PR Newswire | Oct 27, 2021 06:30AM EDT

10/27 05:30 CDT

Prosperity Bancshares, Inc.(r) Reports Third Quarter 2021 Earnings- Third quarter earnings per share (diluted) of $1.39- Third quarter net income of $128.6 million- Loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, increased $217.6 million or 1.3% (5.3% annualized) during the third quarter 2021- Deposits increased $341.4 million or 1.2% (4.7% annualized) during the third quarter 2021- Allowance for credit losses on loans and on off-balance sheet credit exposure of $317.1 million- Allowance for credit losses to total loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, of 1.73%(1)- Nonperforming assets remain low at 0.11% of third quarter average interest-earning assets- Return (annualized) on third quarter average assets of 1.42%- Returns (annualized) on third quarter average common equity of 8.07% and average tangible common equity of 16.72%(1)- Repurchased 767,134 shares during the third quarter 2021- Increase in dividend of 6.1% to $0.52 for the fourth quarter 2021 HOUSTON, Oct. 27, 2021

HOUSTON, Oct. 27, 2021 /PRNewswire/ -- Prosperity Bancshares, Inc.(r) (NYSE: PB), the parent company of Prosperity Bank(r) (collectively, "Prosperity"), reported net income of $128.6 million for the quarter ended September 30, 2021 compared with $130.1 million for the same period in 2020. Net income per diluted common share was $1.39 for the quarter ended September 30, 2021, compared with $1.40 for the same period in 2020, and the annualized return on third quarter average assets was 1.42%. Additionally, loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program ("PPP") loans, increased $217.6 million or 1.3% (5.3% annualized) and deposits increased $341.4 million or 1.2% (4.7% annualized) during the third quarter of 2021. Nonperforming assets remain low at 0.11% of third quarter average interest-earning assets.

"I am pleased to report that the Board of Directors has voted to increase the fourth quarter dividend to $0.52 a share, a 6.1% increase from the third quarter. The increase represents the confidence the Board has in Prosperity's continuing success. Additionally, Prosperity Bancshares repurchased 767,134 shares of its stock during the third quarter 2021 at an average price of $67.87," said David Zalman, Prosperity's Senior Chairman and Chief Executive Officer.

"Prosperity Bank was ranked by Forbes as the 2nd Best Bank in America for 2021 and has been in the Top 10 of Forbes' list since 2010," continued Zalman.

"The Texas and Oklahoma economies continue to benefit by companies relocating from states with higher taxes and more regulation. Texas is projected to increase jobs by 493,000 in 2021. This increase, combined with people moving to the state, requires additional housing and infrastructure, a driver for loans and increased business opportunities. We are seeing higher prices for most crops and higher oil prices, which should help local economies. Inflation continues to be higher than we would like, but we hope that it will moderate next year as the Federal Reserve begins tapering its asset purchases as expected. We believe there are also signs that inventories are starting to increase and supply chains are improving, although it will take some time to stabilize and return to normal," added Zalman.

"Prosperity continues to exhibit solid operating metrics in net income, return on tangible equity and return on assets, and maintain sound credit quality, with low nonperforming assets. Net interest margins have been stressed throughout the low-rate environment, however we believe this should improve if interest rates rise as projected," stated Zalman.

"We look forward to continuing to build our company through organic growth as well as mergers and acquisitions, when they make sense and are appropriately accretive to earnings. Thank you to our customers for their loyalty and business and to our associates and board members for their work and dedication," concluded Zalman.

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

Net income was $128.6 million(2) for the three months ended September 30, 2021 compared with $130.1 million(3) for the same period in 2020, a decrease of $1.5 million or 1.1%. The change was primarily due to decreases in loan income and loan discount accretion of $17.2 million, partially offset by an increase in securities income and a decrease in interest expenses. Net income per diluted common share was $1.39 for the three months ended September 30, 2021 compared with $1.40 for the same period in 2020, a decrease of 0.7%. Net income was $128.6 million(2) for the three months ended September 30, 2021 compared with $130.6 million(4) for the three months ended June 30, 2021, a decrease of $2.0 million or 1.5%. The change was primarily due to a decrease in loan discount accretion of $6.8 million, partially offset by an increase in securities income and a decrease in interest expense. Net income per diluted common share was $1.39 for the three months ended September 30, 2021 compared with $1.41 for the three months ended June 30, 2021, a decrease of 1.4%. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended September 30, 2021 were 1.42%, 8.07% and 16.72%(1), respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 42.34%(1) for the three months ended September 30, 2021.

Net interest income before provision for credit losses for the three months ended September 30, 2021 was $248.6 million compared with $258.1 million for the same period in 2020, a decrease of $9.5 million or 3.7%. The change was primarily due to a decrease in the average balance and average rate on loans and a decrease in loan discount accretion of $17.2 million, partially offset by an increase in the average investment securities balance and a decrease in the average rate on interest-bearing liabilities. On a linked quarter basis, net interest income before provision for credit losses was $248.6 million compared with $245.4 million for the three months ended June 30, 2021, an increase of $3.2 million or 1.3%. The change was primarily due to a decrease in the average rate on interest-bearing liabilities and an increase in average investment securities balance, partially offset by a $6.8 million decrease in loan discount accretion.

The net interest margin on a tax equivalent basis was 3.10% for the three months ended September 30, 2021 compared with 3.57% for the same period in 2020. The change was primarily due to a decrease in the average rate on loans and a decrease in loan discount accretion of $17.2 million, partially offset by an increase in the average investment securities balance and 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 3.10% for the three months ended September 30, 2021 compared with 3.11% for the three months ended June 30, 2021.

Noninterest income was $34.6 million for the three months ended September 30, 2021 compared with $34.9 million for the same period in 2020, a decrease of $279 thousand or 0.8%. On a linked quarter basis, noninterest income decreased $911 thousand or 2.6% to $34.6 million compared with $35.6 million for the three months ended June 30, 2021. This change was primarily due to a decrease in mortgage income and decrease in other noninterest income, partially offset by an increase in nonsufficient funds ("NSF") fees.

Noninterest expense was $119.8 million for the three months ended September 30, 2021 compared with $117.9 million for the same period in 2020, an increase of $1.9 million or 1.6%. This increase was primarily due to an increase in salaries and benefits, partially offset by a decrease in other noninterest expense. On a linked quarter basis, noninterest expense increased $4.6 million or 4.0% to $119.8 million compared with $115.2 million for the three months ended June 30, 2021. This increase was primarily due to an increase in salaries and benefits and gains on sale of other real estate of $1.8 million recorded during the second quarter of 2021.

Results of Operations for the Nine Months Ended September 30, 2021

Net income was $392.5 million(5) for the nine months ended September 30, 2021 compared with $391.8 million(6) for the same period in 2020, an increase of $697 thousand or 0.2%. Net income per diluted common share was $4.23 for the nine months ended September 30, 2021 compared with $4.20 for the same period in 2020, an increase of 0.7%. Annualized returns on average assets, average common equity and average tangible common equity for the nine months ended September 30, 2021 were 1.47%, 8.32% and 17.53%(1), respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 41.52%(1) for the nine months ended September 30, 2021.

