Prosperity Bancshares Annual Report 2003

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FY2003 Annual Report · Prosperity Bancshares

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CONTENTS

Our Vision / Our Mission . . . . . . . . . . . . . . . . . . . . . . 1

Letter to our Shareholders . . . . . . . . . . . . . . . . . . . . . 2

Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Was Prosperity a Good Investment? . . . . . . . . . . . . 9

Our Formula Works . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Directors & Executives . . . . . . . . . . . . . . . . . . . . . . . 12

Prosperity Bancshares, Inc.SM Board of Directors

Prosperity Bancshares, Inc.SM Officers

Prosperity Bank® Board of Directors

Prosperity Bank® Executive Committee

Form 10-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Banking Centers . . . . . . . . . . . . . . . Inside Back Cover

Investor Information . . . . . . . . . . . . . . . . . Back Cover

Our

Vision...

Provide our customers with a quality of product and

service that will meet or exceed their expectations!

Our

Mission...

• Smile;

• Greet the Customer by Name;

• Try to say “YES” instead of no!

Sounds easy and perhaps simplistic, but it works.

It’s the same issue over and over. Our focus has

always been superior customer service. During 2003,

we formalized that concept with this three sentence

statement to remind us and our associates of a most

basic tenant. As the statement has worked its way

through the organization, we have seen a significant

increase in enthusiastic customer feedback.

To Our Shareholders, Customers and Friends:

Two thousand and three was a record year as earnings

grew by 24.5% over the prior year. Earnings per share, fully

diluted, reached $1.36.

We were honored to be listed as one of the fastest growing

companies by Fortune, Fortune Small Business, the American

Banking Journal, and the Houston Chronicle.

Two thousand and three was also a year to test management

and to “Merge and Integrate”. With interest rates at historic

lows, depositors seeking higher yields, and borrowers

demanding low fixed rates all banks faced severe interest rate

Ned S. Holmes, Chairman of the Board; David Zalman, President & Chief Executive Officer.

margin compression. Whether the bank was heavily weighted

in loans or in securities, the compression was a challenge throughout 2003. The slow economic recovery coupled with

the low interest rates exacerbated an already competitive banking environment. While the mortgage market was red hot,

the commercial markets were in some disarray. Several of our Texas peers failed to meet their earnings targets as these

factors hammered their income statements. This same margin compression and competitive environment represented

an opportunity for Prosperity as numerous smaller banks’ management groups concluded that 2003 was an opportune

time to sell.

In this environment, we completed four acquisitions, all of which were in the Dallas market. With the purchase of

Abrams Centre National Bank, BankDallas, mainbank and First State Bank of North Texas, we increased our locations

from two to eleven and added a total of $125 million in loans, $340 million in deposits, and over 100 associates. These

additions have grown our Dallas area footprint to approximately $500 million in total assets. With these acquisitions

came 13 experienced lenders.

In the past twenty four months we have successfully integrated 9 banks and added $900+ million in assets. Our steady

growth in income would evidence the success of our integration efforts. Throughout the year we worked to realign the

loans we acquired to properly mirror our credit culture and historical asset quality.

We continued our Houston focus with a year-long advertising campaign to increase prospect and customer awareness

of Prosperity Bank®. The campaign took a multi-media form with TV, cable, radio and newspaper. Based upon customer

and prospect feedback, we are excited about the results.

INTERNAL GROWTH

Two thousand and four brings with it 51 locations including 29 in the Houston area and 11 in the Dallas area. Equally

important are the 74 experienced lenders who serve as “Real Bankers” empowered to meet our customers’ banking needs.

Additionally, we have introduced a “Treasury Management” function which provides state of the art cash management

services. This includes balance and transaction reporting, electronic funds transfer, check imaging, electronic statements,

and more through the convenience of the Internet.

With these additions, we are positioned for solid and historically consistent internal (same store sales) growth.

ACQUISITIONS

While we continue to look for acquisition opportunities, we must remember that the opportunities are not as directly

controllable as organic growth. While our business model incorporates the acquisition strategy as a value added aspect

which produces a much more rapid return to shareholders than a “branching” model, we realize there is a serendipity

element to acquisitions. This latter realization is exactly why we focus on internal growth as well as acquisitions.

