Prosperity Bancshares, Inc.® Reports Strong Third Quarter 2013 Earnings

HOUSTON , Oct. 23, 2013 /PRNewswire/ -- Prosperity Bancshares, Inc. ® (NYSE: PB), the parent company of Prosperity Bank ® , reported net income for the quarter ended September 30, 2013 , of $55.278 million or $0.91 per diluted common share, an increase in net income of $9.102 million or 19.7%, compared with $46.176 million , and an increase in diluted earnings per share of 11.0%, compared with $0.82 per diluted common share for the same period in 2012.  "I am once again pleased to announce record earnings of $55.278 million for the third quarter of 2013, as well as record earnings per diluted share of $0.91 , representing an 11.0% increase over the same period last year.  During the last year, our bank has experienced significant growth, with total assets increasing $2.342 billion , or 17.1%, compared with the same quarter last year," said David Zalman , Prosperity's Chairman and Chief Executive Officer. "During the past quarter, we announced the signing of definitive merger agreements with FVNB Corp. and its wholly-owned subsidiary First Victoria National Bank headquartered in Victoria, Texas and with F&M Bancorporation Inc. and its wholly- owned subsidiary The F&M Bank & Trust Company headquartered in Tulsa, Oklahoma ," continued Zalman.  Combined, these banks have approximately $4.943 billion in total assets as of September 30, 2013 . "We are proud to announce that we increased our annual dividend again this year 11.6% to $0.96 annually.  We have increased our dividend every year since 1999.  We are also pleased with our organic loan growth of 2.5% (10.0% annualized) on a linked quarter basis.  We continue to see that customers are investing more in their businesses by taking out more loans and using their deposits on hand to grow their business," added Zalman.   "I would like to congratulate our team of associates and board members on another successful quarter and thank them for their ongoing hard work, insight and dedication.  We would also like to express appreciation to our customers for their continued loyalty to the bank," concluded Zalman. Prosperity's management uses certain non−GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity and the tangible equity to tangible assets ratio.  In addition, due to the application of purchase accounting, Prosperity uses certain non-GAAP measures and ratios that exclude the impact of these items to evaluate its allowance for credit losses to total loans (excluding acquired loans accounted for under ASC Topics 310-20 and 310-30).  Prosperity has included in this Earnings Release information relating to these non-GAAP financial measures for the applicable periods presented.  Please refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures. Results of operations for the three months ended September 30, 2013 For the three months ended September 30, 2013 , net income was $55.278 million compared with $46.176 million for the same period in 2012.  Net income per diluted common share was $0.91 for the three months ended September 30, 2013 compared with $0.82 for the same period in 2012. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended September 30, 2013 were 1.37%, 9.31% and 22.14%, respectively.  Prosperity's efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and securities and taxes) was 41.59% for the three months ended September 30, 2013 . Net interest income before provision for credit losses for the quarter ended September 30, 2013 , increased 18.4% to $126.533 million compared with $106.893 million during the same period in 2012.  The increase was primarily due to a 15.3% increase in average interest-earning assets for the same period.  Linked quarter net interest income before provision for credit losses increased 6.6% or $7.791 million to $126.533 million compared with $118.742 million during the three months ended June 30 , 2013.  The net interest margin on a tax equivalent basis increased to 3.59% for the three months ended September 30, 2013 , compared with 3.52% for the same period in 2012 and 3.43% for the three months ended June 30, 2013 . Noninterest income decreased $2.274 million or 9.5% to $21.554 million for the three months ended September 30, 2013 , compared with $23.828 million for the same period in 2012.  The decrease was primarily due to a decrease in debit card income as a result of a Durbin Amendment that became effective on July 1 , 2013.  This Federal Reserve rule is applicable to financial institutions that have assets of $10 billion or more and imposes limits on the amount of interchange, or swipe, fees that can be collected.  On a linked quarter basis, noninterest income decreased 14.7% or $3.720 million . Noninterest expense increased $1.295 million or 2.1% to $61.537 million for the three months ended September 30, 2013 , compared with $60.242 million for the same period in 2012.  The increase is primarily due to additional noninterest expenses associated with the acquisition of Coppermark Bancshares, Inc. ("Coppermark Bank") on April 1, 2013 .  On a linked quarter basis, noninterest expense increased 0.4% or $237 thousand due to one-time pre-tax merger expenses of $308 thousand primarily related to the Coppermark Bank and First Victoria National Bank ("FVNB") acquisitions. Average loans increased 19.4% or $1.004 billion to $6.173 billion for the quarter ended September 30, 2013 , compared with $5.169 billion for the same period in 2012.  On a linked quarter basis, average loans increased 1.0% (4.0% annualized) or $58.796 million from $6.115 billion at June 30, 2013 . Average deposits increased 14.6% to $12.432 billion for the quarter ended September 30, 2013 , compared with $10.846 billion for the same period of 2012. Loans at September 30, 2013 were $6.183 billion , an increase of $1.103 billion or 21.7%, compared with $5.079 billion at September 30 , 2012.  On a linked quarter basis, loans increased $10.106 million or 0.2% (0.7% annualized) from $6.172 billion at June 30 , 2013.  Deposits at September 30, 2013 were $12.456 billion , an increase of $1.501 billion or 13.7% compared with $10.955 billion at September 30 , 2012.  Results of operations for the nine months ended September 30, 2013 For the nine months ended September 30, 2013 , net income was $158.427 million compared with $119.635 million for the same period in 2012.  Net income per diluted common share was $2.67 for the nine months ended September 30, 2013 compared with $2.37 for the same period in 2012.  Returns on average assets, average common equity and average tangible common equity, each on an annualized basis, for the nine months ended September 30, 2013 were 1.35%, 9.29%, and 22.21%, respectively.  Prosperity's efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and securities and taxes) was 42.16% for the nine months ended September 30 , 2013.  Net interest income before provision for credit losses for the nine months ended September 30, 2013 increased $80.952 million or 29.7% to $353.357 million compared with $272.405 million during the same period in 2012.  