Prosperity Bancshares in Houston reported higher second-quarter earnings despite an uptick in its expenses and a worsening efficiency ratio.

The $22.6 billion-asset company said Wednesday that its net income totaled $81.6 million, up 19% from a year earlier.

Net interest income before the provision for credit losses jumped 6%, to $161.8 million, from a year earlier, thanks largely to higher loan and investment yields and an increase in loan balances.

David Zalman, Prosperity's chairman and CEO, said that overall customer sentiment was positive because of reduced income taxes and regulatory reform.

“Overall, we continue to see positive customer sentiment with the reductions in income taxes and in government oversight and regulatory burden. Business people continue to tell me that for the first time in a number of years, they are able to spend their time growing their businesses,” David Zalman, Prosperity’s chairman and CEO, said in a press release.

Prosperity’s total loans increased almost 3%, to $10.1 billion. The loan-to-deposit ratio increased two percentage points, to 59.8%. The net interest margin expanded 14 basis points from last year to 3.28%.

The company’s construction, land development and other land loans spiked 11%, to $1.5 billion, while its commercial real estate loans rose 3%, to $3.4 billion. Commercial and industrial loans decreased more than 2%, to $1.2 billion.

The efficiency ratio was 43.95%, up from 42.34% a year earlier.

Noninterest income totaled $28.4 million, a 2% increase from last year, while noninterest expenses shot up 9%, to $83.6 million. Salaries and benefits totaled $53.4 million, up almost 13% year over year.

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