Prosperity Bancshares, Inc. (NYSE: PB) and Stellar Bancorp, Inc. (NYSE: STEL) have announced a definitive merger agreement that is poised to reshape the banking landscape in Texas by creating the state’s second-largest bank by deposits. The agreement arrived shortly after both institutions released their most recent quarterly financial results, with their respective stock prices reacting divergently in the market.
Under the terms of the deal, Prosperity Bancshares will acquire Stellar Bancorp by issuing 0.3803 shares of its common stock plus a cash payment of $11.36 for each share of Stellar’s common stock. Valued based on Prosperity's closing stock price of $72.90 on January 27, 2026, this positions the overall transaction at approximately $2.002 billion. Both companies’ Boards of Directors have unanimously sanctioned the agreement, indicating strong internal support for the strategic combination.
The closing of this merger is anticipated to occur within the second quarter of 2026, contingent upon customary closing conditions and necessary regulatory approvals. This timeline suggests a moderately paced integration process designed to address compliance and operational harmonization requirements.
David Zalman, serving as Senior Chairman and Chief Executive Officer of Prosperity Bancshares, emphasized the transformative potential of the merger: "The combination of our companies will create the second largest bank by deposits headquartered in Texas with over 330 banking centers." He highlighted that this enhanced scale will provide the combined entity with greater capability to invest in emerging opportunities and improve customer service.
Mr. Zalman further noted the strategic geographic benefits, emphasizing Stellar Bancorp’s strong foothold in Houston and Beaumont, Texas. The acquisition is seen as a substantial opportunity to deepen Prosperity’s presence in Houston’s diverse and growing market, which continues to attract investment and boast expanding population dynamics.
Recent Financial Performance of Both Banks Ahead of Merger
Alongside the announcement of the merger, both banks released their latest quarterly earnings. Prosperity Bancshares reported earnings per share (EPS) of $1.46, marginally surpassing analysts' consensus forecasts of $1.45. However, its total revenue of $317.7 million slightly missed expectations, which were set at $318.5 million.
Meanwhile, Stellar Bancorp posted an EPS of $0.51, aligning with analyst expectations. Its revenue totaled $108.9 million, exceeding the consensus estimate of $107.6 million, reflecting steady operational performance. As of the end of 2025, Stellar Bancorp held cash and cash equivalents amounting to $419.5 million, whereas Prosperity Bancshares reported $1.75 billion in cash and due from banks, indicating a strong liquidity position for both institutions.
Market Reaction and Stock Performance
The merger news triggered noteworthy movements in the market prices of the two companies. At the time of reporting, Prosperity Bancshares shares declined by 9.03%, closing at $66.31. In contrast, Stellar Bancorp shares appreciated by 11.03%, reaching $36.45. These movements reflect investor sentiment reacting to the transaction's immediate implications on shareholder value and future prospects.
Strategic Implications and Outlook
The strategic consolidation is expected to produce a banking institution with more than 330 branches, reinforcing a robust regional presence with an enhanced capacity to compete and grow across Texas markets. The merger will broaden the customer base and financial capabilities of the combined entity, potentially enabling greater investments into technological infrastructure, customer services, and product offerings aligned with future market demands.
While both companies have secured unanimous board approval, the finalization of the merger depends on regulatory approvals and customary closing conditions, which will be closely monitored by stakeholders. The successful consummation of the transaction will hinge on meeting these requirements and effectively managing the integration process.