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Prosperity Bancshares (PB) Q4 Earnings Beat, Revenues Up Y/Y

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Zacks Equity Research
·4 min read
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Prosperity Bancshares Inc.’s PB fourth-quarter 2020 earnings per share of $1.48 surpassed the Zacks Consensus Estimate of $1.35. Moreover, the bottom line increased from adjusted earnings of $1.44 in the prior-year quarter.

Results were primarily driven by an increase in revenues, nil provisions and decline in expenses. Also, the company’s balance sheet position remained strong during the quarter. However, fall in loan balance and lower interest rates were the undermining factors.

Net income available to common shareholders was $137.1 million, up 59.2% year over year.

In 2020, adjusted earnings of $5.54 per share were in line with the consensus estimate and grew 10.4% year over year. Net income available to common shareholders (GAAP basis) was $528.9 million, up 59%.

Revenues Rise, Expenses Down

Net revenues in the quarter were $294.2 million, up 10% from the prior-year quarter. Also, the figure beat the Zacks Consensus Estimate of $283.8 million.

In 2020, net revenues increased 41.7% to $1.16 billion. The top line surpassed the consensus estimate of $1.15 billion.

Net interest income was $257.6 million, up 11% year over year. The rise was mainly driven by higher average interest-earning assets balance and a fall in the average rate on interest-bearing liabilities.

Net interest margin, on a tax-equivalent basis, declined 17 basis points (bps) to 3.49%.

Non-interest income rose 2.9% to $36.5 million. The increase was largely attributable to higher mortgage income and lower loss on write-down of assets.

Non-interest expenses decreased 22.2% to $120.2 million. The fall was largely due to absence of merger-related expenses during the quarter.

As of Dec 31, 2020, total loans were $20.3 billion, down 1.2% from the prior quarter. Total deposits rose 2.4% to $26.9 billion.

Credit Quality: Mixed Bag

Provision for credit losses was nil during the fourth quarter against $1.7 million in the prior-year quarter. Further, as of Dec 31, 2020, total non-performing assets were $59.6 million, decreasing 5.4%.

However, net charge-offs were $7.6 million, up substantially from $1.3 million in the year-ago period. Also, the ratio of allowance for credit losses to total loans was 1.56%, up 110 bps.

Capital & Profitability Ratios Improve

As of Dec 31, 2020, Tier-1 risk-based capital ratio was 13.74%, up from 12.30% on Dec 31, 2019. Moreover, total risk-based capital ratio was 14.23% compared with 12.70% a year ago.

The annualized return on average assets was 1.63%, up from 1.19% at December 2019-end. Annualized return on common equity was 8.98%, improving from 6.63%.

Share Repurchase Update

During the fourth quarter, the company repurchased nearly 0.4 million shares at an average weighted price of $50.89.

Our Take

The acquisition of LegacyTexas Financial is likely to continue aiding Prosperity Bancshares’ growth. Moreover, solid loans and deposit balances are expected to support profitability. However, due to lower rates, margins might be under pressure in the near term.

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

Commerce Bancshares Inc.’s CBSH fourth-quarter 2020 earnings per share of $1.11 surpassed the Zacks Consensus Estimate of 95 cents. Also, the bottom line came in 26.1% higher than the prior-year quarter.

Zions Bancorporation’s ZION fourth-quarter 2020 net earnings per share of $1.66 surpassed the Zacks Consensus Estimate of $1.01. Moreover, the reported figure represents a rise of 71.1% from the year-ago quarter’s number.

Washington Federal’s WAFD first-quarter fiscal 2021 (ended Dec 31) earnings of 51 cents per share surpassed the Zacks Consensus Estimate of 42 cents. However, the figure reflects a year-over-year decline of 40.7%.

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