Prosperity Bancshares Reports Strong First Quarter Results

Prosperity Bancshares, Inc., a leading Texas-based financial holding company, has reported its financial results for the first quarter of 2025, showcasing robust performance and continued growth. The company’s net income available to common shareholders reached $130.2 million, or $1.37 per diluted common share, for the quarter ended March 31, 2025, compared to $110.4 million, or $1.18 per diluted common share, for the same period in 2024.

Net Interest Income Drives Profitability

The primary driver of Prosperity Bancshares’ strong financial results was a significant increase in net interest income. Net interest income before the provision for credit losses was $265.4 million for the first quarter of 2025, an 11.4% increase compared to $238.2 million for the same period in 2024. This was primarily due to an increase in the average balances and average rates on loans, an increase in the average balances on federal funds sold and other earning assets, and a decrease in the average balances and rates on other borrowings.

The company’s net interest margin on a tax-equivalent basis was 3.14% for the first quarter of 2025, a 35-basis-point increase compared to 2.79% for the same period in 2024. This improvement was driven by the factors mentioned above, as well as a decrease in the average balances on investment securities and an increase in the average balances on interest-bearing deposits.

Table 1: Key Financial Metrics

Metric	Q1 2025	Q1 2024
Net Income Available to Common Shareholders	$130.2 million	$110.4 million
Diluted Earnings per Share	$1.37	$1.18
Annualized Return on Average Common Equity	6.94%	6.20%
Annualized Return on Average Assets	1.34%	1.13%
Efficiency Ratio	45.71%	49.07%
Net Interest Margin (Tax-Equivalent)	3.14%	2.79%

Loan Portfolio Remains Stable

Prosperity Bancshares’ total loans were $21.98 billion at March 31, 2025, a slight decrease of 0.8% compared to $22.15 billion at December 31, 2024. The loan portfolio consists of various types of loans, including commercial and industrial, commercial real estate, 1-4 family residential, construction and land development, agriculture, and consumer loans.

The company’s nonperforming assets, which include nonaccrual loans, accruing loans 90 days or more past due, repossessed assets, and other real estate, were $81.4 million at March 31, 2025, relatively unchanged from $81.5 million at December 31, 2024. Nonperforming assets represented 0.37% of total loans and other real estate at the end of the first quarter of 2025.

Allowance for Credit Losses Remains Adequate

The company’s allowance for credit losses on loans totaled $349.1 million at March 31, 2025, a slight decrease of 0.8% compared to $351.8 million at December 31, 2024. The allowance for credit losses on loans represented 1.59% of total loans at the end of the first quarter of 2025, unchanged from the end of 2024.

Prosperity Bancshares’ allowance for credit losses consists of two main components: a specific valuation allowance based on expected losses on impaired loans and certain purchased credit deteriorated (PCD) loans, and a general valuation allowance based on historical lifetime loan loss experience, current economic conditions, reasonable and supportable forecasted economic conditions, and other qualitative risk factors.

The company’s management believes the allowance for credit losses is adequate to cover the expected losses in the loan portfolio as of March 31, 2025. However, the company could sustain losses in future periods that could be substantial in relation to the size of the allowance.

Noninterest Income and Noninterest Expense

Noninterest income totaled $41.3 million for the first quarter of 2025, an increase of 6.3% compared to $38.9 million for the same period in 2024. This increase was primarily due to higher service charges on deposit accounts, nonsufficient funds fees, and other noninterest income, partially offset by a decrease in trust income.

Noninterest expense totaled $140.3 million for the first quarter of 2025, an increase of 3.3% compared to $135.8 million for the same period in 2024. This increase was primarily due to higher salaries and benefits related to the company’s recent acquisition of Lone Star State Bancshares, Inc.

Acquisition and Integration

In April 2024, Prosperity Bancshares completed the merger of Lone Star State Bancshares, Inc. and its wholly owned subsidiary, Lone Star State Bank of West Texas, into the company. As of March 31, 2024, Lone Star reported total assets of $1.38 billion, total loans of $1.08 billion, and total deposits of $1.24 billion.

The integration of Lone Star’s operations was completed in October 2024, and the company recognized $106.7 million in goodwill and $17.7 million in core deposit intangibles as a result of the acquisition.

Capital and Liquidity Remain Strong

Prosperity Bancshares’ total shareholders’ equity was $7.52 billion at March 31, 2025, an increase of 1.1% compared to $7.44 billion at December 31, 2024. The company’s capital ratios remained well above the regulatory minimums required to be considered “well capitalized,” with a Common Equity Tier 1 capital ratio of 16.92%, a Tier 1 capital ratio of 16.92%, and a total capital ratio of 18.17% as of March 31, 2025.

The company’s liquidity position remained strong, with $1.69 billion in cash and cash equivalents at March 31, 2025, compared to $1.97 billion at December 31, 2024. The decrease in cash and cash equivalents was primarily due to net repayments from other short-term borrowings, a net decrease in deposits, and cash dividend payments, partially offset by net proceeds from investment securities and net cash provided by operating activities.

Outlook and Conclusion

Prosperity Bancshares’ strong financial performance in the first quarter of 2025 was driven by its focus on internal growth, efficient operations, and strategic acquisitions. The company’s net interest income growth, stable loan portfolio, and adequate allowance for credit losses position it well to navigate the current economic environment.

Looking ahead, the company will continue to focus on maintaining its strong capital and liquidity positions, as well as pursuing growth opportunities through organic expansion and selective acquisitions. Prosperity Bancshares’ experienced management team, diversified business model, and commitment to risk management are expected to support the company’s continued success in the future.

Overall, Prosperity Bancshares’ first quarter results demonstrate its ability to deliver consistent financial performance and create value for its shareholders. The company’s solid foundation and strategic initiatives position it for continued growth and success in the Texas and Oklahoma markets.