Prosperity Bancshares Inc. (PRSP) filed Quarterly Report for the period ended 2009-09-30.
Prosperity Bancshares is a registered bank holding Company that derives substantially all of its revenues and income from the operation of First Prosperity Bank. The Bank is a full service bank that provides a broad lineof financial products and services to small and medium sized businesses and consumers through full-service banking locations three of which are located in the greater Houston metropolitan area. Prosperity Bancshares Inc. has a market cap of $1.66 billion; its shares were traded at around $35.96 with a P/E ratio of 16.1 and P/S ratio of 4.1. The dividend yield of Prosperity Bancshares Inc. stocks is 1.5%. Prosperity Bancshares Inc. had an annual average earning growth of 19.8% over the past 10 years. GuruFocus rated Prosperity Bancshares Inc. the business predictability rank of 5-star.
Highlight of Business Operations:
As a result of actions taken in early September 2008 by the Treasury Department and the Federal Housing Finance Agency (“FHFA”) with respect to Fannie Mae and Freddie Mac, the Company recorded an other-than-temporary impairment and took a non-cash charge of $14.0 million pre-tax ($9.1 million after-tax) to its earnings for the third quarter of 2008 related to the full carrying cost of its investments in perpetual preferred securities issued by Fannie Mae and Freddie Mac. The value of these securities decreased materially and it is unclear if and when the value will improve.
Total assets were $8.96 billion at September 30, 2009 compared with $9.07 billion at December 31, 2008, a decrease of $115.0 million or 1.3%. Total loans were $3.41 billion at September 30, 2009 compared with $3.57 billion at December 31, 2008, a decrease of $160.8 million or 4.5%. Total deposits were $7.12 billion at September 30, 2009 compared with $7.30 billion December 31, 2008, a decrease of $185.3 million or 2.5%. Shareholders’ equity increased $71.9 million or 5.7%, to $1.33 billion at September 30, 2009 compared with $1.26 billion at December 31, 2008.
Net income available to common shareholders was $29.3 million ($0.63 per common share on a diluted basis) for the quarter ended September 30, 2009 compared with $15.4 million ($0.33 per common share on a diluted basis) for the quarter ended September 30, 2008, an increase in net income of $13.9 million, or 89.8%. Net income for the three months ended September 30, 2008 included a $9.1 million after-tax ($14.0 million pre-tax) impairment charge on Fannie Mae and Freddie Mac perpetual preferred securities. The Company posted returns on average common equity of 8.93% and 5.04%, returns on average assets of 1.32% and 0.91% and efficiency ratios of 44.46% and 45.43% for the quarters ended September 30, 2009 and 2008, respectively. The efficiency ratio is calculated by dividing total non-interest expense (excluding credit loss provisions) by net interest income plus noninterest income (excluding net gains and losses on the sale of securities and assets and impairment write-down on securities). Additionally, taxes are not part of this calculation.
For the nine months ended September 30, 2009, net income available to common shareholders was $81.3 million ($1.76 per common share on a diluted basis) compared with $61.8 million ($1.37 per common share on a diluted basis) for the same period in 2008, an increase in net income of $19.5 million or 31.5%. The Company posted returns on average common equity of 8.39% and 6.97%, returns on average assets of 1.22% and 1.25% and efficiency ratios of 47.60% and 45.65% for the nine months ended September 30, 2009 and 2008, respectively.
Net interest income on a tax equivalent basis was $78.1 million for the quarter ended September 30, 2009 compared with $58.5 million for the quarter ended September 30, 2008, an increase of $19.6 million, or 33.6%. Net interest income increased as a result of an increase in average interest-earning assets and rates paid on interest-bearing liabilities decreasing at a faster pace than the yield on interest-earning assets. Interest-earning assets increased to $7.60 billion for the quarter ended September 30, 2009 compared with $5.60 billion for the quarter ended September 30, 2008, an increase of $2.00 billion, or 35.7%. The increase in average interest-earning assets was primarily attributable to increases in average loans and securities in the quarter ended September 30, 2009 compared with the quarter ended September 30, 2008 resulting from the Franklin Bank acquisition.
Net interest income on a tax equivalent basis increased $63.1 million, or 38.0%, to $229.1 million for the nine months ended September 30, 2009 compared with $166.0 million for the same period in 2008. This increase was mainly attributable to higher average interest-earning assets resulting from an increase in average loans and securities due to the acquisition of Franklin Bank and rates paid on interest-bearing liabilities decreasing at a faster pace than the yield on interest-earning assets. The net interest margin on a tax equivalent basis for the nine months ended September 30, 2009 decreased 7 basis points to 4.03% compared with 4.10% for the same period in 2008. The average rate paid on interest-bearing liabilities decreased 98 basis points from 2.83% for the nine months ended September 30, 2008 compared with 1.85% for the same period in 2009 and the average yield on earning assets decreased 75 basis points from 6.21% for the nine months ended September 30, 2008 compared with 5.46% for the nine months ended September 30, 2009.
PRSP is in the portfolios of David Dreman of Dreman Value Management.
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