PROSPERITY BANCSHARES, INC.® REPORTS FOURTH QUARTER 2024 EARNINGS

"I would like to thank all our customers, associates, directors, and shareholders for helping build such a successful bank," concluded Zalman.

Results of Operations for the Three Months Ended December 31, 2024

Net income was $130.1 million⁽²⁾ for the  three months ended December 31, 2024 compared with $95.5 million⁽³⁾ for the same period in 2023, an increase of $34.6 million or 36.2%. Net income per diluted common share was $1.37 for the three months ended December 31, 2024 compared with $1.02 for the same period in 2023, an increase of 34.3%. The changes were primarily due to an increase in net interest income and a decrease in the Federal Deposit Insurance Corporation ("FDIC") special assessment, partially offset by an increase in salaries and benefits. On a linked quarter basis, net income was $130.1 million⁽²⁾ for the three months ended December 31, 2024 compared with $127.3 million⁽⁴⁾ for the three months ended September 30, 2024, an increase of $2.8 million or 2.2%. Net income per diluted common share was $1.37 for the three months ended December 31, 2024 compared with $1.34 for the three months ended September 30, 2024. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended December 31, 2024 were 1.31%, 7.00% and 13.50%⁽¹⁾, respectively. Prosperity's efficiency ratio (excluding net gains and losses on the sale, write-down or write-up of assets and securities) was 46.10%⁽¹⁾ for the three months ended December 31, 2024.

Net interest income before provision for credit losses was $267.8 million for the three months ended December 31, 2024 compared with $237.0 million for the same period in 2023,  an increase of $30.8 million or 13.0%. The change was primarily due to an increase in the average balances and average rates on loans, an increase in the average balances on federal funds sold and other earning assets and a decrease in the average balances and rates on other borrowings, partially offset by a decrease in the average balances on investment securities and an increase in the average balances and rates on interest-bearing deposits. Net interest income before provision for credit losses increased $6.1 million or 2.3% to $267.8 million for the three months ended December 31, 2024 compared with $261.7 million for the three months ended September 30, 2024. The change was primarily due to a decrease in the average balances on other borrowings and a decrease in the average rates on interest-bearing deposits, partially offset by a decrease in the average balances and average rates on loans and a decrease in the average balances on investment securities.

The net interest margin on a tax equivalent basis was 3.05% for the three months ended December 31, 2024 compared with 2.75% for the same period in 2023. The change was primarily due to an increase in the average balances and average rates on loans and a decrease in the average balances and rate on other borrowings, partially offset by a decrease in the average balances on investment securities and an increase in the average balances and rates on interest-bearing deposits. The net interest margin on a tax equivalent basis was 3.05% for the three months ended December 31, 2024 compared with 2.95% for the three months ended September 30, 2024. The change was primarily due to a decrease in the average balances on other borrowings and a decrease in the average rates on interest-bearing deposits, partially offset by a decrease in the average balances and average rates on loans and a decrease in the average balances on investment securities.

Noninterest income was $39.8 million for the three months ended December 31, 2024 compared with $36.6 million for the same period in 2023, an increase of $3.3 million or 8.9%. The change was primarily due to an increase in nonsufficient funds ("NSF") fees, an increase in service charges on deposit accounts and an increase in the net gain (loss) on sale or write-down of assets. Noninterest income was $39.8 million for the three months ended December 31, 2024 compared with $41.1 million for the three months ended September 30, 2024, a decrease of $1.3 million or 3.1%.

Noninterest expense was $141.5 million for the three months ended December 31, 2024 compared with $152.2 million for the same period in 2023, a decrease of $10.6 million or 7.0%, primarily due to a decrease in the FDIC special assessment, partially offset by an increase in salaries and benefits and an increase in credit and debit card, data processing and software amortization. Noninterest expense was $141.5 million for the three months ended December 31, 2024 compared with $140.3 million for the three months ended September 30, 2024, an increase of $1.2 million or 0.9%.

Results of Operations for the Year Ended December 31, 2024

Net income was $479.4 million⁽⁵⁾ for the year ended December 31, 2024 compared with $419.3 million⁽⁶⁾ for the same period in 2023, an increase of $60.1 million or 14.3%. Net income per diluted common share was $5.05 for the year ended December 31, 2024 compared with $4.51 for the same period in 2023, an increase of 12.0%. Net income and net income per diluted common share for the year ended December 31, 2024 were impacted by an increase in net interest income, a decrease in the FDIC special assessment of $16.3 million, a gain on Visa Class B-1 stock exchange net of investment securities sales of $11.2 million, a decrease in merger related provision for credit losses of $9.5 million and a decrease in merger related expenses of $10.7 million, and increases in noninterest income and noninterest expense related to nine months of Lone Star Bank operations. Returns on average assets, average common equity and average tangible common equity for the year ended December 31, 2024 were 1.21%, 6.56% and 12.73%⁽¹⁾, respectively. 

