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Prosperity Bancshares (PB) Stock Up on Q4 Earnings Beat
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Shares of Prosperity Bancshares Inc. (PB - Free Report) increased 2.9% following the release of its fourth-quarter and 2016 results. Quarterly earnings per share of 99 cents surpassed the Zacks Consensus Estimate by a penny. However, the figure compared unfavorably with the prior-year quarter’s earnings per share of $1.01. Results included purchase accounting adjustments for both periods.
A slight increase in net interest income was partially offset by lower non-interest income, a rise in expenses and higher provisions. Improving loans and deposits balances were the tailwinds, while credit quality reflected weakness.
Prosperity Bancshares’ net income fell 2.4% year over year to $68.8 million.
For 2016, earnings of $3.94 per share were a penny above the Zacks Consensus Estimate. However, the figure declined 3.7% year over year. Results included purchase accounting adjustments for both periods. Net income of $274.5 million decreased 4.2% from the 2015 level.
Revenues Dip, Expenses Rise
Net revenue of $183.3 million for the reported quarter lagged the Zacks Consensus Estimate of $184.8 million. Moreover, the figure marginally declined from the prior-year quarter.
For 2016, net revenue was $751.0 million, which missed the Zacks Consensus Estimate of $756.8 million. Also, the figure was slightly below the year-ago level.
Net interest income rose marginally year over year to $153.8 million. The increase was driven by rise in average interest-earning assets, which was partially offset by higher average rate paid on interest-bearing.
Also, net interest margin, on a tax equivalent basis, increased 2 basis points (bps) to 3.26%.
However, non-interest income declined 2.7% year over year to $29.5 million.
Non-interest expenses were up 1.6% year over year to $79.1 million. The increase was due to a rise in salaries and benefit expenses and the Traditional Bancshares acquisition.
Balance Sheet Strengthens
As of Dec 31, 2016, total loans summed $9.6 billion, up 1% from the prior quarter. Total deposits rose 2.3% from the previous quarter to $17.3 billion.
Credit Quality Worsens
As of Dec 31, 2016, total nonperforming assets increased 11.1% year over year to $48.3 million. Also, the ratio of allowance for credit losses to total loans was up 3 bps year over year to 0.89%.
Further, net charge-offs totaled $2.3 million, significantly up from $0.1 million in the year-ago quarter. Also, provision for credit losses surged significantly from the prior-year quarter to $2.0 million.
Capital Position Enhanced, Profitability Deteriorated
As of Dec 31, 2016, Tier-1 risk-based capital ratio came in at 14.48% compared with 13.55% as of Dec 31, 2015. Moreover, total risk-based capital ratio was 15.20%, up from 14.25% at the end of the year-ago quarter.
Also, common equity tier 1 capital ratio (under Basel III, effective Jan 1, 2015) was 14.48% as of Dec 31, 2016, up from 13.55% in the prior-year quarter.
The annualized return on average assets fell 4 bps year over year to 1.26%. Similarly, annualized return on common equity was 7.58%, compared with 8.17% in the prior-year quarter.
Share Repurchase Update
During 2016, Prosperity Bancshares repurchased 1.24 million shares at an average weighted average price of $40.98 per share.
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 will continue to support its financials. However, mounting operating expenses remain a major headwind given the company’s investment in franchise.
Prosperity Bancshares, Inc. Price, Consensus and EPS Surprise
Zions Bancorporation (ZION - Free Report) reported fourth-quarter 2016 earnings of 60 cents per share, which handily surpassed the Zacks Consensus Estimate of 52 cents. Better-than-expected results were largely driven by higher revenues and provision benefits. Also, driven by cost saving efforts, the company recorded a marginal fall in operating expenses. However, deteriorating asset quality and capital position remained headwinds.
First Republic Bank’s earnings per share for fourth-quarter 2016 came in at $1.03, beating the Zacks Consensus Estimate by a penny. Higher net interest income and non-interest income during the quarter were primarily responsible for the bottom-line improvement. On the flip side, higher expenses remained a headwind.
Associated Banc-Corp (ASB - Free Report) reported fourth-quarter 2016 earnings per share of 34 cents, outpacing the Zacks Consensus Estimate of 32 cents. Better-than-expected results were primarily driven by an improvement in total revenue and lower provision for credit losses. However, an increase in expenses marginally hurt the results.
