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Prosperity Bancshares (PB) Up on Q4 Earnings Beat, Revenue Rise

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Shares of Prosperity Bancshares Inc. (PB - Free Report) gained 3.8% following the release of its fourth-quarter 2022 results. Earnings per share of $1.51 surpassed the Zacks Consensus Estimate by a penny. The bottom line increased 9.4% from the prior-year quarter.

Results were primarily aided by an increase in revenues, along with marginally lower expenses. Higher loan balances and a rise in interest rates aided the margins. The company did not record any provisions in the reported quarter, which was another major positive.

Net income available to common shareholders was $137.9 million, up 8.7% year over year.

Earnings per share of $5.73 for 2022 beat the Zacks Consensus Estimate of $5.71. The bottom line increased 2.3% from 2021. Net income available to common shareholders was $524.5 million, up 1% year over year.

Revenues Improve, Expenses Decline Marginally

Quarterly net revenues were $293.9 million, up 4.8% from the prior-year quarter. The top line lagged the Zacks Consensus Estimate of $296.5 million.

Revenues for 2022 were $1.15 billion, up 1.5% from the prior-year period. The top line was in line with the Zacks Consensus Estimate.

Quarterly net interest income (NII) was $256.1 million, up 4.6% year over year. Net interest margin, on a tax-equivalent basis, expanded 8 basis points (bps) year over year to 3.05%.

Non-interest income totaled $37.7 million, up 5.5% from the prior-year quarter. The rise was driven by an increase in almost all fee income components, except for credit card, debit card and ATM card income, service charges on deposit accounts, mortgage income, and brokerage income.

Non-interest expenses declined marginally year over year to $119.2 million. The fall was due to a decline in salaries and benefits costs, costs related to core deposit intangibles amortization, depreciation expenses, and other non-interest expenses.

The efficiency ratio was 40.87%, down from 42.79% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.

As of Dec 31, 2022, total loans were $18.8 billion, up 1.8% from the end of the previous quarter. Deposits totaled $28.5 billion, down 2.6% sequentially.

Credit Quality Improves

Similar to the year-ago quarter, the company did not record any provision for credit losses in the reported quarter. As of Dec 31, 2022, total non-performing assets were $27.5 million, down 2.1% from the prior-year quarter end.

Net charge-offs were $0.6 million, plunging 25.3% from the year-ago period. The ratio of allowance for credit losses to total loans was 1.49%, down from 1.54%.

Capital & Profitability Ratios Improve

As of Dec 31, 2022, the Tier-1 risk-based capital ratio was 15.88%, up from 15.10% recorded in the prior-year quarter. The total risk-based capital ratio was 16.51%, up from 15.45% as of Dec 31, 2021.

At the end of the fourth quarter, the annualized return on average assets was 1.47%, up from 1.37% at the end of the prior-year quarter. Annualized return on common equity was 8.26%, up from the year-earlier period’s 7.91%.

Share Repurchase Update

In the reported quarter, PB did not repurchase any shares.

On Jan 17, 2023, the company announced a stock repurchase program under which up to 5% or 4.6 million shares of its outstanding common stock can be repurchased till Jan 17, 2024.

Our Take

Aided by robust loans and deposit balances, along with opportunistic acquisitions, the company is well-positioned for top-line growth. Its capital deployment activities, through which it will likely keep enhancing shareholder value, seem impressive.

On Oct 11, 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. The closing of the deals, subject to certain conditions, including the approval by shareholders and customary regulatory approvals, is expected in the first half of 2023.

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, in 2023, 75% will likely be phased-in.

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) fourth-quarter 2022 net earnings per share of $1.84 surpassed the Zacks Consensus Estimate of $1.66. The bottom line increased 37.3% from the year-ago quarter. We had projected earnings of $1.57 per share.

ZION’s results were primarily aided by an improvement in NII, which was driven by rising rates and increasing loan demand. However, higher provisions, a rise in non-interest expenses, and lower deposit balances and non-interest income were the headwinds, which hurt the results to some extent.

BankUnited, Inc.’s (BKU - Free Report) fourth-quarter 2022 earnings per share of 82 cents missed the Zacks Consensus Estimate of $1.11 by a considerable margin. The bottom line also declined 41.8% from the prior-year quarter. We had projected earnings per share of 96 cents.

BKU’s results were adversely impacted by subdued fee income performance and an increase in credit costs. However, higher net interest income, a decent rise in loan balance, increasing rates and a fall in expenses acted as tailwinds.


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