PR Newswire | Jan 26, 2022 06:31AM EST

01/26 05:30 CST

PROSPERITY BANCSHARES, INC.(r) REPORTS FOURTH QUARTER 2021 EARNINGS- Fourth quarter net income of $126.8 million and earnings per share (diluted) of $1.38- Loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, increased $76.7 million or 0.5% (1.8% annualized) during the fourth quarter 2021- Loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, increased $229.2 million or 1.4% during 2021- Deposits increased $1.320 billion or 4.5% (17.9% annualized) during the fourth quarter 2021- Deposits increased $3.411 billion or 12.5% during 2021- Allowance for credit losses on loans to total loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program loans, of 1.72%(1)- Nonperforming assets remain low at 0.09% of fourth quarter average interest-earning assets- Return (annualized) on fourth quarter average assets of 1.37%- Returns (annualized) on fourth quarter average common equity of 7.91% and average tangible common equity of 16.26%(1) HOUSTON, Jan. 26, 2022

HOUSTON, Jan. 26, 2022 /PRNewswire/ -- Prosperity Bancshares, Inc.(r) (NYSE: PB), the parent company of Prosperity Bank(r) (collectively, "Prosperity"), reported net income of $126.8 million for the quarter ended December 31, 2021 compared with $137.1 million for the same period in 2020. Net income per diluted common share was $1.38 for the quarter ended December 31, 2021, compared with $1.48 for the same period in 2020, and the annualized return on fourth quarter average assets was 1.37%. Additionally, loans, excluding Warehouse Purchase Program and SBA Paycheck Protection Program ("PPP") loans, increased $76.7 million or 0.5% (1.8% annualized) and deposits increased $1.320 billion or 4.5% (17.9% annualized) during the fourth quarter of 2021. Nonperforming assets remain low at 0.09% of fourth quarter average interest-earning assets.

"We believe that Texas and Oklahoma will have a higher growth rate and outperform other states over the next several years. Companies and individuals continue to move to Texas and Oklahoma because of lower tax rates and a business-friendly political environment, and we believe that will continue, which should benefit our bank. We expect that companies will need more infrastructure and buildings, people will need more housing and consumer staples, and both will need banks to finance the growth," said David Zalman, Prosperity's Senior Chairman and Chief Executive Officer.

"Our bank continues to show strong deposit growth, with over $3.4 billion added in 2021, and a strong return on assets of 1.37% and return on average tangible equity of 16.26%. Our asset quality continues to be one of the best in the industry. We predict loans will grow given the vibrant economy and the bank's net interest margin should improve going forward with potential rate hikes forecasted by the Federal Reserve. I would like to thank all our customers, associates, and directors for helping us build such a successful bank," concluded Zalman.

Results of Operations for the Three Months Ended December 31, 2021

Net income was $126.8 million(2) for the three months ended December 31, 2021 compared with $137.1 million(3) for the same period in 2020, a decrease of $10.3 million or 7.5%. The change was primarily due to a decrease in loan interest income and loan discount accretion of $10.7 million, partially offset by an increase in securities interest income and a decrease in interest expense. Net income per diluted common share was $1.38 for the three months ended December 31, 2021 compared with $1.48 for the same period in 2020, a decrease of 6.8%. On a linked quarter basis, net income was $126.8 million(2) for the three months ended December 31, 2021 compared with $128.6 million(4) for the three months ended September 30, 2021. Net income per diluted common share was $1.38 for the three months ended December 31, 2021 compared with $1.39 for the three months ended September 30, 2021. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended December 31, 2021 were 1.37%, 7.91% and 16.26%(1), respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 42.79%(1) for the three months ended December 31, 2021.

Net interest income before provision for credit losses for the three months ended December 31, 2021 was $244.8 million compared with $257.6 million for the same period in 2020, a decrease of $12.9 million or 5.0%. 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 $10.7 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 $244.8 million compared with $248.6 million for the three months ended September 30, 2021.

The net interest margin on a tax equivalent basis was 2.97% for the three months ended December 31, 2021 compared with 3.49% for the same period in 2020. The change was primarily due to lower average rates on loans and investment securities and a decrease in loan discount accretion of $10.7 million, 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 2.97% for the three months ended December 31, 2021 compared with 3.10% for the three months ended September 30, 2021. The change was primarily due to lower average rates on loans and 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 $35.8 million for the three months ended December 31, 2021 compared with $36.5 million for the same period in 2020, a decrease of $790 thousand or 2.2%. This change was primarily due to a decrease in mortgage income and a decrease in other noninterest income, partially offset by the net gain on sale of assets compared to prior year's net loss on write-down of assets. On a linked quarter basis, noninterest income increased $1.1 million or 3.2% to $35.8 million compared with $34.6 million for the three months ended September 30, 2021. This change was primarily due to an increase in net gain on sale of assets and an increase in nonsufficient funds ("NSF") fees, partially offset by a decrease in mortgage income.

Noninterest expense was $119.5 million for the three months ended December 31, 2021 compared with $120.2 million for the same period in 2020 and $119.8 million for the three months ended September 30, 2021.

Results of Operations for the Year Ended December 31, 2021

Net income was $519.3 million(5) for the year ended December 31, 2021 compared with $528.9 million(6) for the same period in 2020, a decrease of $9.6 million or 1.8%. Net income per diluted common share was $5.60 for the year ended December 31, 2021 compared with $5.68 for the same period in 2020, a decrease of 1.4%. Returns on average assets, average common equity and average tangible common equity for the year ended December 31, 2021 were 1.44%, 8.21% and 17.18%(1), respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale or write down of assets and taxes) was 41.83%(1) for the year ended December 31, 2021.

Net interest income before provision for credit losses for the year ended December 31, 2021 was $993.3 million compared with $1.031 billion for the same period in 2020, a decrease of $37.4 million or 3.6%. The change was primarily due to lower average rates on loans and a decrease in loan discount accretion of $52.1 million, partially offset by an increase in the average investment securities balance and a decrease in the average rate on interest-bearing liabilities.

The net interest margin on a tax equivalent basis for the year ended December 31, 2021 was 3.14% compared with 3.64% for the same period in 2020. The change was primarily due to lower average rates on loans and investment securities, a decrease in loan discount accretion of $52.1 million, and higher cash balances due to excess liquidity, partially offset by a decrease in the average rate on interest-bearing liabilities.

Noninterest income was $140.0 million for the year ended December 31, 2021 compared with $131.5 million for the same period in 2020, an increase of $8.4 million or 6.4%. This increase was primarily due to the net gain on sale of assets compared to prior year's net loss on write-down of assets and an increase in credit card, debit card and ATM card income, partially offset by a decrease in mortgage income.

Noninterest expense was $473.6 million for the year ended December 31, 2021 compared with $497.2 million for the same period in 2020, a decrease of $23.6 million or 4.7%. 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.

