• Net Income: $130 million for Q1 2025, up from $110 million in Q1 2024, a 17.9% increase.
• Net Income per Diluted Share: $1.37 for Q1 2025, up from $1.18 in Q1 2024, a 16.1% increase.
• Return on Average Assets: 1.34% for Q1 2025.
• Return on Average Tangible Common Equity: 13.23% for Q1 2025.
• Efficiency Ratio: 45.7% for Q1 2025.
• Loans: $21.9 billion as of March 31, 2025, a 3.3% increase from March 31, 2024.
• Deposits: $28 billion as of March 31, 2025, a 3.1% increase from March 31, 2024.
• Net Interest Margin: 3.14% for Q1 2025, up from 2.79% in Q1 2024.
• Noninterest Income: $41.3 million for Q1 2025.
• Noninterest Expense: $140.3 million for Q1 2025.
• Nonperforming Assets: $81.4 million as of March 31, 2025.
• Allowance for Credit Losses: $386 million as of March 31, 2025.

• Warning! GuruFocus has detected 3 Warning Sign with PB.

Release Date: April 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Prosperity Bancshares Inc (NYSE:PB) reported a significant increase in net income, reaching $130 million for Q1 2025, up from $110 million in Q1 2024, marking a 17.9% increase.
• The company maintained a high tangible equity to tangible asset ratio of 11.2%, with tangible equity amounting to $3.9 billion.
• Net interest margin improved to 3.14% for Q1 2025, up from 2.79% in the same period in 2024, indicating better profitability.
• Prosperity Bancshares Inc (NYSE:PB) has strong noninterest-bearing deposits, constituting 34.5% of total deposits as of March 31, 2025.
• The company continues to explore acquisition opportunities, maintaining active conversations with other banks, which could lead to future growth.

Negative Points

• Loans excluding Warehouse Purchase Program loans and loans acquired in the Lone Star merger decreased by $67.6 million compared to December 31, 2024.
• Linked-quarter deposits decreased by $354 million from December 31, 2024, primarily due to seasonality.
• Nonperforming assets remained flat at $81.4 million, indicating persistent asset quality challenges.
• The allowance for credit losses increased to $386 million at March 31, 2025, up from $366 million in the previous year, reflecting ongoing credit risk concerns.
• The company faces market volatility and uncertainty with tariffs, which could impact future growth and profitability.

Q & A Highlights

Q: Can you provide more details on loan growth and your expectations for 2025? A: Kevin Hanigan, President and COO, stated that they expect low single-digit loan growth for the year. The runoff from recent acquisitions is nearly complete, and there is optimism for modest growth in the upcoming quarters. David Zalman, CEO, added that despite some sluggishness, there is optimism among their customers, and they expect loan growth to pick up as uncertainties settle.

Q: With the balance sheet shrinking, will you continue to pay down borrowings if loan growth remains sluggish? A: David Zalman, CEO, mentioned that they have reduced borrowings significantly and do not expect much further reduction. Asylbek Osmonov, CFO, added that they will continue to pay down borrowings if opportunities arise and may also invest in securities yielding around 5.25% to 5.5%.

Q: What are your thoughts on share buybacks given the current stock price? A: David Zalman, CEO, indicated that they would have been active in buying back shares if not for the earnings announcement blackout period. They are currently prioritizing M&A opportunities but will consider buybacks if the stock price experiences another downturn.

Q: Can you provide an update on M&A activity and your preferences in the current environment? A: David Zalman, CEO, noted that M&A discussions have resumed after a brief pause. They are open to both small and large deals, with a preference for transactions that are accretive to shareholders. They expect to see some M&A activity by the end of the year.

Q: How do you view the potential for lowering deposit costs if the Fed stops lowering rates? A: David Zalman, CEO, stated that there is room to lower deposit costs further, especially if rates decrease quickly. Asylbek Osmonov, CFO, added that they have not significantly increased deposit rates and see opportunities to cut rates on special CDs and exception rates if necessary.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.