The increase was attributable primarily to a 33.3% increase in average earning assets over the same period.  Noninterest income increased $18.840 million or 36.6% to $70.269 million for the nine months ended September 30, 2013 compared with $51.429 million for the same period in 2012.  The increase was primarily due to increased NSF fees and service charges and the additional products and services acquired through the acquisition of American State Bank ("ASB") on July 1 , 2012.  The increase in fees and service charges was mainly the result of the additional accounts acquired in the acquisitions consummated in 2012 and 2013.  Noninterest expense increased $37.115 million or 26.2% to $178.604 million for the nine months ended September 30, 2013 compared with $141.489 million for the same period in 2012.  This increase was primarily attributable to the increase in salaries and benefits as a result of the completion of four acquisitions over the past year.  Additionally, total noninterest expense for the nine months ended September 30, 2013 included one-time pre-tax merger expenses of $1.170 million . Average loans increased 36.0% or $1.550 billion to $5.854 billion for the nine months ended September 30, 2013 , compared with $4.304 billion for the same period in 2012.  Average deposits increased 33.0% to $12.294 billion for the nine months ended September 30, 2013 , compared with $9.242 billion for the same period in 2012.  The table below provides detail on loans acquired and deposits assumed in the ASB, Community National Bank ("Community National"), East Texas Financial Services and Coppermark Bank transactions completed on July 1, 2012 , October 1, 2012 , January 1, 2013 and April 1, 2013 , respectively: Balance Sheet Data (at period end) (In thousands) Sep 30, 2013 Jun 30, 2013 Mar 31, 2013 Dec 31, 2012 Sep 30, 2012 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Loans acquired (including new production since respective acquisition dates): ASB $               961,746 $                   967,732 $             974,223 $          1,068,077 $          1,131,005 Community National 62,673 61,722 61,966 63,940 - East Texas Financial Services 104,403 111,626 117,863 - - Coppermark Bank 688,656 772,965 - - - All other 4,365,111 4,258,438 4,108,972 4,047,923 3,948,098 Total loans $            6,182,589 $                6,172,483 $          5,263,024 $          5,179,940 $          5,079,103 Deposits assumed (including new deposits since respective acquisition dates): ASB $            2,370,287 $                2,367,198 $          2,461,485 $          2,510,855 $          2,518,178 Community National 154,378 156,210 156,274 160,404 - East Texas Financial Services 90,649 88,289 98,359 - - Coppermark Bank 1,073,567 1,087,137 - - - All other 8,766,918 8,809,816 8,997,349 8,970,585 8,436,419 Total deposits $          12,455,799 $              12,508,650 $        11,713,467 $        11,641,844 $        10,954,597 As reflected in the table above, loan and deposit growth was impacted by the acquisitions of ASB, Community National, East Texas Financial Services and Coppermark Bank.  Excluding loans acquired in these acquisitions and new production at the acquired banking centers since the respective acquisition dates, loans at September 30, 2013 grew 10.6% compared with September 30, 2012 and 2.5% (10.0% annualized) on a linked quarter basis. Excluding deposits assumed in these acquisitions and new deposits generated at the acquired banking centers since the respective acquisition dates, deposits at September 30, 2013 grew 3.9% compared with September 30, 2012 and decreased 0.5% on a linked quarter basis. At September 30, 2013 , Prosperity had $16.054 billion in total assets, $6.183 billion in loans and $12.456 billion in deposits. Assets, loans and deposits at September 30, 2013 increased by 17.1%, 21.7% and 13.7%, respectively, compared with their respective levels at September 30, 2012 . Asset Quality Nonperforming assets totaled $12.687 million or 0.09% of quarterly average earning assets at September 30, 2013 , compared with $14.051 million or 0.11% of quarterly average earning assets at September 30, 2012 , and $14.864 million or 0.11% of quarterly average earning assets at June 30 , 2013.  The allowance for credit losses was 0.97% of total loans at September 30, 2013 , 1.00% of total loans at September 30, 2012 and 0.91% of total loans at June 30 , 2013.  Excluding loans acquired that are accounted for under ASC Topics 310-20 and 310-30, the allowance for credit losses was 1.20% and 1.18% of remaining loans as of September 30, 2013 and June 30, 2013 , respectively.  Refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure.  The provision for credit losses was $4.025 million for the three months ended September 30, 2013 compared with $2.550 million for the three months ended June 30, 2013 and $1.800 million for the three months ended September 30 , 2012.  Net charge offs were $288 thousand for the three months ended September 30, 2013 compared with $1.423 million for the three months ended June 30, 2013 and $1.255 million for the three months ended September 30, 2012 . Conference Call Prosperity's management team will host a conference call on Wednesday, October 23, 2013 at 10:30 a.m. Eastern Daylight Time ( 9:30 a.m. Central Daylight Time ) to discuss Prosperity's third quarter 2013 earnings. Individuals and investment professionals may participate in the call by dialing 866-952-1906, the reference code is PBUS. Alternatively, individuals may listen to the live webcast of the presentation by visiting Prosperity's website at http://www.prosperitybankusa.com .  The webcast may be accessed directly from Prosperity's home page by clicking the "About Us" tab and then the "Presentations & Calls" link. Dividend Prosperity Bancshares, Inc. declared a fourth quarter cash dividend of $0.240 , an increase of 11.6% over the third quarter dividend of $0.215 , to be paid on January 2, 2014 to all shareholders of record as of December 16, 2013 . Pending Acquisition of F&M Bancorporation On August 29, 2013 , Prosperity announced the signing of a definitive merger agreement with F&M Bancorporation Inc. ("FMBC") and its wholly-owned subsidiary The F&M Bank & Trust Company ("F&M Bank") headquartered in Tulsa , Oklahoma.  F&M Bank operates 13 banking offices; 10 in Tulsa, Oklahoma and surrounding areas and 3 in Dallas , Texas.  As of September 30, 2013 , FMBC on a consolidated basis, reported total assets of $2.470 billion , total loans of $1.882 billion and total deposits of $2.257 billion .  Under the terms of the definitive agreement, Prosperity will issue approximately 3,298,246 shares of Prosperity common stock plus $47.000 million in cash for all outstanding shares of FMBC capital stock, subject to certain conditions and potential adjustments.  