Balance Sheet Information

At December 31, 2021, Prosperity had $37.834 billion in total assets, an increase of $3.775 billion or 11.1% compared with $34.059 billion at December 31, 2020.

Loans at December 31, 2021 were $18.616 billion, a decrease of $1.631 billion or 8.1%, compared with $20.247 billion at December 31, 2020, primarily due to a decrease in Warehouse Purchase Program, commercial real estate and PPP loans, partially offset by an increase in 1-4 family residential loans. Linked quarter loans decreased $341.6 million or 1.8% from $18.958 billion at September 30, 2021. At December 31, 2021, the Company had $169.9 million of PPP loans compared to $963.2 million of PPP loans at December 31, 2020 and $365.8 million of PPP loans at September 30, 2021. Excluding Warehouse Purchase Program and PPP loans, loans at December 31, 2021 were $16.671 billion compared to $16.441 billion at December 31, 2020, an increase of $229.2 million or 1.4%. Linked quarter loans, excluding Warehouse Purchase Program and PPP loans, increased $76.7 million or 0.5% (1.8% annualized) from $16.594 billion at September 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 December 31, 2021, oil and gas loans totaled $491.3 million (net of discount and excluding PPP loans totaling $27.9 million) or 2.6% of total loans, of which $294.1 million were production loans and $197.2 million were servicing loans, compared with total oil and gas loans of $512.7 million (net of discount and excluding PPP loans totaling $88.7 million) or 2.5% of total loans at December 31, 2020, of which $285.8 million were production loans and $226.9 million were servicing loans. In addition, as of December 31, 2021, Prosperity had total unfunded commitments to oil and gas companies of $419.0 million compared with total unfunded commitments to oil and gas companies of $243.2 million as of December 31, 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 December 31, 2021, loans to hotels totaled $386.4 million (excluding PPP loans totaling $920 thousand) or 2.1% of total loans, a decrease of $7.4 million or 1.9%, compared with $393.8 million (excluding PPP loans totaling $6.5 million) at December 31, 2020. At December 31, 2021, loans to restaurants totaled $201.7 million (excluding PPP loans totaling $29.3 million) or 1.1% of total loans, a decrease of $13.0 million or 6.1%, compared with $214.7 million (excluding PPP loans totaling $83.6 million) at December 31, 2020.

Deposits at December 31, 2021 were $30.772 billion, an increase of $3.411 billion or 12.5%, compared with $27.360 billion at December 31, 2020. Linked quarter deposits increased $1.320 billion or 4.5% (17.9% annualized) from $29.452 billion at September 30, 2021.

Asset Quality

Nonperforming assets totaled $28.1 million or 0.09% of quarterly average interest-earning assets at December 31, 2021, compared with $59.6 million or 0.20% of quarterly average interest-earning assets at December 31, 2020 and $36.5 million or 0.11% of quarterly average interest-earning assets at September 30, 2021.

The allowance for credit losses on loans and off-balance sheet credit exposures was $316.3 million at December 31, 2021 compared with $346.0 million at December 31, 2020 and with $317.1 million at September 30, 2021.

The allowance for credit losses on loans was $286.4 million or 1.54% of total loans at December 31, 2021 compared with $316.1 million or 1.56% of total loans at December 31, 2020 and with $287.2 million or 1.51% of total loans at September 30, 2021. Excluding Warehouse Purchase Program and PPP loans, the allowance for credit losses on loans to total loans was 1.72%(1) at December 31, 2021 compared with 1.92%(1) at December 31, 2020 and 1.73%(1)

There was no provision for credit losses for the three month periods ended December 31, 2021, December 31, 2020 and September 30, 2021. There was no provision for credit losses for the year ended December 31, 2021 compared with $20.0 million for the year ended December 31, 2020.

Net charge-offs were $807 thousand for the three months ended December 31, 2021 compared with net charge-offs of $7.6 million for the three months ended December 31, 2020 and net charge-offs of $15.7 million for the three months ended September 30, 2021. Net charge-offs for the fourth quarter of 2021 did not include any purchased credit deteriorated ("PCD") loans and $1.7 million of specific reserves on resolved PCD loans was released to the general reserve.

Net charge-offs were $29.7 million for the year ended December 31, 2021 compared with $31.9 million for the year ended December 31, 2020. Net charge-offs for the year ended December 31, 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 $21.6 million of specific reserves on resolved PCD loans without any related charge-offs was released to the general reserve.

Dividend

Prosperity Bancshares declared a first quarter cash dividend of $0.52 per share to be paid on April 1, 2022 to all shareholders of record as of March 15, 2022.

Stock Repurchase Program

On January 18, 2022, Prosperity Bancshares announced a stock repurchase program under which up to 5%, or approximately 4.6 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 18, 2023, at the discretion of management. Under its 2021 stock repurchase program, Prosperity Bancshares repurchased zero shares of its common stock during the three months ended December 31, 2021 and 767,134 shares of its common stock at an average weighted price of $67.87 per share during the year ended December 31, 2021.

COVID-19 Pandemic

Prosperity continues to monitor the latest developments regarding COVID-19. As of December 31, 2021, pandemic-related restrictions on all business and activities in the states of Texas and Oklahoma remained lifted. 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.

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 December 31, 2021, had an outstanding balance of 1,512 loans totaling $169.9 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 December 31, 2021, Prosperity had approximately $29.5 million in outstanding loans subject to deferral and modification agreements.

Conference Call

Prosperity's management team will host a conference call on Wednesday, January 26, 2022 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity's fourth 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 0033886.

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 on loans 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 December 31, 2021, Prosperity Bancshares, Inc.(r) is a $37.834 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, Quarterly Report on Form 10-Q for the period ended September 30, 2021 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 $4.2 million, net of tax,(2) primarily comprised of loan discount accretion of $5.4 million for the three months ended December 31, 2021.

Includes purchase accounting adjustments of $13.3 million, net of tax,(3) primarily comprised of loan discount accretion of $16.1 million for the three months ended December 31, 2020.

Includes purchase accounting adjustments of $4.3 million, net of tax,(4) primarily comprised of loan discount accretion of $5.4 million for the three months ended September 30, 2021.

Includes purchase accounting adjustments of $31.5 million, net of tax,(5) primarily comprised of loan discount accretion of $39.3 million for the year ended December 31, 2021.

Includes purchase accounting adjustments of $76.5 million, net of tax,(6) primarily comprised of loan discount accretion of $91.3 million, and merger related expenses of $8.0 million and tax benefit for NOL of $20.1 million for the year ended December 31, 2020.

