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:

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.

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.