The transaction is subject to customary closing conditions, including the receipt of customary regulatory approvals and approval by FMBC's shareholders. Pending Acquisition of FVNB Corp. On July 1, 2013 , Prosperity announced the signing of a definitive merger agreement with FVNB Corp. and its wholly-owned subsidiary First Victoria National Bank (collectively referred to as "FVNB") headquartered in Victoria , Texas.  First Victoria National Bank operates 34 banking offices; 4 in Victoria, Texas ; 7 in the South Texas area including Corpus Christi ; 6 in the Bryan/College Station area; 5 in the Central Texas area including New Braunfels ; and 12 in the Houston area including The Woodlands and Huntsville.  As of September 30, 2013 , FVNB, on a consolidated basis, reported total assets of $2.473 billion , total loans of $1.648 billion and total deposits of $2.195 billion .  Under the terms of the definitive agreement, Prosperity will issue approximately 5,570,818 shares of Prosperity common stock plus $91.250 million in cash for all outstanding shares of FVNB Corp. capital stock, subject to certain conditions and potential adjustments.  The transaction is subject to customary closing conditions.  Prosperity Bank has received approval of the transaction from the FDIC and Texas Department of Banking and FVNB Corp.'s shareholders have approved the merger agreement and merger.  Prosperity expects the merger to be consummated in the fourth quarter of 2013. Acquisition of Coppermark Bancshares, Inc. On April 1, 2013 , Prosperity completed the previously announced acquisition of Coppermark Bancshares, Inc. and its wholly-owned subsidiary, Coppermark Bank ("Coppermark") headquartered in Oklahoma City, Oklahoma . Coppermark operated nine (9) full-service banking offices; six (6) in Oklahoma City, Oklahoma and surrounding areas and three (3) in the Dallas, Texas area. As of March 31, 2013 , Coppermark reported, on a consolidated basis, total assets of $1.2 billion , total loans of $847.6 million and total deposits of $1.1 billion . Pursuant to the terms of the acquisition agreement, Prosperity issued 3,258,718 shares of Prosperity common stock plus $60.0 million in cash for all outstanding shares of Coppermark Bancshares capital stock, which resulted in a premium of $91.7 million . Acquisition of East Texas Financial Services, Inc. On January 1, 2013 , Prosperity completed the previously announced acquisition of East Texas Financial Services, Inc. (OTC BB: FFBT) and its wholly-owned subsidiary, First Federal Bank Texas ("Firstbank"). Firstbank operated four (4) banking offices in the Tyler MSA, including three locations in Tyler, Texas and one location in Gilmer, Texas . As of December 31, 2012 , East Texas Financial Services reported, on a consolidated basis, total assets of $165.0 million , total loans of $129.3 million and total deposits of $112.3 million . Pursuant to the terms of the acquisition agreement, Prosperity issued 530,940 shares of Prosperity common stock for all outstanding shares of East Texas Financial Services capital stock, which resulted in a premium of $7.0 million . Acquisition of Community National Bank On October 1, 2012 , Prosperity completed the previously announced acquisition of Community National Bank, Bellaire , Texas.  Community National operated one (1) banking office in Bellaire, Texas , in the Houston Metropolitan Area. As of September 30, 2012 , Community National reported total assets of $183.0 million , total loans of $68.0 million and total deposits of $164.6 million .  Pursuant to the terms of the acquisition agreement, Prosperity issued 372,282 shares of Prosperity common stock plus $11.4 million in cash for all outstanding shares of Community National capital stock, which resulted in a premium of $10.6 million . Acquisition of American State Financial Corporation On July 1, 2012 , Prosperity completed the previously announced acquisition of American State Financial Corporation and its wholly-owned subsidiary American State Bank.  American State Bank operated thirty-seven (37) full-service banking offices in eighteen (18) counties across West Texas . As of June 30, 2012 , ASB, on a consolidated basis, reported total assets of $3.2 billion , total loans of $1.2 billion and total deposits of $2.5 billion . Pursuant to the terms of the acquisition agreement, Prosperity issued 8,524,835 shares of Prosperity common stock plus $178.5 million in cash for all outstanding shares of American State Financial Corporation capital stock, which resulted in a premium of $240.4 million . Prosperity Bancshares, Inc. ® Prosperity Bancshares Inc. ® is a $16.054 billion Houston, Texas based regional financial holding company, formed in 1983. Operating under a community banking philosophy and seeking to develop broad customer relationships based on service and convenience, Prosperity offers a variety of traditional loan and deposit products to its customers, which consist primarily of small and medium sized businesses and consumers. In addition to established banking products, Prosperity offers a complete line of services including: Internet Banking services at http://www.prosperitybankusa.com , Retail Brokerage Services, MasterMoney Debit Cards, 24 hour voice response banking, Trust and Wealth Management; and Mobile Banking. Prosperity currently operates 218 full-service banking locations; 57 in the Houston area; 20 in the South Texas area including Corpus Christi and Victoria ; 35 in the Dallas/Fort Worth area; 22 in the East Texas area; 34 in the Central Texas area including Austin and San Antonio ; 34 in the West Texas area including Lubbock , Midland - Odessa and Abilene ; 10 in the Bryan/College Station area and 6 in the Central Oklahoma area. Bryan/College Station Area - Midway First Colony Goliad Plano Gessner Kingsville Bryan Preston Forest Gladebrook Mathis Bryan-East Preston Road Heights Padre Island Bryan-North Red Oak Highway 6 West Palacios Caldwell Sachse Hillcroft Port Lavaca College Station The Colony Little York Portland Greens Prairie Turtle Creek Medical Center Rockport Madisonville Westmoreland Memorial Drive Sinton Navasota Northside Victoria Rock Prairie Fort Worth - Pasadena Victoria-North Wellborn Road Haltom City Pecan Grove Keller River Oaks West Texas Area - Central Texas Area - Roanoke Royal Oaks Stockyards Sugar Land Abilene - Austin - SW Medical Center Antilley Road 183 Other Dallas/Fort Worth Locations - Tanglewood Barrow Street Allandale Arlington Uptown Cypress Street Cedar Park Azle Waugh Drive Judge Ely Congress Ennis West University Mockingbird Lakeway Gainesville Woodcreek Liberty Hill Glen Rose Lubbock - Northland Granbury 4 th Street Oak Hill Mesquite Other Houston Area Locations - 66 th Street Parmer Lane Muenster Angleton 82 nd Street Research Blvd Sanger Bay City 86 th Street Westlake Waxahachie Beaumont 98 th Street Weatherford Cinco Ranch Avenue Q Other Central Texas Locations - Cleveland North University Bastrop East Texas Area - East Bernard Texas Tech Student Union Cuero El Campo Dime Box Athens Dayton Midland - Dripping Springs Blooming Grove Galveston Wadley Elgin Canton Groves Wall Street Flatonia Carthage Hempstead