THE ECONOMY AND THE UNKNOWNS

If we believe the economic indicators, it would appear we are on the road to economic recovery. GDP is growing at

a rapid pace, housing starts continue strong, inventories are beginning to build, unemployment numbers are trending

downward and the Fed reports growth in all regions of the country. While international uncertainty remains, the Texas

economy is moving in a very positive direction.

CONCLUSION

Throughout 2004, asset quality will remain paramount. With our focus on loan growth, we pledge to maintain our

vigilance of the loan portfolio. Additionally, we will continue to look for compatible merger partners as we strive to

increase penetration in our Texas markets, both rural and urban.

Ned S. Holmes
Chairman of the Board

David Zalman
President & Chief Executive Officer

Financial Highlights

1998

1999

2000

2001

2002

2003

Change
2002 vs.
2003

Change
1998 vs.
2003

FINANCIAL HIGHLIGHTS
Numbers for 1998, 1999, and 2000 have been restated
to reflect the effect of the merger with Commercial
Bancshares accounted for as a pooling of interests.

Net Income (in 000's)

Return on Average Assets

Return on Average Shareholders’ Equity

Net Interest Margin (Tax Equivalent)

Efficiency Ratio

$ 7,081

$ 9,431

$ 10,701

$ 12,958

$ 21,321

$ 26,548

1.01%

14.88%

3.75%

61.72%

1.08%

14.53%

3.77%

59.29%

1.02%

14.67%

3.69%

62.29%

1.09%

15.19%

3.86%

60.14%

1.45%

18.66%

4.16%

50.36%

1.32%

15.60%

3.78%

51.58%

24.5%

(9%)

(16%)

(9%)

(2%)

274.9%

30.7%

4.8%

0.8%

(16.4%)

WEIGHTED AVERAGE SHARES OUTSTANDING (in 000's)

Weighted Average Shares Outstanding, Basic

Weighted Average Shares Outstanding, Diluted

13,832

14,230

15,972

16,408

16,064

16,454

16,172

16,498

17,122

17,442

20,046

20,357

17.1%

16.7%

44.9%

43.1%

PER SHARE

Per Share Net Income (Diluted)

Book Value at Year-End Per Share

Cash Dividends Per Share

CAPITAL RATIOS

Equity to Assets Ratio

Tier 1 Risk Based Capital Ratio

Total Risk Based Capital Ratio

Leverage Ratio

0.50

3.88

0.10

$ 0.58

$ 0.65

$ 0.79

$ 1.22

$ 1.36

4.32

0.10

4.98

0.18

5.47

0.195

8.19

0.22

10.49

0.25

11.5%

28.1%

13.6%

172.0%

170.4%

150.0%

7.72%

15.06%

16.14%

6.59%

6.72%

13.89%

15.74%

6.17%

7.01%

13.80%

14.93%

6.17%

7.03%

18.34%

19.52%

7.57%

8.49%

14.10%

15.30%

6.56%

9.15%

15.82%

16.90%

7.10%

BALANCE SHEET DATA (YEAR-END) (in 000's)

Loans

Securities

Deposits

Shareholders' Equity

Total Assets

$276,106

$ 366,803

$ 411,203

$ 424,400

$ 679,559

$ 770,053

455,202

714,365

61,781

514,983

586,952

752,322

950,317

1,376,880

878,589

1,033,546

1,123,397

1,586,611

2,083,748

69,025

80,333

88,725

154,739

219,588

800,158

1,027,631

1,146,140

1,262,325

1,822,256

2,398,683

7.8%

12.2%

10.5%

8.2%

13.3%

44.9%

31.3%

41.9%

31.6%

18.5%

5.0%

4.7%

7.7%

178.9%

202.5%

191.7%

255.4%

199.8%

ASSET QUALITY RATIOS

Non-performing Assets to Loans

& Other Real Estate

Net Charge-offs to Average Loans

Allowance for Credit Losses to Total Loans

COMMON STOCK MARKET PRICE

Common Stock Market Price-High

Common Stock Market Price-Low

0.14%

(0.08%)

1.33%

0.34%

(0.11%)

1.37%

0.32%

(0.04%)

1.34%

0.00%

0.06%

1.41%

0.38%

0.08%

1.41%

0.13%

0.23%

1.34%

(65.8%)

(7.1%)

187.5%

(387.5%)

(5.0%)

0.8%

6.31

6.00

$ 8.94

$ 10.00

$ 13.94

$ 19.95

6.03

6.44

8.75

13.48

$ 24.35

16.16

22.1%

19.9%

285.7%

169.3%

THE DALLAS CONNECTION AND THE HOUSTON INTEGRATION

We completed the integration of the five banks which we acquired in 2002. Additionally, we acquired four banks in the

Dallas area in 2003. The Dallas area banks attribute approximately $500 million in total assets, $340 million in total
deposits and 11 full service locations, as of December 31, 2003.

