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

Prosperity Bancshares Inc.’s (NYSE:PB) fourth-quarter 2018 earnings of $1.19 per share surpassed the Zacks Consensus Estimate of $1.18. The figure improved 22.7% on a year-over-year basis.

Results were primarily driven by improvement in net interest income, lower costs and reduced provisions. Moreover, loan and deposit balances showed improvement. However, decrease in non-interest income weighed on the results.

Net income available to common shareholders for the reported quarter was $83.3 million, up from $67.1 million registered in the prior-year quarter.

Earnings per share for 2018 came in at $4.61per share, which outpaced the Zacks Consensus Estimate of $4.59. Further, the figure compares favorably with earnings of $3.92 per share reported in 2017. Net income available for common shareholders for 2018 amounted to $321.8 million, up from $272.2 million witnessed in the previous year.

Revenues Improve, Expenses Fall

Net revenues for the reported quarter came in at $186.3 million, up nearly 1% from the prior-year quarter. However, the figure lagged the Zacks Consensus Estimate of $188.3 million.

Net revenues for 2018 came in at $745.6 million, up 1.6% from the prior-year quarter. However, the figure missed the Zacks Consensus Estimate of $747.7 million.

Net interest income for the quarter was $157.2 million, increasing nearly 1% year over year.

Net interest margin, on a tax-equivalent basis, decreased 5 basis points (bps) year over year to 3.15%.

Non-interest income decreased marginally year over year to $29.1 million. This fall was owing to a decrease in almost all components except for nonsufficient funds (NSF) fees, credit card, debit card and ATM card income and other non-interest income.

Non-interest expenses decreased marginally year over year to $80.8 million. The fall can be attributed to a decrease in almost all cost components except for salaries and benefits, regulatory assessments and FDIC insurance and other non-interest expense.

Solid Balance Sheet

As of Dec 31, 2018, total loans were $10.4 billion, up nearly 1% from the prior-quarter end. Total deposits increased 3.1% from the previous quarter end to $17.3 billion.

Credit Quality Improves

As of Dec 31, 2018, total non-performing assets were $19 million, down 49.4% year over year. Moreover, the ratio of allowance for credit losses to total loans was down 1 bps year over year to 0.83%.

Further, net charge-offs totaled $0.56 million, down from the year-ago quarter figure of $4.8 million. Provision for credit losses decreased 50% from the prior-year quarter to $1 million.

Capital & Profitability Ratios Improve

As of Dec 31, 2018, Tier-1 risk-based capital ratio was 16.32%, up from 15.08% as of Dec 31, 2017. Moreover, total risk-based capital ratio was 16.99%, up from 15.74% at the end of the year-ago quarter.

Further, common equity tier 1 capital ratio was 16.32%, up from 15.08% in the prior-year quarter.

The annualized return on average assets was 1.47% at the end of the reported quarter, up from 1.20% in the prior-year quarter. Similarly, annualized return on common equity was 8.25% compared with 7.04% in the prior-year quarter.

Our Viewpoint

The company's solid loan and deposit balances and steady improvement in credit quality is likely to support profitability. However, significant exposure to real estate loan portfolio remains a major near-term concern.

Prosperity Bancshares currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Washington Federal’s (NASDAQ:WAFD) first-quarter fiscal 2019 (ended Dec 31) earnings came in at 65 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflected year-over-year growth of 10.2%.

Synovus Financial’s (NYSE:SNV) fourth-quarter 2018 earnings of 92 cents per share lagged the Zacks Consensus Estimate of 94 cents. However, the reported figure came in 27.8% higher than the prior-year tally.

Hancock Whitney Corporation’s (NASDAQ:HWC) fourth-quarter 2018 operating earnings per share of $1.12 missed the Zacks Consensus Estimate of $1.13. However, the reported figure came in 30.2% higher than the year-ago tally.

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