Bryan/ NorthCollege Garland Mount Vernon Liberty UniversityStation Area

Texas TechBryan Grapevine Palestine Magnolia Student Union

Bryan-29^th Grapevine Main Rusk Magnolia ParkwayStreet

Bryan-East Kiest Seven Points Mont Belvieu Midland

Bryan-North Lake Highlands Teague Nederland Wadley

Caldwell McKinney Tyler-Beckham Needville Wall Street

College McKinney Tyler-South RosenbergStation Eldorado Broadway

Crescent McKinney Redbud Tyler-University Shadow Creek OdessaPoint

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 Preston Parker Bellaire Wirt LocationsParkway

Tower Point Preston Royal Beltway Big Spring

Wellborn Red Oak Clear Lake South Texas Area BrownfieldRoad -

Richardson Copperfield Corpus Christi Brownwood

Central Richardson-West Cypress Calallen CiscoTexas Area

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 Wylie Heights Victoria-Navarro San AngeloBlvd

Westlake Highway 6 West Victoria-North Slaton

Fort Worth Little York Victoria Salem Snyder

OtherCentral Haltom City Medical CenterTexas Area

Locations Hulen Memorial Drive Other South Oklahoma Texas Area

CentralBastrop Keller Northside Locations Oklahoma Area

Canyon Lake Museum Place Pasadena Alice Oklahoma City

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

Dripping Roanoke Pin Oak Beeville ExpresswaySprings

Elgin Stockyards River Oaks Colony Creek I-240

Flatonia Sugar Land Cuero Memorial

Georgetown Other Dallas/ SW Medical Center Edna Fort Worth Area

OtherGruene Locations Tanglewood Goliad Central Oklahoma Area

Kingsland Arlington The Plaza Gonzales Locations

La Grange Azle Uptown Hallettsville Edmond

Lexington Ennis Waugh Drive Kingsville Norman

New Gainesville Westheimer MathisBraunfels

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

The Waxahachie Woodlands-College Yorktown Yale Park

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

The Other TulsaDallas Woodlands-Research West Texas Area Area Forest Locations

14th Street East Texas Area Abilene OwassoPlano

Abrams Athens Other Houston Area Antilley RoadCentre

Addison Blooming Grove Locations Barrow Street

Allen Canton Angleton Cypress Street

Balch Carthage Bay City Judge ElySprings

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 Kerens Hempstead 98^th StreetWarren

Frisco-West Longview Hitchcock Avenue Q

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(In thousands)

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

Balance Sheet Data (at period end)

Loans held for sale $ 7,274 $ 10,197 $ 9,080 $ 20,991 $ 46,777

Loans held for investment 16,833,171 16,949,486 17,147,146 17,345,506 17,357,788

Loans held for investment - Warehouse Purchase Program 1,775,699 1,998,049 2,095,559 2,272,389 2,842,379

Total loans 18,616,144 18,957,732 19,251,785 19,638,886 20,246,944

Investment securities^(A) 12,818,901 12,629,368 11,918,691 10,088,002 8,542,820

Federal funds sold 241 237 281 8,986 553

Allowance for credit losses on loans (286,380) (287,187) (302,884) (307,210) (316,068)

Cash and due from banks 2,547,739 1,055,386 1,059,879 1,947,235 1,342,996

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

Core deposit intangibles, net 61,684 64,539 67,417 70,304 73,235

Other real estate owned 622 150 144 462 10,593

Fixed assets, net 319,799 322,799 324,502 326,970 323,572

Other assets 523,584 537,459 548,473 553,147 602,994

Total assets $ 37,833,970 $ 36,512,119 $ 36,099,924 $ 35,558,418 $ 34,059,275

Noninterest-bearing deposits $ 10,750,034 $ 10,326,489 $ 10,099,149 $ 9,820,445 $ 9,151,233

Interest-bearing deposits 20,021,728 19,125,163 19,011,092 18,942,660 18,209,259

Total deposits 30,771,762 29,451,652 29,110,241 28,763,105 27,360,492

Other borrowings - - - - -

Securities sold under repurchase agreements 448,099 440,969 433,069 377,106 389,583

Subordinated notes - - - - -

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

Other liabilities 156,926 244,110 216,330 166,414 148,584

Total liabilities 31,406,734 30,166,678 29,789,587 29,336,572 27,928,606

Shareholders' equity^(B) 6,427,236 6,345,441 6,310,337 6,221,846 6,130,669

Total liabilities and equity $ 37,833,970 $ 36,512,119 $ 36,099,924 $ 35,558,418 $ 34,059,275

Includes $2,290, $2,483, $1,394, $970 and $974 in unrealized gains on(A) available for sale securities for the quarterly periods ended December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021 and December 31, 2020, respectively.

Includes $1,809, $1,961, $1,101, $766 and $769 in after-tax unrealized(B) gains on available for sale securities for the quarterly periods ended December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021 and December 31, 2020, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(In thousands)

Three Months Ended Year-to-Date

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

Income Statement Data

Interest income:

Loans $ 206,209 $ 213,821 $ 216,803 $ 233,075 $ 241,625 $ 869,908 $ 975,895

Securities^(C) 46,857 46,217 43,708 38,677 36,721 175,459 166,812

Federal funds sold and other earning assets 563 302 340 351 301 1,556 1,203

Total interest income 253,629 260,340 260,851 272,103 278,647 1,046,923 1,143,910

Interest expense:

Deposits 8,685 11,578 15,288 17,362 19,757 52,913 102,502

Other borrowings - - - - 33 - 3,550

Securities sold under repurchase agreements 184 195 164 159 224 702 1,627

Subordinated notes and trust preferred - - - - 999 - 5,498

Total interest expense 8,869 11,773 15,452 17,521 21,013 53,615 113,177

Net interest income 244,760 248,567 245,399 254,582 257,634 993,308 1,030,733

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

Net interest income after provision for credit losses 244,760 248,567 245,399 254,582 257,634 993,308 1,010,733

Noninterest income:

Nonsufficient funds (NSF) fees 8,401 7,962 6,560 6,687 8,051 29,610 30,295

Credit card, debit card and ATM card income 8,894 8,837 8,918 8,031 8,193 34,680 31,245

Service charges on deposit accounts 6,237 6,115 6,062 5,978 6,046 24,392 23,860

Trust income 2,698 2,467 2,276 2,837 2,192 10,278 9,598

Mortgage income 685 1,396 2,914 3,307 3,989 8,302 10,777

Brokerage income 953 861 795 711 642 3,320 2,504

Bank owned life insurance income 1,317 1,325 1,294 1,292 1,252 5,228 5,754

Net gain (loss) on sale or write-down of assets 1,165 255 (244) (79) (675) 1,097 (5,533)

Other noninterest income 5,407 5,427 6,981 5,244 6,857 23,059 23,034

Total noninterest income 35,757 34,645 35,556 34,008 36,547 139,966 131,534

Noninterest expense:

