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Prosperity Bancshares (PB) Beats on Q1 Earnings, Costs Down
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Prosperity Bancshares Inc.’s (PB - Free Report) first-quarter 2017 earnings per share of 99 cents surpassed the Zacks Consensus Estimate of 97 cents. Moreover, the figure compared favorably with the prior-year quarter’s earnings of 98 cents. Results included purchase accounting adjustments for both periods.
A decrease in expenses and a significant fall in provisions were responsible for the better-than-expected results. Also, improving loan balances was a positive for the company. However, a slight increase in non-interest income was offset by a decline in net interest income.
Prosperity Bancshares’ net income declined marginally year over year to $68.6 million.
Revenues & Expenses Decreased
Net revenue of $183.3 million for the reported quarter lagged the Zacks Consensus Estimate of $184.8 million. Moreover, the figure declined nearly 7% from the prior-year quarter.
Net interest income declined 8.3% year over year to $152.4 million, primarily due to a fall in loan discount accretion.
Also, net interest margin, on a tax equivalent basis, decreased 28 basis points (bps) to 3.20%.
However, non-interest income increased marginally year over year to $30.8 million.
Non-interest expenses were down 3.1% year over year to $78.1 million due to a fall in almost all expense components except regulatory assessments and FDIC insurance, other real estate expense and other noninterest expense.
Loans Increased, Deposits Declined
As of Mar 31, 2017, total loans were $9.7 billion, up 1.2% from the prior quarter. However, total deposits fell 1.6% from the previous quarter to $17.1 billion.
Credit Quality Improved
As of Mar 31, 2017, total nonperforming assets were $41.2 million, down 27.7% year over year. Also, the ratio of allowance for credit losses to total loans was down 1 bp year over year to 0.86%.
Further, net charge-offs totaled $3.9 million, down 66.5% from the year-ago quarter. Also, provision for credit losses declined more than 80% from the prior-year quarter to $2.7 million.
Capital Position Enhanced, Profitability Deteriorated
As of Mar 31, 2017, Tier-1 risk-based capital ratio came in at 14.45% compared with 13.20% as of Mar 31, 2016. Moreover, total risk-based capital ratio was 15.14%, up from 13.90% at the end of the year-ago quarter.
Also, common equity tier 1 capital ratio (under Basel III, effective Jan 1, 2015) was 14.45%, up from 13.20% in the prior-year quarter.
The annualized return on average assets fell 1 bp year over year to 1.23%. Similarly, annualized return on common equity was 7.45%, compared with 7.85% in the prior-year quarter.
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. Though expenses decreased in the reported quarter, overall operating expenses are likely to remain on the higher side given the company’s investment in franchise.
Prosperity Bancshares, Inc. Price, Consensus and EPS Surprise
Zions Bancorporation (ZION - Free Report) reported first-quarter 2017 earnings of 61 cents per share, surpassing the Zacks Consensus Estimate of 54 cents. The results largely benefited from top-line growth and decline in provisions, partially offset by higher adjusted non-interest expenses.
First Republic Bank’s first-quarter 2017 earnings per share came in at $1.01, in line with the Zacks Consensus Estimate. The figure improved 8.6% from the year-ago tally. Higher revenues were primarily responsible for the bottom-line improvement. However, higher expenses and provisions remained a headwind.
Associated Banc-Corp (ASB - Free Report) reported first-quarter 2017 earnings per share of 35 cents, outpacing the Zacks Consensus Estimate of 32 cents. Better-than-expected results were primarily driven by an improvement in revenues and lower expenses.
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Prosperity Bancshares (PB) Beats on Q1 Earnings, Costs Down
Prosperity Bancshares Inc.’s (PB - Free Report) first-quarter 2017 earnings per share of 99 cents surpassed the Zacks Consensus Estimate of 97 cents. Moreover, the figure compared favorably with the prior-year quarter’s earnings of 98 cents. Results included purchase accounting adjustments for both periods.
A decrease in expenses and a significant fall in provisions were responsible for the better-than-expected results. Also, improving loan balances was a positive for the company. However, a slight increase in non-interest income was offset by a decline in net interest income.
Prosperity Bancshares’ net income declined marginally year over year to $68.6 million.
Revenues & Expenses Decreased
Net revenue of $183.3 million for the reported quarter lagged the Zacks Consensus Estimate of $184.8 million. Moreover, the figure declined nearly 7% from the prior-year quarter.
Net interest income declined 8.3% year over year to $152.4 million, primarily due to a fall in loan discount accretion.
Also, net interest margin, on a tax equivalent basis, decreased 28 basis points (bps) to 3.20%.
However, non-interest income increased marginally year over year to $30.8 million.
Non-interest expenses were down 3.1% year over year to $78.1 million due to a fall in almost all expense components except regulatory assessments and FDIC insurance, other real estate expense and other noninterest expense.
Loans Increased, Deposits Declined
As of Mar 31, 2017, total loans were $9.7 billion, up 1.2% from the prior quarter. However, total deposits fell 1.6% from the previous quarter to $17.1 billion.
Credit Quality Improved
As of Mar 31, 2017, total nonperforming assets were $41.2 million, down 27.7% year over year. Also, the ratio of allowance for credit losses to total loans was down 1 bp year over year to 0.86%.
Further, net charge-offs totaled $3.9 million, down 66.5% from the year-ago quarter. Also, provision for credit losses declined more than 80% from the prior-year quarter to $2.7 million.
Capital Position Enhanced, Profitability Deteriorated
As of Mar 31, 2017, Tier-1 risk-based capital ratio came in at 14.45% compared with 13.20% as of Mar 31, 2016. Moreover, total risk-based capital ratio was 15.14%, up from 13.90% at the end of the year-ago quarter.
Also, common equity tier 1 capital ratio (under Basel III, effective Jan 1, 2015) was 14.45%, up from 13.20% in the prior-year quarter.
The annualized return on average assets fell 1 bp year over year to 1.23%. Similarly, annualized return on common equity was 7.45%, compared with 7.85% in the prior-year quarter.
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. Though expenses decreased in the reported quarter, overall operating expenses are likely to remain on the higher side 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 #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 first-quarter 2017 earnings of 61 cents per share, surpassing the Zacks Consensus Estimate of 54 cents. The results largely benefited from top-line growth and decline in provisions, partially offset by higher adjusted non-interest expenses.
First Republic Bank’s first-quarter 2017 earnings per share came in at $1.01, in line with the Zacks Consensus Estimate. The figure improved 8.6% from the year-ago tally. Higher revenues were primarily responsible for the bottom-line improvement. However, higher expenses and provisions remained a headwind.
Associated Banc-Corp (ASB - Free Report) reported first-quarter 2017 earnings per share of 35 cents, outpacing the Zacks Consensus Estimate of 32 cents. Better-than-expected results were primarily driven by an improvement in revenues and lower expenses.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>