Prosperity Bancshares Inc.’s PB fourth-quarter 2024 adjusted earnings per share (EPS) of $1.37 beat the Zacks Consensus Estimate of $1.33. Moreover, the bottom line compared favorably with adjusted earnings of $1.19 in the prior-year quarter.

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Results benefited from an increase in net interest income (NII) and adjusted non-interest income. Further, a rise in deposits was another positive. During the quarter, provisions remained nil. However, a rise in adjusted expenses was a major headwind. Also, a lower loan balance was another negative.

Net income available to common shareholders was $130 million, up from $95.5 million in the year-ago quarter.

In 2024, adjusted earnings per share were $5.11, which rose 2.8% from the previous year. The figure surpassed the Zacks Consensus Estimate. Net income available to common shareholders (GAAP) was $479.4 million, up 14.3% year over year.

PB’s Revenues Increase, Adjusted Expenses Rise

Quarterly adjusted total revenues were $307 million, which increased 12.2% from the prior-year quarter. Moreover, the top line beat the Zacks Consensus Estimate of $302.8 million.

In 2024, adjusted total revenues were $1.18 billion, up 6.4% year over year. The top line matched the Zacks Consensus Estimate.

NII was $267.8 million, up 13% year over year. Net interest margin (NIM), on a tax-equivalent basis, expanded 30 basis points to 3.05%. Our estimates for NII and NIM were pegged at $265.1 million and 3.24%, respectively.

Non-interest income was $39.8 million, up 8.9%. The rise was primarily driven by an increase in all the components. Our estimate for the metric was pegged at $34.5 million. Adjusted non-interest income was $39.3 million, up 7.1% from the prior-year quarter.

Non-interest expenses declined 7% to $141.5 million. The fall was mainly attributed to a decrease in net occupancy and equipment charges, regulatory assessments and FDIC insurance charges, communications costs, net gain on sale or write-down of other real estate, and lower other noninterest expenses. On an adjusted basis, non-interest expense was up 7.3% year over year. Our estimate for non-interest expenses was $141.7 million.

The adjusted efficiency ratio was 46.10%, which decreased from 48.23% in the prior year quarter. A decline in the efficiency ratio indicates better profitability.

As of Dec. 31, 2024, total loans were $22.1 billion, which declined 1% sequentially. Total deposits were $28.4 billion, up 1%. Our estimates for total loans and total deposits were $22.2 billion and $28.1 billion, respectively.

PB’s Credit Quality: A Mixed Bag

As of Dec. 31, 2024, total non-performing assets were $81.5 million, which rose from $72.7 million in the prior-year quarter. The ratio of allowance for credit losses to total loans was 1.59%, up from 1.57%.

Net charge-offs were $2.6 million compared with $19.1 million in the year-ago period.
 
The company did not record any provision for credit losses during the reported quarter, similar to the year-ago quarter.

Prosperity Bancshares’ Capital Ratios Improve, Profitability Ratios Increase

As of Dec. 31, 2024, the common equity tier 1 capital ratio was 16.42%, up from 15.54% in the prior year quarter. The total risk-based capital ratio was 17.67%, up from 16.56%.

At the end of the fourth quarter, the annualized return on average assets was 1.31%, up from 0.98% at the end of the prior-year quarter. Also, the annualized return on average common equity was 7%, which increased from 5.39%.

PB’s Share Repurchase Update

During the reported quarter, Prosperity Bancshares did not repurchase any shares.

On Jan. 21, 2025, PB announced a new stock repurchase plan to buy back up to 5% or 4.8 million shares of its common stock, which is set to expire on Jan. 21, 2026.

Our Take on Prosperity Bancshares

Prosperity Bancshares' emphasis on strategic acquisitions is expected to contribute to its long-term financial strength. Decent loans, a solid deposit mix and improving fee income are likely to support the top line. However, a liability-sensitive balance sheet, elevated expenses and subdued mortgage banking prospects remain near-term concerns.

PB 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

East West Bancorp, Inc.’s EWBC fourth-quarter 2024 adjusted EPS of $2.08 lagged the Zacks Consensus Estimate of $2.17. Nonetheless, the bottom line increased 4% from the prior-year quarter’s level.

EWBC’s results were primarily aided by an increase in NII and non-interest income, alongside lower non-interest expenses. Also, deposit and loan balances increased sequentially in the quarter. However, higher provisions were a headwind.

Zions Bancorporation’s ZION fourth-quarter 2024 EPS of $1.34 surpassed the Zacks Consensus Estimate of $1.26. Moreover, the bottom line surged 71.8% from the year-ago quarter.

Results were primarily aided by higher NII and non-interest income. Also, higher loans and deposits were other positives. However, higher provisions and a rise in adjusted non-interest expenses were major headwinds for ZION.

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