Excluding merger related provision and expenses, gain on Visa Class B-1 stock exchange net of investment securities sales, and FDIC special assessment, each net of tax, net income was $484.0 million⁽¹⁾ or $5.11⁽¹⁾ per diluted common share for the year ended December 31, 2024, and annualized returns on average assets, average common equity and average tangible common equity for the same period were 1.22%⁽¹⁾, 6.63%⁽¹⁾ and 12.85%⁽¹⁾, respectively. Prosperity's efficiency ratio was 48.43%⁽¹⁾ for the year ended December 31, 2024; and excluding merger related expenses and FDIC special assessment, the efficiency ratio was 47.75%⁽¹⁾.

Net interest income before provision for credit losses for the year ended December 31, 2024 was $1.026 billion compared with $956.4 million for the same period in 2023, an increase of $70.1 million or 7.3%. The change was primarily due to an increase in the average balances and average rates on loans, an increase in the average balances and average rates on federal funds sold and other earning assets, an increase in loan discount accretion of $9.4 million and a decrease in the average balance and rates on other borrowings, partially offset by a decrease in the average balances on investment securities and an increase in the average balances and rates on interest-bearing deposits.

The net interest margin on a tax equivalent basis for the year ended December 31, 2024 was 2.93% compared with 2.78% for the same period in 2023. The change was primarily due to an increase in the average balances and average rates on loans, an increase in the average balances and average rates on federal funds sold and other earning assets, an increase in loan discount accretion of $9.4 million and a decrease in the average balance and rates on other borrowings, partially offset by a decrease in the average balances on investment securities and an increase in the average balances and rates on interest-bearing deposits.

Noninterest income was $165.8 million for the year ended December 31, 2024 compared with $153.3 million for the same period in 2023, an increase of $12.5 million or 8.2%, primarily due to a gain on Visa Class B-1 stock exchange net of investment securities sales of $11.2 million and increases in service charges on deposit accounts, partially offset by a decrease in other noninterest income.

Noninterest expense was $570.6 million for the year ended December 31, 2024 compared with $556.7 million for the same period in 2023, an increase of $13.9 million or 2.5%, primarily due to an increase in salaries and benefits, an increase in credit and debit card, data processing and software amortization and additional expenses related to nine months of  Lone Star Bank operations, partially offset by a decrease in the FDIC special assessment of $16.3 million and a decrease in merger related expenses of $10.7 million.

Balance Sheet Information

At December 31, 2024, Prosperity had $39.567 billion in total assets, an increase of $1.019 billion or 2.6%, compared with $38.548 billion at December 31, 2023. Linked quarter total assets decreased by $548.6 million compared with $40.115 billion at September 30, 2024.

Loans were $22.149 billion at December 31, 2024, an increase of $968.7 million or 4.6%, compared with $21.181 billion at December 31, 2023, primarily due to the Merger. Linked quarter loans decreased $231.6 million from $22.381 billion at September 30, 2024. Loans, excluding Warehouse Purchase Program loans, were $21.068 billion at December 31, 2024 compared with $20.358 billion at December 31, 2023, an increase of $710.0 million or 3.5%, and compared with $21.152 billion at September 30, 2024, a decrease of $83.8 million.

Deposits were $28.381 billion at December 31, 2024, an increase of $1.202 billion or 4.4%, compared with $27.180 billion at December 31, 2023, primarily due to the Merger. Linked quarter deposits increased $293.7 million or 1.0% (4.2% annualized) from $28.088 billion at September 30, 2024.

The table below provides detail on the impact of loans acquired and deposits assumed in the Merger:

Excluding loans acquired in the Merger and new production at the acquired banking centers since April 1, 2024, loans at December 31, 2024 decreased $88.9 million compared with December 31, 2023 and decreased $179.5 million compared with September 30, 2024.

Excluding deposits assumed in the Merger and new deposits generated at the acquired banking centers since April 1, 2024, deposits at December 31, 2024 increased by $108.0 million compared with December 31, 2023 and increased by $336.4 million compared with September 30, 2024.

Asset Quality

Nonperforming assets totaled $81.5 million or 0.23% of quarterly average interest-earning assets at December 31, 2024 compared with $72.7 million or 0.21% of quarterly average interest-earning assets at December 31, 2023 and $89.9 million or 0.25% of quarterly average interest-earning assets at September 30, 2024.

