Core Viewpoint - Prosperity Bancshares, Inc. (PB) is positioned for growth through strategic acquisitions, strong loan and deposit performance, and efforts to enhance fee income, although challenges such as pressure on net interest margin (NIM) and weak mortgage income persist [1][5]. Group 1: Growth Strategy - PB's organic growth strategy shows promise, with a 7.9% compound annual growth rate (CAGR) in net revenues over the last four years ending in 2023, despite a dip in 2021, 2023, and Q1 2024 [2]. - The company aims to improve its deposit mix, with non-interest-bearing deposits comprising 35.1% of total deposits as of March 31, 2024 [2]. - Total revenues are projected to grow at a CAGR of 10.1% by 2026, with total loans expected to increase by 3.5% in 2024 [2]. Group 2: Acquisitions - Acquisitions are crucial for PB's expansion, having completed over 30 deals since 1998, including the recent acquisition of Lone Star State Bancshares in April 2024 and First Bancshares of Texas in the previous year [3]. - These acquisitions are anticipated to be accretive to earnings, and management is actively pursuing further opportunities for inorganic growth due to a strong balance sheet [3]. Group 3: Financial Position - As of March 31, 2024, PB's other borrowings stood at $3.9 billion, with cash and due from banks at $1.1 billion, indicating a focus on debt repayment initiatives [4]. - The company is expected to manage its debt obligations effectively, even in the face of potential economic downturns, supported by decent earnings strength [4]. Group 4: Margin and Mortgage Income Concerns - PB's NIM decreased to 2.78% in 2023 from 3% in 2022, with continued pressure expected in Q1 2024 due to a liability-sensitive balance sheet [5]. - The company faces uncertainty in its mortgage banking business, with high mortgage rates negatively impacting origination volumes and refinancing activities, leading to a decline in mortgage income in 2021 and 2022 [6]. - Although mortgage income is projected to rise to $3.1 million in 2024 (a 34.2% increase), it is unlikely to return to 2020 and 2021 levels in the near term [6].

```markdown [PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Prosperity Bancshares, Inc.'s unaudited consolidated financial statements for Q1 2024, detailing balance sheets, income, and cash flows, highlighting total assets of **$38.76 billion**, net income of **$110.4 million**, and shareholders' equity of **$7.10 billion** [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2024, total assets increased to **$38.76 billion** from **$38.55 billion** at year-end 2023, driven by a rise in cash and cash equivalents. Total loans saw a slight increase to **$21.27 billion**, while total deposits remained stable at **$27.18 billion**. Shareholders' equity grew to **$7.10 billion** Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | **Total Assets** | **$38,756,520** | **$38,547,877** | **+0.5%** | | Total Cash and Cash Equivalents | $1,086,694 | $458,413 | +137.1% | | Loans, net | $20,935,028 | $20,848,176 | +0.4% | | Total Securities | $12,301,138 | $12,803,896 | -3.9% | | Goodwill | $3,396,402 | $3,396,086 | +0.0% | | **Total Liabilities** | **$31,651,976** | **$31,468,547** | **+0.6%** | | Total Deposits | $27,175,518 | $27,179,809 | -0.0% | | Other Borrowings | $3,900,000 | $3,725,000 | +4.7% | | **Total Shareholders' Equity** | **$7,104,544** | **$7,079,330** | **+0.4%** | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) For the first quarter of 2024, net income was **$110.4 million**, a decrease from **$124.7 million** in the first quarter of 2023. The decline was primarily due to a **2.1%** drop in net interest income to **$238.2 million**, driven by higher interest expense on deposits and borrowings. Diluted earnings per share fell to **$1.18** from **$1.37** year-over-year Q1 2024 vs. Q1 2023 Income Statement (Unaudited) | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Interest Income | $381,914 | $327,309 | +16.7% | | Total Interest Expense | $143,670 | $83,842 | +71.4% | | **Net Interest Income** | **$238,244** | **$243,467** | **-2.1%** | | Provision for Credit Losses | $0 | $0 | N/A | | Total Noninterest Income | $38,870 | $38,266 | +1.6% | | Total Noninterest Expense | $135,848 | $123,000 | +10.4% | | **Net Income** | **$110,426** | **$124,694** | **-11.4%** | | **Diluted EPS** | **$1.18** | **$1.37** | **-13.9%** | [Consolidated Statements of Changes in Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity increased to **$7.10 billion** at March 31, 2024, from **$7.08 billion** at December 31, 2023. The growth was driven by **$110.4 million** in net income, partially offset by **$52.4 million** in cash dividends (**$0.56** per share) and **$35.3 million** in common stock repurchases - Key activities impacting shareholders' equity in Q1 2024 included net income of **$110.4 million**, cash dividends of **$52.4 million**, and common stock repurchases totaling **$35.3 million**[15](index=15&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the first quarter of 2024, the company experienced a net