Prosperity Bancshares, Inc.(SM) 1st Quarter 2001 Operating Earnings Up 24.2%; Dividend Increased 11.1%

Apr 20, 2001, 01:00 ET from Prosperity Bancshares, Inc.

    HOUSTON, April 20 /PRNewswire Interactive News Release/ --
 Prosperity Bancshares, Inc.(SM) (Nasdaq:   PRSP), the parent company of First
 Prosperity Bank(SM), today reported operating earnings (earnings excluding
 merger-related expenses) of $3.244 million for the first quarter of 2001, an
 increase of 24.2 percent from $2.612 million for the first quarter of 2000.
 Operating earnings of $0.39 per diluted common share for the first quarter of
 2001 were $0.07, or 21.9 percent, higher than the same period of 2000.
 Operating earnings on a cash basis increased to $0.43 per diluted common share
 in the first quarter of 2001 from $0.35 in the first quarter of 2000, an
 increase of 22.9 percent.
     On February 23, 2001, Prosperity Bancshares, Inc.(SM) ("Prosperity")
 completed their previously announced merger with Commercial Bancshares, Inc.
 ("Commercial") in a stock for stock exchange transaction valued at
 $61.9 million.  Commercial was a one-bank holding company for Heritage Bank
 with 11 banking offices in the Houston area.  The merger resulted in the
 issuance of approximately 2.8 million shares of Prosperity common stock on a
 fully diluted basis.  In connection with this transaction, Prosperity incurred
 approximately $2.425 million in pretax merger-related expenses and other
 charges.  The transaction was accounted for as a pooling of interests and
 therefore the historical financial data of Prosperity has been restated to
 include the accounts and operations of Commercial for all periods prior to the
 merger date.
     David Zalman, Prosperity's President and Chief Executive Officer said, "I
 am pleased with the first quarter results of our combined companies.  I am
 also proud of what our associates have accomplished in a very short period of
 time.  We have kept the proper focus on our customers, as evidenced by solid
 first quarter loan and deposit growth, and we have made significant progress
 on the integration of our two companies.  Opportunities to improve performance
 through the introduction of improved products and services into both
 franchises have been identified and are beginning to be rolled-out.  I am very
 excited about the future of this company."
     "Having completed the merger of Prosperity Bancshares, Inc.(SM) and
 Commercial Bancshares, Inc., we will now focus our efforts on leveraging the
 strength of our newly combined organization," said Ned S. Holmes, Chairman of
 the Board.  "With our expanded presence in the Greater Houston Metropolitan
 Area as a result of the merger, we are enthusiastic about our prospects for
 continued growth and profitability."
     "We feel that our service-oriented, community banking approach is the
 right approach, and that this merger has joined two banks with similar
 corporate cultures -- focused on customer relationships," added H. E. "Tim"
 Timanus, President and Chief Operating Officer of First Prosperity Bank(SM).
 "In order to capitalize on our growing franchise within Houston, we will
 unveil our new combined corporate identity within the next few weeks.
 Effective May 1, 2001, our bank will become Prosperity Bank(SM) and all former
 Heritage Bank locations should have new signage in place prior to August 1,
 2001."
     "We are on target to meet all the initial cost savings goals we set for
 our combined companies and continue to find additional efficiencies and
 synergies.  We will continue to look for opportunities to enhance revenue and
 control expenses while providing relationship based banking services to our
 growing customer base.  We believe that the markets we serve are vibrant and
 growing," stated David Hollaway, Chief Financial Officer.
     "In light of our first quarter performance, the expedient integration of
 our two companies and a vibrant Houston economy, we are comfortable with the
 analysts' consensus earnings projection for the full year 2001 of $1.65 per
 common share excluding merger-related expenses," remarked Zalman.
 
     Results of Operations Excluding Merger-Related Expenses
     Excluding merger-related expenses, net income for the three months ended
 March 31, 2001 was $3.244 million or $0.39 per diluted common share, compared
 to $2.612 million or $0.32 per diluted common share, for the same period in
 2000, an increase of 24.2 percent and 21.9 percent, respectively.
 Prosperity's annualized return on average assets and return on average common
 shareholders' equity for the three months ended March 31, 2001 would have been
 1.12 percent and 15.79 percent respectively.  The company's efficiency ratio
 would have been 58.07 percent for the three months ended March 31, 2001.
 
