44 for the three months ended March 31, 2021, a decrease of 2.1%. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended June 30, 2021 were 1.45%, 8.31% and 17.49%(1), respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 40.96%(1) for the three months ended June 30, 2021.

Net interest income before provision for credit losses for the three months ended June 30, 2021 was $245.4 million compared with $259.0 million for the same period in 2020, a decrease of $13.6 million or 5.2%. The decrease was primarily due to a decrease in the average loan balance and average rate on loans and a decrease in loan discount accretion of $12.1 million, partially offset by a decrease in the average rate on interest-bearing liabilities. On a linked quarter basis, net interest income before provision for credit losses was $245.4 million compared with $254.6 million for the three months ended March 31, 2021, a decrease of $9.2 million or 3.6%. The decrease was primarily due to a decrease in the average rate on loans and a decrease in loan discount accretion of $4.1 million, partially offset by a decrease in the average rate on interest-bearing liabilities and an increase in average investment securities balance.

The net interest margin on a tax equivalent basis was 3.11% for the three months ended June 30, 2021 compared with 3.69% for the same period in 2020. The change was primarily due to a decrease in the average loan balance and average rate on loans, an increase in lower yielding securities, a decrease in loan discount accretion of $12.1 million and higher cash balances due to excess liquidity, partially offset by a decrease in the average rate on interest-bearing liabilities. On a linked quarter basis, the net interest margin on a tax equivalent basis was 3.11% for the three months ended June 30, 2021 compared with 3.41% for the three months ended March 31, 2021. The change was primarily due to a lower average yield on loans, a $4.1 million decrease in loan discount accretion and higher net premium amortization on securities, partially offset by a decrease in the average rate on interest-bearing liabilities.

Noninterest income was $35.6 million for the three months ended June 30, 2021 compared with $25.7 million for the same period in 2020, an increase of $9.9 million or 38.5%. This increase was primarily due to an increase in credit card, debit card and ATM card income, an increase in mortgage income, lower loss on write-down of assets and an increase in other noninterest income. On a linked quarter basis, noninterest income increased $1.5 million or 4.6% to $35.6 million compared with $34.0 million for the three months ended March 31, 2021. This increase was primarily due to an increase in other noninterest income.

Noninterest expense was $115.2 million for the three months ended June 30, 2021 compared with $134.4 million for the same period in 2020, a decrease of $19.2 million or 14.3%, primarily due to decreases in merger related expenses, salaries and benefits and data processing as a result of efficiencies gained following the LegacyTexas Bank system conversion during the second quarter of 2020, partially offset by gains on sale of other real estate. On a linked quarter basis, noninterest expense decreased $3.9 million or 3.3% to $115.2 million compared with $119.1 million for the three months ended March 31, 2021. This decrease was primarily due to a decrease in salaries and benefits.

Results of Operations for the Six Months Ended June 30, 2021

Net income was $263.9 million(5) for the six months ended June 30, 2021 compared with $261.7 million(6) for the same period in 2020, an increase of $2.2 million or 0.8%. Net income per diluted common share was $2.84 for the six months ended June 30, 2021 compared with $2.80 for the same period in 2020, an increase of 1.4%. Annualized returns on average assets, average common equity and average tangible common equity for the six months ended June 30, 2021 were 1.49%, 8.46% and 17.95%(1), respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 41.11%(1) for the six months ended June 30, 2021.

Net interest income before provision for credit losses for the six months ended June 30, 2021 was $500.0 million compared with $515.0 million for the prior year, a decrease of $15.0 million or 2.9%. The decrease was primarily due to a decrease in the average rate on interest-earning assets and a decrease in loan discount accretion of $24.2 million, partially offset by a decrease in the average rate on interest-bearing liabilities.

The net interest margin on a tax equivalent basis for the six months ended June 30, 2021 was 3.26% compared with 3.75% for the same period in 2020. The change was primarily due to an increase in lower yielding loans, a decrease in loan discount accretion of $24.2 million, higher net premium amortization on securities and higher cash balances due to excess liquidity, partially offset by a decrease in the average rate on interest-bearing liabilities.

Noninterest income was $69.6 million for the six months ended June 30, 2021 compared with $60.1 million for the same period in 2020, an increase of $9.5 million or 15.8%. This increase was primarily due to an increase in credit card, debit card and ATM card income, an increase in mortgage income, lower net loss on write-downs of assets and an increase in other noninterest income, partially offset by a decrease in nonsufficient funds ("NSF") fees.

Noninterest expense was $234.3 million for the six months ended June 30, 2021 compared with $259.1 million for the same period in 2020, a decrease of $24.8 million or 9.6%. The change was primarily due to decreases in merger related expenses, data processing, net occupancy and equipment and other noninterest expense as a result of efficiencies gained following the LegacyTexas Bank system conversion during the second quarter of 2020, partially offset by a gain on sale of other real estate.

Balance Sheet Information

At June 30, 2021, Prosperity had $36.100 billion in total assets, an increase of $3.133 billion or 9.5% compared with $32.967 billion at June 30, 2020.

Loans at June 30, 2021 were $19.252 billion, a decrease of $1.773 billion or 8.4%, compared with $21.025 billion at June 30, 2020, primarily due to a decrease in commercial real estate, PPP and Warehouse Purchase Program loans. Linked quarter loans decreased $387.1 million or 2.0% from $19.639 billion at March 31, 2021, primarily due to a $359.1 million decrease in PPP loans. At June 30, 2021, the Company had $780.0 million of PPP loans compared to $1.392 billion of PPP loans at June 30, 2020 and $1.139 billion of PPP loans at March 31, 2021. Linked quarter loans, excluding Warehouse Purchase Program and PPP loans, increased $148.8 million or 0.9% (3.7% annualized) from $16.227 billion at March 31, 2021.

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, 2021, oil and gas loans totaled $501.8 million (net of discount and excluding PPP loans totaling $92.3 million) or 2.6% of total loans, of which $283.1 million were production loans and $218.7 million were servicing loans, compared with total oil and gas loans of $639.4 million (net of discount and excluding PPP loans totaling $118.6 million) or 3.0% of total loans at June 30, 2020, of which $394.4 million were production loans and $245.0 million were servicing loans. In addition, as of June 30, 2021, Prosperity had total unfunded commitments to oil and gas companies of $298.4 million compared with total unfunded commitments to oil and gas companies of $276.9 million as of June 30, 2020. 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, 2021, loans to hotels totaled $394.2 million (excluding PPP loans totaling $10.6 million) or 2.0% of total loans, an increase of $9.4 million or 2.4%, compared with $384.8 million (excluding PPP loans totaling $8.8 million) or 1.8% of total loans at June 30, 2020. At June 30, 2021, loans to restaurants totaled $201.9 million (excluding PPP loans totaling $92.1 million) or 1.0% of total loans, a decrease of $10.4 million or 4.9%, compared with $212.3 million (excluding PPP loans totaling $110.7 million) or 1.0% of total loans at June 30, 2020.

Deposits at June 30, 2021 were $29.110 billion, an increase of $2.958 billion or 11.3%, compared with $26.153 billion at June 30, 2020. Linked quarter deposits increased $347.1 million or 1.2% (4.8% annualized) from $28.763 billion at March 31, 2021.

