Prosperity Bancshares Inc. (PB)

[56Chevy]

Prosperity Bancshares, Inc.® Reports Record Second Quarter 2014 Earnings

Date : 07/25/2014 @ 6:04AM
Source : PR Newswire (US)
Stock : Prosperity Bancshares Inc. (PB)
Quote : $60.78 -0.69 (-1.12%) @ 4:15PM

HOUSTON, July 25, 2014 /PRNewswire/ -- Prosperity Bancshares, Inc.® (NYSE: PB), the parent company of Prosperity Bank® (collectively, "Prosperity"), reported net income for the quarter ended June 30, 2014, of $75.506 million or $1.08 per diluted common share, an increase in net income of $21.662 million or 40.2%, compared with $53.844 million, and an increase in diluted earnings per share of 21.3%, compared with $0.89 per diluted common share for the same period in 2013.

"I am proud of the strong results our team has generated in the second quarter of 2014. We achieved diluted earnings per share of $1.08 for the quarter, an increase of 21.3% compared with the second quarter of 2013, and continued to see good organic loan growth with our legacy bank. Excluding loans acquired in acquisitions, loans at June 30, 2014 grew 8.4% compared with June 30, 2013 and 3.0% (11.8% annualized) on a linked quarter basis," said David Zalman, Prosperity's Chairman and Chief Executive Officer.

"We are finished with the operational integration of F&M Bank in Tulsa and look forward to building and growing strong relationships with customers and associates in the Tulsa and Dallas markets served by F&M. The F&M Bank associates have been great to work with and we look forward to them assuming leadership roles in our company and helping take us forward," continued Zalman.

"I continue to see growth and prosperity for our company. Texas and Oklahoma continue to have some of the best economies in the United States and show positive economic and growth trends," concluded Zalman.

Prosperity's management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Prosperity reviews tangible book value per share, return on average tangible common equity and the tangible equity to tangible assets ratio. As a result of acquisitions, and thus purchase accounting adjustments, Prosperity uses certain non-GAAP measures and ratios that exclude the impact of these items to evaluate its allowance for credit losses to total loans (excluding acquired loans accounted for under FASB Accounting Standards Codification ("ASC") Topics 310-20, "Receivables-Nonrefundable Fees and Other Costs" and 310-30, "Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality"). Prosperity has included in this Earnings Release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to the "Notes to Selected Financial Data" at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures.

Results of operations for the three months ended June 30, 2014

For the three months ended June 30, 2014, net income was $75.506 million compared with $53.844 million for the same period in 2013. Net income per diluted common share was $1.08 for the three months ended June 30, 2014, compared with $0.89 for the same period in 2013. Net income for the quarter includes one-time merger expenses of $2.026 million. Annualized returns on average assets, average common equity and average tangible common equity for the three months ended June 30, 2014 were 1.42%, 9.75% and 24.06%, respectively. Prosperity's efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and securities and taxes) was 42.90% for the three months ended June 30, 2014.

Net interest income before provision for credit losses for the quarter ended June 30, 2014 increased 46.6% to $174.055 million, compared with $118.742 million during the same period in 2013. The increase was primarily due to a 30.7% increase in average interest-earning assets for the same period. The net interest margin on a tax equivalent basis for the three months ended June 30, 2014 increased to 3.83%, compared with 3.43% for the same period in 2013 and increased from 3.62% for the three months ended March 31, 2014. Linked quarter net interest income before provision for credit losses increased 21.1% or $30.364 million to $174.055 million, compared with $143.691 million during the three months ended March 31, 2014, primarily due to the acquisition of F&M Bancorporation Inc. and its wholly-owned subsidiary, The F&M Bank and Trust Company (collectively, "F&M") and an $11.877 million increase in purchase accounting adjustments from purchased loans. Excluding purchase accounting adjustments, the net interest margin on a tax equivalent basis decreased on a linked quarter basis from 3.33% for the quarter ended March 31, 2014 to 3.31% for the quarter ended June 30, 2014.

Noninterest income increased $8.727 million or 34.5% to $34.001 million for the three months ended June 30, 2014, compared with $25.274 million for the same period in 2013. This increase was primarily due to an increase in fees and service charges as a result of the additional accounts acquired from F&M and FVNB Corp. and its wholly-owned subsidiary, First Victoria National Bank (collectively, "FVNB"). Trust and brokerage income increased as a result of the additional products and services acquired through the acquisition of FVNB in 2013. These increases were partially offset by a decrease in debit card income as a result of the Durbin Amendment that became effective on July 1, 2013. As a result of this legislation, the Federal Reserve imposed limits on the amount of interchange, or swipe, fees that can be collected for financial institutions that have assets of $10 billion or more. On a linked quarter basis, noninterest income increased $5.397 million or 18.9% primarily due to gains on the sale of assets, including the sale of certain bank buildings, gains on other real estate owned, life insurance proceeds received and increased fees and service charges resulting from the additional accounts acquired in the F&M acquisition consummated during the second quarter of 2014.

Noninterest expense increased $27.396 million or 44.7% to $88.696 million for the three months ended June 30, 2014, compared with $61.300 million for the same period in 2013. This increase was primarily due to additional noninterest expenses associated with the acquisitions of FVNB and F&M. On a linked quarter basis, noninterest expense increased 24.9% or $17.662 million primarily due to the additional salaries and benefits and other noninterest expenses associated with the F&M acquisition. Additionally, one-time pre-tax merger expenses of $2.026 million primarily related to the F&M acquisition were recorded during the second quarter of 2014.

Loans at June 30, 2014 were $9.308 billion, an increase of $3.136 billion or 50.8%, compared with $6.172 billion at June 30, 2013, primarily due to the acquisitions of FVNB and F&M. Linked quarter loans increased $1.556 billion or 20.1% from $7.752 billion at March 31, 2014 due mainly to the acquisition of F&M.

Deposits at June 30, 2014 were $17.281 billion, an increase of $4.772 billion or 38.2%, compared with $12.509 billion at June 30, 2013, primarily due to the acquisitions of FVNB and F&M. Linked quarter deposits increased $1.821 billion or 11.8% from $15.460 billion at March 31, 2014 due mainly to the acquisition of F&M.

Average loans increased 54.8% or $3.354 billion to $9.468 billion for the quarter ended June 30, 2014, compared with $6.115 billion for the same period in 2013. On a linked quarter basis, average loans increased 22.1% or $1.712 billion from $7.756 billion for the quarter ended March 31, 2014. Average deposits increased 35.3% or $4.483 billion to $17.164 billion for the quarter ended June 30, 2014, compared with $12.681 billion for the same period of 2013. On a linked quarter basis, average deposits increased 11.6% or $1.782 billion from $15.382 billion for the quarter ended March 31, 2014.

Results of operations for the six months ended June 30, 2014

For the six months ended June 30, 2014, net income was $142.643 million, compared with $103.149 million for the same period in 2013. Net income per diluted common share was $2.10 for the six months ended June 30, 2014, compared with $1.76 for the same period in 2013. Returns on average assets, average common equity and average tangible common equity, each on an annualized basis, for the six months ended June 30, 2014 were 1.43%, 9.72% and 24.12%, respectively. Prosperity's efficiency ratio (excluding credit loss provisions, net gains and losses on the sale of assets and securities and taxes) was 42.51% for the six months ended June 30, 2014.

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FD: I do not own shares of PB at this time.