Prosperity Bancshares Q3 EPS Falls to $1.18 on Merger Expenses

Prosperity Bancshares (PB ), the Houston-based parent company of Prosperity Bank, on October 28, 2026 reported net income of $141.5 million, or $1.18 per diluted common share, for the third quarter ended September 30, 2026, in its quarterly earnings release. A year earlier the company earned $137.6 million, or $1.45 per diluted share, and in the second quarter of 2026 it earned $168.6 million, or $1.67 per diluted share.

The quarter was the first to include Stellar Bancorp, which merged into Prosperity on July 1, 2026. Third-quarter results included $69.7 million of merger related expenses, or $0.46 per diluted share, and an out-of-state tax settlement of $5.0 million, or $0.04 per share, partially offset by a $927 thousand gain, or $0.01 per share, from the exchange and conversion of Visa Class B-2 stock. Excluding those items, the company reported non-GAAP net income of $200.8 million and diluted earnings per share of $1.67.

Annualized returns on average assets, average common equity and average tangible common equity were 1.06%, 5.77% and 11.14%, respectively, the company reported, with the tangible measure non-GAAP. The $5.0 million tax settlement produced what the company described as a higher-than-normal effective tax rate of 24.4%. Prosperity’s efficiency ratio was 62.05% for the quarter and 48.03% excluding merger related expenses.

Net interest income before provision for credit losses was $443.0 million, up $169.5 million or 62.0% from $273.4 million in the third quarter of 2025. The tax-equivalent net interest margin was 3.73%, compared with 3.24% a year earlier and 3.47% in the second quarter of 2026, changes the company attributed primarily to the mergers, the repricing of assets and a decrease in the average balance and average rate on other borrowings. Noninterest income rose to $52.7 million from $41.2 million a year earlier, while noninterest expense increased to $308.6 million from $138.6 million, driven by merger related expenses, salaries and benefits, and additional operating costs tied to the acquired banks.

For the nine months ended September 30, 2026, net income was $426.3 million, or $3.99 per diluted share, compared with $402.9 million, or $4.23, for the same period in 2025. Nine-month results included $113.0 million of merger related expenses. Net interest income before provision for credit losses was $1.095 billion, up 35.7%, with a tax-equivalent margin of 3.58% versus 3.19%.

Balance Sheet Growth and Asset Quality

Total assets were $54.101 billion at September 30, 2026, up $15.771 billion or 41.1% from $38.330 billion a year earlier. Loans were $32.060 billion, up 45.5%, and deposits were $41.231 billion, up 48.4%. Linked quarter, loans increased $7.032 billion or 28.1% and deposits rose $8.631 billion or 26.5%, increases the company said came primarily from the Stellar merger. Noninterest-bearing deposits were $13.8 billion, representing 33.6% of total deposits.

“These increases primarily reflect our three recent mergers,” said David Zalman, Prosperity’s Senior Chairman and Chief Executive Officer. Zalman said the company remains focused on completing the operational integration of Texas Partners Bank and Stellar Bank, and said the Texas and Oklahoma economies continue to expand in late 2026 despite labor supply constraints and headwinds from inflation and energy prices, citing Texas’ growing population of 31.7 million.

Nonperforming assets totaled $193.9 million, or 0.41% of quarterly average interest-earning assets, versus 0.36% a year earlier and 0.34% at June 30, 2026, with the 2026 amounts impacted by nonperforming assets acquired in the mergers. The allowance for credit losses on loans and off-balance sheet credit exposures was $629.6 million, and the allowance on loans was $592.0 million, or 1.85% of total loans and 1.91% excluding Warehouse Purchase Program loans. No provision for credit losses was recorded in the quarter or the nine-month period. Net charge-offs were $4.4 million in the quarter, compared with $6.5 million a year earlier, while nine-month net charge-offs of $47.9 million included a $37.7 million increase in commercial and industrial net charge-offs.

At September 30, 2026, the common equity tier 1 capital ratio was 13.46% and the tier 1 leverage ratio was 9.85%.

Three Acquisitions and Capital Returns

Stellar Bank operated 52 banking offices in the Houston, Beaumont and East Texas areas and in Dallas, and it reported $10.413 billion in assets, $7.510 billion in loans and $8.716 billion in deposits as of June 30, 2026. Prosperity issued 19,371,499 shares of its common stock and paid approximately $578.66 million in cash for all outstanding Stellar shares, recording goodwill of $898.2 million and $184.0 million of core deposit intangibles as of September 30, 2026, figures the company said do not include subsequent fair value adjustments that have not yet been finalized. The Stellar merger added $7.564 billion in loans with $84.7 million of purchase accounting adjustments at acquisition date, and Day One reserve accounting added $146.1 million for purchased credit deteriorated loans and $67.4 million for purchased seasoned loans in the quarter.

Earlier in 2026, American Bank Holding Corporation merged into Prosperity on January 1, with 4,439,938 shares issued and goodwill of $185.7 million and core deposit intangibles of $31.1 million recognized, and Southwest Bancshares merged on February 1, with 4,094,974 shares issued and goodwill of $141.5 million and core deposit intangibles of $33.8 million recognized. Prosperity completed the operational integration of American Bank during the third quarter.

During 2026, Prosperity tendered all of its Visa Class B-2 shares in Visa’s public exchange offer, which expired May 8, 2026, receiving 24,246 Class B-3 shares recorded at zero cost basis and 9,137 Class C shares, all of which have since been sold. The company recorded a $13.2 million gain on the exchange over the nine months.

The board declared a fourth-quarter 2026 cash dividend of $0.64 per share, up $0.04 or 6.67% from the $0.60 paid in each of the prior four quarters, payable January 4, 2027 to shareholders of record as of December 15, 2026. The company said the increase is its 23rd consecutive annual dividend increase, with a 10.4% compound annual growth rate in dividends declared from 2003 to 2026. The increase was separately announced on October 21, 2026, according to the company’s press release archive.

Under the repurchase program announced January 26, 2026, which authorizes purchases of up to 5% of outstanding common stock, or approximately 4.87 million shares, through January 26, 2027, Prosperity repurchased approximately 457 thousand shares at a weighted average price of $69.62 per share for $31.8 million in the third quarter and approximately 1.5 million shares at $68.63 per share for $102.6 million in the nine months.

As of September 30, 2026, Prosperity operated 352 full-service banking locations across Texas and Oklahoma, including 11 Texas Partners Bank and 52 Stellar Bank locations. Management was scheduled to discuss the results on a conference call on October 28, 2026 at 11:30 a.m. Eastern Time.