Asset Quality

Nonperforming assets totaled $33.7 million or 0.11% of quarterly average interest-earning assets at June 30, 2021, compared with $77.9 million or 0.28% of quarterly average interest-earning assets at June 30, 2020, and $44.2 million or 0.15% of quarterly average interest-earning assets at March 31, 2021.

The allowance for credit losses on loans was $302.9 million or 1.57% of total loans at June 30, 2021 compared to $307.2 million or 1.56% of total loans at March 31, 2021 and $324.2 million or 1.54% of total loans at June 30, 2020. The allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program and PPP loans, was 1.85%(1) at June 30, 2021 compared with 1.89%(1) at March 31, 2021 and 1.90%(1) at June 30, 2020.

There was no provision for credit losses for the three months ended June 30, 2021 compared with $10.0 million for the three months ended June 30, 2020 and no provision for credit losses for the three months ended March 31, 2021. There was no provision for credit losses for the six months ended June 30, 2021 compared with $10.0 million for the six months ended June 30, 2020.

Net charge-offs were $4.3 million for the three months ended June 30, 2021 compared with net charge-offs of $13.0 million for the three months ended June 30, 2020 and net charge-offs of $8.9 million for the three months ended March 31, 2021. Net charge-offs for the second quarter of 2021 included $1.0 million related to resolved PCD loans. These PCD loans had specific reserves of $3.1 million, of which $1.0 million was allocated to the charge-offs and $2.1 million was moved to the general reserve. Further, an additional $1.4 million of specific reserves on resolved PCD loans without any related charge-offs was released to the general reserve.

Net charge-offs were $13.2 million for the six months ended June 30, 2021 compared with $13.8 million for the six months ended June 30, 2020. Net charge-offs for the six months ended June 30, 2021 included $8.2 million related to resolved PCD loans. These PCD loans had specific reserves of $9.8 million, of which $7.7 million was allocated to the charge-offs and $2.1 million was moved to the general reserve. Further, an additional $5.6 million of specific reserves on resolved PCD loans without any related charge-offs was released to the general reserve.

Dividend

Prosperity Bancshares declared a third quarter cash dividend of $0.49 per share to be paid on October 1, 2021 to all shareholders of record as of September 15, 2021.

COVID-19 Pandemic

Prosperity continues to monitor the latest developments regarding COVID-19. As of June 30, 2021, the states of Texas and Oklahoma have lifted their respective restrictions on all business and activities. The COVID-19 pandemic has resulted in significant economic uncertainties that have had, and could continue to have, an adverse impact on Prosperity's operating income, financial condition and cash flows. The extent to which the COVID-19 pandemic will impact Prosperity's operations and financial results during 2021 cannot be reasonably or reliably estimated at this time.

Since the implementation of the Paycheck Protection Program in 2020, Prosperity has obtained SBA approvals on approximately 18,700 loans totaling $2.036 billion and, as of June 30, 2021, had an outstanding balance of 7,770 loans totaling $780.0 million after remittance.

Also, in response to the COVID-19 pandemic, Prosperity has provided relief to its loan customers through loan extensions and deferrals. Prosperity's troubled debt restructurings do not include loan modifications related to COVID-19. Beginning in mid-March of 2020, Prosperity began offering deferral and modification of principal and/or interest payments to selected borrowers on a case-by-case basis. As of June 30, 2021, Prosperity had approximately $210.4 million in outstanding loans subject to deferral and modification agreements.

Conference Call

Prosperity's management team will host a conference call on Wednesday, July 28, 2021 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity's second quarter 2021 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 4866823.

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 net operating loss ("NOL") tax benefit; return on average assets excluding merger related expenses, net of tax, and NOL tax benefit; return on average common equity excluding merger related expenses, net of tax, and NOL tax benefit; return on average tangible common equity; return on average tangible common equity excluding merger related expenses, net of tax, and NOL tax benefit; 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 June 30, 2021, Prosperity Bancshares, Inc.(r) is a $36.100 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 treasury management.

As of June 30, 2021, Prosperity operated 274 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 64 in the Dallas/Fort Worth area; 22 in the East Texas area; 29 in the Central Texas area including Austin and San Antonio; 34 in the West Texas area including Lubbock, Midland-Odessa and Abilene; 16 in the Bryan/College Station area; 6 in the Central Oklahoma area; and 8 in the Tulsa, Oklahoma area.

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 Prosperity'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; 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, 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, 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.

Bryan/College Station Area Garland Longview Hitchcock Avenue Q

Bryan Grapevine Mount Vernon Liberty North University

Bryan-29^th Street Grapevine Main Palestine Magnolia Texas Tech Student Union

Bryan-East Kiest Rusk Magnolia Parkway

Bryan-North Lake Highlands Seven Points Mont Belvieu Midland

Caldwell McKinney Teague Nederland Wadley

College Station McKinney Eldorado Tyler-Beckham Needville Wall Street

Crescent Point McKinney Redbud Tyler-South Broadway Rosenberg

Hearne North Carrolton Tyler-University Shadow Creek Odessa

Huntsville Oak Cliff Winnsboro Spring Grandview

Madisonville Park Cities Tomball Grant

Navasota Plano Houston Area Waller Kermit Highway

New Waverly Plano-West Houston West Columbia Parkway

Rock Prairie Preston Forest Aldine Wharton

Southwest Parkway Preston Parker Alief Winnie Other West Texas Area

Tower Point Preston Royal Bellaire Wirt Locations

Wellborn Road Red Oak Beltway Big Spring

Richardson Clear Lake South Texas Area - Brownfield

Central Texas Area Richardson-West Copperfield Corpus Christi Brownwood

Austin Rosewood Court Cypress Calallen Cisco

Allandale The Colony Downtown Carmel Comanche

Cedar Park Tollroad Eastex Northwest Early

Congress Trinity Mills Fairfield Saratoga Floydada

Lakeway Turtle Creek First Colony Timbergate Gorman

Liberty Hill West 15th Plano Fry Road Water Street Levelland

Northland West Allen Gessner Littlefield

Oak Hill Westmoreland Gladebrook Victoria Merkel

Research Blvd Wylie Grand Parkway Victoria Main Plainview

Westlake Heights Victoria-Navarro San Angelo

Fort Worth Highway 6 West Victoria-North Slaton

Other Central Texas Area Haltom City Little York Victoria Salem Snyder

Locations Hulen Medical Center

Bastrop Keller Memorial Drive Other South Texas Area Oklahoma

Canyon Lake Museum Place Northside Locations Central Oklahoma Area

Dime Box Renaissance Square Pasadena Alice Oklahoma City

Dripping Springs Roanoke Pecan Grove Aransas Pass 23^rd Street

Elgin Stockyards Pin Oak Beeville Expressway

Flatonia River Oaks Colony Creek I-240

Georgetown Other Dallas/Fort Worth Area Sugar Land Cuero Memorial

Gruene Locations SW Medical Center Edna

Kingsland Arlington Tanglewood Goliad Other Central Oklahoma Area

La Grange Azle The Plaza Gonzales Locations

Lexington Ennis Uptown Hallettsville Edmond

New Braunfels Flower Mound Waugh Drive Kingsville Norman

Pleasanton Gainesville Westheimer Mathis

Round Rock Glen Rose West University Padre Island Tulsa Area

San Antonio Granbury Woodcreek Palacios Tulsa

Schulenburg Grand Prairie Port Lavaca Garnett

Seguin Jacksboro Katy Portland Harvard

Smithville Mesquite Cinco Ranch Rockport Memorial

Thorndale Muenster Katy-Spring Green Sinton Sheridan

Weimar Runaway Bay Taft S. Harvard

Sanger The Woodlands Yoakum Utica Tower

Dallas/Fort Worth Area Waxahachie The Woodlands-College Park Yorktown Yale

Dallas Weatherford The Woodlands-I-45

14th Street Plano The Woodlands-Research Forest West Texas Area Other Tulsa Area Locations