increase in cash and cash equivalents of **$628.3 million**. This was primarily driven by net cash provided by investing activities of **$405.3 million**, mainly from proceeds from securities, and net cash from operating activities of **$187.4 million**. Financing activities provided a net cash inflow of **$35.5 million** Q1 2024 Cash Flow Summary (Unaudited) | Cash Flow Category | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | | Net Cash Provided by Operating Activities | $187,400 | | Net Cash Provided by Investing Activities | $405,337 | | Net Cash Provided by Financing Activities | $35,544 | | **Net Increase in Cash and Cash Equivalents** | **$628,281** | | Cash and Cash Equivalents, Beginning of Period | $458,413 | | **Cash and Cash Equivalents, End of Period** | **$1,086,694** | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed information on accounting policies and financial statement line items, covering the securities portfolio with significant unrealized losses, loan portfolio breakdown, credit quality metrics, and details on recent acquisitions - The Held-to-Maturity securities portfolio had an amortized cost of **$12.0 billion** but a fair value of only **$10.5 billion** as of March 31, 2024, reflecting significant unrealized losses of **$1.5 billion** primarily due to changes in market interest rates[31](index=31&type=chunk) - Total nonperforming assets increased to **$83.8 million** (**0.39%** of total loans and other real estate) at March 31, 2024, up from **$72.7 million** (**0.34%**) at December 31, 2023[53](index=53&type=chunk)[55](index=55&type=chunk) - The allowance for credit losses on loans decreased to **$330.2 million** at March 31, 2024, from **$332.4 million** at year-end 2023. No provision for credit losses was recorded in Q1 2024 or Q1 2023[88](index=88&type=chunk) - The company completed the merger with First Bancshares of Texas, Inc. on May 1, 2023, and subsequently completed the merger with Lone Star State Bancshares, Inc. on April 1, 2024[144](index=144&type=chunk)[146](index=146&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2024 financial results, noting a net income decrease to **$110.4 million** due to lower net interest margin and higher noninterest expenses, while maintaining a strong capital position and pursuing strategic growth - The company's growth strategy is based on three main components: internal growth, efficient operations, and strategic acquisitions[156](index=156&type=chunk) - Net income for Q1 2024 was **$110.4 million** (**$1.18** per diluted share), down from **$124.7 million** (**$1.37** per diluted share) in Q1 2023, primarily due to decreased net interest income and increased noninterest expense[167](index=167&type=chunk) - The net interest margin on a tax-equivalent basis decreased by **14 basis points** to **2.79%** in Q1 2024 compared to **2.93%** in Q1 2023[172](index=172&type=chunk) [Results of Operations](index=54&type=section&id=MD%26A%20-%20Results%20of%20Operations) In Q1 2024, net interest income fell **2.1%** year-over-year to **$238.2 million** due to rising interest expenses. No provision for credit losses was recorded. Noninterest income saw a modest increase of **1.6%** to **$38.9 million**, while noninterest expense rose **10.4%** to **$135.8 million**, largely driven by costs associated with the FB Merger. The effective tax rate was **21.8%** Change in Net Interest Income (Q1 2024 vs Q1 2023) | Component | Change due to Volume (in thousands) | Change due to Rate (in thousands) | Total Change (in thousands) | | :--- | :--- | :--- | :--- | | **Increase in Interest Income** | **$21,547** | **$33,058** | **$54,605** | | **Increase in Interest Expense** | **$17,144** | **$42,684** | **$59,828** | | **Decrease in Net Interest Income** | **$4,403** | **$(9,626)** | **$(5,223)** | - There was no provision for credit losses for the three months ended March 31, 2024 and 2023[180](index=180&type=chunk) - Noninterest expense increased by **$12.8 million** (**10.4%**) YoY, primarily due to increases in salaries, benefits, and data processing costs related to the FB Merger[185](index=185&type=chunk) [Financial Condition](index=60&type=section&id=MD%26A%20-%20Financial%20Condition) As of March 31, 2024, the company's financial condition remained strong. Total loans increased slightly to **$21.27 billion**. Nonperforming assets rose to **$83.8 million** from **$72.7 million** at year-end 2023. The allowance for credit losses stood at **$330.2 million**, or **1.55%** of total loans. Deposits were stable at **$27.18 billion**. The company maintained a well-capitalized position with a CET1 ratio of **15.75%** - Total loans increased by **$84.7 million** (**0.4%**) to **$21.27 billion** at March 31, 2024, compared to December 31, 2023[193](index=193&type=chunk) - Nonperforming assets increased by **$11.1 million** to **$83.8 million** at March 31, 2024, with the majority of the balance attributable to acquired loans[207](index=207&type=chunk) - The allowance for credit losses on loans as a percentage of total nonperforming loans was **405.1%** at March 31, 