PROSPERITY BANCSHARES INC
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
PB$71.87-0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0000950170-24-055845
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0000950170-24-092984
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 182 previous paragraphs and 197 current paragraphs.
137 unchanged; 40 reworded; 16 added; 5 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 21 previous and 23 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
RECENT ACQUISITIONS
Current report
For the quarter ended June 30, 2024, net income available to common shareholders was $111.6 million or $1.17 per diluted common share compared with $86.9 million or $0.94 per diluted common share for the same period in 2023. Net income and net income per diluted common share for the second quarter of 2024 was impacted by an increase in net interest income and a gain on the
Current report
For the six months ended June 30, 2024, net income available to common shareholders was $222.0 million or $2.34 per diluted common share compared with $211.6 million or $2.30 per diluted common share for the six months ended June 30, 2023. Net income and net income per diluted common share for the six months ended June 30, 2024 was impacted by an increase in net interest income, a gain on the Visa Class B-1 stock exchange net of investment securities sales of $11.0 million, lower merger related provision for credit losses and a decrease in merger related expenses, partially offset by a FDIC special assessment of $3.6 million and an increase in noninterest expenses related to three months of Lone Star Bank operations. The Company posted annualized returns on average common equity of 6.15% and 6.18%, annualized returns on average assets of 1.13% and 1.09% and efficiency ratios of 50.49% and 48.38% for the six months ended June 30, 2024 and 2023, respectively.
Current report
For the Six Months Ended June 30, 2024
Current report
Net interest income before the provision for credit losses was $497.0 million for the six months ended June 30, 2024, an increase of $17.1 million or 3.6%, compared with $479.9 million 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 on federal funds sold and other earning assets and an increase in loan discount accretion, 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.
Current report
Interest income on loans was $642.7 million for the six months ended June 30, 2024, an increase of $108.9 million or 20.4%, compared with $533.8 million for the same period in 2023. The change was due to an increase in both the average balances and average rates on loans held for investment.
Current report
Interest income on securities was $128.8 million for the six months ended June 30, 2024, a decrease of $16.4 million or 11.3%, compared with $145.2 million for the same period in 2023, primarily due to a decrease in the average balances on investment securities.
Current report
Average interest-bearing liabilities were $22.29 billion for the six months ended June 30, 2024, an increase of $964.6 million or 4.5%, compared with $21.32 billion for the same period in 2023, primarily due to an increase in interest-bearing deposits and other borrowings partially offset by a decrease in securities sold under repurchase agreements. The average rate on interest-bearing liabilities was 2.69% for the six months ended June 30, 2024, an increase of 72 basis points, compared with 1.97% for the same period in 2022.
Current report
The net interest margin on a tax-equivalent basis was 2.87% for the six months ended June 30, 2024, an increase of 4 basis points, compared with 2.83% for the six months ended June 30, 2023. The change was primarily due to an increase in the average balances and average rates on loans and an increase in the average balances on federal funds sold and other earning assets and an increase in loan discount accretion, partially offset by an increase in the average balances and rates on interest-bearing deposits. The increases in the average balances on loans and deposits were primarily due to the LSSB Merger.
Current report
Annualized and based on average balances on an actual 366-day or 365-day basis for the six months ended June 30, 2024 and 2023.
Current report
Net charge-offs were $6.5 million for the six months ended June 30, 2024 compared with $15.5 million for the six months ended June 30, 2023. Net charge-offs for the six months ended June 30, 2024 included $1.9 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 LSSB Merger. Further, $8.9 million of reserves on resolved PCD loans was released to the general reserve.
Current report
Noninterest income totaled $46.0 million for the three months ended June 30, 2024 compared with $39.7 million for the same period in 2023, an increase of $6.3 million or 15.9%, primarily due to a gain on the Visa Class B-1 stock exchange net of investment securities sales, partially offset by the change in the net (loss) gain on sale or write-down of assets and a decrease in other noninterest income Noninterest income totaled $84.9 million for the six months ended June 30, 2024 compared with $78.0 million for the same period in 2023, an increase of $6.9 million or 8.9%, primarily due to a gain on the Visa Class B-1 stock exchange net of investment securities sales and an increase in trust income, partially offset by the change in the net (loss) gain on sale or write-down of assets and a decrease in other noninterest income.
Current report
Noninterest expense totaled $152.8 million for the quarter ended June 30, 2024 compared with $145.9 million for the quarter ended June 30, 2023, an increase of $7.0 million or 4.8%. Noninterest expense totaled $288.7 million for the six months ended June 30, 2024 compared with $268.9 million for the six months ended June 30, 2023, an increase of $19.8 million or 7.4%. The change for both periods was primarily due to a FDIC special assessment of $3.6 million, an increase in salaries and benefits and an increase in additional expenses related to three months of Lone Star Bank operations, partially offset by a decrease in merger expenses.
Current report
The following table represents a rollforward of the allowance for credit losses on off-balance sheet credit exposures as of the dates indicated.
Current report
Visa Class B-1 Stock Exchange. During the second quarter of 2024, the Company tendered all of its shares of 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. The Company recorded a gain of $20.6 million during the second quarter of 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, the Company received 48,492 shares of Class B-2 stock, recorded at zero cost basis, and 19,245 shares of Class C common stock and subsequently sold 6,415 shares of Class C stock. The Company intends to sell all remaining shares of Class C stock as permitted by the exchange agreement.
Current report
Annualized and based on average balances on an actual 366-day or 365-day basis for the six months ended June 30, 2024 and 2023.
Removed paragraphs (5)
Previous report
RECENT ACQUISITION
Previous report
SUBSEQUENT EVENT
Previous report
Noninterest income totaled $38.9 million for the three months ended March 31, 2024 compared with $38.3 million for the same period in 2023, an increase of $604 thousand or 1.6%.