Abrams Centre East Texas Area Abilene Owasso

Addison Athens Other Houston Area Antilley Road

Allen Blooming Grove Locations Barrow Street

Balch Springs Canton Angleton Cypress Street

Camp Wisdom Carthage Bay City Judge Ely

Carrollton Corsicana Beaumont Mockingbird

Cedar Hill Crockett Cleveland

Coppell Eustace East Bernard Lubbock

East Plano Gilmer El Campo 4th Street

Euless Grapeland Dayton 66th Street

Frisco Gun Barrel City Galveston 82nd Street

Frisco Warren Jacksonville Groves 86th Street

Frisco-West Kerens Hempstead 98^th Street

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 $9.8 million, net of tax,(2) primarily comprised of loan discount accretion of $12.2 million for the three months ended June 30, 2021.

Includes purchase accounting adjustments of $20.4 million, net of tax,(3) 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 $13.2 million, net of tax,(4) primarily comprised of loan discount accretion of $16.3 million for the three months ended March 31, 2021.

Includes purchase accounting adjustments of $23.0 million, net of tax,(5) primarily comprised of loan discount accretion of $28.5 million for the six months ended June 30, 2021.

Includes purchase accounting adjustments of $44.6 million, net of tax,(6) 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.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(In thousands)

Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020

Balance Sheet Data (at period end)

Loans held for sale $ 9,080 $ 20,991 $ 46,777 $ 51,694 $ 39,516

Loans held for investment 17,147,146 17,345,506 17,357,788 18,013,333 18,428,474

Loans held for investment - Warehouse Purchase Program 2,095,559 2,272,389 2,842,379 2,730,614 2,557,183

Total loans 19,251,785 19,638,886 20,246,944 20,795,641 21,025,173

Investment securities^(A) 11,918,691 10,088,002 8,542,820 7,431,495 7,717,586

Federal funds sold 281 8,986 553 56,469 568

Allowance for credit losses (302,884) (307,210) (316,068) (323,635) (324,205)

Cash and due from banks 1,059,879 1,947,235 1,342,996 1,031,193 332,873

Goodwill 3,231,636 3,231,636 3,231,636 3,231,692 3,231,964

Core deposit intangibles, net 67,417 70,304 73,235 76,478 79,748

Other real estate owned 144 462 10,593 11,548 6,160

Fixed assets, net 324,502 326,970 323,572 325,994 324,975

Other assets 548,473 553,147 602,994 560,724 571,807

Total assets $ 36,099,924 $ 35,558,418 $ 34,059,275 $ 33,197,599 $ 32,966,649

Noninterest-bearing deposits $ 10,099,149 $ 9,820,445 $ 9,151,233 $ 8,998,328 $ 9,040,257

Interest-bearing deposits 19,011,092 18,942,660 18,209,259 17,460,878 17,112,431

Total deposits 29,110,241 28,763,105 27,360,492 26,459,206 26,152,688

Other borrowings - - - 2,570 103,131

Securities sold under repurchase agreements 433,069 377,106 389,583 380,274 365,335

Subordinated notes - - - 125,146 125,365

Allowance for credit losses on off-balance sheet credit exposures 29,947 29,947 29,947 29,947 29,947

Other liabilities 216,330 166,414 148,584 165,579 242,061

Total liabilities 29,789,587 29,336,572 27,928,606 27,162,722 27,018,527

Shareholders' equity^(B) 6,310,337 6,221,846 6,130,669 6,034,877 5,948,122

Total liabilities and equity $ 36,099,924 $ 35,558,418 $ 34,059,275 $ 33,197,599 $ 32,966,649

Includes $1,394, $970, $974, $(442) and $(1,767) in unrealized gains(A) (losses) on available for sale securities for the quarterly periods ended June 30, 2021, March 31, 2021, December 31, 2020, September 30, 2020 and June 30, 2020, respectively.

Includes $1,101, $766, $770, $(349) and $(1,396) in after-tax unrealized(B) gains (losses) on available for sale securities for the quarterly periods ended June 30, 2021, March 31, 2021, December 31, 2020, September 30, 2020 and June 30, 2020, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(In thousands)

Three Months Ended Year-to-Date

Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Jun 30, 2021 Jun 30, 2020

Income Statement Data

Interest income:

Loans $ 216,803 $ 233,075 $ 241,625 $ 244,255 $ 242,772 $ 449,878 $ 490,015

Securities^(C) 43,708 38,677 36,721 38,033 43,776 82,385 92,058

Federal funds sold and other earning assets 340 351 301 144 45 691 758

Total interest income 260,851 272,103 278,647 282,432 286,593 532,954 582,831

Interest expense:

Deposits 15,288 17,362 19,757 22,458 25,269 32,650 60,287

Other borrowings - - 33 52 533 - 3,465

Securities sold under repurchase agreements 164 159 224 309 337 323 1,094

Subordinated notes and trust preferred - - 999 1,500 1,499 - 2,999

Total interest expense 15,452 17,521 21,013 24,319 27,638 32,973 67,845

Net interest income 245,399 254,582 257,634 258,113 258,955 499,981 514,986

Provision for credit losses - - - 10,000 10,000 - 10,000

Net interest income after provision for credit losses 245,399 254,582 257,634 248,113 248,955 499,981 504,986

Noninterest income:

Nonsufficient funds (NSF) fees 6,560 6,687 8,051 7,156 5,645 13,247 15,088

Credit card, debit card and ATM card income 8,918 8,031 8,193 8,315 7,263 16,949 14,737

Service charges on deposit accounts 6,062 5,978 6,046 5,920 5,790 12,040 11,894

Trust income 2,276 2,837 2,192 2,502 2,242 5,113 4,904

Mortgage income 2,914 3,307 3,989 2,958 1,820 6,221 3,830

Brokerage income 795 711 642 628 584 1,506 1,234

Bank owned life insurance income 1,294 1,292 1,252 1,449 1,508 2,586 3,053

Net (loss) on sale or write-down of assets (244) (79) (675) (528) (3,945) (323) (4,330)

Other noninterest income 6,981 5,244 6,857 6,524 4,768 12,225 9,653

Total noninterest income 35,556 34,008 36,547 34,924 25,675 69,564 60,063

Noninterest expense:

Salaries and benefits 75,611 80,037 77,809 75,068 79,109 155,648 156,391

Net occupancy and equipment 8,046 7,833 8,223 8,644 9,190 15,879 18,170

Credit and debit card, data processing and software amortization 8,718 8,233 8,442 8,776 11,690 16,951 23,111

