Prosperity Bancshares reported higher third-quarter net income than a year earlier, while diluted earnings per share fell. Results included substantial costs tied to three acquisitions completed this year. The Houston-based bank also raised its quarterly dividend and reported a sharp increase in assets, loans and deposits, largely reflecting the acquisitions.
The latest deal, the merger with Stellar Bancorp, closed on July 1. Prosperity is still integrating Stellar Bank and Texas Partners Bank, while highlighting the larger scale the acquisitions have brought to the business.
Earnings and operating results
- Net income was $141.5 million, or $1.18 per diluted share, for the quarter ended Sept. 30, compared with $137.6 million and $1.45 per share in the same quarter last year. Net income rose, but diluted earnings per share was lower.
- Excluding merger-related costs and other specified items, Prosperity reported adjusted net income of $200.8 million, or $1.67 per diluted share. The company’s calculation excludes $69.7 million of merger expenses, a $5 million out-of-state tax settlement and a $927,000 gain related to the exchange and conversion of Visa Class B-2 stock.
- Net interest margin reached 3.73%, up 26 basis points from the second quarter and 49 basis points from the third quarter of 2025.
- Total assets were $54.1 billion at quarter-end, up $15.8 billion, or 41.1%, from a year earlier. Loans totaled $32.1 billion, up 45.5%, and deposits were $41.2 billion, up 48.4%. The increases primarily reflect Prosperity’s recent mergers.
- During the third quarter, loans increased by $7.03 billion, or 28.1%, and deposits grew by $8.63 billion, or 26.5%.
- Noninterest-bearing deposits were $13.8 billion, equal to 33.6% of total deposits.
- The allowance for credit losses on loans and off-balance-sheet credit exposure totaled $629.6 million. The allowance for loan losses was 1.91% of loans, excluding loans in the Warehouse Purchase Program.
- Nonperforming assets remained low at 0.41% of average interest-earning assets. The annualized return on average assets was 1.06%.
Mergers, dividend and share repurchases
- Prosperity completed three mergers in 2026: American Bank Holding Corporation on Jan. 1, Southwest Bancshares on Feb. 1, and Stellar Bancorp on July 1. Their banking operations joined Prosperity Bank.
- The company said it remains focused on completing the operational integration of Texas Partners Bank and Stellar Bank. Chief Executive Officer David Zalman said management sees greater scale as supporting competitiveness, efficiency and technology investment.
- The board approved a fourth-quarter dividend of 64 cents per share, up 4 cents, or 6.7%, from the 60 cents paid in each of the prior four quarters. Prosperity said this is its 23rd consecutive annual dividend increase; the compound annual growth rate in dividends declared from 2003 to 2026 was 10.4%.
- Prosperity repurchased 457,000 shares during the third quarter and 1.5 million shares during the first nine months of 2026.
Management described the Texas and Oklahoma economies as continuing to expand despite labor-supply constraints, inflation and energy-price headwinds. It pointed to construction activity, including data centers, manufacturing facilities and projects involving SpaceX and Tesla, as examples of investment across Texas.