Salaries and benefits 76,496 78,412 75,611 80,037 77,809 310,556 309,268

Net occupancy and equipment 8,140 8,165 8,046 7,833 8,223 32,184 35,037

Credit and debit card, data processing and software amortization 9,050 9,103 8,718 8,233 8,442 35,104 40,329

Regulatory assessments and FDIC insurance 2,801 2,497 2,670 2,670 2,670 10,638 9,861

Core deposit intangibles amortization 2,855 2,878 2,887 2,931 3,243 11,551 13,169

Depreciation 4,518 4,524 4,513 4,540 4,261 18,095 18,232

Communications 3,134 3,013 2,982 2,899 2,931 12,028 12,477

Other real estate expense 24 30 198 244 279 496 623

Net loss (gain) on sale or write-down of other real estate 2 4 (1,839) (887) (195) (2,720) (458)

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

Other noninterest expense 12,518 11,189 11,405 10,576 12,542 45,688 50,677

Total noninterest expense 119,538 119,815 115,191 119,076 120,205 473,620 497,233

Income before income taxes 160,979 163,397 165,764 169,514 173,976 659,654 645,034

Provision for income taxes 34,192 34,807 35,153 36,205 36,885 140,357 116,130

Net income available to common shareholders $ 126,787 $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 519,297 $ 528,904

Interest income on securities was reduced by net premium amortization of $16,006, $15,141, $14,436, $12,844 and $11,509 for the three months ended(C) December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021 and December 31, 2020, respectively, and $58,427 and $38,827 for the years ended December 31, 2021 and December 31, 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

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

Profitability

Net income ^(D) (E) $ 126,787 $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 519,297 $ 528,904

Basic earnings per share $ 1.38 $ 1.39 $ 1.41 $ 1.44 $ 1.48 $ 5.60 $ 5.68

Diluted earnings per share $ 1.38 $ 1.39 $ 1.41 $ 1.44 $ 1.48 $ 5.60 $ 5.68

Return on average assets ^(F) 1.37 % 1.42 % 1.45 % 1.54 % 1.63 % 1.44 % 1.62 % ^(J)

Return on average common equity ^(F) 7.91 % 8.07 % 8.31 % 8.60 % 8.98 % 8.21 % 8.85 % ^(J)

Return on average tangible common equity ^(F)^ ^(G) 16.26 % 16.72 % 17.49 % 18.43 % 19.57 % 17.18 % 19.83 % ^(J)

Tax equivalent net interest margin ^(D) (E)^ ^(H) 2.97 % 3.10 % 3.11 % 3.41 % 3.49 % 3.14 % 3.64 %

Efficiency ratio ^(G) (I) 42.79 % 42.34 % 40.96 % 41.25 % 40.77 % 41.83 % 42.58 % ^(K)

Liquidity and Capital Ratios

Equity to assets 16.99 % 17.38 % 17.48 % 17.50 % 18.00 % 16.99 % 18.00 %

Common equity tier 1 capital 15.10 % 14.84 % 15.26 % 14.60 % 13.74 % 15.10 % 13.74 %

Tier 1 risk-based capital 15.10 % 14.84 % 15.26 % 14.60 % 13.74 % 15.10 % 13.74 %

Total risk-based capital 15.45 % 15.20 % 15.71 % 15.07 % 14.23 % 15.45 % 14.23 %

Tier 1 leverage capital 9.62 % 9.55 % 9.50 % 9.68 % 9.67 % 9.62 % 9.67 %

Period end tangible equity to period end tangible assets ^(G) 9.07 % 9.18 % 9.18 % 9.05 % 9.19 % 9.07 % 9.19 %

Other Data

Weighted-average shares used in computing earnings per common share

Basic 92,162 92,683 92,935 92,854 92,559 92,657 93,058

Diluted 92,162 92,683 92,935 92,854 92,559 92,657 93,058

Period end shares outstanding 92,170 92,160 92,935 92,929 92,571 92,170 92,571

Cash dividends paid per common share $ 0.52 $ 0.49 $ 0.49 $ 0.49 $ 0.49 $ 1.99 $ 1.87

Book value per common share $ 69.73 $ 68.85 $ 67.90 $ 66.95 $ 66.23 $ 69.73 $ 66.23

Tangible book value per common share ^(G) $ 34.00 $ 33.09 $ 32.40 $ 31.42 $ 30.53 $ 34.00 $ 30.53

Common Stock Market Price

High $ 78.67 $ 72.97 $ 78.06 $ 83.02 $ 70.38 $ 83.02 $ 75.22

Low $ 68.53 $ 64.40 $ 69.83 $ 66.45 $ 50.43 $ 64.40 $ 42.02

Period end closing price $ 72.35 $ 71.13 $ 71.80 $ 76.16 $ 69.36 $ 72.35 $ 69.36

Employees - FTE (excluding overtime) 3,704 3,625 3,724 3,724 3,756 3,704 3,756

Number of banking centers 273 273 274 275 275 273 275

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

Three Months Ended Year-to-Date

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

Loan discount accretion

ASC 310-20 $4,635 $3,761 $9,731 $13,313 $13,514 $31,440 $70,705

ASC 310-30 $731 $1,618 $2,462 $3,027 $2,545 $7,838 $20,636

Securities net amortization $139 $136 $171 $111 $66 $557 $579

Time deposits amortization $127 $201 $327 $507 $790 $1,162 $6,093

Using effective tax rate of 21.2%, 21.3%, 21.2%, 21.4% and 21.2% for the three months ended December 31, 2021, September 30, 2021, June 30, 2021,(E) March 31, 2021 and December 31, 2020, respectively, and 21.3% and 18.0% for the years ended December 31, 2021 and December 31, 2020, respectively. Net income for the second quarter of 2020 includes a tax benefit for NOL related 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(J) common equity and average tangible common equity excluding merger related 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

Dec 31, 2021 Sep 30, 2021 Dec 31, 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 $ 8,794 $ 71 3.20% $ 11,714 $ 91 3.08% $ 42,856 $ 348 3.23%

Loans held for investment 16,830,163 192,200 4.53% 17,102,998 199,019 4.62% 17,700,756 220,357 4.95%

Loans held for investment - Warehouse Purchase Program 1,772,971 13,938 3.12% 1,836,252 14,711 3.18% 2,603,455 20,920 3.20%

Total Loans 18,611,928 206,209 4.40% 18,950,964 213,821 4.48% 20,347,067 241,625 4.72%

Investment securities 12,751,857 46,857 1.46% ^(M) 12,184,964 46,217 1.50% ^(M) 8,001,679 36,721 1.83% ^(M)

Federal funds sold and other earning assets 1,393,859 563 0.16% 734,787 302 0.16% 1,094,487 301 0.11%

Total interest-earning assets 32,757,644 253,629 3.07% 31,870,715 260,340 3.24% 29,443,233 278,647 3.76%

Allowance for credit losses on loans (287,191) (301,011) (322,138)

