A month has gone by since the last earnings report for Prosperity Bancshares (
PB Quick Quote PB - Free Report) . Shares have lost about 7.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Prosperity Bancshares due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Prosperity Bancshares Q1 Earnings Beat, Revenues Rise Y/Y
Prosperity Bancshares’ first-quarter 2023 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 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.
The company expects loan growth in the mid-to-high single digits in 2023.
The company expects non-interest expenses in the second quarter of 2023 to be $123-$125 million. The projection excludes the impact from one-time merger-related costs (which is estimated to be $26-$28million) and additional noninterest expense from the pending acquisition. Second-quarter 2023 results are expected to be impacted by day two accounting provision expense related to the acquisitions. The estimated range of the acquisition-related provision expense is $28-$31 million. How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
At this time, Prosperity Bancshares has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Prosperity Bancshares has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.