Georgetown Corsicana Hitchcock Odessa - Gonzales Crockett Katy Grandview Hallettsville Eustace Liberty Grant Kingsland Gilmer Magnolia Kermit Highway La Grange Grapeland Mont Belvieu Parkway Lexington Gun Barrel City Nederland New Braunfels Jacksonville Needville Other West Texas Locations - Pleasanton Kerens Shadow Creek Big Spring Round Rock Longview Sweeny Brownfield San Antonio Mount Vernon Tomball Brownwood Schulenburg Palestine Waller Cisco Seguin Rusk West Columbia Comanche Smithville Seven Points Wharton Early Thorndale Teague Winnie Floydada Weimar Tyler-Beckham Wirt Gorman Yoakum Tyler-South Broadway Levelland Yorktown Tyler-University South Texas Area - Littlefield Winnsboro Merkel Dallas/Fort Worth Area - Corpus Christi - Plainview Houston Area - Airline San Angelo Dallas - Carmel Slaton Abrams Centre Houston - Northwest Snyder Balch Springs Aldine Saratoga Camp Wisdom Allen Parkway Water Street Oklahoma Cedar Hill Bellaire 23 rd Street Dallas – Central Expressway Beltway Other South Texas Locations - Edmond Frisco Clear Lake Alice Expressway Frisco-West Copperfield Aransas Pass I-240 Independence Cypress Beeville Memorial Kiest Downtown Edna Norman McKinney Eastex McKinney-Stonebridge Fairfield In connection with the proposed merger of FVNB Corp. into Prosperity Bancshares, Prosperity Bancshares has filed with the Securities and Exchange Commission a registration statement on Form S-4 to register the shares of Prosperity's common stock to be issued to the shareholders of FVNB Corp.  The registration statement includes a proxy statement/prospectus which has been sent to the shareholders of FVNB Corp. seeking their approval of the proposed transaction. WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT ON FORM S-4, THE PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH THE PROPOSED TRANSACTION BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT PROSPERITY, FVNB CORP. AND THE PROPOSED TRANSACTION. In connection with the proposed merger of F&M Bancorporation Inc. into Prosperity Bancshares, Prosperity Bancshares will file with the Securities and Exchange Commission a registration statement on Form S-4 to register the shares of Prosperity's common stock to be issued to the shareholders of F&M Bancorporation.  The registration statement will include a proxy statement/prospectus which will be sent to the shareholders of F&M Bancorporation seeking their approval of the proposed transaction. WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT ON FORM S-4, THE PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH THE PROPOSED TRANSACTION BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT PROSPERITY, F&M BANCORPORATION INC. AND THE PROPOSED TRANSACTION. Investors and security holders may obtain free copies of these documents through the website maintained by the Securities and Exchange Commission at http://www.sec.gov .  Documents filed with the SEC by Prosperity will be available free of charge by directing a request by telephone or mail to Prosperity Bancshares, Inc., Prosperity Bank Plaza, 4295 San Felipe, Houston, Texas 77027 Attn: Investor Relations. Prosperity's telephone number is (281) 269-7199. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by Prosperity's management on the conference call may contain, forward-looking statements within the meaning of the securities laws that are based on current expectations, assumptions, estimates and projections about Prosperity and its subsidiaries.  These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperity's control, which may cause actual results to differ materially from those expressed or implied by the forward-looking statements.  These risks and uncertainties include but are not limited to whether Prosperity can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks;  continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives.  Other risks include, but are not limited to: the possibility that credit quality could deteriorate; actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); a deterioration or downgrade in the credit quality and credit agency ratings of the securities in Prosperity's securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate fluctuations and interest rate fluctuations; and weather.  These and various other factors are discussed in Prosperity's Annual Report on Form 10-K for the year ended December 31, 2012 and other reports and statements Prosperity has filed with the SEC. Copies of the SEC filings for Prosperity Bancshares ® may be downloaded from the Internet at no charge from http:/ / www.prosperitybankusa.com .   Prosperity Bancshares, Inc. ® Financial Highlights (Unaudited) (In thousands)  Sep 30, 2013   Jun 30, 2013   Mar 31, 2013   Dec 31, 2012   Sep 30, 2012  Balance Sheet Data  (at period end) Total loans $              6,182,589 $              6,172,483 $              5,263,024 $         5,179,940 $            5,079,103 Investment securities (A) 7,771,345 8,017,884 7,985,811 7,442,065 6,799,513 Federal funds sold  1,121 606 835 352 302 Allowance for credit losses (59,913) (56,176) (55,049) (52,564) (50,927) Cash and due from banks 269,987 250,542 180,577 325,952 207,650 Goodwill 1,351,782 1,350,834 1,235,743 1,217,162 1,200,098 Core deposit intangibles 25,233 26,688 26,514 26,159 28,092 Other real estate 7,432 10,244 9,913 7,234 8,846 Fixed assets, net 232,240 227,455 206,829 205,268 201,445 Other assets 272,463 270,158 227,117 232,005 237,997 Total assets $            16,054,279 $            16,270,718 $            15,081,314 $       14,583,573 $          13,712,119 Demand deposits $              3,368,357 $              3,283,082 $              2,995,828 $         3,016,205 $            2,827,748 Interest bearing deposits 9,087,442 9,225,568 8,717,639 8,625,639 8,126,849 Total deposits 12,455,799 12,508,650 11,713,467 11,641,844 10,954,597 Securities sold under repurchase agreements 431,969 481,170 470,241 454,502 443,856 Federal funds purchased and  other borrowings 605,951 781,215 576,768 256,753 112,017 Junior subordinated debentures 85,055 85,055 85,055 85,055 85,055 Other liabilities 86,393 69,346 86,328 56,030 78,418 Total liabilities 13,665,167 13,925,436 12,931,859 12,494,184 11,673,943 Shareholders' equity (B) 2,389,112 2,345,282 2,149,455 2,089,389 2,038,176 Total liabilities and equity $            16,054,279 $            16,270,718 $            15,081,314 $       14,583,573 $          13,712,119 (A) Includes $8,588, $9,724, $12,054, $13,824 and $16,991, in unrealized gains on available for sale securities for the quarterly periods ending September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012 and September 30, 2012,  respectively. (B) Includes $5,582, $6,321, $7,835, $8,986 and $11,044, in after-tax unrealized gains on available for sale securities for the quarterly periods ending September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012 and September 30, 2012, respectively.     