2024[209](index=209&type=chunk) - The company participated in the Federal Reserve's Bank Term Funding Program (BTFP), with an outstanding balance of **$3.90 billion** as of March 31, 2024[242](index=242&type=chunk) - The company and its bank subsidiary remained well-capitalized, with a CET1 capital ratio of **15.75%** and a Tier 1 leverage ratio of **10.37%** for the holding company as of March 31, 2024[263](index=263&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=82&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages market risk, primarily interest rate risk, with no material changes reported from the 2023 Annual Report on Form 10-K - There have been no material changes in the Company's market risk exposures from those disclosed in the 2023 Form 10-K[266](index=266&type=chunk) [Controls and Procedures](index=82&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report[267](index=267&type=chunk) - There were no changes in the Company's internal control over financial reporting during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[268](index=268&type=chunk) [PART II—OTHER INFORMATION](index=83&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Legal Proceedings](index=83&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal actions, with management expecting no material adverse effect on financial statements from ultimate liabilities - The company states that any potential liability from ongoing legal actions is not expected to have a material adverse effect on its financial statements[270](index=270&type=chunk) [Risk Factors](index=83&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported compared to the company's 2023 Annual Report on Form 10-K - No material changes in risk factors were reported compared to the 2023 Annual Report on Form 10-K[271](index=271&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=83&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2024, the company repurchased **567,692** common shares at a weighted average price of **$62.12**, as part of a plan to repurchase up to **4.7 million** shares expiring in January 2025 Q1 2024 Share Repurchases | Period | Total Shares Purchased | Weighted Average Price Paid per Share | | :--- | :--- | :--- | | January 2024 | — | $ — | | February 2024 | 567,692 | $62.12 | | March 2024 | — | $ — | | **Total Q1 2024** | **567,692** | **$62.12** | - As of March 31, 2024, **4,137,070** shares remained available for repurchase under the current plan[272](index=272&type=chunk) [Other Information](index=83&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement for the company's common stock during Q1 2024 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q1 2024[275](index=275&type=chunk) [Exhibits](index=84&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including CEO and CFO certifications and Inline XBRL documents ```

Prosperity Bancshares, Inc. (NYSE:PB) Q1 2024 Earnings Conference Call April 24, 2024 11:30 AM ET Company Participants Charlotte Rasche - EVP and General Counsel David Zalman - Senior Chairman and CEO Asylbek Osmonov - CFO Tim Timanus - Chairman Kevin Hanigan - President and COO Conference Call Participants Peter Winter - D.A. Davidson Michael Rose - Raymond James Dave Rochester - Compass Point Catherine Mealor - KBW Brandon King - Truist Manan Gosalia - Morgan Stanley Jared Shaw - Barclays Jon Arfstrom - R ...

First Quarter 2024 "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This presentation 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 ...

```markdown [Press Release and Earnings Summary](index=1&type=section&id=Press%20Release) [First Quarter 2024 Highlights](index=1&type=section&id=First%20Quarter%202024%20Highlights) Prosperity Bancshares reported a net income of **$110.4 million**, or **$1.18 per diluted common share**, for the first quarter of 2024, a decrease from **$124.7 million**, or **$1.37 per share**, in Q1 2023, with key activities including loan and deposit growth, a net interest margin increase to **2.79%**, low nonperforming assets, share repurchases, and the completion of the Lone Star State Bancshares merger Metric | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income | $110.4 million | $124.7 million | | Diluted EPS | $1.18 | $1.37 | - Loans, excluding Warehouse Purchase Program and certain acquired loans, grew by **$115.8 million**, or **2.4% annualized**, during Q1 2024[5](index=5&type=chunk) - Deposits, excluding public funds, increased by **$109.8 million** in Q1 2024, with no brokered deposits purchased, and noninterest-bearing deposits constituted **35.1% of total deposits**[5](index=5&type=chunk) - The company repurchased **567,692 shares** of its common stock during the first quarter[5](index=5&type=chunk) - The merger with Lone Star State Bancshares, Inc. was completed on April 1, 2024[5](index=5&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management expressed excitement about the completed merger with Lone Star State Bancshares, highlighting its strategic importance, and emphasized the strength of the Texas economy and its positive outlook for job