10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012

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, including zip code)

(713) 693-9300

(Registrant’s telephone number, including area code)

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

Large Accelerated Filer	x	Accelerated Filer	¨
Non-accelerated Filer	¨  (Do not check if a smaller reporting company)	Smaller Reporting Company	¨

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

As of May 1, 2012, there were 47,451,041 outstanding shares of the registrant’s Common Stock, par value $1.00 per share.

PROSPERITY BANCSHARES, INC.^® AND SUBSIDIARIES

INDEX TO FORM 10-Q

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Interim Consolidated Financial Statements		1
	Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011 (unaudited)		1
	Consolidated Statements of Income for the Three Months Ended March 31, 2012 and 2011 (unaudited)		2
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2012 and 2011 (unaudited)		3
	Consolidated Statements of Changes in Shareholders’ Equity for the Year Ended December 31, 2011 and for the Three Months Ended March 31, 2012 (unaudited)		4
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011 (unaudited)		5
	Notes to Interim Consolidated Financial Statements (unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		42
Item 4.	Controls and Procedures		42
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings		42
Item 1A.	Risk Factors		43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		43
Item 3.	Defaults upon Senior Securities		43
Item 4.	Mine Safety Disclosures		43
Item 5.	Other Information		43
Item 6.	Exhibits		43
Signatures			44

PART I – FINANCIAL INFORMATION

ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

PROSPERITY BANCSHARES, INC^®. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 31, 2012			December 31, 2011
	(In thousands, except share data)
ASSETS
Cash and due from banks	$	151,467		$	212,800
Federal funds sold		445			642
Total cash and cash equivalents		151,912			213,442
Securities available for sale, at fair value (amortized cost of $278,974 and $301,589, respectively)		298,516			322,316
Securities held to maturity, at cost (fair value of $5,494,671 and $4,492,988, respectively)		5,348,013			4,336,620
Loans held for investment		3,874,862			3,765,906
Allowance for credit losses		(51,642	)		(51,594	)
Loans, net		3,823,220			3,714,312
Accrued interest receivable		30,261			29,405
Goodwill		929,161			924,537
Core deposit intangibles, net of accumulated amortization of $59,583 and $58,158, respectively		19,301			20,996
Bank premises and equipment, net		162,676			159,656
Other real estate owned		7,718			8,328
Bank Owned Life Insurance (BOLI)		52,191			50,029
Federal Home Loan Bank stock		35,032			11,601
Other assets		31,954			31,429
TOTAL ASSETS	$	10,889,955		$	9,822,671
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing	$	2,088,749		$	1,972,226
Interest-bearing		6,455,702			6,088,028
Total deposits		8,544,451			8,060,254
Other borrowings		527,536			12,790
Securities sold under repurchase agreements		58,481			54,883
Accrued interest payable		2,573			2,803
Other liabilities		62,326			39,621
Junior subordinated debentures		85,055			85,055
Total liabilities		9,280,422			8,255,406
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;47,333,949 and 46,947,415 shares issued at March 31, 2012 and December 31, 2011, respectively; 47,296,861 and 46,910,327 shares outstanding at March 31, 2012 and December 31, 2011, respectively		47,334			46,947
Capital surplus		898,962			883,575
Retained earnings		651,142			623,878
Accumulated other comprehensive income — net unrealized gain on available for sale securities, net of tax of $6,840 and $7,254, respectively		12,702			13,472
Less treasury stock, at cost, 37,088 shares		(607	)		(607	)
Total shareholders’ equity		1,609,533			1,567,265
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	10,889,955		$	9,822,671

See notes to interim condensed consolidated financial statements.

1

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three Months Ended March 31,
	2012		2011
	(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees	$	53,217	$	52,200
Securities		38,321		41,204
Federal funds sold		78		5
Total interest income		91,616		93,409
INTEREST EXPENSE:
Deposits		8,791		11,512
Junior subordinated debentures		663		1,147
Notes payable and other borrowings		316		337
Total interest expense		9,770		12,996
NET INTEREST INCOME		81,846		80,413
PROVISION FOR CREDIT LOSSES		150		1,700
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		81,696		78,713
NONINTEREST INCOME:
Customer service fees		11,666		12,042
Other		2,279		1,825
Total noninterest income		13,945		13,867
NONINTEREST EXPENSE:
Salaries and employee benefits		23,252		23,204
Net occupancy		3,557		3,648
Depreciation		2,035		2,021
Debit card, data processing and software amortization		1,532		1,672
Communications		1,748		1,692
Core deposit intangibles amortization		1,695		2,034
Other		6,640		7,424
Total noninterest expense		40,459		41,695
INCOME BEFORE INCOME TAXES		55,182		50,885
PROVISION FOR INCOME TAXES		18,695		17,007
NET INCOME	$	36,487	$	33,878
EARNINGS PER SHARE
Basic	$	0.77	$	0.72
Diluted	$	0.77	$	0.72
CASH DIVIDENDS DECLARED
Cash dividends declared on common stock	$	9,223	$	8,186
Cash dividends declared per common share	$	0.195	$	0.175

See notes to interim consolidated financial statements.

2

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended March 31,
	2012			2011
	(Dollars in thousands)
Net income	$	36,487		$	33,878
Other comprehensive loss, before tax:
Securities available for sale:
Change in unrealized gain/loss during the period		(1,185	)		(919	)
Total other comprehensive loss, before tax		(1,185	)		(919	)
Deferred tax benefit related to other comprehensive income		(415	)		(322	)
Other comprehensive loss, net of tax		(770	)		(597	)
Comprehensive income	$	35,717		$	33,281

See notes to interim consolidated financial statements.

3

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

	Common Stock				Capital		Retained			Accumulated Other Comprehensive			Treasury			Total Shareholders’
	Shares		Amount		Surplus		Earnings			Income			Stock			Equity
	(Amounts in thousands, except share and per share data)
BALANCE AT JANUARY 1, 2011		46,721,114	$	46,721	$	876,050	$	515,871		$	14,304		$	(607	)	$	1,452,339
Net income								33,878									33,878
Other comprehensive loss											(597	)					(597	)
Common stock issued in connection with the exercise of stock options and restricted stock awards		97,600		98		2,259											2,357
Stock based compensation expense						707											707
Cash dividends declared, $0.175 per share								(8,186	)								(8,186	)
BALANCE AT MARCH 31, 2011		46,818,714	$	46,819	$	879,016	$	541,563		$	13,707		$	(607	)	$	1,480,498
BALANCE AT JANUARY 1, 2012		46,947,415	$	46,947	$	883,575	$	623,878		$	13,472		$	(607	)	$	1,567,265
Net income								36,487									36,487
Other comprehensive loss											(770	)					(770	)
Common stock issued in connection with the exercise of stock options and restricted stock awards		71,581		72		1,779											1,851
Common stock issued in connection with the acquisition of Texas Bankers, Inc.		314,953		315		12,393											12,708
Stock based compensation expense						1,215											1,215
Cash dividends declared, $0.195 per share								(9,223	)								(9,223	)
BALANCE AT MARCH 31, 2012		47,333,949	$	47,334	$	898,962	$	651,142		$	12,702		$	(607	)	$	1,609,533

See notes to interim consolidated financial statements.

4

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three Months Ended March 31,
	2012			2011
	(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	36,487		$	33,878
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,730			4,055
Provision for credit losses		150			1,700
Net premium amortization on investments		9,720			6,980
Stock based compensation expense		1,215			707
Net accretion of discount on loans and deposits		—			(50	)
Gain on sale of assets and other real estate		(411	)		(4	)
(Increase) decrease in other assets and accrued interest receivable		(24,626	)		7,195
Increase in accrued interest payable and other liabilities		23,846			19,295
Net cash provided by operating activities		50,111			73,756
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and principal paydowns of held to maturity securities		354,183			334,446
Purchase of held to maturity securities		(1,375,431	)		(554,369	)
Proceeds from maturities and principal paydowns of available for sale securities		22,813			30,497
Net increase in loans		(85,120	)		(94,435	)
Cash and cash equivalents acquired in the purchase of Texas Bankers, Inc.		44,550			—
Purchase of bank premises and equipment		(2,264	)		(2,288	)
Net proceeds from sale of bank premises, equipment and other real estate		4,817			5,628
Net cash used in investing activities		(1,036,452	)		(280,521	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in noninterest-bearing deposits	$	95,498		$	57,237
Net increase in interest-bearing deposits		318,341			304,390
Net proceeds from (repayments of) short-term borrowings		515,000			(146,000	)
Net repayments of long-term borrowings		(254	)		(341	)
Net proceeds from (repayments from) securities sold under repurchase agreements		3,598			(8,812	)
Redemption of junior subordinated debentures		—			(7,210	)
Proceeds from exercise of stock options		1,851			2,357
Payments of cash dividends		(9,223	)		(8,186	)
Net cash provided by financing activities		924,811			193,435
NET DECREASE IN CASH AND CASH EQUIVALENTS	$	(61,530	)	$	(13,330	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		213,442			159,368
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	151,912		$	146,038
NONCASH ACTIVITIES:
Stock issued in connection with the Texas Bankers, Inc. acquisition		12,708			—
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	10,001		$	13,492
Cash paid for income taxes		250			2,000
Noncash investing and financing activities-acquisition of real estate through foreclosure of collateral		3,559			5,935

See notes to interim consolidated financial statements.

5

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

1. BASIS OF PRESENTATION

The interim consolidated financial statements include the accounts of Prosperity Bancshares, Inc.^® (the “Company”) and its wholly-owned subsidiaries, Prosperity Bank^® (the “Bank”) and Prosperity Holdings of Delaware, LLC. All inter-company transactions and balances have been eliminated.

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of the Company on a consolidated basis, and all such adjustments are of a normal recurring nature. These financial statements and the notes thereto should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. Operating results for the three-month period ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012 or any other period.

2. INCOME PER COMMON SHARE

Net income per common share for all periods presented has been calculated in accordance with ASC Topic 260. Outstanding stock options issued by the Company represent the only dilutive effect reflected in diluted weighted average shares. The following table illustrates the computation of basic and diluted earnings per share:

	Three Months Ended March 31,
	2012		2011
	(In thousands, except per share data)
Net income available to shareholders	$	36,487	$	33,878
Weighted average shares outstanding		47,238		46,733
Potential dilutive shares		173		209
Weighted average shares and equivalents outstanding		47,411		46,942
Basic earnings per share	$	0.77	$	0.72
Diluted earnings per share	$	0.77	$	0.72

The incremental shares for the assumed exercise of the outstanding options were determined by application of the treasury stock method. There were no stock options exercisable during the quarters ended March 31, 2012 or 2011 that would have had an anti-dilutive effect on the above computation.

3. NEW ACCOUNTING STANDARDS

Accounting Standards Updates

ASU 2011-03, “Transfers and Servicing (Topic 860)—Reconsideration of Effective Control for Repurchase Agreements.” ASU 2011-03 is intended to improve financial reporting of repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. ASU 2011-03 removes from the assessment of effective control (i) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (ii) the collateral maintenance guidance related to that criterion. ASU 2011-03 became effective for the Company on January 1, 2012 and did not have a significant impact on the Company’s financial statements.

ASU 2011-04, “Fair Value Measurement (Topic 820)—Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs.” ASU 2011-04 amends Topic 820, “Fair Value Measurements and Disclosures,” to converge the fair value measurement guidance in U.S. generally accepted accounting principles and International Financial Reporting Standards. ASU 2011-04 clarifies the application of existing fair value measurement requirements, changes certain principles in Topic 820 and requires additional fair value disclosures. ASU 2011-04 became effective for the Company on January 1, 2012 and did not have a significant impact on the Company’s financial statements (see Note 5-Fair Value).

6

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

ASU 2011-05, “Comprehensive Income (Topic 220)—Presentation of Comprehensive Income.” ASU 2011-05 amends Topic 220, “Comprehensive Income,” to require that all non-owner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, ASU 2011-05 requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented. The option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. ASU 2011-05 became effective for the Company on January 1, 2012; however, certain provisions related to the presentation of reclassification adjustments have been deferred by ASU 2011-12 “Comprehensive Income (Topic 220) – Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” as further discussed below. In connection with the application of ASU 2011-05, the Company’s financial statements now include a separate statement of comprehensive income.

ASU 2011-08, “Intangibles – Goodwill and Other (Topic 350)—Testing Goodwill for Impairment.” ASU 2011-08 amends Topic 350, “Intangibles – Goodwill and Other,” to give entities the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. ASU 2011-08 became effective for the Company on January 1, 2012 and did not have a significant impact on the Company’s financial statements.

ASU 2011-11, “Balance Sheet (Topic 210)—“Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 amends Topic 210, “Balance Sheet,” to require an entity to disclose both gross and net information about financial instruments, such as sales and repurchase agreements and reverse sale and repurchase agreements and securities borrowing/lending arrangements, and derivative instruments that are eligible for offset in the statement of financial position and/or subject to a master netting arrangement or similar agreement. ASU 2011-11 is effective for annual and interim periods beginning on January 1, 2013, and is not expected to have a significant impact on the Company’s financial statements.

ASU 2011-12 “Comprehensive Income (Topic 220)—Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.” ASU 2011-12 defers changes in ASU 2011-05 that relate to the presentation of reclassification adjustments to allow the FASB time to redeliberate whether to require presentation of such adjustments on the face of the financial statements to show the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income. ASU 2011-12 allows entities to continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU 2011-05. All other requirements in ASU 2011-05 are not affected by ASU 2011-12. ASU 2011-12 became effective for the Company on January 1, 2012 and did not have a significant impact on the Company’s financial statements.

7

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

4. LOANS AND ALLOWANCE FOR CREDIT LOSSES

The loan portfolio consists of various types of loans made principally to borrowers located in South and Southeast Texas, Houston, Central Texas, Bryan/College Station, East Texas, Corpus Christi and Dallas/Fort Worth and is classified by major type as follows:

	March 31, 2012		December 31, 2011
	(Dollars in thousands)
Commercial and industrial	$	442,559	$	406,433
Real estate:
Construction and land development		484,295		482,140
1-4 family residential		1,036,318		1,007,266
Home equity		149,597		146,999
Commercial real estate		1,379,242		1,351,986
Agriculture real estate (farmland)		144,399		136,008
Multi-family residential		94,683		89,240
Agriculture		34,075		34,226
Consumer (net of unearned discount)		76,393		78,187
Other		33,301		33,421
Total	$	3,874,862	$	3,765,906

(i) Commercial and Industrial Loans. In nearly all cases, the Company’s commercial loans are made in the Company’s market areas and are underwritten on the basis of the borrower’s ability to service the debt from income. As a general practice, the Company takes as collateral a lien on any available real estate, equipment or other assets owned by the borrower and obtains a personal guaranty of the borrower or principal. Working capital loans are primarily collateralized by short-term assets whereas term loans are primarily collateralized by long-term assets. In general, commercial loans involve more credit risk than residential mortgage loans and commercial mortgage loans and, therefore, usually yield a higher return. The increased risk in commercial loans is due to the type of collateral securing these loans. The increased risk also derives from the expectation that commercial loans generally will be serviced principally from the operations of the business, and those operations may not be successful. Historical trends have shown these types of loans to have higher delinquencies than mortgage loans. As a result of these additional complexities, variables and risks, commercial loans require more thorough underwriting and servicing than other types of loans.

(ii) Commercial Real Estate. The Company makes commercial real estate related loans collateralized by owner-occupied and non-owner-occupied real estate to finance the purchase of real estate. The Company’s commercial real estate related loans are collateralized by first liens on real estate, typically have variable interest rates (or five year or less fixed rates) and amortize over a 15 to 20 year period. Payments on loans secured by such properties are often dependent on the successful operation or management of the properties. Accordingly, repayment of these loans may be subject to adverse conditions in the real estate market or the economy to a greater extent than other types of loans. The Company seeks to minimize these risks in a variety of ways, including giving careful consideration to the property’s operating history, future operating projections, current and projected occupancy, location and physical condition in connection with underwriting these loans. The underwriting analysis also includes credit verification, analysis of global cash flow, appraisals and a review of the financial condition of the borrower. At March 31, 2012, the Company had commercial real estate related loans totaling $1.96 billion which include the categories of construction and land development loans, commercial real estate loans and multi-family residential loans. At March 31, 2012, approximately 35.1% of the outstanding principal balance of the Company’s commercial real estate related loans was secured by owner-occupied properties.

8

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

(iii) 1-4 Family Residential Loans. The Company originates 1-4 family residential mortgage loans collateralized by owner-occupied residential properties located in the Company’s market areas. The Company offers a variety of mortgage loan products which generally are amortized over five to 25 years. Loans collateralized by 1-4 family residential real estate generally have been originated in amounts of no more than 89% of appraised value or have mortgage insurance. The Company requires mortgage title insurance and hazard insurance. The Company has elected to keep all 1-4 family residential loans for its own account rather than selling such loans into the secondary market. By doing so, the Company is able to realize a higher yield on these loans; however, the Company also incurs interest rate risk as well as the risks associated with nonpayments on such loans.

(iv) Construction and Land Development Loans. The Company makes loans to finance the construction of residential and, to a lesser extent, nonresidential properties. Construction loans generally are collateralized by first liens on real estate and have floating interest rates. The Company conducts periodic inspections, either directly or through an agent, prior to approval of periodic draws on these loans. Underwriting guidelines similar to those described above are also used in the Company’s construction lending activities. Construction loans involve additional risks attributable to the fact that loan funds are advanced upon the security of a project under construction, and the project is of uncertain value prior to its completion. Because of uncertainties inherent in estimating construction costs, the market value of the completed project and the effects of governmental regulation on real property, it can be difficult to accurately evaluate the total funds required to complete a project and the related loan to value ratio. As a result of these uncertainties, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan. If the Company is forced to foreclose on a project prior to completion, there is no assurance that the Company will be able to recover all of the unpaid portion of the loan. In addition, the Company may be required to fund additional amounts to complete a project and may have to hold the property for an indeterminate period of time. While the Company has underwriting procedures designed to identify what it believes to be acceptable levels of risks in construction lending, no assurance can be given that these procedures will prevent losses from the risks described above.

(v) Agriculture Loans. The Company provides agriculture loans for short-term crop production, including rice, cotton, milo and corn, farm equipment financing and agriculture real estate financing. The Company evaluates agriculture borrowers primarily based on their historical profitability, level of experience in their particular agriculture industry, overall financial capacity and the availability of secondary collateral to withstand economic and natural variations common to the industry. Because agriculture loans present a higher level of risk associated with events caused by nature, the Company routinely makes on-site visits and inspections in order to identify and monitor such risks.

(vi) Consumer Loans. Consumer loans made by the Company include direct credit automobile loans, recreational vehicle loans, boat loans, home improvement loans, home equity loans, personal loans (collateralized and uncollateralized) and deposit account collateralized loans. The terms of these loans typically range from 12 to 120 months and vary based upon the nature of collateral and size of loan. Generally, consumer loans entail greater risk than do real estate secured loans, particularly in the case of consumer loans that are unsecured or collateralized by rapidly depreciating assets such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan balance. The remaining deficiency often does not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws may limit the amount which can be recovered on such loans.

The Company maintains a loan review department that reviews and validates the credit risk program on a periodic basis. Results of these reviews are presented to management. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.

Concentrations of Credit. Most of the Company’s lending activity occurs within the State of Texas, including the four largest metropolitan areas of Austin, Dallas/Ft. Worth, Houston and San Antonio, as well as other markets. The majority of the Company’s loan portfolio consists of commercial and industrial and commercial real estate loans. As of March 31, 2012 and December 31, 2011, there were no concentrations of loans related to any single industry in excess of 10% of total loans.

9

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

Foreign Loans. The Company has U.S. dollar denominated loans and commitments to borrowers in Mexico. The outstanding balance of these loans and the unfunded amounts available under these commitments were not significant at March 31, 2012 or December 31, 2011.

Related Party Loans. As of March 31, 2012 and December 31, 2011, loans outstanding to directors, officers and their affiliates totaled $7.3 million and $9.8 million, respectively. All transactions entered into between the Company and such related parties are done in the ordinary course of business and made on the same terms and conditions as similar transactions with unaffiliated persons.

An analysis of activity with respect to these related party loans is as follows:

	March 31, 2012			December 31, 2011
	(Dollars in thousands)
Beginning balance	$	9,809		$	12,783
New loans and reclassified related loans		200			4,168
Repayments		(2,728	)		(7,142	)
Ending balance	$	7,281		$	9,809

Nonaccrual and Past Due Loans. The Company has several procedures in place to assist it in maintaining the overall quality of its loan portfolio. The Company has established underwriting guidelines to be followed by its officers and the Company also monitors its delinquency levels for any negative or adverse trends. There can be no assurance, however, that the Company’s loan portfolio will not become subject to increasing pressures from deteriorating borrower credit due to general economic conditions.

The Company generally places a loan on nonaccrual status and ceases accruing interest when the payment of principal or interest is delinquent for 90 days, or earlier in some cases, unless the loan is in the process of collection and the underlying collateral fully supports the carrying value of the loan.

The Company requires appraisals on loans collateralized by real estate. With respect to potential problem loans, an evaluation of the borrower’s overall financial condition is made to determine the need, if any, for possible writedowns or appropriate additions to the allowance for credit losses.

As of the dates indicated, nonaccrual loans, segregated by class of loans, were as follows:

	March 31, 2012		December 31, 2011
	(Dollars in thousands)
Construction and land development	$	1,210	$	1,175
Agriculture and agriculture real estate		67		49
1-4 family residential (includes home equity)		937		923
Commercial real estate (includes multi-family residential)		4,266		790
Commercial and industrial		654		633
Consumer and other		8		8
Total	$	7,142	$	3,578

10

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

An age analysis of past due loans, segregated by class of loans, as of March 31, 2012 and December 31, 2011 were as follows:

	As of March 31, 2012
	Loans 30-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Accruing Loans 90 or More Days Past Due
	(Dollars in thousands)
Construction and land development	$	3,963	$	1,210	$	5,173	$	479,122	$	—
Agriculture and agriculture real estate		88		9		97		178,377		—
1-4 family (includes home equity)		1,181		563		1,744		1,184,171		—
Commercial real estate (includes multi-family residential)		4,947		3,097		8,044		1,465,881		—
Commercial and industrial		1,465		364		1,829		440,730		—
Consumer and other		242		6		248		109,446		—
Total	$	11,886	$	5,249	$	17,135	$	3,857,727	$	—
	Year Ended December 31, 2011
	Loans 30-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Accruing Loans 90 or More Days Past Due
	(Dollars in thousands)
Construction and land development	$	1,281	$	111	$	1,392	$	480,748	$	—
Agriculture and agriculture real estate		365		9		374		169,860		—
1-4 family (includes home equity)		1,527		314		1,841		1,152,424		—
Commercial real estate (includes multi-family residential)		5,630		390		6,020		1,435,206		—
Commercial and industrial		1,544		394		1,938		404,495		—
Consumer and other		89		—		89		111,519		—
Total	$	10,436	$	1,218	$	11,654	$	3,754,252	$	—

The following table presents information regarding past due loans and nonperforming assets at the dates indicated:

	March 31, 2012			December 31, 2011
	(Dollars in thousands)
Nonaccrual loans	$	7,142		$	3,578
Total nonperforming loans		7,142			3,578
Repossessed assets		13			146
Other real estate		7,718			8,328
Total nonperforming assets	$	14,873		$	12,052
Nonperforming assets to total loans and other real estate		0.38	%		0.32	%

The Company believes its conservative lending approach has resulted in sound asset quality. The Company had $14.9 million in nonperforming assets at March 31, 2012 compared with $12.1 million at December 31, 2011. If interest on nonaccrual loans had been accrued under the original loan terms, approximately $162,000 would have been recorded as income for the three months ended March 31, 2012.

11

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

Impaired Loans. Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Impaired loans as of March 31, 2012 are set forth in the following table. No interest income was recognized on impaired loans subsequent to their classification as impaired. The average recorded investment is reported on a year-to-date basis.

	March 31, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
	(Dollars in thousands)
With no related allowance recorded:
Construction and land development	$	276	$	277	$	—	$	194
Agriculture and agriculture real estate		5		6		—		5
1-4 family (includes home equity)		340		379		—		326
Commercial real estate (includes multi-family residential)		1,505		1,527		—		1,087
Commercial and industrial		4		6		—		58
Consumer and other		—		—		—		—
With an allowance recorded:
Construction and land development		1,064		1,064		312		1,064
Agriculture and agriculture real estate		42		45		42		42
1-4 family (includes home equity)		601		661		272		639
Commercial real estate (includes multi-family residential)		5,161		5,167		815		2,822
Commercial and industrial		610		2,029		310		566
Consumer and other		7		18		6		7
Total:
Construction and land development		1,340		1,341		312		1,258
Agriculture and agriculture real estate		47		51		42		47
1-4 family (includes home equity)		941		1,040		272		965
Commercial real estate (includes multi-family residential)		6,666		6,694		815		3,909
Commercial and industrial		614		2,035		310		624
Consumer and other		7		18		6		7

12

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

Impaired loans as of December 31, 2011 are set forth in the following tables. No interest income was recognized on impaired loans subsequent to their classification as impaired. The average recorded investment is reported on a year-to-date basis.

	December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average  Recorded Investment
	(Dollars in thousands)
With no related allowance recorded:
Construction and land development	$	111	$	111	$	—	$	58
Agriculture and agriculture real estate		6		6		—		5
1-4 family (includes home equity)		313		344		—		291
Commercial real estate (includes multi-family residential)		668		705		—		637
Commercial and industrial		112		1,513		—		253
Consumer and other		—		—		—		3
With an allowance recorded:
Construction and land development		1,064		1,064		312		584
Agriculture and agriculture real estate		43		46		39		21
1-4 family (includes home equity)		677		731		362		663
Commercial real estate (includes multi-family residential)		483		485		165		309
Commercial and industrial		521		535		300		642
Consumer and other		8		20		8		18
Total:
Construction and land development		1,175		1,175		312		642
Agriculture and agriculture real estate		49		52		39		26
1-4 family (includes home equity)		990		1,075		362		954
Commercial real estate (includes multi-family residential)		1,151		1,190		165		946
Commercial and industrial		633		2,048		300		895
Consumer and other		8		20		8		21

Credit Quality Indicators. As part of the ongoing monitoring of the credit quality of the Company’s loan portfolio and methodology for calculating the allowance for credit losses, management assigns and tracks loan grades to be used as credit quality indicators. The following is a general description of the loan risk grades used (1-7):

Grade 1 – Credits in this category are of the highest standards of credit quality with virtually no risk of loss. These borrowers would represent top rated companies and individuals with unquestionable financial standing with excellent global cash flow coverage, net worth, liquidity and collateral coverage and/or secured by CD/savings accounts.