Previous report
Noninterest expense totaled $135.8 million for the quarter ended March 31, 2024 compared with $123.0 million for the quarter ended March 31, 2023, an increase of $12.8 million or 10.4%. The change was primarily due to increases in salaries and benefits, other noninterest expense and in credit and debit card, data processing and software amortization expense primarily due to three months of operations related to the FB Merger in the first quarter 2024 compared to none in the first quarter 2023.
Previous report
Annualized and based on average balances on an actual 366-day and 365-day basis for the three months ended March 31, 2024 and 2023.
Reworded paragraphs (40)
Previous wording
Prosperity Bancshares, Inc., a Texas corporation (“Bancshares”), is a registered financial holding company that derives substantially all of its revenues and income from the operation of its bank subsidiary, Prosperity Bank (the “Bank,” and together with Bancshares, the “Company”). The Bank provides a wide array of financial products and services to businesses and consumers throughout Texas and Oklahoma. As of March 31, 2024, the Bank operated 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. The Company’s principal executive office is located at Prosperity Bank Plaza, 4295 San Felipe in Houston, Texas, and its telephone number is (281) 269-7199. The Company’s website address is www.prosperitybankusa.com. Information contained on the Company’s website is not incorporated by reference into this quarterly report on Form 10-Q and is not part of this or any other report.
Current wording
Prosperity Bancshares, Inc., a Texas corporation (“Bancshares”), is a registered financial holding company that derives substantially all of its revenues and income from the operation of its bank subsidiary, Prosperity Bank (the “Bank,” and together with Bancshares, the “Company”). The Bank provides a wide array of financial products and services to businesses and consumers throughout Texas and Oklahoma. As of June 30, 2024, the Bank operated 288 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; 8 in the Tulsa, Oklahoma area and 5 in the West Texas area currently doing business as Lone Star Bank. The Company’s principal executive office is located at Prosperity Bank Plaza, 4295 San Felipe in Houston, Texas, and its telephone number is (281) 269-7199. The
Previous wording
Total assets were $38.76 billion at March 31, 2024 compared with $38.55 billion at December 31, 2023, an increase of $208.6 million or 0.5%. Total loans were $21.27 billion at March 31, 2024 compared with $21.18 billion at December 31, 2023, an increase of $84.7 million or 0.4%. Total deposits were $27.18 billion at March 31, 2024 compared with $27.18 billion at December 31, 2023 with a decrease of $4.3 million. Total shareholders’ equity was $7.10 billion at March 31, 2024 compared with $7.08 billion at December 31, 2023, an increase of $25.2 million or 0.4%.
Current wording
Total assets were $39.76 billion at June 30, 2024 compared with $38.55 billion at December 31, 2023, an increase of $1.21 billion or 3.2%. Total loans were $22.32 billion at June 30, 2024 compared with $21.18 billion at December 31, 2023, an increase of $1.14 billion or 5.4%. Total deposits were $27.93 billion at June 30, 2024 compared with $27.18 billion at December 31, 2023, an increase of $753.3 million or 2.8%. Total shareholders’ equity was $7.28 billion at June 30, 2024 compared with $7.08 billion at December 31, 2023, an increase of $204.1 million or 2.9%.
Previous wording
Merger of Lone Star State Bancshares, Inc. — Effective April 1, 2024, the Company completed the merger of Lone Star State Bancshares, Inc. (“Lone Star”) into the Bancshares and the subsequent merger of its wholly owned subsidiary, Lone Star State Bank of West Texas (“Lone Star Bank”), into the Bank. Lone Star operated five banking centers in the West Texas area, including its main office in Lubbock, and one banking center in each of Brownfield, Midland, Odessa and Big Spring, Texas. As of March 31, 2024, Lone Star, on a consolidated basis, reported total assets of $1.38 billion, total loans of $1.08 billion and total deposits of $1.24 billion.
Current wording
Merger of Lone Star State Bancshares, Inc. — Effective April 1, 2024, the Company completed the merger of Lone Star State Bancshares, Inc. (“Lone Star”) into Bancshares and the subsequent merger of its wholly owned subsidiary Lone Star State Bank of West Texas (“Lone Star Bank”), into the Bank. Lone Star operated five full-service banking offices in the West Texas area, including its main office in Lubbock, and one banking center in each of Brownfield, Midland, Odessa and Big Spring, Texas. As of March 31, 2024, Lone Star, on a consolidated basis, reported total assets of $1.38 billion, total loans of $1.08 billion and total deposits of $1.24 billion.
Previous wording
Under the terms of the definitive agreement, Bancshares issued 2,376,182 shares of its common stock plus approximately $64.1 million in cash for all outstanding shares of Lone Star in the second quarter of 2024.
Current wording
Pursuant to the terms of the definitive agreement, Bancshares issued 2,376,182 shares of its common stock plus approximately $64.1 million in cash for all outstanding shares of Lone Star. This resulted in goodwill of $107.7 million as of June 30, 2024, which does not include all the subsequent fair value adjustments that have not yet been finalized. Goodwill represents the excess of the total purchase price paid over the fair value of the assets acquired, net of the fair value of liabilities assumed. Additionally, the Company recognized $17.7 million of core deposit intangibles as of June 30, 2024.
Previous wording
Merger of First Bancshares of Texas, Inc.— Effective May 1, 2023, the Company completed the merger of First Bancshares of Texas, Inc. (“First Bancshares”) into the Bancshares and the subsequent merger of its wholly owned subsidiary, FirstCapital Bank of Texas, N.A. (“FirstCapital Bank”), into the Bank (collectively, the “FB Merger”). FirstCapital Bank operated 16 full-service banking offices in six different markets in West, North and Central Texas areas, including its main office in Midland, Texas, and banking offices in Midland, Lubbock, Amarillo, Wichita Falls, Burkburnett, Byers, Henrietta, Dallas, Horseshoe Bay, Marble Falls and Fredericksburg, Texas. As of March 31, 2023, First Bancshares, on a consolidated basis, reported total assets of $2.14 billion, total loans of $1.65 billion and total deposits of $1.71 billion.