Net interest income before provision for credit losses for the nine months ended September 30, 2021 was $748.5 million compared with $773.1 million for the prior year, a decrease of $24.6 million or 3.2%. The change was primarily due to a decrease in the average rate on interest-earning assets and a decrease in loan discount accretion of $41.4 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 nine months ended September 30, 2021 was 3.20% compared with 3.69% for the same period in 2020. The change was primarily due to a decrease in the average rate on loans, a decrease in loan discount accretion of $41.4 million, lower rates on investment 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 $104.2 million for the nine months ended September 30, 2021 compared with $95.0 million for the same period in 2020, an increase of $9.2 million or 9.7%. This increase was primarily due to lower net loss on write-down of assets, an increase in credit card, debit card and ATM card income and an increase in other noninterest income.

Noninterest expense was $354.1 million for the nine months ended September 30, 2021 compared with $377.0 million for the same period in 2020, a decrease of $22.9 million or 6.1%. 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 and net gains on sale of other real estate of $2.7 million, partially offset by an increase in salaries and benefits.

Balance Sheet Information

At September 30, 2021, Prosperity had $36.512 billion in total assets, an increase of $3.315 billion or 10.0% compared with $33.198 billion at September 30, 2020.

Loans at September 30, 2021 were $18.958 billion, a decrease of $1.838 billion or 8.8%, compared with $20.796 billion at September 30, 2020, primarily due to a decrease in commercial real estate, PPP and Warehouse Purchase Program loans, partially offset by an increase in 1-4 family residential loans. Linked quarter loans decreased $294.1 million or 1.5% from $19.252 billion at June 30, 2021, primarily due to a $414.1 million decrease in PPP loans. At September 30, 2021, the Company had $365.8 million of PPP loans compared to $1.394 billion of PPP loans at September 30, 2020 and $780.0 million of PPP loans at June 30, 2021. Linked quarter loans, excluding Warehouse Purchase Program and PPP loans, increased $217.6 million or 1.3% (5.3% annualized) from $16.376 billion at June 30, 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 September 30, 2021, oil and gas loans totaled $569.3 million (net of discount and excluding PPP loans totaling $55.8 million) or 3.0% of total loans, of which $352.4 million were production loans and $216.9 million were servicing loans, compared with total oil and gas loans of $604.7 million (net of discount and excluding PPP loans totaling $115.3 million) or 2.9% of total loans at September 30, 2020, of which $359.6 million were production loans and $245.1 million were servicing loans. In addition, as of September 30, 2021, Prosperity had total unfunded commitments to oil and gas companies of $363.3 million compared with total unfunded commitments to oil and gas companies of $258.1 million as of September 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 September 30, 2021, loans to hotels totaled $407.1 million (excluding PPP loans totaling $5.7 million) or 2.1% of total loans, an increase of $20.8 million or 5.4%, compared with $386.3 million (excluding PPP loans totaling $8.8 million) at September 30, 2020. At September 30, 2021, loans to restaurants totaled $198.2 million (excluding PPP loans totaling $49.7 million) or 1.0% of total loans, a decrease of $16.9 million or 7.9%, compared with $215.1 million (excluding PPP loans totaling $110.9 million) at September 30, 2020.

Deposits at September 30, 2021 were $29.452 billion, an increase of $2.992 billion or 11.3%, compared with $26.459 billion at September 30, 2020. Linked quarter deposits increased $341.4 million or 1.2% (4.7% annualized) from $29.110 billion at June 30, 2021.

Asset Quality

Nonperforming assets totaled $36.5 million or 0.11% of quarterly average interest-earning assets at September 30, 2021, compared with $69.5 million or 0.24% of quarterly average interest-earning assets at September 30, 2020, and $33.7 million or 0.11% of quarterly average interest-earning assets at June 30, 2021.

The allowance for credit losses on loans was $287.2 million or 1.51% of total loans at September 30, 2021 compared with $302.9 million or 1.57% of total loans at June 30, 2021 and $323.6 million or 1.56% of total loans at September 30, 2020. The allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program and PPP loans, was 1.73%(1) at September 30, 2021 compared with 1.94%(1) at September 30, 2020 and 1.85%(1) at June 30, 2021.

There was no provision for credit losses for the three months ended September 30, 2021 compared with $10.0 million for the three months ended September 30, 2020 and no provision for credit losses for the three months ended June 30, 2021. There was no provision for credit losses for the nine months ended September 30, 2021 compared with $20.0 million for the nine months ended September 30, 2020.

Net charge-offs were $15.7 million for the three months ended September 30, 2021 compared with net charge-offs of $10.6 million for the three months ended September 30, 2020 and net charge-offs of $4.3 million for the three months ended June 30, 2021. Net charge-offs for the third quarter of 2021 included $4.6 million related to resolved purchased credit deteriorated ("PCD") loans and $10.8 million related to the partial charge-off of one commercial real estate loan obtained through acquisition. The PCD loans had specific reserves of $3.1 million, of which $2.2 million was allocated to the charge-offs and $944 thousand was moved to the general reserve. Further, an additional $14.3 million of specific reserves on resolved PCD loans without any related charge-offs was released to the general reserve.

Net charge-offs were $28.9 million for the nine months ended September 30, 2021 compared with $24.4 million for the nine months ended September 30, 2020. Net charge-offs for the nine months ended September 30, 2021 included $12.7 million related to resolved PCD loans and $10.8 million related to the partial charge-off of one commercial real estate loan obtained through acquisition. The PCD loans had specific reserves of $12.9 million, of which $9.9 million was allocated to the charge-offs and $3.0 million was moved to the general reserve. Further, an additional $19.9 million of specific reserves on resolved PCD loans without any related charge-offs was released to the general reserve.

Dividend

Prosperity Bancshares declared a fourth quarter cash dividend of $0.52 per share to be paid on January 3, 2022 to all shareholders of record as of December 15, 2021.

Stock Repurchase Program

On January 26, 2021, Prosperity Bancshares announced a stock repurchase program under which up to 5%, or approximately 4.65 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 26, 2022, at the discretion of management. Prosperity Bancshares repurchased 767,134 shares of its common stock at an average weighted price of $67.87 per share during the three and nine months ended September 30, 2021.

COVID-19 Pandemic

Prosperity continues to monitor the latest developments regarding COVID-19. As of September 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 September 30, 2021, had an outstanding balance of 3,233 loans totaling $365.8 million.

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 September 30, 2021, Prosperity had approximately $79.5 million in outstanding loans subject to deferral and modification agreements.

Conference Call

Prosperity's management team will host a conference call on Wednesday, October 27, 2021 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity's third 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 0916027.

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, Webcasts & 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 September 30, 2021, Prosperity Bancshares, Inc.(r) is a $36.512 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.

Prosperity currently operates 273 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 63 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.

______________

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 $4.3 million, net of tax,(2) primarily comprised of loan discount accretion of $5.4 million for the three months ended September 30, 2021.

Includes purchase accounting adjustments of $18.7 million, net of tax,(3) primarily comprised of loan discount accretion of $22.5 million for the three months ended September 30, 2020.

Includes purchase accounting adjustments of $9.8 million, net of tax,(4) primarily comprised of loan discount accretion of $12.2 million for the three months ended June 30, 2021.

Includes purchase accounting adjustments of $27.3 million, net of tax,(5) primarily comprised of loan discount accretion of $33.9 million for the nine months ended September 30, 2021.