Noninterest-earning assets 4,476,582 4,728,965 4,569,811

Total assets $ 36,947,035 $ 36,298,669 $ 33,690,906

Interest-bearing liabilities:

Interest-bearing demand deposits $ 6,196,283 $ 2,187 0.14% $ 6,089,678 $ 3,614 0.24% $ 5,545,298 $ 5,301 0.38%

Savings and money market deposits 10,286,650 3,817 0.15% 9,944,664 4,522 0.18% 9,170,179 6,985 0.30%

Certificates and other time deposits 2,766,123 2,681 0.38% 2,897,123 3,442 0.47% 3,047,475 7,471 0.98%

Other borrowings - - - - - - 2,435 33 5.39%

Securities sold under repurchase agreements 432,981 184 0.17% 448,338 195 0.17% 376,779 224 0.24%

Subordinated notes - - - - - - 81,570 999 4.87%

Total interest-bearing liabilities 19,682,037 8,869 0.18% ^(N) 19,379,803 11,773 0.24% ^(N) 18,223,736 21,013 0.46% ^(N)

Noninterest-bearing liabilities:

Noninterest-bearing demand deposits 10,587,441 10,286,062 9,103,742

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

Other liabilities 234,746 229,502 224,907

Total liabilities 30,534,171 29,925,314 27,582,332

Shareholders' equity 6,412,864 6,373,355 6,108,574

Total liabilities and shareholders' equity $ 36,947,035 $ 36,298,669 $ 33,690,906

Net interest income and margin $ 244,760 2.96% $ 248,567 3.09% $ 257,634 3.48%

Non-GAAP to GAAP reconciliation:

Tax equivalent adjustment 457 551 664

Net interest income and margin (tax equivalent basis) $ 245,217 2.97% $ 249,118 3.10% $ 258,298 3.49%

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

(M) Yield on securities was impacted by net premium amortization of $16,006, $15,141, and $11,509 for the three months ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively.

(N) Total cost of funds, including noninterest bearing deposits, was 0.12%, 0.16%, and 0.31% for the three months ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

YIELD ANALYSIS Year-to-Date

Dec 31, 2021 Dec 31, 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 $ 16,807 $ 510 3.03% $ 55,883 $ 1,923 3.44%

Loans held for investment 17,128,069 806,012 4.71% 17,842,438 910,532 5.10%

Loans held for investment - Warehouse Purchase Program 1,988,724 63,386 3.19% 1,964,206 63,440 3.23%

Total loans 19,133,600 869,908 4.55% 19,862,527 975,895 4.91%

Investment securities 11,328,903 175,459 1.55% ^(P) 8,022,205 166,812 2.08% ^(P)

Federal funds sold and other earning assets 1,212,698 1,556 0.13% 529,075 1,203 0.23%

Total interest-earning assets 31,675,201 1,046,923 3.31% 28,413,807 1,143,910 4.03%

Allowance for credit losses on loans (302,381) (324,308)

Noninterest-earning assets 4,602,458 4,555,851

Total assets $ 35,975,278 $ 32,645,350

Interest-bearing liabilities:

Interest-bearing demand deposits $ 6,169,864 $ 17,215 0.28% $ 5,177,736 $ 22,046 0.43%

Savings and money market deposits 9,883,549 19,582 0.20% 8,654,874 37,685 0.44%

Certificates and other time deposits 2,917,976 16,116 0.55% 3,194,274 42,771 1.34%

Other borrowings - - - 329,276 3,550 1.08%

Securities sold under repurchase agreements 410,747 702 0.17% 371,872 1,627 0.44%

Subordinated notes - - - 114,499 5,498 4.80%

Total interest-bearing liabilities 19,382,136 53,615 0.28% ^(Q) 17,842,531 113,177 0.63% ^(Q)

Noninterest-bearing liabilities:

Noninterest-bearing demand deposits 10,036,519 8,558,385

Allowance for credit losses on off-balance sheet credit exposures 29,947 25,735

Other liabilities 204,522 244,047

Total liabilities 29,653,124 26,670,698

Shareholders' equity 6,322,154 5,974,652

Total liabilities and shareholders' equity 35,975,278 $ 32,645,350

Net interest income and margin $ 993,308 3.14% $ 1,030,733 3.63%

Non-GAAP to GAAP reconciliation:

Tax equivalent adjustment 2,229 2,735

Net interest income and margin (tax equivalent basis) $ 995,537 3.14% $ 1,033,468 3.64%

(O) Based on an actual 365-day or 366-day basis.

(P) Yield on securities was impacted by net premium amortization of $58,427 and $38,827 for the years ended December 31, 2021 and 2020, respectively.

(Q) Total cost of funds, including noninterest bearing deposits, was 0.18% and 0.43% for the years ended December 31, 2021 and 2020, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended

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

YIELD TREND ^(R)

Interest-Earning Assets:

Loans held for sale 3.20 % 3.08 % 3.19 % 2.90 % 3.23 %

Loans held for investment 4.53 % 4.62 % 4.65 % 5.02 % 4.95 %

Loans held for investment - Warehouse Purchase Program 3.12 % 3.18 % 3.21 % 3.23 % 3.20 %

Total loans 4.40 % 4.48 % 4.50 % 4.80 % 4.72 %

Investment securities ^(S) 1.46 % 1.50 % 1.57 % 1.71 % 1.83 %

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

Total interest-earning assets 3.07 % 3.24 % 3.30 % 3.64 % 3.76 %

Interest-Bearing Liabilities:

Interest-bearing demand deposits 0.14 % 0.24 % 0.35 % 0.39 % 0.38 %

Savings and money market deposits 0.15 % 0.18 % 0.22 % 0.25 % 0.30 %

Certificates and other time deposits 0.38 % 0.47 % 0.58 % 0.76 % 0.98 %

Other borrowings - - - - 5.39 %

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

Subordinated notes - - - - 4.87 %

Total interest-bearing liabilities 0.18 % 0.24 % 0.32 % 0.38 % 0.46 %

Net Interest Margin 2.96 % 3.09 % 3.10 % 3.40 % 3.48 %

Net Interest Margin (tax equivalent) 2.97 % 3.10 % 3.11 % 3.41 % 3.49 %

(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 $16,006,(S) $15,141, $14,436, $12,844 and $11,509 for the three months ended December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021 and December 31, 2020, respectively.