Grade 2 – Credits in this category are not immune from risk but are well-protected by the collateral and paying capacity of the borrower. These loans may exhibit a minor unfavorable credit factor, but the overall credit is sufficiently strong to minimize the possibility of loss.

Grade 3 – Credits graded 3 constitute an undue and unwarranted credit risk, however the factors do not rise to a level of substandard. These credits have potential weaknesses and/or declining trends that, if not corrected, could expose the Company to risk at a future date. Credits graded 3 are monitored on the Company’s internally generated watch list and evaluated on a quarterly basis.

Grade 4 – Credits in this category are deemed “substandard” loans in accordance with regulatory guidelines. Loans in this category have well-defined weakness that, if not corrected, could make default of principal and interest possible, but it is not yet certain. Loans in this category are still accruing interest and may be dependent upon secondary sources of repayment and/or collateral liquidation.

13

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

Grade 5 – Credits in this category are deemed “substandard” and “impaired” pursuant to regulatory guidelines. As such, the Company has determined that it is probable that less than 100% of the principal and interest will be collected. Loans graded 5 are individually evaluated for a specific reserve valuation and will typically have the accrual of interest stopped.

Grade 6 – Credits in this category include “doubtful” loans in accordance with regulatory guidance. Such loans are on nonaccrual and factors have indicated a loss is imminent. These loans are also deemed “impaired.” While a specific reserve may be in place while the loan and collateral is being evaluated these loans are typically charged down to an amount the Company deems collectable.

Grade 7 – Credits in this category are deemed a “loss” in accordance with regulatory guidelines and charged off or charged down. The Company may continue collection efforts and may have partial recovery in the future.

The following table presents risk grades and classified loans by class of loan at March 31, 2012. Classified loans include loans in risk grades 5, 6 and 7.

	Construction and Land Development		Agriculture and Agriculture Real Estate		1-4 Family (Includes Home Equity)		Commercial Real Estate (Includes Multi-Family)		Commercial and Industrial		Consumer and Other		Total
	(Dollars in thousands)
Grade 1	$	—	$	2,866	$	—	$	—	$	44,595	$	29,250	$	76,711
Grade 2		467,926		175,256		1,170,383		1,432,728		393,055		80,134		3,719,482
Grade 3		1,716		272		9,823		14,878		3,795		—		30,484
Grade 4		13,313		33		4,768		19,653		500		303		38,570
Grade 5		1,340		47		922		6,666		565		6		9,546
Grade 6		—		—		19		—		49		1		69
Grade 7		—		—		—		—		—		—		—
Total	$	484,295	$	178,474	$	1,185,915	$	1,473,925	$	442,559	$	109,694	$	3,874,862

The following table presents risk grades and classified loans by class of loan at December 31, 2011. Classified loans include loans in risk grades 5, 6 and 7.

	Construction and Land Development		Agriculture and Agriculture Real Estate		1-4 Family (Includes Home Equity)		Commercial Real Estate (Includes Multi- Family)		Commercial and Industrial		Consumer and Other		Total
	(Dollars in thousands)
Grade 1	$	—	$	3,319	$	—	$	—	$	45,218	$	31,602	$	80,139
Grade 2		465,572		166,656		1,140,210		1,399,915		355,862		79,996		3,608,211
Grade 3		1,757		210		9,131		14,335		4,189		—		29,622
Grade 4		13,636		—		3,934		25,825		531		2		43,928
Grade 5		1,175		49		970		1,151		532		8		3,885
Grade 6		—		—		20		—		101		—		121
Grade 7		—		—		—		—		—		—		—
Total	$	482,140	$	170,234	$	1,154,265	$	1,441,226	$	406,433	$	111,608	$	3,765,906

14

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

Charge-offs/recoveries, segregated by class of loans, for the three months ended March 31, 2012 and twelve months ended December 31, 2011 were as follows:

	Three Months Ended March 31, 2012
	Charge-offs			Recoveries		Net Charge- offs
	(Dollars in thousands)
Construction and land development	$	(26	)	$	4	$	(22	)
1-4 family (includes home equity)		(52	)		2		(50	)
Commercial real estate and agriculture (includes multi-family)		(23	)		5		(18	)
Commercial and industrial		(78	)		93		15
Consumer and other		(203	)		176		(27	)
	$	(382	)	$	280	$	(102	)
	Year Ended December 31, 2011
	Charge-offs			Recoveries		Net Charge- offs
	(Dollars in thousands)
Construction and land development	$	(1,509	)	$	400	$	(1,109	)
1-4 family (includes home equity)		(1,392	)		32		(1,360	)
Commercial real estate and agriculture (includes multi-family)		(1,027	)		41		(986	)
Commercial and industrial		(1,694	)		526		(1,168	)
Consumer and other		(1,228	)		661		(567	)
	$	(6,850	)	$	1,660	$	(5,190	)

Allowance for Credit Losses. The allowance for credit losses is a valuation established through charges to earnings in the form of a provision for credit losses. Management has established an allowance for credit losses which it believes is adequate for estimated losses in the Company’s loan portfolio. The amount of the allowance for credit losses is affected by the following: (i) charge-offs of loans that occur when loans are deemed uncollectible and decrease the allowance, (ii) recoveries on loans previously charged off that increase the allowance and (iii) provisions for credit losses charged to earnings that increase the allowance. Based on an evaluation of the loan portfolio and consideration of the factors listed below, management presents a quarterly review of the allowance for credit losses to the Bank’s Board of Directors, indicating any change in the allowance since the last review and any recommendations as to adjustments in the allowance.

The Company’s allowance for credit losses consists of two components: a specific valuation allowance based on probable losses on specifically identified loans and a general valuation allowance based on historical loan loss experience, general economic conditions and other qualitative risk factors both internal and external to the Company.

In setting the specific valuation allowance, the Company follows a loan review program to evaluate the credit risk in the loan portfolio. Through this loan review process, the Company maintains an internal list of impaired loans which, along with the delinquency list of loans, helps management assess the overall quality of the loan portfolio and the adequacy of the allowance for credit losses. All loans that have been identified as impaired are reviewed on a quarterly basis in order to determine whether a specific reserve is required. For each impaired loan, the Company allocates a specific loan loss reserve primarily based on the value of the collateral securing the impaired loan requiring a reserve in accordance with ASC Topic 310, Receivables. The specific reserves are determined on an individual loan basis. Impaired loans are excluded from the general valuation allowance described below.

In determining the amount of the general valuation allowance, management considers factors such as historical loan loss experience, industry diversification of the Company’s commercial loan portfolio, concentration risk of specific loan types, the volume, growth and composition of the Company’s loan portfolio, current economic conditions that may affect the borrower’s ability to pay and the value of collateral, the evaluation of the Company’s loan portfolio through its internal loan review process, general economic conditions and other qualitative risk factors both internal and external to the Company and other relevant factors in accordance with

15

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

ASC Topic 450. Based on a review of these factors for each loan type, the Company applies an estimated percentage to the outstanding balance of each loan type, excluding any impaired loan. The Company uses this information to establish the amount of the general valuation allowance.

In connection with its review of the loan portfolio, the Company considers risk elements attributable to particular loan types or categories in assessing the quality of individual loans. Some of the risk elements include:

• for 1-4 family residential mortgage loans, the borrower’s ability to repay the loan, including a consideration of the debt to income ratio and employment and income stability, the loan to value ratio, and the age, condition and marketability of collateral;

• for commercial real estate loans and multifamily residential loans, the debt service coverage ratio (income from the property in excess of operating expenses compared to loan payment requirements), operating results of the owner in the case of owner-occupied properties, the loan to value ratio, the age and condition of the collateral and the volatility of income, property value and future operating results typical of properties of that type;

• for construction and land development loans, the perceived feasibility of the project including the ability to sell developed lots or improvements constructed for resale or the ability to lease property constructed for lease, the quality and nature of contracts for presale or prelease, if any, experience and ability of the developer and loan to value ratio;

• for commercial and industrial loans, the operating results of the commercial, industrial or professional enterprise, the borrower’s business, professional and financial ability and expertise, the specific risks and volatility of income and operating results typical for businesses in that category and the value, nature and marketability of collateral;

• for agricultural real estate loans, the experience and financial capability of the borrower, projected debt service coverage of the operations of the borrower and loan to value ratio; and

• for non-real estate agricultural loans, the operating results, experience and financial capability of the borrower, historical and expected market conditions and the value, nature and marketability of collateral.

In addition, for each category, the Company considers secondary sources of income and the financial strength and credit history of the borrower and any guarantors.

At March 31, 2012, the allowance for credit losses totaled $51.6 million or 1.33% of total loans. At December 31, 2011, the allowance aggregated $51.6 million or 1.37% of total loans.

16

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

The following table details the recorded investment in loans and activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2012. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

	Construction and Land Development			Agriculture and Agriculture Real Estate		1-4 Family (includes Home Equity)			Commercial Real Estate (includes Multi- Family)			Commercial and Industrial			Consumer and Other			Total
	(Dollars in thousands)
Allowance for credit losses:
Beginning balance	$	12,094		$	511	$	12,645		$	21,460		$	3,826		$	1,058		$	51,594
Provision for credit losses		(732	)		109		(72	)		468			171			206			150
Charge-offs		(26	)		—		(52	)		(23	)		(78	)		(203	)		(382	)
Recoveries		4			—		2			5			93			176			280
Net charge-offs		(22	)		—		(50	)		(18	)		15			(27	)		(102	)
Ending balance	$	11,340		$	620	$	12,523		$	21,910		$	4,012		$	1,237		$	51,642
Ending balance: individually evaluated for impairment	$	312		$	42	$	272		$	815		$	310		$	6		$	1,757
Ending balance: collectively evaluated for impairment		11,028			578		12,251			21,095			3,702			1,231			49,885
Loans:
Ending balance: individually evaluated for impairment		1,340			47		941			6,666			614			7			9,615
Ending balance: collectively evaluated for impairment		482,955			178,427		1,184,974			1,467,259			441,945			109,687			3,865,247
Ending balance	$	484,295		$	178,474	$	1,185,915		$	1,473,925		$	442,559		$	109,694		$	3,874,862

17

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

The following table details the recorded investment in loans and activity in the allowance for credit losses by portfolio segment for the year ended December 31, 2011. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

	Construction and Land Development			Agriculture and Agriculture Real Estate		1-4 Family (includes Home Equity)			Commercial Real Estate (includes Multi-Family)			Commercial and Industrial			Consumer and Other			Total
	(Dollars in thousands)
Allowance for credit losses:
Beginning balance	$	12,994		$	271	$	12,837		$	20,436		$	3,891		$	1,155		$	51,584
Provision for credit losses		209			239		1,168			2,011			1,103			470			5,200
Charge-offs		(1,509	)		—		(1,392	)		(1,027	)		(1,694	)		(1,228	)		(6,850	)
Recoveries		400			1		32			40			526			661			1,660
Net charge-offs		(1,109	)		1		(1,360	)		(987	)		(1,168	)		(567	)		(5,190	)
Ending balance		12,094			511		12,645			21,460			3,826			1,058			51,594
Ending balance: individually evaluated for impairment		312			39		362			165			300			8			1,186
Ending balance: collectively evaluated for impairment	$	11,782		$	472	$	12,283		$	21,295		$	3,526		$	1,050		$	50,408
Loans:
Ending balance: individually evaluated for impairment		1,175			49		990			1,151			633			8			4,006
Ending balance: collectively evaluated for impairment		480,965			170,185		1,153,275			1,440,075			405,800			111,600			3,761,900
Ending balance	$	482,140		$	170,234	$	1,154,265		$	1,441,226		$	406,433		$	111,608		$	3,765,906

Troubled Debt Restructurings. The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. Effective July 1, 2011, the Company adopted the provisions of ASU No. 2011-02, “Receivables (Topic 310)—A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.” As such, the Company reassessed all loan modifications occurring since January 1, 2011 for identification as troubled debt restructurings.

18

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

The Company had the following troubled debt restructurings outstanding as of the dates indicated:

	As of March 31,						As of December 31,
	2012						2011
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(Dollars in thousands)
Troubled Debt Restructurings
Construction and land development		—	$	—	$	—		—	$	—	$	—
Agriculture and agriculture real estate		—		—		—		—		—		—
1-4 Family (includes home equity)		4		109		76		4		109		84
Commercial real estate (includes multi-family)		1		2,560		2,493		2		5,264		5,171
Commercial and industrial		3		114		93		3		114		93
Consumer and other		—		—		—		—		—		—
Total		8	$	2,783	$	2,662		9	$	5,487	$	5,348

As of March 31, 2012, there have been no defaults on any loans that were modified as troubled debt restructurings during the preceding three months. Default is determined at 90 or more days past due. The modifications primarily related to extending the amortization periods of the loans, which includes loans modified during bankruptcy. The Company did not grant principal reductions on any restructured loan. Loans restructured during the three months ended March 31, 2012 on non-accrual status as of March 31, 2012 totaled $169,000. The remaining restructured loans are performing and accruing loans. These modifications did not have a material impact on the Company’s determination of the allowance for credit losses.

5. FAIR VALUE

Effective January 1, 2008, the Company adopted FASB ASC Topic 820, Fair Value Measurement and Disclosures. ASC Topic 820, which defines fair value, addresses aspects of the expanding application of fair value accounting and establishes a consistent framework for measuring fair value. Fair value represents the estimated price that would be received from selling an asset or paid to transfer a liability, otherwise knows as an “exit price.”

Fair Value Hierarchy

ASC Topic 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC Topic 820, these inputs are summarized in the three broad levels listed below:

• Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 1 assets include U.S. Treasury securities and CRA funds that are highly liquid and are actively traded in over-the-counter markets.

• Level 2 – Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities) or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company’s Level 2 assets include U.S. government and agency mortgage-backed debt securities, corporate securities and municipal bonds.

• Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair values requires significant management judgment or estimation.

In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to ASC Topic 820.

19

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, 2012 and December 31, 2011, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	March 31, 2012
	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Available for sale securities (at fair value):
States and political subdivisions	$	—	$	37,916	$	—	$	37,916
Corporate debt securities and other		7,628		1,602		—		9,230
Collateralized mortgage obligations		—		727		—		727
Mortgage-backed securities		—		250,643		—		250,643
TOTAL	$	7,628	$	290,888	$	—	$	298,516

	December 31, 2011
	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Available for sale securities (at fair value):
States and political subdivisions	$	—	$	39,076	$	—	$	39,076
Corporate debt securities and other		7,656		1,613		—		9,269
Collateralized mortgage obligations		—		765		—		765
Mortgage-backed securities		—		273,206		—		273,206
Total	$	7,656	$	314,660	$	—	$	322,316

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets measured at fair value on a non-recurring basis during the reported periods include certain impaired loans reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 2 inputs based on observable market data, typically in the case of real estate collateral. For the three months ended March 31, 2012, the Company had additions to impaired loans of $2.1 million of which $2.1 million were outstanding at March 31, 2012.

Financial assets measured at fair value on a non-recurring basis during the reported periods also include other real estate owned and repossessed assets. For the three months ended March 31, 2012, the Company had additions to other real estate owned of $3.5 million, of which $718,000 were outstanding at March 31, 2012. The remaining financial assets and financial liabilities measured at fair value on a non-recurring basis that were recorded in 2012 and remained outstanding at March 31, 2012 were not significant. During the reported periods, all fair value measurements for other real estate owned and repossessed assets utilized Level 2 inputs based on observable market data. There were no transfers between Level 1 and Level 2 assets during the three months ended March 31, 2012.

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. FASB ASC Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

These fair value disclosures represent the Company’s estimates based on relevant market information and information about the financial instruments. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of the various instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in the above methodologies and assumptions could significantly affect the estimates.

20

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Cash Equivalents—For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Federal Funds Sold—The carrying amount is a reasonable estimate of fair value.

Securities—For securities held as investments, fair value equals quoted market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans Held for Investment—For fixed rate loans and certain homogeneous categories of loans (such as some residential mortgages and other consumer loans), fair value is estimated by discounting the future cash flows using the risk-free Treasury rate for the applicable maturity, adjusted for servicing and credit risk. The carrying value of variable rate loans approximates fair value because the loans reprice frequently to current market rates.

Deposits—The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

Junior Subordinated Debentures—The fair value of the junior subordinated debentures was calculated using the quoted market prices, if available. If quoted market prices are not available, fair value is estimated using quoted market prices for similar subordinated debentures.

Other Borrowings—Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt using a discounted cash flows methodology.

Securities Sold Under Repurchase Agreements—The fair value of securities sold under repurchase agreements is the amount payable on demand at the reporting date.

Off-Balance Sheet Financial Instruments—The fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreement and the present creditworthiness of the counterparties.

FASB ASC Topic 825, Financial Instruments, requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The carrying amount and estimated fair values of the Company’s financial instruments are as follows:

	March 31, 2012
	Carrying Amount		Estimated Fair Value
	(Dollars in thousands)
Financial assets:
Cash and due from banks	$	151,467	$	151,467
Federal funds sold		445		445
Available for sale securities		298,516		298,516
Held to maturity securities		5,348,013		5,494,671
Loans held for investment and for sale (net of allowance for credit losses)		3,823,220		3,915,517
Total	$	9,621,661	$	9,860,616
Financial liabilities:
Deposits	$	8,544,451	$	8,565,167
Other borrowings		527,536		529,424
Securities sold under repurchase agreements		58,481		58,481
Junior subordinated debentures		85,055		71,651
Total	$	9,215,523	$	9,224,723

21

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

The Company’s off-balance sheet commitments including letters of credit, which totaled $488.0 million at March 31, 2012, are funded at current market rates at the date they are drawn upon. It is management’s opinion that the fair value of these commitments would approximate their carrying value, if drawn upon.

The fair value estimates presented herein are based on pertinent information available to management at March 31, 2012. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

6. GOODWILL AND CORE DEPOSIT INTANGIBLES

Changes in the carrying amount of the Company’s goodwill and core deposit intangibles (“CDI”) for three months ended March 31, 2012 were as follows:

	Goodwill		Core Deposit Intangibles
	(Dollars in thousands)
Balance as of December 31, 2011	$	924,537	$	20,996
Amortization		—		(1,695	)
Acquisition of Texas Bankers, Inc.		4,624		—
Balance as of March 31, 2012	$	929,161	$	19,301

Goodwill is recorded on the acquisition date of each entity. The Company may record subsequent adjustments to goodwill for amounts undeterminable at acquisition date, such as deferred taxes and real estate valuations, and therefore the goodwill amounts reflected in the table above may change accordingly. The Company initially records the total premium paid on acquisitions as goodwill. After finalizing the valuation, core deposit intangibles are identified and reclassified from goodwill to core deposit intangibles on the balance sheet. This reclassification has no effect on total assets, liabilities, shareholders’ equity, net income or cash flows. Management performs an evaluation annually, and more frequently if a triggering event occurs, of whether any impairment of the goodwill and other intangibles has occurred. If any such impairment is determined, a write-down is recorded. As of March 31, 2012, there were no impairments recorded on goodwill.

Although the Company completed the Texas Bankers acquisition in January 2012, the Company has not yet finalized the allocation of the purchase price.

CDI are amortized on an accelerated basis over their estimated lives, which the Company believes is between 8 and 10 years. Gross core deposit intangibles outstanding were $79.1 million at March 31, 2012 and December 31, 2011. Net core deposit intangibles outstanding were $19.3 million and $21.0 million at the same dates, respectively. Amortization expense related to intangible assets totaled $1.7 million and $2.0 million for the three months ended March 31, 2012 and 2011, respectively. The estimated aggregate future amortization expense for intangible assets remaining as of March 31, 2012 is as follows (dollars in thousands):

Remaining 2012	$	4,652
2013		4,465
2014		3,314
2015		2,804
2016		2,481
Thereafter		1,585
Total	$	19,301

22

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

7. STOCK BASED COMPENSATION

At March 31, 2012, the Company had four stock-based employee compensation plans and one stock option plan assumed in connection with an acquisition under which no additional options will be granted. Two of the four plans adopted by the Company have expired and therefore no additional awards may be issued under those plans. The Company accounts for stock-based employee compensation plans using the fair value-based method of accounting in accordance with ASC Topic 718. ASC Topic 718 was effective for companies in 2006; however, the Company has been recognizing compensation expense since January 1, 2003. The Company recognized $1.2 million and $707,000 in stock-based compensation expense for the three months ended March 31, 2012 and 2011, respectively. There was approximately $420,000 and $234,000 of income tax benefit recorded for the stock-based compensation expense for the same periods.

On February 22, 2012, the Company’s Board of Directors adopted the Prosperity Bancshares, Inc. 2012 Stock Incentive Plan (the “2012 Plan”), subject to approval by the Company’s shareholders. The Company’s shareholders approved the 2012 Plan at the annual meeting of shareholders on April 17, 2012. The 2012 Plan authorizes the issuance of up to 1,250,000 shares of common stock upon the exercise of options granted under the 2012 Plan or pursuant to the grant or exercise, as the case may be, of other awards granted under the 2012 Plan, including restricted stock, stock appreciation rights, phantom stock awards and performance awards. As of March 31, 2012, no options or other awards have been granted under the 2012 Plan.

During 2004, the Company’s Board of Directors adopted the Prosperity Bancshares, Inc. 2004 Stock Incentive Plan (the “2004 Plan”) which authorizes the issuance of up to 1,250,000 shares of common stock pursuant to the exercise or grant, as the case may be, of awards under such plan and the shareholders approved the 2004 Plan in 2005. The Company has granted shares with forfeiture restrictions (“restricted stock”) to certain directors, officers and associates under the 2004 Plan. The awardee is not entitled to the shares until they vest, which is generally over a one to five year period, but the awardee is entitled to receive dividends on and vote the shares prior to vesting. The shares granted do not have a cost to the awardee and the only requirement of vesting is continued service to the Company. Compensation cost related to restricted stock is calculated based on the fair value of the shares at the date of grant. If the awardee leaves the Company before the shares vest, the unvested shares are forfeited. As of March 31, 2012, there were 404,000 shares of restricted stock outstanding with a weighted average grant date fair value of $37.47 per share.

Stock options are issued at the current market price on the date of the grant, subject to a pre-determined vesting period with a contractual term of 10 years. Options assumed in connection with acquisitions also have a contractual term of 10 years from date of original issuance under the original plan. The fair value of stock options granted is estimated at the date of grant using the Black-Scholes option-pricing model. Stock-based compensation expense is recognized ratably over the requisite service period for all awards.

The fair value of options was estimated using an option-pricing model with the following weighted average assumptions as of the dates indicated:

	March 31,
	2012			2011
Expected life (in years)		5.27			5.20
Risk free interest rate		3.68	%		3.72	%
Volatility		20.87	%		20.96	%
Dividend yield		1.26	%		1.25	%

23

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

A summary of changes in outstanding options during the three months ended March 31, 2012 is set forth below:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands)					(In years)		(In thousands)
Options outstanding, beginning of period		525		$	28.18
Options granted		—			—
Options forfeited		(4	)		31.19
Options exercised		(70	)		26.43
Options outstanding, end of period		451		$	28.42		3.78	$	7,829
Options vested or expected to vest		437		$	28.15		3.74	$	7,713
Options exercisable, end of period		278		$	27.23		2.93	$	5,156

No options were granted during the three months ended March 31, 2012 or 2011. The total intrinsic value of the options exercised during the three-month periods ended March 31, 2012 and 2011 was $1.4 million and $1.9 million, respectively. No options vested during the three-month period ended March 31, 2012 and the total fair value of options vested during the three-month period ended March 31, 2011 was approximately $66,000.

A summary of changes in non-vested options is set forth below:

	Three Months Ended March 31,
	2012					2011
	Number of Options			Weighted Average Grant Date Fair Value		Number of Options			Weighted Average Grant Date Fair Value
	(In thousands)					(In thousands)
Non-vested options outstanding, beginning of period		177		$	6.96		313		$	6.89
Options granted		—			—		—			—
Non-vested options forfeited		(4	)		6.76		—			—
Options vested		—			—		(12	)		5.62
Non-vested options outstanding, end of period		173		$	6.97		301		$	6.94

The Company received $1.9 million and $2.4 million in cash from the exercise of stock options during the three-month periods ended March 31, 2012 and 2011, respectively. There was no tax benefit realized from option exercises of the share-based payment arrangements during the three-month periods ended March 31, 2012 and 2011.

As of March 31, 2012, there was $7.9 million of total unrecognized compensation expense related to stock-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 2.0 years.

8. CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ITEMS

Contractual Obligations

The following table summarizes the Company’s contractual obligations and other commitments to make future payments as of March 31, 2012 (other than deposit obligations). The payments do not include pre-payment options that may be available to the Company. The Company’s future cash payments associated with its contractual obligations pursuant to its junior subordinated debentures, Federal Home Loan Bank (“FHLB”) advances and long-term notes payable and operating leases as of March 31, 2012 are summarized below. Payments for junior subordinated debentures include interest of $54.0 million that will be paid over future periods. Future interest payments were calculated using the current rate in effect at March 31, 2012. The current principal balance of the junior subordinated debentures at March 31, 2012 was $85.1 million. Payments for FHLB borrowings include interest of $3.3 million that will be paid over the future periods. Payments related to leases are based on actual payments specified in underlying contracts.

