Prosperity Bancshares(PB)2025-02-27 22:11Financial Performance - The Company reported total assets of 1.07 billion, and total deposits of 2.14 billion, total loans of 1.71 billion as of March 31, 2023[19] - Total loans increased to 968.7 million or 4.6% from 2.26 per share for 2024, compared to 60.35 per share during the year ended December 31, 2024[205] Operational Efficiency - The Company's average cost of funds was 1.87%, and the average cost of deposits was 1.47% for the year ended December 31, 2024[31] - The Company plans to maintain stringent cost control practices to enhance operational efficiency[39] - The Company is focusing on cross-selling efforts to increase product offerings to existing customers[40] - The Company has maintained profitability every year since its inception, including during adverse economic conditions in Texas and Oklahoma[15] Regulatory Compliance - Regulatory compliance is critical, with the Company subject to extensive federal and state regulations impacting its operations[43] - The Federal Reserve Board requires bank holding companies to act as a source of strength for their banking subsidiaries[53] - The Company must adhere to limitations on dividends and share repurchases as mandated by federal and state laws[48] - The Company is committed to maintaining sound banking practices to avoid regulatory penalties and ensure financial stability[57] - The Company and the Bank are required to maintain a minimum leverage ratio of 4%[69] Capital and Risk Management - As of December 31, 2024, the Company's CET1 ratio to risk-weighted assets was 16.42%, Tier 1 capital to risk-weighted assets was 16.42%, total capital to risk-weighted assets was 17.67%, and Tier 1 capital to average quarterly assets (leverage ratio) was 10.82%[75] - The capital conservation buffer required is 2.5% above each minimum risk-based capital ratio to absorb losses during economic stress[70] - The Company and the Bank's regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer in 2024[75] - The Company maintains an allowance for credit losses to cover estimated losses in its loan portfolio, but this may not be sufficient if actual credit losses exceed expectations[115] Cybersecurity and Technology - The Company’s cybersecurity risk management program is designed to protect sensitive data and mitigate risks across various operational areas[182] - The Company has not experienced any cybersecurity incidents that materially impacted its business strategy or financial condition to date[187] - The Company is subject to evolving cybersecurity regulations, with significant penalties for non-compliance[98] - The SEC requires disclosure of material cybersecurity incidents within four business days, impacting the Company's reporting obligations[99] - Cybersecurity threats are evolving, and the Company's measures to prevent cyberattacks may not fully mitigate risks, potentially leading to significant financial and reputational damage[147] Market and Competitive Environment - The banking business remains highly competitive, with the Company emphasizing customer service and technology to maintain its market position[42] - The Company faces intense competition from various financial institutions, which could adversely affect its growth and profitability[178] - The market for acquisitions remains highly competitive, and the Company may struggle to find suitable candidates for growth, impacting its strategic objectives[138] Economic and Credit Risks - The Company's profitability is significantly influenced by local economic conditions in Texas and Oklahoma, where slower population or income growth could adversely affect its financial performance[117] - The Company faces increased credit risks associated with commercial real estate loans, which typically have larger balances and are more sensitive to economic conditions[121] - The Company is exposed to risks from geopolitical events and economic conditions, which could impact borrowers' ability to repay loans and the overall credit quality of its portfolio[112] - The Company's loan portfolio, particularly in energy lending, is vulnerable to declines in oil and natural gas prices, which could lead to increased loan delinquencies[124] Environmental and Social Governance (ESG) - Climate change poses immediate and long-term risks, including operational, credit, and reputational risks, which could adversely affect the Company's financial condition[165] - Increasing scrutiny regarding Environmental, Social, and Governance (ESG) practices may impose additional costs and regulatory risks on the Company[168] Legal and Litigation Risks - The Company is subject to claims and litigation related to intellectual property, which could result in substantial damages and increased operating expenses[159] - Legal actions regarding fiduciary responsibilities may lead to significant financial liabilities and adversely affect market perception and customer demand[161]