Includes purchase accounting adjustments of $63.3 million, net of tax,(6) primarily comprised of loan discount accretion of $75.3 million, and merger related expenses of $8.0 million for the nine months ended September 30, 2020.

Bryan/College Station Area Garland Mount Vernon Liberty North University

Bryan Grapevine Palestine Magnolia Texas Tech Student Union

Bryan-29^th Street Grapevine Main Rusk Magnolia Parkway

Bryan-East Kiest Seven Points Mont Belvieu Midland

Bryan-North Lake Highlands Teague Nederland Wadley

Caldwell McKinney Tyler-Beckham Needville Wall Street

College Station McKinney Eldorado Tyler-South Broadway Rosenberg

Crescent Point McKinney Redbud Tyler-University Shadow Creek Odessa

Hearne North Carrolton Winnsboro Spring Grandview

Huntsville Oak Cliff Tomball Grant

Madisonville Park Cities Houston Area Waller Kermit Highway

Navasota Plano Houston West Columbia Parkway

New Waverly Plano-West Aldine Wharton

Rock Prairie Preston Forest Alief Winnie Other West Texas Area

Southwest Parkway Preston Parker Bellaire Wirt Locations

Tower Point Preston Royal Beltway Big Spring

Wellborn Road Red Oak Clear Lake South Texas Area - Brownfield

Richardson Copperfield Corpus Christi Brownwood

Central Texas Area Richardson-West Cypress Calallen Cisco

Austin Rosewood Court Downtown Carmel Comanche

Allandale The Colony Eastex Northwest Early

Cedar Park Tollroad Fairfield Saratoga Floydada

Congress Trinity Mills First Colony Timbergate Gorman

Lakeway Turtle Creek Fry Road Water Street Levelland

Liberty Hill West 15th Plano Gessner Littlefield

Northland West Allen Gladebrook Victoria Merkel

Oak Hill Westmoreland Grand Parkway Victoria Main Plainview

Research Blvd Wylie Heights Victoria-Navarro San Angelo

Westlake Highway 6 West Victoria-North Slaton

Fort Worth Little York Victoria Salem Snyder

Other Central Texas Area Haltom City Medical Center

Locations Hulen Memorial Drive Other South Texas Area Oklahoma

Bastrop Keller Northside Locations Central Oklahoma Area

Canyon Lake Museum Place Pasadena Alice Oklahoma City

Dime Box Renaissance Square Pecan Grove Aransas Pass 23^rd Street

Dripping Springs Roanoke Pin Oak Beeville Expressway

Elgin Stockyards River Oaks Colony Creek I-240

Flatonia Sugar Land Cuero Memorial

Georgetown Other Dallas/Fort Worth Area SW Medical Center Edna

Gruene Locations Tanglewood Goliad Other Central Oklahoma Area

Kingsland Arlington The Plaza Gonzales Locations

La Grange Azle Uptown Hallettsville Edmond

Lexington Ennis Waugh Drive Kingsville Norman

New Braunfels Gainesville Westheimer Mathis

Pleasanton Glen Rose West University Padre Island Tulsa Area

Round Rock Granbury Woodcreek Palacios Tulsa

San Antonio Grand Prairie Port Lavaca Garnett

Schulenburg Jacksboro Katy Portland Harvard

Seguin Mesquite Cinco Ranch Rockport Memorial

Smithville Muenster Katy-Spring Green Sinton Sheridan

Thorndale Runaway Bay Taft S. Harvard

Weimar Sanger The Woodlands Yoakum Utica Tower

Waxahachie The Woodlands-College Park Yorktown Yale

Dallas/Fort Worth Area Weatherford The Woodlands-I-45

Dallas The Woodlands-Research Forest West Texas Area Other Tulsa Area Locations

14th Street Plano East Texas Area Abilene Owasso

Abrams Centre Athens Other Houston Area Antilley Road

Addison Blooming Grove Locations Barrow Street

Allen Canton Angleton Cypress Street

Balch Springs Carthage Bay City Judge Ely

Camp Wisdom Corsicana Beaumont Mockingbird

Carrollton Crockett Cleveland

Cedar Hill Eustace East Bernard Lubbock

Coppell Gilmer El Campo 4th Street

East Plano Grapeland Dayton 66th Street

Euless Gun Barrel City Galveston 82nd Street

Frisco Jacksonville Groves 86th Street

Frisco Warren Kerens Hempstead 98^th Street

Frisco-West Longview Hitchcock Avenue Q

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(In thousands)

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

Balance Sheet Data(at period end)

Loans held for sale $ 10,197 $ 9,080 $ 20,991 $ 46,777 $ 51,694

Loans held for 16,949,486 17,147,146 17,345,506 17,357,788 18,013,333investment

Loans held forinvestment - 1,998,049 2,095,559 2,272,389 2,842,379 2,730,614Warehouse PurchaseProgram

Total loans 18,957,732 19,251,785 19,638,886 20,246,944 20,795,641

Investment 12,629,368 11,918,691 10,088,002 8,542,820 7,431,495securities^(A)

Federal funds sold 237 281 8,986 553 56,469

Allowance for (287,187) (302,884) (307,210) (316,068) (323,635)credit losses

Cash and due from 1,055,386 1,059,879 1,947,235 1,342,996 1,031,193banks

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

Core deposit 64,539 67,417 70,304 73,235 76,478intangibles, net

Other real estate 150 144 462 10,593 11,548owned

Fixed assets, net 322,799 324,502 326,970 323,572 325,994

Other assets 537,459 548,473 553,147 602,994 560,724

Total assets $ 36,512,119 $ 36,099,924 $ 35,558,418 $ 34,059,275 $ 33,197,599

Noninterest-bearing $ 10,326,489 $ 10,099,149 $ 9,820,445 $ 9,151,233 $ 8,998,328deposits

Interest-bearing 19,125,163 19,011,092 18,942,660 18,209,259 17,460,878deposits

Total deposits 29,451,652 29,110,241 28,763,105 27,360,492 26,459,206

Other borrowings - - - - 2,570

Securities soldunder repurchase 440,969 433,069 377,106 389,583 380,274agreements

Subordinated notes - - - - 125,146

Allowance forcredit losses on 29,947 29,947 29,947 29,947 29,947off-balance sheetcredit exposures

Other liabilities 244,110 216,330 166,414 148,584 165,579

Total liabilities 30,166,678 29,789,587 29,336,572 27,928,606 27,162,722

Shareholders' 6,345,441 6,310,337 6,221,846 6,130,669 6,034,877equity^(B)

Total liabilities $ 36,512,119 $ 36,099,924 $ 35,558,418 $ 34,059,275 $ 33,197,599and equity

(A) Includes $2,483, $1,394, $970, $974 and $(442) in unrealized gains (losses)on available for sale securities for the quarterly periods ended September 30,2021, June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020,respectively.

