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Prosperity Bancshares' (PB) Q3 Earnings In Line, Costs Up
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Prosperity Bancshares Inc. (PB - Free Report) reported third-quarter 2016 earnings per share of 99 cents, in line with the Zacks Consensus Estimate. However, the figure compared unfavorably with the prior-year quarter earnings per share of $1.01. Results included purchase accounting adjustments for both periods.
Lower revenues and a rise in expenses were the downside. Moreover, a fall in loans and deposit balances added to the negatives. This probably led to a drop in the company’s share price by 2.2% on the day of reporting.
Nonetheless, the company witnessed a fall in provisions and net charge-offs. Also, its capital position improved.
Prosperity Bancshares’ net income fell 2.8% year over year to $68.7 million.
Net revenue of $183.8 million lagged the Zacks Consensus Estimate of $189.6 million. Moreover, the figure represents a decline of 2.2% year over year.
Net interest income (excluding provision for credit losses) decreased 1.3% year over year to $154.1 million. A fall in loan discount accretion led to this decline. Also, net interest margin, on a tax equivalent basis, slipped 1 basis points (bps) to 3.29%.
Further, non-interest income declined 6.6% year over year to $29.7 million. The fall was primarily led by a decrease in nonsufficient funds (NSF) fees, brokerage income as well as other income.
Non-interest expenses were up 4% year over year to $79.5 million. The increase was triggered by a rise in salaries and benefit expense, credit and debit card, data processing and software amortization costs, communications and other expenses.
Efficiency ratio was 43.26%, up from 40.72% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.
Balance Sheet Deteriorated
As of Sep 30, 2016, total loans summed $9.5 billion, down 1.1% from the prior quarter. Total deposits declined 1.7% from the previous quarter to $16.9 billion.
Credit Quality: Mixed Bag
As of Sep 30, 2016, total nonperforming assets increased 23.7% year over year to $60.2 million. Also, the ratio of allowance for credit losses to total loans was up 2 bps year over year to 0.90%.
However, net charge-offs totaled $0.2 million, significantly down from $5.3 million in the year-ago quarter. Also, provision for credit losses was down 62.3% to $2.0 million from the prior-year quarter.
Capital Position Enhanced, Profitability Deteriorated
As of Sep 30, 2016, Tier-1 risk-based capital ratio came in at 14.41% compared with 13.37% as of Sep 30, 2015. Moreover, total risk-based capital ratio was 15.14%, up from 14.09% at the end of the year-ago quarter.
Also, common equity tier 1 capital ratio (under Basel III, effective Jan 1, 2015) was 14.41% as of Sep 30, 2016, up 104 bps from the prior-year quarter.
The annualized return on average assets fell 3 bps year over year to 1.27%. Similarly, annualized return on common equity was 7.66%, compared with 8.31% in the prior-year quarter.
Dividend Hike
Concurrent with the earnings release, the company declared fourth-quarter cash dividend of 34 cents per share, up 13.3% from the prior payout. The dividend will be paid on Jan 3, 2017 to shareholders of record as of Dec 16.
Our Viewpoint
Driven by a steady rise in loan and deposit balances, Prosperity Bancshares is well poised for organic growth. Moreover, given its balance sheet strength, the company is expected to expand further through acquisitions. In addition, improving net interest margin and impressive credit quality will continue to support its financials.
However, mounting operating expenses remain a major headwind given the company’s investment in franchise. Also, as the company looks forward to further inorganic growth, merger-related charges will lead to an increase in overall expenses.
Zions Bancorporation (ZION - Free Report) reported third-quarter 2016 earnings of 57 cents per share, which surpassed the Zacks Consensus Estimate of 50 cents. Moreover, this compared favorably with the year-ago earnings of 41 cents per share. Better-than-expected results were primarily driven by higher revenues. However, escalated provision for loan losses and increasing non-interest expenses remained headwind.
SVB Financial Group reported third-quarter 2016 earnings per share of $2.12, which comfortably surpassed the Zacks Consensus Estimate of $1.75. Further, the bottom line compared favorably with the year-ago figure of $1.57. Better-than-expected results were primarily driven by a rise in net interest income (NII) and fee income. Further, a decline in provisions for loan losses supported the results.
Cullen/Frost Bankers, Inc. (CFR - Free Report) reported third-quarter 2016 earnings per share of $1.24, beating the Zacks Consensus Estimate of $1.16. Moreover, the reported figure was up from $1.17 per share recorded in the year-ago quarter. Higher revenues primarily supported the beat. The company also registered growth in deposit balances. Moreover, improvement in capital ratios added to the positives. However, elevated expenses and deteriorating credit metrics were the dampening factors.