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Prosperity Bancshares (PB) Stock Up on Q4 Earnings Beat
Shares of Prosperity Bancshares Inc. (PB - Free Report) increased 2.9% following the release of its fourth-quarter and 2016 results. Quarterly earnings per share of 99 cents surpassed the Zacks Consensus Estimate by a penny. However, the figure compared unfavorably with the prior-year quarter’s earnings per share of $1.01. Results included purchase accounting adjustments for both periods.
A slight increase in net interest income was partially offset by lower non-interest income, a rise in expenses and higher provisions. Improving loans and deposits balances were the tailwinds, while credit quality reflected weakness.
Prosperity Bancshares’ net income fell 2.4% year over year to $68.8 million.
For 2016, earnings of $3.94 per share were a penny above the Zacks Consensus Estimate. However, the figure declined 3.7% year over year. Results included purchase accounting adjustments for both periods. Net income of $274.5 million decreased 4.2% from the 2015 level.
Revenues Dip, Expenses Rise
Net revenue of $183.3 million for the reported quarter lagged the Zacks Consensus Estimate of $184.8 million. Moreover, the figure marginally declined from the prior-year quarter.
For 2016, net revenue was $751.0 million, which missed the Zacks Consensus Estimate of $756.8 million. Also, the figure was slightly below the year-ago level.
Net interest income rose marginally year over year to $153.8 million. The increase was driven by rise in average interest-earning assets, which was partially offset by higher average rate paid on interest-bearing.
Also, net interest margin, on a tax equivalent basis, increased 2 basis points (bps) to 3.26%.
However, non-interest income declined 2.7% year over year to $29.5 million.
Non-interest expenses were up 1.6% year over year to $79.1 million. The increase was due to a rise in salaries and benefit expenses and the Traditional Bancshares acquisition.
Balance Sheet Strengthens
As of Dec 31, 2016, total loans summed $9.6 billion, up 1% from the prior quarter. Total deposits rose 2.3% from the previous quarter to $17.3 billion.
Credit Quality Worsens
As of Dec 31, 2016, total nonperforming assets increased 11.1% year over year to $48.3 million. Also, the ratio of allowance for credit losses to total loans was up 3 bps year over year to 0.89%.
Further, net charge-offs totaled $2.3 million, significantly up from $0.1 million in the year-ago quarter. Also, provision for credit losses surged significantly from the prior-year quarter to $2.0 million.
Capital Position Enhanced, Profitability Deteriorated
As of Dec 31, 2016, Tier-1 risk-based capital ratio came in at 14.48% compared with 13.55% as of Dec 31, 2015. Moreover, total risk-based capital ratio was 15.20%, up from 14.25% at the end of the year-ago quarter.
Also, common equity tier 1 capital ratio (under Basel III, effective Jan 1, 2015) was 14.48% as of Dec 31, 2016, up from 13.55% in the prior-year quarter.
The annualized return on average assets fell 4 bps year over year to 1.26%. Similarly, annualized return on common equity was 7.58%, compared with 8.17% in the prior-year quarter.
Share Repurchase Update
During 2016, Prosperity Bancshares repurchased 1.24 million shares at an average weighted average price of $40.98 per share.
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 will continue to support its financials. However, mounting operating expenses remain a major headwind given the company’s investment in franchise.
Prosperity Bancshares, Inc. Price, Consensus and EPS Surprise
Prosperity Bancshares, Inc. Price, Consensus and EPS Surprise | Prosperity Bancshares, Inc. Quote
Currently, Prosperity Bancshares carries a Zacks Rank #2 (Buy). 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 fourth-quarter 2016 earnings of 60 cents per share, which handily surpassed the Zacks Consensus Estimate of 52 cents. Better-than-expected results were largely driven by higher revenues and provision benefits. Also, driven by cost saving efforts, the company recorded a marginal fall in operating expenses. However, deteriorating asset quality and capital position remained headwinds.
First Republic Bank’s earnings per share for fourth-quarter 2016 came in at $1.03, beating the Zacks Consensus Estimate by a penny. Higher net interest income and non-interest income during the quarter were primarily responsible for the bottom-line improvement. On the flip side, higher expenses remained a headwind.
Associated Banc-Corp (ASB - Free Report) reported fourth-quarter 2016 earnings per share of 34 cents, outpacing the Zacks Consensus Estimate of 32 cents. Better-than-expected results were primarily driven by an improvement in total revenue and lower provision for credit losses. However, an increase in expenses marginally hurt the results.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>