Safe and Sound

Prosperity Bank

El Campo, TX
4
Star Rating
El Campo, TX-based Prosperity Bank is an FDIC-insured bank founded in 1949. Regulatory filings show the bank having equity of $3.81 billion on assets of $22.58 billion, as of December 31, 2017.

With 3,017 full-time employees in 271 offices in multiple states, the bank currently holds loans and leases worth $9.94 billion, including real estate loans of $8.07 billion. U.S. bank customers currently have $17.84 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Prosperity Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three important criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and provides protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a valuable measurement of a bank's financial fortitude. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Prosperity Bank received a score of 10 out of a possible 30 points, coming in below the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Prosperity Bank's Tier 1 capital ratio was 14.98 percent, above the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather economic headwinds.

Overall, Prosperity Bank held equity amounting to 16.86 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with lots of these types of assets could eventually have to use capital to cover losses, diminishing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, reducing earnings and elevating the risk of a future failure.

Prosperity Bank beat out the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.26 percent of Prosperity Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Prosperity Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to address problematic loans, potentially making the bank better prepared to withstand financial trouble. Banks that are losing money, however, are less able to do those things.

Prosperity Bank did above-average on Bankrate's earnings test, achieving a score of 16 out of a possible 30.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Prosperity Bank was 7.58 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $281.6 million on total equity of $3.81 billion. The bank had an annualized return on average assets, or ROA, of 1.26 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.