The allowance for credit losses on loans and off-balance sheet credit exposures was $389.5 million at December 31, 2024 compared with $368.9 million at December 31, 2023 and $392.0 million at September 30, 2024. There was no provision for credit losses for the three months ended December 31, 2024 and 2023, and a provision for credit losses of $9.1 million and $18.5 million for the years ended December 31, 2024 and 2023, respectively. As a result of the loans acquired in the Merger, the second quarter of 2024 included a $7.9 million provision for credit losses on loans and a $1.2 million provision for credit losses on off-balance sheet credit exposures. 

The allowance for credit losses on loans was $351.8 million or 1.59% of total loans at December 31, 2024 compared with $332.4 million or 1.57% of total loans at December 31, 2023 and $354.4 million or 1.58% of total loans at September 30, 2024. Excluding Warehouse Purchase Program loans, the allowance for credit losses on loans to total loans was 1.67%⁽¹⁾ at December 31, 2024 compared with 1.63%⁽¹⁾ at December 31, 2023 and 1.68%⁽¹⁾ at September 30, 2024.

Net charge-offs were $2.6 million for the three months ended December 31, 2024 compared with net charge-offs of $19.1 million for the three months ended December 31, 2023 and net charge-offs of $5.5 million for the three months ended September 30, 2024. For the fourth quarter of 2024, $1.5 million of reserves on resolved purchased credit deteriorated ("PCD") loans without any related charge-offs were released to the general reserve.

Net charge-offs were $14.6 million for the year ended December 31, 2024 compared with $38.0 million for the year ended December 31, 2023. Net charge-offs for the year ended December 31, 2024 included $3.4 million related to resolved PCD loans, which had specific reserves that were allocated to the charge-offs. Additionally, reserves on PCD loans increased by $26.1 million due to Day One accounting for PCD loans at the time of the Merger. Further, $15.4 million of reserves on resolved PCD loans were released to the general reserve.

Visa Class B-1 Stock Exchange

During the second quarter 2024, Prosperity tendered all of its shares of Visa, Inc. ("Visa") Class B-1 common stock in exchange for a combination of Visa Class B-2 common stock and Visa Class C common stock, pursuant to the terms and subject to the conditions of the public offering of Visa to exchange its Class B-1 common stock for a combination of shares of its Class B-2 common stock and Class C common stock, which expired on May 3, 2024. Prosperity recorded an unrealized gain of $20.6 million during the second quarter 2024 based on the conversion privilege of the Class C common stock and the closing price of Visa Class A common stock. In the exchange, Prosperity received 48,492 shares of Class B-2 stock, recorded at zero cost basis, and 19,245 shares of Class C common stock and has subsequently sold all shares of Class C stock.

Dividend

Prosperity Bancshares declared a first quarter 2025 cash dividend of $0.58 per share to be paid on April 1, 2025, to all shareholders of record as of March 14, 2025.

Stock Repurchase Program

On January 21, 2025, Prosperity Bancshares announced a stock repurchase program under which up to 5%, or approximately 4.8 million shares, of its outstanding common stock may be acquired over a one-year period expiring on January 21, 2026, at the discretion of management. Under its 2024 stock repurchase program, Prosperity Bancshares repurchased zero shares of its common stock during the three months ended December 31, 2024, and approximately 1.2 million shares of its common stock at an average weighted price of $60.35 per share during the year ended December 31, 2024.

Merger of Lone Star State Bancshares, Inc.

On April 1, 2024, Prosperity completed the merger of Lone Star and its wholly owned subsidiary Lone Star Bank, headquartered in Lubbock, Texas. Lone Star Bank operated 5 full-service banking offices in the West Texas area, including its main office in Lubbock, and 1 banking center in each of Brownfield, Midland, Odessa and Big Spring, Texas.

Pursuant to the terms of the definitive agreement, Prosperity issued 2,376,182 shares of Prosperity common stock plus approximately $64.1 million in cash for all outstanding shares of Lone Star in the second quarter of 2024. This resulted in goodwill of $106.7 million as of December 31, 2024, which does not include all the subsequent fair value adjustments that have not yet been finalized.

Conference Call

Prosperity's management team will host a conference call on Wednesday, January 29, 2025, at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity's fourth quarter 2024 earnings. Individuals and investment professionals may participate in the call by dialing 877-883-0383 for domestic participants, or 412-902-6506 for international participants. The participant elite entry number is 7777695.

Alternatively, individuals may listen to the live webcast of the presentation by visiting Prosperity's website at www.prosperitybankusa.com. The webcast may be accessed from Prosperity's Investor Relations page by selecting "Presentations, Webcasts & Calls" from the menu and following the instructions.