NET INCOME GROWTH
In 2003, net income grew by 24.5% to
$26.5 million or $1.36 per
fully diluted common share.

ASSET GROWTH
During 2003, total assets grew by 31.6% to
$2.4 billion, while total loans were up 13.3%
to $770 million and total deposits were up 31.3%
to $2.1 billion as compared to 2002.

$26,548

$21,321

$12,958

$10,701

$9,431

$7,081

1998

1999

2000

2001

2002

2003

$2,398,683

$1,822,256

$30,000

$25,000

$20,000

$15,000

$10,000

$5,000

$2,500,000

$2,000,000

$1,500,000

$1,146,140

$1,027,631

$1,262,325

$1,000,000

$800,158

$500,000

1998

1999

2000

2001

2002

2003

ASSET MIX
At year-end the asset mix reflected securities at 58% and loans at 31%.
With a 31% loan to asset ratio and 51 banking centers staffed
by one or more lenders, our goal is to increase earnings through a
reallocation of the assets with a heavier loan weighting.

Investments 58%

Loans 31%

Goodwill 5%

Other Assets 2%

Cash & Due From 4%

LOAN GROWTH
With acquisitions, loan growth has
continued and at year-end the balance
exceeded $770 million.

$800,000

$700,000

$600,000

$500,000

$400,000

$300,000

$276,106

$411,203

$424,400

$366,803

$770,053

$679,559

LOAN PORTFOLIO MAKEUP
The makeup of the loan portfolio has also changed over
time, with the addition of several commercially-oriented
banks and our involvement in the Houston and Dallas markets.
The one-to-four family category has fallen while the commercial
real estate and industrial categories have grown.

$200,000

$100,000

1998

1999

2000

2001

2002

2003

Agriculture
3%

Other
0%

Consumer
7%

Commercial and industrial
12%

Construction and land
development
5%

Multi family residential
3%

Farmland
2%

Commercial mortgages
33%

Home Equity
4%

1-4 family residential
31%

0.40%

0.35%

0.30%

0.25%

0.20%

0.15%

0.10%

0.5%

0.0%

ASSET / LOAN QUALITY
As of year-end 2003, non-performing loans as a percentage of total loans
and other real estate were 0.13%, with net charge-offs to average loans
at 0.23% and allowance for credit losses to total loans at 1.34%.
Our stated goals include increasing our loan to asset and loan to
deposit ratios while maintaining the asset quality.

During 2002 and 2003, as part of the due diligence on the nine banks
we acquired, we identified numerous loans that did not fit our credit
quality and underwriting standards. During the same period, we
aggressively pursued a program of moving those non-Prosperity quality
loans out of the bank. Under this strategy, the quality of the loan portfolio
has improved as compared to 2002. As noted above, we ended the year
with a ratio of non-performing loans to total loans and other real estate
at 13 basis points (.13%) vs. 38 basis points (.38%) at year-end 2002.

0.38%

0.13%

2002

2003

DEPOSIT COMPOSITION
The non-interest bearing portion of our deposit base has
steadily increased. As of year-end 2003, non-interest demand
deposits represented 22% of total deposits vs. 21% in 2002 and 17%
in 2001. At year-end 2003, our deposits were concentrated in
low cost demand, money market, NOW and savings categories
representing 67% of total deposits. The Company's long term
strategy of growing and acquiring core deposits is one of the
factors which has enabled us to meet our earnings per share target.

MMA & Savings
$487.9
23%

CDs & IRAs < 100
$343.2
17%

CDs & IRAs > 100
$334.0
16%

Interest bearing DDA
$451.2
22%

Non-interest bearing DDA
$467.4
22%

SHAREHOLDERS’ EQUITY
Shareholders’ Equity ended the year at
$219.6 million, a 41.9% increase over
year-end 2002.

