PB's Q3 Earnings Meet, Higher Top Line & Nil Provisions Aid, Stock Up

Shares of Prosperity Bancshares, Inc. PB gained 2.9% yesterday following the announcement of solid third-quarter 2025 results. Earnings of $1.45 were in line with the Zacks Consensus Estimate. The bottom line grew 8.2% year over year.

Results benefited from an increase in net interest income (NII), non-interest income, alongside nil provisions and lower expenses. Further, a higher loan and deposit balance was a positive. 

Net income available to common shareholders was $137.6 million, up 8.1% from the year-ago quarter. Our estimate for the metric was $136.9 million.

PB’s Revenues Rise, Expenses Fall

Total revenues came in at $314.7 million, up from $302.8 million a year earlier. However, the top line missed the Zacks Consensus Estimate of $316.6 million.

NII rose 4.5% year over year to $273.4 million, supported by lower funding costs and balance sheet repricing benefits. Net interest margin (NIM), on a tax-equivalent basis, expanded 29 basis points to 3.24% from 2.95% in the prior-year quarter, reflecting improved asset yields and reduced borrowing costs. Our estimates for NII and NIM were pegged at $274.8 million and 3.27%, respectively.

Noninterest income totaled $41.2 million, nearly unchanged from $41.1 million a year earlier, as higher fee-based revenues were offset by lower gains on asset sales. Our estimate for the metric was pegged at $41.7 million.

Noninterest expenses were $138.6 million, down 1.2% year over year, mainly attributable to lower salaries and benefits, regulatory assessments and FDIC insurance, other non-interest costs.  Our estimate for non-interest expenses was $142.1 million.

Efficiency ratio improved to 44.06% from 46.87% in the prior-year quarter, reflecting stronger operating leverage.

PB’s Balance Sheet & Capital Position

As of Sept. 30, 2025, total assets were $38.33 billion, slightly below $38.41 billion a quarter earlier, primarily due to reduced borrowings.

Total loans were $22.03 billion, a marginal decrease from the previous quarter. Deposits increased 1.1% sequentially to $27.78 billion. Our estimates for total loans and total deposits were $22.4 billion and $27.9 billion, respectively.

As of Sept. 30, 2025, the common equity tier 1 ratio improved to 17.53% from 15.84% in the year-ago quarter. The total risk-based capital ratio rose to 18.78% from 17.09%, and the equity-to-assets ratio strengthened to 20.0% from 18.35%.

At the end of the third quarter, return on average assets was 1.44%, and return on average common equity was 7.18%, both higher year over year.

PB’s Credit Quality: A Mixed Bag

As of Sept. 30, 2025, non-performing assets totaled $119.6 million, up from $89.9 million a year ago. Net charge-offs were $6.5 million, rising from $5.5 million in the same quarter of 2024.

The company reported no provision for credit losses during the quarter, consistent with the year-ago period. The ratio of allowance for credit losses on loans was $1.54% of total loans, down from 1.58% a year earlier.

Prosperity Bancshares’s Capital Distribution Plans

The board approved a 3.5% dividend increase to 60 cents per share for the fourth quarter of 2025, marking the 22nd consecutive annual dividend hike. 

Prosperity also repurchased 299,318 shares at an average price of $66.62 under its ongoing 2025 stock buyback program.

Our Take on Prosperity Bancshares

Prosperity Bancshares delivered another solid quarter with expanding margins and prudent expense management. Its strong capital base and consistent shareholder return underscore stability, while pending acquisitions of American Bank Holding Corporation and Southwest Bancshares, Inc. are expected to enhance scale and market reach across Texas and Oklahoma. 
 

Prosperity Bancshares, Inc. Price, Consensus and EPS Surprise

Prosperity Bancshares, Inc. price-consensus-eps-surprise-chart | Prosperity Bancshares, Inc. Quote

Currently, Prosperity Bancshares carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of PB’s Peer Banks

Associated Banc-Corp’s ASB third-quarter 2025 earnings of 73 cents per share outpaced the Zacks Consensus Estimate of 66 cents. Also, the bottom line compared favorably with 56 cents earned in the prior-year quarter.

ASB’s results benefited from an increase in NII and non-interest income. A rise in loans and deposit balances, and lower provisions acted as tailwinds. However, higher expenses were the undermining factor.

Hilltop Holdings Inc.’s HTH third-quarter 2025 earnings of 74 cents per share handily beat the Zacks Consensus Estimate of 49 cents. Moreover, the bottom line surged 60.9% from the prior-year quarter.

Results primarily benefited from higher NII and non-interest income. Also, higher loan balances and an improvement in credit quality were other positives. However, an increase in non-interest expenses was the spoilsport for HTH.

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This article originally published on Zacks Investment Research (zacks.com).

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