growth, reiterating focus on long-term customer relationships, strong asset quality, and delivering shareholder returns through dividends and share repurchases, noting a total capital return of **$278 million** in 2023 - The merger with Lone Star State Bancshares was completed on April 1, 2024, with operational integration scheduled for late October 2024[3](index=3&type=chunk) - Management highlighted the strength of the Texas economy, noting it is the world's eighth-largest and the top state for Fortune 500 headquarters[4](index=4&type=chunk) - The company maintains a strong tangible equity to tangible assets ratio of **10.33%** for Q1 2024 while actively returning capital to shareholders[7](index=7&type=chunk) - In 2023, total capital returned to shareholders through dividends and share repurchases amounted to **$278 million**[7](index=7&type=chunk) [Financial Performance](index=3&type=section&id=Financial%20Performance) [Results of Operations](index=3&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202024) For Q1 2024, net income was **$110.4 million**, an increase from Q4 2023 due to higher interest income and lower FDIC assessments, but a decrease from Q1 2023 primarily due to lower net interest income and higher noninterest expenses related to the FB Merger, with net interest income before provision for credit losses at **$238.2 million**, a net interest margin improvement by **4 basis points** sequentially to **2.79%**, increased noninterest income to **$38.9 million**, and noninterest expense decreasing from the prior quarter to **$135.8 million** Metric | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net Income | $110.4 million | $95.5 million | $124.7 million | | Diluted EPS | $1.18 | $1.02 | $1.37 | - Net interest income before provision for credit losses was **$238.2 million**, a **0.5% increase** from Q4 2023 and a **2.1% decrease** from Q1 2023[9](index=9&type=chunk) - The tax-equivalent net interest margin was **2.79%** in Q1 2024, up from **2.75%** in Q4 2023 but down from **2.93%** in Q1 2023[10](index=10&type=chunk) - Noninterest expense decreased **10.7%** from Q4 2023 to **$135.8 million**, mainly due to lower FDIC assessments, and increased **10.4%** from Q1 2023, driven by higher salaries and merger-related operating costs[12](index=12&type=chunk) [Balance Sheet Information](index=3&type=section&id=Balance%20Sheet%20Information) As of March 31, 2024, total assets stood at **$38.757 billion**, a **2.5% increase** year-over-year, total loans reached **$21.265 billion**, up **10.0%** from the prior year with organic growth of **3.0%** excluding warehouse and acquired loans, and total deposits were stable at **$27.176 billion**, with the report providing a detailed breakdown of loans and deposits showing the impact of the First Bancshares of Texas (FB Merger) acquisition Balance Sheet Item | Balance Sheet Item | March 31, 2024 | March 31, 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Total Assets | $38.757 billion | $37.829 billion | +2.5% | | Total Loans | $21.265 billion | $19.334 billion | +10.0% | | Total Deposits | $27.176 billion | $27.004 billion | +0.6% | - Excluding Warehouse Purchase Program loans and loans from the FB Merger, core loans grew **$115.8 million** or **2.4% annualized** compared to December 31, 2023[18](index=18&type=chunk) - Deposits from the FirstCapital Bank acquisition (FB Merger) totaled **$1.449 billion** as of March 31, 2024[18](index=18&type=chunk) [Asset Quality](index=4&type=section&id=Asset%20Quality) Asset quality remains strong with nonperforming assets at a low **0.24% of quarterly average interest-earning assets** as of March 31, 2024, a slight increase from the previous quarter but up from **0.07%** a year ago, with the allowance for credit losses on loans at **$330.2 million**, or **1.55% of total loans**, and net charge-offs of **$2.1 million** for the quarter, a significant decrease from the **$19.1 million** in Q4 2023 - Nonperforming assets totaled **$83.8 million**, or **0.24% of quarterly average interest-earning assets**, at March 31, 2024, compared to **$72.7 million (0.21%)** at December 31, 2023 and **$24.5 million (0.07%)** at March 31, 2023[20](index=20&type=chunk) Allowance for Credit Losses | Allowance for Credit Losses | March 31, 2024 | Dec 31, 2023 | March 31, 2023 | | :--- | :--- | :--- | :--- | | On Loans & Off-Balance Sheet | $366.7 million | $368.9 million | $312.1 million | | On Loans to Total Loans | 1.55% | 1.57% | 1.46% | | On Loans to Total Loans (Ex-Warehouse) | 1.62% | 1.63% | 1.52% | - Net charge-offs for Q1 2024 were **$2.1 million**, compared to **$19.1 million** in Q4 2023 and net recoveries of **$615 thousand** in Q1 2023[23](index=23&type=chunk) [Capital Management and Corporate Actions](index=6&type=section&id=Capital%20Management%20and%20Corporate%20Actions) [Dividend](index=6&type=section&id=Dividend) The company announced a cash dividend for the second quarter of 2024, maintaining its commitment to providing returns to shareholders - Prosperity Bancshares declared a second quarter 2024 cash dividend of **$0.56 per