It has been about a month since the last earnings report for Prosperity Bancshares (PB - Free Report) . Shares have lost about 4.7% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Prosperity Bancshares Q3 Earnings & Revenues Beat Estimates
Prosperity Bancshares’ third-quarter 2019 earnings of $1.19 per share surpassed the Zacks Consensus Estimate by a penny. The figure inched up nearly 1% on a year-over-year basis.
Results were primarily driven by lower operating expenses, slight rise in non-interest income and a considerable fall in provisions. Further, loan and deposit growth supported the financials. However, decline in net interest income amid lower interest rates was an undermining factor.
Net income available to common shareholders was $81.8 million, down nearly 1% from the prior-year quarter.
Revenues & Expenses Fall
Net revenues were $184.7 million, down 1.7% from the prior-year quarter. Also, the figure lagged the Zacks Consensus Estimate of $186.2 million.
Net interest income was $154 million, declining 2.1% year over year. The decline was mainly due to higher rates on interest-bearing liabilities and fall in investment securities balances. These were partly offset by an increase in loan balances and loan yield.
Net interest margin, on a tax-equivalent basis, inched up 1 basis point to 3.16%.
Non-interest income increased marginally to $30.7 million. This rise was mainly driven by increase in nonsufficient funds fees.
Non-interest expenses fell 1.3% year over year to $80.7 million. The decline was largely due to fall in regulatory assessments and FDIC insurance costs, and other noninterest expenses.
As of Sep 30, 2019, total loans were $10.7 billion, up nearly 1% from the prior-quarter end. Total deposits grew marginally to $16.9 billion on a sequential basis.
Credit Quality: Mixed Bag
Provision for credit losses decreased 53.2% to $0.1 million. Moreover, the ratio of allowance for credit losses to total loans was down 2 basis points year over year to 0.82%.
Also, net charge-offs were $1 million, down 20.6%. However, as of Sep 30, 2019, total non-performing assets were $51.2 million, increasing significantly from $16.8 million in the prior-year quarter.
Strong Capital & Profitability Ratios
As of Sep 30, 2019, Tier-1 risk-based capital ratio was 16.68%, up from 15.94% as of Sep 30, 2018. Moreover, total risk-based capital ratio was 17.34%, up from 16.60% at the end of the year-ago quarter.
Further, common equity tier 1 capital ratio was 16.68%, up from 15.94% in the prior-year quarter.
The annualized return on average assets was 1.47%, up from 1.46%. Similarly, annualized return on common equity was 7.89% compared with 8.30% in the prior-year quarter.
Share Repurchase Update
During the second quarter, Prosperity Bancshares repurchased nearly 0.7 million shares at an average price of $63.59 per share.
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.