(B) Includes $1,961, $1,101, $766, $769 and $(349) in after-tax unrealizedgains (losses) on available for sale securities for the quarterly periods endedSeptember 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020 andSeptember 30, 2020, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(In thousands)

Three Months Ended Year-to-Date

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

IncomeStatement Data

Interestincome:

Loans $ 213,821 $ 216,803 $ 233,075 $ 241,625 $ 244,255 $ 663,699 $ 734,270

Securities^(C) 46,217 43,708 38,677 36,721 38,033 128,602 130,091

Federal fundssold and other 302 340 351 301 144 993 902earning assets

Total interest 260,340 260,851 272,103 278,647 282,432 793,294 865,263income

Interestexpense:

Deposits 11,578 15,288 17,362 19,757 22,458 44,228 82,745

Other - - - 33 52 - 3,517borrowings

Securitiessold under 195 164 159 224 309 518 1,403repurchaseagreements

Subordinatednotes and - - - 999 1,500 - 4,499trustpreferred

Total interest 11,773 15,452 17,521 21,013 24,319 44,746 92,164expense

Net interest 248,567 245,399 254,582 257,634 258,113 748,548 773,099income

Provision for - - - - 10,000 - 20,000credit losses

Net interestincome after 248,567 245,399 254,582 257,634 248,113 748,548 753,099provision forcredit losses

Noninterestincome:

Nonsufficientfunds (NSF) 7,962 6,560 6,687 8,051 7,156 21,209 22,244fees

Credit card,debit card and 8,837 8,918 8,031 8,193 8,315 25,786 23,052ATM cardincome

Servicecharges on 6,115 6,062 5,978 6,046 5,920 18,155 17,814depositaccounts

Trust income 2,467 2,276 2,837 2,192 2,502 7,580 7,406

Mortgage 1,396 2,914 3,307 3,989 2,958 7,617 6,788income

Brokerage 861 795 711 642 628 2,367 1,862income

Bank ownedlife insurance 1,325 1,294 1,292 1,252 1,449 3,911 4,502income

Net gain(loss) on sale 255 (244) (79) (675) (528) (68) (4,858)or write-downof assets

Othernoninterest 5,427 6,981 5,244 6,857 6,524 17,652 16,177income

Totalnoninterest 34,645 35,556 34,008 36,547 34,924 104,209 94,987income

Noninterestexpense:

Salaries and 78,412 75,611 80,037 77,809 75,068 234,060 231,459benefits

Net occupancy 8,165 8,046 7,833 8,223 8,644 24,044 26,814and equipment

Credit anddebit card,data 9,103 8,718 8,233 8,442 8,776 26,054 31,887processing andsoftwareamortization

Regulatoryassessments 2,497 2,670 2,670 2,670 2,512 7,837 7,191and FDICinsurance

Core depositintangibles 2,878 2,887 2,931 3,243 3,270 8,696 9,926amortization

Depreciation 4,524 4,513 4,540 4,261 4,605 13,577 13,971

Communications 3,013 2,982 2,899 2,931 3,027 8,894 9,546

Other real 30 198 244 279 258 472 344estate expense

Net loss(gain) on saleor write-down 4 (1,839) (887) (195) (137) (2,722) (263)of other realestate

Merger related - - - - - - 8,018expenses

Othernoninterest 11,189 11,405 10,576 12,542 11,896 33,170 38,135expense

Totalnoninterest 119,815 115,191 119,076 120,205 117,919 354,082 377,028expense

Income before 163,397 165,764 169,514 173,976 165,118 498,675 471,058income taxes

Provision for 34,807 35,153 36,205 36,885 35,054 106,165 79,245income taxes

Net incomeavailable to $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 392,510 $ 391,813commonshareholders

(C) Interest income on securities was reduced by net premium amortization of$15,141, $14,436, $12,844, $11,509 and $10,089 for the three months endedSeptember 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020 andSeptember 30, 2020, respectively, and $42,421 and $27,318 for the nine monthsended September 30, 2021 and September 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

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

Profitability

Net income ^(D) $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 392,510 $ 391,813(E)

Basic earnings $ 1.39 $ 1.41 $ 1.44 $ 1.48 $ 1.40 $ 4.23 $ 4.20per share

Diluted earnings $ 1.39 $ 1.41 $ 1.44 $ 1.48 $ 1.40 $ 4.23 $ 4.20per share

Return on average 1.42 % 1.45 % 1.54 % 1.63 % 1.58 % 1.47 % 1.62 % ^assets ^(F) (J)

Return on average ^common equity ^ 8.07 % 8.31 % 8.60 % 8.98 % 8.64 % 8.32 % 8.78 % (J)(F)

Return on average ^tangible common 16.72 % 17.49 % 18.43 % 19.57 % 19.19 % 17.53 % 19.77 % (J)equity ^(F)^ ^(G)

Tax equivalentnet interest 3.10 % 3.11 % 3.41 % 3.49 % 3.57 % 3.20 % 3.69 %margin ^(D) (E)^ ^(H)

Efficiency ratio 42.34 % 40.96 % 41.25 % 40.77 % 40.17 % 41.52 % 43.19 % ^^(G) (I) (K)

Liquidity andCapital Ratios

Equity to assets 17.38 % 17.48 % 17.50 % 18.00 % 18.18 % 17.38 % 18.18 %

Common equity 14.84 % 15.26 % 14.60 % 13.74 % 13.17 % 14.84 % 13.17 %tier 1 capital

Tier 1 risk-based 14.84 % 15.26 % 14.60 % 13.74 % 13.17 % 14.84 % 13.17 %capital

Total risk-based 15.20 % 15.71 % 15.07 % 14.23 % 14.28 % 15.20 % 14.28 %capital

Tier 1 leverage 9.55 % 9.50 % 9.68 % 9.67 % 9.57 % 9.55 % 9.57 %capital

Period endtangible equityto period end 9.18 % 9.18 % 9.05 % 9.19 % 9.12 % 9.18 % 9.12 %tangible assets ^(G)

Other Data

Weighted-averageshares used incomputingearnings percommon share

Basic 92,683 92,935 92,854 92,559 92,656 92,823 93,226

Diluted 92,683 92,935 92,854 92,559 92,656 92,823 93,226

Period end shares 92,160 92,935 92,929 92,571 92,562 92,160 92,562outstanding

Cash dividendspaid per common $ 0.49 $ 0.49 $ 0.49 $ 0.49 $ 0.46 $ 1.47 $ 1.38share

Book value per $ 68.85 $ 67.90 $ 66.95 $ 66.23 $ 65.20 $ 68.85 $ 65.20common share

Tangible bookvalue per common $ 33.09 $ 32.40 $ 31.42 $ 30.53 $ 29.46 $ 33.09 $ 29.46share ^(G)

Common StockMarket Price

High $ 72.97 $ 78.06 $ 83.02 $ 70.38 $ 60.63 $ 83.02 $ 75.22

Low $ 64.40 $ 69.83 $ 66.45 $ 50.43 $ 48.80 $ 64.40 $ 42.02

Period end $ 71.13 $ 71.80 $ 76.16 $ 69.36 $ 51.83 $ 71.13 $ 51.83closing price

Employees - FTE(excluding 3,625 3,724 3,724 3,756 3,716 3,625 3,716overtime)

Number of banking 273 274 275 275 275 273 275centers

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

Three Months Ended Year-to-Date

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

Loan discountaccretion

ASC 310-20 $3,761 $9,731 $13,313 $13,514 $16,729 $26,805 $57,191

ASC 310-30 $1,618 $2,462 $3,027 $2,545 $5,805 $7,107 $18,091

Securities net $136 $171 $111 $66 $116 $418 $513amortization

Time deposits $201 $327 $507 $790 $1,240 $1,035 $5.303amortization

(E) Using effective tax rate of 21.3%, 21.2%, 21.4%, 21.2% and 21.2% for thethree months ended September 30, 2021, June 30, 2021, March 31, 2021,December 31, 2020 and September 30, 2020, respectively, and 21.3% and 16.8% forthe nine months ended September 30, 2021 and September 30, 2020, respectively.Net income for the second quarter of 2020 includes a tax benefit for NOLrelated to the CARES Act.