Current wording
Merger of First Bancshares of Texas, Inc.— Effective May 1, 2023, the Company completed the merger of First Bancshares of Texas, Inc. (“First Bancshares”) into Bancshares and the subsequent merger of its wholly owned subsidiary, FirstCapital Bank of Texas, N.A. (“FirstCapital Bank”), into the Bank (collectively, the “FB Merger”). FirstCapital Bank operated 16 full-service banking offices in six different markets in West, North and Central Texas areas, including its main office in Midland, Texas, and banking offices in Midland, Lubbock, Amarillo, Wichita Falls, Burkburnett, Byers, Henrietta, Dallas, Horseshoe Bay, Marble Falls and Fredericksburg, Texas. As of March 31, 2023, First Bancshares, on a consolidated basis, reported total assets of $2.14 billion, total loans of $1.65 billion and total deposits of $1.71 billion.
Previous wording
Pursuant to the terms of the definitive agreement, the Bancshares issued 3,583,370 shares of its common stock and approximately $91.5 million in cash for all outstanding shares of First Bancshares capital stock. As of March 31, 2024, the Company recognized goodwill of $164.8 million, which does not include all the subsequent fair value adjustments that have not yet been finalized. During the second quarter of 2023, the Company completed the operational conversion of FirstCapital Bank.
Current wording
Pursuant to the terms of the definitive agreement, Bancshares issued 3,583,370 shares of its common stock plus approximately $91.5 million in cash for all outstanding shares of First Bancshares capital stock. As of June 30, 2024, the Company recognized goodwill of $164.8 million, which includes all the final subsequent fair value adjustments. During the second quarter of 2023, the Company completed the operational conversion of FirstCapital Bank.
Previous wording
Net income available to common shareholders was $110.4 million for the quarter ended March 31, 2024 compared with $124.7 million for the same period in 2023. The change was primarily due to a decrease in net interest income and an increase in noninterest expense primarily due to an increase in salaries and benefits and expenses due to the FB Merger. Net income per diluted common share was $1.18 for the quarter ended March 31, 2024 compared with $1.37 for the same period in 2023. The Company posted annualized returns on average common equity of 6.20% and 7.38%, annualized returns on average assets of 1.13% and 1.31% and efficiency ratios of 49.07% and 43.68% for the quarters ended March 31, 2024 and 2023, respectively. The efficiency ratio is calculated by dividing total noninterest expense (excluding net gains and losses on the sale or write down of assets and securities) by the sum of net interest income and noninterest income. Because the ratio is a measure of revenues and expenses resulting from the Company’s lending activities and fee-based banking services, net gains and losses on the sale or write-down of assets and securities are not included. Additionally, taxes are not part of this calculation.
Current wording
Visa, Inc. (“Visa”) Class B-1 stock exchange net of investment securities sales of $10.7 million, partially offset by a merger related provision for credit losses of $9.1 million, merger related expenses of $4.4 million, a FDIC special assessment of $3.6 million and an increase in noninterest expenses related to three months of Lone Star Bank operations. The Company posted annualized returns on average common equity of 6.10% and 5.01%, annualized returns on average assets of 1.12% and 0.89% and efficiency ratios of 51.82% and 53.21% for the quarters ended June 30, 2024 and 2023, respectively. The efficiency ratio is calculated by dividing total noninterest expense (excluding net gains and losses on the sale, write down or write up of assets and securities) by the sum of net interest income and noninterest income. Because the ratio is a measure of revenues and expenses resulting from the Company’s lending activities and fee-based banking services, net gains and losses on the sale, write-up or write-down of assets and securities are not included. Additionally, taxes are not part of this calculation.
Previous wording
Net interest income before the provision for credit losses was $238.2 million for the quarter ended March 31, 2024, a decrease of $5.2 million or 2.1%, compared with $243.5 million for the same period in 2023. The change was primarily due to an increase in the average balances on other borrowings, an increase in the average rates on interest-bearing deposits and a decrease in the average balance on investment securities, partially offset by an increase in the average balances and average rates on loans.
Current wording
Net interest income before the provision for credit losses was $258.8 million for the quarter ended June 30, 2024, an increase of $22.3 million or 9.4%, compared with $236.5 million 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 on federal funds sold and other earning assets, an increase in loan discount accretion, and a decrease in the average balances 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.
Previous wording
Interest income on loans was $306.2 million for the quarter ended March 31, 2024, an increase of $59.1 million or 23.9%, compared with $247.1 million for the same period in 2023. The increase was due to an increase in both the average balances and average rates on loans.
Current wording
Interest income on loans was $336.4 million for the quarter ended June 30, 2024, an increase of $49.8 million or 17.4%, compared with $286.6 million for the same period in 2023. The increase was due to an increase in both the average balances and average rates on loans.
Previous wording
Interest income on securities was $66.4 million for the quarter ended March 31, 2024, a decrease of $6.8 million or 9.2%, compared with $73.2 million for the same period in 2023, primarily due to a decrease in the average balances on investment securities.
Current wording
Interest income on securities was $62.4 million for the quarter ended June 30, 2024, a decrease of $9.6 million or 13.4%, compared with $72.1 million for the same period in 2023, primarily due to a decrease in the average balances on investment securities.
Previous wording
Average interest-bearing liabilities were $22.10 billion for the quarter ended March 31, 2024, an increase of $1.28 billion or 6.1%, compared with $20.82 billion for the same period in 2023, primarily due to an increase in other borrowings and an increase in average rates on interest-bearing deposits. The average rate on interest-bearing liabilities was 2.62% for the quarter ended March 31, 2024, an increase of 99 basis points, compared with 1.63% for the same period in 2023.
Current wording
Average interest-bearing liabilities were $22.48 billion for the quarter ended June 30, 2024, an increase of $656.5 million or 3.0%, compared with $21.83 billion for the same period in 2023, primarily due to an increase in interest-earning deposits partially offset by a decrease in other borrowings and securities sold under repurchase agreements. The average rate on interest-bearing liabilities was 2.76% for the quarter ended June 30, 2024, an increase of 48 basis points, compared with 2.28% for the same period in 2023.
