It has been about a month since the last earnings report for Prosperity Bancshares (PB). Shares have lost about 0.5% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Prosperity Bancshares due for a breakout? 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’ Q1 Earnings Beat, Revenues & Expenses Rise Y/Y
Prosperity Bancshares first-quarter 2026 adjusted earnings of $1.50 per share surpassed the Zacks Consensus Estimate of $1.41. The bottom line compared favorably with earnings of $1.37 in the prior-year quarter.
In the reported quarter, Prosperity Bancshares completed the acquisitions of American Bank Holding and Southwest Bancshares. Also, it announced a deal to acquire Stellar Bancorp and its subsidiary for $2 billion.
Results benefited from an increase in NII and non-interest income, alongside nil provisions. Higher loans and deposit balances were other positives. However, an increase in expenses due to the merger-related charges hurt the results to some extent.
Results in the reported quarter excluded merger-related expenses of $42.5 million. Including those, net income available to common shareholders was $116.3 million or $1.16 per share compared with $130.2 million or $1.37 per share in the year-ago quarter. Our estimate for net income was $115.1 million.
Revenues Improve, Expenses Rise
Total revenues were $367.6 million, up 19.9% year over year. The top line surpassed the Zacks Consensus Estimate of $352.9 million.
NII rose 21% year over year to $321.2 million. Also, NIM, on a tax-equivalent basis, expanded 37 basis points to 3.51%. Our estimates for NII and NIM were pegged at $295.6 million and 3.36%, respectively.
Non-interest income totaled $46.5 million, up 12.5% year over year. The rise was driven by an increase in all fee-based revenue components, except for other non-interest income. Our estimate for the metric was pegged at $54.4 million.
Non-interest expenses were $217.3 million, up 54.9% year over year. The rise was primarily due to merger-related expenses incurred in the reported quarter. Our estimate for non-interest expenses was $202.7 million.
The efficiency ratio improved to 59.16% from 45.71% in the prior-year quarter.
Balance Sheet Strong, Capital & Profitability Ratios Weaken
As of March 31, 2026, total assets were $43.6 billion, up 13.4% from the previous quarter. Total loans were $25.3 billion, up 16% sequentially. Deposits increased 14.6% sequentially to $32.6 billion. Our estimates for total loans and total deposits were $25.3 billion and $32.8 billion, respectively.
As of March 31, 2026, the common equity tier 1 ratio was 15.44%, down from 16.92% in the year-ago quarter. The total risk-based capital ratio declined to 16.69% from 18.17% in the prior-year quarter. The equity-to-assets ratio was 18.82%, down from 19.39% as of March 31, 2025.
At the end of the first quarter, return on average assets was 1.10%, down from 1.34% in the prior-year quarter. The return on average common equity was 5.70%, down from 6.94% in the prior-year quarter.
Credit Quality: A Mixed Bag
As of March 31, 2026, non-performing assets were $122.1 million, up 50% from the year-ago period. Net charge-offs were $41.3 million, up significantly from $2.7 million in the same quarter of 2025.
The company reported no provision for credit losses during the reported quarter, consistent with the year-ago period. The ratio of allowance for credit losses on loans was $1.52% of the total loans, down from 1.59% a year earlier.
Share Repurchase Update
In the reported quarter, the company repurchased 0.837 million shares at an average price of $68.15 under its ongoing 2026 stock buyback program.
Outlook
The company expects NIM to be relatively stable sequentially in the second quarter of 2026. Including Stellar Bancorp in its internal modeling, management expects an average NIM to be around 3.60% for 2026, with an exit rate at approximately 3.70% for the combined company. 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 $176-$180 million for the second quarter of 2026. This excludes a one-time pre-tax merger-related charge of almost $100 million for Stellar Bancorp.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in estimates revision.
VGM Scores
Currently, Prosperity Bancshares has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Prosperity Bancshares has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Prosperity Bancshares, Inc. (PB): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).