Prosperity Bancshares, Inc. ® Financial Highlights (Unaudited) (In thousands) Three Months Ended Year-to-Date Sep 30, 2013 Jun 30, 2013 Mar 31, 2013 Dec 31, 2012 Sep 30, 2012 Sep 30, 2013 Sep 30, 2012 Income Statement Data Interest income: Loans $         94,236 $         89,842 $         81,464 $         82,727 $         80,587 $       265,542 $       188,597 Securities (C) 41,961 39,384 36,548 34,956 37,025 117,893 113,418 Federal funds sold and other earning assets 16 76 19 36 21 111 108 Total interest income 136,213 129,302 118,031 117,719 117,633 383,546 302,123 Interest expense: Deposits 8,314 9,170 8,690 8,217 9,395 26,174 26,269 Junior subordinated debentures 610 606 605 631 651 1,821 1,962 Securities sold under repurchase agreements 317 312 292 294 315 921 411 Other borrowings 439 472 362 276 379 1,273 1,076 Total interest expense 9,680 10,560 9,949 9,418 10,740 30,189 29,718 Net interest income 126,533 118,742 108,082 108,301 106,893 353,357 272,405 Provision for credit losses 4,025 2,550 2,800 3,550 1,800 9,375 2,550 Net interest income after provision for credit losses 122,508 116,192 105,282 104,751 105,093 343,982 269,855 Noninterest income: Nonsufficient funds (NSF) fees 8,649 8,346 8,509 9,292 9,265 25,504 19,050 Debit card and ATM card income 4,307 7,007 6,487 6,683 6,246 17,801 14,374 Service charges on deposit accounts 3,169 3,304 2,931 2,877 3,362 9,404 9,006 Trust income 901 896 1,017 915 831 2,814 831 Mortgage income 931 1,567 991 1,120 1,437 3,489 1,350 Bank owned life insurance income 916 932 776 1,242 736 2,624 1,430 Net gain (loss) on sale of assets 126 (180) 1 (244) (50) (53) 13 Net (loss) gain on sale of other real estate (864) 237 (105) (113) (597) (732) (344) Other noninterest income 3,419 3,165 2,834 2,334 2,598 9,418 5,719 Total noninterest income 21,554 25,274 23,441 24,106 23,828 70,269 51,429 Noninterest expense: Salaries and benefits 37,135 37,517 33,209 31,980 36,701 107,861 83,525 Core deposit intangibles amortization 1,455 1,341 1,755 1,932 2,007 4,551 5,297 Net occupancy and equipment 5,094 4,669 4,278 4,812 4,614 14,041 11,663 Depreciation 2,679 2,464 2,378 2,491 2,369 7,521 6,432 Debit card, data processing and software amortization 2,756 3,249 2,570 3,106 2,901 8,575 6,339 Regulatory assessments and FDIC insurance 2,516 2,579 2,395 2,365 2,107 7,490 5,314 Communications (includes telephone, courier and postage) 2,397 2,410 2,196 2,381 2,226 7,003 5,777 Other real estate expense 75 237 223 465 271 535 2,619 Other non-interest expense 7,430 6,834 6,763 7,436 7,046 21,027 14,523 Total noninterest expense 61,537 61,300 55,767 56,968 60,242 178,604 141,489 Net income before taxes 82,525 80,166 72,956 71,889 68,679 235,647 179,795 Federal income taxes 27,247 26,322 23,651 23,623 22,503 77,220 60,160 Net income available to common shareholders $         55,278 $         53,844 $         49,305 $         48,266 $         46,176 $       158,427 $       119,635 (C) Interest income on securities was reduced by net premium amortization of $15,136, $18,838, $22,710, $23,992 and $21,423 for the three month periods ended September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012 and September 30, 2012, respectively, and $56,685 and $42,897 for the nine month periods ended September 30, 2013 and 2012, respectively.     Prosperity Bancshares, Inc. ® Financial Highlights (Unaudited) (Dollars and share amounts in thousands, except per share data and market prices) Three Months Ended Year-to-Date Sep 30, 2013 Jun 30, 2013 Mar 31, 2013 Dec 31, 2012 Sep 30, 2012 Sep 30, 2013 Sep 30, 2012 Profitability Net income $         55,278 $          53,844 $         49,305 $         48,266 $         46,176 $       158,427 $       119,635 Basic earnings per share $             0.92 $              0.89 $             0.87 $             0.86 $             0.83 $             2.68 $             2.38 Diluted earnings per share $             0.91 $              0.89 $             0.86 $             0.85 $             0.82 $             2.67 $             2.37 Return on average assets (D)  1.37% 1.33% 1.33% 1.36% 1.32% 1.35% 1.35% Return on average common equity (D)  9.31% 9.27% 9.23% 9.28% 9.10% 9.29% 9.08% Return on average tangible common equity (D) (E) 22.14% 22.32% 22.30% 22.92% 21.59% 22.21% 21.80% Tax equivalent net interest margin (F) 3.59% 3.43% 3.42% 3.53% 3.52% 3.48% 3.56% Efficiency ratio (G) 41.59% 42.51% 42.40% 42.95% 46.07% 42.16% 43.69% Liquidity and Capital Ratios Equity to assets 14.88% 14.41% 14.25% 14.33% 14.86% 14.88% 14.86% Tier 1 risk-based capital 14.74% 14.15% 14.77% 14.40% 14.43% 14.74% 14.43% Total risk-based capital 15.55% 14.91% 15.61% 15.22% 15.26% 15.55% 15.26% Tier 1 leverage capital 7.37% 7.07% 7.10% 7.10% 6.92% 7.37% 6.92% Tangible equity to tangible assets (E) 6.90% 6.50% 6.42% 6.34% 6.49% 6.90% 6.49% Other Data Shares used in computed earnings per share Basic 60,344 60,250 56,988 56,427 55,958 59,207 50,239 Diluted 60,504 60,394 57,134 56,554 56,093 59,362 50,393 Period end shares outstanding 60,383 60,315 57,014 56,447 56,058 60,383 56,058 Cash dividends paid per common share $         0.2150 $          0.2150 $         0.2150 $         0.2150 $         0.1950 $         0.6450 $         0.4100 Book value per share $           39.57 $            38.88 $           37.70 $           37.02 $           36.36 $           39.57 $           36.36 Tangible book value per share (E) $           16.76 $            16.05 $           15.56 $           14.99 $           14.45 $           16.76 $           14.45 Common Stock Market Price High $           61.99 $            52.38 $           47.56 $           43.54 $           45.40 $           61.99 $           47.66 Low 51.85 44.33 42.38 38.56 38.90 42.38 38.90 Period end market price 61.84 51.79 47.39 42.00 42.62 61.84 42.62 Employees – FTE 2,454 2,496 2,304 2,266 2,260 2,454 2,260 Number of banking centers 218 219 224 217 213 218 213 (D) Interim periods annualized. (E) Refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure. (F) Net interest margin for all periods presented is calculated on an actual 365 day basis or 366 day basis. (G) 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 assets and securities.  Additionally, taxes are not part of this calculation.    Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands) YIELD ANALYSIS  Three Months Ended Sep 30, 2013 Jun 30, 2013 Sep 30, 2012 Average Balance Interest Earned/ Interest Paid Average Yield/ Rate Average Balance Interest Earned/ Interest Paid Average Yield/ Rate Average Balance Interest Earned/ Interest Paid Average Yield/ Rate Interest-Earning Assets:  Loans $     6,173,394 $    94,236 6.06% $     6,114,598 $        89,842 5.89% $     5,169,101 $    80,587 6.20% Investment securities 8,015,221 41,961 2.08% (H) 7,964,157 39,384 1.98% (H) 7,106,871 37,025 2.08% (H) Federal funds sold and other earning assets 27,451 16 0.22% 35,113 76 0.87% 53,111 21 0.16%   Total interest earning assets  14,216,066 $  136,213 3.80% 14,113,868 $      129,302 3.67% 12,329,083 $  117,633 3.80% Allowance for credit losses  (56,765) (57,754) (53,944) Noninterest-earning assets  2,034,968 2,114,816 1,730,120   Total assets $   16,194,269 $   16,170,930 $   14,005,259 Interest-Bearing Liabilities:  Interest-bearing demand deposits $     2,400,555 $      1,708 0.28% $     2,580,750 $          2,100 0.33% $     2,181,928 $      2,273 0.41% Savings and money market deposits 4,233,911 2,911 0.27% 4,261,466 3,172 0.30% 3,516,601 2,987 0.34% Certificates and other time deposits  2,489,848 3,695 0.59% 2,543,895 3,898 0.61% 2,387,279 4,135 0.69% Securities sold under repurchase    agreements  455,276 317 0.28% 471,430 312 0.27% 438,410 315 0.29% Federal funds purchased and other  borrowings  772,083 439 0.23% 541,034 472 0.35% 512,739 379 0.29% Junior subordinated debentures  85,055 610 2.85% 85,055 606 2.86% 85,055 651 3.04%   Total interest-bearing liabilities  10,436,728 9,680 0.37% (I) 10,483,630 10,560 0.40% (I) 9,122,012 10,740 0.47% (I) Noninterest-bearing liabilities:  Noninterest-bearing demand deposits 3,308,158 3,295,211 2,760,405 Other liabilities  73,571 69,741 92,873   Total liabilities 13,818,457 13,848,582 11,975,290 Shareholders' equity  2,375,812 2,322,348 2,029,969   Total liabilities and shareholders' equity  $   16,194,269 $   16,170,930 $   14,005,259 Net interest income and margin  $  126,533 3.53% $      118,742 3.37% $  106,893 3.45% Non-GAAP to GAAP reconciliation: Tax equivalent adjustment 2,028 2,063 2,138 Net interest income and margin (tax equivalent basis) $  128,561 3.59% $      120,805 3.43% $  109,031 3.52% (H) Yield on securities was impacted by net premium amortization of $15,136, $18,838, and $21,423 for the three month periods ended September 30, 2013, June 30, 2013 and September 30, 2012, respectively. (I) Total cost of funds, including noninterest bearing deposits, was 0.28%, 0.31% and 0.36% for the three months ended September 30, 2013, June 30, 2013, and September 30, 2012, respectively.     Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands) YIELD ANALYSIS  Year-to-Date Sep 30, 2013 Sep 30, 2012 Average Balance Interest Earned/ Interest Paid Average Yield/ Rate Average Balance Interest Earned/ Interest Paid Average Yield/ Rate Interest-Earning Assets:  Loans $     5,853,924 $    265,542 6.06% $     4,303,984 $      188,597 5.85% Investment securities 7,912,599 117,893 1.99% (J) 5,983,102 113,418 2.53% (J) Federal funds sold and other earning assets 32,426 111 0.46% 66,771 108 0.22%   Total interest-earning assets  13,798,949 $    383,546 3.72% 10,353,857 $      302,123 3.90% Allowance for credit losses  (55,933) (52,104) Noninterest-earning assets  2,000,425 1,498,332   Total assets $   15,743,441 $   11,800,085 Interest-Bearing Liabilities:  Interest-bearing demand deposits $     2,545,983 $        6,018 0.32% $     1,861,954 $          6,425 0.46% Savings and money market deposits 4,096,889 8,912 0.29% 3,031,269 8,020 0.35% Certificates and other time deposits  2,468,518 11,244 0.61% 2,080,606 11,824 0.76% Securities sold under repurchase agreements  458,441 921 0.27% 197,775 411 0.28% Federal funds purchased and other borrowings  558,594 1,273 0.30% 465,505 1,076 0.31% Junior subordinated debentures  85,055 1,821 2.86% 85,055 1,962 3.08%   Total interest bearing liabilities  10,213,480 30,189 0.40% (K) 7,722,164 29,718 0.51% (K) Noninterest-bearing liabilities:  Noninterest-bearing demand deposits 3,182,349 2,267,876 Other liabilities  68,721 53,320   Total liabilities 13,464,550 10,043,360 Shareholders' equity  2,278,891 1,756,725   Total liabilities and shareholders' equity  $   15,743,441 $   11,800,085 Net interest income and margin  $    353,357 3.42% $      272,405 3.51% Non-GAAP to GAAP reconciliation: Tax equivalent adjustment 6,216 3,866 Net interest income and margin  (tax equivalent basis) $    359,573 3.48% $      276,271 3.56% (J) Yield on securities was impacted by net premium amortization of $56,685 and $42,897 for the nine month periods ended September 30, 2013 and September 30, 2012, respectively. (K) Total cost of funds, including noninterest bearing deposits, was 0.30% and 0.40% for the nine months ended September 30, 2013 and September 30, 2012, respectively.     Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (Dollars in thousands) Three Months Ended Year-to-Date Sep 30, 2013 Jun 30, 2013 Mar 31, 2013 Dec 31, 2012 Sep 30, 2012 Sep 30, 2013 Sep 30, 2012 Adjustment to Loan Yield (L) Interest on loans, as reported $           94,236 $           89,842 $           81,464 $           82,727 $            80,587 $          265,542 $         188,597 Less: Purchase accounting adjustment- loan discount accretion (16,421) (12,031) (14,292) (14,523) (11,188) (42,744) (11,889) Interest on loans without discount accretion $           77,815 $           77,811 $           67,172 $           68,204 $            69,399 $          222,798 $         176,708 Average loans $      6,173,394 $      6,114,598 $      5,263,784 $      5,140,163 $       5,169,101 $       5,853,924 $      4,303,984 Loan yield without discount accretion 5.00% 5.10% 5.18% 5.28% 5.34% 5.09% 5.48% Loan yield, as reported 6.06% 5.89% 6.28% 6.40% 6.20% 6.06% 5.85% Three Months Ended Year-to-Date Sep 30, 2013 Jun 30, 2013 Mar 31, 2013 Dec 31, 2012 Sep 30, 2012 Sep 30, 2013 Sep 30, 2012 Adjustment to Securities Yield (L) Interest on securities, as reported $           41,961 $           39,384 $           36,548 $           34,956 $            37,025 $          117,893 $         113,418 Add: Purchase accounting adjustment- securities amortization 2,275 2,599 3,106 3,540 3,451 7,980 3,451 Interest on securities including amortization $           44,236 $           41,983 $           39,654 $           38,496 $            40,476 $          125,873 $         116,869 Average securities $      8,015,221 $      7,964,157 $      7,755,567 $      7,228,418 $       7,106,871 $       7,912,599 $      5,983,102 Securities yield without purchase accounting adjustment 2.19% 2.11% 2.07% 2.12% 2.27% 2.13% 2.61% Securities yield, as reported 2.08% 1.98% 1.91% 1.92% 2.08% 1.99% 2.53% Net Interest Margin (tax equivalent basis, excluding purchase accounting adjustments to yield) 3.19% 3.09% 3.08% 3.18% 3.16% 3.13% 3.46% Net Interest Margin (tax equivalent basis), as reported 3.59% 3.43% 3.42% 3.53% 3.52% 3.48% 3.56% Net income available to common shareholders, as reported $           55,278 $           53,844 $           49,305 $           48,266 $            46,176 $          158,427 $         119,635   Less:  Purchase accounting adjustments, net of tax (M) (9,476) (6,335) (7,560) (7,374) (5,202) (23,371) (5,615) Net income available to common shareholders, adjusted $           45,802 $           47,509 $           41,745 $           40,892 $            40,974 $          135,056 $         114,020 Acquired Loans Accounted for  Under ASC 310-20 Acquired Loans Accounted for  Under ASC 310-30 Total Loans Accounted for  Under ASC 310-20 and 310-30 Balance at Acquisition Date Balance at Jun 30, 2013 Balance at Sep 30, 2013 Balance at Acquisition Date Balance at  Jun 30, 2013 Balance at Sep 30, 2013 Balance at Acquisition Date Balance