Previous wording
The net interest margin on a tax-equivalent basis was 2.79% for the quarter ended March 31, 2024, a decrease of 14 basis points compared with 2.93% for the same period in 2023. The change was primarily due to an increase in the average balances on other borrowings, an increase in the average rates on interest-bearing deposits and a decrease in the average balance on investment securities, partially offset by an increase in the average balances and average rates on loans.
Current wording
The net interest margin on a tax-equivalent basis was 2.94% for the quarter ended June 30, 2024, an increase of 21 basis points compared with 2.73% 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 on federal funds sold and other earning assets, an increase in loan discount accretion, and a decrease in the average balances on other borrowings, partially offset by an increase in the average balances and rates on interest-bearing deposits. The increases in the average balances on loans and deposits were primarily due to the LSSB Merger.
Previous wording
There was no provision for credit losses for the three months ended March 31, 2024 and 2023.
Current wording
The provision for credit losses was $9.1 million for the three and six months ended June 30, 2024 compared to the $18.5 million provision for credit losses for the three and six months ended June 30, 2023. As a result of the loans acquired in the LSSB 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.
Previous wording
Net charge-offs were $2.1 million for the quarter ended March 31, 2024 compared with net recoveries of $615 thousand for the quarter ended March 31, 2023. Net charge-offs for the three months ended March 31, 2024 included $991 thousand related to resolved PCD loans, which had specific reserves that were allocated to the charge-offs. Further, an additional $4.1 million of specific reserves on resolved PCD loans without any related charge-offs was released to the general reserve.
Current wording
Net charge-offs were $4.4 million for the quarter ended June 30, 2024 compared with net charge-offs of $16.1 million for the quarter ended June 30, 2023. Net charge-offs for the three months ended June 30, 2024 included $878 thousand 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 LSSB Merger. Further, $4.8 million of reserves on resolved PCD loans without any related charge-offs was released to the general reserve.
Previous wording
Includes stock-based compensation expense of $3.4 million and $3.2 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Includes stock-based compensation expense of $3.1 million and $2.7 million for the three months ended June 30, 2024 and 2023, respectively, and $6.5 million and $5.9 million for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
The amount of federal and state income tax expense is influenced by the amount of pre-tax income, the amount of tax-exempt income and the amount of other nondeductible expenses. Income tax expense totaled $30.8 million for the three months ended March 31, 2024 compared with $34.0 million for the same period in 2023, a decrease of $3.2 million or 9.4%. The Company’s effective tax rate for the three months ended March 31, 2024 and 2023 was 21.8% and 21.4%, respectively.
Current wording
The amount of federal and state income tax expense is influenced by the amount of pre-tax income, the amount of tax-exempt income and the amount of other nondeductible expenses. Income tax expense totaled $31.3 million for the three months ended June 30, 2024 compared with $24.8 million for the same period in 2023, an increase of $6.5 million or 26.1%. Income tax expense totaled $62.1 million for the six months ended June 30, 2024 compared with $58.8 million for the same period in 2023, an increase of $3.3 million or 5.6%. The Company’s effective tax rate for the three months ended June 30, 2024 and 2023 was 21.9% and 22.2%, respectively. The Company’s effective tax rate for the six months ended June 30, 2024 and 2023 was 21.9% and 21.8%, respectively.
Previous wording
The Company separates its loan portfolio into two general categories of loans: (1) “originated loans,” which are loans originated by Prosperity Bank and made pursuant to the Company’s loan policy and procedures in effect at the time the loan was made, and (2) “acquired loans,” which are loans acquired in a business combination and recorded at fair value at acquisition date. Those acquired loans that are renewed or substantially modified after the date of the business combination are referred to as “re-underwritten acquired loans.” If a renewal or substantial modification of an acquired loan is underwritten by the Company with a new credit analysis, the loan may no longer be categorized as an acquired loan. For example, acquired loans to one borrower may be combined into a new loan with a new loan number and categorized as an originated loan. Acquired loans with a fair value discount or premium at the date of the business combination that remained at the reporting date are referred to as “fair-valued acquired loans.” All fair-valued acquired loans are further categorized into PCD loans and “Non-PCD loans.” Acquired loans with evidence of credit quality deterioration as of the acquisition date when compared to the origination date are classified as PCD loans.
Current wording
The Company separates its loan portfolio into two general categories of loans: (1) “originated loans,” which are loans originated by the Company and made pursuant to the Company’s loan policy and procedures in effect at the time the loan was made, and (2) “acquired loans,” which are loans acquired in a business combination and recorded at fair value at acquisition date. Those acquired loans that are renewed or substantially modified after the date of the business combination are referred to as “re-underwritten acquired loans.” If a renewal or substantial modification of an acquired loan is underwritten by the Company with a new credit analysis, the loan may no longer be categorized as an acquired loan. For example, acquired loans to one borrower may be combined into a new loan with a new loan number and categorized as an originated loan. Acquired loans with a fair value discount or premium at the date of the business combination that remained at the reporting date are referred to as “fair-valued acquired loans.” All fair-valued acquired loans are further categorized into PCD loans and “Non-PCD loans.” Acquired loans with evidence of credit quality deterioration as of the acquisition date when compared to the origination date are classified as PCD loans.
Previous wording
At March 31, 2024, total loans were $21.27 billion, an increase of $84.7 million or 0.4%, compared with $21.18 billion at December 31, 2023. Loans at March 31, 2024 included $6.4 million of loans held for sale and $864.9 million of Warehouse Purchase Program loans compared with $5.7 million of loans held for sale and $822.2 million of Warehouse Purchase Program loans at December 31, 2023. At March 31, 2024 and December 31, 2023, loans represented 54.9% of total assets.