Regulatory assessments and FDIC insurance 2,670 2,670 2,670 2,512 2,601 5,340 4,679

Core deposit intangibles amortization 2,887 2,931 3,243 3,270 3,293 5,818 6,656

Depreciation 4,513 4,540 4,261 4,605 4,598 9,053 9,366

Communications 2,982 2,899 2,931 3,027 3,324 5,881 6,519

Other real estate expense 198 244 279 258 40 442 86

Net (gain) loss on sale or write-down of other real estate (1,839) (887) (195) (137) 4 (2,726) (126)

Merger related expenses - - - - 7,474 - 8,018

Other noninterest expense 11,405 10,576 12,542 11,896 13,045 21,981 26,239

Total noninterest expense 115,191 119,076 120,205 117,919 134,368 234,267 259,109

Income before income taxes 165,764 169,514 173,976 165,118 140,262 335,278 305,940

Provision for income taxes 35,153 36,205 36,885 35,054 9,361 71,358 44,191

Net income available to common shareholders $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 130,901 $ 263,920 $ 261,749

Interest income on securities was reduced by net premium amortization of $14,436, $12,844, $11,509, $10,089 and $9,224 for the three months ended(C) June 30, 2021, March 31, 2021, December 31, 2020, September 30, 2020 and June 30, 2020, respectively, and $27,280 and $17,229 for the six months ended June 30, 2021 and June 30, 2020, 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, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Jun 30, 2021 Jun 30, 2020

Profitability

Net income ^(D) (E) $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 130,901 $ 263,920 $ 261,749

Basic earnings per share $ 1.41 $ 1.44 $ 1.48 $ 1.40 $ 1.41 $ 2.84 $ 2.80

Diluted earnings per share $ 1.41 $ 1.44 $ 1.48 $ 1.40 $ 1.41 $ 2.84 $ 2.80

Return on average assets ^(F) 1.45 % 1.54 % 1.63 % 1.58 % 1.61 % ^(J) 1.49 % 1.64 % ^(J)

Return on average common equity ^(F) 8.31 % 8.60 % 8.98 % 8.64 % 8.84 % ^(J) 8.46 % 8.85 % ^(J)

Return on average tangible common equity ^(F)^ ^(G) 17.49 % 18.43 % 19.57 % 19.19 % 19.98 % ^(J) 17.95 % 20.07 % ^(J)

Tax equivalent net interest margin ^(D) (E)^ ^(H) 3.11 % 3.41 % 3.49 % 3.57 % 3.69 % 3.26 % 3.75 %

Efficiency ratio ^(G) (I) 40.96 % 41.25 % 40.77 % 40.17 % 46.56 % ^(K) 41.11 % 44.72 % ^(K)

Liquidity and Capital Ratios

Equity to assets 17.48 % 17.50 % 18.00 % 18.18 % 18.04 % 17.48 % 18.04 %

Common equity tier 1 capital 15.26 % 14.60 % 13.74 % 13.17 % 12.29 % 15.26 % 12.29 %

Tier 1 risk-based capital 15.26 % 14.60 % 13.74 % 13.17 % 12.29 % 15.26 % 12.29 %

Total risk-based capital 15.71 % 15.07 % 14.23 % 14.28 % 13.36 % 15.71 % 13.36 %

Tier 1 leverage capital 9.50 % 9.68 % 9.67 % 9.57 % 9.41 % 9.50 % 9.41 %

Period end tangible equity to period end tangible assets ^(G) 9.18 % 9.05 % 9.19 % 9.12 % 8.89 % 9.18 % 8.89 %

Other Data

Weighted-average shares used in computing earnings per common share

Basic 92,935 92,854 92,559 92,656 92,658 92,895 93,514

Diluted 92,935 92,854 92,559 92,656 92,658 92,895 93,514

Period end shares outstanding 92,935 92,929 92,571 92,562 92,660 92,935 92,660

Cash dividends paid per common share $ 0.49 $ 0.49 $ 0.49 $ 0.46 $ 0.46 $ 0.98 $ 0.92

Book value per common share $ 67.90 $ 66.95 $ 66.23 $ 65.20 $ 64.19 $ 67.90 $ 64.19

Tangible book value per common share ^(G) $ 32.40 $ 31.42 $ 30.53 $ 29.46 $ 28.45 $ 32.40 $ 28.45

Common Stock Market Price

High $ 78.06 $ 83.02 $ 70.38 $ 60.63 $ 72.95 $ 83.02 $ 75.22

Low $ 69.83 $ 66.45 $ 50.43 $ 48.80 $ 43.68 $ 66.45 $ 42.02

Period end closing price $ 71.80 $ 76.16 $ 69.36 $ 51.83 $ 59.38 $ 71.80 $ 59.38

Employees - FTE (excluding overtime) 3,724 3,724 3,756 3,716 3,793 3,724 3,793

Number of banking centers 274 275 275 275 275 274 275

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

Three Months Ended Year-to-Date

Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Jun 30, 2021 Jun 30, 2020

Loan discount accretion

ASC 310-20 $9,731 $13,313 $13,514 $16,729 $17,999 $23,044 $40,462

ASC 310-30 $2,462 $3,027 $2,545 $5,805 $6,267 $5,489 $12,286

Securities net amortization $171 $111 $66 $116 $203 $282 $397

Time deposits amortization $327 $507 $790 $1,240 $1,793 $834 $4,063

Using effective tax rate of 21.2%, 21.4%, 21.2%, 21.2% and 6.7% for the three months ended June 30, 2021, March 31, 2021, December 31, 2020,(E) September 30, 2020 and June 30, 2020, respectively, and 21.3% and 14.4% for the six months ended June 30, 2021 and June 30, 2020, respectively. Net income for the second quarter of 2020 includes a tax benefit for NOL due to the CARES Act.

(F) Interim periods annualized.

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

(H) 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(I) 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(J) expenses, net of tax, and NOL tax benefit, 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 expenses,(K) 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

Jun 30, 2021 Mar 31, 2021 Jun 30, 2020

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

Interest-earning assets:

Loans held for sale $ 13,716 $ 109 3.19% $ 33,327 $ 238 2.90% $ 63,338 $ 523 3.32%

Loans held for investment 17,305,259 200,817 4.65% 17,279,066 213,978 5.02% 18,135,226 228,062 5.06%

Loans held for investment - Warehouse Purchase Program 1,984,305 15,877 3.21% 2,369,601 18,859 3.23% 1,843,097 14,187 3.10%

Total Loans 19,303,280 216,803 4.50% 19,681,994 233,075 4.80% 20,041,661 242,772 4.87%

Investment securities 11,180,948 43,708 1.57% ^(M) 9,148,841 38,677 1.71% ^(M) 8,054,008 43,776 2.19% ^(M)

Federal funds sold and other earning assets 1,221,993 340 0.11% 1,506,645 351 0.09% 172,761 45 0.10%

Total interest-earning assets 31,706,221 260,851 3.30% 30,337,480 272,103 3.64% 28,268,430 286,593 4.08%

Allowance for credit losses (306,059) (315,590) (325,720)

