10-Q 1 pb-10q_20220930.htm 10-Q pb-10q_20220930.htm
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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 September 30, 2022

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 October 31, 2022, there were 91,308,546 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 September 30, 2022 (unaudited) and December 31, 2021

3

 

Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)

4

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)

5

 

Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)

6

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited)

7

 

Notes to Consolidated Financial Statements (unaudited)

8

Item 2.

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

31

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

55

Item 4.

Controls and Procedures

55

 

 

PART II—OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

56

Item 1A.

Risk Factors

56

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

56

Item 3.

Defaults Upon Senior Securities

56

Item 4.

Mine Safety Disclosures

56

Item 5.

Other Information

56

Item 6.

Exhibits

57

Signatures

58

                                                                                                                                    

 

 

2

 

 

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

 

 

 

 

 

(Dollars in thousands, except par value)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

602,152

 

 

$

2,547,739

 

Federal funds sold

 

 

244

 

 

 

241

 

Total cash and cash equivalents

 

 

602,396

 

 

 

2,547,980

 

Available for sale securities, at fair value

 

 

491,230

 

 

 

514,932

 

Held to maturity securities, at cost (fair value of $12,653,210 and $12,251,213, respectively)

 

 

14,315,257

 

 

 

12,303,969

 

Total securities

 

 

14,806,487

 

 

 

12,818,901

 

Loans held for sale

 

 

2,871

 

 

 

7,274

 

Loans held for investment

 

 

17,580,653

 

 

 

16,833,171

 

Loans held for investment - Warehouse Purchase Program

 

 

922,764

 

 

 

1,775,699

 

Total loans

 

 

18,506,288

 

 

 

18,616,144

 

Less: allowance for credit losses on loans

 

 

(282,179

)

 

 

(286,380

)

Loans, net

 

 

18,224,109

 

 

 

18,329,764

 

Accrued interest receivable

 

 

81,358

 

 

 

66,030

 

Goodwill

 

 

3,231,636

 

 

 

3,231,636

 

Core deposit intangibles, net

 

 

53,906

 

 

 

61,684

 

Bank premises and equipment, net

 

 

337,099

 

 

 

319,799

 

Other real estate owned

 

 

1,758

 

 

 

622

 

Bank owned life insurance (BOLI)

 

 

329,342

 

 

 

327,149

 

Federal Home Loan Bank of Dallas stock

 

 

78,955

 

 

 

8,901

 

Other assets

 

 

96,456

 

 

 

121,504

 

TOTAL ASSETS

 

$

37,843,502

 

 

$

37,833,970

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

11,154,143

 

 

$

10,750,034

 

Interest-bearing

 

 

18,145,952

 

 

 

20,021,728

 

Total deposits

 

 

29,300,095

 

 

 

30,771,762

 

Other borrowings

 

 

1,165,000

 

 

 

—

 

Securities sold under repurchase agreements

 

 

454,304

 

 

 

448,099

 

Accrued interest payable

 

 

2,099

 

 

 

1,261

 

Allowance for credit losses on off-balance sheet credit exposures

 

 

29,947

 

 

 

29,947

 

Other liabilities

 

 

280,415

 

 

 

155,665

 

Total liabilities

 

 

31,231,860

 

 

 

31,406,734

 

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; 91,210,296 issued and outstanding at September 30, 2022; 92,170,480 shares issued and outstanding at December 31, 2021

 

 

91,211

 

 

 

92,171

 

Capital surplus

 

 

3,538,719

 

 

 

3,595,023

 

Retained earnings

 

 

2,981,947

 

 

 

2,738,233

 

Accumulated other comprehensive (loss) income —net unrealized gain on available for sale securities, net of tax (benefit) expense of $(62) and $481, respectively

 

 

(235

)

 

 

1,809

 

Total shareholders’ equity

 

 

6,611,642

 

 

 

6,427,236

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

37,843,502

 

 

$

37,833,970

 

 

 

See notes to consolidated financial statements.

 

3

 

 

PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(Dollars in thousands, except per share data)

 

INTEREST INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

210,268

 

 

$

213,821

 

 

$

596,063

 

 

$

663,699

 

Securities

 

 

68,761

 

 

 

46,217

 

 

 

187,883

 

 

 

128,602

 

Federal funds sold and other earning assets

 

 

525

 

 

 

302

 

 

 

2,297

 

 

 

993

 

Total interest income

 

 

279,554

 

 

 

260,340

 

 

 

786,243

 

 

 

793,294

 

INTEREST EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

14,669

 

 

 

11,578

 

 

 

32,064

 

 

 

44,228

 

Other borrowings

 

 

3,719

 

 

 

—

 

 

 

4,169

 

 

 

—

 

Securities sold under repurchase agreements

 

 

487

 

 

 

195

 

 

 

916

 

 

 

518

 

Total interest expense

 

 

18,875

 

 

 

11,773

 

 

 

37,149

 

 

 

44,746

 

NET INTEREST INCOME

 

 

260,679

 

 

 

248,567

 