at  Jun 30, 2013 Balance at Sep 30, 2013 Loan marks: Previouly acquired banks (N) $           81,328 $           37,832 $           32,842 $           28,764 $            22,989 $            21,977 $         110,092 $         60,821 $            54,819 2013 acquisitions (O) 29,440 24,695 19,101 23,414 22,571 19,122 52,854 47,266 38,223 Total $         110,768 $           62,527 $           51,943 $           52,178 $            45,560 $            41,099 $         162,946 $       108,087 $            93,042 Acquired portfolio loan balances: Previouly acquired banks (N) $      1,298,380 $         653,945 $         602,128 $           57,979 $            43,505 $            39,715 $      1,356,359 $       697,450 $          641,843 2013 acquisitions (O) 939,804 775,372 595,119 54,083 53,754 37,639 993,887 829,126 632,758 Total $      2,238,184 $      1,429,317 $      1,197,247 $         112,062 $            97,259 $            77,354 $      2,350,246 (P) $    1,526,576 $       1,274,601 (L)  Non-GAAP financial measure. (M) Using effective tax rate of 33.0%, 32.8%, 32.45, 32.9% and 32.8% for the three month periods ended September 30, 2013, June 30, 2013, March 31, 2013,  December 31, 2012 and September 30, 2012, respectively, and 32.8% and 33.0% for the nine month periods ended September 30, 2013 and 2012, respectively. (N)  Includes Bank of Texas, Bank Arlington, ASB and Community National which were acquired in 2012. (O)  Includes East Texas Financial Services and Coppermark Bank. (P)  Actual principal balances acquired.   Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) Three Months Ended  Sep 30, 2013   Jun 30, 2013   Mar 31, 2013   Dec 31, 2012   Sep 30, 2012  YIELD TREND Interest-Earning Assets:  Loans 6.06% 5.89% 6.28% 6.40% 6.20% Investment securities (Q)   2.08% 1.98% 1.91% 1.92% 2.08% Federal funds sold and other earning assets 0.22% 0.87% 0.22% 0.19% 0.16%   Total interest-earning assets  3.80% 3.67% 3.67% 3.76% 3.80% Interest-Bearing Liabilities:  Interest-bearing demand deposits 0.28% 0.33% 0.34% 0.31% 0.41% Savings and money market deposits 0.27% 0.30% 0.30% 0.29% 0.34% Certificates and other time deposits  0.59% 0.61% 0.62% 0.64% 0.69% Securities sold under repurchase agreements 0.28% 0.27% 0.26% 0.25% 0.29% Federal funds purchased and other borrowings  0.23% 0.35% 0.41% 0.40% 0.29% Junior subordinated debentures  2.85% 2.86% 2.88% 2.95% 3.04%   Total interest-bearing liabilities  0.37% 0.40% 0.42% 0.41% 0.47% Net Interest Margin  3.53% 3.37% 3.36% 3.46% 3.45% Net Interest Margin (tax equivalent) 3.59% 3.43% 3.42% 3.53% 3.52% (Q) Yield on securities was impacted by net premium amortization of $15,136, $18,838, $22,710, $23,992 and $21,423 for the three month periods ended September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012 and  September 30, 2012, respectively. Prosperity Bancshares, Inc.® Financial Highlights (Unaudited) (In thousands) Three Months Ended Sep 30, 2013 June 30, 2013 Mar 31, 2013 Dec 31, 2012 Sep 30, 2012 Balance Sheet Averages Total loans $          6,173,394 $          6,114,598 $        5,263,784 $        5,140,163 $        5,169,101 Investment securities 8,015,221 7,964,157 7,755,567 7,228,418 7,106,871 Federal funds sold and other earning assets 27,451 35,113 34,793 75,135 53,111 Total interest-earning assets 14,216,066 14,113,868 13,054,144 12,443,716 12,329,083 Allowance for credit losses (56,765) (57,754) (53,242) (50,775) (53,944) Cash and due from banks 189,082 279,271 206,990 198,797 206,124 Goodwill 1,351,236 1,331,568 1,226,332 1,211,596 1,157,330 Core Deposit Intangibles (CDI) 25,938 25,893 25,244 27,108 17,280 Other real estate 9,494 19,605 11,789 9,571 11,600 Fixed assets, net 231,480 223,769 207,517 206,869 192,542 Other assets 227,738 234,710 171,589 190,815 145,244 Total assets $        16,194,269 $        16,170,930 $      14,850,363 $      14,237,697 $      14,005,259 Noninterest-bearing deposits $          3,308,158 $          3,295,211 $        2,939,621 $        2,963,998 $        2,760,405 Interest-bearing demand deposits 2,400,555 2,580,750 2,659,489 2,328,969 2,181,928 Savings and money market deposits 4,233,911 4,261,466 3,790,416 3,600,109 3,516,601 Certificates and other time deposits 2,489,848 2,543,895 2,370,499 2,366,155 2,387,279 Total deposits 12,432,472 12,681,322 11,760,025 11,259,231 10,846,213 Securities sold under repurchase agreements 455,276 471,430 448,542 459,998 438,410 Federal funds purchased and other borrowings 772,083 541,034 358,120 272,239 512,739 Junior subordinated debentures 85,055 85,055 85,055 85,055 85,055 Other liabilities 73,571 69,741 62,716 80,085 92,873 Shareholders' equity 2,375,812 2,322,348 2,135,905 2,081,089 2,029,969 Total liabilities and equity $        16,194,269 $        16,170,930 $      14,850,363 $      14,237,697 $      14,005,259     Prosperity Bancshares, Inc. ® Financial Highlights (Unaudited) (Dollars in thousands) Sep 30, 2013 Jun 30, 2013 Mar 31, 2013 Dec 31, 2012 Sep 30, 2012 Period End Balances Loan Portfolio Commercial and other $     1,028,799 16.6% $        999,677 16.2% $        760,531 14.5% $        798,882 15.4% $        792,247 15.6% Construction 703,193 11.4% 694,585 11.2% 575,307 10.9% 550,768 10.6% 496,417 9.8% 1-4 family residential 1,503,771 24.4% 1,452,268 23.7% 1,338,936 25.5% 1,255,765 24.3% 1,213,872 23.9% Home equity 211,742 3.4% 208,739 3.4% 203,815 3.9% 186,801 3.6% 183,844 3.6% Commercial real estate 2,304,862 37.2% 2,390,820 38.6% 1,993,518 37.8% 1,990,642 38.4% 1,976,112 38.9% Agriculture (includes farmland) 321,518 5.2% 314,945 5.1% 286,789 5.4% 285,637 5.5% 304,134 6.0% Consumer 108,704 1.8% 111,449 1.8% 104,128 2.0% 111,445 2.2% 112,477 2.2% Total loans $     6,182,589 $     6,172,483 $     5,263,024 $     5,179,940 $     5,079,103 Deposit Types Noninterest-bearing DDA $     3,368,357 27.0% $     3,283,082 26.0% $     2,995,828 25.6% $     3,016,205 25.9% $     2,827,748 25.8% Interest-bearing DDA 2,366,997 19.0% 2,483,428 19.9% 2,521,998 21.5% 2,626,331 22.6% 2,208,568 20.2% Money Market 2,834,172 22.8% 2,868,880 23.0% 2,509,501 21.4% 2,362,454 20.3% 2,303,680 21.0% Savings 1,413,153 11.3% 1,371,214 11.0% 1,345,044 11.5% 1,293,552 11.1% 1,276,271 11.7% Certificates and other time deposits 2,473,120 19.9% 2,502,046 20.1% 2,341,096 20.0% 2,343,302 20.1% 2,338,330 21.3% Total deposits $   12,455,799 $   12,508,650 $   11,713,467 $   11,641,844 $   10,954,597 Loan to Deposit Ratio 49.6% 49.3% 44.9% 44.5% 46.4% Construction Loans Single family residential construction $        239,980 33.5% $        234,257 32.9% $        177,218 30.6% $        161,401 29.2% $        150,959 30.1% Land development 60,927 8.6% 63,857 9.0% 42,520 7.4% 42,199 7.6% 38,075 7.6% Raw land 52,789 7.4% 59,701 8.4% 46,672 8.1% 58,794 10.6% 47,620 9.5% Residential lots 95,361 13.4% 91,018 12.8% 93,598 16.2% 92,697 16.8% 97,445 19.4% Commercial lots 58,085 8.2% 60,960 8.6% 64,394 11.2% 63,716 11.5% 63,418 12.7% Commercial construction and other 204,940 28.9% 200,633 28.3% 153,047 26.5% 134,427 24.3% 103,677 20.7% Net