     Results of Operations as Reported
     For the three months ended March 31, 2001, net income was $1.667 million
 compared to $2.612 million for the same period in 2000.  Net income per
 diluted common share was $0.20 for the three months ended March 31, 2001
 compared with $0.32 for the same period in 2000.  This decrease in net income,
 and net income per diluted common share, resulted principally from
 $2.425 million in pretax merger-related expenses.  Return on average assets
 and average common shareholders' equity for the three months ended March 31,
 2001 was 0.58 percent and 8.11 percent.
     Net interest income for the quarter ended March 31, 2001 increased 9.2
 percent, to $9.301 million from $8.515 million during the same period in 2000.
 The increase was attributable primarily to a 12.0 percent increase in average
 earning assets.
     Non-interest income increased 11.0 percent to $2.035 million for the three
 months ended March 31, 2001 compared with the same period in 2000.
 Non-interest expenses increased $2.603 million or 39.9 percent as compared
 with the first quarter of 2000.  The majority of this increase was due to
 $2.425 million in merger-related expenses.  Excluding these merger-related
 expenses, non-interest expenses increased 2.7 percent.
     Loans at March 31, 2001 were $418.6 million, an increase of $47.2 million,
 or 12.7 percent, from $371.5 million at March 31, 2000.  Non-performing assets
 totaled $420,000 or 0.10 percent of loans and other real estate at March 31,
 2001, compared to $1.269 million or 0.34 percent of loans and other real
 estate at March 31, 2000 and $669,000 or 0.16 percent of loans and other real
 estate at December 31, 2000.  On a stand alone basis, Prosperity would have
 reported no non-performing assets in any of the same reporting periods.  Total
 deposits at March 31, 2001 increased to $1.054 billion, or 18.2 percent from
 total deposits at March 31, 2000.
     At March 31, 2001, Prosperity had $1.170 billion in total assets,
 $418.6 million in loans, $1.054 billion in deposits, and over 85,000 deposit
 and loan accounts.  Assets, loans and deposits at March 31, 2001 grew by 13.1
 percent, 12.7 percent and 18.2 percent respectively, compared with their
 levels at March 31, 2000.
 
     Results of Previously Separate Companies
     On February 23, 2001, Prosperity and Commercial completed their previously
 announced merger.  Separate net interest income and net income amounts for the
 merged entities are presented as follows:  Prosperity's net interest income
 for the quarter ended March 31, 2001 was $6.248 million, an increase of 12.1
 percent over the same period last year.  Net income for the quarter, excluding
 merger-related expenses, was $2.242 million, an increase of 14.0 percent over
 the same period last year.  Commercial's net interest income for the quarter
 ended March 31, 2001 was $3.534 million, an increase of 20.2 percent over the
 same period last year.  Net income for the quarter, excluding merger-related
 expenses, was $1.002 million, an increase of 55.3 percent over the same period
 last year.
 
     Quarterly Cash Dividend Increased 11.1 Percent
     Ned S. Holmes, Chairman of the Board announced that the Board of Directors
 voted to increase the regular annual cash dividend to $0.40 from $0.36 per
 common share.  "We are pleased to be able to reward our shareholders with this
 increased dividend," remarked Holmes.
 
     Prosperity Bancshares, Inc.(SM), formed in 1983, is a $1.1 billion bank
 holding company headquartered in Houston, Texas.  Operating under a community
 banking philosophy, Prosperity seeks 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
 consumers and small and medium sized businesses.  In addition to established
 banking products, Prosperity offers a complete line of services including:
 Internet Banking services at www.firstprosperity.com and
 www.heritagebanktx.com , Trust Services, MasterMoney Debit Cards, and 24 hour
 voice response banking.  The bank currently operates twenty-nine (29) full
 service banking locations in thirteen (13) contiguous counties including the
 Greater Houston Metropolitan Area.  (Angleton, Bay City, Beeville, Clear Lake,
 Cleveland, Cuero, Cypress, East Bernard, Edna, El Campo, Fairfield, Goliad,
 Hitchcock, Houston - Bellaire, Houston - Downtown, Houston - Medical Center,
 Houston - Post Oak, Houston - River Oaks, Houston - Tanglewood, Houston -
 Waugh Drive, Liberty, Magnolia, Mathis, Needville, Palacios, Sweeny, Victoria,
 West Columbia, and Wharton.)
 
 
                          Prosperity Bancshares, Inc.
                       Financial Highlights  (Unaudited)
                             (Dollars in thousands)
 
                             Three Months Ended             Years Ended
                         Mar 31, 2001  Mar 31, 2000  Dec 31, 2000 Dec 31, 1999
 
     Balance Sheet Averages
     Investment securities $594,526      $552,056     $550,431      $465,788
     Total loans            407,471       368,830      383,054       319,178
     Fed funds sold and
      other earnings         70,339        36,283       37,929        30,214
     Total earning
      assets              1,072,336       957,169      971,414       815,180
     Allowance for credit
      losses                 (5,528)       (5,088)      (5,245)       (4,272)
     Cash and due from
      banks                  34,205        33,779       32,084        28,730
     Goodwill                23,473        19,113       20,292        11,949
     Other assets            30,739        21,463       27,337        24,194
     Total assets        $1,155,225    $1,026,436   $1,045,882      $875,781
 