Current wording
At June 30, 2024, total loans were $22.32 billion, an increase of $1.14 billion or 5.4%, compared with $21.18 billion at December 31, 2023. Loans at June 30, 2024 included $10.0 million of loans held for sale and $1.08 billion of Warehouse Purchase Program loans compared with $5.7 million of loans held for sale and $822.2 million of Warehouse Purchase Program loans at December 31, 2023. At June 30, 2024, loans represented 56.1% of total assets compared with 54.9% of total assets at December 31, 2023.
Previous wording
Nonperforming assets increased $11.1 million to $83.8 million at March 31, 2024 compared with $72.7 million at December 31, 2023, with the majority of the balance for each period attributable to acquired loans.
Current wording
Nonperforming assets increased $16.9 million to $89.6 million at June 30, 2024 compared with $72.7 million at December 31, 2023, with a significant portion of the balance for each period attributable to acquired loans.
Previous wording
Nonperforming assets were 0.39% of total loans and other real estate at March 31, 2024 and 0.34% of total loans and other real estate at December 31, 2023. The allowance for credit losses on loans as a percentage of total nonperforming loans was 405.1% at March 31, 2024 and 468.89% at December 31, 2023.
Current wording
Nonperforming assets were 0.40% of total loans and other real estate at June 30, 2024 and 0.34% of total loans and other real estate at December 31, 2023. The allowance for credit losses on loans as a percentage of total nonperforming loans was 425.9% at June 30, 2024 and 468.9% at December 31, 2023.
Previous wording
The Company had gross charge-offs on originated loans of $1.9 million during the three months ended March 31, 2024. Partially offsetting these charge-offs were recoveries on originated loans of $381 thousand. Gross charge-offs on acquired loans were $1.7 million during the three months ended March 31, 2024. Offsetting these charge-offs were recoveries on acquired loans of $1.1 million. Total charge-offs for the three months ended March 31, 2024 were $3.6 million, partially offset by total recoveries of $1.5 million.
Current wording
The Company had gross charge-offs on originated loans of $4.7 million during the six months ended June 30, 2024. Partially offsetting these charge-offs were recoveries on originated loans of $685 thousand. Gross charge-offs on acquired loans were $5.0 million during the six months ended June 30, 2024. Offsetting these charge-offs were recoveries on acquired loans of $2.5 million. Total charge-offs for the six months ended June 30, 2024 were $9.7 million, partially offset by total recoveries of $3.2 million.
Previous wording
The allowance for credit losses on loans totaled $330.2 million at March 31, 2024 compared to $332.4 million at December 31, 2023, a decrease of $2.1 million or 0.6%. The allowance for credit losses on loans totaled 1.55% of total loans at March 31, 2024 and 1.57% of total loans at December 31, 2023.
Current wording
The allowance for credit losses on loans totaled $359.9 million at June 30, 2024 compared with $332.4 million at December 31, 2023, an increase of $27.5 million or 8.3%, primarily due to the LSSB Merger. The allowance for credit losses on loans totaled 1.61% of total loans at June 30, 2024 and 1.57% of total loans at December 31, 2023.
Previous wording
At March 31, 2024, $226.3 million of the allowance for credit losses on loans was attributable to originated loans, an increase of $3.9 million or 1.8% compared with $222.4 million of the allowance at December 31, 2023. At March 31, 2024, $30.0 million of the allowance for credit losses on loans was attributable to re-underwritten acquired loans compared with $30.0 million of the allowance at December 31, 2023, an increase of $89 thousand or 0.3%. At March 31, 2024, $20.4 million of the allowance for credit losses on loans was attributable to Non-PCD loans compared with $22.3 million of the allowance at December 31, 2023, a decrease of $1.9 million or 8.4%. At March 31, 2024, $53.4 million of the allowance for credit losses on loans was attributable to PCD loans compared with $57.7 million of the allowance at December 31, 2023, a decrease of $4.3 million or 7.4%.
Current wording
At June 30, 2024, $223.9 million of the allowance for credit losses on loans was attributable to originated loans, an increase of $1.5 million or 0.7% compared with $222.4 million of the allowance at December 31, 2023. At June 30, 2024, $30.5 million of the allowance for credit losses on loans was attributable to re-underwritten acquired loans compared with $30.0 million of the allowance at December 31, 2023, an increase of $525 thousand or 1.8%. At June 30, 2024, $30.8 million of the allowance for credit losses on loans was attributable to Non-PCD loans compared with $22.3 million of the allowance at December 31, 2023, an increase of $8.5 million or 37.9%. At June 30, 2024, $74.7 million of the allowance for credit losses on loans was attributable to PCD loans compared with $57.7 million of the allowance at December 31, 2023, an increase of $17.0 million or 29.5%.
Previous wording
At March 31, 2024, the Company had $26.0 million of total outstanding accretable discounts on Non-PCD loans and PCD loans. The Company believes that the allowance for credit losses on loans at March 31, 2024 is adequate to absorb expected lifetime losses that may be realized from the loan portfolio as of such date. Nevertheless, the Company could sustain losses in future periods which could be substantial in relation to the size of the allowance at March 31, 2024.
Current wording
At June 30, 2024, the Company had $43.8 million of total outstanding accretable discounts on Non-PCD loans and PCD loans. The Company believes that the allowance for credit losses on loans at June 30, 2024 is adequate to absorb expected lifetime losses that may be realized from the loan portfolio as of such date. Nevertheless, the Company could sustain losses in future periods which could be substantial in relation to the size of the allowance at June 30, 2024.
Previous wording
The allowance for credit losses on off-balance sheet credit exposures estimates expected credit losses over the contractual period in which there is exposure to credit risk via a contractual obligation to extend credit, except when an obligation is unconditionally cancelable by the Company. The allowance is adjusted by provisions for credit losses charged to earnings that increase the allowance, or by provision releases returned to earnings that decrease the allowance. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on the commitments expected to fund. The estimate of commitments expected to fund is affected by historical analysis of utilization rates. The expected credit loss rates applied to the commitments expected to fund are affected by the general valuation allowance utilized for outstanding balances with the same underlying assumptions and drivers. As of March 31, 2024 and December 31, 2023, the Company had $36.5 million in allowance for credit losses on off-balance sheet credit exposures. The allowance for credit losses on off-balance sheet credit exposures is a separate line item on the Company’s consolidated balance sheet.
