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Prosperity Bancshares(PB) - 2022 Q4 - Earnings Call Transcript
PBProsperity Bancshares(PB)2023-01-25 20:51
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Financial Data and Key Metrics Changes - The annualized return on average assets for Q4 2022 was 1.47%, and the annualized return on average tangible common equity was 16.2% [10] - Net income for Q4 2022 was 137.9million,anincreaseof8.7137.9 million, an increase of 8.7% compared to 126 million in Q4 2021 [11] - Net income per diluted common share for Q4 2022 was 1.51,up9.41.51, up 9.4% from 1.38 in Q4 2021 [11] - Total deposits decreased to 28.5billion,adeclineof7.328.5 billion, a decline of 7.3% from 30.8 billion in Q4 2021 [13] - The efficiency ratio improved to 40.8% for Q4 2022, compared to 42.8% in Q4 2021 [12] Business Line Data and Key Metrics Changes - Loans excluding Warehouse Purchase Program and PPP loans increased to 18billion,up8.518 billion, up 8.5% from 16.7 billion in Q4 2021 [12] - Net interest income before provision for credit losses for Q4 2022 was 256.1million,anincreaseof4.6256.1 million, an increase of 4.6% from 244.8 million in Q4 2021 [19] - Noninterest income for Q4 2022 was 37.7million,comparedto37.7 million, compared to 35.8 million in Q4 2021 [112] Market Data and Key Metrics Changes - The company expects growth in loans to continue into 2023, driven by strong consumer spending, particularly in tourism, restaurant, and hospitality sectors [17] - The economies in Texas and Oklahoma are anticipated to outperform other states due to lower tax rates and a business-friendly environment [18] Company Strategy and Development Direction - The company is excited about its pending merger with First Bancshares of Texas and Lone Star State Bancshares, which will add approximately 3billioninassetsandincreasemarketshareinWestTexas[16]−Thecompanyaimstofocusonloangrowthratherthanbondpurchases,indicatingapreferenceforincreasingtheloanportfolio[134]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementbelievesthatthenetinterestmarginwillcontinuetoincreaseoverthenextseveralyearsasthebondportfoliorepricestohigheryields[18]−Thecompanyisoptimisticaboutloangrowth,projectingmid−singledigittohighsingle−digitgrowthfor2023[140]OtherImportantInformation−Theallowanceforcreditlossesonloanswas3 billion in assets and increase market share in West Texas [16] - The company aims to focus on loan growth rather than bond purchases, indicating a preference for increasing the loan portfolio [134] Management's Comments on Operating Environment and Future Outlook - Management believes that the net interest margin will continue to increase over the next several years as the bond portfolio reprices to higher yields [18] - The company is optimistic about loan growth, projecting mid-single digit to high single-digit growth for 2023 [140] Other Important Information - The allowance for credit losses on loans was 311 million at December 31, 2022, compared to 316millionattheendof2021[15]−Non−performingassetstotaled316 million at the end of 2021 [15] - Non-performing assets totaled 27 million, representing 8 basis points of quarterly average interest-earning assets [14] Q&A Session Summary Question: What is the outlook for net interest margin? - Management indicated that while the net interest margin may be flat in the short term, significant increases are expected in the long term as the bond portfolio reprices higher [127][130] Question: How is the company managing deposit pressures? - Management noted that they have good relationships with public fund customers and are managing deposit rates carefully to retain deposits [28][60] Question: What is the company's strategy regarding M&A? - The company plans to remain active in M&A, particularly looking for opportunities during market dislocations, while being cautious about the impact of AOCI on larger deals [145][147]