 

 

749,094

 

 

 

748,548

 

PROVISION FOR CREDIT LOSSES

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES

 

 

260,679

 

 

 

248,567

 

 

 

749,094

 

 

 

748,548

 

NONINTEREST INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonsufficient funds (NSF) fees

 

 

8,887

 

 

 

7,962

 

 

 

25,495

 

 

 

21,209

 

Credit card, debit card and ATM card income

 

 

8,889

 

 

 

8,837

 

 

 

25,948

 

 

 

25,786

 

Service charges on deposit accounts

 

 

6,222

 

 

 

6,115

 

 

 

18,798

 

 

 

18,155

 

Trust income

 

 

3,174

 

 

 

2,467

 

 

 

8,752

 

 

 

7,580

 

Mortgage income

 

 

340

 

 

 

1,396

 

 

 

1,297

 

 

 

7,617

 

Brokerage income

 

 

940

 

 

 

861

 

 

 

2,749

 

 

 

2,367

 

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

 

 

50

 

 

 

255

 

 

 

1,847

 

 

 

(68

)

Other

 

 

6,186

 

 

 

6,752

 

 

 

22,518

 

 

 

21,563

 

Total noninterest income

 

 

34,688

 

 

 

34,645

 

 

 

107,404

 

 

 

104,209

 

NONINTEREST EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

79,578

 

 

 

78,412

 

 

 

239,360

 

 

 

234,060

 

Net occupancy and equipment

 

 

8,412

 

 

 

8,165

 

 

 

24,299

 

 

 

24,044

 

Credit and debit card, data processing and software amortization

 

 

9,516

 

 

 

9,103

 

 

 

27,611

 

 

 

26,054

 

Regulatory assessments and FDIC insurance

 

 

2,807

 

 

 

2,497

 

 

 

8,508

 

 

 

7,837

 

Core deposit intangibles amortization

 

 

2,577

 

 

 

2,878

 

 

 

7,778

 

 

 

8,696

 

Depreciation

 

 

4,436

 

 

 

4,524

 

 

 

13,522

 

 

 

13,577

 

Communications

 

 

3,374

 

 

 

3,013

 

 

 

9,499

 

 

 

8,894

 

Net other real estate (income) expense

 

 

(15

)

 

 

34

 

 

 

(213

)

 

 

(2,250

)

Other

 

 

11,529

 

 

 

11,189

 

 

 

34,578

 

 

 

33,170

 

Total noninterest expense

 

 

122,214

 

 

 

119,815

 

 

 

364,942

 

 

 

354,082

 

INCOME BEFORE INCOME TAXES

 

 

173,153

 

 

 

163,397

 

 

 

491,556

 

 

 

498,675

 

PROVISION FOR INCOME TAXES

 

 

37,333

 

 

 

34,807

 

 

 

104,920

 

 

 

106,165

 

NET INCOME

 

$

135,820

 

 

$

128,590

 

 

$

386,636

 

 

$

392,510

 

EARNINGS PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.49

 

 

$

1.39

 

 

$

4.22

 

 

$

4.23

 

Diluted

 

$

1.49

 

 

$

1.39

 

 

$

4.22

 

 

$

4.23

 

 

See notes to consolidated financial statements.

 

4

 

 

PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(Dollars in thousands)

 

Net income

 

$

135,820

 

 

$

128,590

 

 

$

386,636

 

 

$

392,510

 

Other comprehensive (loss) income, before tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized (losses) gains during the period

 

 

(1,813

)

 

 

1,089

 

 

 

(2,587

)

 

 

1,509

 

Total other comprehensive (loss) income

 

 

(1,813

)

 

 

1,089

 

 

 

(2,587

)

 

 

1,509

 

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

 

 

380

 

 

 

(229

)

 

 

543

 

 

 

(317

)

Other comprehensive (loss) income, net of tax

 

 

(1,433

)

 

 

860

 

 

 

(2,044

)

 

 

1,192

 

Comprehensive income

 

$

134,387

 

 

$

129,450

 

 

$

384,592

 

 

$

393,702

 

 

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 JUNE 30, 2022

 

 

91,195,646

 

 

$

91,196

 

 

$

3,535,877

 

 

$

2,893,556

 

 

$

1,198

 

 

$

6,521,827

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

135,820

 

 

 

 

 

 

 

135,820

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,433

)

 

 

(1,433

)

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

 

 

14,650

 

 

 

15

 

 

 

(15

)

 

 

 

 

 

 

 

 

 

 

—

 

Common stock repurchase

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

—

 

Stock based compensation expense

 

 

 

 

 

 

 

 

 

 

2,857

 

 

 

 

 

 

 

 

 

 

 

2,857

 

Cash dividends declared, $0.52 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(47,429

)

 

 

 

 

 

 

(47,429

)

BALANCE AT SEPTEMBER 30, 2022

 

 

91,210,296

 

 

$

91,211

 

 

$

3,538,719

 

 

$

2,981,947

 

 

$

(235

)

 

$

6,611,642