Prosperity Bancshares Inc.
) fourth-quarter 2013 earnings of 98 cents per share came ahead
of the Zacks Consensus Estimate of 91 cents on the back of its
efficient inorganic growth. The reported figure also compared
favorably with 85 cents earned in the year-ago quarter.
Moreover, for the full year 2013, Prosperity Bancshares recorded
earnings per share of $3.65 versus $3.23 in 2012. Earnings for
the year also beat the Zacks Consensus Estimate of $3.58.
Better-than-expected results benefited from top-line growth,
partially offset by rise in operating expenses and provision for
credit losses. Further, healthy growth in loans and deposits,
along with improved profitability ratios were tailwinds for the
quarter. While capital ratios deteriorated, asset quality was a
Net income came in at $63.0 million, up 30.5% year over year.
However, for the full year, net income came in at $221.4 million,
increasing 31.9% from $167.9 billion in 2012.
Prosperity Bancshares' total revenue in the quarter came in at
$180.9 million, growing 27.6% year over year. Moreover, it
surpassed the Zacks Consensus Estimate of $157.0 million.
For 2013, total revenue came in at $634.7 million, up nearly
28.1% from $495.4 million in 2012. Moreover, total revenue
surpassed the Zacks Consensus Estimate of $578.0 million.
Net interest income rose 34.3% year over year to $145.5 million.
The increase was primarily due to a 23.2% rise in average
interest-earning assets. Also, net interest margin grew 29 basis
points (bps) from the prior-year quarter to 3.82%.
Non-interest income increased 4.4% year over year to $25.2
million. The rise was attributable to the company's three recent
acquisitions completed during the year, partially offset by a
fall in debit card income following the Durbin Amendment, which
became effective on Jul 1, 2013.
Non-interest expenses were $68.6 million, up 20.4% from $57.0
million in the prior-year quarter. The rise was mainly due to
additional non-interest expenses related to the acquisition of
FVNB Corp. and First Victoria National Bank (FVNB) in November.
Efficiency ratio improved to 40.24% from 42.95% in the prior-year
quarter. A fall in efficiency ratio indicates rise in
As of Dec 31, 2013, total loans were $7.8 billion, rising 50.1%
from $5.1 billion as of Dec 31, 2012. Total deposits increased
31.3% year over year to $15.3 billion.
Asset quality was a mixed bag in the quarter. The ratio of
allowance for credit losses to total loans declined 14 bps year
over year to 0.87%. Further, net charge-offs were $0.5 million,
down 74.1% from $1.9 million in the year-ago quarter.
Total nonperforming assets were $22.5 million, up 72.9% from the
year-ago period. Moreover, provision for credit losses increased
significantly to $7.8 million from $3.5 million in the prior-year
Profitability and Capital Ratios
Prosperity Bancshares' capital ratios deteriorated, while
profitability ratios improved during the quarter. As of Dec 31,
2013, Tier-1 risk-based capital ratio was 13.29%, compared with
14.40% as of Dec 31, 2012. Moreover, total risk-based capital
ratio came in at 14.03%, down from 15.22% at the end of the
The annualized return on average assets was 1.42% as of Dec 31,
2013, up from 1.36% as of Dec 31, 2012. Similarly, annualized
return on common equity came in at 9.53%, up from 9.28% as of Dec
Performance of Other Regional Banks
) surpassed the Zacks Consensus Estimate driven by growth in top
line and lower provision,
) beat the Zacks Consensus Estimate due to prudent expense
M&T Bank Corp.
) lagged the Zacks Consensus Estimate due to a rise in
Prosperity Bancshares' strategic acquisitions and organic growth
are quite impressive. Moreover, the company's strong balance
sheet is expected to bode well for its overall expansion going
However, rising expenses resulting from recent mergers and
acquisitions keep us skeptical. Further, the low interest rate
scenario and stringent regulatory requirements will likely weigh
on the company's financials in the quarters ahead.
Currently, Prosperity Bancshares has a Zacks Rank #3 (Hold).
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