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Three Months Ended

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

Balance Sheet Averages

Loans held for sale $ 8,794 $ 11,714 $ 13,716 $ 33,327 $ 42,856

Loans held for investment 16,830,163 17,102,998 17,305,259 17,279,066 17,700,756

Loans held for investment - Warehouse Purchase Program 1,772,971 1,836,252 1,984,305 2,369,601 2,603,455

Total Loans 18,611,928 18,950,964 19,303,280 19,681,994 20,347,067

Investment securities 12,751,857 12,184,964 11,180,948 9,148,841 8,001,679

Federal funds sold and other earning assets 1,393,859 734,787 1,221,993 1,506,645 1,094,487

Total interest-earning assets 32,757,644 31,870,715 31,706,221 30,337,480 29,443,233

Allowance for credit losses on loans (287,191) (301,011) (306,059) (315,590) (322,138)

Cash and due from banks 329,406 570,765 521,737 308,787 289,579

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

Core deposit intangibles, net 63,091 65,955 68,830 71,763 74,919

Other real estate 321 279 3,001 6,385 14,573

Fixed assets, net 321,524 323,584 326,570 326,004 325,485

Other assets 530,603 536,745 544,085 576,300 633,405

Total assets $ 36,947,035 $ 36,298,669 $ 36,096,022 $ 34,544,360 $ 33,690,906

Noninterest-bearing deposits $ 10,587,441 $ 10,286,062 $ 10,062,085 $ 9,206,791 $ 9,103,742

Interest-bearing demand deposits 6,196,283 6,089,678 6,281,068 6,112,469 5,545,298

Savings and money market deposits 10,286,650 9,944,664 9,872,624 9,420,064 9,170,179

Certificates and other time deposits 2,766,123 2,897,123 2,980,186 3,031,621 3,047,475

Total deposits 29,836,497 29,217,527 29,195,963 27,770,945 26,866,694

Other borrowings - - - - 2,435

Securities sold under repurchase agreements 432,981 448,338 383,975 376,662 376,779

Subordinated notes - - - - 81,570

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

Other liabilities 234,746 229,502 198,748 169,138 224,907

Shareholders' equity 6,412,864 6,373,355 6,287,389 6,197,668 6,108,574

Total liabilities and equity $ 36,947,035 $ 36,298,669 $ 36,096,022 $ 34,544,360 $ 33,690,906

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

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

Period End Balances

Loan Portfolio

Commercial and industrial $ 2,050,631 11.0 % $ 1,841,899 9.7 % $ 2,021,951 10.5 % $ 2,104,116 10.7 % $ 2,210,003 10.9 %

Warehouse purchase program 1,775,699 9.5 % 1,998,049 10.6 % 2,095,559 10.9 % 2,272,389 11.6 % 2,842,379 14.0 %

Construction, land development and other land loans 2,299,715 12.4 % 2,269,417 12.0 % 2,147,474 11.2 % 2,031,355 10.4 % 1,956,960 9.7 %

1-4 family residential 4,860,419 26.1 % 4,709,468 24.8 % 4,531,589 23.5 % 4,310,437 21.9 % 4,253,331 21.0 %

Home equity 808,289 4.4 % 746,426 3.9 % 637,431 3.3 % 554,278 2.8 % 504,207 2.5 %

Commercial real estate (includes multi-family residential) 5,251,368 28.2 % 5,550,841 29.3 % 5,681,184 29.5 % 5,858,475 29.8 % 6,078,764 30.0 %

Agriculture (includes farmland) 620,338 3.3 % 631,497 3.3 % 590,135 3.1 % 571,783 2.9 % 581,352 2.9 %

Consumer and other 288,496 1.6 % 274,980 1.5 % 264,652 1.4 % 293,023 1.5 % 344,028 1.7 %

Energy 491,305 2.6 % 569,314 3.0 % 501,821 2.6 % 503,947 2.6 % 512,735 2.5 %

Paycheck Protection Program 169,884 0.9 % 365,841 1.9 % 779,989 4.0 % 1,139,083 5.8 % 963,185 4.8 %

Total loans $ 18,616,144 $ 18,957,732 $ 19,251,785 $ 19,638,886 $ 20,246,944

Deposit Types

Noninterest-bearing DDA $ 10,750,034 34.9 % $ 10,326,489 35.0 % $ 10,099,149 34.7 % $ 9,820,445 34.1 % $ 9,151,233 33.4 %

Interest-bearing DDA 6,741,092 21.9 % 6,088,923 20.7 % 6,185,115 21.2 % 6,158,641 21.4 % 5,899,051 21.6 %

Money market 7,178,904 23.3 % 6,864,664 23.3 % 6,706,252 23.0 % 6,714,889 23.4 % 6,381,014 23.3 %

Savings 3,401,727 11.1 % 3,293,850 11.2 % 3,160,606 10.9 % 3,083,447 10.7 % 2,863,086 10.5 %

Certificates and other time deposits 2,700,005 8.8 % 2,877,726 9.8 % 2,959,119 10.2 % 2,985,683 10.4 % 3,066,108 11.2 %

Total deposits $ 30,771,762 $ 29,451,652 $ 29,110,241 $ 28,763,105 $ 27,360,492

Loan to Deposit Ratio 60.5 % 64.4 % 66.1 % 68.3 % 74.0 %

Prosperity Bancshares, Inc.^(r)

Financial Highlights (Unaudited)

(Dollars in thousands)

Construction Loans

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

Single family residential construction $ 728,393 31.7 % $ 659,248 29.0 % $ 624,954 29.1 % $ 590,223 29.1 % $ 579,761 29.6 %

Land development 99,099 4.3 % 92,623 4.1 % 97,709 4.6 % 97,267 4.8 % 103,307 5.3 %

Raw land 322,673 14.0 % 315,803 13.9 % 245,484 11.4 % 243,394 12.0 % 247,628 12.7 %

Residential lots 206,978 9.0 % 195,201 8.6 % 165,645 7.7 % 176,884 8.6 % 158,441 8.1 %

Commercial lots 184,901 8.0 % 169,189 7.5 % 153,714 7.2 % 137,512 6.8 % 114,427 5.8 %

Commercial construction and other 757,687 33.0 % 837,436 36.9 % 860,069 40.0 % 786,192 38.7 % 753,587 38.5 %

Net unaccreted discount (16) (83) (101) (117) (191)

Total construction loans $ 2,299,715 $ 2,269,417 $ 2,147,474 $ 2,031,355 $ 1,956,960

Non-Owner Occupied Commercial Real Estate Loans by Metropolitan StatisticalArea (MSA) as of December 31, 2021

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

Collateral Type

Shopping center/retail $ 338,333 $ 295,795 $ 43,084 $ 17,404 $ 28,424 $ 285,351 $ 1,008,391

Commercial and industrial buildings 156,430 75,850 17,850 22,957 17,848 158,717 449,652

Office buildings 110,424 423,035 23,515 70,651 4,761 77,452 709,838

Medical buildings 96,724 21,552 2,594 22,871 43,311 65,361 252,413

Apartment buildings 120,376 199,421 12,842 15,669 34,737 139,622 522,667

Hotel 86,187 68,438 41,308 28,958 - 140,210 365,101

Other 74,949 68,338 28,468 7,932 3,735 72,608 256,030

Total $ 983,423 $ 1,152,429 $ 169,661 $ 186,442 $ 132,816 $ 939,321 $ 3,564,092 ^(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 Sep 30, 2021 Dec 31, 2021 Sep 30, 2021 Dec 31, 2021 Sep 30, 2021 Dec 31, 2021 Date Date Date

