Prosperity Bancshares Inc. in Houston beat analysts' estimates for its fourth-quarter earnings.

The $8.85 billion-asset company bested estimates by two cents a share, reporting Friday that earnings rose 35% from the fourth quarter of 2008. Net income was $7.9 million, or 65 cents a share.

Analysts following Prosperity had expected earnings of 63 cents a share, according to Thomson Reuters.

Provisions for loan losses increased 41%, to $8.5 million, from the same period in 2008. Chargeoffs were 0.12% of average loans, compared with 0.07%.

Net interest income before provisions for loan losses increased 25%, to $80 million. The higher net interest income was largely the result of lower deposit pricing, which reduced interest expenses by 40%, to $19.5 million. The net interest margin increased 59 basis points to 4.24%.

The ratio of nonperforming assets to assets was 0.22%, up 2 basis points from Dec. 31, 2008.

Prosperity's net interest margin was affected by the company's acquisition of the failed Franklin Bank in Houston in November 2008. Prosperity gained $3.7 billion of deposits for a 1.7% deposit premium.

Last week, Prosperity announced it will acquire the three Texas branches of U.S. Bank, adding $420 million of deposits.

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