RETURN ON AVERAGE SHAREHOLDERS’ EQUITY
The return on shareholders’ equity fell from 18.66% to
15.60% (’02 - ’03) as weighted average diluted shares outstanding
went from 17.4 million to 20.4 million for the same periods.
This increase in weighted average shares was 16.7%. Even with the
increase in weighted average shares outstanding, Prosperity was able
to deliver a return on average shareholders’ equity in excess of 15%.

$250,000

$200,000

$150,000

$100,000

$50,000

20.00%

18.00%

$219,588

$154,739

$61,781

$69,025

$80,333

$88,725

1998

1999

2000

2001

2002

2003

18.66%

16.00%

14.88%

14.53%

14.67%

15.19%

15.60%

14.00%

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%

1998

1999

2000

2001

2002

2003

RETURN ON AVERAGE ASSETS
Return on average assets ended the year
at 1.32%, as compared with the
1.45% for 2002.

PER SHARE NET INCOME
Per share net income grew at a rate of 172%
over the period from 1998 through 2003.

BOOK VALUE PER SHARE
During this same time period,
book value per share increased from $3.88 in 1998
to $10.49 in 2003, or 170%.

DIVIDENDS PER SHARE
The dividend payout has increased
steadily and was $0.25 per share in 2003.
We also announced a 20% increase
for 2004 to $0.30 per share.

1.60%

1.40%

1.20%

1.00%

0.80%

0.60%

0.40%

0.20%

0.00%

$1.40

$1.20

$1.00

$0.80

$0.60

$0.40

$0.20

$12.00

$10.00

$8.00

$6.00

$4.00

$2.00

$0.25

$0.20

$0.15

$0.10

$0.05

1.45%

1.32%

1.01%

1.08%

1.02%

1.09%

1998

1999

2000

2001

2002

2003

$1.36

$1.22

$0.79

$0.65

$0.58

$0.50

1998

1999

2000

2001

2002

2003

$10.49

$8.19

$5.47

$4.98

$3.88

$4.32

1998

1999

2000

2001

2002

2003

$0.25

$0.22

$0.195

$0.18

$0.10

1998

1999

2000

2001

2002

2003

THE HIGHS AND THE LOWS
Over the past twelve months our stock has traded
from a low of $16.16 to a high of $24.35.

$30.00

$25.00

$20.00

$15.00

$10.00

$6.31

$24.35

$19.95

$13.94

$13.48

$16.16

$8.94

$10.00

$8.75

$6.00

$6.03

$6.44

$5.00

1998

1999

2000

2001

2002

2003

Common Stock Market Price-High
Common Stock Market Price-Low

WAS PROSPERITY A GOOD INVESTMENT?

The Performance Graph compares the cumulative total sharehold-

er return on the Company's Common Stock for the period beginning

at the close of trading on December 31, 1998, to December 31, 2003,

with the cumulative total return of the S&P 500 Total Return Index

and the Nasdaq Bank Index for the same period. Dividend reinvest-

ment has been assumed.

The Performance Graph assumes $100 invested on December 31,

1998 in the Company's Common Stock, the S&P 500 Total Return

Index and the Nasdaq Bank Index.

450

400

350

300

250

200

150

100

0
1998

100

1999

2000

2001

2002

2003

131.68

121.11

96.15

166.22

110.34

109.84

230.97

97.32

118.92

329.46

75.75

121.74

397.52

97.40

156.62

Prosperity Bancshares, Inc.
S&P 500*
NASDAQ Bank Index*

The historical stock price performance for the Company's stock,

*Source: CRSP, Center for Research in Security Prices, Graduate School of Business, The University of Chicago 2004.

shown on the accompanying graph, is not necessarily indicative of future stock performance.

WHAT’S IN STORE IN ’04?

Fifty-one Banking Centers with seventy-four active lenders marketing loans, deposits and treasury management

services positions Prosperity for a strong showing in two thousand and four.

With the four Dallas acquisitions, we grew from two to eleven full service banking centers. The growth in Dallas has

been especially rewarding as we increased both loans and deposits. This positions us to make further market inroads.

In the greater Houston CMSA, we have 29 banking centers. Seventy-five percent of our locations now lie in the

two largest CMSAs in Texas. As of year-end 2003, over 50% of our loans and deposits emanated from the same two

dynamic markets.