     Non-interest bearing
      deposits             $179,400      $172,384     $175,194      $146,344
     Interest bearing
      deposits              855,641       720,436      745,332       621,535
     Total deposits       1,035,041       892,820      920,526       767,879
     Fed funds purchased &
      other interest bearing
       liabilities           16,706        51,967       32,333        36,107
     Other liabilities        9,282         3,637        8,071         5,384
     Company obligated trust
      preferred securities of
       subsidiary trust      12,000        12,000       12,000         1,500
     Shareholders' equity    82,196        66,012       72,952        64,911
     Total liabilities and
      equity             $1,155,225    $1,026,436   $1,045,882      $875,781
 
 
                          Prosperity Bancshares, Inc.
                       Financial Highlights  (Unaudited)
                 (Dollars in thousands, except per share data)
 
                                                Three Months Ended
                                    Mar 31, 2001   Mar 31, 2000  Dec 31, 2000
 
     Income Statement Data
     Interest on loans                $8,873          $7,809        $8,822
     Interest on securities            9,467           8,426         9,062
     Interest on fed funds
      sold and other earning assets      980             527         1,110
     Total interest income            19,320          16,762        18,994
     Interest expense                 10,019           8,247        10,176
     Net interest income (A)           9,301           8,515         8,818
     Provision for credit losses           0              75            50
     Net interest income after
      provision for credit losses      9,301           8,440         8,768
     Service charges on
      deposit accounts                 1,788           1,526         1,684
     Other income                        247             308           352
     Total non-interest income         2,035           1,834         2,036
 
     Goodwill                            341             264           332
     Salaries and benefits             3,335           3,190         3,337
     One-time merger-related expenses  2,425               0             0
     Other expenses                    3,028           3,072         3,339
     Total non-interest expenses       9,129           6,526         7,008
     Net earnings before taxes         2,207           3,748         3,796
     Federal income taxes                540           1,136         1,076
     Net earnings available
      to shareholders              $(B)1,667          $2,612        $2,720
 
     Basic earnings per share          $0.21           $0.33         $0.34
 
     Diluted earnings per share        $0.20           $0.32         $0.33
 
     (A) Net interest income on a tax equivalent basis would be $9,782, $8,785
         and $9,275 for the three months ended March 31, 2001, March 31, 2000
         and December 31, 2000, respectively.
 
     (B) Excluding merger-related expenses, net earnings available to common
         shareholders would have been $3,244 or $0.39 per diluted common share
         for the three months ended March 31, 2001.
 
 
                          Prosperity Bancshares, Inc.
                       Financial Highlights  (Unaudited)
        (Dollars and share amounts in thousands, except per share data)
 
                               Three Months Ended            Years Ended
                         Mar 31, 2001  Mar 31, 2000  Dec 31, 2000 Dec 31, 1999
 
     Common Share and Other Data
     Employees - FTE            320           336          348           335
 
     Book value per share    $10.17         $8.72        $9.95         $8.63
     Tangible book value
      per share               $7.26         $6.29        $6.98         $6.16
 
     Period end shares
      outstanding             8,120         8,018        8,072         7,995
     Weighted average shares
      outstanding (basic)     8,087         8,004        8,032         7,986
     Weighted average shares
      outstanding (diluted)   8,258         8,216        8,227         8,204
 
     Non-accrual loans         $420          $724          $10          $755
     Restructured loans           0             0          114             0
     Total non-performing
      loans                     420           724          124           755
     Other real estate            0           545          545           500
     Total non-performing
      assets                   $420        $1,269         $669        $1,255
     Accruing loans 90 days or
      more days past due          0            28          780             8
     Allowance for credit
      losses at end
       of period             $5,598        $5,150       $5,523        $5,031
 
     Net (recoveries)/
      charge-offs              $(74)         $(45)       $(172)        $(362)
 
 
                          Prosperity Bancshares, Inc.
                       Financial Highlights  (Unaudited)
 
                               Three Months Ended            Years Ended
                         Mar 31, 2001  Mar 31, 2000  Dec 31, 2000 Dec 31, 1999
 
     Performance Ratios
     Return on average
      assets (annualized)   (C)0.58%         1.02%        1.02%         1.08%
     Return on average
      common equity
       (annualized)         (C)8.11%        15.83%       14.67%        14.53%
     Net interest margin
      (tax equivalent)
       (annualized)            3.65%         3.67%        3.69%         3.77%
 
     Efficiency ratio(D)   (C)80.02%        62.01%       62.29%        59.76%
 
     Diluted earnings
      per share            (C)$0.20         $0.32        $1.30         $1.15
 
