Prosperity Bancshares Inc.’s ( PB Quick Quote PB - Free Report) first-quarter 2021 earnings per share of $1.44 surpassed the Zacks Consensus Estimate of $1.38. Moreover, the bottom line increased from adjusted earnings of $1.39 recorded in the prior-year quarter.
Results benefited from decline in expenses and growth in deposit balance.Further, improving capital ratios acts as a tailwind. However, lower revenues and fall in loan balance were the undermining factors. These were most likely the reasons that led the shares of Prosperity Bancshares to fall 3.3% following the release.
Net income available to common shareholders was $133.3 million, up 1.9% year over year.
Revenues Fall, Expenses Down, Deposits Rise
Net revenues were $288.6 million, down marginally from the prior-year quarter. However, the figure beat the Zacks Consensus Estimate of $282.5 million.
Net interest income was $254.6 million, down marginally year over year.
Net interest margin, on a tax-equivalent basis, shrunk 40 basis points (bps) to 3.41%.
Non-interest income edged down 1.1% to $34 million. This fall largely resulted from the decline in nonsufficient funds (NSF) fees, service charges on deposit accounts and bank-owned life insurance income.
Non-interest expenses dropped 4.5% to $119.1 million. Decrease in net occupancy and equipment costs, credit and debit card, data processing and software amortization costs, core deposit intangibles amortization costs, depreciation, communication, merger related expenses and other noninterest expense were the primary reasons behind this fall.
As of Mar 31, 2021, total average loans were $19.7 billion, down 3.3% from the prior quarter. However, total average deposits rose 3.4% to $27.8 billion.
Credit Quality Improve
Provision for credit losses was nil during the first quarters of both 2021 and 2020. Further, as of Mar 31, 2021, total non-performing assets were $44.2 million, plunging 34.3%. Also, the ratio of allowance for credit losses to total loans was 1.56%, down 15 bps.
However, net charge-offs were $8.9 million, up significantly from the year-ago period’s $0.8 million.
Capital Ratios Improve
As of Mar 31, 2021, Tier-1 risk-based capital ratio was 14.60%, up from 12.27% on Mar 31, 2020. Moreover, total risk-based capital ratio was 15.07% compared with the prior year’s 12.81%.
Profitability Ratios Deteriorates
The annualized return on average assets was 1.54%, down from the 1.67% witnessed at March 2020-end. Annualized return on common equity was 8.60%, down from the year-earlier period’s 8.86%.
Solid balance sheet position is likely to keep supporting financials in the quarters ahead. Nonetheless, margin pressure due to lower rates and weak loan demand are major concerns.
Prosperity Bancshares currently carries a Zacks Rank #3 (Hold). You can see
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