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10 Bank Stocks Bringing Home the Bacon (Mmm... Bacon)

6. Prosperity Bancshares

Prosperity Bancshares (PRSP) of Houston was down 2% year-to-date, closing last Friday at $37.92. Based on a quarterly payout of 20 cents, the shares have a dividend yield of 2.06%.

The company's year-to-date ROA was 1.46% as of Sept. 30, and its five-year average ROA was 1.34%.

Prosperity had $9.6 billion in total assets as of Sept. 30, with 180 branches in the Houston area; South and Central Texas and in the Dallas/Fort Worth area.

Third-quarter net income was $36.4 million, or 77 cents a share, increasing from $35.1 million, or 75 cents a share, in the second quarter and $32.2 million, or 69 cents a share, in the third quarter of 2010.

The year-over-year earnings improvement reflected a 3% year-over-year increase in net interest income to $83.5 million, as "the average yield on interest earning assets decreased 23 basis points while the rate paid on interest bearing liabilities decreased 30 basis points for the same period." The third-quarter net interest margin improved to a tax-adjusted 4.02%, from 3.97% a year earlier.

Earnings were also helped by a decline in the provision for loan losses to $950,000 during the third quarter, from $3 million a year earlier.

FIG Partners analyst Christopher Marinac on Oct. 24 reiterated his neutral rating on Prosperity Bancshares, with a $39.95 price target, saying that although the company "delivered another solid quarter of profits, superb returns on assets and tangible common equity (TCE), and tangible book value growth--all with taking a limited amount of risk," it seemed possible that over the next several quarters, earnings would be "down slightly or flat in general."

The shares trade for 12.2 times the consensus 2012 EPS estimate of $3.04, among analysts polled by FactSet, and three times tangible book value, according to SNL.

Three out of 17 analysts covering Prosperity Bancshares rate the stock a buy, while the remaining analysts all have neutral ratings.

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