24

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

	Payments due in:
	Remaining Fiscal 2012		Fiscal 2013-2014		Fiscal 2015-2016		Thereafter		Total
	(Dollars in thousands)
Junior subordinated debentures	$	1,884	$	5,024	$	5,024	$	127,159	$	139,091
Federal Home Loan Bank borrowings		516,126		3,258		3,456		8,002		530,842
Operating leases		3,872		7,727		3,125		517		15,241
Total	$	521,882	$	16,009	$	11,605	$	135,678	$	685,174

Off-Balance Sheet Items

In the normal course of business, the Company enters into various transactions, which, in accordance with accounting principles generally accepted in the United States, are not included in its consolidated balance sheets. The Company enters into these transactions to meet the financing needs of its customers. These transactions include commitments to extend credit and standby letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

The Company’s commitments associated with outstanding standby letters of credit and commitments to extend credit as of March 31, 2012 are summarized below. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements:

	Remaining Fiscal 2012		Fiscal 2013-2014		Fiscal 2015-2016		Thereafter		Total
	(Dollars in thousands)
Standby letters of credit	$	9,716	$	5,699	$	122	$	—	$	15,537
Commitments to extend credit		195,980		102,365		8,925		165,168		472,438
Total	$	205,696	$	108,064	$	9,047	$	165,168	$	487,975

9. OTHER COMPREHENSIVE INCOME (LOSS)

The tax effects allocated to each component of other comprehensive income (loss) were as follows:

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
	(Dollars in thousands)
Three months ended March 31, 2012:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	(1,185	)	$	(415	)	$	(770	)
Total other comprehensive income	$	(1,185	)	$	(415	)	$	(770	)
Three months ended March 31, 2011:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	(919	)	$	(322	)	$	(597	)
Total other comprehensive income	$	(919	)	$	(322	)	$	(597	)

25

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

Activity in accumulated other comprehensive income, net of tax, was as follows:

	Securities Available For Sale			Accumulated other Comprehensive Income
	(Dollars in thousands)
Balance January 1, 2012	$	13,472		$	13,472
Other comprehensive income (loss)		(770	)		(770	)
Balance March 31, 2012	$	12,702		$	12,702
Balance as of January 1, 2011	$	14,304		$	14,304
Other comprehensive income (loss)		(597	)		(597	)
Balance March 31, 2011	$	13,707		$	13,707

10. SUBSEQUENT EVENTS AND RECENT ACQUISITIONS

Acquisition of The Bank Arlington – On April 1, 2012, the Company completed the previously announced acquisition of The Bank Arlington. The Bank Arlington operated one banking office in Arlington, Texas, in the Dallas/Fort Worth CMSA. As of March 31, 2012, The Bank Arlington reported total assets of $37.3 million, total loans of $22.8 million and total deposits of $33.2 million.

Under the terms of the agreement, the Company issued 135,347 shares of Company common stock for all outstanding shares of The Bank Arlington capital stock which resulted in a premium of $2.8 million.

Pending Acquisition of American State Financial Corporation—On February 27, 2012, the Company announced the signing of a definitive agreement to acquire American State Financial Corporation and its wholly owned subsidiary, American State Bank (“ASB”), through the merger of American State Financial with and into the Company. ASB operates thirty-seven (37) banking offices in eighteen (18) counties across West Texas. As of March 31, 2012, American State Financial, on a consolidated basis, reported total assets of $3.16 billion, total loans of $1.24 billion and total deposits of $2.51 billion. Under the terms of the definitive agreement, the Company will issue up to 8,525,000 shares of its common stock plus $178.5 million in cash for all outstanding shares of American State Financial capital stock, subject to certain conditions and potential adjustment.

The merger has been approved by the Boards of Directors of both companies and is expected to close during the third quarter of 2012, although delays may occur. The transaction is subject to certain conditions, including the approval by American State Financial’s shareholders and customary regulatory approvals. Operational integration is anticipated to begin during the third quarter of 2012.

Pending Acquisition of East Texas Financial Services, Inc.—On December 8, 2011, the Company entered into a definitive agreement to acquire East Texas Financial Services, Inc. (OTC BB: FFBT) and its wholly-owned subsidiary, First Federal Bank Texas (“Firstbank”). Firstbank operates four banking offices in the Tyler MSA, including three locations in Tyler, Texas and one location in Gilmer, Texas. As of March 31, 2012, East Texas Financial Services, on a consolidated basis, reported total assets of $208.6 million, total loans of $153.5 million and total deposits of $127.6 million.

Under the terms of the definitive agreement, the Company will issue up to 531,000 shares of Company common stock for all outstanding shares of East Texas Financial Services capital stock, subject to certain conditions and potential adjustments. The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval of the stockholders of East Texas Financial Services. On May 4, 2012, East Texas Financial Services and each of its directors were named defendants in a suit brought by East Texas Financial Corporation (“ETFC”), a shareholder of East Texas Financial Services, to block the proposed merger. More specifically, the suit alleges that the stockholders’ vote approving the merger was invalid and improper. Accordingly, the closing date of the transaction is uncertain at this time.

Acquisition of Texas Bankers, Inc.—On January 1, 2012, Prosperity completed the previously announced acquisition of Texas Bankers, Inc. and its wholly-owned subsidiary, Bank of Texas, Austin, Texas.

26

PROSPERITY BANCSHARES, INC. ^® AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012

(UNAUDITED)

The three (3) Bank of Texas banking offices in the Austin, Texas CMSA consisted of a location in Rollingwood, which was consolidated with Prosperity’s Westlake location and remains in Bank of Texas’ Rollingwood banking office; one banking center in downtown Austin, which was consolidated into Prosperity’s downtown Austin location; and another banking center in Thorndale. Prosperity now operates thirty-four (34) banking centers in the Central Texas area including Austin and San Antonio.

Texas Bankers, on a consolidated basis, reported total assets of $77.0 million, total loans of $27.6 million and total deposits of $70.4 million as of December 31, 2011.

Under the terms of the agreement, Prosperity issued 314,953 shares of Prosperity common stock for all outstanding shares of Texas Bankers capital stock which resulted in a premium of $5.2 million.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Cautionary Notice Regarding Forward-Looking Statements

Statements and financial discussion and analysis contained in this quarterly report on Form 10-Q that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions and involve a number of risks and uncertainties, many of which are beyond the Company’s control. Many possible events or factors could affect the future financial results and performance of the Company and could cause such results or performance to differ materially from those expressed in the forward-looking statements. These possible events or factors include, without limitation:

• changes in the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations resulting in, among other things, a deterioration in credit quality or reduced demand for credit, including the result and effect on the Company’s loan portfolio and allowance for credit losses;

• changes in interest rates and market prices, which could reduce the Company’s net interest margins, asset valuations and expense expectations;

• changes in the levels of loan prepayments and the resulting effects on the value of the Company’s loan portfolio;

• changes in local economic and business conditions which adversely affect the Company’s customers and their ability to transact profitable business with the company, including the ability of the Company’s borrowers to repay their loans according to their terms or a change in the value of the related collateral;

• increased competition for deposits and loans adversely affecting rates and terms;

• the timing, impact and other uncertainties of any future acquisitions, including the Company’s ability to identify suitable future acquisition candidates, the success or failure in the integration of their operations, and the ability to enter new markets successfully and capitalize on growth opportunities;

• the possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on the results of operations;

• increased credit risk in the Company’s assets and increased operating risk caused by a material change in commercial, consumer and/or real estate loans as a percentage of the total loan portfolio;

• the concentration of the Company’s loan portfolio in loans collateralized by real estate;

• the failure of assumptions underlying the establishment of and provisions made to the allowance for credit losses;

• changes in the availability of funds resulting in increased costs or reduced liquidity;

• a deterioration or downgrade in the credit quality and credit agency ratings of the securities in the Company’s securities portfolio;

• increased asset levels and changes in the composition of assets and the resulting impact on the Company’s capital levels and regulatory capital ratios;

• the Company’s ability to acquire, operate and maintain cost effective and efficient systems without incurring unexpectedly difficult or expensive but necessary technological changes;

• the loss of senior management or operating personnel and the potential inability to hire qualified personnel at reasonable compensation levels;

27

• government intervention in the U.S. financial system;

• changes in statutes and government regulations or their interpretations applicable to financial holding companies and the Company’s present and future banking and other subsidiaries, including changes in tax requirements and tax rates;

• increases in FDIC deposit insurance assessments;

• potential risk of environmental liability associated with lending activities;

• potential payment of interest on demand deposit accounts to effectively compete for clients;

• acts of terrorism, an outbreak of hostilities or other international or domestic calamities, weather or other acts of God and other matters beyond the Company’s control; and

• other risks and uncertainties listed from time to time in the Company’s reports and documents filed with the Securities and Exchange Commission.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. The Company believes it has chosen these assumptions or bases in good faith and that they are reasonable. However, the Company cautions you that assumptions or bases almost always vary from actual results, and the differences between assumptions or bases and actual results can be material. The Company undertakes no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Management’s Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of the Company’s interim consolidated financial statements and accompanying notes. This section should be read in conjunction with the Company’s interim consolidated financial statements and accompanying notes included elsewhere in this report and with the consolidated financial statements and accompanying notes and other detailed information appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

OVERVIEW

The Company, a Texas corporation, was formed in 1983 as a vehicle to acquire the former Allied First Bank in Edna, Texas which was chartered in 1949 as The First National Bank of Edna and is now known as Prosperity Bank. The Company is a registered financial holding company that derives substantially all of its revenues and income from the operation of its bank subsidiary, Prosperity Bank^® (“Prosperity Bank^®“ or the “Bank”). The Bank provides a wide array of financial products and services to small and medium-sized businesses and consumers. As of March 31, 2012, the Bank operated one hundred seventy-six (176) full-service banking locations; with fifty-nine (59) in the Houston area, twenty (20) in the South Texas area including Corpus Christi and Victoria, thirty-four (34) in the Central Texas, ten (10) in the Bryan/College Station area, twenty-one (21) in East Texas and thirty-two (32) in the Dallas/Fort Worth, Texas area. The Company’s headquarters are located at Prosperity Bank Plaza, 4295 San Felipe in Houston, Texas and its telephone number is (281) 269-7199. The Company’s website address is www.prosperitybanktx.com. Information contained on the Company’s website is not incorporated by reference into this quarterly report on Form 10-Q and is not part of this or any other report.

The Company generates the majority of its revenues from interest income on loans, service charges on customer accounts and income from investment in securities. The revenues are partially offset by interest expense paid on deposits and other borrowings and noninterest expenses such as administrative, occupancy and general operating expenses. Net interest income is the difference between interest income on earning assets such as loans and securities and interest expense on liabilities such as deposits and borrowings which are used to fund those earning assets. The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities impact net interest income and margin.

Three principal components of the Company’s growth strategy are internal growth, stringent cost control practices and acquisitions, including strategic merger transactions and FDIC assisted transactions. The Company focuses on continuous internal growth. Each banking center is operated as a separate profit center, maintaining separate data with respect to its net interest income, efficiency ratio, deposit growth, loan growth and overall profitability. Banking center presidents and managers are accountable for performance in these areas and compensated accordingly. The Company also focuses on maintaining stringent cost control practices and policies. The Company has centralized many of its critical operations, such as data processing and loan processing. Management believes that this centralized infrastructure can accommodate substantial additional growth while enabling the Company to minimize operational costs through certain economies of scale. The Company also intends to continue to seek expansion opportunities. On January 1, 2012, the Company completed the acquisition of Texas Bankers, Inc. which added three retail banking centers of which two were consolidated with nearby existing banking centers. On April 1, 2012, the Company completed the acquisition of The Bank Arlington which added one retail banking center. In addition, the Company has announced the pending acquisitions of East Texas Financial Services, Inc. and American State Financial Corporation.

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Total assets were $10.89 billion at March 31, 2012 compared with $9.82 billion at December 31, 2011, an increase of $1.07 billion or 10.9%. Total loans were $3.87 billion at March 31, 2012 compared with $3.77 billion at December 31, 2011, an increase of $109.0 million or 2.9%. Total deposits were $8.54 billion at March 31, 2012 compared with $8.06 billion at December 31, 2011, an increase of $484.2 million or 6.0%. Shareholders’ equity increased $42.3 million or 2.7%, to $1.61 billion at March 31, 2012 compared with $1.57 billion at December 31, 2011.

CRITICAL ACCOUNTING POLICIES

The Company’s accounting policies are integral to understanding the financial results reported. Accounting policies are described in detail in Note 1 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. The Company believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity:

Allowance for Credit Losses—The allowance for credit losses is established through charges to earnings in the form of a provision for credit losses. Management has established an allowance for credit losses which it believes is adequate for estimated losses in the Company’s loan portfolio. Based on an evaluation of the loan portfolio, management presents a monthly review of the allowance for credit losses to the Bank’s Board of Directors, indicating any change in the allowance since the last review and any recommendations as to adjustments in the allowance. In making its evaluation, management considers factors such as historical loan loss experience, industry diversification of the Company’s commercial loan portfolio, the amount of nonperforming assets and related collateral, the volume, growth and composition of the Company’s loan portfolio, current economic conditions that may affect the borrower’s ability to pay and the value of collateral, the evaluation of the Company’s loan portfolio through its internal loan review process and other relevant factors. Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that, in management’s judgment, should be charged off. Charge-offs occur when loans are deemed to be uncollectible. The allowance for credit losses includes allowance allocations calculated in accordance with FASB ASC Topic 310, Receivables, and allowance allocations determined in accordance with FASB ASC Topic 450, Contingencies.

Goodwill and Intangible Assets—Goodwill and intangible assets that have indefinite useful lives are subject to an impairment test at least annually, or more often, if events or circumstances indicate that it is more likely than not that the fair value of Prosperity Bank, the Company’s only reporting unit with assigned goodwill, is below the carrying value of its equity. Goodwill is tested for impairment using a two-step process that begins with an estimation of the fair value of the Company’s reporting unit compared with its carrying value. If the carrying amount exceeds the fair value of the reporting unit, a second test is completed comparing the implied fair value of the reporting unit’s goodwill to its carrying value to measure the amount of impairment. The Company estimated the fair value of its reporting unit through several valuation techniques that consider, among other things, the historical and current financial position and results of operations of the Company, general economic and market conditions and exit prices for recent market transactions. The Company had no intangible assets with indefinite useful lives at March 31, 2012. Other identifiable intangible assets that are subject to amortization are amortized on an accelerated basis over the years expected to be benefited, which the Company believes is between eight and ten years. These amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value to carrying value. Based on the Company’s annual goodwill impairment test as of September 30, 2011, management does not believe any of its goodwill is impaired as of March 31, 2012 because the fair value of the Company’s equity exceeded its carrying value. While the Company believes no impairment existed at March 31, 2012 under accounting standards applicable at that date, different conditions or assumptions, or changes in cash flows or profitability, if significantly negative or unfavorable, could have a material adverse effect on the outcome of the Company’s impairment evaluation and financial condition or future results of operations.

Stock-Based Compensation—The Company accounts for stock-based employee compensation plans using the fair value-based method of accounting in accordance with FASB ASC Topic 718, Stock Compensation. ASC 718 was effective for companies in 2006; however, the Company had been recognizing compensation expense since January 1, 2003. The Company’s results of operations reflect compensation expense for all employee stock-based compensation, including the unvested portion of stock options granted prior to 2003. ASC 718 requires that management make assumptions including stock price volatility and employee turnover that are utilized to measure compensation expense. The fair value of stock options granted is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of subjective assumptions.

Other Than Temporarily Impaired Securities—The Company’s available for sale securities portfolio is reported at fair value. When the fair value of a security is below its amortized cost, and depending on the length of time the condition exists and the extent the fair market value is below amortized cost, additional analysis is performed to determine whether an impairment exists. Available for sale and held to maturity securities are analyzed quarterly for possible other-than-temporary impairment. The analysis considers (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, (iii) whether the market decline was affected by macroeconomic conditions, and (iv) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. Often, the information available to conduct these assessments is limited and rapidly changing, making estimates of fair value subject to judgment. If actual information or conditions are different than estimated, the extent of the impairment of the security may be different than previously estimated, which could have a material effect on the Company’s results of operations and financial condition.

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SUBSEQUENT EVENTS AND RECENT ACQUISITIONS

Acquisition of The Bank Arlington—On April 1, 2012, the Company completed the previously announced acquisition of The Bank Arlington. The Bank Arlington operated one banking office in Arlington, Texas, in the Dallas/Fort Worth CMSA. As of March 31, 2012, The Bank Arlington reported total assets of $37.3 million, total loans of $22.8 million and total deposits of $33.2 million.

Under the terms of the agreement, the Company issued 135,347 shares of Company common stock for all outstanding shares of The Bank Arlington capital stock which resulted in a premium of $2.8 million.

Pending Acquisition of American State Financial Corporation—On February 27, 2012, the Company announced the signing of a definitive agreement to acquire American State Financial Corporation and its wholly owned subsidiary, American State Bank (“ASB”), through the merger of American State Financial with and into the Company. ASB operates thirty-seven (37) banking offices in eighteen (18) counties across West Texas. As of March 31, 2012, American State Financial, on a consolidated basis, reported total assets of $3.16 billion, total loans of $1.24 billion and total deposits of $2.51 billion. Under the terms of the definitive agreement, the Company will issue up to 8,525,000 shares of its common stock plus $178.5 million in cash for all outstanding shares of American State Financial capital stock, subject to certain conditions and potential adjustment.

The merger has been approved by the Boards of Directors of both companies and is expected to close during the third quarter of 2012, although delays may occur. The transaction is subject to certain conditions, including the approval by American State Financial’s shareholders and customary regulatory approvals. Operational integration is anticipated to begin during the third quarter of 2012.

Pending Acquisition of East Texas Financial Services, Inc.—On December 8, 2011, the Company entered into a definitive agreement to acquire East Texas Financial Services, Inc. (OTC BB: FFBT) and its wholly-owned subsidiary, First Federal Bank Texas (“Firstbank”). Firstbank operates four banking offices in the Tyler MSA, including three locations in Tyler, Texas and one location in Gilmer, Texas. As of March 31, 2012, East Texas Financial Services, on a consolidated basis, reported total assets of $208.6 million, total loans of $153.5 million and total deposits of $127.6 million.

Under the terms of the definitive agreement, the Company will issue up to 531,000 shares of Company common stock for all outstanding shares of East Texas Financial Services capital stock, subject to certain conditions and potential adjustments. The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval of the stockholders of East Texas Financial Services. On May 4, 2012, East Texas Financial Services and each of its directors were named defendants in a suit brought by East Texas Financial Corporation (“ETFC”), a shareholder of East Texas Financial Services, to block the proposed merger. More specifically, the suit alleges that the stockholders’ vote approving the merger was invalid and improper. Accordingly, the closing date of the transaction is uncertain at this time.

Acquisition of Texas Bankers, Inc.—On January 1, 2012, Prosperity completed the previously announced acquisition of Texas Bankers, Inc. and its wholly-owned subsidiary, Bank of Texas, Austin, Texas.

The three (3) Bank of Texas banking offices in the Austin, Texas CMSA consisted of a location in Rollingwood, which was consolidated with Prosperity’s Westlake location and remains in Bank of Texas’ Rollingwood banking office; one banking center in downtown Austin, which was consolidated into Prosperity’s downtown Austin location; and another banking center in Thorndale. Prosperity now operates thirty-four (34) banking centers in the Central Texas area including Austin and San Antonio. As of December 31, 2011, Texas Bankers, on a consolidated basis, reported total assets of $77.0 million, total loans of $27.6 million and total deposits of $70.4 million.

Under the terms of the agreement, Prosperity issued 314,953 shares of Prosperity common stock for all outstanding shares of Texas Bankers capital stock which resulted in a premium of $5.2 million.

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RESULTS OF OPERATIONS

Net income available to shareholders was $36.5 million ($0.77 per common share on a diluted basis) for the quarter ended March 31, 2012 compared with $33.9 million ($0.72 per common share on a diluted basis) for the quarter ended March 31, 2011, an increase of $2.6 million or 7.7%. The Company posted returns on average common equity of 9.15% and 9.22%, returns on average assets of 1.39% and 1.42% and efficiency ratios of 42.23% and 44.30% for the quarters ended March 31, 2012 and 2011, respectively. The efficiency ratio is calculated by dividing total noninterest expense (excluding credit loss provisions) by net interest income plus noninterest income (excluding net gains and losses on the sale of securities and assets). Additionally, taxes are not part of this calculation.

Net Interest Income

The Company’s net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as a “volume change.” It is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits and other borrowed funds, referred to as a “rate change.”

Net interest income before the provision for credit losses was $81.8 million for the quarter ended March 31, 2012 compared with $80.4 million for the quarter ended March 31, 2011, an increase of $1.4 million or 1.8%. The average rate paid on interest-bearing liabilities decreased 26 basis points from 0.83% for the quarter ended March 31, 2011 to 0.57% for the quarter ended March 31, 2012, while the average yield on interest-earning assets decreased 59 basis points from 4.62% for the quarter ended March 31, 2011 compared with 4.03% for the quarter ended March 31, 2012. The average volume of interest-bearing liabilities increased $508.4 million and the average volume of interest-earning assets increased $929.8 million for the same period. The net interest margin on a tax equivalent basis decreased 38 basis points from 4.02% for the quarter ended March 31, 2011 to 3.64% for the quarter ended March 31, 2012.

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The following table sets forth, for each major category of interest-earning assets and interest-bearing liabilities, the average amounts outstanding, the interest earned or paid on such amounts, and the average rate earned or paid for the quarters ended March 31, 2012 and 2011. The table also sets forth the average rate paid on total interest-bearing liabilities, and the net interest margin on average total interest-earning assets for the same periods. Except as indicated in the footnotes, no tax-equivalent adjustments were made and all average balances are daily average balances. Any nonaccruing loans have been included in the table as loans carrying a zero yield.

	Three Months Ended March 31,
	2012								2011
	Average Outstanding Balance			Interest Earned/ Paid		Average Yield/ Rate (4)			Average Outstanding Balance			Interest Earned/ Paid		Average Yield/ Rate (4)
	(Dollars in thousands)
Assets
Interest-earning assets:
Loans	$	3,818,991		$	53,217		5.60	%	$	3,516,524		$	52,200		6.02	%
Securities (1)		5,192,257			38,321		2.95			4,677,900			41,204		3.52
Federal funds sold and other temporary investments		126,154			78		0.25			13,179			5		0.15
Total interest-earning assets		9,137,402			91,616		4.03	%		8,207,603			93,409		4.62	%
Less allowance for credit losses		(51,601	)							(51,697	)
Total interest-earning assets, net of allowance		9,085,801								8,155,906
Noninterest-earning assets		1,414,340								1,405,708
Total assets	$	10,500,141							$	9,561,614
Liabilities and shareholders’ equity
Interest-bearing liabilities:
Interest-bearing demand deposits	$	1,694,240		$	2,063		0.49	%	$	1,489,160		$	2,238		0.61	%
Savings and money market accounts		2,792,348			2,589		0.37			2,359,077			3,336		0.57
Certificates of deposit		1,971,071			4,139		0.84			2,177,566			5,938		1.11
Junior subordinated debentures		85,055			663		3.14			91,063			1,147		5.11
Federal funds purchased and other borrowings		272,760			279		0.41			191,945			268		0.57
Securities sold under repurchase agreements		53,304			37		0.28			51,609			69		0.54
Total interest-bearing liabilities		6,868,778			9,770		0.57	%		6,360,420			12,996		0.83	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		1,970,942								1,672,590
Other liabilities		65,137								59,556
Total liabilities		8,904,857								8,092,566
Shareholders’ equity		1,595,284								1,469,048
Total liabilities and shareholders’ equity	$	10,500,141							$	9,561,614
Net interest rate spread							3.46	%							3.79	%
Net interest income and margin (2)				$	81,846		3.60	%				$	80,413		3.97	%
Net interest income and margin (tax-equivalent basis) (3)				$	82,742		3.64	%				$	81,302		4.02	%

(1) Yield is based on amortized cost and does not include any component of unrealized gains or losses.

(2) The net interest margin is equal to net interest income divided by average interest-earning assets.

(3) In order to make pretax income and resultant yields on tax-exempt investments and loans comparable to those on taxable investments and loans, a tax-equivalent adjustment has been computed using a federal income tax rate of 35%.

(4) Annualized and based on an actual/366 day basis for the three months ended March 31, 2012 and on an actual/365 day basis for the three months ended March 31, 2011.

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The following table presents the dollar amount of changes in interest income and interest expense for the major components of interest-earning assets and interest-bearing liabilities and distinguishes between the increase (decrease) attributable to changes in volume and changes in interest rates. For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to rate.

	Three Months Ended March 31,
	2012 vs. 2011
	Increase (Decrease) Due to
	Volume			Rate			Total
	(Dollars in thousands)
Interest-earning assets:
Loans	$	4,490		$	(3,473	)	$	1,017
Securities		4,531			(7,414	)		(2,883	)
Federal funds sold and other temporary investments		43			30			73
Total increase (decrease) in interest income		9,064			(10,857	)		(1,793	)
Interest-bearing liabilities:
Interest-bearing demand deposits		312			(487	)		(175	)
Savings and money market accounts		620			(1,367	)		(747	)
Certificates of deposit		(569	)		(1,230	)		(1,799	)
Junior subordinated debentures		(77	)		(407	)		(484	)
Federal funds purchased and other borrowings		114			(103	)		11
Securities sold under repurchase agreements		2			(34	)		(32	)
Total increase (decrease) in interest expense		402			(3,628	)		(3,226	)
Increase (decrease) in net interest income	$	8,662		$	(7,229	)	$	1,433

Provision for Credit Losses

Management actively monitors the Company’s asset quality and provides specific loss provisions when necessary. Provisions for credit losses are charged to income to bring the total allowance for credit losses to a level deemed appropriate by management of the Company based on such factors as historical credit loss experience, industry diversification of the commercial loan portfolio, the amount of nonperforming loans and related collateral, the volume growth and composition of the loan portfolio, current economic conditions that may affect the borrower’s ability to pay and the value of collateral, the evaluation of the loan portfolio through the internal loan review function and other relevant factors.

Loans are charged-off against the allowance for credit losses when appropriate. Although management believes it uses the best information available to make determinations with respect to the provision for credit losses, future adjustments may be necessary if economic conditions differ from the assumptions used in making the initial determinations.

The Company recorded a $150,000 and $1.7 million provision for credit losses for the quarters ended March 31, 2012 and 2011, respectively. For the quarter ended March 31, 2012, net charge-offs were $102,000 compared with net charge-offs of $1.5 million for the quarter ended March 31, 2011.

Noninterest Income

The Company’s primary sources of recurring noninterest income are NSF fees, debit and ATM card income and service charges on deposit accounts. Noninterest income does not include loan origination fees which are recognized over the life of the related loan as an adjustment to yield using the interest method. Noninterest income totaled $13.9 million for the three months ended March 31, 2012 compared with $13.9 million for the same period in 2011, an increase of $78,000 or 0.6%. The increase was primarily due to increases in net gain on sale of other real estate and debit card and ATM card income, partially offset by a decrease in NSF fees. The Company expects to be subject to the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act beginning in July 2013, which imposes limits on the amount of debit card and ATM card income that can be collected.

