Prosperity Bancshares(PB) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Prosperity Bancshares reported net income of $137.6 million for Q3 2025, an increase from $127.3 million in Q3 2024, reflecting a year-over-year growth of 10.2% [5] - Net income per diluted common share increased to $1.45 for Q3 2025, up 8.2% from $1.34 in Q3 2024 [6] - The net interest margin on a tax-equivalent basis improved to 3.24% for Q3 2025, compared to 2.95% for the same period in 2024, marking a 29 basis points increase [12] Business Line Data and Key Metrics Changes - Loans outstanding were approximately $22.028 billion at September 30, 2025, down from $22.197 billion at June 30, 2025, indicating a decrease of $169 million [15] - Non-interest income for Q3 2025 was $41.2 million, slightly down from $43 million in Q2 2025 [12] - Non-interest expense was $138.6 million for Q3 2025, compared to $140.3 million for the same period in 2024 [12] Market Data and Key Metrics Changes - Deposits increased to $27.7 billion at September 30, 2025, up by $308 million or 1.1% from $27.4 billion at June 30, 2025 [8] - Non-performing assets totaled $119 million, representing 0.54% of loans and other real estate, an increase from $110 million or 0.50% at June 30, 2025 [14] Company Strategy and Development Direction - The company signed a definitive merger agreement with Southwest Bancshares Inc., which will expand its footprint in the San Antonio metro area and enhance its market share [4] - The company is also pursuing a merger with American Bank Holding Corporation to strengthen its presence in South Texas [4] - The management emphasized a focus on core deposits and maintaining a healthy loan-to-deposit ratio, currently at 80% [68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Texas economy, noting it remains one of the strongest and most diverse economies in the world, with a GDP of approximately $2.7 trillion [9] - The competitive lending environment is described as aggressive, with management opting to be prudent in loan pricing to protect net interest margins [24] - Future loan growth is expected to be modest, with a projection of low single digits for the next year, influenced by ongoing acquisitions [22] Other Important Information - The Board of Directors approved an increase in the fourth quarter 2025 dividend to $0.60 per share from $0.58 per share [5] - The company does not have any brokered deposits, which is a positive indicator of its deposit quality [8] Q&A Session Summary Question: Outlook for loan growth - Management indicated that loans are down slightly year-to-date and expect a flat quarter due to competitive pricing and elevated payoffs [21] Question: Buyback activity - Management stated that buyback activity will be price-dependent and expressed a desire to be more active in the near future [29] Question: Hiring more lenders - Management confirmed ongoing efforts to hire more lenders to bolster loan growth, while maintaining a focus on quality [37] Question: Margin outlook - Management remains optimistic about margin expansion over the next 12 to 36 months, despite potential rate cuts [45] Question: Deposit competition - Management is comfortable with the current loan-to-deposit ratio and emphasized the importance of core deposits [101]