     Asset Quality Ratios
     Non-performing assets
      to loans and other
       real estate             0.10%         0.34%        0.16%         0.34%
     Net charge-offs
      (recoveries)
       to average loans       (0.02%)       (0.01%)      (0.04%)       (0.11%)
     Allowance for credit
      losses to total loans    1.34%         1.39%        1.34%         1.37%
 
     Common Stock Market Price
      High                   $22.63        $16.69       $20.00        $17.88
 
      Low                    $18.75        $12.88       $12.88        $12.00
 
      Period end market
       price                 $19.50        $14.75       $19.75        $16.00
 
     (C) Excluding merger-related expenses, ROAA; ROAE; Efficiency Ratio; and
         Diluted Earnings Per Common Share; would have been 1.12%; 15.79%;
         58.07% and $0.39 for the three months ended March 31, 2001.
 
     (D) Calculated by dividing total noninterest expense (excluding securities
         losses and credit loss provisions) by net interest income plus
         noninterest income.  Note:  The trust preferred securities expense is
         treated as interest expense for this calculation.  Additionally, taxes
         are not part of this calculation.
 
 
                          Prosperity Bancshares, Inc.
                        Financial Highlights (Unaudited)
                             (Dollars in thousands)
 
                         Mar 31, 2001  Mar 31, 2000  Dec 31, 2000 Dec 31, 1999
 
     Balance Sheet Data (at period end)
 
     Investment securities $664,123      $551,733     $588,278      $514,983
     Total loans            418,648       371,484      411,203       366,803
     Fed funds sold and
      other earning assets   10,758        37,691       63,454        56,385
     Total earning
      assets              1,093,529       960,908    1,062,935       938,171
     Allowance for credit
      losses                 (5,598)       (5,150)      (5,523)       (5,031)
     Cash and due from banks 28,672        29,205       35,709        39,731
     Goodwill                23,663        19,522       24,003        19,795
     Other Real Estate            0           545          545           500
     Other assets            30,034        29,677       28,471        34,465
     Total assets        $1,170,300    $1,034,707   $1,146,140    $1,027,631
 
     Non-interest bearing
      deposits             $184,831      $173,766     $187,959      $173,798
     Interest bearing
      deposits              869,162       718,117      845,587       704,791
     Total deposits       1,053,993       891,883    1,033,546       878,589
     Fed funds purchased
      and other interest
       bearing liabilities   13,778        55,205       13,931        63,119
     Other liabilities        7,912         5,690        6,330         4,898
     Company obligated trust
      preferred securities of
       subsidiary trust      12,000        12,000       12,000        12,000
     Shareholders' equity    82,617        69,929       80,333        69,025
     Total liabilities
      and equity         $1,170,300    $1,034,707   $1,146,140    $1,027,631
 
 
                          Prosperity Bancshares, Inc.
                        Financial Highlights(Unaudited)
 
                               Three Months Ended            Years Ended
                         Mar 31, 2001  Mar 31, 2000  Dec 31, 2000  Dec 31, 1999
 
     Cash Basis Data
     (Excluding goodwill amortization & related tax expense)
     Return on average
      assets (annualized)   (F)0.68%         1.11%        1.12%         1.15%
     Return on average common
      equity (annualized)   (F)9.54%        17.32%       16.09%        15.52%
 
     Efficiency Ratio(E)   (F)76.94%        59.30%       59.47%        57.69%
 
     Diluted cash earnings
      per share            (F)$0.24         $0.35        $1.45         $1.24
 
     (E) Efficiency Ratio adjusted for goodwill amortization expense only.
 
     (F) Excluding merger-related expenses, ROAA (cash basis); ROAE (cash
         basis); Efficiency Ratio (cash basis); and Diluted Earnings Per Common
         Share (cash basis); would have been 1.22%; 17.21%; 54.99% and $0.43
         for the three months ended March 31, 2001.
 
     "Safe Harbor" Statement under the Private Securities Litigation Reform Act
 of 1995:  The statements contained in this release which are not historical
 facts contain forward-looking information with respect to plans, projections
 or future performance of Prosperity Bancshares, Inc. SM and its subsidiaries.
 Forward-looking statements, within the meaning of Section 21E of the
 Securities Exchange Act of 1934, may have been made in this document.
 Prosperity's results may differ materially from those in the forward-looking
 statements for a variety of reasons, including actions of competitors; changes
 in laws and regulations (including changes in governmental interpretations of
 regulations and changes in accounting standards); 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 weather.  These factors are more fully
 described in Prosperity Bancshares, Inc.'s filings with the Securities and
 Exchange Commission.
     Copies of Prosperity Bancshares, Inc.'s SM SEC filings may be downloaded
 from the Internet at no charge from FreeEDGAR, a real-time access to SEC
 filings site located at www.freeedgar.com .
 
