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Prosperity Bancshares (PB) Q3 Earnings Beat, Stock Dips 2.8%

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·4 min read
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Prosperity Bancshares Inc.’s PB third-quarter 2021 earnings per share of $1.39 surpassed the Zacks Consensus Estimate by a penny. However, the bottom line represents a marginal decline from the prior-year quarter’s figure.

The company did not record any provisions in the reported quarter, which was a major positive. However, a decline in net interest income (NII) along with a marginal fall in non-interest income hurt results to an extent. Higher expenses were another headwind. Probably, because of these, shares of the company lost 2.8% following the release.

Net income available to common shareholders was $128.6 million, down 1.1% year over year.

Revenues Decline, Expenses Rise

Net revenues were $283.2 million, down 3.4% from the prior-year quarter. The top line surpassed the Zacks Consensus Estimate of $280.4 million.

NII was $248.6 million, down 3.7% year over year. Net interest margin, on a tax-equivalent basis, contracted 47 basis points (bps) to 3.10%.

Non-interest income totaled $34.6 million, down marginally from the prior-year quarter. The decline was due to a fall in trust income, mortgage income, bank-owned life insurance income and other non-interest income.

Non-interest expenses increased 1.6% from the prior-year quarter to $119.8 million. A rise in salaries and benefits costs, and credit and debit card, data processing and software amortization expenses primarily led to the increase. Also, in the reported quarter, the company recorded a net loss on the sale or write-down of other real estates against a gain in the prior-year quarter.

As of Sep 30, 2021, total loans were $18.96 billion, down 1.5% from the end of the previous quarter. Deposits totaled $29.45 billion, up from $29.11 billion as of Jun 30, 2021.

Credit Quality: A Mixed Bag

In the reported quarter, the company did not record any provision for credit losses against provisions of $10 million in the year-ago quarter. As of Sep 30, 2021, total non-performing assets were $36.5 million, plunging 47.4% from the prior-year quarter end.

The ratio of allowance for credit losses to total loans was 1.51%, down 5 bps year over year. However, net charge-offs were $15.7 million, up from $10.6 million recorded in the year-ago period.

Capital Ratios Improve

As of Sep 30, 2021, the Tier-1 risk-based capital ratio was 14.84%, up from 13.17% as of Sep 30, 2020. The total risk-based capital ratio was 15.20% compared with the prior year’s 14.28%.

Profitability Ratios Deteriorate

At the end of the third quarter, the annualized return on average assets was 1.42%, down from 1.58% witnessed at the end of the prior-year quarter. Annualized return on common equity was 8.07%, down from the year-earlier period’s 8.64%.

Our Take

The company’s solid balance sheet position is expected to keep supporting its financials in the quarters ahead. Nonetheless, margin pressure due to low rates remains concerning.

Prosperity Bancshares, Inc. Price, Consensus and EPS Surprise

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 third-quarter 2021 net earnings per share of $1.45 surpassed the Zacks Consensus Estimate of $1.38. The bottom line represents an increase of 43.6% from the year-ago quarter’s number.

Hancock Whitney Corporation’s HWC third-quarter 2021 adjusted earnings of $1.45 per share outpaced the Zacks Consensus Estimate of $1.29. The bottom line improved 61.1% from the prior-year quarter.

First Horizon National Corporation’s FHN third-quarter 2021 earnings per share of 50 cents beat the Zacks Consensus Estimate of 41 cents. Results excluded an after-tax impact of 9 cents per share from notable items related to the IBERIABANK Corporation Merger and early retirement of certain trust preferred securities.


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