UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED June 30, 2021

OR

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

FOR THE TRANSITION PERIOD FROM              TO             

COMMISSION FILE NUMBER: 001-35388

PROSPERITY BANCSHARES, INC.^®

(Exact name of registrant as specified in its charter)

Texas	74-2331986
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Prosperity Bank Plaza
4295 San Felipe, Houston, Texas	77027
(Address of principal executive offices)	(Zip Code)

(281) 269-7199

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $1.00 per share	PB	New York Stock Exchange, Inc.

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

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

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

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

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

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

As of August 2, 2021, there were 92,930,089 outstanding shares of the registrant’s Common Stock, par value $1.00 per share.  

PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES

INDEX TO FORM 10-Q

PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020	3
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)	5
	Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	53
Item 4.	Controls and Procedures	53
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	54
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3.	Defaults Upon Senior Securities	54
Item 4.	Mine Safety Disclosures	54
Item 5.	Other Information	54
Item 6.	Exhibits	55
Signatures		56

2

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PROSPERITY BANCSHARES, INC.^® AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2021			2020
	(unaudited)
	(Dollars in thousands, except par value)
ASSETS
Cash and due from banks	$	1,059,879		$	1,342,996
Federal funds sold		281			553
Total cash and cash equivalents		1,060,160			1,343,549
Available for sale securities, at fair value		611,890			651,514
Held to maturity securities, at cost (fair value of $11,399,235 and $8,039,142, respectively)		11,306,801			7,891,306
Total securities		11,918,691			8,542,820
Loans held for sale		9,080			46,777
Loans held for investment		17,147,146			17,357,788
Loans held for investment - Warehouse Purchase Program		2,095,559			2,842,379
Total loans		19,251,785			20,246,944
Less: allowance for credit losses on loans		(302,884	)		(316,068	)
Loans, net		18,948,901			19,930,876
Accrued interest receivable		74,210			82,068
Goodwill		3,231,636			3,231,636
Core deposit intangibles, net		67,417			73,235
Bank premises and equipment, net		324,502			323,572
Other real estate owned		144			10,593
Bank owned life insurance (BOLI)		325,505			324,356
Federal Home Loan Bank of Dallas stock		8,901			8,901
Other assets		139,857			187,669
TOTAL ASSETS	$	36,099,924		$	34,059,275
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing	$	10,099,149		$	9,151,233
Interest-bearing		19,011,092			18,209,259
Total deposits		29,110,241			27,360,492
Fed funds purchased and other borrowings		—			—
Securities sold under repurchase agreements		433,069			389,583
Subordinated notes		—			—
Accrued interest payable		14,309			3,462
Allowance for credit losses on off-balance sheet credit exposures		29,947			29,947
Other liabilities		202,021			145,122
Total liabilities		29,789,587			27,928,606
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; 92,934,789 shares issued and outstanding at June 30, 2021; 92,570,789 shares issued and outstanding at December 31, 2020		92,935			92,571
Capital surplus		3,640,266			3,634,140
Retained earnings		2,576,035			2,403,189
Accumulated other comprehensive income —net unrealized gain on available for sale securities, net of tax expense of $293 and $205, respectively		1,101			769
Total shareholders’ equity		6,310,337			6,130,669
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	36,099,924		$	34,059,275

See notes to consolidated financial statements.

3

PROSPERITY BANCSHARES, INC.^® AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees	$	216,803		$	242,772		$	449,878		$	490,015
Securities		43,708			43,776			82,385			92,058
Federal funds sold and other earning assets		340			45			691			758
Total interest income		260,851			286,593			532,954			582,831
INTEREST EXPENSE:
Deposits		15,288			25,269			32,650			60,287
Other borrowings		—			533			—			3,465
Securities sold under repurchase agreements		164			337			323			1,094
Subordinated notes		—			1,499			—			2,999
Total interest expense		15,452			27,638			32,973			67,845
NET INTEREST INCOME		245,399			258,955			499,981			514,986
PROVISION FOR CREDIT LOSSES		—			10,000			—			10,000
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		245,399			248,955			499,981			504,986
NONINTEREST INCOME:
Nonsufficient funds (NSF) fees		6,560			5,645			13,247			15,088
Credit card, debit card and ATM card income		8,918			7,263			16,949			14,737
Service charges on deposit accounts		6,062			5,790			12,040			11,894
Trust income		2,276			2,242			5,113			4,904
Mortgage income		2,914			1,820			6,221			3,830
Brokerage income		795			584			1,506			1,234
Net loss on sale or write down of assets		(244	)		(3,945	)		(323	)		(4,330	)
Other		8,275			6,276			14,811			12,706
Total noninterest income		35,556			25,675			69,564			60,063
NONINTEREST EXPENSE:
Salaries and employee benefits		75,611			79,109			155,648			156,391
Net occupancy and equipment		8,046			9,190			15,879			18,170
Credit and debit card, data processing and software amortization		8,718			11,690			16,951			23,111
Regulatory assessments and FDIC insurance		2,670			2,601			5,340			4,679
Core deposit intangibles amortization		2,887			3,293			5,818			6,656
Depreciation		4,513			4,598			9,053			9,366
Communications		2,982			3,324			5,881			6,519
Net other real estate (income) expense		(1,641	)		44			(2,284	)		(40	)
Merger related expenses		—			7,474			—			8,018
Other		11,405			13,045			21,981			26,239
Total noninterest expense		115,191			134,368			234,267			259,109
INCOME BEFORE INCOME TAXES		165,764			140,262			335,278			305,940
PROVISION FOR INCOME TAXES		35,153			9,361			71,358			44,191
NET INCOME	$	130,611		$	130,901		$	263,920		$	261,749
EARNINGS PER SHARE:
Basic	$	1.41		$	1.41		$	2.84		$	2.80
Diluted	$	1.41		$	1.41		$	2.84		$	2.80

See notes to consolidated financial statements.

4

PROSPERITY BANCSHARES, INC.^® AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	(Dollars in thousands)
Net income	$	130,611		$	130,901		$	263,920		$	261,749
Other comprehensive income (loss), before tax:
Securities available for sale:
Change in unrealized gains (losses) during the period		424			1,654			420			(2,529	)
Total other comprehensive income (loss)		424			1,654			420			(2,529	)
Deferred tax (expense) benefit related to other comprehensive income (loss)		(89	)		(347	)		(88	)		531
Other comprehensive income (loss), net of tax		335			1,307			332			(1,998	)
Comprehensive income	$	130,946		$	132,208		$	264,252		$	259,751

See notes to consolidated financial statements.

5

PROSPERITY BANCSHARES, INC.^® AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

											Accumulated
											Other		Total
	Common Stock				Capital			Retained			Comprehensive		Shareholders’
	Shares		Amount		Surplus			Earnings			Income (Loss)		Equity
	(In thousands, except share and per share data)
Three Months Ended
BALANCE AT MARCH 31, 2021		92,928,539	$	92,929	$	3,637,188		$	2,490,963		$	766	$	6,221,846
Net income									130,611					130,611
Other comprehensive income												335		335
Common stock issued in connection with the issuance of restricted stock awards, net		6,250		6		(6	)							—
Stock based compensation expense						3,084								3,084
Cash dividends declared, $0.49 per share									(45,539	)				(45,539	)
BALANCE AT JUNE 30, 2021		92,934,789	$	92,935	$	3,640,266		$	2,576,035		$	1,101	$	6,310,337
Six Months Ended
BALANCE AT DECEMBER 31, 2020		92,570,789	$	92,571	$	3,634,140		$	2,403,189		$