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SOURCE Prosperity Bancshares, Inc.
    HOUSTON, April 20 /PRNewswire Interactive News Release/ --
 Prosperity Bancshares, Inc.(SM) (Nasdaq:   PRSP), the parent company of First
 Prosperity Bank(SM), today reported operating earnings (earnings excluding
 merger-related expenses) of $3.244 million for the first quarter of 2001, an
 increase of 24.2 percent from $2.612 million for the first quarter of 2000.
 Operating earnings of $0.39 per diluted common share for the first quarter of
 2001 were $0.07, or 21.9 percent, higher than the same period of 2000.
 Operating earnings on a cash basis increased to $0.43 per diluted common share
 in the first quarter of 2001 from $0.35 in the first quarter of 2000, an
 increase of 22.9 percent.
     On February 23, 2001, Prosperity Bancshares, Inc.(SM) ("Prosperity")
 completed their previously announced merger with Commercial Bancshares, Inc.
 ("Commercial") in a stock for stock exchange transaction valued at
 $61.9 million.  Commercial was a one-bank holding company for Heritage Bank
 with 11 banking offices in the Houston area.  The merger resulted in the
 issuance of approximately 2.8 million shares of Prosperity common stock on a
 fully diluted basis.  In connection with this transaction, Prosperity incurred
 approximately $2.425 million in pretax merger-related expenses and other
 charges.  The transaction was accounted for as a pooling of interests and
 therefore the historical financial data of Prosperity has been restated to
 include the accounts and operations of Commercial for all periods prior to the
 merger date.
     David Zalman, Prosperity's President and Chief Executive Officer said, "I
 am pleased with the first quarter results of our combined companies.  I am
 also proud of what our associates have accomplished in a very short period of
 time.  We have kept the proper focus on our customers, as evidenced by solid
 first quarter loan and deposit growth, and we have made significant progress
 on the integration of our two companies.  Opportunities to improve performance
 through the introduction of improved products and services into both
 franchises have been identified and are beginning to be rolled-out.  I am very
 excited about the future of this company."
     "Having completed the merger of Prosperity Bancshares, Inc.(SM) and
 Commercial Bancshares, Inc., we will now focus our efforts on leveraging the
 strength of our newly combined organization," said Ned S. Holmes, Chairman of
 the Board.  "With our expanded presence in the Greater Houston Metropolitan
 Area as a result of the merger, we are enthusiastic about our prospects for
 continued growth and profitability."
     "We feel that our service-oriented, community banking approach is the
 right approach, and that this merger has joined two banks with similar
 corporate cultures -- focused on customer relationships," added H. E. "Tim"
 Timanus, President and Chief Operating Officer of First Prosperity Bank(SM).
 "In order to capitalize on our growing franchise within Houston, we will
 unveil our new combined corporate identity within the next few weeks.
 Effective May 1, 2001, our bank will become Prosperity Bank(SM) and all former
 Heritage Bank locations should have new signage in place prior to August 1,
 2001."
     "We are on target to meet all the initial cost savings goals we set for
 our combined companies and continue to find additional efficiencies and
 synergies.  We will continue to look for opportunities to enhance revenue and
 control expenses while providing relationship based banking services to our
 growing customer base.  We believe that the markets we serve are vibrant and
 growing," stated David Hollaway, Chief Financial Officer.
     "In light of our first quarter performance, the expedient integration of
 our two companies and a vibrant Houston economy, we are comfortable with the
 analysts' consensus earnings projection for the full year 2001 of $1.65 per
 common share excluding merger-related expenses," remarked Zalman.
 
     Results of Operations Excluding Merger-Related Expenses
     Excluding merger-related expenses, net income for the three months ended
 March 31, 2001 was $3.244 million or $0.39 per diluted common share, compared
 to $2.612 million or $0.32 per diluted common share, for the same period in
 2000, an increase of 24.2 percent and 21.9 percent, respectively.
 Prosperity's annualized return on average assets and return on average common
 shareholders' equity for the three months ended March 31, 2001 would have been
 1.12 percent and 15.79 percent respectively.  The company's efficiency ratio
 would have been 58.07 percent for the three months ended March 31, 2001.
 