Non-GAAP Financial Measures

Prosperity's management uses certain non-GAAP financial measures to evaluate its performance. Specifically, for internal planning and forecasting purposes, Prosperity reviews each of diluted earnings per share, return on average assets, return on average common equity, and return on average tangible common equity, in each case excluding merger related provision for credit losses, net of tax, merger related expenses, net of tax, FDIC special assessment, net of tax, and net gain on the sale or write-up of securities, net of tax; return on average tangible common equity; tangible book value per share; the tangible equity to tangible assets ratio; allowance for credit losses to total loans excluding Warehouse Purchase Program loans; the efficiency ratio, excluding net gains and losses on the sale, write-down or write-up of assets and securities; and the efficiency ratio, excluding net gains and losses on the sale, write-down or write-up of assets and securities, merger related expenses, and FDIC special assessment. Prosperity believes these non-GAAP financial measures provide information useful to investors in understanding Prosperity's financial results and their presentation, together with the accompanying reconciliations, provides a more 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 financial measures provide useful information by excluding certain items that may not be indicative of its core operating earnings and business outlook. These non-GAAP financial measures should not be considered a substitute for, nor of greater importance than, GAAP basis financial measures and results; 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. 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 to the nearest respective GAAP financial measures.

Prosperity Bancshares, Inc. ®

As of December 31, 2024, Prosperity Bancshares, Inc.^® is a $39.567 billion Houston, Texas based regional financial holding company providing personal banking services and investments to consumers and businesses throughout Texas and Oklahoma. Founded in 1983, Prosperity believes in a community banking philosophy, taking care of customers, businesses and communities in the areas it serves by providing financial solutions to simplify everyday financial needs. In addition to offering traditional deposit and loan products, Prosperity offers digital banking solutions, credit and debit cards, mortgage services, retail brokerage services, trust and wealth management, and treasury management.

Prosperity currently operates 283 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 62 in the Dallas/Fort Worth area; 22 in the East Texas area; 31 in the Central Texas area including Austin and San Antonio; 44 in the West Texas area including Lubbock, Midland-Odessa, Abilene, Amarillo and Wichita Falls; 15 in the Bryan/College Station area; 6 in the Central Oklahoma area; and 8 in the Tulsa, Oklahoma area.

Cautionary Notes on Forward-Looking Statements

"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 federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, oral or written forward-looking statements may also be included in other information released to the public.  Such forward-looking statements are typically, but not exclusively, identified by the use in the statements of words or phrases such as "aim," "anticipate," "believe," "estimate," "expect," "goal," "guidance," "intend," "is anticipated," "is expected," "is intended," "objective," "plan," "projected," "projection," "will affect," "will be," "will continue," "will decrease," "will grow," "will impact," "will increase," "will incur," "will reduce," "will remain," "will result," "would be," variations of such words or phrases (including where the word "could," "may," or "would" is used rather than the word "will" in a phrase) and similar words and phrases indicating that the statement addresses some future result, occurrence, plan or objective. Forward-looking statements include all statements other than statements of historical fact, including forecasts or trends, and are based on current expectations, assumptions, estimates and projections about Prosperity Bancshares and its subsidiaries. These forward-looking statements may include information about Prosperity's possible or assumed future economic performance or future results of operations, including future revenues, income, expenses, provision for credit losses, provision for taxes, effective tax rate, earnings per share and cash flows and Prosperity's future capital expenditures and dividends, future financial condition and changes therein, including changes in Prosperity's loan portfolio and allowance for credit losses, changes in deposits, borrowings and the investment securities portfolio, future capital structure or changes therein, as well as the plans and objectives of management for Prosperity's future operations, future or proposed acquisitions, the future or expected effect of acquisitions on Prosperity's operations, results of operations, financial condition, and future economic performance, statements about the anticipated benefits of any proposed transactions, and statements about the assumptions underlying any such statement. These forward‑looking statements are not guarantees of future performance and are based on expectations and assumptions Prosperity currently believes to be valid. Because forward-looking statements relate to future results and occurrences, many of which are outside of Prosperity's control, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. 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); the possibility that the anticipated benefits of an acquisition transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of two companies or as a result of the strength of the economy and competitive factors generally; 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, interest rate and commodity price fluctuations; and the effect, impact, potential duration or other implications of weather and climate-related events. Prosperity disclaims any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments. These and various other factors are discussed in Prosperity's Annual Report on Form 10-K for the year ended December 31, 2023, and other reports and statements Prosperity has filed with the Securities and Exchange Commission ("SEC"). Copies of the SEC filings for Prosperity may be downloaded from the Internet at no charge from http://www.prosperitybankusa.com.