PB Prosperity Bancshares Inc

HOUSTON, April 24, 2019 /PRNewswire/ -- Prosperity Bancshares, Inc.^® (NYSE: PB), the parent company of Prosperity Bank^® (collectively, "Prosperity"), reported net income for the quarter ended March 31, 2019 of $82.402 million, an increase of $8.041 million or 10.8% compared with $74.361 million for the same period in 2018. Net income per diluted common share increased 10.3% to $1.18 compared with $1.07 for the same period in 2018. Net income and earnings per diluted common share for the three months ended March 31, 2018 were impacted by net charge-offs of $9.441 million. Additionally, loans increased 4.0% compared with the first quarter 2018 and nonperforming assets remain low at 0.21% of first quarter average interest-earning assets.

"Prosperity is fortunate to operate in vibrant and growing states.  We continue to see employment growth and a tailwind from companies expanding in and moving to Texas and Oklahoma due to a business friendly political climate and lower tax rates.  However, we did experience some pause in loan growth during the first quarter of 2019, impacted by the continued pay downs we experience," said David Zalman, Prosperity's Chairman and Chief Executive Officer.

"Prosperity continues to focus on building core customer relationships, maintaining sound asset quality and operating the bank in an efficient manner, while investing in ever-changing technology and product distribution channels.  We intend to continue to grow our company both organically and through mergers and acquisitions," continued Zalman.

"I want to thank everyone involved in our company for helping to make it the success it has become," concluded Zalman.

Results of Operations for the Three Months Ended March 31, 2019

Net income was $82.402 million⁽²⁾ for the three months ended March 31, 2019 compared with $74.361 million⁽³⁾ for the same period in 2018, an increase of $8.041 million or 10.8%. Net income per diluted common share was $1.18 for the three months ended March 31, 2019 compared with $1.07 for the same period in 2018, an increase of 10.3%. Net income and earnings per diluted common share for the three months ended March 31, 2018 were impacted by net charge-offs of $9.441 million. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended March 31, 2019 were 1.46%, 8.05% and 15.24%⁽¹⁾, respectively.  Prosperity's efficiency ratio (excluding credit loss provisions, net gains on the sale of assets and taxes) was 42.94%⁽¹⁾ for the three months ended March 31, 2019.

Net interest income before provision for credit losses for the three months ended March 31, 2019 was $154.911 million compared with $153.223 million for the same period in 2018, an increase of $1.688 million or 1.1%. Linked quarter net interest income before provision for credit losses decreased $2.337 million or 1.5% to $154.911 million compared with $157.248 million for the three months ended December 31, 2018. Linked quarter net interest income was impacted by a decrease in loan discount accretion of $1.110 million.

The net interest margin on a tax equivalent basis was 3.20% for the three months ended March 31, 2019 compared with 3.16% for the same period in 2018. This change was primarily due to higher average yields on loans and investment securities, partially offset by higher average rates on deposits and other borrowings. On a linked quarter basis, the net interest margin was 3.20% compared with 3.15% for the three months ended December 31, 2018. This increase was primarily due to higher yields and average balances on loans and lower average borrowings mainly resulting from the increase in average deposits.

Noninterest income was $28.144 million for the three months ended March 31, 2019 compared with $27.938 million for the same period in 2018, an increase of $206 thousand or 0.7%. On a linked quarter basis, noninterest income decreased $935 thousand or 3.2% to $28.144 million compared with $29.079 million for the three months ended December 31, 2018. This decrease was primarily due to a decrease in NSF fees and credit card, debit card and ATM card income.

Noninterest expense was $78.571 million for the three months ended March 31, 2019 compared with $80.054 million for the same period in 2018, a decrease of $1.483 million or 1.9%. This decrease was primarily due to a decrease in regulatory assessments and FDIC insurance resulting from the elimination of the FDIC temporary surcharge imposed on large banks by the Dodd-Frank Act. On a linked quarter basis, noninterest expense decreased $2.233 million or 2.8% to $78.571 million compared with $80.804 million for the three months ended December 31, 2018. This change was primarily due to decreases in salaries and benefits, other noninterest expense and regulatory assessments and FDIC insurance. 

Balance Sheet Information

At March 31, 2019, Prosperity had $22.354 billion in total assets, a decrease of $118.073 million or 0.5%, compared with $22.472 billion at March 31, 2018.

Loans at March 31, 2019 were $10.414 billion, an increase of $402.606 million or 4.0%, compared with $10.011 billion at March 31, 2018. Linked quarter loans increased $43.709 million or 0.4% (1.7% annualized) from $10.370 billion at December 31, 2018.

Deposits at March 31, 2019 were $17.198 billion, a decrease of $135.109 million or 0.8%, compared with $17.333 billion at March 31, 2018. This was primarily due to lower municipal deposits compared with the prior year. Linked quarter deposits decreased $58.788 million or 0.3% from $17.257 billion at December 31, 2018.

Asset Quality

Nonperforming assets totaled $40.883 million or 0.21% of quarterly average interest-earning assets at March 31, 2019, compared with $33.217 million or 0.17% of quarterly average interest-earning assets at March 31, 2018, and $18.956 million or 0.10% of quarterly average interest-earning assets at December 31, 2018. The linked quarter change was primarily due to a commercial and industrial loan and a 1-4 family residential loan being placed on nonaccrual during the first quarter of 2019.