Current wording
The allowance for credit losses on off-balance sheet credit exposures estimates expected credit losses over the contractual period in which there is exposure to credit risk via a contractual obligation to extend credit, except when an obligation is unconditionally cancelable by the Company. The allowance is adjusted by provisions for credit losses charged to earnings that increase the allowance, or by provision releases returned to earnings that decrease the allowance. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on the commitments expected to fund. The estimate of commitments expected to fund is affected by historical analysis of utilization rates. The expected credit loss rates applied to the commitments expected to fund are affected by the general valuation allowance utilized for outstanding balances with the same underlying assumptions and drivers. As of June 30, 2024 and December 31, 2023, the Company had $37.6 million and $36.5 million, respectively, in allowance for credit losses on off-balance sheet credit exposures, with the increase due to the LSSB Merger. The allowance for credit losses on off-balance sheet credit exposures is a separate line item on the Company’s consolidated balance sheet.
Previous wording
The carrying cost of securities totaled $12.30 billion at March 31, 2024 compared with $12.80 billion at December 31, 2023, a decrease of $502.8 million or 3.9%. At March 31, 2024, securities represented 31.7% of total assets compared with 33.2% of total assets at December 31, 2023.
Current wording
The carrying cost of securities totaled $11.70 billion at June 30, 2024 compared with $12.80 billion at December 31, 2023, a decrease of $1.10 billion or 8.6%. At June 30, 2024, securities represented 29.4% of total assets compared with 33.2% of total assets at December 31, 2023.
Previous wording
Held to maturity securities. The Company’s held to maturity investments include mortgage-related bonds issued by either the Government National Mortgage Corporation (“Ginnie Mae”), Fannie Mae or Federal Home Loan Mortgage Corporation (“Freddie Mac”). Ginnie Mae issued securities are explicitly guaranteed by the U.S. government, while Fannie Mae and Freddie Mac issued securities are fully guaranteed by those respective United States government-sponsored agencies, and conditionally guaranteed by the full faith and credit of the United States. The Company’s held to maturity securities also include taxable and tax-exempt municipal securities issued primarily by school districts, utility districts and municipalities located in Texas. The Company’s investment in municipal securities is exposed to credit risk. The securities are highly rated by major rating agencies and regularly reviewed by management. A significant portion are guaranteed or insured by either the Texas Permanent School Fund, Assured Guaranty or Build America Mutual. As of March 31, 2024 the Company’s municipal securities represent 0.9% of the securities portfolio. Management has the ability and intent to hold the securities classified as held to maturity until they mature, at which time the Company will receive full value for the securities. Accordingly, as of March 31, 2024, management believes that there is no potential for material credit losses on held to maturity securities.
Current wording
Held to maturity securities. The Company’s held to maturity investments include mortgage-related bonds issued by either the Government National Mortgage Corporation (“Ginnie Mae”), Fannie Mae or Federal Home Loan Mortgage Corporation (“Freddie Mac”). Ginnie Mae issued securities are explicitly guaranteed by the U.S. government, while Fannie Mae and Freddie Mac issued securities are fully guaranteed by those respective United States government-sponsored agencies, and conditionally guaranteed by the full faith and credit of the United States. The Company’s held to maturity securities also include taxable and tax-exempt municipal securities issued primarily by school districts, utility districts and municipalities located in Texas. The Company’s investment in municipal securities is exposed to credit risk. The securities are highly rated by major rating agencies and regularly reviewed by management. A significant portion are guaranteed or insured by either the Texas Permanent School Fund, Assured Guaranty or Build America Mutual. As of June 30, 2024 the Company’s municipal securities represent 1.0% of the securities portfolio. Management has the ability and intent to hold the securities classified as held to maturity until they mature, at which time the Company will receive full value for the securities. Accordingly, as of June 30, 2024, management believes that there is no potential for material credit losses on held to maturity securities.
Previous wording
Total deposits were $27.18 billion at March 31, 2024 compared with $27.18 billion at December 31, 2023 with a decrease of $4.3 million. At March 31, 2024, noninterest-bearing deposits totaled $9.53 billion, a decrease of $250.0 million or 2.6% compared with $9.78 billion at December 31, 2023. Interest-bearing deposits totaled $17.65 billion at March 31, 2024 compared with $17.40 billion at December 31, 2023, an increase of $245.7 million or 1.4%.
Current wording
Total deposits were $27.93 billion at June 30, 2024 compared with $27.18 billion at December 31, 2023, an increase of $753.3 million or 2.8%. Total noninterest-bearing deposits were $9.71 billion at June 30, 2024 compared with $9.78 billion at December 31, 2023, a decrease of $70.1 million or 0.7%. Interest-bearing deposits were $18.23 billion at June 30, 2024 compared with $17.40 billion at December 31, 2023, an increase of $823.3 million or 4.7%. The increases were primarily due to the LSSB Merger.
Previous wording
Average deposits for the three months ended March 31, 2024 were $27.16 billion, a decrease of $733.2 million or 2.6%, compared with $27.89 billion for the three months ended March 31, 2023. The ratio of average interest-bearing deposits to total average deposits was 65.2% and 62.8% during the first three months of 2024 and 2023, respectively.
Current wording
Average deposits for the six months ended June 30, 2024 were $27.63 billion, an increase of $72.3 million or 0.3%, compared with $27.56 billion for the six months ended June 30, 2023. The ratio of average interest-bearing deposits to total average deposits was 65.2% and 62.5% during the first six months of 2024 and 2023, respectively.
