Shares of Prosperity Bancshares Inc. (PB - Free Report) gained 2.2% following the release of better-than-expected first-quarter 2023 results. Earnings per share of $1.37 surpassed the Zacks Consensus Estimate of $1.33. The bottom line increased 3% from the prior-year quarter. Our estimate for earnings was $1.26.
Results were primarily aided by an increase in revenues. Further, higher loan balances and interest rates aided the margins. The company did not record any provisions in the reported quarter, which was another major positive. However, the company witnessed higher operating expenses and lower deposits.
Net income available to common shareholders was $124.7 million, up 1.9% year over year.
Revenues & Expenses Increase
Net revenues were $281.7 million, up 2.4% from the prior-year quarter. The top line lagged the Zacks Consensus Estimate of $285 million. Our estimate for net revenues was $285.5 million.
Net interest income (NII) was $243.5 million, up 1.5%. Net interest margin, on a tax-equivalent basis, expanded 5 basis points to 2.93%. Our estimates for NII and NIM were $249.5 million and 2.85%, respectively.
Non-interest income totaled $38.3 million, up 9%. The rise was mainly driven by an increase in credit card, debit card and ATM card income, trust income, brokerage income and other non-interest income. Our estimate for non-interest income was $36 million.
Non-interest expenses increased 2.6% to $123 million. The rise was largely due to an increase in net occupancy and equipment costs, credit and debit card, data processing and software amortization expenses, regulatory assessments and FDIC insurance expenses, communication costs and other non-interest expenses. The reported quarter also included merger-related charges of $0.9 million. Our estimate for non-interest expenses was $126 million.
The efficiency ratio was 43.68%, in line with the prior-year quarter.
As of Mar 31, 2023, total loans were $19.3 billion, up 2.3% from the end of the previous quarter. Deposits totaled $27 billion, down 5.4%.
Credit Quality Impressive
Similar to the year-ago quarter, the company did not record any provision for credit losses in the reported quarter. As of Mar 31, 2023, total non-performing assets were $24.5 million, down 9.9% from the prior-year quarter end. Our estimate for the metric was $14.3 million.
Net recoveries were $0.6 million against net charge-offs of $1.2 million in the year-ago period. The ratio of allowance for credit losses to total loans was 1.46%, down from 1.58%.
Capital & Profitability Ratios Solid
As of Mar 31, 2023, the Tier-1 risk-based capital ratio was 15.59%, up from 15.32% recorded in the prior-year quarter. The total risk-based capital ratio was 16.41%, up from 15.99% as of Mar 31, 2022.
At the end of the first quarter, the annualized return on average assets was 1.31%, up from 1.29% at the end of the prior-year quarter. Annualized return on common equity was 7.38%, down from the year-earlier period’s 7.54%.
Share Repurchase Update
During the reported quarter, Prosperity Bancshares repurchased 611,263 shares at an average weighted price of $62.20 share.
Our Take
Supported by robust loans, higher rates and opportunistic acquisitions, PB is well-positioned for top-line growth. Yet rising expenses and worsening operating backdrop are major near-term concerns.
Last October, PB entered two separate agreements to acquire Lone Star State Bancshares, Inc. for $228.7 million and First Bancshares of Texas, Inc. for $341.6 million. While the company has received all necessary regulatory approvals for the acquisition of First Bancshares (expected to close on May 1), the Lone Star State deal is yet to get regulatory approvals.
Prosperity Bancshares anticipates the deals to result in pro-forma earnings accretion of 5.9% in 2023 and 8.9% in 2024. The transactions are expected to result in cost savings of 25% of non-interest expenses. Of this, this year, 75% will likely be phased-in.
Prosperity Bancshares currently 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’s (ZION - Free Report) first-quarter 2023 net earnings per share of $1.33 lagged the Zacks Consensus Estimate of $1.51. The bottom line increased 4.7% from the year-ago quarter. We had projected earnings of $1.39 per share.
ZION's results were adversely impacted by higher provisions, a rise in non-interest expenses and lower deposit balances. However, there was an improvement in NII, which was driven by rising rates and decent loan demand. Non-interest income also increased for the quarter.
BankUnited, Inc.'s (BKU - Free Report) first-quarter 2023 earnings per share of 70 cents missed the Zacks Consensus Estimate of 93 cents. The bottom line also declined 11.4% from the prior-year quarter. We had projected earnings per share of 97 cents.
BKU's results were adversely impacted by an increase in operating expenses, lower deposits and high provisions for credit losses. However, higher NII, non-interest income and increasing rates acted as tailwinds.
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Shares of Prosperity Bancshares Inc. (PB - Free Report) gained 2.2% following the release of better-than-expected first-quarter 2023 results. Earnings per share of $1.37 surpassed the Zacks Consensus Estimate of $1.33. The bottom line increased 3% from the prior-year quarter. Our estimate for earnings was $1.26.