share**, payable on July 1, 2024, to shareholders of record as of June 14, 2024[25](index=25&type=chunk) [Stock Repurchase Program](index=6&type=section&id=Stock%20Repurchase%20Program) Prosperity continued to execute its stock repurchase program in the first quarter of 2024, buying back a portion of its outstanding common stock - Under its 2024 stock repurchase program, the company repurchased **567,692 shares** of common stock at an average price of **$62.12 per share** during Q1 2024[26](index=26&type=chunk) [Merger Activity](index=6&type=section&id=Merger%20Activity) The company completed its merger with Lone Star State Bancshares, Inc. on April 1, 2024, expanding its presence in West Texas, following the successful merger and integration of First Bancshares of Texas, Inc. in 2023 - On April 1, 2024, Prosperity completed the merger of Lone Star State Bancshares, Inc., which as of March 31, 2024, had total assets of **$1.384 billion**, loans of **$1.075 billion**, and deposits of **$1.241 billion**[27](index=27&type=chunk) - The Lone Star transaction involved issuing **2,376,182 shares** of Prosperity common stock and approximately **$64.1 million in cash**[28](index=28&type=chunk) - The merger with First Bancshares of Texas, Inc. was completed on May 1, 2023, adding **16 banking offices** and resulting in goodwill of **$164.8 million**[29](index=29&type=chunk)[30](index=30&type=chunk) [Financial Highlights (Tables)](index=13&type=section&id=Financial%20Highlights%20%28Tables%29) [Consolidated Financial Statements](index=13&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements provide a detailed five-quarter view of the company's balance sheet and income statement, with total assets at **$38.76 billion**, total loans at **$21.27 billion**, total deposits at **$27.18 billion**, total interest income at **$381.9 million**, and net income at **$110.4 million** for Q1 2024 Selected Balance Sheet Data (at period end, in thousands) | | Mar 31, 2024 | Dec 31, 2023 | Mar 31, 2023 | | :--- | :--- | :--- | :--- | | Total loans | $21,265,247 | $21,180,538 | $19,334,359 | | Total assets | $38,756,520 | $38,547,877 | $37,829,232 | | Total deposits | $27,175,518 | $27,179,809 | $27,004,236 | | Shareholders' equity | $7,104,544 | $7,079,330 | $6,739,117 | Selected Income Statement Data (for three months ended, in thousands) | | Mar 31, 2024 | Dec 31, 2023 | Mar 31, 2023 | | :--- | :--- | :--- | :--- | | Net interest income | $238,244 | $236,983 | $243,467 | | Total noninterest income | $38,870 | $36,568 | $38,266 | | Total noninterest expense | $135,848 | $152,171 | $123,000 | | Net income | $110,426 | $95,476 | $124,694 | [Key Performance and Capital Ratios](index=16&type=section&id=Key%20Performance%20and%20Capital%20Ratios) This section outlines key profitability, liquidity, and capital adequacy metrics, with Q1 2024 annualized return on average assets at **1.13%**, return on average tangible common equity at **12.06%**, efficiency ratio at **49.07%**, and strong capital levels including a Common Equity Tier 1 capital ratio of **15.78%** and a tangible equity to tangible assets ratio of **10.33%** Profitability Ratios (Q1 2024) | Metric | Value | | :--- | :--- | | Diluted earnings per share | $1.18 | | Return on average assets (annualized) | 1.13% | | Return on average tangible common equity (annualized) | 12.06% | | Tax equivalent net interest margin | 2.79% | | Efficiency ratio | 49.07% | Capital Ratios (at March 31, 2024) | Ratio | Value | | :--- | :--- | | Common equity tier 1 capital | 15.78% | | Tier 1 risk-based capital | 15.78% | | Total risk-based capital | 17.08% | | Tier 1 leverage capital | 10.37% | | Tangible equity to tangible assets | 10.33% | [Yield Analysis and Trends](index=17&type=section&id=Yield%20Analysis%20and%20Trends) The yield analysis shows a rising trend in asset yields and liability costs, with Q1 2024 yield on total interest-earning assets at **4.45%**, up from **4.35%** in the prior quarter and **3.92%** in the prior year, and the cost of total interest-bearing liabilities at **2.62%**, up from **2.58%** sequentially and **1.63%** year-over-year, resulting in a tax-equivalent net interest margin of **2.79%** for the quarter Yield/Rate Comparison (Annualized) | | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Yield on Total Loans | 5.83% | 5.75% | 5.29% | | Yield on Total Interest-Earning Assets | 4.45% | 4.35% | 3.92% | | Cost of Total Interest-Bearing Liabilities | 2.62% | 2.58% | 1.63% | | Net Interest Margin (Tax Equivalent) | 2.79% | 2.75% | 2.93% | [Loan and Deposit Composition](index=20&type=section&id=Loan%20and%20Deposit%20Composition) As of March 31, 2024, the loan portfolio of **$21.3 billion** was well-diversified, with significant concentrations in 1-4 family residential (**34.5%**) and commercial real estate (**26.5%**), and the deposit base of **$27.2 billion** was led by noninterest-bearing demand deposits, which comprised **35.1% of the total**, with a loan-to-deposit ratio of **78.3%** Loan Portfolio Composition (March 31, 2024) | Loan Type | Percentage | | :--- | :--- | | 1-4 