Prosperity Bancshares(PB) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the year ended December 31, 2025, net income was $543 million, an increase of $63 million or 13.2% compared to $480 million for the same period in 2024 [5] - Net income per diluted common share was $5.72 for the year ending December 31, 2025, compared to $5.05 for the same period in 2024, an increase of 13.3% [5] - The net income for the three months ending December 31, 2025, was $139.9 million, an increase of $9.8 million or 7.6% compared to $130 million for the same period in 2024 [6] - The annualized return on average assets was 1.49% and on average tangible common equity was 13.61% for the three months ending December 31, 2025 [6] - The efficiency ratio was 43.6% for the three months ending December 31, 2025 [6] Business Line Data and Key Metrics Changes - Net interest income before provision for credit losses for the three months ended December 31, 2025, was $275 million, an increase of $7.2 million compared to $267.8 million for the same period in 2024 [13] - Non-interest income was $42.8 million for the three months ended December 31, 2025, compared to $39.8 million for the same period in 2024 [16] - Non-interest expense was $138.7 million for the three months ended December 31, 2025, compared to $141.5 million for the same period in 2024 [17] Market Data and Key Metrics Changes - Deposits were $28.4 billion at December 31, 2025, an increase of $700 million from $27.7 billion at September 30, 2025 [8] - Nonperforming assets totaled $150 million, or 46 basis points of quarterly average interest-earning assets at December 31, 2025, compared to $119 million, or 36 basis points at September 30, 2025 [9] Company Strategy and Development Direction - The company completed a merger with American Bank on January 1, 2026, and expects to finalize the merger with Southwest Bancshares on February 1, 2026 [10][11] - The acquisition of Stellar Bancorp is seen as a significant milestone, enhancing the company's Texas footprint and making it the largest Texas-based bank in the market [12] - The company aims to deliver shareholder value through low-cost core deposits, operational efficiency, sound credit quality, and growth via opportunistic M&A [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to maintain and grow earnings, citing strong demand for loans and a disciplined approach to credit quality [8][12] - The company anticipates improvements in net interest margin due to the integration of acquired banks and favorable market conditions [78][86] - Management highlighted the importance of focusing on customer care and successful integration of the three banks acquired [35] Other Important Information - The company repurchased approximately $157 million, or 2.34 million shares of its common stock at an average weighted price of $67.04 under its 2025 stock repurchase program [7] - The allowance for credit losses on loans was $333 million, with a strong coverage ratio of 2.21 times non-performing assets [9] Q&A Session Summary Question: What is driving the difference in earnings estimates for Stellar compared to consensus? - Management indicated that Stellar's fourth quarter earnings would influence the estimates, and a representative from Stellar provided insights on their growth momentum and earnings potential [27][31] Question: Why is this acquisition different from past ones? - Management emphasized the familiarity and alignment between the two banks, suggesting that the integration would be smoother and more efficient than previous acquisitions [33][35] Question: Can you elaborate on the price of the acquisition and the expected synergies? - Management acknowledged the premium paid for Stellar but justified it by highlighting the expected earnings growth and enhanced franchise value from the merger [39][42] Question: What are the capital deployment plans moving forward? - Management indicated a focus on integration for the coming months, with potential for opportunistic buybacks and dividend increases based on strong cash flow projections [45][48] Question: How will the company manage multiple bank integrations simultaneously? - Management assured that designated teams are in place for integration, allowing core operations to continue without distraction [51][53] Question: Can you discuss the increase in nonperforming assets? - Management provided details on specific loans contributing to the increase and expressed confidence in the overall credit quality of the portfolio [108][110]