PB Prosperity Bancshares Inc

Continuing with its legacy of acquisitions, Prosperity Bancshares Inc. (PB) recently signed a definitive merger deal with Victoria, Texas-based FVNB Corp. and its fully owned subsidiary, First Victoria National Bank. According to the agreement, First Victoria National Bank, (comprising 34 banking branches), will merge with Prosperity Bank after completion of the transaction.

As per the deal, Prosperity will issue 5,570,818 shares of its common stock, along with $91.25 million cash for FVNB Corp’s outstanding capital stock, subject to certain conditions and adjustments.

Additionally, the merger, approved by the board of directors of both the companies, is expected to be complete by this year end. However, the deal is yet to get the sanction of certain customary regulations and FVNB shareholders.

Upon completion of the acquisition, M. Russell Marshall, CEO of FVNB, will serve as the Chairman of Prosperity’s Wealth Management/Private Banking, while Kenneth Vickers, Chief Lending Officer of FVNB, will be Senior EVP of the Executive Loan Committee. Further, John Zacek, EVP of the Victoria Region for FVNB, will become President of South Texas Area for Prosperity.

Notably, David Zalman, Chairman and CEO of Prosperity, stated that the merger with FVNB would contribute positively to the company’s profitability in the long run. He banks upon the companies’ sound knowledge of customer demand and expects the merged enterprise to deliver better services through improved and diversified financial products. Moreover, the merger will consolidate Prosperity’s foothold in South Texas.

Acquisitions Reflect Earnings Power

From capital perspective, Prosperity is doing well owing to its earnings power. Acquisitions remain a vital part of the company’s growth strategy. Over the years, the company has grown through acquiring banks and branches. Following four major deals in 2012, the company completed the merger of East Texas Financial Services Inc. in Jan 2013 as well as the merger of Coppermark Bancshares, Inc and the latter’s fully-owned subsidiary, Coppermark Bank in Apr 2013.

We expect continued synergies from the ongoing acquisitions and organic growth to benefit Prosperity in the long term. However, a persistently low interest rate environment, slow economic growth rate, exposure to the real estate loan portfolio and stringent regulations are expected to dent the company’s financials in the near term.

Prosperity currently carries a Zacks Rank #2 (Buy). Some better performing banks include Ameris Bancorp (ABCB), Farmers Capital Bank Corporation (FFKT) and Home Bancshares, Inc. (HOMB).  All of them carry a Zacks Rank #1(Strong Buy).

 
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PROSPERITY BCSH (PB): Free Stock Analysis Report
 
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