unaccreted discount (8,889) (15,841) (2,142) (2,466) (4,777) Total construction loans $        703,193 $        694,585 $        575,307 $        550,768 $        496,417   Prosperity Bancshares, Inc. ® Financial Highlights (Unaudited) (Dollars in thousands) Three Months Ended Sep 30, 2013 Jun 30, 2013 Mar 31, 2013 Dec 31, 2012 Sep 30, 2012 Asset Quality Nonaccrual loans $            4,954 $                4,295 $                7,529 $            5,382 $            5,063 Accruing loans 90 or more days past due 283 325 642 331 132 Total non-performing loans 5,237 4,620 8,171 5,713 5,195 Repossessed assets 18 - 49 68 10 Other real estate 7,432 10,244 9,913 7,234 8,846   Total nonperforming assets $          12,687 $              14,864 $              18,133 $          13,015 $          14,051 Nonperforming assets: Commercial $            1,223 $                1,191 $                3,896 $            1,568 $            1,599 Construction 4,611 5,898 3,678 3,522 3,182 1-4 family (including home equity) 2,441 2,112 3,746 3,081 3,089 Commercial real estate (including multi-family) 4,233 4,330 5,533 2,608 4,671 Agriculture  23 1,213 1,183 1,463 1,476 Consumer and other 156 120 97 773 34 Total  $          12,687 $              14,864 $              18,133 $          13,015 $          14,051 Number of loans/properties 128 123 124 116 119 Allowance for credit losses at end of period $          59,913 $              56,176 $              55,049 $          52,564 $          50,927 Net charge-offs: Commercial $               119 $                   148 $                     59 $               205 $             (511) Construction (30) 124 (56) 21 155 1-4 family (including home equity) 15 35 102 65 251 Commercial real estate (including  multi-family) (471) 801 (57) 1,012 800 Agriculture 13 13 (7) 70 (30) Consumer and other 642 302 274 540 590 Total  $               288 $                1,423 $                   315 $            1,913 $            1,255 Asset Quality Ratios Nonperforming assets to average earning assets 0.09% 0.11% 0.14% 0.10% 0.11% Nonperforming assets to loans and other real estate 0.20% 0.24% 0.34% 0.25% 0.28% Net charge-offs to average loans  (annualized) 0.02% 0.09% 0.02% 0.15% 0.08% Allowance for credit losses to total loans 0.97% 0.91% 1.05% 1.01% 1.00% Allowance for credit losses to total loans (excluding acquired loans accounted for under ASC Topics 310-20 and 310-30) (E) 1.20% 1.18% 1.25% 1.22% 1.27% Prosperity Bancshares, Inc. ® Notes to Selected Financial Data (Unaudited) (Dollars and share amounts in thousands, except per share data) Consolidated Financial Highlights NOTES TO SELECTED FINANCIAL DATA Prosperity's management uses certain non−GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity and the tangible equity to tangible assets ratio for internal planning and forecasting purposes. In addition, due to the application of purchase accounting, Prosperity uses certain non-GAAP measures and ratios that exclude the impact of these items to evaluate its allowance for credit losses to total loans (excluding acquired loans accounted for under ASC Topics 310-20 and 310-30).  Prosperity has included in this Earnings Release information relating to these non-GAAP financial measures for the applicable periods presented.  Prosperity believes these non-GAAP financial measures provide information useful to investors in understanding Prosperity's financial results and Prosperity believes that its presentation, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting Prosperity's business and allows investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. Further, Prosperity believes that these non-GAAP measures provide useful information by excluding certain items that may not be indicative of its core operating earnings and business outlook.  These non-GAAP measures should not be considered a substitute for GAAP basis measures and results and Prosperity strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. Three Months Ended Year-to-Date  Sep 30, 2013   Jun 30, 2013   Mar 31, 2013   Dec 31, 2012   Sep 30, 2012   Sep 30, 2013   Sep 30, 2012  Return on average tangible common equity: Net income $            55,278 $            53,844 $            49,305 $            48,266 $            46,176 $          158,427 $          119,635 Average shareholders' equity $       2,375,812 $       2,322,348 $       2,135,905 $       2,081,089 $       2,029,969 $       2,278,891 $       1,756,725 Less: Average goodwill and other intangible assets (1,377,174) (1,357,461) (1,251,576) (1,238,704) (1,174,610) (1,325,214) (1,025,116) Average tangible shareholders' equity $          998,638 $          964,887 $          884,329 $          842,385 $          855,359 $          953,677 $          731,609 Return on average tangible common  equity: 22.14% 22.32% 22.30% 22.92% 21.59% 22.21% 21.80% Tangible book value per share: Shareholders' equity $       2,389,112 $       2,345,282 $       2,149,455 $       2,089,389 $       2,038,176 $       2,389,112 $       2,038,176 Less: Goodwill and other intangible assets (1,377,015) (1,377,522) (1,262,257) (1,243,321) (1,228,190) (1,377,015) (1,228,190)   Tangible shareholders' equity $       1,012,097 $          967,760 $          887,198 $          846,068 $          809,986 $       1,012,097 $          809,986 Period end shares outstanding 60,383 60,315 57,014 56,447 56,058 60,383 56,058 Tangible book value per share: $              16.76 $              16.05 $              15.56 $              14.99 $              14.45 $              16.76 $              14.45 Tangible equity to tangible assets ratio: Tangible shareholders' equity $       1,012,097 $          967,760 $          887,198 $          846,068 $          809,986 $       1,012,097 $          809,986 Total assets $     16,054,279 $     16,270,718 $     15,081,314 $     14,583,573 $     13,712,119 $     16,054,279 $     13,712,119 Less: Goodwill and other intangible assets (1,377,015) (1,377,522) (1,262,257) (1,243,321) (1,228,190) (1,377,015) (1,228,190)   Tangible assets $     14,677,264 $     14,893,196 $     13,819,057 $     13,340,252 $     12,483,929 $     14,677,264 $     12,483,929 Tangible equity to tangible assets ratio: 6.90% 6.50% 6.42% 6.34% 6.49% 6.90% 6.49%       Prosperity Bancshares, Inc. ® Notes to Selected Financial Data (Unaudited) (Dollars in thousands)  Sep 30, 2013   Jun 30, 2013   Dec 31, 2012  Allowance for credit losses to total loans, excluding acquired loans: Allowance for credit losses $            59,913 $            56,176 $            52,564 Total loans $       6,182,589 $       6,172,483 $       5,179,940 Less: Fair value of acquired loans accounted for under ASC Topics 310-20 and 310-30 (does not include new production) $       1,181,559 $       1,418,489 $          887,953 Total loans less acquired loans $       5,001,030 $       4,753,994 $       4,291,987 Allowance for credit losses to total loans, excluding acquired loans (non-GAAP basis) 1.20% 1.18% 1.22%       SOURCE Prosperity Bancshares, Inc.