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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 001-35388

 

PROSPERITY BANCSHARES, INC.®

(Exact name of registrant as specified in its charter)

 

 

Texas

74-2331986

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

 

Prosperity Bank Plaza

 

4295 San Felipe, Houston, Texas

77027

(Address of principal executive offices)

(Zip Code)

 

(281) 269-7199

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $1.00 per share

 

PB

 

New York Stock Exchange, Inc.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large Accelerated Filer

☒

 

Accelerated Filer

☐

 

 

 

 

 

Non-accelerated Filer

☐

 

Smaller Reporting Company

☐

 

 

 

 

 

 

 

 

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 5, 2024, there were 95,261,166 outstanding shares of the registrant’s Common Stock, par value $1.00 per share.

 

 

 

 

PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES

INDEX TO FORM 10-Q

 

PART I—FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

3

Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023

3

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)

4

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)

5

Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)

6

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (unaudited)

7

Notes to Consolidated Financial Statements (unaudited)

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

60

Item 4.

Controls and Procedures

60

 

 

PART II—OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

61

Item 1A.

Risk Factors

61

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

61

Item 3.

Defaults Upon Senior Securities

61

Item 4.

Mine Safety Disclosures

61

Item 5.

Other Information

61

Item 6.

Exhibits

62

Signatures

63

 

 

2

 

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

June 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(unaudited)

 

 

 

 

 

 

(Dollars in thousands, except par value)

 

ASSETS

 

 

 

 

 

 

Cash and due from banks

 

$

1,507,604

 

 

$

458,153

 

Federal funds sold

 

 

234

 

 

 

260

 

Total cash and cash equivalents

 

 

1,507,838

 

 

 

458,413

 

Available for sale securities, at fair value

 

 

318,647

 

 

 

438,588

 

Held to maturity securities, at cost (fair value of $9,992,366 and $10,984,598, respectively)

 

 

11,383,492

 

 

 

12,365,308

 

Total securities

 

 

11,702,139

 

 

 

12,803,896

 

Loans held for sale

 

 

9,951

 

 

 

5,734

 

Loans held for investment

 

 

21,229,461

 

 

 

20,352,559

 

Loans held for investment - Warehouse Purchase Program

 

 

1,081,403

 

 

 

822,245

 

Total loans

 

 

22,320,815

 

 

 

21,180,538

 

Less: allowance for credit losses on loans

 

 

(359,852

)

 

 

(332,362

)

Loans, net

 

 

21,960,963

 

 

 

20,848,176

 

Accrued interest receivable

 

 

107,339

 

 

 

96,327

 

Goodwill

 

 

3,504,107

 

 

 

3,396,086

 

Core deposit intangibles, net

 

 

74,324

 

 

 

63,994

 

Bank premises and equipment, net

 

 

377,394

 

 

 

369,992

 

Other real estate owned

 

 

4,960

 

 

 

1,708

 

Bank owned life insurance (BOLI)

 

 

382,499

 

 

 

379,447

 

Federal Home Loan Bank of Dallas stock

 

 

10,184

 

 

 

8,750

 

Other assets

 

 

130,547

 

 

 

121,088

 

TOTAL ASSETS

 

$

39,762,294

 

 

$

38,547,877

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Noninterest-bearing

 

$

9,706,505

 

 

$

9,776,572

 

Interest-bearing

 

 

18,226,581

 

 

 

17,403,237

 

Total deposits

 

 

27,933,086

 

 

 

27,179,809

 

Other borrowings

 

 

3,900,000

 

 

 

3,725,000

 

Securities sold under repurchase agreements

 

 

233,689

 

 

 

309,277

 

Accrued interest payable

 

 

129,565

 

 

 

34,819

 

Allowance for credit losses on off-balance sheet credit exposures

 

 

37,646

 

 

 

36,503

 

Other liabilities

 

 

244,864

 

 

 

183,139

 

Total liabilities

 

 

32,478,850

 

 

 

31,468,547

 

COMMITMENTS AND CONTINGENCIES

 

 

—

 

 

 

—

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

Preferred stock, $1 par value; 20,000,000 shares authorized; none issued or outstanding

 

 

—

 

 

 

—

 