Noninterest-earning assets 4,695,860 4,522,470 4,562,016

Total assets $ 36,096,022 $ 34,544,360 $ 32,504,726

Interest-bearing liabilities:

Interest-bearing demand deposits $ 6,281,068 $ 5,471 0.35% $ 6,112,469 $ 5,943 0.39% $ 4,949,023 $ 4,621 0.38%

Savings and money market deposits 9,872,624 5,490 0.22% 9,420,064 5,753 0.25% 8,537,352 8,745 0.41%

Certificates and other time deposits 2,980,186 4,327 0.58% 3,031,621 5,666 0.76% 3,224,196 11,903 1.48%

Other borrowings - - - - - - 474,867 533 0.45%

Securities sold under repurchase agreements 383,975 164 0.17% 376,662 159 0.17% 365,077 337 0.37%

Subordinated notes - - - - - - 125,475 1,499 4.80%

Total interest-bearing liabilities 19,517,853 15,452 0.32% ^(N) 18,940,816 17,521 0.38% ^(N) 17,675,990 27,638 0.63% ^(N)

Noninterest-bearing liabilities:

Noninterest-bearing demand deposits 10,062,085 9,206,791 8,583,734

Allowance for credit losses on off-balance sheet credit exposures 29,947 29,947 29,947

Other liabilities 198,748 169,138 289,899

Total liabilities 29,808,633 28,346,692 26,579,570

Shareholders' equity 6,287,389 6,197,668 5,925,156

Total liabilities and shareholders' equity $ 36,096,022 $ 34,544,360 $ 32,504,726

Net interest income and margin $ 245,399 3.10% $ 254,582 3.40% $ 258,955 3.68%

Non-GAAP to GAAP reconciliation:

Tax equivalent adjustment 586 635 690

Net interest income and margin (tax equivalent basis) $ 245,985 3.11% $ 255,217 3.41% $ 259,645 3.69%

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

Yield on securities was impacted by net premium amortization of $14,436,(M) $12,844 and $9,224 for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively.

Total cost of funds, including noninterest bearing deposits, was 0.21%,(N) 0.25% and 0.42% for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

YIELD ANALYSIS Year-to-Date

Jun 30, 2021 Jun 30, 2020

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

Interest-earning assets:

Loans held for sale $ 23,468 $ 347 2.98% $ 65,128 $ 1,155 3.57%

Loans held for investment 17,292,235 414,795 4.84% 17,699,162 464,579 5.28%

Loans held for investment - Warehouse Purchase Program 2,175,888 34,736 3.22% 1,481,710 24,281 3.30%

Total loans 19,491,591 449,878 4.65% 19,246,000 490,015 5.12%

Investment securities 10,170,508 82,385 1.63% ^(P) 8,244,102 92,058 2.25% ^(P)

Federal funds sold and other earning assets 1,363,533 691 0.10% 198,196 758 0.77%

Total interest-earning assets 31,025,632 532,954 3.46% 27,688,298 582,831 4.23%

Allowance for credit losses^(B) (310,798) (326,862)

Noninterest-earning assets 4,609,640 4,569,631

Total assets $ 35,324,474 $ 31,931,067

Interest-bearing liabilities:

Interest-bearing demand deposits $ 6,197,235 $ 11,414 0.37% $ 4,969,700 $ 11,717 0.47%

Savings and money market deposits 9,647,594 11,243 0.24% 8,251,396 22,867 0.56%

Certificates and other time deposits 3,005,761 9,993 0.67% 3,314,472 25,703 1.56%

Other borrowings - - - 653,914 3,465 1.07%

Securities sold under repurchase agreements 380,339 323 0.17% 365,846 1,094 0.60%

Subordinated notes - - - 125,585 2,999 4.80%

Total interest-bearing liabilities 19,230,929 32,973 0.35% ^(Q) 17,680,913 67,845 0.77% ^(Q)

Noninterest-bearing liabilities:

Noninterest-bearing demand deposits 9,636,800 8,037,767

Allowance for credit losses on off-balance sheet credit exposures 29,947 21,478

Other liabilities 184,023 276,211

Total liabilities 29,081,699 26,016,369

Shareholders' equity 6,242,775 5,914,698

Total liabilities and shareholders' equity 35,324,474 $ 31,931,067

Net interest income and margin $ 499,981 3.25% $ 514,986 3.74%

Non-GAAP to GAAP reconciliation:

Tax equivalent adjustment 1,222 1,413

Net interest income and margin (tax equivalent basis) $ 501,203 3.26% $ 516,399 3.75%

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

(P) Yield on securities was impacted by net premium amortization of $27,280 and $17,229 for the six months ended June 30, 2021 and 2020, respectively.

(Q) Total cost of funds, including noninterest bearing deposits, was 0.23% and 0.53% for the six months ended June 30, 2021 and 2020, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended

Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020

YIELD TREND ^(R)

Interest-Earning Assets:

Loans held for sale 3.19 % 2.90 % 3.23 % 3.30 % 3.32 %

Loans held for investment 4.65 % 5.02 % 4.95 % 4.91 % 5.06 %

Loans held for investment - Warehouse Purchase Program 3.21 % 3.23 % 3.20 % 3.18 % 3.10 %

Total loans 4.50 % 4.80 % 4.72 % 4.72 % 4.87 %

Investment securities ^(S) 1.57 % 1.71 % 1.83 % 1.99 % 2.19 %

Federal funds sold and other earning assets 0.11 % 0.09 % 0.11 % 0.09 % 0.10 %

Total interest-earning assets 3.30 % 3.64 % 3.76 % 3.90 % 4.08 %

Interest-Bearing Liabilities:

Interest-bearing demand deposits 0.35 % 0.39 % 0.38 % 0.38 % 0.38 %

Savings and money market deposits 0.22 % 0.25 % 0.30 % 0.35 % 0.41 %

Certificates and other time deposits 0.58 % 0.76 % 0.98 % 1.23 % 1.48 %

Other borrowings - - 5.39 % 1.49 % 0.45 %

Securities sold under repurchase agreements 0.17 % 0.17 % 0.24 % 0.32 % 0.37 %

Subordinated notes - - 4.87 % 4.76 % 4.80 %

Total interest-bearing liabilities 0.32 % 0.38 % 0.46 % 0.54 % 0.63 %

Net Interest Margin 3.10 % 3.40 % 3.48 % 3.56 % 3.68 %

Net Interest Margin (tax equivalent) 3.11 % 3.41 % 3.49 % 3.57 % 3.69 %

(R) 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 $14,436,(S) $12,844, $11,509, $10,089 and $9,224 for the three months ended June 30, 2021, March 31, 2021, December 31, 2020, September 30, 2020 and June 30, 2020, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended

Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020

Balance Sheet Averages

Loans held for sale $ 13,716 $ 33,327 $ 42,856 $ 50,606 $ 63,338

Loans held for investment 17,305,259 17,279,066 17,700,756 18,267,559 18,135,226

Loans held for investment - Warehouse Purchase Program 1,984,305 2,369,601 2,603,455 2,279,461 1,843,097

Total Loans 19,303,280 19,681,994 20,347,067 20,597,626 20,041,661

Investment securities 11,180,948 9,148,841 8,001,679 7,603,762 8,054,008

Federal funds sold and other earning assets 1,221,993 1,506,645 1,094,487 618,228 172,761

