Prosperity Bancshares (PB) Down 0.2% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Prosperity Bancshares (PB). Shares have lost about 0.2% 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? 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 Q2 Earnings Beat on Higher NII & Lower ExpensesProsperity Bancshares’ second-quarter 2025 earnings per share of $1.42 beat the Zacks Consensus Estimate of $1.40. Moreover, the bottom line compared favorably with adjusted earnings of $1.22 in the prior-year quarter.Results benefited from an increase in NII, adjusted non-interest income, alongside lower provisions and expenses. Also, a higher loan balance was another positive. However, a lower deposit balance was a negative.Net income available to common shareholders was $135.2 million, up from $111.6 million in the year-ago quarter.Revenues Increase, Expenses DeclineQuarterly total revenues were $310.7 million, which increased 1.9% from the prior-year quarter. However, the top line missed the Zacks Consensus Estimate of $312.5 million.NII was $267.7 million, up 3.5% year over year. Net interest margin (NIM), on a tax-equivalent basis, expanded 24 basis points to 3.18%. Our estimates for NII and NIM were pegged at $271.1 million and 3.15%, respectively.Non-interest income was $43 million, down 6.6%. The fall was due to lower net gain on sale or write-up of securities. Our estimate for the metric was pegged at $40.6 million. Adjusted non-interest income was $41.6 million, up 14.9% from the prior-year quarter.Non-interest expenses declined 9.3% to $138.6 million. The decline can be attributed to a decrease in almost all cost components, except for net occupancy and equipment charges, as well as credit and debit card, data processing, and software amortization costs, communications charges, and other real estate expenses. Our estimate for non-interest expenses was $143.3 million.The adjusted efficiency ratio was 44.80%, which decreased from 49.13% in the prior year quarter. A decline in the efficiency ratio indicates better profitability.As of June 30, 2025, total loans were $22.2 billion, which rose 1% from the prior quarter. On the other hand, total deposits were $27.5 billion, a 2% sequential decline. Our estimates for total loans and total deposits were $23 billion and $28.3 billion, respectively.Credit Quality: A Mixed BagAs of June 30, 2025, total non-performing assets were $110.5 million, which rose from $89.6 million in the prior-year quarter. The ratio of allowance for credit losses to total loans was 1.56%, down from 1.61% year over year.Net charge-offs were $3 million compared with $4.4 million in the year-ago period.The company did not record any provision for credit losses during the reported quarter, down from the year-ago quarter figure of $9.1 million.Capital & Profitability Ratios ImproveAs of June 30, 2025, the common equity tier 1 capital ratio was 17.10%, up from 15.42% in the prior year quarter. The total risk-based capital ratio was 18.35%, up from 16.67%.At the end of the second quarter, the annualized return on average assets was 1.41%, up from 1.12% at the end of the prior-year quarter. Also, the annualized return on average common equity was 7.13%, which increased from 6.10%.OutlookThe company projects NII to keep improving in 2025. Also, the ABHC acquisition is projected to add approximately $85-$90 million to NII on an annualized basis.Management expects NIM to be higher in 2025 on the back of continued asset repricing. NIM is expected to be in the range of 3.25-3.30% on average for 2025, with a little bit higher in the fourth quarter.Management anticipates non-interest expenses to be in the range of $141-$144 million for the third quarter of 2025.Management expects loan growth to be in the low single-digit range for 2025.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a downward trend in fresh estimates.VGM ScoresCurrently, Prosperity Bancshares has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a score of C on the value side, putting it in the middle 20% 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.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Prosperity Bancshares has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.One Big Gain, Every Trading DayTo help you take full advantage of this market, you’re invited to access every stock recommendation in all our private portfolios - for just $1.Zacks private portfolio services that closed 256 double and triple-digit winners in 2024 alone. That’s about one big gain every day the market was open. 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