With the completion of our integration of nine banks in the past 17 months adding $900+ million in assets, we are

positioned to be a strategic player in both the Dallas and Houston Markets —while not ignoring the commitment to our

rural heritage and those elements of our franchise.

TECHNOLOGY

The in-house conversion of our data and item processing was completed during 2003. This move not only allows us to

more effectively control costs, but also gives us more flexibility in the development of new banking products and services.

Our Internet Banking product is just one area where our customers have seen major improvements. Through the

Internet we are now able to deliver treasury management services to our commercial customer base. In addition, we

continue our commitment to our consumer customers.

Our Formula Works

EFFICIENCY

Our Efficiency Ratio for 2003, ended the year at 51.6%. This is slightly

above the 2002 level and is attributable to the acquisition of mainbank

in November and First State Bank of North Texas in December.

We believe our internal growth and acquisitions strategies should both

orient and position us to maintain a very acceptable Efficiency Ratio.

70.00%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

61.72%

59.29%

62.29%

60.14%

50.36%

51.58%

1998

1999

2000

2001

2002

2003

A CONTINUING STRENGTH

The Urban- Rural Franchise —this mix calls for a high level of involvement on the part of our officers and associates

in their respective communities. From Mathis in the south through Houston and into Dallas, community involvement

and leadership continue to be important as we deliver banking services and products. The “No 1-800 Numbers” message

is delivered by our “Real Bankers”.

As part of our commitment to our communities, each of our Banking Centers presented (and continues to present) at

local high schools, the FDIC’s approved and endorsed “Money Smart” program which helps consumers understand and

appreciate the benefits of commercial banks, their products, services and the role they play in each community.

WHAT WORKS

“Real Bankers…not just a bank SM! ” This is how we have differentiated ourselves from the competition since we

started in 1983. We continue to believe that the availability of bankers with decision making authority on-site at each of

our locations, remains relevant in an era of out-of-state mega-bank consolidations and staff reductions. This is why we

staff each Banking Center with a senior decision maker!

INTERNAL GROWTH AND ACQUISITIONS

Internal growth remains an integral part of our business model. We continue to recognize the importance of growing

market share within each of the communities we serve. Our image based advertising in the Houston and Dallas markets is

designed to lever off our size and elevate market awareness. The addition of our Treasury Management services also adds

value for our customers and allows us to offer many of the cash management tools available through the mega-banks.

Acquisitions remain a key element of our growth strategy. As the costs of owning and operating a bank continue to

escalate, owners of independent banks are coming to realize the benefits of partnering with us. The proof of this

statement can be seen in that the senior managements of all four of our Dallas area acquisitions have become members of

Prosperity’s senior management team.

PROSPERITY BANCSHARES, INC. SM BOARD OF DIRECTORS

Ned S. Holmes
Chairman of the Board

James A. Bouligny

Charles A. Davis, Jr.

William H. Fagan, M. D.

Charles J. Howard, M. D.

Perry Mueller, Jr., D.D.S.

A. Virgil Pace, Jr.

Tracy T. Rudolph

Harrison Stafford II

Robert H. Steelhammer

H. E. (Tim) Timanus, Jr.

David Zalman

PROSPERITY BANCSHARES, INC. SM OFFICERS

standing, left to right
David Zalman, President & Chief Executive Officer
David Hollaway, CPA, Chief Financial Officer

seated, left to right
H. E. (Tim) Timanus, Jr., Executive Vice President & Chief Operating Officer
James D. (Dan) Rollins III, Senior Vice President

not pictured
denise Urbanovsky, Secretary

PROSPERITY BANK® BOARD OF DIRECTORS

David Zalman
Chairman & Chief Executive Officer

H. E. (Tim) Timanus, Jr.
President & Chief Operating Officer

Peter Fisher
Vice Chairman & General Counsel

Gerald Clark

Jason H. Downie

Ned S. Holmes, Jr.

Jack Lord

Joseph B. Swinbank

Fred Zeidman

Charles A. Davis, Jr.

Leah Henderson

Clyde Lacy

Errol John Dietze

Ned S. Holmes

Mohammad Ladjevardian

Perry Mueller, Jr., D.D.S.

Matthew W. Plummer, Jr., D.M.D.

