A month has gone by since the last earnings report for Prosperity Bancshares (PB). Shares have added about 6% 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? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.
Prosperity Bancshares’ Q4 Earnings Top Estimates on Higher NII
Prosperity Bancshares’ fourth-quarter 2025 adjusted earnings of $1.46 surpassed the Zacks Consensus Estimate of $1.45. The bottom line grew 6.6% year over year.
Results benefited from an increase in NII, non-interest income, alongside nil provisions and lower expenses. Further, a higher deposit balance was positive. However, a decline in loan balance was a concern.
Results in the reported quarter included the reversal of the FDIC special assessment and merger-related charges. After considering it, net income available to common shareholders was $139.9 million, up 7.6% from the year-ago quarter. Our estimate for the metric was $134.9 million.
For 2025, adjusted earnings per share of $5.69 beat the Zacks Consensus Estimate by a penny. The figure represented a rise of 11.4% from the previous year. Net income available to common shareholders (GAAP) was $542.8 million, up 13.2% year over year. Our estimate for net income available to common shareholders was $537.9 million.
Revenues Rise, Expenses Fall
Quarterly total revenues came in at $317.7 million, up from $307.6 million a year earlier. The top line was marginally above the Zacks Consensus Estimate of $317.3 million.
For 2025, total revenues were $1.25 billion, up 4.8% year over year. The top line matched the Zacks Consensus Estimate.
NII rose 4.5% year over year to $275 million. Also, NIM, on a tax-equivalent basis, expanded 25 basis points to 3.30%. Improvement in both was supported by lower funding costs, balance sheet repricing benefits and lower average deposit balances. Our estimates for NII and NIM were $279.5 million and 3.43%, respectively.
Non-interest income totaled $42.8 million, up 7.4%. This was driven by an increase in all fee-based revenues except nonsufficient funds (NSF) fees and net gains on asset sales. Our estimate for the metric was pegged at $41.2 million.
Non-interest expenses were $138.7 million, down 2% year over year. This was mainly attributable to lower salaries and benefits, regulatory assessments and FDIC insurance, core deposit intangibles amortization and other real estate expenses. Our estimate for non-interest expenses was $141 million.
Efficiency ratio improved to 43.66% from 46.10% in the prior-year quarter.
Balance Sheet & Capital Position Strong
As of Dec. 31, 2025, total assets were $38.46 billion, up marginally from the previous quarter.
Total loans were $21.81 billion, down 1%. Deposits increased 2.5% to $28.48 billion. Our estimates for total loans and total deposits were $22.04 billion and $28.02 billion, respectively.
As of Dec. 31, 2025, the common equity tier 1 ratio improved to 17.55% from 16.42% in the year-ago quarter. The total risk-based capital ratio rose to 18.80% from 17.67%, and the equity-to-assets ratio strengthened to 19.8% from 18.8%.
At the end of the fourth quarter, return on average assets was 1.49% and return on average common equity was 7.30%, both higher year over year.
Credit Quality: A Mixed Bag
As of Dec. 31, 2025, non-performing assets were $150.8 million, up from $81.5 million a year ago. Net charge-offs were $5.9 million, up from $2.6 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 $1.53% of total loans, down from 1.59% a year earlier.
Share Repurchase Plan
In the reported quarter, Prosperity repurchased 2.04 million shares at an average price of $67.10 under its 2025 stock buyback program.
Outlook
NIM is expected to be at least 3.50% for 2026. This excludes the Stellar Bancorp deal. Management expects the metric to trend higher in 2027 and 2028 driven by continued asset repricing and acquisitions.
Management anticipates non-interest expenses to be in the range of $172-$176 million for the first quarter of 2026. This excludes one-time pre-tax restructuring charges of $30-$33 million related to ABHC and Southwest deals. Also, the Stellar Bancorp transaction is expected to result in a pre-tax charge of almost $100 million.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Prosperity Bancshares has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock has a score of B on the value side, putting it in the top 40% for value investors.
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 downward for the stock, and the magnitude of these revisions looks promising. Interestingly, 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 0.5%. The company reported its results for the quarter ended December 2025 more than a month ago.
Texas Capital reported revenues of $327.48 million in the last reported quarter, representing a year-over-year change of +15.4%. EPS of $2.08 for the same period compares with $1.43 a year ago.
Texas Capital is expected to post earnings of $1.45 per share for the current quarter, representing a year-over-year change of +57.6%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Texas Capital. Also, the stock has a VGM Score of D.
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Prosperity Bancshares, Inc. (PB): Free Stock Analysis Report Texas Capital Bancshares, Inc. (TCBI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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