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The following table presents, for the periods indicated, the major categories of noninterest income:

	Three Months Ended March 31,
	2012			2011
	(Dollars in thousands)
Non-sufficient funds (NSF) fees	$	5,389		$	6,107
Debit card and ATM card income		3,836			3,452
Service charges on deposit accounts		2,441			2,483
Banking related service fees		535			500
Bank owned life insurance income (BOLI)		350			335
(Loss) gain on sale of assets, net		(7	)		165
Gain (loss) on sale of other real estate, net		418			(160	)
Other noninterest income		983			985
Total noninterest income	$	13,945		$	13,867

Noninterest Expense

Noninterest expense totaled $40.5 million for the quarter ended March 31, 2012 compared with $41.7 million for the quarter ended March 31, 2011, a decrease of $1.2 million or 3.0%. This decrease was principally due to a decrease in regulatory assessments and FDIC insurance and a decrease in CDI amortization.

The following table presents, for the periods indicated, the major categories of noninterest expense:

	Three Months Ended March 31,
	2012		2011
	(Dollars in thousands)
Salaries and employee benefits (1)	$	23,252	$	23,204
Non-staff expenses:
Net occupancy		3,557		3,648
Depreciation		2,035		2,021
Debit card, data processing and software amortization		1,532		1,672
Communications (2)		1,748		1,692
Printing and supplies		461		446
Regulatory assessments and FDIC insurance		1,548		3,001
Ad valorem taxes		1,012		1,005
Core deposit intangibles amortization		1,695		2,034
Professional fees		709		572
Other real estate		691		292
Other		2,219		2,108
Total noninterest expense	$	40,459	$	41,695

(1) Includes stock-based compensation expense of $1.2 million and $708,000 for the three months ended March 31, 2012 and 2011, respectively.

(2) Communications expense includes telephone, data circuits, postage and courier expenses.

Income Taxes

Income tax expense increased $1.7 million to $18.7 million for the quarter ended March 31, 2012 compared with $17.0 million for the same period in 2011. The increase was primarily attributable to higher pretax net earnings for the quarter ended March 31, 2012 compared with the same period in 2011. The Company’s effective tax rate for the three months ended March 31, 2012 was 33.9% compared with 33.4% for the same period in 2011.

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FINANCIAL CONDITION

Loan Portfolio

Total loans were $3.87 billion at March 31, 2012, an increase of $109.0 million or 2.9% compared with $3.77 billion at December 31, 2011. Outstanding loans at March 31, 2012 comprised 42.4% of average earning assets for the quarter ended March 31, 2012.

The following table summarizes the loan portfolio of the Company by type of loan as of March 31, 2012 and December 31, 2011:

	March 31, 2012					December 31, 2011
	Amount		Percent			Amount		Percent
	(Dollars in thousands)
Commercial and industrial	$	442,559		11.4	%	$	406,433		10.8	%
Real estate:
Construction and land development		484,295		12.5			482,140		12.8
1-4 family residential		1,036,318		26.7			1,007,266		26.7
Home equity		149,597		3.9			146,999		3.9
Commercial real estate		1,379,242		35.6			1,351,986		35.9
Agriculture real estate (farmland)		144,399		3.7			136,008		3.6
Multi-family residential		94,683		2.4			89,240		2.4
Agriculture		34,075		0.9			34,226		0.9
Consumer (net of unearned discount)		76,393		2.0			78,187		2.1
Other		33,301		0.9			33,421		0.9
Total loans	$	3,874,862		100.0	%	$	3,765,906		100.0	%

Nonperforming Assets

The Company had $14.9 million in nonperforming assets at March 31, 2012 and $12.1 million in nonperforming assets at December 31, 2011, an increase of $2.8 million or 23.4%. The ratio of nonperforming assets to loans and other real estate was 0.38% at March 31, 2012 compared with 0.32% at December 31, 2011.

The Company generally places a loan on nonaccrual status and ceases accruing interest when the payment of principal or interest is delinquent for 90 days, or earlier in some cases, unless the loan is in the process of collection and the underlying collateral fully supports the carrying value of the loan. The Company generally charges off loans before attaining nonaccrual status.

The following table presents information regarding past due loans and nonperforming assets as of the dates indicated:

	March 31, 2012			December 31, 2011
	(Dollars in thousands)
Nonaccrual loans	$	7,142		$	3,578
Total nonperforming loans		7,142			3,578
Repossessed assets		13			146
Other real estate		7,718			8,328
Total nonperforming assets	$	14,873		$	12,052
Nonperforming assets to total loans and other real estate		0.38	%		0.32	%
Nonperforming assets to average earning assets		0.16	%		0.15	%

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Allowance for Credit Losses

Management actively monitors the Company’s asset quality and provides specific loss allowances when necessary. The allowance for credit losses is a reserve established through charges to earnings in the form of a provision for credit losses. Loans are charged off against the allowance for credit losses when appropriate. Although management believes it uses the best information available to make determinations with respect to the allowance for credit losses, future adjustments may be necessary if economic conditions differ from the assumptions used in making the initial determinations. As of March 31, 2012, the allowance for credit losses amounted to $51.6 million or 1.33% of total loans compared with $51.6 million or 1.37% of total loans at December 31, 2011.

Set forth below is an analysis of the allowance for credit losses as of and for the three months ended March 31, 2012 and as of and for the year ended December 31, 2011:

	As of and for the Three Months Ended March 31, 2012			As of and for the Year Ended December 31, 2011
	(Dollars in thousands)
Average loans outstanding	$	3,818,991		$	3,648,701
Gross loans outstanding at end of period	$	3,874,862		$	3,765,906
Allowance for credit losses at beginning of period	$	51,594		$	51,584
Provision for credit losses		150			5,200
Charge-offs:
Commercial and industrial		(78	)		(1,694	)
Real estate and agriculture		(101	)		(3,927	)
Consumer and other		(203	)		(1,229	)
Recoveries:
Commercial and industrial		93			481
Real estate and agriculture		11			472
Consumer and other		176			707
Net charge-offs		(102	)		(5,190	)
Allowance for credit losses at end of period	$	51,642		$	51,594
Ratio of allowance to end of period loans		1.33	%		1.37	%
Ratio of net charge-offs to average loans (annualized)		0.01	%		0.14	%
Ratio of allowance to end of period nonperforming loans		723.1	%		1,442.0	%

Securities

The following table summarizes the amortized cost of securities as of the dates shown (available for sale securities are not adjusted for unrealized gains or losses):

	March 31, 2012		December 31, 2011
	(In thousands)
U.S. Treasury securities and obligations of U.S. government agencies	$	8,707	$	8,696
States and political subdivisions		70,871		74,974
Corporate debt securities		2,992		2,990
Collateralized mortgage obligations		239,636		282,565
Mortgage-backed securities		5,284,593		4,248,796
Qualified School Constructions Bonds (QSCB)		12,900		12,900
Equity securities		7,288		7,288
Total amortized cost	$	5,626,987	$	4,638,209
Total fair value	$	5,793,187	$	4,815,304

36

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The investment securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities classified as available for sale or held-to-maturity are evaluated for OTTI under FASB ASC Topic 320, “Investments—Debt and Equity Securities.” Certain purchased beneficial interests, including non-agency mortgage-backed securities, asset-backed securities, and collateralized debt obligations, that had credit ratings at the time of purchase of below AA are evaluated using the model outlined in ASC Topic 325, “Investments—Other.” The Company currently does not own any securities that are accounted for under ASC Topic 325.

In determining OTTI under ASC Topic 320, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time. If applicable, the second segment of the portfolio uses the OTTI guidance provided by ASC Topic 325 that is specific to purchased beneficial interests that, on the purchase date, were rated below AA. Under the ASC Topic 325 model, an impairment is considered other than temporary if, based on the Company’s best estimate of cash flows that a market participant would use in determining the current fair value of the beneficial interest, there has been an adverse change in those estimated cash flows.

When OTTI occurs under either model, the amount of the other-than-temporary impairment recognized in earnings depends on whether an entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss. If an entity intends to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the OTTI shall be separated into the amount representing the credit-related portion of the impairment loss (“credit loss”) and the noncredit portion of the impairment loss (“noncredit portion”). The amount of the total OTTI related to the credit loss is determined based on the difference between the present value of cash flows expected to be collected and the amortized cost basis and such difference is recognized in earnings. The amount of the total OTTI related to the noncredit portion is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings shall become the new amortized cost basis of the investment.

As of March 31, 2012, the Company does not intend to sell any debt securities and management believes that the Company more likely than not will not be required to sell any debt securities before their anticipated recovery, at which time the Company will receive full value for the securities. Furthermore, as of March 31, 2012, management does not have the intent to sell any of its securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of March 31, 2012, management believes any impairment in the Company’s securities are temporary and no impairment loss has been realized in the Company’s consolidated statements of income.

37

The following table presents the amortized cost and fair value of securities classified as available for sale at March 31, 2012:

		0000000000		0000000000		0000000000			0000000000
	March 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in thousands)
Available for Sale
States and political subdivisions	$	35,845	$	2,079	$	(8	)	$	37,916
Corporate debt securities and other		8,780		450		—			9,230
Collateralized mortgage obligations		742		—		(15	)		727
Mortgage-backed securities		233,607		17,098		(62	)		250,643
Total	$	278,974	$	19,627	$	(85	)	$	298,516
Held to Maturity
U.S. Treasury securities and obligations of U.S. government agencies	$	8,707	$	351	$	—		$	9,058
States and political subdivisions (including QSCB)		47,926		3,294		(117	)		51,103
Corporate debt securities and other		1,500		102		—			1,602
Collateralized mortgage obligations		238,894		4,795		(122	)		243,567
Mortgage-backed securities		5,050,986		143,368		(5,013	)		5,189,341
Total	$	5,348,013	$	151,910	$	(5,252	)	$	5,494,671

The amortized cost and fair value of investment securities as of December 31, 2011 are as follows:

		0000000000		0000000000		0000000000			0000000000
	December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Dollars in thousands)
Available for Sale
States and political subdivisions	$	37,060	$	2,022	$	(6	)	$	39,076
Collateralized mortgage obligations		786		—		(21	)		765
Mortgage-backed securities		254,965		18,307		(66	)		273,206
Other securities		8,778		491		—			9,269
Total	$	301,589	$	20,820	$	(93	)	$	322,316
Held to Maturity
U.S. Treasury securities and obligations of U.S. government agencies	$	8,696	$	455	$	—		$	9,151
States and political subdivisions (including QSCB)		50,814		3,324		(284	)		53,854
Corporate debt securities		1,500		114		—			1,614
Collateralized mortgage obligations		281,778		5,009		(150	)		286,637
Mortgage-backed securities		3,993,832		147,991		(91	)		4,141,732
Total	$	4,336,620	$	156,893	$	(525	)	$	4,492,988

Premises and Equipment

Premises and equipment, net of accumulated depreciation, totaled $162.7 million at March 31, 2012 and $159.7 million at December 31, 2011.

Deposits

Total deposits were $8.54 billion at March 31, 2012 compared with $8.06 billion at December 31, 2011, an increase of $484.2 million or 6.0%. At March 31, 2012, noninterest-bearing deposits accounted for approximately 24.4% of total deposits compared with 24.5% of total deposits at December 31, 2011. Interest-bearing deposits totaled $6.46 billion or 75.6% of total deposits at March 31, 2012 compared with $6.09 billion or 75.5% of total deposits at December 31, 2011.

38

The following table summarizes the daily average balances and weighted average rates paid on deposits for the periods indicated below:

	Three Months Ended March 31, 2012					Year Ended December 31, 2011
	Average Balance		Average Rate			Average Balance		Average Rate
	(Dollars in thousands)
Interest-bearing demand	$	1,694,240		0.49	%	$	1,393,501		0.53	%
Regular savings		530,032		0.20			472,983		0.32
Money market savings		2,262,316		0.41			1,948,752		0.53
Time deposits		1,971,071		0.84			2,135,858		1.02
Total average interest-bearing deposits		6,457,659		0.55			5,951,094		0.69
Noninterest-bearing deposits		1,970,942		—			1,800,102		—
Total average deposits	$	8,428,601		0.42	%	$	7,751,196		0.53	%

Other Borrowings

The Company utilizes borrowings to supplement deposits to fund its lending and investment activities. Borrowings consist of funds from the Federal Home Loan Bank (“FHLB”) and correspondent banks. FHLB advances are considered short-term, overnight borrowings. At March 31, 2012, the Company had $515.0 million in FHLB advances compared with no FHLB advances at December 31, 2011. The highest outstanding balance of FHLB advances during the first quarter of 2012 was $725.0 million compared with $474.0 million for the year ended December 31, 2011. The average rate paid on FHLB advances for the quarter ended March 31, 2012 was 0.04%. At March 31, 2012, the Company had $12.5 million in FHLB long-term notes payable compared with $12.8 million at December 31, 2011. The weighted average interest rate paid on the FHLB notes payable at March 31, 2012 was 5.3%. The maturity dates on the FHLB notes payable range from the years 2013 to 2028 and have interest rates ranging from 4.1% to 6.1%. FHLB borrowings are available to the Company under a security and pledge agreement. At March 31, 2012, the Company had total funds of $3.84 billion available under this agreement, of which $527.5 million was outstanding.

At March 31, 2012, the Company had $58.5 million in overnight securities sold under repurchase agreements compared with $54.9 million at December 31, 2011, an increase of $3.6 million or 6.6%, with average rates paid of 0.28% and 0.54%, respectively.

The following table presents the Company’s borrowings at March 31, 2012 and December 31, 2011:

	March 31, 2012		December 31, 2011
	(Dollars in thousands)
FHLB advances	$	515,000	$	—
FHLB long-term notes payable		12,536		12,790
Total other borrowings		527,536		12,790
Securities sold under repurchase agreements		58,481		54,883
Total	$	586,017	$	67,673

Junior Subordinated Debentures

At March 31, 2012 and December 31, 2011, the Company had outstanding $85.1 million in junior subordinated debentures issued to the Company’s unconsolidated subsidiary trusts.

39

A summary of pertinent information related to the Company’s seven issues of junior subordinated debentures outstanding at March 31, 2012 is set forth in the table below:

Description	Issuance Date		Trust Preferred Securities Outstanding		Interest  Rate(1)		Junior Subordinated Debt Owed to Trusts		Maturity Date(2)
Prosperity Statutory Trust II		July 31, 2001	$	15,000,000		3 month LIBOR + 3.58%, not to exceed 12.50%	$	15,464,000		July 31, 2031
Prosperity Statutory Trust III		Aug. 15, 2003		12,500,000		3 month LIBOR + 3.00%		12,887,000		Sept. 17, 2033
Prosperity Statutory Trust IV		Dec. 30, 2003		12,500,000		3 month LIBOR + 2.85%		12,887,000		Dec. 30, 2033
SNB Capital Trust IV(3)		Sept. 25, 2003		10,000,000		3 month LIBOR + 3.00%		10,310,000		Sept. 25, 2033
TXUI Statutory Trust II(4)		Dec. 19, 2003		5,000,000		3 month LIBOR + 2.85%		5,155,000		Dec. 19, 2033
TXUI Statutory Trust III(4)		Nov. 30, 2005		15,500,000		3 month LIBOR + 1.39%		15,980,000		Dec. 15, 2035
TXUI Statutory Trust IV(4)		Mar. 31, 2006		12,000,000		3 month LIBOR + 1.39%		12,372,000		June 30, 2036
							$	85,055,000

(1) The 3-month LIBOR in effect as of March 31, 2012 was 0.468%.

(2) All debentures are callable five years from issuance date.

(3) Assumed in connection with the SNB acquisition on April 1, 2006.

(4) Assumed in connection with the TXUI acquisition on January 31, 2007.

Liquidity

Liquidity involves the Company’s ability to raise funds to support asset growth or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate the Company on an ongoing basis. The Company’s largest source of funds is deposits and its largest use of funds is loans. The Company does not expect a change in the source or use of its funds in the future. Although access to purchased funds from correspondent banks is available and has been utilized on occasion to take advantage of investment opportunities, the Company does not generally rely on these external funding sources. The cash and federal funds sold position, supplemented by amortizing investment and loan portfolios, has generally created an adequate liquidity position.

As of March 31, 2012, the Company had outstanding $472.4 million in commitments to extend credit and $15.5 million in commitments associated with outstanding standby letters of credit. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.

The Company has no exposure to future cash restrictions associated with known uncertainties or capital expenditures of a material nature.

Asset liquidity is provided by cash and assets which are readily marketable or which will mature in the near future. As of March 31, 2012, the Company had cash and cash equivalents of $151.9 million compared with $213.4 million at December 31, 2011, a decrease of $61.5 million. The decrease was primarily due to purchases of securities of $1.38 billion and an increase in loans of $85.1 million, offset by an increase in deposits of $413.8 million, proceeds from the maturities and repayments of securities of $377.0 million, net earnings of $36.5 million, an increase in other assets and accrued interest receivable of $24.6 million and net proceeds from short-term borrowings of $515.0 million.

40

Contractual Obligations

The following table summarizes the Company’s contractual obligations and other commitments to make future payments as of March 31, 2012 (other than deposit obligations). The payments do not include pre-payment options that may be available to the Company. The Company’s future cash payments associated with its contractual obligations pursuant to its junior subordinated debentures, FHLB advances and long-term notes payable and operating leases as of March 31, 2012 are summarized below. Payments for junior subordinated debentures include interest of $54.0 million that will be paid over future periods. Future interest payments were calculated using the current rate in effect at March 31, 2012. The current principal balance of the junior subordinated debentures at March 31, 2012 was $85.1 million. Payments for FHLB borrowings include interest of $3.3 million that will be paid over the future periods. Payments related to leases are based on actual payments specified in underlying contracts.

	Payments due in:
	Remaining Fiscal 2012		Fiscal 2013-2014		Fiscal 2015-2016		Thereafter		Total
	(Dollars in thousands)
Junior subordinated debentures	$	1,884	$	5,024	$	5,024	$	127,159	$	139,091
Federal Home Loan Bank borrowings		516,126		3,258		3,456		8,002		530,842
Operating leases		3,872		7,727		3,125		517		15,241
Total	$	521,882	$	16,009	$	11,605	$	135,678	$	685,174

Off-Balance Sheet Items

In the normal course of business, the Company enters into various transactions, which, in accordance with accounting principles generally accepted in the United States, are not included in its consolidated balance sheets. The Company enters into these transactions to meet the financing needs of its customers. These transactions include commitments to extend credit and standby letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

The Company’s commitments associated with outstanding standby letters of credit and commitments to extend credit as of March 31, 2012 are summarized below. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements:

	Remaining Fiscal 2012		Fiscal 2013-2014		Fiscal 2015-2016		Thereafter		Total
	(Dollars in thousands)
Standby letters of credit	$	9,716	$	5,699	$	122	$	—	$	15,537
Commitments to extend credit		195,980		102,365		8,925		165,168		472,438
Total	$	205,696	$	108,064	$	9,047	$	165,168	$	487,975

Capital Resources

Total shareholders’ equity was $1.61 billion at March 31, 2012 compared with $1.57 billion at December 31, 2011, an increase of $42.3 million or 2.7%. The increase was due primarily to net earnings of $36.5 million, the issuance of common stock in connection with the exercise of stock options and restricted stock awards of $1.9 million and the issuance of common stock in connection with the acquisition of Texas Bankers of $12.7 million, which was partially offset by dividends paid of $9.2 million for the three months ended March 31, 2012.

41

Both the Board of Governors of the Federal Reserve System with respect to the Company, and the Federal Deposit Insurance Corporation (“FDIC”) with respect to the Bank, have established certain minimum risk-based capital standards that apply to bank holding companies and federally insured banks. The following table sets forth the Company’s total risk-based capital, Tier 1 risk-based capital and Tier 1 to average assets (leverage) ratios as of March 31, 2012:

Consolidated Capital Ratios:
Total capital (to risk weighted assets)	16.80	%
Tier 1 capital (to risk weighted assets)	15.70	%
Tier 1 capital (to average assets)	7.68	%

As of March 31, 2012, the Bank’s risk-based capital ratios were above the levels required for the Bank to be designated as “well capitalized” by the FDIC. To be designated as “well capitalized”, the minimum ratio requirements for the Bank’s total risk-based capital, Tier 1 risk-based capital and Tier 1 to average assets (leverage) capital ratios must be 10.0%, 6.0% and 5.0%, respectively. The following table sets forth the Bank’s total risk-based capital, Tier 1 risk-based capital, and Tier 1 to average assets (leverage) capital ratios as of March 31, 2012:

Capital Ratios (Bank Only):
Total capital (to risk weighted assets)	16.52	%
Tier 1 capital (to risk weighted assets)	15.41	%
Tier 1 capital (to average assets)	7.53	%

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company manages market risk, which for the Company is primarily interest rate volatility, through its Asset Liability Committee which is composed of senior officers of the Company, in accordance with policies approved by the Company’s Board of Directors.

The Company uses simulation analysis to examine the potential effects of market changes on net interest income and market value. The Company considers macroeconomic variables, Company strategy, liquidity and other factors as it quantifies market risk. See the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Interest Rate Sensitivity and Liquidity” which was filed with the Securities and Exchange Commission on February 29, 2012 for further discussion.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective as of the end of the period covered by this report.

Changes in internal control over financial reporting. There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company and the Bank are defendants, from time to time, in legal actions arising from transactions conducted in the ordinary course of business. The Company and Bank believe, after consultations with legal counsel, that the ultimate liability, if any, arising from such actions will not have a material adverse effect on their financial statements.

42

ITEM 1A. RISK FACTORS

There have been no material changes in the Company’s risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

a. Not applicable

b. Not applicable

c. Not applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

Not applicable

ITEM 6. EXHIBITS

Exhibit Number	Description of Exhibit
3.1	Amended and Restated Articles of Incorporation of Prosperity Bancshares, Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (Registration No. 333-63267) (the “Registration Statement”))
3.2	Articles of Amendment to Amended and Restated Articles of Incorporation of Prosperity Bancshares, Inc. (incorporated herein by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006)
3.3	Amended and Restated Bylaws of Prosperity Bancshares, Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 19, 2007)
4.1	Form of certificate representing shares of the Company’s common stock (incorporated by reference to Exhibit 4 to the Registration Statement)
31.1*	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
31.2*	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
32.1**	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*	Interactive Financial Data

* Filed with this Quarterly Report on Form 10-Q.

** Furnished with this Quarterly Report on Form 10-Q.

43

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		PROSPERITY BANCSHARES, INC.  ®
		(Registrant)
Date:	05/09/12	/s/ David Zalman
		David Zalman
		Chief Executive Officer
Date:	05/09/12	/s/ David Hollaway
		David Hollaway
		Chief Financial Officer

44

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934, AS AMENDED

I, David Zalman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Prosperity Bancshares, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2012

/s/David Zalman

David Zalman

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934, AS AMENDED

I, David Hollaway, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Prosperity Bancshares, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2012

/s/David Hollaway

David Hollaway

Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Prosperity Bancshares, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Zalman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and operating results of the Company.

/s/David Zalman

David Zalman

Chief Executive Officer

May 9, 2012

EX-32.2

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Prosperity Bancshares, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Hollaway, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and operating results of the Company.

