Prosperity Bancshares, Inc. (NYSE:PB)

CAPS Rating: 2 out of 5

A financial holding company for Prosperity Bank, which provides a line of financial products and services to small and medium-sized businesses and consumers.


Player Avatar dexion10 (27.92) Submitted: 8/12/2008 12:25:30 PM : Underperform Start Price: $29.91 PB Score: -21.14

I'm very excited to add this texas bank PRSP to my list of regional bank shorts. I found this because the insiders just sold 3.3M in stock.

Before I tear this bank to shreads let me give you a key fact. This is a $1.5B market cap bank. Remember that as we review the size enormous size of their:

Goodwill - $800M
Multiple to tangible book = 4.5x
Construction Loans $600M (360M in land)


Market cap of 1.5B

This bank trades at 4.3x tangible book value at a time when most banks are lucky to trade at 2x to 2.5x

PRSP has $830M in goodwill (likely related to overpaying for previous acquisitions)

Further the bank has over 600M in construction loans. They have nearly $360M loaned out on land deals of one form or another. Remember this is only a $1.5B bank

At June 30, 2008, construction loans totaled $658.669 million, consisting of approximately $225 million of single family residence construction; $130 million of land development; $135 million of raw land; $100 million of lot loans; and $69 million of commercial construction and other construction loans.

Report this Post 4 Replies
Member Avatar thepull (99.48) Submitted: 8/19/2008 1:14:20 AM
Recs: 0

Nice writeup.I always check the $ gains on the otc webpage and it is almost always regional banks in the past couple weeks, but I'm too lazy to do any research on them. I can imagine what their balance sheets look like though.

Member Avatar anchak (99.85) Submitted: 8/21/2008 9:54:29 PM
Recs: 0

Dex....I didn't get a chance to look at the balance sheet ....since I presumed they would be a CAPS pick only - I did today because found they were Optionable. I agree with almost everything you said - and one thing which I think got you to the stock - Heavy insider selling. This foretells of really bad things to come. However, PRSP has a good performing book till now. Which means they may have done a decent job of underwriting the loans. Thus I would not turn this into a whale hunt.Given the environment - a little blip in their asset quality will probably cause a slide - but till now there's nothing - and remember its been about a year on this crisis.THEY WILL SURVIVE - I am pretty sure.

Member Avatar dexion10 (27.92) Submitted: 8/26/2008 5:55:47 PM
Recs: 0

Anchak - you are right PRSP is a decent bank. I am short the stock - but the bank is fine.The stock is probably overvalued. In a crazy market like 2008 I like a few easy longs and shorts... ones that are just plainly undervalued longs or overvalued shorts. PRSP falls into the latter category. I'm not predicting gloom and doom - but rather that there is no upside to the stock at $33. If I get lucky the Houston market will join the rest of the US in recession (not likely). If everything goes PRSP's way then the stock trades in the low $30's indefinitely. If the regional bank crisis has one more leg down PRSP will get swept up in the sell off just like everyone else and more importantly the comparable / relative valuation will be even more overvalued... why pay 4.25x book for a good bank when you can buy another "GOOD" bank for 1.5x book

Member Avatar walt373 (99.86) Submitted: 1/15/2010 6:58:34 PM
Recs: 0

Just read an article on Morningstar about this bank. It puts them in a really good light.

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