Published on 26 Oct 2023 on Zacks via Yahoo Finance

Prosperity Bancshares (PB) Stock Gains 4% on Q3 Earnings Beat

Shares of Prosperity Bancshares Inc. PB rallied 4% in response to better-than-expected third-quarter 2023 results. Earnings per share of $1.20 beat the Zacks Consensus Estimate by a penny. The bottom line, however, decreased 19.5% from the prior-year quarter. The reported quarter figure includes merger-related provisions and expenses.Results benefited from higher non-interest income and no provisions. Further, a solid loan and deposit balance offered some support. However, lower net interest income (NII) and higher expenses were the headwinds.Net income available to common shareholders was $112.2 million, down 17.4% year over year.

Revenues Fall & Expenses Increase

Net revenues were $278.3 million, down 5.8% from the prior-year quarter. The top line marginally surpassed the Zacks Consensus Estimate of $278.2 million.Net interest income (NII) was $239.5 million, down 8.1% year over year. Net interest margin (NIM), on a tax-equivalent basis, shrunk 39 basis points (bps) to 2.72%. Our estimates for NII and NIM were $241.2 million and 2.85%, respectively.Non-interest income totaled $38.7 million, up 11.7%. The rise was mainly driven by an increase in almost all the components of non-interest income, except non-sufficient funds (NSF) fees and net loss on sale or write-down of assets. Our estimate for non-interest income was $36.5 million.Non-interest expenses increased 11% to $135.7 million. The rise was largely due to an increase in almost all cost components except other real estate expenses. The reported quarter also included merger-related charges of $1.1 million. Our estimate for non-interest expenses was $135.4 million.The efficiency ratio was 48.74%, up from 41.38% in the prior-year quarter. A rise in the efficiency ratio indicates lower profitability.As of Sep 30, 2023, total loans were $21.4 billion, down 1% from the previous quarter. Deposits totaled $27.4 billion, down marginally.