     Results of Operations as Reported
     For the three months ended March 31, 2001, net income was $1.667 million
 compared to $2.612 million for the same period in 2000.  Net income per
 diluted common share was $0.20 for the three months ended March 31, 2001
 compared with $0.32 for the same period in 2000.  This decrease in net income,
 and net income per diluted common share, resulted principally from
 $2.425 million in pretax merger-related expenses.  Return on average assets
 and average common shareholders' equity for the three months ended March 31,
 2001 was 0.58 percent and 8.11 percent.
     Net interest income for the quarter ended March 31, 2001 increased 9.2
 percent, to $9.301 million from $8.515 million during the same period in 2000.
 The increase was attributable primarily to a 12.0 percent increase in average
 earning assets.
     Non-interest income increased 11.0 percent to $2.035 million for the three
 months ended March 31, 2001 compared with the same period in 2000.
 Non-interest expenses increased $2.603 million or 39.9 percent as compared
 with the first quarter of 2000.  The majority of this increase was due to
 $2.425 million in merger-related expenses.  Excluding these merger-related
 expenses, non-interest expenses increased 2.7 percent.
     Loans at March 31, 2001 were $418.6 million, an increase of $47.2 million,
 or 12.7 percent, from $371.5 million at March 31, 2000.  Non-performing assets
 totaled $420,000 or 0.10 percent of loans and other real estate at March 31,
 2001, compared to $1.269 million or 0.34 percent of loans and other real
 estate at March 31, 2000 and $669,000 or 0.16 percent of loans and other real
 estate at December 31, 2000.  On a stand alone basis, Prosperity would have
 reported no non-performing assets in any of the same reporting periods.  Total
 deposits at March 31, 2001 increased to $1.054 billion, or 18.2 percent from
 total deposits at March 31, 2000.
     At March 31, 2001, Prosperity had $1.170 billion in total assets,
 $418.6 million in loans, $1.054 billion in deposits, and over 85,000 deposit
 and loan accounts.  Assets, loans and deposits at March 31, 2001 grew by 13.1
 percent, 12.7 percent and 18.2 percent respectively, compared with their
 levels at March 31, 2000.
 
     Results of Previously Separate Companies
     On February 23, 2001, Prosperity and Commercial completed their previously
 announced merger.  Separate net interest income and net income amounts for the
 merged entities are presented as follows:  Prosperity's net interest income
 for the quarter ended March 31, 2001 was $6.248 million, an increase of 12.1
 percent over the same period last year.  Net income for the quarter, excluding
 merger-related expenses, was $2.242 million, an increase of 14.0 percent over
 the same period last year.  Commercial's net interest income for the quarter
 ended March 31, 2001 was $3.534 million, an increase of 20.2 percent over the
 same period last year.  Net income for the quarter, excluding merger-related
 expenses, was $1.002 million, an increase of 55.3 percent over the same period
 last year.
 
     Quarterly Cash Dividend Increased 11.1 Percent
     Ned S. Holmes, Chairman of the Board announced that the Board of Directors
 voted to increase the regular annual cash dividend to $0.40 from $0.36 per
 common share.  "We are pleased to be able to reward our shareholders with this
 increased dividend," remarked Holmes.
 
     Prosperity Bancshares, Inc.(SM), formed in 1983, is a $1.1 billion bank
 holding company headquartered in Houston, Texas.  Operating under a community
 banking philosophy, Prosperity seeks 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
 consumers and small and medium sized businesses.  In addition to established
 banking products, Prosperity offers a complete line of services including:
 Internet Banking services at www.firstprosperity.com and
 www.heritagebanktx.com , Trust Services, MasterMoney Debit Cards, and 24 hour
 voice response banking.  The bank currently operates twenty-nine (29) full
 service banking locations in thirteen (13) contiguous counties including the
 Greater Houston Metropolitan Area.  (Angleton, Bay City, Beeville, Clear Lake,
 Cleveland, Cuero, Cypress, East Bernard, Edna, El Campo, Fairfield, Goliad,
 Hitchcock, Houston - Bellaire, Houston - Downtown, Houston - Medical Center,
 Houston - Post Oak, Houston - River Oaks, Houston - Tanglewood, Houston -
 Waugh Drive, Liberty, Magnolia, Mathis, Needville, Palacios, Sweeny, Victoria,
 West Columbia, and Wharton.)
 
 
                          Prosperity Bancshares, Inc.
                       Financial Highlights  (Unaudited)
                             (Dollars in thousands)
 
                             Three Months Ended             Years Ended
                         Mar 31, 2001  Mar 31, 2000  Dec 31, 2000 Dec 31, 1999
 
     Balance Sheet Averages
     Investment securities $594,526      $552,056     $550,431      $465,788
     Total loans            407,471       368,830      383,054       319,178
     Fed funds sold and
      other earnings         70,339        36,283       37,929        30,214
     Total earning
      assets              1,072,336       957,169      971,414       815,180
     Allowance for credit
      losses                 (5,528)       (5,088)      (5,245)       (4,272)
     Cash and due from
      banks                  34,205        33,779       32,084        28,730
     Goodwill                23,473        19,113       20,292        11,949
     Other assets            30,739        21,463       27,337        24,194
     Total assets        $1,155,225    $1,026,436   $1,045,882      $875,781
 