/s/David Hollaway

David Hollaway

Chief Financial Officer

May 9, 2012

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Fair Value (Schedule Of Fair Value Assets And Liabilities Measured On Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Total	$ 298,516	$ 322,316
States And Political Subdivisions [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities	37,916	39,076
Corporate Debt Securities And Other [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities	9,230	9,269
Collateralized Mortgage Obligations [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities	727	765
Mortgage-Backed Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities	250,643	273,206
Level 1 [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Total	7,628	7,656
Level 1 [Member] | States And Political Subdivisions [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities
Level 1 [Member] | Corporate Debt Securities And Other [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities	7,628	7,656
Level 1 [Member] | Collateralized Mortgage Obligations [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities
Level 1 [Member] | Mortgage-Backed Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities
Level 2 [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Total	290,888	314,660
Level 2 [Member] | States And Political Subdivisions [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities	37,916	39,076
Level 2 [Member] | Corporate Debt Securities And Other [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities	1,602	1,613
Level 2 [Member] | Collateralized Mortgage Obligations [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities	727	765
Level 2 [Member] | Mortgage-Backed Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities	250,643	273,206
Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Total
Level 3 [Member] | States And Political Subdivisions [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities
Level 3 [Member] | Corporate Debt Securities And Other [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities
Level 3 [Member] | Collateralized Mortgage Obligations [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities
Level 3 [Member] | Mortgage-Backed Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items]
Available for sale securities

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Contractual Obligations And Off-Balance Sheet Items (Narrative) (Details) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Indefinite-lived Intangible Assets by Major Class [Line Items]
Interest portion of junior subordinated debentures	$ 663,000	$ 1,147,000
Current principal balance of the junior subordinated debentures	139,091,000
Interest to be paid over future periods included in FHLB payments	3,300,000
Contractual Obligations [Member]
Indefinite-lived Intangible Assets by Major Class [Line Items]
Interest portion of junior subordinated debentures	54,000,000
Current principal balance of the junior subordinated debentures	$ 85,100,000

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Stock Based Compensation (Summary Of Changes In Outstanding Options) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012 Y
Stock Based Compensation [Abstract]
Number of Options outstanding, beginning of period	525
Options granted, Number of Options
Options forfeited, Number of Options	(4)
Options exercised, Number of Options	(70)
Number of Options outstanding, end of period	451
Options vested or expected to vest, Number of Options	437
Options exercisable, end of period, Number of Options	278
Options outstanding, Weighted Average Exercise Price, beginning of period	$ 28.18
Options granted, Weighted Average Exercise Price
Options forfeited, Weighted Average Exercise Price	$ 31.19
Options exercised, Weighted Average Exercise Price	$ 26.43
Options outstanding, Weighted Average Exercise Price, end of period	$ 28.42
Options vested or expected to vest, Weighted Average Exercise Price	$ 28.15
Options exercisable, Weighted Average Exercise Price, end of period	$ 27.23
Options outstanding, Weighted Average Remaining Contractual Term (in years), end of period	3.78
Options vested or expected to vest, Weighted Average Remaining Contractual Term (in years)	3.74
Options exercisable, Weighted Average Remaining Contractual Term (in years), end of period	2.93
Options outstanding, Aggregate Intrinsic Value, end of period	$ 7,829
Options vested or expected to vest, Aggregate Intrinsic Value, end of period	7,713
Options exercisable, Aggregate Intrinsic Value, end of period	$ 5,156

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Loans And Allowance For Credit Losses (Schedule Of Impaired Loans) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2012	Dec. 31, 2011
Construction And Land Development [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	$ 1,340	$ 1,175
Unpaid Principal Balance	1,341	1,175
Related Allowance	312	312
Average Recorded Investment	1,258	642
Agriculture And Agriculture Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	47	49
Unpaid Principal Balance	51	52
Related Allowance	42	39
Average Recorded Investment	47	26
1-4 Family Residential (Includes Home Equity) [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	941	990
Unpaid Principal Balance	1,040	1,075
Related Allowance	272	362
Average Recorded Investment	965	954
Commercial Real Estate (Includes Multi-Family) [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	6,666	1,151
Unpaid Principal Balance	6,694	1,190
Related Allowance	815	165
Average Recorded Investment	3,909	946
Commercial And Industrial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	614	633
Unpaid Principal Balance	2,035	2,048
Related Allowance	310	300
Average Recorded Investment	624	895
Consumer And Other [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	7	8
Unpaid Principal Balance	18	20
Related Allowance	6	8
Average Recorded Investment	7	21
With No Related Allowance Recorded [Member] | Construction And Land Development [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	276	111
Unpaid Principal Balance	277	111
Average Recorded Investment	194	58
With No Related Allowance Recorded [Member] | Agriculture And Agriculture Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	5	6
Unpaid Principal Balance	6	6
Average Recorded Investment	5	5
With No Related Allowance Recorded [Member] | 1-4 Family Residential (Includes Home Equity) [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	340	313
Unpaid Principal Balance	379	344
Average Recorded Investment	326	291
With No Related Allowance Recorded [Member] | Commercial Real Estate (Includes Multi-Family) [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	1,505	668
Unpaid Principal Balance	1,527	705
Average Recorded Investment	1,087	637
With No Related Allowance Recorded [Member] | Commercial And Industrial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	4	112
Unpaid Principal Balance	6	1,513
Average Recorded Investment	58	253
With No Related Allowance Recorded [Member] | Consumer And Other [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment		3
With An Allowance Recorded [Member] | Construction And Land Development [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	1,064	1,064
Unpaid Principal Balance	1,064	1,064
Related Allowance	312	312
Average Recorded Investment	1,064	584
With An Allowance Recorded [Member] | Agriculture And Agriculture Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	42	43
Unpaid Principal Balance	45	46
Related Allowance	42	39
Average Recorded Investment	42	21
With An Allowance Recorded [Member] | 1-4 Family Residential (Includes Home Equity) [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	601	677
Unpaid Principal Balance	661	731
Related Allowance	272	362
Average Recorded Investment	639	663
With An Allowance Recorded [Member] | Commercial Real Estate (Includes Multi-Family) [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	5,161	483
Unpaid Principal Balance	5,167	485
Related Allowance	815	165
Average Recorded Investment	2,822	309
With An Allowance Recorded [Member] | Commercial And Industrial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	610	521
Unpaid Principal Balance	2,029	535
Related Allowance	310	300
Average Recorded Investment	566	642
With An Allowance Recorded [Member] | Consumer And Other [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	7	8
Unpaid Principal Balance	18	20
Related Allowance	6	8
Average Recorded Investment	$ 7	$ 18

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Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2012

Other Comprehensive Income (Loss) [Abstract]

Schedule Of Tax Effects Allocated To Each Component Of Other Comprehensive Income (Loss)

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
	(Dollars in thousands)
Three months ended March 31, 2012:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	(1,185	)	$	(415	)	$	(770	)
Total other comprehensive income	$	(1,185	)	$	(415	)	$	(770	)
Three months ended March 31, 2011:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	(919	)	$	(322	)	$	(597	)
Total other comprehensive income	$	(919	)	$	(322	)	$	(597	)

Activity Of Accumulated Other Comprehensive Income

	Securities Available For Sale			Accumulated other Comprehensive Income
	(Dollars in thousands)
Balance January 1, 2012	$	13,472		$	13,472
Other comprehensive income (loss)		(770	)		(770	)
Balance March 31, 2012	$	12,702		$	12,702
Balance as of January 1, 2011	$	14,304		$	14,304
Other comprehensive income (loss)		(597	)		(597	)
Balance March 31, 2011	$	13,707		$	13,707

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Contractual Obligations And Off-Balance Sheet Items (Letters Of Credit And Commitments) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012
Life Settlement Contracts, Fair Value Method, Disclosure Items [Line Items]
Standby letters of credit	$ 15,537
Commitments to extend credit	472,438
Total	487,975
Remaining Fiscal 2012 [Member]
Life Settlement Contracts, Fair Value Method, Disclosure Items [Line Items]
Standby letters of credit	9,716
Commitments to extend credit	195,980
Total	205,696
Fiscal 2013-2014 [Member]
Life Settlement Contracts, Fair Value Method, Disclosure Items [Line Items]
Standby letters of credit	5,699
Commitments to extend credit	102,365
Total	108,064
Fiscal 2015-2016 [Member]
Life Settlement Contracts, Fair Value Method, Disclosure Items [Line Items]
Standby letters of credit	122
Commitments to extend credit	8,925
Total	9,047
Thereafter [Member]
Life Settlement Contracts, Fair Value Method, Disclosure Items [Line Items]
Commitments to extend credit	165,168
Total	$ 165,168

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Goodwill And Core Deposit Intangibles (Schedule Of Goodwill And Core Deposit Intangibles) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2010
Goodwill And Core Deposit Intangibles [Abstract]
Goodwill, beginning balance	$ 924,537
Goodwill, Amortization
Goodwill, Acquisition of First Bank branches	4,624
Goodwill, ending balance	929,161
Core Deposit Intangibles, beginning balance	20,996	19,300	21,000
Core Deposit Intangibles, Amortization	(1,695)
Core Deposit Intangibles, Acquisition of Texas Bankers, Inc.
Core Deposit Intangibles, ending balance	$ 19,301	$ 19,300	$ 21,000

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Loans And Allowance For Credit Losses (Schedule Of Troubled Debt Restructurings Outstanding) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2012	Dec. 31, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Number Of Contracts	8	9
Pre-Modification Outstanding Recorded Investment	$ 2,783	$ 5,487
Post-Modification Outstanding Recorded Investment	2,662	5,348
Construction And Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Number Of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Agriculture And Agriculture Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Number Of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
1-4 Family Residential (Includes Home Equity) [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Number Of Contracts	4	4
Pre-Modification Outstanding Recorded Investment	109	109
Post-Modification Outstanding Recorded Investment	76	84
Commercial Real Estate (Commercial Mortgage And Multi Family) [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Number Of Contracts	1	2
Pre-Modification Outstanding Recorded Investment	2,560	5,264
Post-Modification Outstanding Recorded Investment	2,493	5,171
Commercial And Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Number Of Contracts	3	3
Pre-Modification Outstanding Recorded Investment	114	114
Post-Modification Outstanding Recorded Investment	93	93
Consumer And Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Number Of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment

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Other Comprehensive Income (Loss) (Activity Of Accumulated Other Comprehensive Income) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Other Comprehensive Income (Loss) [Abstract]
Beginning Balance, Securities Available For Sale	$ 13,472	$ 14,304
Other comprehensive income (loss)	(770)	(597)
Ending Balance, Securities Available For Sale	12,702	13,707
Beginning Balance, Accumulated other Comprehensive Income	13,472	14,304
Other comprehensive income (loss), Accumulated other Comprehensive Income	(770)	(597)
Ending Balance, Accumulated other Comprehensive Income	$ 12,702	$ 13,707

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Stock Based Compensation (Summary Of Changes In Non-Vested Options) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Stock Based Compensation [Abstract]
Non-vested options outstanding, beginning of period	177	313
Options granted, Number of Options
Non-vested options forfeited, number of options	(4)
Options vested, Number of Options		(12)
Non-vested options outstanding, end of period	173	301
Non-vested options outstanding, beginning of period, Weighted Average Grant Date Fair Value	$ 6.96	$ 6.89
Options granted, Weighted Average Grant Date Fair Value
Non-vested options forfeited, Weighted Average Grant Date Fair Value	$ 6.76
Options vested, Weighted Average Grant Date Fair Value		$ 5.62
Non-vested options outstanding, end of period, Weighted Average Grant Date Fair Value	$ 6.97	$ 6.94

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Basis Of Presentation

3 Months Ended

Mar. 31, 2012

Basis Of Presentation [Abstract]

Basis Of Presentation

1. BASIS OF PRESENTATION

The interim consolidated financial statements include the accounts of Prosperity Bancshares, Inc.^® (the "Company") and its wholly-owned subsidiaries, Prosperity Bank^® (the "Bank") and Prosperity Holdings of Delaware, LLC. All inter-company transactions and balances have been eliminated.

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of the Company on a consolidated basis, and all such adjustments are of a normal recurring nature. These financial statements and the notes thereto should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2011. Operating results for the three-month period ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012 or any other period.

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Goodwill And Core Deposit Intangibles (Schedule Of The Estimated Aggregate Future Amortization Expense For Intangible Assets) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012
Goodwill And Core Deposit Intangibles [Abstract]
Remaining 2012	$ 4,652
2013	4,465
2014	3,314
2015	2,804
2016	2,481
Thereafter	1,585
Total	$ 19,301

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Loans And Allowance For Credit Losses (Schedule Of Activity With Respect To Related-Party Loans) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2012	Dec. 31, 2011
Loans And Allowance For Credit Losses [Abstract]
Beginning balance	$ 9,809	$ 12,783
New loans and reclassified related loans	200	4,168
Repayments	(2,728)	(7,142)
Ending balance	$ 7,281	$ 9,809

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Loans And Allowance For Credit Losses (Schedule Of Types Of Loans In Loan Portfolio) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Commercial and industrial	$ 442,559	$ 406,433
Agriculture	34,075	34,226
Consumer (net of unearned discount)	76,393	78,187
Other	33,301	33,421
Total	3,874,862	3,765,906
Construction And Land Development [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Real estate	484,295	482,140
Total	484,295	482,140
1-4 Family Residential [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Real estate	1,036,318	1,007,266
Home Equity [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Real estate	149,597	146,999
Commercial Real Estate [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Real estate	1,379,242	1,351,986
Agriculture Real Estate (Farmland) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Real estate	144,399	136,008
Multi-Family Residential [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Real estate	$ 94,683	$ 89,240

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Stock Based Compensation (Narrative) (Details) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011 Y	Mar. 31, 2010
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock-based employee compensation plans	4
Number of stock option plans	1
Number of stock-based employee compensation plans expired	2
Allocated stock-based compensation expense	$ 1,200,000	$ 707,000
Employee service stock-based compensation tax benefit from compensation expense	420,000	234,000
Stock-based compensation arrangement by stock-based payment award, award vesting period in years, minimum	one
Stock-based compensation arrangement by stock-based payment award, award vesting period in years, maximum	five
Contractual term of stock options, years	10
Number of options granted during the period	0		0
Intrinsic value of options exercised	1,400,000	1,900,000
Total fair value of options vested		66,000
Proceeds from stock options exercised	1,851,000	2,357,000
Tax benefit from option exercises		0	0
Unrecognized compensation expense	$ 7,900,000
Expected weighted average period of unrecognized compensation expense recognized, in years		2.0
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of restricted stock outstanding	404,000
Weighted average price of restricted stock outstanding	$ 37.47
2012 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized for issuance	1,250,000
2004 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized for issuance	1,250,000

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Loans And Allowance For Credit Losses (Schedule Of Nonaccrual Loans, Segregated By Class Of Loans) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	$ 7,142	$ 3,578
Construction And Land Development [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	1,210	1,175
Agriculture And Agriculture Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	67	49
1-4 Family Residential (Includes Home Equity) [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	937	923
Commercial Real Estate (Includes Multi-Family) [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	4,266	790
Commercial And Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	654	633
Consumer And Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	$ 8	$ 8

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Loans And Allowance For Credit Losses (Schedule Of Past Due Loans With Age Analysis, Segregated By Class Of Loans) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Loans 30-89 Days Past Due	$ 11,886	$ 10,436
Loans 90 or More Days Past Due	5,249	1,218
Total Past Due Loans	17,135	11,654
Current Loans	3,857,727	3,754,252
Accruing Loans 90 or More Days Past Due
Construction And Land Development [Member]
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Loans 30-89 Days Past Due	3,963	1,281
Loans 90 or More Days Past Due	1,210	111
Total Past Due Loans	5,173	1,392
Current Loans	479,122	480,748
Accruing Loans 90 or More Days Past Due
Agriculture And Agriculture Real Estate [Member]
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Loans 30-89 Days Past Due	88	365
Loans 90 or More Days Past Due	9	9
Total Past Due Loans	97	374
Current Loans	178,377	169,860
Accruing Loans 90 or More Days Past Due
1-4 Family Residential (Includes Home Equity) [Member]
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Loans 30-89 Days Past Due	1,181	1,527
Loans 90 or More Days Past Due	563	314
Total Past Due Loans	1,744	1,841
Current Loans	1,184,171	1,152,424
Accruing Loans 90 or More Days Past Due
Commercial Real Estate (Includes Multi-Family) [Member]
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Loans 30-89 Days Past Due	4,947	5,630
Loans 90 or More Days Past Due	3,097	390
Total Past Due Loans	8,044	6,020
Current Loans	1,465,881	1,435,206
Accruing Loans 90 or More Days Past Due
Commercial And Industrial [Member]
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Loans 30-89 Days Past Due	1,465	1,544
Loans 90 or More Days Past Due	364	394
Total Past Due Loans	1,829	1,938
Current Loans	440,730	404,495
Accruing Loans 90 or More Days Past Due
Consumer And Other [Member]
Assets and Associated Liabilities of Transfers Accounted for as Secured Borrowings [Line Items]
Loans 30-89 Days Past Due	242	89
Loans 90 or More Days Past Due	6
Total Past Due Loans	248	89
Current Loans	109,446	111,519
Accruing Loans 90 or More Days Past Due

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Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 36,487	$ 33,878
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,730	4,055
Provision for credit losses	150	1,700	5,200
Net premium amortization on investments	9,720	6,980
Stock based compensation expense	1,215	707
Net accretion of discount on loans and deposits		(50)
(Gain) on sale of assets and other real estate	(411)	(4)
(Increase) decrease in other assets and accrued interest receivable	(24,626)	7,195
Increase in accrued interest payable and other liabilities	23,846	19,295
Net cash provided by operating activities	50,111	73,756
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and principal paydowns of held to maturity securities	354,183	334,446
Purchase of held to maturity securities	(1,375,431)	(554,369)
Proceeds from maturities and principal paydowns of available for sale securities	22,813	30,497
Net increase in loans	(85,120)	(94,435)
Cash and cash equivalents acquired in the purchase of Texas Bankers, Inc.	44,550
Purchase of bank premises and equipment	(2,264)	(2,288)
Net proceeds from sale of bank premises, equipment and other real estate	4,817	5,628
Net cash used in investing activities	(1,036,452)	(280,521)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in noninterest-bearing deposits	95,498	57,237
Net increase in interest-bearing deposits	318,341	304,390
Net proceeds from (repayments of) short-term borrowings	515,000	(146,000)
Net repayments of long-term borrowings	(254)	(341)
Net proceeds from (repayments from) securities sold under repurchase agreements	3,598	(8,812)
Redemption of junior subordinated debentures		(7,210)
Proceeds from exercise of stock options	1,851	2,357
Payments of cash dividends	(9,223)	(8,186)
Net cash provided by financing activities	924,811	193,435
NET DECREASE IN CASH AND CASH EQUIVALENTS	(61,530)	(13,330)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	213,442	159,368	159,368
CASH AND CASH EQUIVALENTS, END OF PERIOD	151,912	146,038	213,442
NONCASH ACTIVITIES:
Stock issued in connection with the Texas Bankers, Inc. acquisition	12,708
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	10,001	13,492
Cash paid for income taxes	250	2,000
Noncash investing and financing activities-acquisition of real estate through foreclosure of collateral	$ 3,559	$ 5,935

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Loans And Allowance For Credit Losses (Schedule Of Past Due Loans And Nonperforming Assets) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Loans And Allowance For Credit Losses [Abstract]
Nonaccrual loans	$ 7,142	$ 3,578
Total nonperforming loans	7,142	3,578
Repossessed assets	13	146
Other real estate	7,718	8,328
Total nonperforming assets	$ 14,873	$ 12,052
Nonperforming assets to total loans and other real estate	0.38%	0.32%

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Fair Value (Summary Of Financial Assets And Liabilities Measured On Recurring And Non-Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and due from banks	$ 151,467	$ 212,800
Federal funds sold	445	642
Available for sale securities	298,516	322,316
Held to maturity securities	5,494,671	4,492,988
Deposits	8,544,451	8,060,254
Other borrowings	527,536	12,790
Securities sold under repurchase agreements	58,481	54,883
Junior subordinated debentures	85,055	85,055
Carrying Amount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and due from banks	151,467
Federal funds sold	445
Available for sale securities	298,516
Held to maturity securities	5,348,013
Loans held for investment and for sale (net of allowance for credit losses)	3,823,220
Total	9,621,661
Deposits	8,544,451
Other borrowings	527,536
Securities sold under repurchase agreements	58,481
Junior subordinated debentures	85,055
Total	9,215,523
Estimated Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and due from banks	151,467
Federal funds sold	445
Available for sale securities	298,516
Held to maturity securities	5,494,671
Loans held for investment and for sale (net of allowance for credit losses)	3,915,517
Total	9,860,616
Deposits	8,565,167
Other borrowings	529,424
Securities sold under repurchase agreements	58,481
Junior subordinated debentures	71,651
Total	$ 9,224,723

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Subsequent Events And Recent Acquisitions (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Dec. 31, 2011
The Bank Arlington [Member]
Subsequent Event [Line Items]
Total assets	$ 37.3
Total loans	22.8
Total deposits	33.2
Common stock shares issued	135,347
Common stock shares premium	2.8
The Bank Arlington [Member] | Arlington, Texas [Member]
Subsequent Event [Line Items]
Number of banking offices	1
East Texas Financial Services, Inc. [Member]
Subsequent Event [Line Items]
Total assets	208.6
Total loans	153.5
Total deposits	127.6
Common stock shares issued	531,000
East Texas Financial Services, Inc. [Member] | Tyler MSA [Member]
Subsequent Event [Line Items]
Number of banking offices	4
East Texas Financial Services, Inc. [Member] | Tyler, Texas [Member]
Subsequent Event [Line Items]
Number of banking offices	3
East Texas Financial Services, Inc. [Member] | Gilmer, Texas [Member]
Subsequent Event [Line Items]
Number of banking offices	1
Texas Bankers, Inc. [Member]
Subsequent Event [Line Items]
Total assets		77.0
Total loans		27.6
Total deposits		70.4
Common stock shares issued	314,953
Common stock shares premium	5.2
Texas Bankers, Inc. [Member] | Central Texas Area Including Austin And San Antonio [Member]
Subsequent Event [Line Items]
Number of banking offices	34
Texas Bankers, Inc. [Member] | Austin [Member]
Subsequent Event [Line Items]
Number of banking offices	3
Texas Bankers, Inc. [Member] | Downtown Austin [Member]
Subsequent Event [Line Items]
Number of banking offices	1
Texas Bankers, Inc. [Member] | Thorndale [Member]
Subsequent Event [Line Items]
Number of banking offices	1
American State Financial Corporation [Member]
Subsequent Event [Line Items]
Number of banking offices	37
Number of counties with operating bank offices	18
Total assets	3,160.0
Total loans	1,240.0
Total deposits	2,510.0
Common stock shares issued	8,525,000
Common stock shares premium	$ 178.5

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
ASSETS
Cash and due from banks	$ 151,467	$ 212,800
Federal funds sold	445	642
Total cash and cash equivalents	151,912	213,442
Securities available for sale, at fair value (amortized cost of $ 278,974 and $ 301,589 respectively)	298,516	322,316
Securities held to maturity, at cost (fair value of $ 5,494,671 and $ 4,492,988 respectively)	5,348,013	4,336,620
Loans held for investment	3,874,862	3,765,906
Allowance for credit losses	(51,642)	(51,594)
Loans, net	3,823,220	3,714,312
Accrued interest receivable	30,261	29,405
Goodwill	929,161	924,537
Core deposit intangibles, net of accumulated amortization of $ 59,583 and $ 58,158, respectively	19,301	20,996
Bank premises and equipment, net	162,676	159,656
Other real estate owned	7,718	8,328
Bank Owned Life Insurance (BOLI)	52,191	50,029
Federal Home Loan Bank stock	35,032	11,601
Other assets	31,954	31,429
TOTAL ASSETS	10,889,955	9,822,671
Deposits:
Noninterest-bearing	2,088,749	1,972,226
Interest-bearing	6,455,702	6,088,028
Total deposits	8,544,451	8,060,254
Other borrowings	527,536	12,790
Securities sold under repurchase agreements	58,481	54,883
Accrued interest payable	2,573	2,803
Other liabilities	62,326	39,621
Junior subordinated debentures	85,055	85,055
Total liabilities	9,280,422	8,255,406
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; 47,333,949 and 46,947,415 shares issued at March 31, 2012 and December 31, 2011, respectively; 47,296,861 and 46,910,327 shares outstanding at March 31, 2012 and December 31, 2011, respectively	47,334	46,947
Capital surplus	898,962	883,575
Retained earnings	651,142	623,878
Accumulated other comprehensive income - net unrealized gain on available for sale securities, net of tax of $ 6,840 and $ 7,254 respectively	12,702	13,472
Less treasury stock, at cost, 37,088 shares	(607)	(607)
Total shareholders' equity	1,609,533	1,567,265
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 10,889,955	$ 9,822,671

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Stock Based Compensation (Summary Of Fair Value Of Options Estimated Using Option-Pricing Model) (Details)	3 Months Ended
	Mar. 31, 2012 Y	Mar. 31, 2011 Y
Stock Based Compensation [Abstract]
Expected life (in years)	5.27	5.20
Risk free interest rate	3.68%	3.72%
Volatility	20.87%	20.96%
Dividend yield	1.26%	1.25%

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Consolidated Statements Of Changes In Shareholders' Equity (USD $) In Thousands, except Share data	Common Stock [Member]	Capital Surplus [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]	Treasury Stock [Member]	Total
BEGINNING BALANCE at Dec. 31, 2010	$ 46,721	$ 876,050	$ 515,871	$ 14,304	$ (607)	$ 1,452,339
BEGINNING BALANCE (in shares) at Dec. 31, 2010	46,721,114
Net income			33,878			33,878
Other comprehensive loss				(597)		(597)
Common stock issued in connection with the exercise of stock options and restricted stock awards (in shares)	97,600
Common stock issued in connection with the exercise of stock options and restricted stock awards	98	2,259				2,357
Stock based compensation expense		707				707
Cash dividends declared			(8,186)			(8,186)
ENDING BALANCE at Mar. 31, 2011	46,819	879,016	541,563	13,707	(607)	1,480,498
ENDING BALANCE (in shares) at Mar. 31, 2011	46,818,714
BEGINNING BALANCE at Dec. 31, 2011	46,947	883,575	623,878	13,472	(607)	1,567,265
BEGINNING BALANCE (in shares) at Dec. 31, 2011	46,947,415
Net income			36,487			36,487
Other comprehensive loss				(770)		(770)
Common stock issued in connection with the exercise of stock options and restricted stock awards (in shares)	71,581
Common stock issued in connection with the exercise of stock options and restricted stock awards	72	1,779				1,851
Common stock issued in connection with the acquisition of Texas Bankers, Inc. (in shares)	314,953
Common stock issued in connection with the acquisition of Texas Bankers, Inc.	315	12,393				12,708
Stock based compensation expense		1,215				1,215
Cash dividends declared			(9,223)			(9,223)
ENDING BALANCE at Mar. 31, 2012	$ 47,334	$ 898,962	$ 651,142	$ 12,702	$ (607)	$ 1,609,533
ENDING BALANCE (in shares) at Mar. 31, 2012	47,333,949

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Loans And Allowance For Credit Losses (Schedule Of Charge-Off Recoveries) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2012	Dec. 31, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Charge-offs	$ (382)	$ (6,850)
Recoveries	280	1,660
Net Charge-offs	(102)	(5,190)
Construction And Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Charge-offs	(26)	(1,509)
Recoveries	4	400
Net Charge-offs	(22)	(1,109)
1-4 Family Residential (Includes Home Equity) [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Charge-offs	(52)	(1,392)
Recoveries	2	32
Net Charge-offs	(50)	(1,360)
Commercial Real Estate (Includes Multi-Family) [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Charge-offs	(23)	(1,027)
Recoveries	5	41
Net Charge-offs	(18)	(986)
Commercial And Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Charge-offs	(78)	(1,694)
Recoveries	93	526
Net Charge-offs	15	(1,168)
Consumer And Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Charge-offs	(203)	(1,228)
Recoveries	176	661
Net Charge-offs	$ (27)	$ (567)

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Goodwill And Core Deposit Intangibles (Tables)

3 Months Ended

Mar. 31, 2012

Goodwill And Core Deposit Intangibles [Abstract]

Schedule Of Goodwill And Core Deposit Intangibles

	Goodwill		Core Deposit Intangibles
	(Dollars in thousands)
Balance as of December 31, 2011	$	924,537	$	20,996
Amortization		—		(1,695	)
Acquisition of Texas Bankers, Inc.		4,624		—
Balance as of March 31, 2012	$	929,161	$	19,301

Schedule Of The Estimated Aggregate Future Amortization Expense For Intangible Assets

Remaining 2012	$	4,652
2013		4,465
2014		3,314
2015		2,804
2016		2,481
Thereafter		1,585
Total	$	19,301