family residential | 34.5% | | Commercial real estate | 26.5% | | Construction, land development | 13.5% | | Commercial and industrial | 9.1% | | Other | 16.4% | Deposit Composition (March 31, 2024) | Deposit Type | Percentage | | :--- | :--- | | Noninterest-bearing DDA | 35.1% | | Money market | 22.6% | | Interest-bearing DDA | 17.9% | | Certificates and other time deposits | 14.0% | | Savings | 10.4% | [Detailed Asset Quality and Loan Analysis](index=21&type=section&id=Detailed%20Asset%20Quality%20and%20Loan%20Analysis) This section provides a granular breakdown of specific loan portfolios and asset quality metrics, with total nonperforming assets at **$83.8 million**, largest portions in 1-4 family residential and commercial real estate, construction loans totaling **$2.88 billion**, and non-owner occupied commercial real estate exposure highest in the Houston and Dallas MSAs, along with details on acquired loan portfolios from past mergers Nonperforming Assets by Category (March 31, 2024) | Category | Amount (in thousands) | | :--- | :--- | | 1-4 family residential (includes home equity) | $30,206 | | Commercial real estate | $23,720 | | Construction, land development | $15,826 | | Commercial and industrial | $10,199 | | Other | $3,860 | - Non-owner occupied commercial real estate loans totaled **$3.65 billion**, with the largest concentrations in Houston (**$1.10 billion**) and Dallas (**$0.91 billion**)[69](index=69&type=chunk) - The total balance of acquired loan portfolios from various past mergers stood at **$2.17 billion** as of March 31, 2024[70](index=70&type=chunk) [Notes to Selected Financial Data](index=23&type=section&id=Notes%20to%20Selected%20Financial%20Data) [Reconciliation of Non-GAAP Financial Measures](index=23&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section provides reconciliations of non-GAAP financial measures to their nearest GAAP equivalents, which management uses for internal planning and to provide investors with a clearer view of core operating performance by excluding items such as merger-related expenses and the one-time FDIC special assessment, with key reconciled metrics including tangible book value per share, adjusted earnings per share, adjusted returns on assets and equity, and an adjusted efficiency ratio - Management uses non-GAAP measures to evaluate performance, excluding items like merger-related expenses, merger-related provision for credit losses, and the FDIC special assessment to better reflect core operating earnings[76](index=76&type=chunk) Tangible Book Value Per Share Reconciliation (Mar 31, 2024) | | Amount (in thousands) | | :--- | :--- | | Shareholders' equity (GAAP) | $7,104,544 | | Less: Goodwill and other intangible assets | ($3,457,159) | | Tangible shareholders' equity (Non-GAAP) | $3,647,385 | | **Tangible book value per share (Non-GAAP)** | **$39.00** | Adjusted Efficiency Ratio Reconciliation (Q1 2024 vs Q4 2023) | | Q1 2024 | Q4 2023 | | :--- | :--- | :--- | | Efficiency Ratio (GAAP) | 49.07% | 55.61% | | Adjusted Efficiency Ratio (Non-GAAP) | 49.07% | 48.23% | [Company Information and Forward-Looking Statements](index=8&type=section&id=Company%20Information%20and%20Forward-Looking%20Statements) [About Prosperity Bancshares, Inc.](index=8&type=section&id=About%20Prosperity%20Bancshares%2C%20Inc.) Prosperity Bancshares, Inc. is a **$38.757 billion** Houston-based regional financial holding company with a strong presence throughout Texas and Oklahoma, operating **288 full-service banking locations** as of March 31, 2024, and following a community banking philosophy since its founding in 1983, offering a wide range of personal and business banking services - As of March 31, 2024, Prosperity Bancshares is a **$38.757 billion** Houston-based regional financial holding company[35](index=35&type=chunk) - The company operates **288 full-service banking locations** across Texas and Oklahoma, serving consumers and businesses with a community banking approach[35](index=35&type=chunk)[36](index=36&type=chunk) [Cautionary Notes on Forward-Looking Statements](index=8&type=section&id=Cautionary%20Notes%20on%20Forward-Looking%20Statements) This report includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, which are not historical facts but are based on current expectations and subject to various risks and uncertainties, with the company cautioning that these statements are not guarantees of future performance and disclaiming any obligation to update them - The report contains forward-looking statements that involve inherent uncertainties and risks, including the ability to integrate acquisitions, sustain growth, and navigate economic conditions[37](index=37&type=chunk) - The company disclaims any obligation to update forward-looking statements to reflect future events or developments, with further details on risks available in the company's SEC filings[37](index=37&type=chunk)[38](index=38&type=chunk) ```

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 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) (State or other jurisdiction of incorporati ...