Loan marks:

Acquired banks ^(V) $ 345,599 $ 12,774 $ 8,143 $ 320,052 $ 5,569 $ 4,838 $ 665,651 $ 18,343 $ 12,981

Acquired portfolio loan balances:

Acquired banks ^(V) 12,286,159 2,585,926 2,094,039 689,573 89,833 83,909 12,975,732 ^(W) 2,675,759 2,177,948

Acquired portfolio loan balances less loan marks $ 11,940,560 $ 2,573,152 $ 2,085,896 $ 369,521 $ 84,264 $ 79,071 $ 12,310,081 $ 2,657,416 $ 2,164,967

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

(U) Represents a portion of total commercial real estate loans of $5.251 billion as of December 31, 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

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

Asset Quality

Nonaccrual loans $ 26,269 $ 35,035 $ 32,880 $ 43,025 $ 47,185 $ 26,269 $ 47,185

Accruing loans 90 or more days past due 887 1,038 330 313 1,699 887 1,699

Total nonperforming loans 27,156 36,073 33,210 43,338 48,884 27,156 48,884

Repossessed assets 310 326 310 362 93 310 93

Other real estate 622 150 144 462 10,593 622 10,593

Total nonperforming assets $ 28,088 $ 36,549 $ 33,664 $ 44,162 $ 59,570 $ 28,088 $ 59,570

Nonperforming assets:

Commercial and industrial (includes energy) $ 6,150 $ 8,199 $ 8,613 $ 11,290 $ 16,176 $ 6,150 $ 16,176

Construction, land development and other land loans 1,841 803 1,423 1,692 1,566 1,841 1,566

1-4 family residential (includes home equity) 11,990 11,117 11,681 11,920 25,830 11,990 25,830

Commercial real estate (includes multi-family residential) 7,276 15,691 11,266 16,896 12,315 7,276 12,315

Agriculture (includes farmland) 816 643 661 803 2,075 816 2,075

Consumer and other 15 96 20 1,561 1,608 15 1,608

Total $ 28,088 $ 36,549 $ 33,664 $ 44,162 $ 59,570 $ 28,088 $ 59,570

Number of loans/properties 157 155 152 167 208 157 208

Allowance for credit losses on loans $ 286,380 $ 287,187 $ 302,884 $ 307,210 $ 316,068 $ 286,380 $ 316,068

Net charge-offs (recoveries):

Commercial and industrial (includes energy) $ 177 $ 3,763 $ 3,529 $ 1,584 $ 4,085 $ 9,053 $ 24,607

Construction, land development and other land loans (162) (4) (105) (5) (110) (276) 350

1-4 family residential (includes home equity) (72) 66 (6) 47 1,982 35 2,290

Commercial real estate (includes multi-family residential) (10) 11,180 517 6,589 626 18,276 1,221

Agriculture (includes farmland) (102) (63) (9) 33 (4) (141) (25)

Consumer and other 976 755 400 610 988 2,741 3,496

Total $ 807 $ 15,697 $ 4,326 $ 8,858 $ 7,567 $ 29,688 $ 31,939

Asset Quality Ratios

Nonperforming assets to average interest-earning assets 0.09 % 0.11 % 0.11 % 0.15 % 0.20 % 0.09 % 0.21 %

Nonperforming assets to loans and other real estate 0.15 % 0.19 % 0.17 % 0.22 % 0.29 % 0.15 % 0.29 %

Net charge-offs to average loans (annualized) 0.02 % 0.33 % 0.09 % 0.18 % 0.15 % 0.16 % 0.16 %

Allowance for credit losses on loans to total loans 1.54 % 1.51 % 1.57 % 1.56 % 1.56 % 1.54 % 1.56 %

Allowance for credit losses on loans to total loans, excluding 1.72 % 1.73 % 1.85 % 1.89 % 1.92 % 1.72 % 1.92 %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 related expensesnet of tax, and NOL tax benefit; return on average assets excluding mergerrelated expenses net of tax, and NOL tax benefit; return on average commonequity excluding merger related expenses net of tax, and NOL tax benefit;return on average tangible common equity; return on average tangible commonequity 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 on loans to total loans excluding WarehousePurchase Program and PPP loans; the efficiency ratio, excluding net gains andlosses on the sale or write down of assets and securities; and the efficiencyratio, 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 on loans tototal loans (excluding Warehouse Purchase Program loans and PPP loans).Prosperity has included information below relating to these non-GAAP financialmeasures for the applicable periods presented.

Three Months Ended Year-to-Date

Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Dec 31, 2021 Dec 31, 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 $ 126,787 $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 519,297 $ 528,904

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

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

Net income, excluding merger related expenses net of tax, $ 126,787 $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 519,297 $ 515,093and NOL tax benefit ^(X) (Y)

Weighted average diluted shares outstanding 92,162 92,683 92,935 92,854 92,559 92,657 93,058

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

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

Diluted earnings per share, excluding merger related $ 1.38 $ 1.39 $ 1.41 $ 1.44 $ 1.48 $ 5.60 $ 5.54expenses net of tax, and NOL tax benefit ^(X) (Y)

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

Net income, excluding merger related expenses net of tax, $ 126,787 $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 519,297 $ 515,093and NOL tax benefit ^(X) (Y)

Average total assets $ 36,947,035 $ 36,298,669 $ 36,096,022 $ 34,544,360 $ 33,690,906 $ 35,975,278 $ 32,645,350

Return on average assets excluding merger related 1.37 % 1.42 % 1.45 % 1.54 % 1.63 % 1.44 % 1.58 %expenses net of tax, and NOL tax benefit^ (F) (X) (Y)

Reconciliation of return on average common equity to

return on average common equity excludingmerger related expenses net of tax, and NOL tax benefit:

Net income, excluding merger related expenses net of tax, $ 126,787 $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 519,297 $ 515,903and NOL tax benefit ^(X) (Y)

Average shareholders' equity $ 6,412,864 $ 6,373,355 $ 6,287,389 $ 6,197,668 $ 6,108,574 $ 6,322,154 $ 5,974,652

Return on average common equity excluding merger 7.91 % 8.07 % 8.31 % 8.60 % 8.98 % 8.21 % 8.62 %related expenses 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 $ 126,787 $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 519,297 $ 528,904

Average shareholders' equity $ 6,412,864 $ 6,373,355 $ 6,287,389 $ 6,197,668 $ 6,108,574 $ 6,322,154 $ 5,974,652

Less: Average goodwill and other intangible assets (3,294,728) (3,297,592) (3,300,467) (3,304,994) (3,306,769) (3,299,412) (3,307,639)

Average tangible shareholders' equity $ 3,118,136 $ 3,075,763 $ 2,986,922 $ 2,892,674 $ 2,801,805 $ 3,022,742 $ 2,667,013

Return on average tangible common equity ^(F) 16.26 % 16.72 % 17.49 % 18.43 % 19.57 % 17.18 % 19.83 %

(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 related to the CARES Act.