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Loans And Allowance For Credit Losses (Schedule Of Recorded Investment In Loans And Activity In The Allowance For Credit Losses By Portfolio Segment) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 51,594	$ 51,584	$ 51,584
Provision for credit losses	150	1,700	5,200
Charge-offs	(382)		(6,850)
Recoveries	280		1,660
Net charge-offs	(102)		(5,190)
Ending balance	51,642		51,594
Ending balance: individually evaluated for impairment	1,757		1,186
Ending balance: collectively evaluated for impairment	49,885		50,408
Ending balance	3,874,862		3,765,906
Construction And Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	12,094	12,994	12,994
Provision for credit losses	(732)		209
Charge-offs	(26)		(1,509)
Recoveries	4		400
Net charge-offs	(22)		(1,109)
Ending balance	11,340		12,094
Ending balance: individually evaluated for impairment	312		312
Ending balance: collectively evaluated for impairment	11,028		11,782
Ending balance	484,295		482,140
Agriculture And Agriculture Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	511	271	271
Provision for credit losses	109		239
Recoveries			1
Net charge-offs			1
Ending balance	620		511
Ending balance: individually evaluated for impairment	42		39
Ending balance: collectively evaluated for impairment	578		472
Ending balance	178,474		170,234
1-4 Family Residential (Includes Home Equity) [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	12,645	12,837	12,837
Provision for credit losses	(72)		1,168
Charge-offs	(52)		(1,392)
Recoveries	2		32
Net charge-offs	(50)		(1,360)
Ending balance	12,523		12,645
Ending balance: individually evaluated for impairment	272		362
Ending balance: collectively evaluated for impairment	12,251		12,283
Ending balance	1,185,915		1,154,265
Commercial Real Estate (Includes Multi-Family) [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	21,460	20,436	20,436
Provision for credit losses	468		2,011
Charge-offs	(23)		(1,027)
Recoveries	5		40
Net charge-offs	(18)		(987)
Ending balance	21,910		21,460
Ending balance: individually evaluated for impairment	815		165
Ending balance: collectively evaluated for impairment	21,095		21,295
Ending balance	1,473,925		1,441,226
Commercial And Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	3,826	3,891	3,891
Provision for credit losses	171		1,103
Charge-offs	(78)		(1,694)
Recoveries	93		526
Net charge-offs	15		(1,168)
Ending balance	4,012		3,826
Ending balance: individually evaluated for impairment	310		300
Ending balance: collectively evaluated for impairment	3,702		3,526
Ending balance	442,559		406,433
Consumer And Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,058	1,155	1,155
Provision for credit losses	206		470
Charge-offs	(203)		(1,228)
Recoveries	176		661
Net charge-offs	(27)		(567)
Ending balance	1,237		1,058
Ending balance: individually evaluated for impairment	6		8
Ending balance: collectively evaluated for impairment	1,231		1,050
Ending balance	109,694		111,608
Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: individually evaluated for impairment	9,615		4,006
Ending balance: collectively evaluated for impairment	3,865,247		3,761,900
Loans [Member] | Construction And Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: individually evaluated for impairment	1,340		1,175
Ending balance: collectively evaluated for impairment	482,955		480,965
Loans [Member] | Agriculture And Agriculture Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: individually evaluated for impairment	47		49
Ending balance: collectively evaluated for impairment	178,427		170,185
Loans [Member] | 1-4 Family Residential (Includes Home Equity) [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: individually evaluated for impairment	941		990
Ending balance: collectively evaluated for impairment	1,184,974		1,153,275
Loans [Member] | Commercial Real Estate (Includes Multi-Family) [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: individually evaluated for impairment	6,666		1,151
Ending balance: collectively evaluated for impairment	1,467,259		1,440,075
Loans [Member] | Commercial And Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: individually evaluated for impairment	614		633
Ending balance: collectively evaluated for impairment	441,945		405,800
Loans [Member] | Consumer And Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance: individually evaluated for impairment	7		8
Ending balance: collectively evaluated for impairment	$ 109,687		$ 111,600

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Contractual Obligations And Off-Balance Sheet Items (Tables)

3 Months Ended

Mar. 31, 2012

Contractual Obligations And Off-Balance Sheet Items [Abstract]

Contractual Obligations And Other Commitments

	Payments due in:
	Remaining Fiscal 2012		Fiscal 2013-2014		Fiscal 2015-2016		Thereafter		Total
	(Dollars in thousands)
Junior subordinated debentures	$	1,884	$	5,024	$	5,024	$	127,159	$	139,091
Federal Home Loan Bank borrowings		516,126		3,258		3,456		8,002		530,842
Operating leases		3,872		7,727		3,125		517		15,241
Total	$	521,882	$	16,009	$	11,605	$	135,678	$	685,174

Letters Of Credit And Commitments

	Remaining Fiscal 2012		Fiscal 2013-2014		Fiscal 2015-2016		Thereafter		Total
	(Dollars in thousands)
Standby letters of credit	$	9,716	$	5,699	$	122	$	—	$	15,537
Commitments to extend credit		195,980		102,365		8,925		165,168		472,438
Total	$	205,696	$	108,064	$	9,047	$	165,168	$	487,975

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Consolidated Statements Of Changes In Shareholders' Equity (Parenthetical) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Consolidated Statements Of Changes In Shareholders' Equity [Abstract]
Cash dividends declared, per share	$ 0.195	$ 0.175

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Consolidated Balance Sheets [Abstract]
Available for sale securities, amortized cost	$ 278,974	$ 301,589
Held to maturity securities, fair value	5,494,671	4,492,988
Core deposit intangibles, accumulated amortization	59,583	58,158
Preferred stock, par value	$ 1	$ 1
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	47,333,949	46,947,415
Common stock, shares outstanding	47,296,861	46,910,327
Accumulated other comprehensive income - unrealized gain on available for sale securities, tax	$ 6,840	$ 7,254
Treasury stock, shares	37,088

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Other Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2012

Other Comprehensive Income (Loss) [Abstract]

Other Comprehensive Income (Loss)

9. OTHER COMPREHENSIVE INCOME (LOSS)

The tax effects allocated to each component of other comprehensive income (loss) were as follows:

	Before Tax Amount			Tax Expense (Benefit)			Net of Tax Amount
	(Dollars in thousands)
Three months ended March 31, 2012:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	(1,185	)	$	(415	)	$	(770	)
Total other comprehensive income	$	(1,185	)	$	(415	)	$	(770	)
Three months ended March 31, 2011:
Securities available for sale:
Change in net unrealized gain/loss during the period	$	(919	)	$	(322	)	$	(597	)
Total other comprehensive income	$	(919	)	$	(322	)	$	(597	)

Activity in accumulated other comprehensive income, net of tax, was as follows:

	Securities Available For Sale			Accumulated other Comprehensive Income
	(Dollars in thousands)
Balance January 1, 2012	$	13,472		$	13,472
Other comprehensive income (loss)		(770	)		(770	)
Balance March 31, 2012	$	12,702		$	12,702
Balance as of January 1, 2011	$	14,304		$	14,304
Other comprehensive income (loss)		(597	)		(597	)
Balance March 31, 2011	$	13,707		$	13,707

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Document And Entity Information	3 Months Ended
	Mar. 31, 2012	May 01, 2012
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1
Trading Symbol	prsp
Entity Registrant Name	PROSPERITY BANCSHARES INC
Entity Central Index Key	0001068851
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		47,451,041

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Subsequent Events And Recent Acquisitions

3 Months Ended

Mar. 31, 2012

Subsequent Events And Recent Acquisitions [Abstract]

Subsequent Events And Recent Acquisitions

10. SUBSEQUENT EVENTS AND RECENT ACQUISITIONS

Acquisition of The Bank Arlington – On April 1, 2012, the Company completed the previously announced acquisition of The Bank Arlington. The Bank Arlington operated one banking office in Arlington, Texas, in the Dallas/Fort Worth CMSA. As of March 31, 2012, The Bank Arlington reported total assets of $37.3 million, total loans of $22.8 million and total deposits of $33.2 million.

Under the terms of the agreement, the Company issued 135,347 shares of Company common stock for all outstanding shares of The Bank Arlington capital stock which resulted in a premium of $2.8 million.

Pending Acquisition of American State Financial Corporation—On February 27, 2012, the Company announced the signing of a definitive agreement to acquire American State Financial Corporation and its wholly owned subsidiary, American State Bank ("ASB"), through the merger of American State Financial with and into the Company. ASB operates thirty-seven (37) banking offices in eighteen (18) counties across West Texas. As of March 31, 2012, American State Financial, on a consolidated basis, reported total assets of $3.16 billion, total loans of $1.24 billion and total deposits of $2.51 billion. Under the terms of the definitive agreement, the Company will issue up to 8,525,000 shares of its common stock plus $178.5 million in cash for all outstanding shares of American State Financial capital stock, subject to certain conditions and potential adjustment.

The merger has been approved by the Boards of Directors of both companies and is expected to close during the third quarter of 2012, although delays may occur. The transaction is subject to certain conditions, including the approval by American State Financial's shareholders and customary regulatory approvals. Operational integration is anticipated to begin during the third quarter of 2012.

Pending Acquisition of East Texas Financial Services, Inc.—On December 8, 2011, the Company entered into a definitive agreement to acquire East Texas Financial Services, Inc. (OTC BB: FFBT) and its wholly-owned subsidiary, First Federal Bank Texas ("Firstbank"). Firstbank operates four banking offices in the Tyler MSA, including three locations in Tyler, Texas and one location in Gilmer, Texas. As of March 31, 2012, East Texas Financial Services, on a consolidated basis, reported total assets of $208.6 million, total loans of $153.5 million and total deposits of $127.6 million.

Under the terms of the definitive agreement, the Company will issue up to 531,000 shares of Company common stock for all outstanding shares of East Texas Financial Services capital stock, subject to certain conditions and potential adjustments. The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval of the stockholders of East Texas Financial Services. On May 4, 2012, East Texas Financial Services and each of its directors were named defendants in a suit brought by East Texas Financial Corporation ("ETFC"), a shareholder of East Texas Financial Services, to block the proposed merger. More specifically, the suit alleges that the stockholders' vote approving the merger was invalid and improper. Accordingly, the closing date of the transaction is uncertain at this time.

Acquisition of Texas Bankers, Inc.—On January 1, 2012, Prosperity completed the previously announced acquisition of Texas Bankers, Inc. and its wholly-owned subsidiary, Bank of Texas, Austin, Texas.

The three (3) Bank of Texas banking offices in the Austin, Texas CMSA consisted of a location in Rollingwood, which was consolidated with Prosperity's Westlake location and remains in Bank of Texas' Rollingwood banking office; one banking center in downtown Austin, which was consolidated into Prosperity's downtown Austin location; and another banking center in Thorndale. Prosperity now operates thirty-four (34) banking centers in the Central Texas area including Austin and San Antonio.

Texas Bankers, on a consolidated basis, reported total assets of $77.0 million, total loans of $27.6 million and total deposits of $70.4 million as of December 31, 2011.

Under the terms of the agreement, Prosperity issued 314,953 shares of Prosperity common stock for all outstanding shares of Texas Bankers capital stock which resulted in a premium of $5.2 million.

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Consolidated Statements Of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
INTEREST INCOME:
Loans, including fees	$ 53,217	$ 52,200
Securities	38,321	41,204
Federal funds sold	78	5
Total interest income	91,616	93,409
INTEREST EXPENSE:
Deposits	8,791	11,512
Junior subordinated debentures	663	1,147
Notes payable and other borrowings	316	337
Total interest expense	9,770	12,996
NET INTEREST INCOME	81,846	80,413
PROVISION FOR CREDIT LOSSES	150	1,700
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	81,696	78,713
NONINTEREST INCOME:
Customer service fees	11,666	12,042
Other	2,279	1,825
Total noninterest income	13,945	13,867
NONINTEREST EXPENSE:
Salaries and employee benefits	23,252	23,204
Net occupancy	3,557	3,648
Depreciation	2,035	2,021
Debit card, data processing and software amortization	1,532	1,672
Communications	1,748	1,692
Core deposit intangibles amortization	1,695	2,034
Other	6,640	7,424
Total noninterest expense	40,459	41,695
INCOME BEFORE INCOME TAXES	55,182	50,885
PROVISION FOR INCOME TAXES	18,695	17,007
NET INCOME	36,487	33,878
EARNINGS PER SHARE
Basic	$ 0.77	$ 0.72
Diluted	$ 0.77	$ 0.72
CASH DIVIDENDS DECLARED
Cash dividends declared on common stock	$ 9,223	$ 8,186
Cash dividends declared per common share	$ 0.195	$ 0.175

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Loans And Allowance For Credit Losses

3 Months Ended

Mar. 31, 2012

Loans And Allowance For Credit Losses [Abstract]

Loans And Allowance For Credit Losses

4. LOANS AND ALLOWANCE FOR CREDIT LOSSES

The loan portfolio consists of various types of loans made principally to borrowers located in South and Southeast Texas, Houston, Central Texas, Bryan/College Station, East Texas, Corpus Christi and Dallas/Fort Worth and is classified by major type as follows:

	March 31, 2012		December 31, 2011
	(Dollars in thousands)
Commercial and industrial	$	442,559	$	406,433
Real estate:
Construction and land development		484,295		482,140
1-4 family residential		1,036,318		1,007,266
Home equity		149,597		146,999
Commercial real estate		1,379,242		1,351,986
Agriculture real estate (farmland)		144,399		136,008
Multi-family residential		94,683		89,240
Agriculture		34,075		34,226
Consumer (net of unearned discount)		76,393		78,187
Other		33,301		33,421
Total	$	3,874,862	$	3,765,906

(i) Commercial and Industrial Loans. In nearly all cases, the Company's commercial loans are made in the Company's market areas and are underwritten on the basis of the borrower's ability to service the debt from income. As a general practice, the Company takes as collateral a lien on any available real estate, equipment or other assets owned by the borrower and obtains a personal guaranty of the borrower or principal. Working capital loans are primarily collateralized by short-term assets whereas term loans are primarily collateralized by long-term assets. In general, commercial loans involve more credit risk than residential mortgage loans and commercial mortgage loans and, therefore, usually yield a higher return. The increased risk in commercial loans is due to the type of collateral securing these loans. The increased risk also derives from the expectation that commercial loans generally will be serviced principally from the operations of the business, and those operations may not be successful. Historical trends have shown these types of loans to have higher delinquencies than mortgage loans. As a result of these additional complexities, variables and risks, commercial loans require more thorough underwriting and servicing than other types of loans.

(ii) Commercial Real Estate. The Company makes commercial real estate related loans collateralized by owner-occupied and non-owner-occupied real estate to finance the purchase of real estate. The Company's commercial real estate related loans are collateralized by first liens on real estate, typically have variable interest rates (or five year or less fixed rates) and amortize over a 15 to 20 year period. Payments on loans secured by such properties are often dependent on the successful operation or management of the properties. Accordingly, repayment of these loans may be subject to adverse conditions in the real estate market or the economy to a greater extent than other types of loans. The Company seeks to minimize these risks in a variety of ways, including giving careful consideration to the property's operating history, future operating projections, current and projected occupancy, location and physical condition in connection with underwriting these loans. The underwriting analysis also includes credit verification, analysis of global cash flow, appraisals and a review of the financial condition of the borrower. At March 31, 2012, the Company had commercial real estate related loans totaling $1.96 billion which include the categories of construction and land development loans, commercial real estate loans and multi-family residential loans. At March 31, 2012, approximately 35.1% of the outstanding principal balance of the Company's commercial real estate related loans was secured by owner-occupied properties.

(iii) 1-4 Family Residential Loans. The Company originates 1-4 family residential mortgage loans collateralized by owner-occupied residential properties located in the Company's market areas. The Company offers a variety of mortgage loan products which generally are amortized over five to 25 years. Loans collateralized by 1-4 family residential real estate generally have been originated in amounts of no more than 89% of appraised value or have mortgage insurance. The Company requires mortgage title insurance and hazard insurance. The Company has elected to keep all 1-4 family residential loans for its own account rather than selling such loans into the secondary market. By doing so, the Company is able to realize a higher yield on these loans; however, the Company also incurs interest rate risk as well as the risks associated with nonpayments on such loans.

(iv) Construction and Land Development Loans. The Company makes loans to finance the construction of residential and, to a lesser extent, nonresidential properties. Construction loans generally are collateralized by first liens on real estate and have floating interest rates. The Company conducts periodic inspections, either directly or through an agent, prior to approval of periodic draws on these loans. Underwriting guidelines similar to those described above are also used in the Company's construction lending activities. Construction loans involve additional risks attributable to the fact that loan funds are advanced upon the security of a project under construction, and the project is of uncertain value prior to its completion. Because of uncertainties inherent in estimating construction costs, the market value of the completed project and the effects of governmental regulation on real property, it can be difficult to accurately evaluate the total funds required to complete a project and the related loan to value ratio. As a result of these uncertainties, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan. If the Company is forced to foreclose on a project prior to completion, there is no assurance that the Company will be able to recover all of the unpaid portion of the loan. In addition, the Company may be required to fund additional amounts to complete a project and may have to hold the property for an indeterminate period of time. While the Company has underwriting procedures designed to identify what it believes to be acceptable levels of risks in construction lending, no assurance can be given that these procedures will prevent losses from the risks described above.

(v) Agriculture Loans. The Company provides agriculture loans for short-term crop production, including rice, cotton, milo and corn, farm equipment financing and agriculture real estate financing. The Company evaluates agriculture borrowers primarily based on their historical profitability, level of experience in their particular agriculture industry, overall financial capacity and the availability of secondary collateral to withstand economic and natural variations common to the industry. Because agriculture loans present a higher level of risk associated with events caused by nature, the Company routinely makes on-site visits and inspections in order to identify and monitor such risks.

(vi) Consumer Loans. Consumer loans made by the Company include direct credit automobile loans, recreational vehicle loans, boat loans, home improvement loans, home equity loans, personal loans (collateralized and uncollateralized) and deposit account collateralized loans. The terms of these loans typically range from 12 to 120 months and vary based upon the nature of collateral and size of loan. Generally, consumer loans entail greater risk than do real estate secured loans, particularly in the case of consumer loans that are unsecured or collateralized by rapidly depreciating assets such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan balance. The remaining deficiency often does not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws may limit the amount which can be recovered on such loans.

The Company maintains a loan review department that reviews and validates the credit risk program on a periodic basis. Results of these reviews are presented to management. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company's policies and procedures.

Concentrations of Credit. Most of the Company's lending activity occurs within the State of Texas, including the four largest metropolitan areas of Austin, Dallas/Ft. Worth, Houston and San Antonio, as well as other markets. The majority of the Company's loan portfolio consists of commercial and industrial and commercial real estate loans. As of March 31, 2012 and December 31, 2011, there were no concentrations of loans related to any single industry in excess of 10% of total loans.

Foreign Loans. The Company has U.S. dollar denominated loans and commitments to borrowers in Mexico. The outstanding balance of these loans and the unfunded amounts available under these commitments were not significant at March 31, 2012 or December 31, 2011.

Related Party Loans. As of March 31, 2012 and December 31, 2011, loans outstanding to directors, officers and their affiliates totaled $7.3 million and $9.8 million, respectively. All transactions entered into between the Company and such related parties are done in the ordinary course of business and made on the same terms and conditions as similar transactions with unaffiliated persons.

An analysis of activity with respect to these related party loans is as follows:

	March 31, 2012			December 31, 2011
	(Dollars in thousands)
Beginning balance	$	9,809		$	12,783
New loans and reclassified related loans		200			4,168
Repayments		(2,728	)		(7,142	)
Ending balance	$	7,281		$	9,809

Nonaccrual and Past Due Loans. The Company has several procedures in place to assist it in maintaining the overall quality of its loan portfolio. The Company has established underwriting guidelines to be followed by its officers and the Company also monitors its delinquency levels for any negative or adverse trends. There can be no assurance, however, that the Company's loan portfolio will not become subject to increasing pressures from deteriorating borrower credit due to general economic conditions.

The Company generally places a loan on nonaccrual status and ceases accruing interest when the payment of principal or interest is delinquent for 90 days, or earlier in some cases, unless the loan is in the process of collection and the underlying collateral fully supports the carrying value of the loan.

The Company requires appraisals on loans collateralized by real estate. With respect to potential problem loans, an evaluation of the borrower's overall financial condition is made to determine the need, if any, for possible writedowns or appropriate additions to the allowance for credit losses.

As of the dates indicated, nonaccrual loans, segregated by class of loans, were as follows:

	March 31, 2012		December 31, 2011
	(Dollars in thousands)
Construction and land development	$	1,210	$	1,175
Agriculture and agriculture real estate		67		49
1-4 family residential (includes home equity)		937		923
Commercial real estate (includes multi-family residential)		4,266		790
Commercial and industrial		654		633
Consumer and other		8		8
Total	$	7,142	$	3,578

An age analysis of past due loans, segregated by class of loans, as of March 31, 2012 and December 31, 2011 were as follows:

	As of March 31, 2012
	Loans 30-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Accruing Loans 90 or More Days Past Due
	(Dollars in thousands)
Construction and land development	$	3,963	$	1,210	$	5,173	$	479,122	$	—
Agriculture and agriculture real estate		88		9		97		178,377		—
1-4 family (includes home equity)		1,181		563		1,744		1,184,171		—
Commercial real estate (includes multi-family residential)		4,947		3,097		8,044		1,465,881		—
Commercial and industrial		1,465		364		1,829		440,730		—
Consumer and other		242		6		248		109,446		—
Total	$	11,886	$	5,249	$	17,135	$	3,857,727	$	—
	Year Ended December 31, 2011
	Loans 30-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Accruing Loans 90 or More Days Past Due
	(Dollars in thousands)
Construction and land development	$	1,281	$	111	$	1,392	$	480,748	$	—
Agriculture and agriculture real estate		365		9		374		169,860		—
1-4 family (includes home equity)		1,527		314		1,841		1,152,424		—
Commercial real estate (includes multi-family residential)		5,630		390		6,020		1,435,206		—
Commercial and industrial		1,544		394		1,938		404,495		—
Consumer and other		89		—		89		111,519		—
Total	$	10,436	$	1,218	$	11,654	$	3,754,252	$	—

The following table presents information regarding past due loans and nonperforming assets at the dates indicated:

	March 31, 2012			December 31, 2011
	(Dollars in thousands)
Nonaccrual loans	$	7,142		$	3,578
Total nonperforming loans		7,142			3,578
Repossessed assets		13			146
Other real estate		7,718			8,328
Total nonperforming assets	$	14,873		$	12,052
Nonperforming assets to total loans and other real estate		0.38	%		0.32	%

The Company believes its conservative lending approach has resulted in sound asset quality. The Company had $14.9 million in nonperforming assets at March 31, 2012 compared with $12.1 million at December 31, 2011. If interest on nonaccrual loans had been accrued under the original loan terms, approximately $162,000 would have been recorded as income for the three months ended March 31, 2012.

Impaired Loans. Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan's existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Impaired loans as of March 31, 2012 are set forth in the following table. No interest income was recognized on impaired loans subsequent to their classification as impaired. The average recorded investment is reported on a year-to-date basis.

	March 31, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
	(Dollars in thousands)
With no related allowance recorded:
Construction and land development	$	276	$	277	$	—	$	194
Agriculture and agriculture real estate		5		6		—		5
1-4 family (includes home equity)		340		379		—		326
Commercial real estate (includes multi-family residential)		1,505		1,527		—		1,087
Commercial and industrial		4		6		—		58
Consumer and other		—		—		—		—
With an allowance recorded:
Construction and land development		1,064		1,064		312		1,064
Agriculture and agriculture real estate		42		45		42		42
1-4 family (includes home equity)		601		661		272		639
Commercial real estate (includes multi-family residential)		5,161		5,167		815		2,822
Commercial and industrial		610		2,029		310		566
Consumer and other		7		18		6		7
Total:
Construction and land development		1,340		1,341		312		1,258
Agriculture and agriculture real estate		47		51		42		47
1-4 family (includes home equity)		941		1,040		272		965
Commercial real estate (includes multi-family residential)		6,666		6,694		815		3,909
Commercial and industrial		614		2,035		310		624
Consumer and other		7		18		6		7

Impaired loans as of December 31, 2011 are set forth in the following tables. No interest income was recognized on impaired loans subsequent to their classification as impaired. The average recorded investment is reported on a year-to-date basis.

	December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average  Recorded Investment
	(Dollars in thousands)
With no related allowance recorded:
Construction and land development	$	111	$	111	$	—	$	58
Agriculture and agriculture real estate		6		6		—		5
1-4 family (includes home equity)		313		344		—		291
Commercial real estate (includes multi-family residential)		668		705		—		637
Commercial and industrial		112		1,513		—		253
Consumer and other		—		—		—		3
With an allowance recorded:
Construction and land development		1,064		1,064		312		584
Agriculture and agriculture real estate		43		46		39		21
1-4 family (includes home equity)		677		731		362		663
Commercial real estate (includes multi-family residential)		483		485		165		309
Commercial and industrial		521		535		300		642
Consumer and other		8		20		8		18
Total:
Construction and land development		1,175		1,175		312		642
Agriculture and agriculture real estate		49		52		39		26
1-4 family (includes home equity)		990		1,075		362		954
Commercial real estate (includes multi-family residential)		1,151		1,190		165		946
Commercial and industrial		633		2,048		300		895
Consumer and other		8		20		8		21

Credit Quality Indicators. As part of the ongoing monitoring of the credit quality of the Company's loan portfolio and methodology for calculating the allowance for credit losses, management assigns and tracks loan grades to be used as credit quality indicators. The following is a general description of the loan risk grades used (1-7):

Grade 1 – Credits in this category are of the highest standards of credit quality with virtually no risk of loss. These borrowers would represent top rated companies and individuals with unquestionable financial standing with excellent global cash flow coverage, net worth, liquidity and collateral coverage and/or secured by CD/savings accounts.

Grade 2 – Credits in this category are not immune from risk but are well-protected by the collateral and paying capacity of the borrower. These loans may exhibit a minor unfavorable credit factor, but the overall credit is sufficiently strong to minimize the possibility of loss.

Grade 3 – Credits graded 3 constitute an undue and unwarranted credit risk, however the factors do not rise to a level of substandard. These credits have potential weaknesses and/or declining trends that, if not corrected, could expose the Company to risk at a future date. Credits graded 3 are monitored on the Company's internally generated watch list and evaluated on a quarterly basis.

Grade 4 – Credits in this category are deemed "substandard" loans in accordance with regulatory guidelines. Loans in this category have well-defined weakness that, if not corrected, could make default of principal and interest possible, but it is not yet certain. Loans in this category are still accruing interest and may be dependent upon secondary sources of repayment and/or collateral liquidation.

Grade 5 – Credits in this category are deemed "substandard" and "impaired" pursuant to regulatory guidelines. As such, the Company has determined that it is probable that less than 100% of the principal and interest will be collected. Loans graded 5 are individually evaluated for a specific reserve valuation and will typically have the accrual of interest stopped.

Grade 6 – Credits in this category include "doubtful" loans in accordance with regulatory guidance. Such loans are on nonaccrual and factors have indicated a loss is imminent. These loans are also deemed "impaired." While a specific reserve may be in place while the loan and collateral is being evaluated these loans are typically charged down to an amount the Company deems collectable.

Grade 7 – Credits in this category are deemed a "loss" in accordance with regulatory guidelines and charged off or charged down. The Company may continue collection efforts and may have partial recovery in the future.

The following table presents risk grades and classified loans by class of loan at March 31, 2012. Classified loans include loans in risk grades 5, 6 and 7.