(F) Interim periods annualized.

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

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

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

(J) For calculations of the annualized returns on average assets, averagecommon equity and average tangible common equity excluding merger relatedexpenses, net of tax, and NOL tax benefit, refer to the "Notes to SelectedFinancial Data" at the end of this Earnings Release for a reconciliation ofthis non-GAAP financial measure to the nearest GAAP financial measure.

(K) For calculations of the efficiency ratio excluding merger related expenses,net of tax, refer to the "Notes to Selected Financial Data" at the end of thisEarnings Release for a reconciliation of this non-GAAP financial measure to thenearest GAAP financial measure.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

YIELD ANALYSIS Three Months Ended

Sep 30, 2021 Jun 30, 2021 Sep 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 $ 11,714 $ 91 3.08% $ 13,716 $ 109 3.19% $ 50,606 $ 420 3.30%

Loans held for 17,102,998 199,019 4.62% 17,305,259 200,817 4.65% 18,267,559 225,596 4.91%investment

Loans held forinvestment - Warehouse 1,836,252 14,711 3.18% 1,984,305 15,877 3.21% 2,279,461 18,239 3.18%Purchase Program

Total Loans 18,950,964 213,821 4.48% 19,303,280 216,803 4.50% 20,597,626 244,255 4.72%

Investment securities 12,184,964 46,217 1.50% ^ 11,180,948 43,708 1.57% ^ 7,603,762 38,033 1.99% ^ (M) (M) (M)

Federal funds sold and 734,787 302 0.16% 1,221,993 340 0.11% 618,228 144 0.09%other earning assets

Total interest-earning 31,870,715 260,340 3.24% 31,706,221 260,851 3.30% 28,819,616 282,432 3.90%assets

Allowance for credit (301,011) (306,059) (321,424)losses

Noninterest-earning 4,728,965 4,695,860 4,482,646assets

Total assets $ 36,298,669 $ 36,096,022 $ 32,980,838

Interest-bearingliabilities:

Interest-bearing demand $ 6,089,678 $ 3,614 0.24% $ 6,281,068 $ 5,471 0.35% $ 5,221,722 $ 5,028 0.38%deposits

Savings and money market 9,944,664 4,522 0.18% 9,872,624 5,490 0.22% 8,937,751 7,833 0.35%deposits

Certificates and other 2,897,123 3,442 0.47% 2,980,186 4,327 0.58% 3,103,290 9,597 1.23%time deposits

Other borrowings - - - - - - 13,898 52 1.49%

Securities sold under 448,338 195 0.17% 383,975 164 0.17% 378,888 309 0.32%repurchase agreements

Subordinated notes - - - - - - 125,256 1,500 4.76%

Total interest-bearing 19,379,803 11,773 0.24% ^ 19,517,853 15,452 0.32% ^ 17,780,805 24,319 0.54% ^liabilities (N) (N) (N)

Noninterest-bearingliabilities:

Noninterest-bearing 10,286,062 10,062,085 8,980,814demand deposits

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

Other liabilities 229,502 198,748 167,532

Total liabilities 29,925,314 29,808,633 26,959,098

Shareholders' equity 6,373,355 6,287,389 6,021,740

Total liabilities and $ 36,298,669 $ 36,096,022 $ 32,980,838shareholders' equity

Net interest income and $ 248,567 3.09% $ 245,399 3.10% $ 258,113 3.56%margin

Non-GAAP to GAAPreconciliation:

Tax equivalent 551 586 658adjustment

Net interest income andmargin (tax equivalent $ 249,118 3.10% $ 245,985 3.11% $ 258,771 3.57%basis)

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

(M) Yield on securities was impacted by net premium amortization of $15,141,$14,436, and $10,089 for the three months ended September 30, 2021, June 30,2021 and September 30, 2020, respectively.

(N) Total cost of funds, including noninterest bearing deposits, was 0.16%,0.21% and 0.36% for the three months ended September 30, 2021, June 30, 2021and September 30, 2020, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

YIELD ANALYSIS Year-to-Date

Sep 30, 2021 Sep 30, 2020

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

Interest-earningassets:

Loans held for sale $ 19,507 $ 439 3.01% $ 60,256 $ 1,575 3.49%

Loans held for 17,228,462 613,813 4.76% 17,890,010 690,175 5.15%investment

Loans held forinvestment - Warehouse 2,061,432 49,447 3.21% 1,749,568 42,520 3.25%Purchase Program

Total loans 19,309,401 663,699 4.60% 19,699,834 734,270 4.98%

Investment securities 10,849,373 128,602 1.58% ^ 8,029,097 130,091 2.16% ^ (P) (P)

Federal funds sold and 1,151,647 993 0.12% 339,229 902 0.36%other earning assets

Total interest-earning 31,310,421 793,294 3.39% 28,068,160 865,263 4.12%assets

Allowance for credit (307,500) (325,036)losses

Noninterest-earning 4,644,874 4,540,440assets

Total assets $ 35,647,795 $ 32,283,564

Interest-bearingliabilities:

Interest-bearing $ 6,160,988 $ 15,028 0.33% $ 5,054,320 $ 16,745 0.44%demand deposits

Savings and money 9,747,706 15,765 0.22% 8,481,852 30,700 0.48%market deposits

Certificates and other 2,969,151 13,435 0.60% 3,243,564 35,300 1.45%time deposits

Other borrowings - - - 439,018 3,517 1.07%

Securities sold under 403,254 518 0.17% 370,225 1,403 0.51%repurchase agreements

Subordinated notes - - - 125,475 4,499 4.79%

Total interest-bearing 19,281,099 44,746 0.31% ^ 17,714,454 92,164 0.69% ^liabilities (Q) (Q)

Noninterest-bearingliabilities:

Noninterest-bearing 9,855,599 8,354,410demand deposits

Allowance for creditlosses on off-balance 29,947 24,321sheet credit exposures

Other liabilities 194,347 239,747

Total liabilities 29,360,992 26,332,932

Shareholders' equity 6,286,803 5,950,632

Total liabilities and 35,647,795 $ 32,283,564shareholders' equity

Net interest income $ 748,548 3.20% $ 773,099 3.68%and margin

Non-GAAP to GAAPreconciliation:

Tax equivalent 1,772 2,071adjustment

Net interest incomeand margin (tax $ 750,320 3.20% $ 775,170 3.69%equivalent basis)

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

(P) Yield on securities was impacted by net premium amortization of $42,421 and$27,318 for the nine months ended September 30, 2021 and 2020, respectively.