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Prosperity Bancshares' (PB) Q3 Earnings In Line, Costs Up
Prosperity Bancshares Inc. (PB - Free Report) reported third-quarter 2016 earnings per share of 99 cents, in line with the Zacks Consensus Estimate. However, the figure compared unfavorably with the prior-year quarter earnings per share of $1.01. Results included purchase accounting adjustments for both periods.
Lower revenues and a rise in expenses were the downside. Moreover, a fall in loans and deposit balances added to the negatives. This probably led to a drop in the company’s share price by 2.2% on the day of reporting.
Nonetheless, the company witnessed a fall in provisions and net charge-offs. Also, its capital position improved.
Prosperity Bancshares’ net income fell 2.8% year over year to $68.7 million.
Revenues Decline, Expenses Up
Net revenue of $183.8 million lagged the Zacks Consensus Estimate of $189.6 million. Moreover, the figure represents a decline of 2.2% year over year.
Net interest income (excluding provision for credit losses) decreased 1.3% year over year to $154.1 million. A fall in loan discount accretion led to this decline. Also, net interest margin, on a tax equivalent basis, slipped 1 basis points (bps) to 3.29%.
Further, non-interest income declined 6.6% year over year to $29.7 million. The fall was primarily led by a decrease in nonsufficient funds (NSF) fees, brokerage income as well as other income.
Non-interest expenses were up 4% year over year to $79.5 million. The increase was triggered by a rise in salaries and benefit expense, credit and debit card, data processing and software amortization costs, communications and other expenses.
Efficiency ratio was 43.26%, up from 40.72% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.
Balance Sheet Deteriorated
As of Sep 30, 2016, total loans summed $9.5 billion, down 1.1% from the prior quarter. Total deposits declined 1.7% from the previous quarter to $16.9 billion.
Credit Quality: Mixed Bag
As of Sep 30, 2016, total nonperforming assets increased 23.7% year over year to $60.2 million. Also, the ratio of allowance for credit losses to total loans was up 2 bps year over year to 0.90%.
However, net charge-offs totaled $0.2 million, significantly down from $5.3 million in the year-ago quarter. Also, provision for credit losses was down 62.3% to $2.0 million from the prior-year quarter.
Capital Position Enhanced, Profitability Deteriorated
As of Sep 30, 2016, Tier-1 risk-based capital ratio came in at 14.41% compared with 13.37% as of Sep 30, 2015. Moreover, total risk-based capital ratio was 15.14%, up from 14.09% at the end of the year-ago quarter.
Also, common equity tier 1 capital ratio (under Basel III, effective Jan 1, 2015) was 14.41% as of Sep 30, 2016, up 104 bps from the prior-year quarter.
The annualized return on average assets fell 3 bps year over year to 1.27%. Similarly, annualized return on common equity was 7.66%, compared with 8.31% in the prior-year quarter.
Dividend Hike
Concurrent with the earnings release, the company declared fourth-quarter cash dividend of 34 cents per share, up 13.3% from the prior payout. The dividend will be paid on Jan 3, 2017 to shareholders of record as of Dec 16.
Our Viewpoint
Driven by a steady rise in loan and deposit balances, Prosperity Bancshares is well poised for organic growth. Moreover, given its balance sheet strength, the company is expected to expand further through acquisitions. In addition, improving net interest margin and impressive credit quality will continue to support its financials.
However, mounting operating expenses remain a major headwind given the company’s investment in franchise. Also, as the company looks forward to further inorganic growth, merger-related charges will lead to an increase in overall expenses.
PROSPERITY BCSH Price, Consensus and EPS Surprise
PROSPERITY BCSH Price, Consensus and EPS Surprise | PROSPERITY BCSH Quote
Currently, Prosperity Bancshares carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Zions Bancorporation (ZION - Free Report) reported third-quarter 2016 earnings of 57 cents per share, which surpassed the Zacks Consensus Estimate of 50 cents. Moreover, this compared favorably with the year-ago earnings of 41 cents per share. Better-than-expected results were primarily driven by higher revenues. However, escalated provision for loan losses and increasing non-interest expenses remained headwind.
SVB Financial Group reported third-quarter 2016 earnings per share of $2.12, which comfortably surpassed the Zacks Consensus Estimate of $1.75. Further, the bottom line compared favorably with the year-ago figure of $1.57. Better-than-expected results were primarily driven by a rise in net interest income (NII) and fee income. Further, a decline in provisions for loan losses supported the results.
Cullen/Frost Bankers, Inc. (CFR - Free Report) reported third-quarter 2016 earnings per share of $1.24, beating the Zacks Consensus Estimate of $1.16. Moreover, the reported figure was up from $1.17 per share recorded in the year-ago quarter. Higher revenues primarily supported the beat. The company also registered growth in deposit balances. Moreover, improvement in capital ratios added to the positives. However, elevated expenses and deteriorating credit metrics were the dampening factors.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>.