	Construction and Land Development		Agriculture and Agriculture Real Estate		1-4 Family (Includes Home Equity)		Commercial Real Estate (Includes Multi-Family)		Commercial and Industrial		Consumer and Other		Total
	(Dollars in thousands)
Grade 1	$	—	$	2,866	$	—	$	—	$	44,595	$	29,250	$	76,711
Grade 2		467,926		175,256		1,170,383		1,432,728		393,055		80,134		3,719,482
Grade 3		1,716		272		9,823		14,878		3,795		—		30,484
Grade 4		13,313		33		4,768		19,653		500		303		38,570
Grade 5		1,340		47		922		6,666		565		6		9,546
Grade 6		—		—		19		—		49		1		69
Grade 7		—		—		—		—		—		—		—
Total	$	484,295	$	178,474	$	1,185,915	$	1,473,925	$	442,559	$	109,694	$	3,874,862

The following table presents risk grades and classified loans by class of loan at December 31, 2011. Classified loans include loans in risk grades 5, 6 and 7.

	Construction and Land Development		Agriculture and Agriculture Real Estate		1-4 Family (Includes Home Equity)		Commercial Real Estate (Includes Multi- Family)		Commercial and Industrial		Consumer and Other		Total
	(Dollars in thousands)
Grade 1	$	—	$	3,319	$	—	$	—	$	45,218	$	31,602	$	80,139
Grade 2		465,572		166,656		1,140,210		1,399,915		355,862		79,996		3,608,211
Grade 3		1,757		210		9,131		14,335		4,189		—		29,622
Grade 4		13,636		—		3,934		25,825		531		2		43,928
Grade 5		1,175		49		970		1,151		532		8		3,885
Grade 6		—		—		20		—		101		—		121
Grade 7		—		—		—		—		—		—		—
Total	$	482,140	$	170,234	$	1,154,265	$	1,441,226	$	406,433	$	111,608	$	3,765,906

Charge-offs/recoveries, segregated by class of loans, for the three months ended March 31, 2012 and twelve months ended December 31, 2011 were as follows:

	Three Months Ended March 31, 2012
	Charge-offs			Recoveries		Net Charge- offs
	(Dollars in thousands)
Construction and land development	$	(26	)	$	4	$	(22	)
1-4 family (includes home equity)		(52	)		2		(50	)
Commercial real estate and agriculture (includes multi-family)		(23	)		5		(18	)
Commercial and industrial		(78	)		93		15
Consumer and other		(203	)		176		(27	)
	$	(382	)	$	280	$	(102	)
	Year Ended December 31, 2011
	Charge-offs			Recoveries		Net Charge- offs
	(Dollars in thousands)
Construction and land development	$	(1,509	)	$	400	$	(1,109	)
1-4 family (includes home equity)		(1,392	)		32		(1,360	)
Commercial real estate and agriculture (includes multi-family)		(1,027	)		41		(986	)
Commercial and industrial		(1,694	)		526		(1,168	)
Consumer and other		(1,228	)		661		(567	)
	$	(6,850	)	$	1,660	$	(5,190	)

Allowance for Credit Losses. The allowance for credit losses is a valuation established through charges to earnings in the form of a provision for credit losses. Management has established an allowance for credit losses which it believes is adequate for estimated losses in the Company's loan portfolio. The amount of the allowance for credit losses is affected by the following: (i) charge-offs of loans that occur when loans are deemed uncollectible and decrease the allowance, (ii) recoveries on loans previously charged off that increase the allowance and (iii) provisions for credit losses charged to earnings that increase the allowance. Based on an evaluation of the loan portfolio and consideration of the factors listed below, management presents a quarterly review of the allowance for credit losses to the Bank's Board of Directors, indicating any change in the allowance since the last review and any recommendations as to adjustments in the allowance.

The Company's allowance for credit losses consists of two components: a specific valuation allowance based on probable losses on specifically identified loans and a general valuation allowance based on historical loan loss experience, general economic conditions and other qualitative risk factors both internal and external to the Company.

In setting the specific valuation allowance, the Company follows a loan review program to evaluate the credit risk in the loan portfolio. Through this loan review process, the Company maintains an internal list of impaired loans which, along with the delinquency list of loans, helps management assess the overall quality of the loan portfolio and the adequacy of the allowance for credit losses. All loans that have been identified as impaired are reviewed on a quarterly basis in order to determine whether a specific reserve is required. For each impaired loan, the Company allocates a specific loan loss reserve primarily based on the value of the collateral securing the impaired loan requiring a reserve in accordance with ASC Topic 310, Receivables. The specific reserves are determined on an individual loan basis. Impaired loans are excluded from the general valuation allowance described below.

In determining the amount of the general valuation allowance, management considers factors such as historical loan loss experience, industry diversification of the Company's commercial loan portfolio, concentration risk of specific loan types, the volume, growth and composition of the Company's loan portfolio, current economic conditions that may affect the borrower's ability to pay and the value of collateral, the evaluation of the Company's loan portfolio through its internal loan review process, general economic conditions and other qualitative risk factors both internal and external to the Company and other relevant factors in accordance with

ASC Topic 450. Based on a review of these factors for each loan type, the Company applies an estimated percentage to the outstanding balance of each loan type, excluding any impaired loan. The Company uses this information to establish the amount of the general valuation allowance.

In connection with its review of the loan portfolio, the Company considers risk elements attributable to particular loan types or categories in assessing the quality of individual loans. Some of the risk elements include:

• for 1-4 family residential mortgage loans, the borrower's ability to repay the loan, including a consideration of the debt to income ratio and employment and income stability, the loan to value ratio, and the age, condition and marketability of collateral;

• for commercial real estate loans and multifamily residential loans, the debt service coverage ratio (income from the property in excess of operating expenses compared to loan payment requirements), operating results of the owner in the case of owner-occupied properties, the loan to value ratio, the age and condition of the collateral and the volatility of income, property value and future operating results typical of properties of that type;

• for construction and land development loans, the perceived feasibility of the project including the ability to sell developed lots or improvements constructed for resale or the ability to lease property constructed for lease, the quality and nature of contracts for presale or prelease, if any, experience and ability of the developer and loan to value ratio;

• for commercial and industrial loans, the operating results of the commercial, industrial or professional enterprise, the borrower's business, professional and financial ability and expertise, the specific risks and volatility of income and operating results typical for businesses in that category and the value, nature and marketability of collateral;

• for agricultural real estate loans, the experience and financial capability of the borrower, projected debt service coverage of the operations of the borrower and loan to value ratio; and

• for non-real estate agricultural loans, the operating results, experience and financial capability of the borrower, historical and expected market conditions and the value, nature and marketability of collateral.

In addition, for each category, the Company considers secondary sources of income and the financial strength and credit history of the borrower and any guarantors.

At March 31, 2012, the allowance for credit losses totaled $51.6 million or 1.33% of total loans. At December 31, 2011, the allowance aggregated $51.6 million or 1.37% of total loans.

The following table details the recorded investment in loans and activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2012. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

	Construction and Land Development			Agriculture and Agriculture Real Estate		1-4 Family (includes Home Equity)			Commercial Real Estate (includes Multi- Family)			Commercial and Industrial			Consumer and Other			Total
	(Dollars in thousands)
Allowance for credit losses:
Beginning balance	$	12,094		$	511	$	12,645		$	21,460		$	3,826		$	1,058		$	51,594
Provision for credit losses		(732	)		109		(72	)		468			171			206			150
Charge-offs		(26	)		—		(52	)		(23	)		(78	)		(203	)		(382	)
Recoveries		4			—		2			5			93			176			280
Net charge-offs		(22	)		—		(50	)		(18	)		15			(27	)		(102	)
Ending balance	$	11,340		$	620	$	12,523		$	21,910		$	4,012		$	1,237		$	51,642
Ending balance: individually evaluated for impairment	$	312		$	42	$	272		$	815		$	310		$	6		$	1,757
Ending balance: collectively evaluated for impairment		11,028			578		12,251			21,095			3,702			1,231			49,885
Loans:
Ending balance: individually evaluated for impairment		1,340			47		941			6,666			614			7			9,615
Ending balance: collectively evaluated for impairment		482,955			178,427		1,184,974			1,467,259			441,945			109,687			3,865,247
Ending balance	$	484,295		$	178,474	$	1,185,915		$	1,473,925		$	442,559		$	109,694		$	3,874,862

The following table details the recorded investment in loans and activity in the allowance for credit losses by portfolio segment for the year ended December 31, 2011. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

	Construction and Land Development			Agriculture and Agriculture Real Estate		1-4 Family (includes Home Equity)			Commercial Real Estate (includes Multi-Family)			Commercial and Industrial			Consumer and Other			Total
	(Dollars in thousands)
Allowance for credit losses:
Beginning balance	$	12,994		$	271	$	12,837		$	20,436		$	3,891		$	1,155		$	51,584
Provision for credit losses		209			239		1,168			2,011			1,103			470			5,200
Charge-offs		(1,509	)		—		(1,392	)		(1,027	)		(1,694	)		(1,228	)		(6,850	)
Recoveries		400			1		32			40			526			661			1,660
Net charge-offs		(1,109	)		1		(1,360	)		(987	)		(1,168	)		(567	)		(5,190	)
Ending balance		12,094			511		12,645			21,460			3,826			1,058			51,594
Ending balance: individually evaluated for impairment		312			39		362			165			300			8			1,186
Ending balance: collectively evaluated for impairment	$	11,782		$	472	$	12,283		$	21,295		$	3,526		$	1,050		$	50,408
Loans:
Ending balance: individually evaluated for impairment		1,175			49		990			1,151			633			8			4,006
Ending balance: collectively evaluated for impairment		480,965			170,185		1,153,275			1,440,075			405,800			111,600			3,761,900
Ending balance	$	482,140		$	170,234	$	1,154,265		$	1,441,226		$	406,433		$	111,608		$	3,765,906

Troubled Debt Restructurings. The restructuring of a loan is considered a "troubled debt restructuring" if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. Effective July 1, 2011, the Company adopted the provisions of ASU No. 2011-02, "Receivables (Topic 310)—A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring." As such, the Company reassessed all loan modifications occurring since January 1, 2011 for identification as troubled debt restructurings.

The Company had the following troubled debt restructurings outstanding as of the dates indicated:

	As of March 31,						As of December 31,
	2012						2011
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(Dollars in thousands)
Troubled Debt Restructurings
Construction and land development		—	$	—	$	—		—	$	—	$	—
Agriculture and agriculture real estate		—		—		—		—		—		—
1-4 Family (includes home equity)		4		109		76		4		109		84
Commercial real estate (includes multi-family)		1		2,560		2,493		2		5,264		5,171
Commercial and industrial		3		114		93		3		114		93
Consumer and other		—		—		—		—		—		—
Total		8	$	2,783	$	2,662		9	$	5,487	$	5,348

As of March 31, 2012, there have been no defaults on any loans that were modified as troubled debt restructurings during the preceding three months. Default is determined at 90 or more days past due. The modifications primarily related to extending the amortization periods of the loans, which includes loans modified during bankruptcy. The Company did not grant principal reductions on any restructured loan. Loans restructured during the three months ended March 31, 2012 on non-accrual status as of March 31, 2012 totaled $169,000. The remaining restructured loans are performing and accruing loans. These modifications did not have a material impact on the Company's determination of the allowance for credit losses.

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New Accounting Standards

3 Months Ended

Mar. 31, 2012

New Accounting Standards [Abstract]

New Accounting Standards

3. NEW ACCOUNTING STANDARDS

Accounting Standards Updates

ASU 2011-03, "Transfers and Servicing (Topic 860)—Reconsideration of Effective Control for Repurchase Agreements." ASU 2011-03 is intended to improve financial reporting of repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. ASU 2011-03 removes from the assessment of effective control (i) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (ii) the collateral maintenance guidance related to that criterion. ASU 2011-03 became effective for the Company on January 1, 2012 and did not have a significant impact on the Company's financial statements.

ASU 2011-04, "Fair Value Measurement (Topic 820)—Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs." ASU 2011-04 amends Topic 820, "Fair Value Measurements and Disclosures," to converge the fair value measurement guidance in U.S. generally accepted accounting principles and International Financial Reporting Standards. ASU 2011-04 clarifies the application of existing fair value measurement requirements, changes certain principles in Topic 820 and requires additional fair value disclosures. ASU 2011-04 became effective for the Company on January 1, 2012 and did not have a significant impact on the Company's financial statements (see Note 5-Fair Value).

ASU 2011-05, "Comprehensive Income (Topic 220)—Presentation of Comprehensive Income." ASU 2011-05 amends Topic 220, "Comprehensive Income," to require that all non-owner changes in stockholders' equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, ASU 2011-05 requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented. The option to present components of other comprehensive income as part of the statement of changes in stockholders' equity was eliminated. ASU 2011-05 became effective for the Company on January 1, 2012; however, certain provisions related to the presentation of reclassification adjustments have been deferred by ASU 2011-12 "Comprehensive Income (Topic 220) – Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05," as further discussed below. In connection with the application of ASU 2011-05, the Company's financial statements now include a separate statement of comprehensive income.

ASU 2011-08, "Intangibles – Goodwill and Other (Topic 350)—Testing Goodwill for Impairment." ASU 2011-08 amends Topic 350, "Intangibles – Goodwill and Other," to give entities the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. ASU 2011-08 became effective for the Company on January 1, 2012 and did not have a significant impact on the Company's financial statements.

ASU 2011-11, "Balance Sheet (Topic 210)—"Disclosures about Offsetting Assets and Liabilities." ASU 2011-11 amends Topic 210, "Balance Sheet," to require an entity to disclose both gross and net information about financial instruments, such as sales and repurchase agreements and reverse sale and repurchase agreements and securities borrowing/lending arrangements, and derivative instruments that are eligible for offset in the statement of financial position and/or subject to a master netting arrangement or similar agreement. ASU 2011-11 is effective for annual and interim periods beginning on January 1, 2013, and is not expected to have a significant impact on the Company's financial statements.

ASU 2011-12 "Comprehensive Income (Topic 220)—Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05." ASU 2011-12 defers changes in ASU 2011-05 that relate to the presentation of reclassification adjustments to allow the FASB time to redeliberate whether to require presentation of such adjustments on the face of the financial statements to show the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income. ASU 2011-12 allows entities to continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU 2011-05. All other requirements in ASU 2011-05 are not affected by ASU 2011-12. ASU 2011-12 became effective for the Company on January 1, 2012 and did not have a significant impact on the Company's financial statements.

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Stock Based Compensation (Tables)

3 Months Ended

Mar. 31, 2012

Stock Based Compensation [Abstract]

Summary Of Fair Value Of Options Estimated Using Option-Pricing Model

	March 31,
	2012			2011
Expected life (in years)		5.27			5.20
Risk free interest rate		3.68	%		3.72	%
Volatility		20.87	%		20.96	%
Dividend yield		1.26	%		1.25	%

Summary Of Changes In Outstanding Options

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands)					(In years)		(In thousands)
Options outstanding, beginning of period		525		$	28.18
Options granted		—			—
Options forfeited		(4	)		31.19
Options exercised		(70	)		26.43
Options outstanding, end of period		451		$	28.42		3.78	$	7,829
Options vested or expected to vest		437		$	28.15		3.74	$	7,713
Options exercisable, end of period		278		$	27.23		2.93	$	5,156

Summary Of Changes In Non-Vested Options

	Three Months Ended March 31,
	2012				2011
	Number of Options		Weighted Average Grant Date Fair Value		Number of Options			Weighted Average Grant Date Fair Value
	(In thousands)				(In thousands)
Non-vested options outstanding, beginning of period		177	$	6.96		313		$	6.89
Options granted		—		—		—			—
Non-vested options forfeited		(4)		6.76		—			—
Options vested		—		—		(12	)		5.62
Non-vested options outstanding, end of period		173	$	6.97		301		$	6.94

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Income Per Common Share (Tables)

3 Months Ended

Mar. 31, 2012

Income Per Common Share [Abstract]

Computation Of Basic And Diluted Earnings Per Share

	Three Months Ended March 31,
	2012		2011
	(In thousands, except per share data)
Net income available to shareholders	$	36,487	$	33,878
Weighted average shares outstanding		47,238		46,733
Potential dilutive shares		173		209
Weighted average shares and equivalents outstanding		47,411		46,942
Basic earnings per share	$	0.77	$	0.72
Diluted earnings per share	$	0.77	$	0.72

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Stock Based Compensation

3 Months Ended

Mar. 31, 2012

Stock Based Compensation [Abstract]

Stock Based Compensation

7. STOCK BASED COMPENSATION

At March 31, 2012, the Company had four stock-based employee compensation plans and one stock option plan assumed in connection with an acquisition under which no additional options will be granted. Two of the four plans adopted by the Company have expired and therefore no additional awards may be issued under those plans. The Company accounts for stock-based employee compensation plans using the fair value-based method of accounting in accordance with ASC Topic 718. ASC Topic 718 was effective for companies in 2006; however, the Company has been recognizing compensation expense since January 1, 2003. The Company recognized $1.2 million and $707,000 in stock-based compensation expense for the three months ended March 31, 2012 and 2011, respectively. There was approximately $420,000 and $234,000 of income tax benefit recorded for the stock-based compensation expense for the same periods.

On February 22, 2012, the Company's Board of Directors adopted the Prosperity Bancshares, Inc. 2012 Stock Incentive Plan (the "2012 Plan"), subject to approval by the Company's shareholders. The Company's shareholders approved the 2012 Plan at the annual meeting of shareholders on April 17, 2012. The 2012 Plan authorizes the issuance of up to 1,250,000 shares of common stock upon the exercise of options granted under the 2012 Plan or pursuant to the grant or exercise, as the case may be, of other awards granted under the 2012 Plan, including restricted stock, stock appreciation rights, phantom stock awards and performance awards. As of March 31, 2012, no options or other awards have been granted under the 2012 Plan.

During 2004, the Company's Board of Directors adopted the Prosperity Bancshares, Inc. 2004 Stock Incentive Plan (the "2004 Plan") which authorizes the issuance of up to 1,250,000 shares of common stock pursuant to the exercise or grant, as the case may be, of awards under such plan and the shareholders approved the 2004 Plan in 2005. The Company has granted shares with forfeiture restrictions ("restricted stock") to certain directors, officers and associates under the 2004 Plan. The awardee is not entitled to the shares until they vest, which is generally over a one to five year period, but the awardee is entitled to receive dividends on and vote the shares prior to vesting. The shares granted do not have a cost to the awardee and the only requirement of vesting is continued service to the Company. Compensation cost related to restricted stock is calculated based on the fair value of the shares at the date of grant. If the awardee leaves the Company before the shares vest, the unvested shares are forfeited. As of March 31, 2012, there were 404,000 shares of restricted stock outstanding with a weighted average grant date fair value of $37.47 per share.

Stock options are issued at the current market price on the date of the grant, subject to a pre-determined vesting period with a contractual term of 10 years. Options assumed in connection with acquisitions also have a contractual term of 10 years from date of original issuance under the original plan. The fair value of stock options granted is estimated at the date of grant using the Black-Scholes option-pricing model. Stock-based compensation expense is recognized ratably over the requisite service period for all awards.

The fair value of options was estimated using an option-pricing model with the following weighted average assumptions as of the dates indicated:

	March 31,
	2012			2011
Expected life (in years)		5.27			5.20
Risk free interest rate		3.68	%		3.72	%
Volatility		20.87	%		20.96	%
Dividend yield		1.26	%		1.25	%

A summary of changes in outstanding options during the three months ended March 31, 2012 is set forth below:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands)					(In years)		(In thousands)
Options outstanding, beginning of period		525		$	28.18
Options granted		—			—
Options forfeited		(4	)		31.19
Options exercised		(70	)		26.43
Options outstanding, end of period		451		$	28.42		3.78	$	7,829
Options vested or expected to vest		437		$	28.15		3.74	$	7,713
Options exercisable, end of period		278		$	27.23		2.93	$	5,156

No options were granted during the three months ended March 31, 2012 or 2011. The total intrinsic value of the options exercised during the three-month periods ended March 31, 2012 and 2011 was $1.4 million and $1.9 million, respectively. No options vested during the three-month period ended March 31, 2012 and the total fair value of options vested during the three-month period ended March 31, 2011 was approximately $66,000.

A summary of changes in non-vested options is set forth below:

	Three Months Ended March 31,
	2012				2011
	Number of Options		Weighted Average Grant Date Fair Value		Number of Options			Weighted Average Grant Date Fair Value
	(In thousands)				(In thousands)
Non-vested options outstanding, beginning of period		177	$	6.96		313		$	6.89
Options granted		—		—		—			—
Non-vested options forfeited		(4)		6.76		—			—
Options vested		—		—		(12	)		5.62
Non-vested options outstanding, end of period		173	$	6.97		301		$	6.94

The Company received $1.9 million and $2.4 million in cash from the exercise of stock options during the three-month periods ended March 31, 2012 and 2011, respectively. There was no tax benefit realized from option exercises of the share-based payment arrangements during the three-month periods ended March 31, 2012 and 2011.

As of March 31, 2012, there was $7.9 million of total unrecognized compensation expense related to stock-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 2.0 years.

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Fair Value

3 Months Ended

Mar. 31, 2012

Fair Value [Abstract]

Fair Value

5. FAIR VALUE

Effective January 1, 2008, the Company adopted FASB ASC Topic 820, Fair Value Measurement and Disclosures. ASC Topic 820, which defines fair value, addresses aspects of the expanding application of fair value accounting and establishes a consistent framework for measuring fair value. Fair value represents the estimated price that would be received from selling an asset or paid to transfer a liability, otherwise knows as an "exit price."

Fair Value Hierarchy

ASC Topic 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC Topic 820, these inputs are summarized in the three broad levels listed below:

• Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 1 assets include U.S. Treasury securities and CRA funds that are highly liquid and are actively traded in over-the-counter markets.

• Level 2 – Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities) or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company's Level 2 assets include U.S. government and agency mortgage-backed debt securities, corporate securities and municipal bonds.

• Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair values requires significant management judgment or estimation.

In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to ASC Topic 820.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, 2012 and December 31, 2011, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	March 31, 2012
	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Available for sale securities (at fair value):
States and political subdivisions	$	—	$	37,916	$	—	$	37,916
Corporate debt securities and other		7,628		1,602		—		9,230
Collateralized mortgage obligations		—		727		—		727
Mortgage-backed securities		—		250,643		—		250,643
TOTAL	$	7,628	$	290,888	$	—	$	298,516

	December 31, 2011
	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Available for sale securities (at fair value):
States and political subdivisions	$	—	$	39,076	$	—	$	39,076
Corporate debt securities and other		7,656		1,613		—		9,269
Collateralized mortgage obligations		—		765		—		765
Mortgage-backed securities		—		273,206		—		273,206
Total	$	7,656	$	314,660	$	—	$	322,316

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets measured at fair value on a non-recurring basis during the reported periods include certain impaired loans reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 2 inputs based on observable market data, typically in the case of real estate collateral. For the three months ended March 31, 2012, the Company had additions to impaired loans of $2.1 million of which $2.1 million were outstanding at March 31, 2012.

Financial assets measured at fair value on a non-recurring basis during the reported periods also include other real estate owned and repossessed assets. For the three months ended March 31, 2012, the Company had additions to other real estate owned of $3.5 million, of which $718,000 were outstanding at March 31, 2012. The remaining financial assets and financial liabilities measured at fair value on a non-recurring basis that were recorded in 2012 and remained outstanding at March 31, 2012 were not significant. During the reported periods, all fair value measurements for other real estate owned and repossessed assets utilized Level 2 inputs based on observable market data. There were no transfers between Level 1 and Level 2 assets during the three months ended March 31, 2012.

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. FASB ASC Topic 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

These fair value disclosures represent the Company's estimates based on relevant market information and information about the financial instruments. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of the various instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in the above methodologies and assumptions could significantly affect the estimates.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Cash Equivalents—For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Federal Funds Sold—The carrying amount is a reasonable estimate of fair value.

Securities—For securities held as investments, fair value equals quoted market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans Held for Investment—For fixed rate loans and certain homogeneous categories of loans (such as some residential mortgages and other consumer loans), fair value is estimated by discounting the future cash flows using the risk-free Treasury rate for the applicable maturity, adjusted for servicing and credit risk. The carrying value of variable rate loans approximates fair value because the loans reprice frequently to current market rates.

Deposits—The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

Junior Subordinated Debentures—The fair value of the junior subordinated debentures was calculated using the quoted market prices, if available. If quoted market prices are not available, fair value is estimated using quoted market prices for similar subordinated debentures.

Other Borrowings—Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt using a discounted cash flows methodology.

Securities Sold Under Repurchase Agreements—The fair value of securities sold under repurchase agreements is the amount payable on demand at the reporting date.

Off-Balance Sheet Financial Instruments—The fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreement and the present creditworthiness of the counterparties.

FASB ASC Topic 825, Financial Instruments, requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The carrying amount and estimated fair values of the Company's financial instruments are as follows:

	March 31, 2012
	Carrying Amount		Estimated Fair Value
	(Dollars in thousands)
Financial assets:
Cash and due from banks	$	151,467	$	151,467
Federal funds sold		445		445
Available for sale securities		298,516		298,516
Held to maturity securities		5,348,013		5,494,671
Loans held for investment and for sale (net of allowance for credit losses)		3,823,220		3,915,517
Total	$	9,621,661	$	9,860,616
Financial liabilities:
Deposits	$	8,544,451	$	8,565,167
Other borrowings		527,536		529,424
Securities sold under repurchase agreements		58,481		58,481
Junior subordinated debentures		85,055		71,651
Total	$	9,215,523	$	9,224,723

The Company's off-balance sheet commitments including letters of credit, which totaled $488.0 million at March 31, 2012, are funded at current market rates at the date they are drawn upon. It is management's opinion that the fair value of these commitments would approximate their carrying value, if drawn upon.

The fair value estimates presented herein are based on pertinent information available to management at March 31, 2012. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

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Goodwill And Core Deposit Intangibles

3 Months Ended

Mar. 31, 2012

Goodwill And Core Deposit Intangibles [Abstract]

Goodwill And Core Deposit Intangibles

6. GOODWILL AND CORE DEPOSIT INTANGIBLES

Changes in the carrying amount of the Company's goodwill and core deposit intangibles ("CDI") for three months ended March 31, 2012 were as follows:

	Goodwill		Core Deposit Intangibles
	(Dollars in thousands)
Balance as of December 31, 2011	$	924,537	$	20,996
Amortization		—		(1,695	)
Acquisition of Texas Bankers, Inc.		4,624		—
Balance as of March 31, 2012	$	929,161	$	19,301

Goodwill is recorded on the acquisition date of each entity. The Company may record subsequent adjustments to goodwill for amounts undeterminable at acquisition date, such as deferred taxes and real estate valuations, and therefore the goodwill amounts reflected in the table above may change accordingly. The Company initially records the total premium paid on acquisitions as goodwill. After finalizing the valuation, core deposit intangibles are identified and reclassified from goodwill to core deposit intangibles on the balance sheet. This reclassification has no effect on total assets, liabilities, shareholders' equity, net income or cash flows. Management performs an evaluation annually, and more frequently if a triggering event occurs, of whether any impairment of the goodwill and other intangibles has occurred. If any such impairment is determined, a write-down is recorded. As of March 31, 2012, there were no impairments recorded on goodwill.