Common stock, $1 par value; 200,000,000 shares authorized; 95,262,416 issued and outstanding at June 30, 2024; 93,722,383 shares issued and outstanding at December 31, 2023

 

 

95,263

 

 

 

93,723

 

Capital surplus

 

 

3,790,305

 

 

 

3,703,795

 

Retained earnings

 

 

3,399,462

 

 

 

3,283,210

 

Accumulated other comprehensive loss —net unrealized loss on available for sale securities, net of tax benefit of $(422) and $(372), respectively

 

 

(1,586

)

 

 

(1,398

)

Total shareholders’ equity

 

 

7,283,444

 

 

 

7,079,330

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

39,762,294

 

 

$

38,547,877

 

 

 

See notes to consolidated financial statements.

 

3

 

PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(Dollars in thousands, except per share data)

 

INTEREST INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

336,428

 

 

$

286,638

 

 

$

642,656

 

 

$

533,756

 

Securities

 

 

62,428

 

 

 

72,053

 

 

 

128,849

 

 

 

145,238

 

Federal funds sold and other earning assets

 

 

14,095

 

 

 

1,757

 

 

 

23,360

 

 

 

8,763

 

Total interest income

 

 

412,951

 

 

 

360,448

 

 

 

794,865

 

 

 

687,757

 

INTEREST EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

106,124

 

 

 

63,964

 

 

 

198,816

 

 

 

111,307

 

Other borrowings

 

 

46,282

 

 

 

57,351

 

 

 

95,228

 

 

 

91,747

 

Securities sold under repurchase agreements

 

 

1,759

 

 

 

2,674

 

 

 

3,791

 

 

 

4,777

 

Total interest expense

 

 

154,165

 

 

 

123,989

 

 

 

297,835

 

 

 

207,831

 

NET INTEREST INCOME

 

 

258,786

 

 

 

236,459

 

 

 

497,030

 

 

 

479,926

 

PROVISION FOR CREDIT LOSSES

 

 

9,066

 

 

 

18,540

 

 

 

9,066

 

 

 

18,540

 

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES

 

 

249,720

 

 

 

217,919

 

 

 

487,964

 

 

 

461,386

 

NONINTEREST INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

Nonsufficient funds (NSF) fees

 

 

8,153

 

 

 

8,512

 

 

 

16,441

 

 

 

16,607

 

Credit card, debit card and ATM card income

 

 

9,384

 

 

 

9,206

 

 

 

18,245

 

 

 

17,872

 

Service charges on deposit accounts

 

 

6,436

 

 

 

6,078

 

 

 

12,842

 

 

 

12,004

 

Trust income

 

 

3,601

 

 

 

3,358

 

 

 

7,757

 

 

 

6,583

 

Mortgage income

 

 

745

 

 

 

661

 

 

 

1,355

 

 

 

899

 

Brokerage income

 

 

1,186

 

 

 

1,000

 

 

 

2,421

 

 

 

2,149

 

Net (loss) gain on sale or write-down of assets

 

 

(903

)

 

 

1,994

 

 

 

(938

)

 

 

2,115

 

Net gain on sale or write-up of securities

 

 

10,723

 

 

 

—

 

 

 

11,021

 

 

 

—

 

Other

 

 

6,678

 

 

 

8,879

 

 

 

15,729

 

 

 

19,725

 

Total noninterest income

 

 

46,003

 

 

 

39,688

 

 

 

84,873

 

 

 

77,954

 

NONINTEREST EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

89,584

 

 

 

84,723

 

 

 

175,355

 

 

 

162,521

 

Net occupancy and equipment

 

 

8,915

 

 

 

8,935

 

 

 

17,538

 

 

 

16,960

 

Credit and debit card, data processing and software amortization

 

 

11,998

 

 

 

10,344

 

 

 

22,973

 

 

 

19,910

 

Regulatory assessments and FDIC insurance

 

 

10,317

 

 

 

5,097

 

 

 

15,855

 

 

 

10,070

 

Core deposit intangibles amortization

 

 

4,156

 

 

 

3,167

 

 

 

7,393

 

 

 

5,541

 

Depreciation

 

 

4,836

 

 

 

4,658

 

 

 

9,522

 

 

 

9,091

 

Communications

 

 

3,485

 

 

 

3,693

 

 