(Q) Total cost of funds, including noninterest bearing deposits, was 0.21% and0.47% for the nine months ended September 30, 2021 and 2020, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended

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

YIELD TREND ^(R)

Interest-Earning Assets:

Loans held for sale 3.08 % 3.19 % 2.90 % 3.23 % 3.30 %

Loans held for investment 4.62 % 4.65 % 5.02 % 4.95 % 4.91 %

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

Total loans 4.48 % 4.50 % 4.80 % 4.72 % 4.72 %

Investment securities ^(S) 1.50 % 1.57 % 1.71 % 1.83 % 1.99 %

Federal funds sold and other 0.16 % 0.11 % 0.09 % 0.11 % 0.09 %earning assets

Total interest-earning assets 3.24 % 3.30 % 3.64 % 3.76 % 3.90 %

Interest-Bearing Liabilities:

Interest-bearing demand 0.24 % 0.35 % 0.39 % 0.38 % 0.38 %deposits

Savings and money market 0.18 % 0.22 % 0.25 % 0.30 % 0.35 %deposits

Certificates and other time 0.47 % 0.58 % 0.76 % 0.98 % 1.23 %deposits

Other borrowings - - - 5.39 % 1.49 %

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

Subordinated notes - - - 4.87 % 4.76 %

Total interest-bearing 0.24 % 0.32 % 0.38 % 0.46 % 0.54 %liabilities

Net Interest Margin 3.09 % 3.10 % 3.40 % 3.48 % 3.56 %

Net Interest Margin (tax 3.10 % 3.11 % 3.41 % 3.49 % 3.57 %equivalent)

(R) Annualized and based on average balances on an actual 365-day or 366-daybasis.

(S) Yield on securities was impacted by net premium amortization of $15,141,$14,436, $12,844, $11,509 and $10,089 for the three months ended September 30,2021, June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020,respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended

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

Balance SheetAverages

Loans held for sale $ 11,714 $ 13,716 $ 33,327 $ 42,856 $ 50,606

Loans held for 17,102,998 17,305,259 17,279,066 17,700,756 18,267,559investment

Loans held forinvestment - 1,836,252 1,984,305 2,369,601 2,603,455 2,279,461Warehouse PurchaseProgram

Total Loans 18,950,964 19,303,280 19,681,994 20,347,067 20,597,626

Investment 12,184,964 11,180,948 9,148,841 8,001,679 7,603,762securities

Federal funds soldand other earning 734,787 1,221,993 1,506,645 1,094,487 618,228assets

Totalinterest-earning 31,870,715 31,706,221 30,337,480 29,443,233 28,819,616assets

Allowance for (301,011) (306,059) (315,590) (322,138) (321,424)credit losses

Cash and due from 570,765 521,737 308,787 289,579 267,887banks

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

Core deposit 65,955 68,830 71,763 74,919 78,269intangibles, net

Other real estate 279 3,001 6,385 14,573 8,061

Fixed assets, net 323,584 326,570 326,004 325,485 325,958

Other assets 536,745 544,085 576,300 633,405 570,495

Total assets $ 36,298,669 $ 36,096,022 $ 34,544,360 $ 33,690,906 $ 32,980,838

Noninterest-bearing $ 10,286,062 $ 10,062,085 $ 9,206,791 $ 9,103,742 $ 8,980,814deposits

Interest-bearing 6,089,678 6,281,068 6,112,469 5,545,298 5,221,722demand deposits

Savings and money 9,944,664 9,872,624 9,420,064 9,170,179 8,937,751market deposits

Certificates and 2,897,123 2,980,186 3,031,621 3,047,475 3,103,290other time deposits

Total deposits 29,217,527 29,195,963 27,770,945 26,866,694 26,243,577

Other borrowings - - - 2,435 13,898

Securities soldunder repurchase 448,338 383,975 376,662 376,779 378,888agreements

Subordinated notes - - - 81,570 125,256

Allowance forcredit losses on 29,947 29,947 29,947 29,947 29,947off-balance sheetcredit exposures

Other liabilities 229,502 198,748 169,138 224,907 167,532

Shareholders' 6,373,355 6,287,389 6,197,668 6,108,574 6,021,740equity

Total liabilities $ 36,298,669 $ 36,096,022 $ 34,544,360 $ 33,690,906 $ 32,980,838and equity

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

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

Period End Balances

Loan Portfolio

Commercial and industrial $ 1,841,899 9.7 % $ 2,021,951 10.5 % $ 2,104,116 10.7 % $ 2,210,003 10.9 % $ 2,171,302 10.5 %

Warehouse purchase program 1,998,049 10.6 % 2,095,559 10.9 % 2,272,389 11.6 % 2,842,379 14.0 % 2,730,614 13.1 %

Construction, land development and other land loans 2,269,417 12.0 % 2,147,474 11.2 % 2,031,355 10.4 % 1,956,960 9.7 % 2,081,762 10.0 %

1-4 family residential 4,709,468 24.8 % 4,531,589 23.5 % 4,310,437 21.9 % 4,253,331 21.0 % 4,189,852 20.1 %

Home equity 746,426 3.9 % 637,431 3.3 % 554,278 2.8 % 504,207 2.5 % 477,552 2.3 %

Commercial real estate (includes multi-family 5,550,841 29.3 % 5,681,184 29.5 % 5,858,475 29.8 % 6,078,764 30.0 % 6,179,901 29.7 %residential)

Agriculture (includes farmland) 631,497 3.3 % 590,135 3.1 % 571,783 2.9 % 581,352 2.9 % 598,972 2.9 %

Consumer and other 274,980 1.5 % 264,652 1.4 % 293,023 1.5 % 344,028 1.7 % 367,231 1.8 %

Energy 569,314 3.0 % 501,821 2.6 % 503,947 2.6 % 512,735 2.5 % 604,698 2.9 %

Paycheck Protection Program 365,841 1.9 % 779,989 4.0 % 1,139,083 5.8 % 963,185 4.8 % 1,393,757 6.7 %

Total loans $ 18,957,732 $ 19,251,785 $ 19,638,886 $ 20,246,944 $ 20,795,641

Deposit Types

Noninterest-bearing DDA $ 10,326,489 35.0 % $ 10,099,149 34.7 % $ 9,820,445 34.1 % $ 9,151,233 33.4 % $ 8,998,328 34.0 %

Interest-bearing DDA 6,088,923 20.7 % 6,185,115 21.2 % 6,158,641 21.4 % 5,899,051 21.6 % 5,297,802 20.0 %

Money market 6,864,664 23.3 % 6,706,252 23.0 % 6,714,889 23.4 % 6,381,014 23.3 % 6,324,127 23.9 %

Savings 3,293,850 11.2 % 3,160,606 10.9 % 3,083,447 10.7 % 2,863,086 10.5 % 2,772,492 10.5 %

Certificates and other time deposits 2,877,726 9.8 % 2,959,119 10.2 % 2,985,683 10.4 % 3,066,108 11.2 % 3,066,457 11.6 %

Total deposits $ 29,451,652 $ 29,110,241 $ 28,763,105 $ 27,360,492 $ 26,459,206

Loan to Deposit Ratio 64.4 % 66.1 % 68.3 % 74.0 % 78.6 %

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Construction Loans

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

Single family residential $ 659,248 29.0 % $ 624,954 29.1 % $ 590,223 29.1 % $ 579,761 29.6 % $ 654,933 31.5 %construction