Previous wording
Bank Term Funding Program— During the second quarter of 2023, the Bank began participating in the Federal Reserve’s Bank Term Funding Program (“BTFP”), which ceased extending new loans as of March 11, 2024. Under the BTFP program, eligible depository institutions could obtain loans of up to one year in length by pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets are valued at par. At March 31, 2024, the Bank had secured borrowing capacity of $5.53 billion collateralized by the par value of pledged securities totaling $5.53 billion. At March 31, 2024, the balance outstanding was $3.90 billion consisting of a one-term advance maturing in January 2025 with an interest rate of 4.76%.
Current wording
Bank Term Funding Program— During the second quarter of 2023, the Bank began participating in the Federal Reserve’s Bank Term Funding Program (“BTFP”), which ceased extending new loans as of March 11, 2024. Under the BTFP program, eligible depository institutions could obtain loans of up to one year in length by pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets are valued at par. At June 30, 2024, the balance outstanding was $3.90 billion consisting of a one-term advance maturing in January 2025 with an interest rate of 4.76%, collateralized by the par value of pledged securities.
Previous wording
Securities sold under repurchase agreements— At March 31, 2024, the Company had $261.7 million in securities sold under repurchase agreements with banking customers compared with $309.3 million at December 31, 2023, a decrease of $47.6 million or 15.4%. Repurchase agreements are generally settled on the following business day; however, approximately $3.0 million of the repurchase agreements outstanding at March 31, 2024 have maturity dates ranging from 12 to 24 months. All securities sold under repurchase agreements are collateralized by certain pledged securities.
Current wording
Securities sold under repurchase agreements— At June 30, 2024, the Company had $233.7 million in securities sold under repurchase agreements with banking customers compared with $309.3 million at December 31, 2023, a decrease of $75.6 million or 24.4%. Repurchase agreements are generally settled on the following business day; however, approximately $3.0 million of the repurchase agreements outstanding at June 30, 2024 have maturity dates ranging from 12 to 24 months. All securities sold under repurchase agreements are collateralized by certain pledged securities.
Previous wording
As of March 31, 2024, the Company had outstanding $4.43 billion in commitments to extend credit, $83.8 million in commitments associated with outstanding standby letters of credit and $1.06 billion in commitments associated with unused capacity on Warehouse Purchase Program loans. Since commitments associated with letters of credit, unused capacity on Warehouse Purchase Program loans and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.
Current wording
As of June 30, 2024, the Company had outstanding $4.35 billion in commitments to extend credit, $91.2 million in commitments associated with outstanding standby letters of credit and $855.7 million in commitments associated with unused capacity on Warehouse Purchase Program loans. Since commitments associated with letters of credit, unused capacity on Warehouse Purchase Program loans and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.
Previous wording
Asset liquidity is provided by cash and assets which are readily marketable or which will mature in the near future. As of March 31, 2024, the Company had cash and cash equivalents of $1.09 billion compared with $458.4 million at December 31, 2023, an increase of $628.3 million or 137.1%. The increase was primarily due to net proceeds from principal paydowns and sales of investment securities of $496.1 million, net cash provided by operating activities of $187.4 million and proceeds from short-term borrowings of $175.0 million, partially offset by a net increase in loans of $85.4 million, payment of cash dividends of $52.4 million, repurchase of common stock of $35.3 million and a decrease in securities sold under repurchase agreements of $47.6 million.
Current wording
Asset liquidity is provided by cash and assets which are readily marketable or which will mature in the near future. As of June 30, 2024, the Company had cash and cash equivalents of $1.51 billion compared with $458.4 million at December 31, 2023, an increase of $1.05 billion or 228.9%. The increase was primarily due to net proceeds from maturities, sales and principal paydowns of investment securities of $1.14 billion, net cash provided by operating activities of $403.9 million, net cash provided by the purchase of Lone Star of $169.9 million and net proceeds from other short-term borrowings of $175.0 million, partially offset by net decrease in deposits of $487.0 million, net increase in loans of $87.2 million, payment of cash dividends of $105.8 million, net decrease in securities sold under repurchase agreements of $75.6 million and repurchase of common stock of $74.8 million.
Previous wording
On January 16, 2024, the Company announced a stock repurchase program under which the Company could repurchase up to 5%, or approximately 4.7 million shares, of its outstanding common stock over a one-year period expiring on January 16, 2025, at the discretion of management. Under the stock repurchase program, Bancshares may repurchase shares from time to time at prevailing market prices, through open-market purchases or privately negotiated transactions, depending upon market conditions. Repurchases under this program may also be made in transactions outside the safe harbor during a pending merger, acquisition or similar transaction. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities. Shares of stock repurchased are held as authorized but unissued shares. Bancshares is not obligated to purchase any particular number of shares, and Bancshares may suspend, modify or terminate the program at any time and for any reason without prior notice. Under its 2024 stock repurchase program, Bancshares repurchased 567,692 shares of its common stock at an average weighted price of $62.12 per share during the three months ended March 31, 2024.
Current wording
On January 16, 2024, the Company announced a stock repurchase program under which the Company could repurchase up to 5%, or approximately 4.7 million shares, of its outstanding common stock over a one-year period expiring on January 16, 2025, at the discretion of management. Under the stock repurchase program, Bancshares may repurchase shares from time to time at prevailing market prices, through open-market purchases or privately negotiated transactions, depending upon market conditions. Repurchases under this program may also be made in transactions outside the safe harbor during a pending merger, acquisition or similar transaction. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities. Shares of stock repurchased are held as authorized but unissued shares. Bancshares is not obligated to purchase any particular number of shares, and Bancshares may suspend, modify or terminate the program at any time and for any reason without prior notice. Under its 2024 stock repurchase program, Bancshares repurchased approximately 671 thousand shares of its common stock at a weighted average price of $58.86 per share during the three months ended June 30, 2024 and approximately 1.2 million shares of its common stock at a weighted average price of $60.35 per share during the six months ended June 30, 2024.