Total interest-earning assets 31,706,221 30,337,480 29,443,233 28,819,616 28,268,430

Allowance for credit losses (306,059) (315,590) (322,138) (321,424) (325,720)

Cash and due from banks 521,737 308,787 289,579 267,887 247,426

Goodwill 3,231,637 3,233,231 3,231,850 3,231,976 3,223,469

Core deposit intangibles, net 68,830 71,763 74,919 78,269 81,539

Other real estate 3,001 6,385 14,573 8,061 5,666

Fixed assets, net 326,570 326,004 325,485 325,958 327,811

Other assets 544,085 576,300 633,405 570,495 676,105

Total assets $ 36,096,022 $ 34,544,360 $ 33,690,906 $ 32,980,838 $ 32,504,726

Noninterest-bearing deposits $ 10,062,085 $ 9,206,791 $ 9,103,742 $ 8,980,814 $ 8,583,734

Interest-bearing demand deposits 6,281,068 6,112,469 5,545,298 5,221,722 4,949,023

Savings and money market deposits 9,872,624 9,420,064 9,170,179 8,937,751 8,537,352

Certificates and other time deposits 2,980,186 3,031,621 3,047,475 3,103,290 3,224,196

Total deposits 29,195,963 27,770,945 26,866,694 26,243,577 25,294,305

Other borrowings - - 2,435 13,898 474,867

Securities sold under repurchase agreements 383,975 376,662 376,779 378,888 365,077

Subordinated notes - - 81,570 125,256 125,475

Allowance for credit losses on off-balance sheet credit exposures 29,947 29,947 29,947 29,947 29,947

Other liabilities 198,748 169,138 224,907 167,532 289,899

Shareholders' equity 6,287,389 6,197,668 6,108,574 6,021,740 5,925,156

Total liabilities and equity $ 36,096,022 $ 34,544,360 $ 33,690,906 $ 32,980,838 $ 32,504,726

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020

Period End Balances

Loan Portfolio

Commercial and industrial $ 2,021,951 10.5 % $ 2,104,116 10.7 % $ 2,210,003 10.9 % $ 2,171,302 10.5 % $ 2,214,742 10.5 %

Warehouse purchase program 2,095,559 10.9 % 2,272,389 11.6 % 2,842,379 14.0 % 2,730,614 13.1 % 2,557,183 12.2 %

Construction, land development and other land loans 2,147,474 11.2 % 2,031,355 10.4 % 1,956,960 9.7 % 2,081,762 10.0 % 2,033,037 9.7 %

1-4 family residential 4,531,589 23.5 % 4,310,437 21.9 % 4,253,331 21.0 % 4,189,852 20.1 % 4,184,972 19.9 %

Home equity 637,431 3.3 % 554,278 2.8 % 504,207 2.5 % 477,552 2.3 % 437,098 2.1 %

Commercial real estate (includes multi-family residential) 5,681,184 29.5 % 5,858,475 29.8 % 6,078,764 30.0 % 6,179,901 29.7 % 6,550,086 31.2 %

Agriculture (includes farmland) 590,135 3.1 % 571,783 2.9 % 581,352 2.9 % 598,972 2.9 % 612,694 2.9 %

Consumer and other 264,652 1.4 % 293,023 1.5 % 344,028 1.7 % 367,231 1.8 % 403,462 1.9 %

Energy 501,821 2.6 % 503,947 2.6 % 512,735 2.5 % 604,698 2.9 % 639,402 3.0 %

Paycheck Protection Program 779,989 4.0 % 1,139,083 5.8 % 963,185 4.8 % 1,393,757 6.7 % 1,392,497 6.6 %

Total loans $ 19,251,785 $ 19,638,886 $ 20,246,944 $ 20,795,641 $ 21,025,173

Deposit Types

Noninterest-bearing DDA $ 10,099,149 34.7 % $ 9,820,445 34.1 % $ 9,151,233 33.4 % $ 8,998,328 34.0 % $ 9,040,257 34.6 %

Interest-bearing DDA 6,185,115 21.2 % 6,158,641 21.4 % 5,899,051 21.6 % 5,297,802 20.0 % 5,130,495 19.6 %

Money market 6,706,252 23.0 % 6,714,889 23.4 % 6,381,014 23.3 % 6,324,127 23.9 % 6,148,206 23.5 %

Savings 3,160,606 10.9 % 3,083,447 10.7 % 2,863,086 10.5 % 2,772,492 10.5 % 2,722,718 10.4 %

Certificates and other time deposits 2,959,119 10.2 % 2,985,683 10.4 % 3,066,108 11.2 % 3,066,457 11.6 % 3,111,012 11.9 %

Total deposits $ 29,110,241 $ 28,763,105 $ 27,360,492 $ 26,459,206 $ 26,152,688

Loan to Deposit Ratio 66.1 % 68.3 % 74.0 % 78.6 % 80.4 %

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Construction Loans

Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020

Single family residential construction $ 624,954 29.1 % $ 590,223 29.1 % $ 579,761 29.6 % $ 654,933 31.5 % $ 710,401 34.9 %

Land development 97,709 4.6 % 97,267 4.8 % 103,307 5.3 % 114,937 5.5 % 114,748 5.6 %

Raw land 245,484 11.4 % 243,394 12.0 % 247,628 12.7 % 240,154 11.5 % 274,159 13.5 %

Residential lots 165,645 7.7 % 176,884 8.6 % 158,441 8.1 % 137,615 6.6 % 144,765 7.1 %

Commercial lots 153,714 7.2 % 137,512 6.8 % 114,427 5.8 % 109,569 5.3 % 103,267 5.1 %

Commercial construction and other 860,069 40.0 % 786,192 38.7 % 753,587 38.5 % 825,053 39.6 % 687,618 33.8 %

Net unaccreted discount (101) (117) (191) (499) (1,921)

Total construction loans $ 2,147,474 $ 2,031,355 $ 1,956,960 $ 2,081,762 $ 2,033,037

Non-Owner Occupied Commercial Real Estate Loans by Metropolitan StatisticalArea (MSA) as of June 30, 2021

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

Collateral Type

Shopping center/retail $ 380,117 $ 270,891 $ 52,981 $ 19,350 $ 29,253 $ 297,645 $ 1,050,237

Commercial and industrial buildings 157,719 89,284 20,485 20,970 17,691 172,869 479,018

Office buildings 158,722 494,963 30,440 73,335 4,912 72,207 834,579

Medical buildings 105,852 25,139 2,639 23,839 39,217 78,944 275,630

Apartment buildings 246,330 257,044 24,080 14,993 35,917 162,749 741,113

Hotel 79,503 70,388 43,372 28,996 - 131,253 353,512

Other 76,469 62,065 24,118 8,211 3,560 65,570 239,993

Total $ 1,204,712 $ 1,269,774 $ 198,115 $ 189,694 $ 130,550 $ 981,237 $ 3,974,082 ^(U)

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 Acquisition Acquisition Mar 31, 2021 Jun 30, 2021 Mar 31, 2021 Jun 30, 2021 Mar 31, 2021 Jun 30, 2021 Date Date Date

Loan marks:

Acquired banks ^(V) $ 345,599 $ 26,285 $ 16,535 $ 320,052 $ 11,157 $ 8,695 $ 665,651 $ 37,442 $ 25,230

Acquired portfolio loan balances:

Acquired banks ^(V) 12,286,159 3,339,670 2,913,494 689,573 163,191 144,694 12,975,732 ^(W) 3,502,861 3,058,188

Acquired portfolio loan balances less loan marks $ 11,940,560 $ 3,313,385 $ 2,896,959 $ 369,521 $ 152,034 $ 135,999 $ 12,310,081 $ 3,465,419 $ 3,032,958

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

(U) Represents a portion of total commercial real estate loans of $5.681 billion as of June 30, 2021.