Land development 92,623 4.1 % 97,709 4.6 % 97,267 4.8 % 103,307 5.3 % 114,937 5.5 %

Raw land 315,803 13.9 % 245,484 11.4 % 243,394 12.0 % 247,628 12.7 % 240,154 11.5 %

Residential lots 195,201 8.6 % 165,645 7.7 % 176,884 8.6 % 158,441 8.1 % 137,615 6.6 %

Commercial lots 169,189 7.5 % 153,714 7.2 % 137,512 6.8 % 114,427 5.8 % 109,569 5.3 %

Commercial construction and other 837,436 36.9 % 860,069 40.0 % 786,192 38.7 % 753,587 38.5 % 825,053 39.6 %

Net unaccreted discount (83) (101) (117) (191) (499)

Total construction loans $ 2,269,417 $ 2,147,474 $ 2,031,355 $ 1,956,960 $ 2,081,762

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

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

Collateral Type

Shopping center/retail $ 344,431 $ 287,295 $ 43,715 $ 16,729 $ 28,842 $ 316,601 $ 1,037,613

Commercial and industrial buildings 159,540 83,393 19,884 20,930 18,037 158,211 459,995

Office buildings 122,714 471,358 28,437 72,232 4,783 77,257 776,781

Medical buildings 105,696 23,741 2,617 23,053 39,699 65,846 260,652

Apartment buildings 259,581 145,045 37,544 15,854 35,052 179,293 672,369

Hotel 74,641 77,389 42,971 29,372 - 152,221 376,594

Other 75,713 68,519 18,409 8,442 3,769 72,250 247,102

Total $ 1,142,316 $ 1,156,740 $ 193,577 $ 186,612 $ 130,182 $ 1,021,679 $ 3,831,106 ^ (U)

Acquired Loans

Non-PCD Loans PCD Loans Total Acquired Loans

Balance at Balance at Balance at Balance at Balance Balance Balance at Balance at Balance at at at Acquisition Jun 30, Sep 30, Acquisition Acquisition Jun 30, Sep 30, 2021 2021 Jun 30, Sep 30, 2021 2021 Date Date 2021 2021 Date

Loan marks:

Acquired banks $ 345,599 $ 16,535 $ 12,774 $ 320,052 $ 8,695 $ 5,569 $ 665,651 $ 25,230 $ 18,343^(V)

Acquiredportfolio loanbalances:

Acquired banks 12,286,159 2,913,494 2,585,926 689,573 144,694 89,833 12,975,732 ^ 3,058,188 2,675,759^(V) (W)

Acquiredportfolio loan $ 11,940,560 $ 2,896,959 $ 2,573,152 $ 369,521 $ 135,999 $ 84,264 $ 12,310,081 $ 3,032,958 $ 2,657,416balances lessloan marks

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

(U) Represents a portion of total commercial real estate loans of $5.551billion as of September 30, 2021.

(V) Includes Bank Arlington, American State Bank, Community National Bank,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

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

Asset Quality

Nonaccrual loans $ 35,035 $ 32,880 $ 43,025 $ 47,185 $ 57,412 $ 35,035 $ 57,412

Accruing loans 90 or more days past due 1,038 330 313 1,699 462 1,038 462

Total nonperforming loans 36,073 33,210 43,338 48,884 57,874 36,073 57,874

Repossessed assets 326 310 362 93 120 326 120

Other real estate 150 144 462 10,593 11,548 150 11,548

Total nonperforming assets $ 36,549 $ 33,664 $ 44,162 $ 59,570 $ 69,542 $ 36,549 $ 69,542

Nonperforming assets:

Commercial and industrial (includes energy) $ 8,199 $ 8,613 $ 11,290 $ 16,176 $ 17,273 $ 8,199 $ 17,273

Construction, land development and other 803 1,423 1,692 1,566 2,633 803 2,633land loans

1-4 family residential (includes home 11,117 11,681 11,920 25,830 29,953 11,117 29,953equity)

Commercial real estate (includes 15,691 11,266 16,896 12,315 16,069 15,691 16,069multi-family residential)

Agriculture (includes farmland) 643 661 803 2,075 1,931 643 1,931

Consumer and other 96 20 1,561 1,608 1,683 96 1,683

Total $ 36,549 $ 33,664 $ 44,162 $ 59,570 $ 69,542 $ 36,549 $ 69,542

Number of loans/properties 155 152 167 208 198 155 198

Allowance for credit losses at end of period $ 287,187 $ 302,884 $ 307,210 $ 316,068 $ 323,635 $ 287,187 $ 323,635

Net charge-offs (recoveries):

Commercial and industrial (includes energy) $ 3,763 $ 3,529 $ 1,584 $ 4,085 $ 8,344 $ 8,876 $ 20,522

Construction, land development and other (4) (105) (5) (110) 478 (114) 460land loans

1-4 family residential (includes home 66 (6) 47 1,982 252 107 308equity)

Commercial real estate (includes 11,180 517 6,589 626 676 18,286 595multi-family residential)

Agriculture (includes farmland) (63) (9) 33 (4) (17) (39) (21)

Consumer and other 755 400 610 988 837 1,765 2,508

Total $ 15,697 $ 4,326 $ 8,858 $ 7,567 $ 10,570 $ 28,881 $ 24,372

Asset Quality Ratios

Nonperforming assets to average 0.11 % 0.11 % 0.15 % 0.20 % 0.24 % 0.12 % 0.25 %interest-earning assets

Nonperforming assets to loans and other real 0.19 % 0.17 % 0.22 % 0.29 % 0.33 % 0.19 % 0.33 %estate

Net charge-offs to average loans 0.33 % 0.09 % 0.18 % 0.15 % 0.21 % 0.20 % 0.17 %(annualized)

Allowance for credit losses to total loans 1.51 % 1.57 % 1.56 % 1.56 % 1.56 % 1.51 % 1.56 %

Allowance for credit losses to total loans,excluding 1.73 % 1.85 % 1.89 % 1.92 % 1.94 % 1.73 % 1.94 %Warehouse Purchase Program loans andPaycheck 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

Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Sep 30, 2021 Sep 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 $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 392,510 $ 391,813

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

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

Net income, excluding merger related expenses, net oftax, $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 392,510 $ 378,002

and NOL tax benefit ^(X) (Y)

Weighted average diluted shares outstanding 92,683 92,935 92,854 92,559 92,656 92,823 93,226

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

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

Diluted earnings per share, excluding merger relatedexpenses, $ 1.39 $ 1.41 $ 1.44 $ 1.48 $ 1.40 $ 4.23 $ 4.05

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 oftax, $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 392,510 $ 378,002

and NOL tax benefit ^(X) (Y)

Average total assets $ 36,298,669 $ 36,096,022 $ 34,544,360 $ 33,690,906 $ 32,980,838 $ 35,647,795 $ 32,283,564

Return on average assets excluding merger relatedexpenses, 1.42 % 1.45 % 1.54 % 1.63 % 1.58 % 1.47 % 1.56 %

net of tax, and NOL tax benefit^ (F) (X) (Y)

Reconciliation of return on average common equity toreturn on

average common equity excluding merger relatedexpenses,net of tax, and NOL tax benefit:

Net income, excluding merger related expenses, net oftax, $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 392,510 $ 378,002

and NOL tax benefit ^(X) (Y)

Average shareholders' equity $ 6,373,355 $ 6,287,389 $ 6,197,668 $ 6,108,574 $ 6,021,740 $ 6,286,803 $ 5,950,632

Return on average common equity excluding mergerrelated expenses, 8.07 % 8.31 % 8.60 % 8.98 % 8.64 % 8.32 % 8.47 %

net of tax, and NOL tax benefit ^(F) (X) (Y)

Reconciliation of return on average common equity toreturn on

average tangible common equity:

Net income $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 392,510 $ 391,813

Average shareholders' equity $ 6,373,355 $ 6,287,389 $ 6,197,668 $ 6,108,574 $ 6,021,740 $ 6,286,803 $ 5,950,632

Less: Average goodwill and other intangible assets (3,297,592) (3,300,467) (3,304,994) (3,306,769) (3,310,245) (3,300,990) (3,307,925)

Average tangible shareholders' equity $ 3,075,763 $ 2,986,922 $ 2,892,674 $ 2,801,805 $ 2,711,495 $ 2,985,813 $ 2,642,707

Return on average tangible common equity ^(F) 16.72 % 17.49 % 18.43 % 19.57 % 19.19 % 17.53 % 19.77 %

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

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

Three Months Ended Year-to-Date

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

Reconciliation of return on average common equity to return on average tangiblecommon equity excluding merger related expenses, net of tax, and NOL taxbenefit:

Net income, excluding merger related expenses, net of tax, and NOL tax benefit^ $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 130,064 $ 392,510 $ 378,002(X) (Y)

Average shareholders' equity $ 6,373,355 $ 6,287,389 $ 6,197,668 $ 6,108,574 $ 6,021,740 $ 6,286,803 $ 5,950,632

Less: Average goodwill and other intangible assets (3,297,592) (3,300,467) (3,304,994) (3,306,769) (3,310,245) (3,300,990) (3,307,925)

Average tangible shareholders' equity $ 3,075,763 $ 2,986,922 $ 2,892,674 $ 2,801,805 $ 2,711,495 $ 2,985,813 $ 2,642,707

Return on average tangible common equity excluding merger related expenses, net 16.72 % 17.49 % 18.43 % 19.57 % 19.19 % 17.53 % 19.07 %of tax, and NOL tax benefit ^(F) (X) (Y)

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

Shareholders' equity $ 6,345,441 $ 6,310,337 $ 6,221,846 $ 6,130,669 $ 6,034,877 $ 6,345,441 $ 6,034,877

Less: Goodwill and other intangible assets (3,296,175) (3,299,053) (3,301,940) (3,304,871) (3,308,170) (3,296,175) 3,308,170

Tangible shareholders' equity $ 3,049,266 $ 3,011,284 $ 2,919,906 $ 2,825,798 $ 2,726,707 $ 3,049,266 $ 2,726,707

Period end shares outstanding 92,160 92,935 92,929 92,571 92,562 92,160 92,562

Tangible book value per share $ 33.09 $ 32.40 $ 31.42 $ 30.53 $ 29.46 $ 33.09 29.46

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

Tangible shareholders' equity $ 3,049,266 $ 3,011,284 $ 2,919,906 $ 2,825,798 $ 2,726,707 $ 3,049,266 $ 2,726,707

Total assets $ 36,512,119 $ 36,099,924 $ 35,558,418 $ 34,059,275 $ 33,197,599 $ 36,512,119 $ 33,197,599

Less: Goodwill and other intangible assets (3,296,175) (3,299,053) (3,301,940) (3,304,871) (3,308,170) (3,296,175) (3,308,170)

Tangible assets $ 33,215,944 $ 32,800,871 $ 32,256,478 $ 30,754,404 $ 29,889,429 $ 33,215,944 $ 29,889,429

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

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

excluding Warehouse Purchase Program and Paycheck Protection Program loans:

Allowance for credit losses $ 287,187 $ 302,884 $ 307,210 $ 316,068 $ 323,635 $ 287,187 $ 323,635

Total loans $ 18,957,732 $ 19,251,785 $ 19,638,886 $ 20,246,944 $ 20,795,641 $ 18,957,732 $ 20,795,641

Less: Warehouse Purchase Program loans (1,998,049) (2,095,559) (2,272,389) (2,842,379) (2,730,614) (1,998,049) (2,730,614)

Less: Paycheck Protection Program loans (365,841) (779,989) (1,139,083) (963,185) (1,393,757) (365,841) (1,393,757)

Total loans less Warehouse Purchase Program and Paycheck Protection Program $ 16,593,842 $ 16,376,237 $ 16,227,414 $ 16,441,380 $ 16,671,270 $ 16,593,842 $ 16,671,270loans

Allowance for credit losses to total loans, excluding Warehouse Purchase 1.73 % 1.85 % 1.89 % 1.92 % 1.94 % 1.73 % 1.94 %Program and Paycheck Protection Program loans

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

Noninterest expense $ 119,815 $ 115,191 $ 119,076 $ 120,205 $ 117,919 $ 354,082 $ 377,028

Net interest income $ 248,567 $ 245,399 $ 254,582 $ 257,634 $ 258,113 $ 748,548 $ 773,099

Noninterest income 34,645 35,556 34,008 36,547 34,924 104,209 94,987

Less: net gain (loss) on sale or write down of assets 255 (244) (79) (675) (528) (68) (4,858)

Noninterest income excluding net gains and losses on the sale or write down of 34,390 35,800 34,087 37,222 35,452 104,277 99,845assets and securities

Total income excluding net gains and losses on the sale or write down of assets $ 282,957 $ 281,199 $ 288,669 $ 294,856 $ 293,565 $ 852,825 $ 872,944and taxes

Efficiency ratio, excluding net gains and losses on the sale or write down of 42.34 % 40.96 % 41.25 % 40.77 % 40.17 % 41.52 % 43.19 %assets and taxes

Three Months Ended Year-to-Date

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

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

Noninterest expense $ 119,815 $ 115,191 $ 119,076 $ 120,205 $ 117,919 $ 354,082 $ 377,028

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

Noninterest expense excluding merger related expenses $ 119,815 $ 115,191 $ 119,076 $ 120,205 $ 117,919 $ 354,082 $ 369,010

Net interest income $ 248,567 $ 245,399 $ 254,582 $ 257,634 $ 258,113 $ 748,548 $ 773,099

Noninterest income 34,645 35,556 34,008 36,547 34,924 104,209 94,987

Less: net gain (loss) on sale or write down of assets 255 (244) (79) (675) (528) (68) (4,858)

Noninterest income excluding net gains and losses on the sale or write down of 34,390 35,800 34,087 37,222 35,452 104,277 99,845assets and taxes

Total income excluding net gains and losses on the sale or write down of assets $ 282,957 $ 281,199 $ 288,669 $ 294,856 $ 293,565 $ 852,825 $ 872,944and taxes

Efficiency ratio, excluding net gains and losses on the sale or write down of 42.34 % 40.96 % 41.25 % 40.77 % 40.17 % 41.52 % 42.27 %assets, taxes and merger related expenses

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SOURCE Prosperity Bancshares, Inc.