Results were primarily aided by an increase in revenues. Further, higher loan balances and interest rates aided the margins. The company did not record any provisions in the reported quarter, which was another major positive. However, the company witnessed higher operating expenses and lower deposits.
Net income available to common shareholders was $124.7 million, up 1.9% year over year.
Revenues & Expenses Increase
Net revenues were $281.7 million, up 2.4% from the prior-year quarter. The top line lagged the Zacks Consensus Estimate of $285 million. Our estimate for net revenues was $285.5 million.
Net interest income (NII) was $243.5 million, up 1.5%. Net interest margin, on a tax-equivalent basis, expanded 5 basis points to 2.93%. Our estimates for NII and NIM were $249.5 million and 2.85%, respectively.
Non-interest income totaled $38.3 million, up 9%. The rise was mainly driven by an increase in credit card, debit card and ATM card income, trust income, brokerage income and other non-interest income. Our estimate for non-interest income was $36 million.
Non-interest expenses increased 2.6% to $123 million. The rise was largely due to an increase in net occupancy and equipment costs, credit and debit card, data processing and software amortization expenses, regulatory assessments and FDIC insurance expenses, communication costs and other non-interest expenses. The reported quarter also included merger-related charges of $0.9 million. Our estimate for non-interest expenses was $126 million.
The efficiency ratio was 43.68%, in line with the prior-year quarter.
As of Mar 31, 2023, total loans were $19.3 billion, up 2.3% from the end of the previous quarter. Deposits totaled $27 billion, down 5.4%.
Credit Quality Impressive
Similar to the year-ago quarter, the company did not record any provision for credit losses in the reported quarter. As of Mar 31, 2023, total non-performing assets were $24.5 million, down 9.9% from the prior-year quarter end. Our estimate for the metric was $14.3 million.
Net recoveries were $0.6 million against net charge-offs of $1.2 million in the year-ago period. The ratio of allowance for credit losses to total loans was 1.46%, down from 1.58%.
Capital & Profitability Ratios Solid
As of Mar 31, 2023, the Tier-1 risk-based capital ratio was 15.59%, up from 15.32% recorded in the prior-year quarter. The total risk-based capital ratio was 16.41%, up from 15.99% as of Mar 31, 2022.
At the end of the first quarter, the annualized return on average assets was 1.31%, up from 1.29% at the end of the prior-year quarter. Annualized return on common equity was 7.38%, down from the year-earlier period’s 7.54%.
Share Repurchase Update
During the reported quarter, Prosperity Bancshares repurchased 611,263 shares at an average weighted price of $62.20 share.
Our Take
Supported by robust loans, higher rates and opportunistic acquisitions, PB is well-positioned for top-line growth. Yet rising expenses and worsening operating backdrop are major near-term concerns.
Last October, PB entered two separate agreements to acquire Lone Star State Bancshares, Inc. for $228.7 million and First Bancshares of Texas, Inc. for $341.6 million. While the company has received all necessary regulatory approvals for the acquisition of First Bancshares (expected to close on May 1), the Lone Star State deal is yet to get regulatory approvals.
Prosperity Bancshares anticipates the deals to result in pro-forma earnings accretion of 5.9% in 2023 and 8.9% in 2024. The transactions are expected to result in cost savings of 25% of non-interest expenses. Of this, this year, 75% will likely be phased-in.
Prosperity Bancshares currently 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’s (ZION - Free Report) first-quarter 2023 net earnings per share of $1.33 lagged the Zacks Consensus Estimate of $1.51. The bottom line increased 4.7% from the year-ago quarter. We had projected earnings of $1.39 per share.
ZION's results were adversely impacted by higher provisions, a rise in non-interest expenses and lower deposit balances. However, there was an improvement in NII, which was driven by rising rates and decent loan demand. Non-interest income also increased for the quarter.
BankUnited, Inc.'s (BKU - Free Report) first-quarter 2023 earnings per share of 70 cents missed the Zacks Consensus Estimate of 93 cents. The bottom line also declined 11.4% from the prior-year quarter. We had projected earnings per share of 97 cents.
BKU's results were adversely impacted by an increase in operating expenses, lower deposits and high provisions for credit losses. However, higher NII, non-interest income and increasing rates acted as tailwinds.
Top 5 ChatGPT Stocks Revealed
Zacks Senior Stock Strategist, Kevin Cook names 5 hand-picked stocks with sky-high growth potential in a brilliant sector of Artificial Intelligence. By 2030, the AI industry is predicted to have an internet and iPhone-scale economic impact of $15.7 Trillion.
Today you can invest in the wave of the future, an automation that answers follow-up questions … admits mistakes … challenges incorrect premises … rejects inappropriate requests. As one of the selected companies puts it, “Automation frees people from the mundane so they can accomplish the miraculous.”
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