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

(W) Actual principal balances acquired.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended Year-to-Date

Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Jun 30, 2021 Jun 30, 2020

Asset Quality

Nonaccrual loans $ 32,880 $ 43,025 $ 47,185 $ 57,412 $ 62,904 $ 32,880 $ 62,904

Accruing loans 90 or more days past due 330 313 1,699 462 8,691 330 8,691

Total nonperforming loans 33,210 43,338 48,884 57,874 71,595 33,210 71,595

Repossessed assets 310 362 93 120 187 310 187

Other real estate 144 462 10,593 11,548 6,160 144 6,160

Total nonperforming assets $ 33,664 $ 44,162 $ 59,570 $ 69,542 $ 77,942 $ 33,664 $ 77,942

Nonperforming assets:

Commercial and industrial (includes energy) $ 8,613 $ 11,290 $ 16,176 $ 17,273 $ 15,238 $ 8,613 $ 15,238

Construction, land development and other land loans 1,423 1,692 1,566 2,633 10,530 1,423 10,530

1-4 family residential (includes home equity) 11,681 11,920 25,830 29,953 29,812 11,681 29,812

Commercial real estate (includes multi-family residential) 11,266 16,896 12,315 16,069 20,748 11,266 20,748

Agriculture (includes farmland) 661 803 2,075 1,931 1,501 661 1,501

Consumer and other 20 1,561 1,608 1,683 113 20 113

Total $ 33,664 $ 44,162 $ 59,570 $ 69,542 $ 77,942 $ 33,664 $ 77,942

Number of loans/properties 152 167 208 198 213 152 213

Allowance for credit losses at end of period $ 302,884 $ 307,210 $ 316,068 $ 323,635 $ 324,205 $ 302,884 $ 324,205

Net charge-offs (recoveries):

Commercial and industrial (includes energy) $ 3,529 $ 1,584 $ 4,085 $ 8,344 $ 12,206 $ 5,113 $ 12,178

Construction, land development and other land loans (105) (5) (110) 478 (6) (110) (18)

1-4 family residential (includes home equity) (6) 47 1,982 252 51 41 56

Commercial real estate (includes multi-family residential) 517 6,589 626 676 - 7,106 (81)

Agriculture (includes farmland) (9) 33 (4) (17) (3) 24 (4)

Consumer and other 400 610 988 837 753 1,010 1,671

Total $ 4,326 $ 8,858 $ 7,567 $ 10,570 $ 13,001 $ 13,184 $ 13,802

Asset Quality Ratios

Nonperforming assets to average interest-earning assets 0.11 % 0.15 % 0.20 % 0.24 % 0.28 % 0.11 % 0.28 %

Nonperforming assets to loans and other real estate 0.17 % 0.22 % 0.29 % 0.33 % 0.37 % 0.17 % 0.37 %

Net charge-offs to average loans (annualized) 0.09 % 0.18 % 0.15 % 0.21 % 0.26 % 0.14 % 0.14 %

Allowance for credit losses to total loans 1.57 % 1.56 % 1.56 % 1.56 % 1.54 % 1.57 % 1.54 %

Allowance for credit losses to total loans, excluding 1.85 % 1.89 % 1.92 % 1.94 % 1.90 % 1.85 % 1.90 % Warehouse Purchase Program loans and Paycheck Protection Program loans ^(G)

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 tax benefit; return on average assets excludingmerger related expenses, net of tax, and NOL tax benefit; return on averagecommon equity excluding merger related expenses, net of tax, and NOL taxbenefit; return on average tangible common equity; return on average tangiblecommon equity excluding merger related expenses, net of tax, and NOL taxbenefit; tangible book value per share; the tangible equity to tangible assetsratio; allowance for credit losses to total loans excluding Warehouse PurchaseProgram and PPP loans; the efficiency ratio, excluding net gains and losses onthe 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 andsecurities and merger related expenses, for internal planning and forecastingpurposes. In addition, due to the application of purchase accounting,Prosperity uses certain non-GAAP financial measures and ratios that exclude theimpact of these items to evaluate its allowance for credit losses to totalloans (excluding Warehouse Purchase Program loans and PPP loans). Prosperityhas included information below relating to these non-GAAP financial measuresfor the applicable periods presented.

Three Months Ended Year-to-Date

Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Jun 30, 2021 Jun 30, 2020

Reconciliation of diluted earnings per share to diluted

earnings per share, excluding merger related expenses, net of tax, and NOL tax benefit:

Net income $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 130,901 $ 263,920 $ 261,749

Add: merger related expenses, net of tax^(X) - - - - 5,904 - 6,334

Less: NOL tax benefit ^(Y) - - - - (20,145) - (20,145)

Net income, excluding merger related expenses, net of tax, $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 116,660 $ 263,920 $ 247,938 and NOL tax benefit ^(X) (Y)

Weighted average diluted shares outstanding 92,935 92,854 92,559 92,656 92,658 92,895 93,514

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

NOL tax benefit per diluted share ^(X) $ - $ - $ - $ - $ (0.22) $ - $ (0.22)

Diluted earnings per share, excluding merger related $ 1.41 $ 1.44 $ 1.48 $ 1.40 $ 1.25 $ 2.84 $ 2.65 expenses, net of tax, and NOL tax benefit ^(X) (Y)

Reconciliation of return on average assets to return on average assets excluding merger related expenses, net of tax, and NOL tax benefit:

Net income, excluding merger related expenses, net of tax, $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 116,660 $ 263,920 $ 247,938 and NOL tax benefit ^(X) (Y)

Average total assets $ 36,096,022 $ 34,544,360 $ 33,690,906 $ 32,980,838 $ 32,504,726 $ 35,324,474 $ 31,931,067

Return on average assets excluding merger related 1.45 % 1.54 % 1.63 % 1.58 % 1.44 % 1.49 % 1.55 % expenses, net of tax, and NOL tax benefit^ (F) (X) (Y)

Reconciliation of return on average common equity to

return on average common equity excluding

merger related expenses, net of tax, and NOL tax benefit:

Net income, excluding merger related expenses, net of tax, $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 116,660 $ 263,920 $ 247,938 and NOL tax benefit ^(X) (Y)

Average shareholders' equity $ 6,287,389 $ 6,197,668 $ 6,108,574 $ 6,021,740 $ 5,925,156 $ 6,242,775 $ 5,914,698

Return on average common equity excluding merger 8.31 % 8.60 % 8.98 % 8.64 % 7.88 % 8.46 % 8.38 % related expenses, net of tax, and NOL tax benefit ^(F) (X) (Y)