Financial Data and Key Metrics - Net income for Q4 2023 was $95 million, or $1.02 per diluted share, compared to $112 million, or $1.20 per diluted share, in Q3 2023, impacted by a one-time FDIC special assessment of $19.9 million and merger-related expenses [192] - Excluding the FDIC special assessment and merger-related expenses, net income was $111 million, or $1.19 per diluted share [192] - Annualized return on average assets, average common equity, and average tangible common equity (excluding one-time items) were 1.15%, 6.29%, and 12.3%, respectively [195] - Net interest margin (NIM) was 2.75% in Q4 2023, up from 2.72% in Q3 2023, but down from 3.05% in Q4 2022 [55] - Unrealized losses on the held-to-maturity bond book decreased from $1.6 billion to $1.1 billion net of tax in Q4 2023 [19] Business Line Data and Key Metrics - Loans decreased by $252 million (1.2%) to $21.2 billion in Q4 2023 compared to Q3 2023, but increased by $2.3 billion (12.4%) year-over-year [181] - Non-performing assets (NPAs) increased to $72.7 million in Q4 2023, up from $69.5 million in Q3 2023, primarily due to the First Bancshares merger [50] - Net charge-offs increased to $19.1 million in Q4 2023, up from $3.4 million in Q3 2023, largely due to the FirstCapital Bank merger [61] - The allowance for credit losses was $369 million, covering 5.1x non-performing loans [43] Market Data and Key Metrics - Deposits decreased by $133 million (0.5%) to $27.2 billion in Q4 2023 compared to Q3 2023, and by $1.4 billion (4.7%) year-over-year [45] - Non-interest-bearing deposits accounted for 36% of total deposits, with certificates of deposit representing only 13% [193] - The loan-to-deposit ratio was 62%-65%, well below the policy limit of 85% [10] Company Strategy and Industry Competition - The company is focused on maintaining liquidity and core deposits, avoiding broker deposits, and growing loans and deposits in tandem [12] - The company expects loan growth to be back-end loaded in 2024, with a target of 3%-5% growth, driven by repricing of fixed-rate loans and new loan production [135] - The company is optimistic about M&A opportunities, particularly in Texas and Oklahoma, and is awaiting regulatory approval for the Lone Star State Bancshares acquisition [51][93] - The company is positioned to benefit from asset repricing, with $2.1 billion in bond cash flows expected to be reinvested at higher rates, enhancing NIM and net interest income (NII) [13][167] Management Commentary on Operating Environment and Future Outlook - Management expects NIM to expand to historically normal levels over the next 24 months, with a target of 3.30%-3.40%, driven by loan repricing and reduced borrowing costs [68][69] - The company anticipates deposit growth of 2% in 2024, with potential for higher growth if rates decline and customers return funds to non-interest-bearing accounts [73][177] - Management is cautious about the pace of rate cuts, expecting fewer cuts than the market anticipates, but believes the company is well-positioned to benefit from either rate increases or decreases [111][125] Other Important Information - The company has a strong capital position, with a CET1 ratio of 10%, and is focused on increasing dividends and pursuing M&A opportunities rather than aggressive share buybacks [28][173] - The company is monitoring regulatory proposals on interchange and overdraft fees, which could impact service charge income if implemented [101][105] Q&A Session Summary Question: Outlook for NIM and NII in 2024 - The company expects NIM to expand to 2.96% in 6 months and 3.14% in 12 months, driven by loan repricing and reduced borrowing costs [69][70] - The company is not assuming significant rate cuts in its model but believes NIM will still expand even if rates decline [70][125] Question: Deposit Growth and Repricing - The company expects deposit growth of 2% in 2024, with potential for higher growth if rates decline [73][177] - The company has $3.5 billion in CDs maturing within 12 months, which can be repriced quickly if rates decline [88] Question: Loan Growth and Prepayment Activity - The company expects 3%-5% loan growth in 2024, with potential for higher growth if the economy rebounds [135] - Prepayment activity has slowed, with fewer payoffs in Q4 2023 compared to Q3 2023 [111] Question: M&A Strategy and Lone Star Deal - The company is awaiting regulatory approval for the Lone Star State Bancshares acquisition and remains interested in M&A opportunities, particularly in Texas and Oklahoma [51][93] - The company is focused on acquiring banks with strong core deposits and good management teams [170] Question: Impact of Rate Cuts on NIM - The company believes its balance sheet is neutrally positioned, with NIM expected to expand even if rates decline [123][125] - The company expects to benefit from reduced borrowing costs if rates decline, offsetting any impact on loan yields [122][124]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2023 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.® | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ...