Three Months Ended Year-to-Date

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

Reconciliation of return on average common equity toreturn 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, $ 126,787 $ 128,590 $ 130,611 $ 133,309 $ 137,091 $ 519,297 $ 515,093and NOL tax benefit^ (X) (Y)

Average shareholders' equity $ 6,412,864 $ 6,373,355 $ 6,287,389 $ 6,197,668 $ 6,108,574 $ 6,322,154 $ 5,974,652

Less: Average goodwill and other intangible assets (3,294,728) (3,297,592) (3,300,467) (3,304,994) (3,306,769) (3,299,412) (3,307,639)

Average tangible shareholders' equity $ 3,118,136 $ 3,075,763 $ 2,986,922 $ 2,892,674 $ 2,801,805 $ 3,022,742 $ 2,667,013

Return on average tangible common equity excludingmerger related expenses net of tax, 16.26 % 16.72 % 17.49 % 18.43 % 19.57 % 17.18 % 19.31 %and NOL tax benefit ^(F) (X) (Y)

Reconciliation of book value per share to tangible book

value per share:

Shareholders' equity $ 6,427,236 $ 6,345,441 $ 6,310,337 $ 6,221,846 $ 6,130,669 $ 6,427,236 $ 6,130,669

Less: Goodwill and other intangible assets (3,293,320) (3,296,175) (3,299,053) (3,301,940) (3,304,871) (3,293,320) (3,304,871)

Tangible shareholders' equity $ 3,133,916 $ 3,049,266 $ 3,011,284 $ 2,919,906 $ 2,825,798 $ 3,133,916 $ 2,825,798

Period end shares outstanding 92,170 92,160 92,935 92,929 92,571 92,170 92,571

Tangible book value per share $ 34.00 $ 33.09 $ 32.40 $ 31.42 $ 30.53 $ 34.00 30.53

Reconciliation of equity to assets ratio to period end

tangible equity to period end tangible assets ratio:

Tangible shareholders' equity $ 3,133,916 $ 3,049,266 $ 3,011,284 $ 2,919,906 $ 2,825,798 $ 3,133,916 $ 2,825,798

Total assets $ 37,833,970 $ 36,512,119 $ 36,099,924 $ 35,558,418 $ 34,059,275 $ 37,833,970 $ 34,059,275

Less: Goodwill and other intangible assets (3,293,320) (3,296,175) (3,299,053) (3,301,940) (3,304,871) (3,293,320) (3,304,871)

Tangible assets $ 34,540,650 $ 33,215,944 $ 32,800,871 $ 32,256,478 $ 30,754,404 $ 34,540,650 $ 30,754,404

Period end tangible equity to period end tangible assets ratio 9.07 % 9.18 % 9.18 % 9.05 % 9.19 % 9.07 % 9.19 %

Reconciliation of allowance for credit losses on loans to totalloans to allowance for credit losses on loans to total loans

excluding Warehouse Purchase Program and

Paycheck Protection Program loans:

Allowance for credit losses on loans $ 286,380 $ 287,187 $ 302,884 $ 307,210 $ 316,068 $ 286,380 $ 316,068

Total loans $ 18,616,144 $ 18,957,732 $ 19,251,785 $ 19,638,886 $ 20,246,944 $ 18,616,144 $ 20,246,944

Less: Warehouse Purchase Program loans (1,775,699) (1,998,049) (2,095,559) (2,272,389) (2,842,379) (1,775,699) (2,842,379)

Less: Paycheck Protection Program loans (169,884) (365,841) (779,989) (1,139,083) (963,185) (169,884) (963,185)

Total loans less Warehouse Purchase Program and $ 16,670,561 $ 16,593,842 $ 16,376,237 $ 16,227,414 $ 16,441,380 $ 16,670,561 $ 16,441,380Paycheck Protection Program loans

Allowance for credit losses on loans to total loans excluding 1.72 % 1.73 % 1.85 % 1.89 % 1.92 % 1.72 % 1.92 %Warehouse Purchase Program and PaycheckProtection Program loans

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

Noninterest expense $ 119,538 $ 119,815 $ 115,191 $ 119,076 $ 120,205 $ 473,620 $ 497,233

Net interest income $ 244,760 $ 248,567 $ 245,399 $ 254,582 $ 257,634 $ 993,308 $ 1,030,733

Noninterest income 35,757 34,645 35,556 34,008 36,547 139,966 131,534

Less: net gain (loss) on sale or write down of assets 1,165 255 (244) (79) (675) 1,097 (5,533)

Noninterest income excluding net gains and losses on the 34,592 34,390 35,800 34,087 37,222 138,869 137,067sale or write down of assets and securities

Total income excluding net gains and losses on the $ 279,352 $ 282,957 $ 281,199 $ 288,669 $ 294,856 $ 1,132,177 $ 1,167,800sale or write down of assets and taxes

Efficiency ratio, excluding net gains and losses on the 42.79 % 42.34 % 40.96 % 41.25 % 40.77 % 41.83 % 42.58 %sale or write down of assets and taxes

Three Months Ended Year-to-Date

Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Dec 31, 2021 Dec 31, 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 $ 119,538 $ 119,815 $ 115,191 $ 119,076 $ 120,205 $ 473,620 $ 497,233

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

Noninterest expense excluding merger related expenses $ 119,538 $ 119,815 $ 115,191 $ 119,076 $ 120,205 $ 473,620 $ 489,215

Net interest income $ 244,760 $ 248,567 $ 245,399 $ 254,582 $ 257,634 $ 993,308 $ 1,030,733

Noninterest income 35,757 34,645 35,556 34,008 36,547 139,966 131,534

Less: net gain (loss) on sale or write down of assets 1,165 255 (244) (79) (675) 1,097 (5,533)

Noninterest income excluding net gains and losses on the 34,592 34,390 35,800 34,087 37,222 138,869 137,067sale or write down of assets and taxes

Total income excluding net gains and losses on the $ 279,352 $ 282,957 $ 281,199 $ 288,669 $ 294,856 $ 1,132,177 $ 1,167,800sale or write down of assets and taxes

Efficiency ratio excluding net gains and losses on the 42.79 % 42.34 % 40.96 % 41.25 % 40.77 % 41.83 % 41.89 %sale or write down of assets, taxes and merger related expenses

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SOURCE Prosperity Bancshares, Inc.