D. R. (Tom) Uher

Jim Barta
Advisory Director

Joe Zalman, Jr.

PROSPERITY BANK® EXECUTIVE COMMITTEE

David Zalman
Chairman & Chief Executive Officer

David Hollaway, CPA
Chief Financial Officer

Chris A. Bagley
Chief Credit Officer, President
Waugh Drive Banking Center, Houston

Chris J. Delaup
President, River Oaks Banking Center,
Houston

Thomas A. Miller
President, Wharton Banking Center,
Wharton

H. E. (Tim) Timanus, Jr.
President & Chief Operating Officer

James D. (Dan) Rollins III
Executive Vice President

Robert L. Benter
President, Post Oak Banking Center,
Houston

Mark D. Humphrey
President, Clear Lake & Hitchcock
Banking Centers, Houston

Peter Fisher
Vice Chairman & General Counsel

Randy D. Hester
Chief Lending Officer, President Brazoria
County Banking Centers, West Columbia

Donald A. Bolton, Jr.
President, Victoria Banking Center,
Victoria

Mark Lovvorn
Chairman, Dallas Area Banking Centers,
Dallas

Jay W. Porter, Jr.
President, North Houston Banking Centers,
Houston

Randall Reeves
President, Downtown Banking Center,
Houston

MONT BELVIEU
10305 Eagle Drive
Mont Belvieu, Texas 77580
281-576-5444

NEEDVILLE
13325 Highway 36
Needville, Texas 77461
979-793-4211

PALACIOS
600 Henderson
Palacios, Texas 77465
361-972-5481

PRESTON ROAD
18800 Preston Road
Dallas, Texas 75252
972-312-9107

POST OAK
3040 Post Oak Blvd., Ste. 150
Houston, Texas 77056
713-993-0002

RED OAK
500 North I-35 Service Road
Red Oak, Texas 75154
972-617-7377

RIVER OAKS
Prosperity Bank Plaza
4295 San Felipe
Houston, Texas 77027
713-693-9400

