Prosperity Bancshares (PB) Up 6.2% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Prosperity Bancshares (PB). Shares have added about 6.2% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Prosperity Bancshares due for a pullback? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Prosperity Bancshares, Inc. before we dive into how investors and analysts have reacted as of late.

Prosperity Bancshares’ Q3 Earnings Meet, Higher Top Line & Nil Provisions Aid

Prosperity Bancshares’ third-quarter 2025 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 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.

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, and 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.

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.

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.

Share Repurchase Update

During the reported quarter, Prosperity Bancshares repurchased 299,318 shares at an average price of $66.62 under its ongoing 2025 stock buyback program.

Outlook

The company expects NII to keep improving in 2025. Also, the ABHC acquisition is projected to add approximately $85-$90 million to NII on an annualized basis.

NIM is expected to be in the range of 3.25-3.30% for 2025. Management expects NIM to be higher in 2026 and 2027 on the back of continued asset repricing and acquisitions. 

Management anticipates non-interest expenses to be in the range of $141-$143 million for the fourth quarter of 2025.

Management expects the loan balance to be stable and deposits to rise $200-$300 million on a sequential basis in the fourth quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Prosperity Bancshares has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a score of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Prosperity Bancshares has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Prosperity Bancshares is part of the Zacks Banks - Southwest industry. Over the past month, Texas Capital (TCBI), a stock from the same industry, has gained 9.9%. The company reported its results for the quarter ended September 2025 more than a month ago.

Texas Capital reported revenues of $340.35 million in the last reported quarter, representing a year-over-year change of +11.6%. EPS of $2.18 for the same period compares with $1.62 a year ago.

For the current quarter, Texas Capital is expected to post earnings of $1.80 per share, indicating a change of +25.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -0% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Texas Capital. Also, the stock has a VGM Score of B.

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

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