Previous wording
The Company’s leases relate primarily to operating leases for office space and banking centers. The Company determines if an arrangement is a lease or contains a lease at inception. The Company’s leases have remaining lease terms of 1 to 15 years, which may include the option to extend the lease when it is reasonably certain for the Company to exercise that option. Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses its incremental collateralized borrowing rate to determine the present value of lease payments. Short-term leases and leases with variable lease costs are immaterial, and the Company has one sublease arrangement. Sublease income was $869 thousand and $806 thousand for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, operating lease ROU assets and lease liabilities were approximately $36.8 million. ROU assets and lease liabilities were classified as other assets and other liabilities, respectively.
Current wording
The Company’s leases relate primarily to operating leases for office space and banking centers. The Company determines if an arrangement is a lease or contains a lease at inception. The Company’s leases have remaining lease terms of 1 to 15 years, which may include the option to extend the lease when it is reasonably certain for the Company to exercise that option. Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses its incremental collateralized borrowing rate to determine the present value of lease payments. Short-term leases and leases with variable lease costs are immaterial, and the Company has one sublease arrangement. Sublease income was $828 thousand and $688 thousand for the three months ended June 30, 2024 and 2023 and $1.7 million and $1.5 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, operating lease ROU assets and lease liabilities were approximately $34.6 million. ROU assets and lease liabilities were classified as other assets and other liabilities, respectively.
Previous wording
As of March 31, 2024, the weighted average of remaining lease terms of the Company’s operating leases was 5.7 years. The weighted average discount rate used to determine the lease liabilities as of March 31, 2024 for the Company’s operating leases was 2.9%. Cash paid for the Company’s operating leases was $2.9 million and $2.8 million for the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024, the Company obtained $2.1 million in ROU assets in exchange for lease liabilities for one operating lease.
Current wording
As of June 30, 2024, the weighted average of remaining lease terms of the Company’s operating leases was 5.6 years. The weighted average discount rate used to determine the lease liabilities as of June 30, 2024 for the Company’s operating leases was 2.9%. Cash paid for the Company’s operating leases was $2.9 million and $3.1 million for the three months ended June 30, 2024 and 2023, respectively, and $5.8 million and $5.9 million for the six months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024, the Company obtained $2.1 million in ROU assets in exchange for lease liabilities for one operating lease.
Previous wording
The Company’s commitments associated with outstanding standby letters of credit, unused capacity of Warehouse Purchase Program loans and commitments to extend credit expiring by period as of March 31, 2024 are summarized below. Since commitments associated with letters of credit, unused capacity of Warehouse Purchase Program loans and commitments to extend credit may expire unused, the amounts shown may not necessarily reflect the actual future cash funding requirements.
Current wording
The Company’s commitments associated with outstanding standby letters of credit, unused capacity on Warehouse Purchase Program loans and commitments to extend credit expiring by period as of June 30, 2024 are summarized below. Since commitments associated with letters of credit, unused capacity on Warehouse Purchase Program loans and commitments to extend credit may expire unused, the amounts shown may not necessarily reflect the actual future cash funding requirements.
Previous wording
Allowance for Credit Losses on Off-balance Sheet Credit Exposures. The Company records an allowance for credit losses on off-balance sheet credit exposure that is adjusted through a charge to provision for credit losses on the Company’s consolidated statement of income. At March 31, 2024 and December 31, 2023, this allowance, reported as a separate line item on the Company’s consolidated balance sheet, totaled $36.5 million.
Current wording
Allowance for Credit Losses on Off-balance Sheet Credit Exposures. The Company records an allowance for credit losses on off-balance sheet credit exposure that is adjusted through a charge to provision for credit losses on the Company’s consolidated statement of income. At June 30, 2024 and December 31, 2023, this allowance, reported as a separate line item on the Company’s consolidated balance sheet, totaled $37.6 million and $36.5 million, respectively. The increase in the allowance was due to the LSSB Merger.
Previous wording
Total shareholders’ equity was $7.10 billion at March 31, 2024 compared with $7.08 billion at December 31, 2023, an increase of $25.2 million or 0.4%. The increase was primarily due to net income of $110.4 million, partially offset by dividend payments of $52.4 million and common stock repurchases of $35.3 million.
Current wording
Total shareholders’ equity was $7.28 billion at June 30, 2024 compared with $7.08 billion at December 31, 2023, an increase of $204.1 million or 2.9%. The increase was primarily the result of the common stock issuance in connection with the LSSB Merger of $156.3 million and net income of $222.0 million, partially offset by dividend payments of $105.8 million and common stock repurchases of $74.8 million.
Previous wording
The Basel III Capital Rules adopted by the federal regulatory authorities in 2013 substantially revised the risk-based capital requirements applicable to the Company and the Bank. The Basel III Capital Rules became effective for the Company on January 1, 2015, subject to a phase-in period for certain provisions. The Basel III Capital Rules require a capital conservation buffer with respect to each of the Common Equity Tier 1, Tier 1 risk-based and total risk-based capital ratios, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. The capital conservation buffer of 2.5% was fully phased-in on January 1, 2019. A financial institution with a conservation buffer of less than the required amount will be subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers.
Current wording
The Basel III Capital Rules, effective for the Company on January 1, 2015, substantially revised the risk-based capital requirements applicable to the Company and the Bank. The Basel III Capital Rules require a 2.5% capital conservation buffer with respect to each of the Common Equity Tier 1, Tier 1 risk-based and total risk-based capital ratios, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. A financial institution with a conservation buffer of less than the required amount will be subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Company’s website address is www.prosperitybankusa.com. Information contained on the Company’s website is not incorporated by reference into this quarterly report on Form 10-Q and is not part of this or any other report.
Current report — wording carried from elsewhere
Yield is based on amortized cost and does not include any component of unrealized gains or losses.
Current report — wording carried from elsewhere
The net interest margin is equal to net interest income divided by average interest-earning assets.
Current report — wording carried from elsewhere
In order to make pretax income and resultant yields on tax-exempt investments and loans comparable to those on taxable investments and loans, a tax-equivalent adjustment has been computed using a federal income tax rate of 21% and other applicable effective tax rates.