SWEENY
206 North McKinney
Sweeny, Texas 77480
979-548-2717

TANGLEWOOD
5707 Woodway
Houston, Texas 77057
713-693-9225

TURTLE CREEK
3802 Oak Lawn Avenue
Dallas, Texas 75219
214-521-4800

VICTORIA
2702 North Navarro
Victoria, Texas 77901
361-576-9223

WAUGH DRIVE
55 Waugh Drive, Ste. 100
Houston, Texas 77007
713-693-9100

WEST COLUMBIA
510 East Brazos
West Columbia, Texas 77486
979-345-3141

WESTMORELAND
2415 South Westmoreland Road
Dallas, Texas 75211
214-330-3800

WHARTON
143 West Burleson Street
Wharton, Texas 77488
979-282-2000

WINNIE
146 Spur 5
Winnie, Texas 77665
409-296-3000

WOODCREEK
2828 FM 1960 East
Houston, Texas 77073
281-443-7600

ABRAMS CENTRE
9330 LBJ Freeway, Ste. 150
Dallas, Texas 75243
972-238-9292

ALDINE
1906 Aldine Bender
Houston, Texas 77032
281-987-7600

ANGLETON
116 South Velasco
Angleton, Texas 77515
979-849-6404

BAY CITY
1600 Seventh Street
Bay City, Texas 77414
979-245-4200

BEEVILLE
100 South Washington
Beeville, Texas 78102
361-358-3612

CYPRESS
25820 US Highway 290
Cypress, Texas 77429
281-373-0062

DAYTON
106 North Main
Dayton, Texas 77535
936-258-7681

DOWNTOWN
777 Walker, Ste. L140
Houston, Texas 77002
713-693-9250

GOLIAD
145 North Jefferson
Goliad, Texas 77963
361-645-3246

HWY 6 – WEST
1070 Highway 6 South
Houston, Texas 77077
281-496-9103

HITCHCOCK
8300 Highway 6
Hitchcock, Texas 77563
409-986-5547

EAST BERNARD
700 Church Street
East Bernard, Texas 77435
979-335-7573

KIEST
333 West Kiest Boulevard
Dallas, Texas 75224
214-371-6000

EDNA
102 North Wells
Edna, Texas 77957
361-782-3533

BELLAIRE
6800 West Loop S., Ste. 100
Bellaire, Texas 77401
713-693-9200

EL CAMPO
1301 North Mechanic Street
El Campo, Texas 77437
979-543-2200

BLOOMING GROVE
109 South Fordyce Street
Blooming Grove, Texas 76626
903-695-2311

ENNIS
207 South Clay
Ennis, Texas 75119
972-875-8461

LIBERTY
520 Main Street
Liberty, Texas 77575
936-336-5731

MAGNOLIA
18935 FM 1488
Magnolia, Texas 77355
281-356-8211

MATHIS
103 North Highway 359
Mathis, Texas 78368
361-547-3336

CAMP WISDOM
3515 W. Camp Wisdom Rd.
Dallas, Texas 75237
214-467-6996

CEDAR HILL
217 East FM 1382
Cedar Hill, Texas 75104
972-291-6246

FAIRFIELD
15050 Fairfield Village Square Dr.
Cypress, Texas 77433
281-373-0080

MEDICAL CENTER
7505 South Main St., Ste. 100
Houston, Texas 77030
713-693-9275

GALVESTON
2424 Market Street
Galveston, Texas 77550
409-762-2103

MEMORIAL
12602 Memorial Drive
Houston, Texas 77024
713-465-0300

CITYWEST
2500 CityWest Boulevard
Houston, Texas 77042
713-334-8000

GLADEBROOK
3934 FM 1960 West, Ste. 100
Houston, Texas 77068
832-249-7600

CLEAR LAKE
100 West Medical Center Blvd.
Webster, Texas 77598
281-332-3595

CLEVELAND
104 West Crockett Street
Cleveland, Texas 77327
281-592-2661

COPPERFIELD
8686 Highway 6 North
Houston, Texas 77095
281-345-9555

CORSICANA
100 South Main Street
Corsicana, Texas 75110
903-872-0077

CUERO
106 North Esplanade
Cuero, Texas 77954
361-275-2374

ANNUAL REPORT ON FORM 10-K
Copies of the Company’s 2003 Annual Report
on Form 10-K filed with the Securities and
Exchange Commission will be mailed to
shareholders and other interested persons
upon written request to:

James D. (Dan) Rollins III
Senior Vice President
Prosperity Bancshares, Inc.SM
Prosperity Bank Plaza
4295 San Felipe
Houston, TX 77027

INVESTOR INQUIRIES
Analysts, investors, and others desiring
additional financial data about Prosperity
Bancshares, Inc.SM may contact:

James D. (Dan) Rollins III
Senior Vice President
Prosperity Bancshares, Inc.SM
Prosperity Bank Plaza
4295 San Felipe
Houston, TX 77027
Telephone (713) 693-9300
Facsimile (713) 693-9309

Investor information

CORPORATE OFFICE
Prosperity Bancshares, Inc.SM
Prosperity Bank Plaza
4295 San Felipe
Houston, TX 77027
Telephone (713) 693-9300

TRANSFER AGENT & REGISTRAR
DIVIDEND REINVESTMENT
PLAN ADMINISTRATOR
Computershare Investor Services
350 Indiana Street, Suite 800
Golden, CO 80041
Telephone (303) 262-0600

INDEPENDENT AUDITORS
Deloitte & Touche, L. L. P.
333 Clay Street, Suite 2300
Houston, TX 77002-4196

COUNSEL
Bracewell & Patterson, L. L. P.
711 Louisiana Street, Suite 2900
Houston, TX 77002-2781

COMMON STOCK LISTING
Shares of Prosperity Bancshares, Inc.SM
common stock are listed on the
NASDAQ Stock Market under the symbol PRSP.

TRUST PREFERRED SECURITIES LISTING

Shares of Prosperity Capital Trust I
trust preferred securities are listed on NASDAQ
Stock Market under the symbol PRSPP.

Shares of Paradigm Capital Trust II
trust preferred securities are listed on the OTC
Bulletin Board under the symbol PDCTP.

Prosperity Bancshares, Inc.SM is a registered financial holding company. Prosperity Bank®, its primary subsidiary, is a full service bank that
provides a full range of financial products and services to small and medium-sized businesses and consumers through fifty-one (51) full-service
banking locations in fifteen (15) contiguous counties surrounding and including the Greater Houston Metropolitan Area and the Dallas Area.