Although the Company completed the Texas Bankers acquisition in January 2012, the Company has not yet finalized the allocation of the purchase price.

CDI are amortized on an accelerated basis over their estimated lives, which the Company believes is between 8 and 10 years. Gross core deposit intangibles outstanding were $79.1 million at March 31, 2012 and December 31, 2011. Net core deposit intangibles outstanding were $19.3 million and $21.0 million at the same dates, respectively. Amortization expense related to intangible assets totaled $1.7 million and $2.0 million for the three months ended March 31, 2012 and 2011, respectively. The estimated aggregate future amortization expense for intangible assets remaining as of March 31, 2012 is as follows (dollars in thousands):

Remaining 2012	$	4,652
2013		4,465
2014		3,314
2015		2,804
2016		2,481
Thereafter		1,585
Total	$	19,301

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Contractual Obligations And Off-Balance Sheet Items

3 Months Ended

Mar. 31, 2012

Contractual Obligations And Off-Balance Sheet Items [Abstract]

Contractual Obligations And Off-Balance Sheet Items

8. CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ITEMS

Contractual Obligations

The following table summarizes the Company's contractual obligations and other commitments to make future payments as of March 31, 2012 (other than deposit obligations). The payments do not include pre-payment options that may be available to the Company. The Company's future cash payments associated with its contractual obligations pursuant to its junior subordinated debentures, Federal Home Loan Bank ("FHLB") advances and long-term notes payable and operating leases as of March 31, 2012 are summarized below. Payments for junior subordinated debentures include interest of $54.0 million that will be paid over future periods. Future interest payments were calculated using the current rate in effect at March 31, 2012. The current principal balance of the junior subordinated debentures at March 31, 2012 was $85.1 million. Payments for FHLB borrowings include interest of $3.3 million that will be paid over the future periods. Payments related to leases are based on actual payments specified in underlying contracts.

	Payments due in:
	Remaining Fiscal 2012		Fiscal 2013-2014		Fiscal 2015-2016		Thereafter		Total
	(Dollars in thousands)
Junior subordinated debentures	$	1,884	$	5,024	$	5,024	$	127,159	$	139,091
Federal Home Loan Bank borrowings		516,126		3,258		3,456		8,002		530,842
Operating leases		3,872		7,727		3,125		517		15,241
Total	$	521,882	$	16,009	$	11,605	$	135,678	$	685,174

Off-Balance Sheet Items

In the normal course of business, the Company enters into various transactions, which, in accordance with accounting principles generally accepted in the United States, are not included in its consolidated balance sheets. The Company enters into these transactions to meet the financing needs of its customers. These transactions include commitments to extend credit and standby letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

The Company's commitments associated with outstanding standby letters of credit and commitments to extend credit as of March 31, 2012 are summarized below. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements:

	Remaining Fiscal 2012		Fiscal 2013-2014		Fiscal 2015-2016		Thereafter		Total
	(Dollars in thousands)
Standby letters of credit	$	9,716	$	5,699	$	122	$	—	$	15,537
Commitments to extend credit		195,980		102,365		8,925		165,168		472,438
Total	$	205,696	$	108,064	$	9,047	$	165,168	$	487,975

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Loans And Allowance For Credit Losses (Schedule Showing Risk Grades And Classified Loans By Class Of Loan) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	$ 3,874,862	$ 3,765,906
Construction And Land Development [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	484,295	482,140
Agriculture And Agriculture Real Estate [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	178,474	170,234
1-4 Family Residential (Includes Home Equity) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	1,185,915	1,154,265
Commercial Real Estate (Includes Multi-Family) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	1,473,925	1,441,226
Commercial And Industrial [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	442,559	406,433
Consumer And Other [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	109,694	111,608
Grade 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	76,711	80,139
Grade 1 [Member] | Agriculture And Agriculture Real Estate [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	2,866	3,319
Grade 1 [Member] | Commercial And Industrial [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	44,595	45,218
Grade 1 [Member] | Consumer And Other [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	29,250	31,602
Grade 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	3,719,482	3,608,211
Grade 2 [Member] | Construction And Land Development [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	467,926	465,572
Grade 2 [Member] | Agriculture And Agriculture Real Estate [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	175,256	166,656
Grade 2 [Member] | 1-4 Family Residential (Includes Home Equity) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	1,170,383	1,140,210
Grade 2 [Member] | Commercial Real Estate (Includes Multi-Family) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	1,432,728	1,399,915
Grade 2 [Member] | Commercial And Industrial [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	393,055	355,862
Grade 2 [Member] | Consumer And Other [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	80,134	79,996
Grade 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	30,484	29,622
Grade 3 [Member] | Construction And Land Development [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	1,716	1,757
Grade 3 [Member] | Agriculture And Agriculture Real Estate [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	272	210
Grade 3 [Member] | 1-4 Family Residential (Includes Home Equity) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	9,823	9,131
Grade 3 [Member] | Commercial Real Estate (Includes Multi-Family) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	14,878	14,335
Grade 3 [Member] | Commercial And Industrial [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	3,795	4,189
Grade 4 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	38,570	43,928
Grade 4 [Member] | Construction And Land Development [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	13,313	13,636
Grade 4 [Member] | Agriculture And Agriculture Real Estate [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	33
Grade 4 [Member] | 1-4 Family Residential (Includes Home Equity) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	4,768	3,934
Grade 4 [Member] | Commercial Real Estate (Includes Multi-Family) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	19,653	25,825
Grade 4 [Member] | Commercial And Industrial [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	500	531
Grade 4 [Member] | Consumer And Other [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	303	2
Grade 5 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	9,546	3,885
Grade 5 [Member] | Construction And Land Development [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	1,340	1,175
Grade 5 [Member] | Agriculture And Agriculture Real Estate [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	47	49
Grade 5 [Member] | 1-4 Family Residential (Includes Home Equity) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	922	970
Grade 5 [Member] | Commercial Real Estate (Includes Multi-Family) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	6,666	1,151
Grade 5 [Member] | Commercial And Industrial [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	565	532
Grade 5 [Member] | Consumer And Other [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	6	8
Grade 6 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	69	121
Grade 6 [Member] | 1-4 Family Residential (Includes Home Equity) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	19	20
Grade 6 [Member] | Commercial And Industrial [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	49	101
Grade 6 [Member] | Consumer And Other [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for investment	$ 1

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Other Comprehensive Income (Loss) (Schedule Of Tax Effects Allocated To Each Component Of Other Comprehensive Income (Loss)) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Other Comprehensive Income (Loss) [Abstract]
Change in unrealized gain/loss during the period	$ (1,185)	$ (919)
Total other comprehensive income, Before Tax Amount	(1,185)	(919)
Change in unrealized gain/loss during the period, Tax Expense (Benefit)	(415)	(322)
Total other comprehensive income, Tax Expense (Benefit)	(415)	(322)
Change in unrealized gain/loss during the period, Net of Tax Amount	(770)	(597)
Total other comprehensive income	$ (770)	$ (597)

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Fair Value (Tables)

3 Months Ended

Mar. 31, 2012

Fair Value [Abstract]

Schedule Of Fair Value Assets And Liabilities Measured On Recurring Basis

	March 31, 2012
	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Available for sale securities (at fair value):
States and political subdivisions	$	—	$	37,916	$	—	$	37,916
Corporate debt securities and other		7,628		1,602		—		9,230
Collateralized mortgage obligations		—		727		—		727
Mortgage-backed securities		—		250,643		—		250,643
TOTAL	$	7,628	$	290,888	$	—	$	298,516

	December 31, 2011
	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Available for sale securities (at fair value):
States and political subdivisions	$	—	$	39,076	$	—	$	39,076
Corporate debt securities and other		7,656		1,613		—		9,269
Collateralized mortgage obligations		—		765		—		765
Mortgage-backed securities		—		273,206		—		273,206
Total	$	7,656	$	314,660	$	—	$	322,316

Summary Of Financial Assets And Liabilities Measured On Recurring And Non-Recurring Basis

	March 31, 2012
	Carrying Amount		Estimated Fair Value
	(Dollars in thousands)
Financial assets:
Cash and due from banks	$	151,467	$	151,467
Federal funds sold		445		445
Available for sale securities		298,516		298,516
Held to maturity securities		5,348,013		5,494,671
Loans held for investment and for sale (net of allowance for credit losses)		3,823,220		3,915,517
Total	$	9,621,661	$	9,860,616
Financial liabilities:
Deposits	$	8,544,451	$	8,565,167
Other borrowings		527,536		529,424
Securities sold under repurchase agreements		58,481		58,481
Junior subordinated debentures		85,055		71,651
Total	$	9,215,523	$	9,224,723

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Income Per Common Share (Computation Of Basic And Diluted Earnings Per Share) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Income Per Common Share [Abstract]
Net income available to shareholders	$ 36,487	$ 33,878
Weighted average shares outstanding	47,238,000	46,733,000
Potential dilutive shares	173,000	209,000
Weighted average shares and equivalents outstanding	47,411,000	46,942,000
Basic earnings per share	$ 0.77	$ 0.72
Diluted earnings per share	$ 0.77	$ 0.72
Stock options exercisable that would have had an anti-dilutive effect	0	0

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Contractual Obligations And Off-Balance Sheet Items (Contractual Obligations And Other Commitments) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012
Operating Leased Assets [Line Items]
Junior subordinated debentures	$ 139,091
Federal Home Loan Bank borrowings	530,842
Operating leases	15,241
Total	685,174
Remaining Fiscal 2012 [Member]
Operating Leased Assets [Line Items]
Junior subordinated debentures	1,884
Federal Home Loan Bank borrowings	516,126
Operating leases	3,872
Total	521,882
Fiscal 2013-2014 [Member]
Operating Leased Assets [Line Items]
Junior subordinated debentures	5,024
Federal Home Loan Bank borrowings	3,258
Operating leases	7,727
Total	16,009
Fiscal 2015-2016 [Member]
Operating Leased Assets [Line Items]
Junior subordinated debentures	5,024
Federal Home Loan Bank borrowings	3,456
Operating leases	3,125
Total	11,605
Thereafter [Member]
Operating Leased Assets [Line Items]
Junior subordinated debentures	127,159
Federal Home Loan Bank borrowings	8,002
Operating leases	517
Total	$ 135,678

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Goodwill And Core Deposit Intangibles (Narrative) (Details) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2011	Dec. 31, 2010
Goodwill And Core Deposit Intangibles [Abstract]
Impairments recorded on goodwill or other intangibles		$ 0
Intangible assets, estimated life in years, minimum	8
Intangible assets, estimated life in years, maximum	10
Gross core deposit intangibles outstanding	79,100,000			79,100,000
Net core deposit intangibles outstanding	19,301,000	19,300,000	20,996,000	21,000,000
Amortization expense related to intangible assets	$ 1,695,000	$ 2,034,000

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Consolidated Statements Of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Consolidated Statements Of Comprehensive Income [Abstract]
Net income	$ 36,487	$ 33,878
Securities available for sale:
Change in unrealized gain/loss during the period	(1,185)	(919)
Total other comprehensive loss, before tax	(1,185)	(919)
Deferred tax benefit related to other comprehensive income	(415)	(322)
Other comprehensive loss, net of tax	(770)	(597)
Comprehensive income	$ 35,717	$ 33,281

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Income Per Common Share

3 Months Ended

Mar. 31, 2012

Income Per Common Share [Abstract]

Income Per Common Share

2. INCOME PER COMMON SHARE

Net income per common share for all periods presented has been calculated in accordance with ASC Topic 260. Outstanding stock options issued by the Company represent the only dilutive effect reflected in diluted weighted average shares. The following table illustrates the computation of basic and diluted earnings per share:

	Three Months Ended March 31,
	2012		2011
	(In thousands, except per share data)
Net income available to shareholders	$	36,487	$	33,878
Weighted average shares outstanding		47,238		46,733
Potential dilutive shares		173		209
Weighted average shares and equivalents outstanding		47,411		46,942
Basic earnings per share	$	0.77	$	0.72
Diluted earnings per share	$	0.77	$	0.72

The incremental shares for the assumed exercise of the outstanding options were determined by application of the treasury stock method. There were no stock options exercisable during the quarters ended March 31, 2012 or 2011 that would have had an anti-dilutive effect on the above computation.

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Loans And Allowance For Credit Losses (Narrative) (Details) (USD $)	3 Months Ended
	Mar. 31, 2012 D Y	Dec. 31, 2011	Dec. 31, 2010
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of loans related to single industry on total loans, maximum	10.00%	10.00%
Total nonperforming assets	$ 14,873,000	$ 12,052,000
Interest on non-accrual loans	162,000,000
Allowance for credit losses totaled	51,600,000	51,600,000
Allowance for credit losses as a percentage of total loans	1.33%	1.37%
Loans outstanding to directors, officers and affiliates	7,281,000	9,809,000	12,783,000
Minimum period for ceases accruing interest, in days	90
Maximum principal and interest collectible on substandard impaired loans, percentage	100.00%
Determined period of default, minimum number of days past due	90
Loans restructured, non-accrual	169,000,000
Fixed rate, in years	5
Commercial Mortgages [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of outstanding principal balance, commercial real estate loans	35.10%
Commercial real estate loans, net	$ 1,960,000,000
Maximum [Member] | Commercial Mortgages [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Term of consumer loans	20
Maximum [Member] | 1-4 Family Residential Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Term of consumer loans	25
Maximum [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Term of consumer loans	120
Minimum [Member] | Commercial Mortgages [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Term of consumer loans	15
Minimum [Member] | 1-4 Family Residential Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Term of consumer loans	5
Originated loan to appraised value without mortgage insurance, percentage	89.00%
Minimum [Member] | Consumer Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Term of consumer loans	12

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Fair Value (Narrative) (Details) (USD $)	3 Months Ended
	Mar. 31, 2012
Fair Value [Abstract]
Additions to impaired loans	$ 2,100,000
Additions to other real estate	3,500,000
Impaired loans outstanding	2,100,000
Real estate owned outstanding	718,000
Company's off-balance sheet commitments total	$ 488,000,000

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Loans And Allowance For Credit Losses (Tables)

3 Months Ended

Mar. 31, 2012

Loans And Allowance For Credit Losses [Abstract]

Schedule Of Types Of Loans In Loan Portfolio

	March 31, 2012		December 31, 2011
	(Dollars in thousands)
Commercial and industrial	$	442,559	$	406,433
Real estate:
Construction and land development		484,295		482,140
1-4 family residential		1,036,318		1,007,266
Home equity		149,597		146,999
Commercial real estate		1,379,242		1,351,986
Agriculture real estate (farmland)		144,399		136,008
Multi-family residential		94,683		89,240
Agriculture		34,075		34,226
Consumer (net of unearned discount)		76,393		78,187
Other		33,301		33,421
Total	$	3,874,862	$	3,765,906

Schedule Of Activity With Respect To Related-Party Loans

	March 31, 2012			December 31, 2011
	(Dollars in thousands)
Beginning balance	$	9,809		$	12,783
New loans and reclassified related loans		200			4,168
Repayments		(2,728	)		(7,142	)
Ending balance	$	7,281		$	9,809

Schedule Of Nonaccrual Loans, Segregated By Class Of Loans

	March 31, 2012		December 31, 2011
	(Dollars in thousands)
Construction and land development	$	1,210	$	1,175
Agriculture and agriculture real estate		67		49
1-4 family residential (includes home equity)		937		923
Commercial real estate (includes multi-family residential)		4,266		790
Commercial and industrial		654		633
Consumer and other		8		8
Total	$	7,142	$	3,578

Schedule Of Past Due Loans With Age Analysis, Segregated By Class Of Loans

	As of March 31, 2012
	Loans 30-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Accruing Loans 90 or More Days Past Due
	(Dollars in thousands)
Construction and land development	$	3,963	$	1,210	$	5,173	$	479,122	$	—
Agriculture and agriculture real estate		88		9		97		178,377		—
1-4 family (includes home equity)		1,181		563		1,744		1,184,171		—
Commercial real estate (includes multi-family residential)		4,947		3,097		8,044		1,465,881		—
Commercial and industrial		1,465		364		1,829		440,730		—
Consumer and other		242		6		248		109,446		—
Total	$	11,886	$	5,249	$	17,135	$	3,857,727	$	—
	Year Ended December 31, 2011
	Loans 30-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Accruing Loans 90 or More Days Past Due
	(Dollars in thousands)
Construction and land development	$	1,281	$	111	$	1,392	$	480,748	$	—
Agriculture and agriculture real estate		365		9		374		169,860		—
1-4 family (includes home equity)		1,527		314		1,841		1,152,424		—
Commercial real estate (includes multi-family residential)		5,630		390		6,020		1,435,206		—
Commercial and industrial		1,544		394		1,938		404,495		—
Consumer and other		89		—		89		111,519		—
Total	$	10,436	$	1,218	$	11,654	$	3,754,252	$	—

Schedule Of Past Due Loans And Nonperforming Assets

	March 31, 2012			December 31, 2011
	(Dollars in thousands)
Nonaccrual loans	$	7,142		$	3,578
Total nonperforming loans		7,142			3,578
Repossessed assets		13			146
Other real estate		7,718			8,328
Total nonperforming assets	$	14,873		$	12,052
Nonperforming assets to total loans and other real estate		0.38	%		0.32	%

Schedule Of Impaired Loans

	March 31, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
	(Dollars in thousands)
With no related allowance recorded:
Construction and land development	$	276	$	277	$	—	$	194
Agriculture and agriculture real estate		5		6		—		5
1-4 family (includes home equity)		340		379		—		326
Commercial real estate (includes multi-family residential)		1,505		1,527		—		1,087
Commercial and industrial		4		6		—		58
Consumer and other		—		—		—		—
With an allowance recorded:
Construction and land development		1,064		1,064		312		1,064
Agriculture and agriculture real estate		42		45		42		42
1-4 family (includes home equity)		601		661		272		639
Commercial real estate (includes multi-family residential)		5,161		5,167		815		2,822
Commercial and industrial		610		2,029		310		566
Consumer and other		7		18		6		7
Total:
Construction and land development		1,340		1,341		312		1,258
Agriculture and agriculture real estate		47		51		42		47
1-4 family (includes home equity)		941		1,040		272		965
Commercial real estate (includes multi-family residential)		6,666		6,694		815		3,909
Commercial and industrial		614		2,035		310		624
Consumer and other		7		18		6		7

Impaired loans as of December 31, 2011 are set forth in the following tables. No interest income was recognized on impaired loans subsequent to their classification as impaired. The average recorded investment is reported on a year-to-date basis.

	December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average  Recorded Investment
	(Dollars in thousands)
With no related allowance recorded:
Construction and land development	$	111	$	111	$	—	$	58
Agriculture and agriculture real estate		6		6		—		5
1-4 family (includes home equity)		313		344		—		291
Commercial real estate (includes multi-family residential)		668		705		—		637
Commercial and industrial		112		1,513		—		253
Consumer and other		—		—		—		3
With an allowance recorded:
Construction and land development		1,064		1,064		312		584
Agriculture and agriculture real estate		43		46		39		21
1-4 family (includes home equity)		677		731		362		663
Commercial real estate (includes multi-family residential)		483		485		165		309
Commercial and industrial		521		535		300		642
Consumer and other		8		20		8		18
Total:
Construction and land development		1,175		1,175		312		642
Agriculture and agriculture real estate		49		52		39		26
1-4 family (includes home equity)		990		1,075		362		954
Commercial real estate (includes multi-family residential)		1,151		1,190		165		946
Commercial and industrial		633		2,048		300		895
Consumer and other		8		20		8		21

Schedule Showing Risk Grades And Classified Loans By Class Of Loan

	Construction and Land Development		Agriculture and Agriculture Real Estate		1-4 Family (Includes Home Equity)		Commercial Real Estate (Includes Multi-Family)		Commercial and Industrial		Consumer and Other		Total
	(Dollars in thousands)
Grade 1	$	—	$	2,866	$	—	$	—	$	44,595	$	29,250	$	76,711
Grade 2		467,926		175,256		1,170,383		1,432,728		393,055		80,134		3,719,482
Grade 3		1,716		272		9,823		14,878		3,795		—		30,484
Grade 4		13,313		33		4,768		19,653		500		303		38,570
Grade 5		1,340		47		922		6,666		565		6		9,546
Grade 6		—		—		19		—		49		1		69
Grade 7		—		—		—		—		—		—		—
Total	$	484,295	$	178,474	$	1,185,915	$	1,473,925	$	442,559	$	109,694	$	3,874,862

The following table presents risk grades and classified loans by class of loan at December 31, 2011. Classified loans include loans in risk grades 5, 6 and 7.

	Construction and Land Development		Agriculture and Agriculture Real Estate		1-4 Family (Includes Home Equity)		Commercial Real Estate (Includes Multi- Family)		Commercial and Industrial		Consumer and Other		Total
	(Dollars in thousands)
Grade 1	$	—	$	3,319	$	—	$	—	$	45,218	$	31,602	$	80,139
Grade 2		465,572		166,656		1,140,210		1,399,915		355,862		79,996		3,608,211
Grade 3		1,757		210		9,131		14,335		4,189		—		29,622
Grade 4		13,636		—		3,934		25,825		531		2		43,928
Grade 5		1,175		49		970		1,151		532		8		3,885
Grade 6		—		—		20		—		101		—		121
Grade 7		—		—		—		—		—		—		—
Total	$	482,140	$	170,234	$	1,154,265	$	1,441,226	$	406,433	$	111,608	$	3,765,906

Schedule Of Charge-Off Recoveries

	Three Months Ended March 31, 2012
	Charge-offs			Recoveries		Net Charge- offs
	(Dollars in thousands)
Construction and land development	$	(26	)	$	4	$	(22	)
1-4 family (includes home equity)		(52	)		2		(50	)
Commercial real estate and agriculture (includes multi-family)		(23	)		5		(18	)
Commercial and industrial		(78	)		93		15
Consumer and other		(203	)		176		(27	)
	$	(382	)	$	280	$	(102	)
	Year Ended December 31, 2011
	Charge-offs			Recoveries		Net Charge- offs
	(Dollars in thousands)
Construction and land development	$	(1,509	)	$	400	$	(1,109	)
1-4 family (includes home equity)		(1,392	)		32		(1,360	)
Commercial real estate and agriculture (includes multi-family)		(1,027	)		41		(986	)
Commercial and industrial		(1,694	)		526		(1,168	)
Consumer and other		(1,228	)		661		(567	)
	$	(6,850	)	$	1,660	$	(5,190	)

Schedule Of Recorded Investment In Loans And Activity In The Allowance For Credit Losses By Portfolio Segment

	Construction and Land Development			Agriculture and Agriculture Real Estate		1-4 Family (includes Home Equity)			Commercial Real Estate (includes Multi- Family)			Commercial and Industrial			Consumer and Other			Total
	(Dollars in thousands)
Allowance for credit losses:
Beginning balance	$	12,094		$	511	$	12,645		$	21,460		$	3,826		$	1,058		$	51,594
Provision for credit losses		(732	)		109		(72	)		468			171			206			150
Charge-offs		(26	)		—		(52	)		(23	)		(78	)		(203	)		(382	)
Recoveries		4			—		2			5			93			176			280
Net charge-offs		(22	)		—		(50	)		(18	)		15			(27	)		(102	)
Ending balance	$	11,340		$	620	$	12,523		$	21,910		$	4,012		$	1,237		$	51,642
Ending balance: individually evaluated for impairment	$	312		$	42	$	272		$	815		$	310		$	6		$	1,757
Ending balance: collectively evaluated for impairment		11,028			578		12,251			21,095			3,702			1,231			49,885
Loans:
Ending balance: individually evaluated for impairment		1,340			47		941			6,666			614			7			9,615
Ending balance: collectively evaluated for impairment		482,955			178,427		1,184,974			1,467,259			441,945			109,687			3,865,247
Ending balance	$	484,295		$	178,474	$	1,185,915		$	1,473,925		$	442,559		$	109,694		$	3,874,862

The following table details the recorded investment in loans and activity in the allowance for credit losses by portfolio segment for the year ended December 31, 2011. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

	Construction and Land Development			Agriculture and Agriculture Real Estate		1-4 Family (includes Home Equity)			Commercial Real Estate (includes Multi-Family)			Commercial and Industrial			Consumer and Other			Total
	(Dollars in thousands)
Allowance for credit losses:
Beginning balance	$	12,994		$	271	$	12,837		$	20,436		$	3,891		$	1,155		$	51,584
Provision for credit losses		209			239		1,168			2,011			1,103			470			5,200
Charge-offs		(1,509	)		—		(1,392	)		(1,027	)		(1,694	)		(1,228	)		(6,850	)
Recoveries		400			1		32			40			526			661			1,660
Net charge-offs		(1,109	)		1		(1,360	)		(987	)		(1,168	)		(567	)		(5,190	)
Ending balance		12,094			511		12,645			21,460			3,826			1,058			51,594
Ending balance: individually evaluated for impairment		312			39		362			165			300			8			1,186
Ending balance: collectively evaluated for impairment	$	11,782		$	472	$	12,283		$	21,295		$	3,526		$	1,050		$	50,408
Loans:
Ending balance: individually evaluated for impairment		1,175			49		990			1,151			633			8			4,006
Ending balance: collectively evaluated for impairment		480,965			170,185		1,153,275			1,440,075			405,800			111,600			3,761,900
Ending balance	$	482,140		$	170,234	$	1,154,265		$	1,441,226		$	406,433		$	111,608		$	3,765,906

Schedule Of Troubled Debt Restructurings Outstanding

	As of March 31,						As of December 31,
	2012						2011
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	(Dollars in thousands)
Troubled Debt Restructurings
Construction and land development		—	$	—	$	—		—	$	—	$	—
Agriculture and agriculture real estate		—		—		—		—		—		—
1-4 Family (includes home equity)		4		109		76		4		109		84
Commercial real estate (includes multi-family)		1		2,560		2,493		2		5,264		5,171
Commercial and industrial		3		114		93		3		114		93
Consumer and other		—		—		—		—		—		—
Total		8	$	2,783	$	2,662		9	$	5,487	$	5,348