The allowance for credit losses was $86.091 million or 0.83% of total loans at March 31, 2019, $83.600 million or 0.84% of total loans at March 31, 2018 and $86.440 million or 0.83% of total loans at December 31, 2018. Excluding loans acquired that are accounted for under FASB Accounting Standards Codification ("ASC") Topics 310-20 and 310-30, the allowance for credit losses was 0.87%⁽¹⁾ of remaining loans as of March 31, 2019, compared with 0.90%⁽¹⁾ at March 31, 2018 and 0.88%⁽¹⁾ at December 31, 2018.

The provision for credit losses was $700 thousand for the three months ended March 31, 2019 compared with $9.000 million for the three months ended March 31, 2018 and $1.000 million for the three months ended December 31, 2018.

Net charge-offs were $1.049 million for the three months ended March 31, 2019 compared with $9.441 million for the three months ended March 31, 2018 and $556 thousand for the three months ended December 31, 2018.

Dividend

Prosperity Bancshares, Inc. declared a second quarter cash dividend of $0.41 per share to be paid on July 1, 2019 to all shareholders of record as of June 14, 2019.  

Conference Call

Prosperity's management team will host a conference call on Wednesday, April 24, 2019 at 11:30 a.m. Eastern Time (10:30 a.m. Central Time) to discuss Prosperity's first quarter 2019 earnings. Individuals and investment professionals may participate in the call by dialing 877-883-0383 for domestic participants, or 412-902-6506 for international participants. The elite entry number is 5401422.

Alternatively, individuals may listen to the live webcast of the presentation by visiting Prosperity's website at www.prosperitybankusa.com.  The webcast may be accessed from Prosperity's home page by selecting "Presentations & Calls" from the drop-down menu on the Investor Relations tab and following the instructions.

Non-GAAP Financial Measures

Prosperity's management uses certain non-GAAP financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity, tangible equity to tangible assets ratio and the efficiency ratio, excluding net gains and losses on the sale of assets and securities.  Further, as a result of acquisitions and the related purchase accounting adjustments, Prosperity uses certain non-GAAP financial measures and ratios that exclude the impact of these items to evaluate its allowance for credit losses to total loans (excluding acquired loans accounted for under ASC Topics 310-20, "Receivables-Nonrefundable Fees and Other Costs" and 310-30, "Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality").  Prosperity believes these non-GAAP financial measures provide information useful to investors in understanding Prosperity's financial results and that their presentation, together with the accompanying reconciliations, provides a more complete understanding of factors and trends affecting Prosperity's business and allows investors to view performance in a manner similar to management, the entire financial services sector, bank stock analysts and bank regulators. Further, Prosperity believes that these non-GAAP financial measures provide useful information by excluding certain items that may not be indicative of its core operating earnings and business outlook.  These non-GAAP financial measures should not be considered a substitute for, nor of greater importance than, GAAP basis financial measures and results; Prosperity strongly encourages investors to review its consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. Please refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures to the nearest respective GAAP financial measures.

Prosperity Bancshares, Inc. ®

As of March 31, 2019, Prosperity Bancshares, Inc. ^® is a $22.354 billion Houston, Texas based regional financial holding company, formed in 1983. Operating under a community banking philosophy and seeking to develop broad customer relationships based on service and convenience, Prosperity offers a variety of traditional loan and deposit products to its customers, which consist primarily of small and medium sized businesses and consumers. In addition to established banking products, Prosperity offers a complete line of services including: Internet Banking services at www.prosperitybankusa.com, Retail Brokerage Services, Credit Cards, Debit Cards, 24 hour voice response banking, Trust and Wealth Management, Mortgage Services, Cash Management and Mobile Banking.

As of March 31, 2019, Prosperity operated 242 full-service banking locations: 65 in the Houston area, including The Woodlands; 29 in the South Texas area including Corpus Christi and Victoria; 33 in the Dallas/Fort Worth area; 22 in the East Texas area; 29 in the Central Texas area including Austin and San Antonio; 34 in the West Texas area including Lubbock, Midland-Odessa and Abilene; 16 in the Bryan/College Station area; 6 in the Central Oklahoma area; and 8 in the Tulsa, Oklahoma area.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by Prosperity's management on the conference call may contain, forward-looking statements within the meaning of the securities laws. Forward-looking statements include all statements other than statements of historical fact, including forecasts or trends, and are based on current expectations, assumptions, estimates and projections about Prosperity Bancshares and its subsidiaries.  These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Prosperity's control, which may cause actual results to differ materially from those expressed or implied by the forward-looking statements.  These risks and uncertainties include but are not limited to whether Prosperity can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks; continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives.  Other risks include, but are not limited to: the possibility that credit quality could deteriorate; actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); a deterioration or downgrade in the credit quality and credit agency ratings of the securities in Prosperity's securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate, interest rate and commodity price fluctuations; and weather.  These and various other factors are discussed in Prosperity Bancshares' Annual Report on Form 10-K for the year ended December 31, 2018 and other reports and statements Prosperity Bancshares has filed with the SEC. Copies of the SEC filings for Prosperity Bancshares may be downloaded from the Internet at no charge from http://www.prosperitybankusa.com.