Financial Data and Key Metrics Changes - The Board of Directors approved an increase in the fourth quarter 2023 dividend to $0.56 per share from $0.55 per share, reflecting confidence in the company and markets [13] - Net income for Q3 2023 was $112 million, down from $135 million in Q3 2022, with net income per diluted share at $1.20 compared to $1.49 in the same period last year [14] - Tangible capital increased by $243 million from September 30, 2022, to September 30, 2023, after paying $203 million in dividends and repurchasing $72 million of common stock [14] - The net interest margin on a tax-equivalent basis was 2.72% for Q3 2023, stable compared to 2.73% in Q2 2023, but down from 3.11% in Q3 2022 [15][29] Business Line Data and Key Metrics Changes - Loans totaled $21.4 billion on September 30, 2023, a decrease of $221 million or 1% from June 30, 2023, but an increase of $2.9 billion or 15.8% compared to September 30, 2022 [16] - Non-interest income was $38.7 million for Q3 2023, compared to $39.7 million in Q2 2023 and $34.7 million in Q3 2022 [30] - Non-interest expense decreased to $135.7 million in Q3 2023 from $145.9 million in Q2 2023, primarily due to merger-related expenses [30] Market Data and Key Metrics Changes - Deposits were $27.3 billion on September 30, 2023, a decrease of $68 million from June 30, 2023, and down $2 billion or 6.8% from September 30, 2022 [17][18] - Non-performing assets totaled $69 million, or 20 basis points of quarterly average interest-earning assets, compared to $62 million or 18 basis points in Q2 2023 [19][32] Company Strategy and Development Direction - The company is focused on optimizing its balance sheet and expects net interest margin to improve over the next 6 to 24 months as assets reprice to market rates [15][22] - The company is committed to the acquisition of Lone Star Bank shares, pending regulatory approvals, and is exploring further M&A opportunities [27][88] - The company anticipates continued consolidation in the banking industry due to increased costs and regulatory burdens [28] Management's Comments on Operating Environment and Future Outlook - Management noted that while loan growth is moderating, the Texas and Oklahoma economies are benefiting from relocations, which could drive future growth [22] - The management expressed confidence in the stability of their asset quality and reserves, despite potential macroeconomic challenges [99][102] - Management indicated that they are cautious about the future but believe their current reserve levels are appropriate [102] Other Important Information - The efficiency ratio improved to 48.7% for Q3 2023 from 53.2% in Q2 2023, indicating better cost management [31] - The company expects non-interest expense for Q4 2023 to be in the range of $134 million to $136 million, excluding a special FDIC assessment expected to add $10 million annually [30][111] Q&A Session Summary Question: What is the outlook for net interest margin (NIM)? - Management believes NIM has bottomed out and expects a moderate increase in Q4 2023, driven by balance sheet optimization and loan repricing [41][63] Question: What are the expectations for loan production and growth? - Loan production is expected to be low to mid-single digits for the next year, with some restrictions on lending due to deposit relationships [82][84] Question: Can you provide an update on the Lone Star acquisition? - The company is still working with regulators for approval on the Lone Star deal and remains committed to completing the transaction [88] Question: How is the company managing expenses in the current environment? - The company anticipates a 2% to 3% increase in expenses for 2024, excluding special assessments, while implementing automation initiatives to mitigate costs [110] Question: What is the current state of credit quality in commercial real estate? - Management reported stable credit quality in commercial real estate, particularly in multifamily and office sectors, with no significant issues observed [99][100]

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995 Third Quarter Highlights • Deposits, excluding public fund deposits, increased $259.9 million, with no brokered deposits purchased • Loans, excluding Warehouse Purchase Program loans and loans acquired in the Merger, increased $111.1 million during third quarter 2023 • Nonperforming assets to average earning assets remain low at 0.20% or $69.5 million • Pending merger with Lone Star State Bancshares, Inc. | --- | --- | --- | ...