 

6,887

 

 

 

7,155

 

Net other real estate income

 

 

100

 

 

 

(497

)

 

 

149

 

 

 

(452

)

Merger related expenses

 

 

4,381

 

 

 

12,891

 

 

 

4,381

 

 

 

13,751

 

Other

 

 

15,070

 

 

 

12,859

 

 

 

28,637

 

 

 

24,323

 

Total noninterest expense

 

 

152,842

 

 

 

145,870

 

 

 

288,690

 

 

 

268,870

 

INCOME BEFORE INCOME TAXES

 

 

142,881

 

 

 

111,737

 

 

 

284,147

 

 

 

270,470

 

PROVISION FOR INCOME TAXES

 

 

31,279

 

 

 

24,799

 

 

 

62,119

 

 

 

58,838

 

NET INCOME

 

$

111,602

 

 

$

86,938

 

 

$

222,028

 

 

$

211,632

 

EARNINGS PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.17

 

 

$

0.94

 

 

$

2.34

 

 

$

2.30

 

Diluted

 

$

1.17

 

 

$

0.94

 

 

$

2.34

 

 

$

2.30

 

 

See notes to consolidated financial statements.

 

4

 

PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(Dollars in thousands)

 

Net income

 

$

111,602

 

 

$

86,938

 

 

$

222,028

 

 

$

211,632

 

Other comprehensive income, before tax:

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gain (loss) during the period

 

 

946

 

 

 

1,006

 

 

 

(238

)

 

 

1,002

 

Total other comprehensive loss

 

 

946

 

 

 

1,006

 

 

 

(238

)

 

 

1,002

 

Deferred tax (expense) benefit related to other comprehensive income (loss)

 

 

(199

)

 

 

(211

)

 

 

50

 

 

 

(210

)

Other comprehensive income (loss), net of tax

 

 

747

 

 

 

795

 

 

 

(188

)

 

 

792

 

Comprehensive income

 

$

112,349

 

 

$

87,733

 

 

$

221,840

 

 

$

212,424

 

 

See notes to consolidated financial statements.

 

5

 

PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Capital

 

 

Retained

 

 

Comprehensive

 

 

Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Surplus

 

 

Earnings

 

 

Income (Loss)

 

 

Equity

 

 

 

(In thousands, except share and per share data)

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT MARCH 31, 2024

 

 

93,525,291

 

 

$

93,525

 

 

$

3,672,090

 

 

$

3,341,262

 

 

$

(2,333

)

 

$

7,104,544

 

Net income

 

 

 

 

 

 

 

 

 

 

 

111,602

 

 

 

 

 

 

111,602

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

747

 

 

 

747

 

Common stock issued in connection with the issuance of restricted stock awards, net

 

 

31,500

 

 

 

32

 

 

 

(32

)

 

 

 

 

 

 

 

 

—

 

Common stock issued in connection with the acquisition of Lone Star State Bancshares, Inc.

 

 

2,376,143

 

 

 

2,376

 

 

 

153,927

 

 

 

 

 

 

 

 

 

156,303

 

Common stock repurchase

 

 

(670,518

)

 

 

(670

)

 

 

(38,814

)

 

 

 

 

 

 

 

 

(39,484

)

Stock based compensation expense

 

 

 

 

 

 

 

 

3,134

 

 

 

 

 

 

 

 

 

3,134

 

Cash dividends declared, $0.56 per share

 

 

 

 

 

 

 

 

 

 

 

(53,402

)

 

 

 

 

 

(53,402

)

BALANCE AT JUNE 30, 2024

 

 

95,262,416

 

 

$

95,263

 

 

$

3,790,305

 

 

$

3,399,462

 

 

$

(1,586

)

 

$

7,283,444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT DECEMBER 31, 2023

 

 

93,722,383

 

 

$

93,723

 

 

$

3,703,795

 

 

$

3,283,210

 

 

$

(1,398

)

 

$

7,079,330

 

Net income

 

 

 

 

 

 

 

 

 

 

 

222,028

 

 

 

 

 

 

222,028

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(188

)

 

 

(188

)

Common stock issued in connection with the issuance of restricted stock awards, net

 

 

402,100

 

 

 

402

 

 

 

(402

)

 

 

 

 

 

 

 

 

—

 

Common stock issued in connection with the acquisition of Lone Star State Bancshares, Inc.