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

Net income $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 130,901 $ 263,920 $ 261,749

Average shareholders' equity $ 6,287,389 $ 6,197,668 $ 6,108,574 $ 6,021,740 $ 5,925,156 $ 6,242,775 $ 5,914,698

Less: Average goodwill and other intangible assets (3,300,467) (3,304,994) (3,306,769) (3,310,245) (3,305,008) (3,302,718) (3,306,753)

Average tangible shareholders' equity $ 2,986,922 $ 2,892,674 $ 2,801,805 $ 2,711,495 $ 2,620,148 $ 2,940,057 $ 2,607,945

Return on average tangible common equity ^(F) 17.49 % 18.43 % 19.57 % 19.19 % 19.98 % 17.95 % 20.07 %

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

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

Three Months Ended Year-to-Date

Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Jun 30, 2021 Jun 30, 2020

Reconciliation of return on average common equity to

return on average tangible common equity excluding merger related expenses, net of tax, and

NOL tax benefit:

Net income, excluding merger related expenses, net of tax, $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 116,660 $ 263,920 $ 247,938 and NOL tax benefit^ (X) (Y)

Average shareholders' equity $ 6,287,389 $ 6,197,668 $ 6,108,574 $ 6,021,740 $ 5,925,156 $ 6,242,775 $ 5,914,698

Less: Average goodwill and other intangible assets (3,300,467) (3,304,994) (3,306,769) (3,310,245) (3,305,008) (3,302,718) (3,306,753)

Average tangible shareholders' equity $ 2,986,922 $ 2,892,674 $ 2,801,805 $ 2,711,495 $ 2,620,148 $ 2,940,057 $ 2,607,945

Return on average tangible common equity excluding 17.49 % 18.43 % 19.57 % 19.19 % 17.81 % 17.95 % 19.01 % merger related expenses, net of tax, and NOL tax benefit ^(F) (X) (Y)

Reconciliation of book value per share to tangible book

value per share:

Shareholders' equity $ 6,310,337 $ 6,221,846 $ 6,130,669 $ 6,034,877 $ 5,948,122 $ 6,310,337 $ 5,948,122

Less: Goodwill and other intangible assets (3,299,053) (3,301,940) (3,304,871) (3,308,170) (3,311,712) (3,299,053) (3,311,712)

Tangible shareholders' equity $ 3,011,284 $ 2,919,906 $ 2,825,798 $ 2,726,707 $ 2,636,410 $ 3,011,284 $ 2,636,410

Period end shares outstanding 92,935 92,929 92,571 92,562 92,660 92,935 92,660

Tangible book value per share $ 32.40 $ 31.42 $ 30.53 $ 29.46 $ 28.45 $ 32.40 28.45

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

Tangible shareholders' equity $ 3,011,284 $ 2,919,906 $ 2,825,798 $ 2,726,707 $ 2,636,410 $ 3,011,284 $ 2,636,410

Total assets $ 36,099,924 $ 35,558,418 $ 34,059,275 $ 33,197,599 $ 32,966,649 $ 36,099,924 $ 32,966,649

Less: Goodwill and other intangible assets (3,299,053) (3,301,940) (3,304,871) (3,308,170) (3,311,712) (3,299,053) (3,311,712)

Tangible assets $ 32,800,871 $ 32,256,478 $ 30,754,404 $ 29,889,429 $ 29,654,937 $ 32,800,871 $ 29,654,937

Period end tangible equity to period end tangible assets ratio 9.18 % 9.05 % 9.19 % 9.12 % 8.89 % 9.18 % 8.89 %

Reconciliation of allowance for credit losses to total loans to allowance for credit losses to total loans,

excluding Warehouse Purchase Program and

Paycheck Protection Program loans:

Allowance for credit losses $ 302,884 $ 307,210 $ 316,068 $ 323,635 $ 324,205 $ 302,884 $ 324,205

Total loans $ 19,251,785 $ 19,638,886 $ 20,246,944 $ 20,795,641 $ 21,025,173 $ 19,251,785 $ 21,025,173

Less: Warehouse Purchase Program loans (2,095,559) (2,272,389) (2,842,379) (2,730,614) (2,557,183) (2,095,559) 2,557,183

Less: Paycheck Protection Program loans (779,989) (1,139,083) (963,185) (1,393,757) (1,392,497) (779,989) 1,392,497

Total loans less Warehouse Purchase Program and $ 16,376,237 $ 16,227,414 $ 16,441,380 $ 16,671,270 $ 17,075,493 $ 16,376,237 $ 17,075,493 Paycheck Protection Program loans

Allowance for credit losses to total loans, excluding 1.85 % 1.89 % 1.92 % 1.94 % 1.90 % 1.85 % 1.90 % Warehouse Purchase Program and Paycheck Protection Program loans

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

Noninterest expense $ 115,191 $ 119,076 $ 120,205 $ 117,919 $ 134,368 $ 234,267 $ 259,109

Net interest income $ 245,399 $ 254,582 $ 257,634 $ 258,113 $ 258,955 $ 499,981 $ 514,986

Noninterest income 35,556 34,008 36,547 34,924 25,675 69,564 60,063

Less: net loss on sale or write down of assets (244) (79) (675) (528) (3,945) (323) (4,330)

Noninterest income excluding net gains and losses on the 35,800 34,087 37,222 35,452 29,620 69,887 64,393 sale or write down of assets and securities

Total income excluding net gains and losses on the $ 281,199 $ 288,669 $ 294,856 $ 293,565 $ 288,575 $ 569,868 $ 579,379 sale or write down of assets and taxes

Efficiency ratio, excluding net gains and losses on the 40.96 % 41.25 % 40.77 % 40.17 % 46.56 % 41.11 % 44.72 % sale or write down of assets and taxes

Three Months Ended Year-to-Date

Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Jun 30, 2021 Jun 30, 2020

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

Noninterest expense $ 115,191 $ 119,076 $ 120,205 $ 117,919 $ 134,368 $ 234,267 $ 259,109

Less: merger related expenses - - - - 7,474 - 8,018

Noninterest expense excluding merger related expenses $ 115,191 $ 119,076 $ 120,205 $ 117,919 $ 126,894 $ 234,267 $ 251,091

Net interest income $ 245,399 $ 254,582 $ 257,634 $ 258,113 $ 258,955 $ 499,981 $ 514,986

Noninterest income 35,556 34,008 36,547 34,924 25,675 69,564 60,063

Less: net loss on sale or write down of assets (244) (79) (675) (528) (3,945) (323) (4,330)

Noninterest income excluding net gains and losses on the 35,800 34,087 37,222 35,452 29,620 69,887 64,393 sale or write down of assets and taxes

Total income excluding net gains and losses on the $ 281,199 $ 288,669 $ 294,856 $ 293,565 $ 288,575 $ 569,868 $ 579,379 sale or write down of assets and taxes

Efficiency ratio, excluding net gains and losses on the 40.96 % 41.25 % 40.77 % 40.17 % 43.97 % 41.11 % 43.34 % sale or write down of assets, taxes and merger related expenses

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SOURCE Prosperity Bancshares, Inc.