     Non-interest bearing
      deposits             $179,400      $172,384     $175,194      $146,344
     Interest bearing
      deposits              855,641       720,436      745,332       621,535
     Total deposits       1,035,041       892,820      920,526       767,879
     Fed funds purchased &
      other interest bearing
       liabilities           16,706        51,967       32,333        36,107
     Other liabilities        9,282         3,637        8,071         5,384
     Company obligated trust
      preferred securities of
       subsidiary trust      12,000        12,000       12,000         1,500
     Shareholders' equity    82,196        66,012       72,952        64,911
     Total liabilities and
      equity             $1,155,225    $1,026,436   $1,045,882      $875,781
 
 
                          Prosperity Bancshares, Inc.
                       Financial Highlights  (Unaudited)
                 (Dollars in thousands, except per share data)
 
                                                Three Months Ended
                                    Mar 31, 2001   Mar 31, 2000  Dec 31, 2000
 
     Income Statement Data
     Interest on loans                $8,873          $7,809        $8,822
     Interest on securities            9,467           8,426         9,062
     Interest on fed funds
      sold and other earning assets      980             527         1,110
     Total interest income            19,320          16,762        18,994
     Interest expense                 10,019           8,247        10,176
     Net interest income (A)           9,301           8,515         8,818
     Provision for credit losses           0              75            50
     Net interest income after
      provision for credit losses      9,301           8,440         8,768
     Service charges on
      deposit accounts                 1,788           1,526         1,684
     Other income                        247             308           352
     Total non-interest income         2,035           1,834         2,036
 
     Goodwill                            341             264           332
     Salaries and benefits             3,335           3,190         3,337
     One-time merger-related expenses  2,425               0             0
     Other expenses                    3,028           3,072         3,339
     Total non-interest expenses       9,129           6,526         7,008
     Net earnings before taxes         2,207           3,748         3,796
     Federal income taxes                540           1,136         1,076
     Net earnings available
      to shareholders              $(B)1,667          $2,612        $2,720
 
     Basic earnings per share          $0.21           $0.33         $0.34
 
     Diluted earnings per share        $0.20           $0.32         $0.33
 
     (A) Net interest income on a tax equivalent basis would be $9,782, $8,785
         and $9,275 for the three months ended March 31, 2001, March 31, 2000
         and December 31, 2000, respectively.
 
     (B) Excluding merger-related expenses, net earnings available to common
         shareholders would have been $3,244 or $0.39 per diluted common share
         for the three months ended March 31, 2001.
 
 
                          Prosperity Bancshares, Inc.
                       Financial Highlights  (Unaudited)
        (Dollars and share amounts in thousands, except per share data)
 
                               Three Months Ended            Years Ended
                         Mar 31, 2001  Mar 31, 2000  Dec 31, 2000 Dec 31, 1999
 
     Common Share and Other Data
     Employees - FTE            320           336          348           335
 
     Book value per share    $10.17         $8.72        $9.95         $8.63
     Tangible book value
      per share               $7.26         $6.29        $6.98         $6.16
 
     Period end shares
      outstanding             8,120         8,018        8,072         7,995
     Weighted average shares
      outstanding (basic)     8,087         8,004        8,032         7,986
     Weighted average shares
      outstanding (diluted)   8,258         8,216        8,227         8,204
 
     Non-accrual loans         $420          $724          $10          $755
     Restructured loans           0             0          114             0
     Total non-performing
      loans                     420           724          124           755
     Other real estate            0           545          545           500
     Total non-performing
      assets                   $420        $1,269         $669        $1,255
     Accruing loans 90 days or
      more days past due          0            28          780             8
     Allowance for credit
      losses at end
       of period             $5,598        $5,150       $5,523        $5,031
 
     Net (recoveries)/
      charge-offs              $(74)         $(45)       $(172)        $(362)
 
 
                          Prosperity Bancshares, Inc.
                       Financial Highlights  (Unaudited)
 
                               Three Months Ended            Years Ended
                         Mar 31, 2001  Mar 31, 2000  Dec 31, 2000 Dec 31, 1999
 
     Performance Ratios
     Return on average
      assets (annualized)   (C)0.58%         1.02%        1.02%         1.08%
     Return on average
      common equity
       (annualized)         (C)8.11%        15.83%       14.67%        14.53%
     Net interest margin
      (tax equivalent)
       (annualized)            3.65%         3.67%        3.69%         3.77%
 
     Efficiency ratio(D)   (C)80.02%        62.01%       62.29%        59.76%
 
     Diluted earnings
      per share            (C)$0.20         $0.32        $1.30         $1.15
 