 

 

2,376,143

 

 

 

2,376

 

 

 

153,927

 

 

 

 

 

 

 

 

 

156,303

 

Common stock repurchase

 

 

(1,238,210

)

 

 

(1,238

)

 

 

(73,528

)

 

 

 

 

 

 

 

 

(74,766

)

Stock based compensation expense

 

 

 

 

 

 

 

 

6,513

 

 

 

 

 

 

 

 

 

6,513

 

Cash dividends declared, $1.12 per share

 

 

 

 

 

 

 

 

 

 

 

(105,776

)

 

 

 

 

 

(105,776

)

BALANCE AT JUNE 30, 2024

 

 

95,262,416

 

 

$

95,263

 

 

$

3,790,305

 

 

$

3,399,462

 

 

$

(1,586

)

 

$

7,283,444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Capital

 

 

Retained

 

 

Comprehensive

 

 

Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Surplus

 

 

Earnings

 

 

Income (Loss)

 

 

Equity

 

 

 

(In thousands, except share and per share data)

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT MARCH 31, 2023

 

 

90,693,102

 

 

$

90,694

 

 

$

3,507,670

 

 

$

3,144,229

 

 

$

(3,476

)

 

$

6,739,117

 

Net income

 

 

 

 

 

 

 

 

 

 

 

86,938

 

 

 

 

 

 

86,938

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

795

 

 

 

795

 

Common stock issued in connection with the issuance of restricted stock awards, net

 

 

40,450

 

 

 

40

 

 

 

(40

)

 

 

 

 

 

 

 

 

—

 

Common stock issued in connection with the acquisition of First Bancshares of Texas, Inc.

 

 

3,582,675

 

 

 

3,583

 

 

 

220,764

 

 

 

 

 

 

 

 

 

224,347

 

Common stock repurchase

 

 

(594,773

)

 

 

(595

)

 

 

(33,613

)

 

 

 

 

 

 

 

 

(34,208

)

Stock based compensation expense

 

 

 

 

 

 

 

 

2,743

 

 

 

 

 

 

 

 

 

2,743

 

Cash dividends declared, $0.55 per share

 

 

 

 

 

 

 

 

 

 

 

(51,616

)

 

 

 

 

 

(51,616

)

BALANCE AT JUNE 30, 2023

 

 

93,721,454

 

 

$

93,722

 

 

$

3,697,524

 

 

$

3,179,551

 

 

$

(2,681

)

 

$

6,968,116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT DECEMBER 31, 2022

 

 

91,313,615

 

 

$

91,314

 

 

$

3,541,924

 

 

$

3,069,609

 

 

$

(3,473

)

 

$

6,699,374

 

Net income

 

 

 

 

 

 

 

 

 

 

 

211,632

 

 

 

 

 

 

211,632

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

792

 

 

 

792

 

Common stock issued in connection with the issuance of restricted stock awards, net

 

 

31,200

 

 

 

31

 

 

 

(31

)

 

 

 

 

 

 

 

 

—

 

Common stock issued in connection with the acquisition of First Bancshares of Texas, Inc.

 

 

3,582,675

 

 

 

3,583

 

 

 

220,764

 

 

 

 

 

 

 

 

 

224,347

 

Common stock repurchase

 

 

(1,206,036

)

 

 

(1,206

)

 

 

(71,042

)

 

 

 

 

 

 

 

 

(72,248

)

Stock based compensation expense

 

 

 

 

 

 

 

 

5,909

 

 

 

 

 

 

 

 

 

5,909

 

Cash dividends declared, $1.10 per share

 

 

 

 

 

 

 

 

 

 

 

(101,690

)

 

 

 

 

 

(101,690

)

BALANCE AT JUNE 30, 2023

 

 

93,721,454

 

 

$

93,722

 

 

$

3,697,524

 

 

$

3,179,551

 

 

$

(2,681

)

 

$

6,968,116

 

 

See notes to consolidated financial statements.

6

 

PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

 

(Dollars in thousands)

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

222,028

 

 

$

211,632

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and core deposit intangibles amortization

 

 

16,915

 

 

 

14,632

 

Provision for credit losses