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Prosperity Bancshares (PB) Q1 Earnings Beat, Stock Down 3.3%

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Prosperity Bancshares Inc.’s (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%.

Our Take

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, Inc. Price, Consensus and EPS Surprise

Prosperity Bancshares, Inc. Price, Consensus and EPS Surprise

Prosperity Bancshares, Inc. price-consensus-eps-surprise-chart | Prosperity Bancshares, Inc. Quote

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 2021 net earnings per share of $1.90 topped the Zacks Consensus Estimate of $1.15. Also, the bottom line marked a significant improvement from the 4 cents earned in the year-ago quarter.

BOK Financial’s (BOKF - Free Report) earnings per share of $2.10 handily surpassed the Zacks Consensus Estimate of $1.92 during the first quarter. Further, the bottom line compared favorably with the prior-year quarter’s 88 cents.

First Horizon National Corporation’s (FHN - Free Report) first-quarter adjusted earnings per share of 51 cents beat the Zacks Consensus Estimate of 37 cents. In addition, the bottom line showed significant improvement from the prior-year quarter’s 5 cents.

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