     Asset Quality Ratios
     Non-performing assets
      to loans and other
       real estate             0.10%         0.34%        0.16%         0.34%
     Net charge-offs
      (recoveries)
       to average loans       (0.02%)       (0.01%)      (0.04%)       (0.11%)
     Allowance for credit
      losses to total loans    1.34%         1.39%        1.34%         1.37%
 
     Common Stock Market Price
      High                   $22.63        $16.69       $20.00        $17.88
 
      Low                    $18.75        $12.88       $12.88        $12.00
 
      Period end market
       price                 $19.50        $14.75       $19.75        $16.00
 
     (C) Excluding merger-related expenses, ROAA; ROAE; Efficiency Ratio; and
         Diluted Earnings Per Common Share; would have been 1.12%; 15.79%;
         58.07% and $0.39 for the three months ended March 31, 2001.
 
     (D) Calculated by dividing total noninterest expense (excluding securities
         losses and credit loss provisions) by net interest income plus
         noninterest income.  Note:  The trust preferred securities expense is
         treated as interest expense for this calculation.  Additionally, taxes
         are not part of this calculation.
 
 
                          Prosperity Bancshares, Inc.
                        Financial Highlights (Unaudited)
                             (Dollars in thousands)
 
                         Mar 31, 2001  Mar 31, 2000  Dec 31, 2000 Dec 31, 1999
 
     Balance Sheet Data (at period end)
 
     Investment securities $664,123      $551,733     $588,278      $514,983
     Total loans            418,648       371,484      411,203       366,803
     Fed funds sold and
      other earning assets   10,758        37,691       63,454        56,385
     Total earning
      assets              1,093,529       960,908    1,062,935       938,171
     Allowance for credit
      losses                 (5,598)       (5,150)      (5,523)       (5,031)
     Cash and due from banks 28,672        29,205       35,709        39,731
     Goodwill                23,663        19,522       24,003        19,795
     Other Real Estate            0           545          545           500
     Other assets            30,034        29,677       28,471        34,465
     Total assets        $1,170,300    $1,034,707   $1,146,140    $1,027,631
 
     Non-interest bearing
      deposits             $184,831      $173,766     $187,959      $173,798
     Interest bearing
      deposits              869,162       718,117      845,587       704,791
     Total deposits       1,053,993       891,883    1,033,546       878,589
     Fed funds purchased
      and other interest
       bearing liabilities   13,778        55,205       13,931        63,119
     Other liabilities        7,912         5,690        6,330         4,898
     Company obligated trust
      preferred securities of
       subsidiary trust      12,000        12,000       12,000        12,000
     Shareholders' equity    82,617        69,929       80,333        69,025
     Total liabilities
      and equity         $1,170,300    $1,034,707   $1,146,140    $1,027,631
 
 
                          Prosperity Bancshares, Inc.
                        Financial Highlights(Unaudited)
 
                               Three Months Ended            Years Ended
                         Mar 31, 2001  Mar 31, 2000  Dec 31, 2000  Dec 31, 1999
 
     Cash Basis Data
     (Excluding goodwill amortization & related tax expense)
     Return on average
      assets (annualized)   (F)0.68%         1.11%        1.12%         1.15%
     Return on average common
      equity (annualized)   (F)9.54%        17.32%       16.09%        15.52%
 
     Efficiency Ratio(E)   (F)76.94%        59.30%       59.47%        57.69%
 
     Diluted cash earnings
      per share            (F)$0.24         $0.35        $1.45         $1.24
 
     (E) Efficiency Ratio adjusted for goodwill amortization expense only.
 
     (F) Excluding merger-related expenses, ROAA (cash basis); ROAE (cash
         basis); Efficiency Ratio (cash basis); and Diluted Earnings Per Common
         Share (cash basis); would have been 1.22%; 17.21%; 54.99% and $0.43
         for the three months ended March 31, 2001.
 
     "Safe Harbor" Statement under the Private Securities Litigation Reform Act
 of 1995:  The statements contained in this release which are not historical
 facts contain forward-looking information with respect to plans, projections
 or future performance of Prosperity Bancshares, Inc. SM and its subsidiaries.
 Forward-looking statements, within the meaning of Section 21E of the
 Securities Exchange Act of 1934, may have been made in this document.
 Prosperity's results may differ materially from those in the forward-looking
 statements for a variety of reasons, including actions of competitors; changes
 in laws and regulations (including changes in governmental interpretations of
 regulations and changes in accounting standards); 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 weather.  These factors are more fully
 described in Prosperity Bancshares, Inc.'s filings with the Securities and
 Exchange Commission.
     Copies of Prosperity Bancshares, Inc.'s SM SEC filings may be downloaded
 from the Internet at no charge from FreeEDGAR, a real-time access to SEC
 filings site located at www.freeedgar.com .
 
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 SOURCE  Prosperity Bancshares, Inc.