Prosperity Bancshares Delivers Solid Financial Performance

Prosperity Bancshares, Inc., a leading financial holding company in Texas and Oklahoma, has reported its financial results for the first quarter of 2026. The company’s net income available to common shareholders was $116.3 million, or $1.16 per diluted common share, for the quarter ended March 31, 2026.

Overview of Financial Performance

Prosperity Bancshares’ net interest income, which is the difference between interest earned on loans and investments and interest paid on deposits and borrowings, increased by 21% to $321.2 million in the first quarter of 2026 compared to the same period in 2025. This growth was primarily driven by the repricing of assets and the impact of recent acquisitions.

The company’s net interest margin, which measures the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities, increased to 3.51% in the first quarter of 2026, up from 3.14% in the same period last year. This improvement was also due to the repricing of assets and the acquisitions.

Noninterest income, which includes fees and other revenue from the company’s banking services, increased by 12.5% to $46.5 million in the first quarter of 2026 compared to the same period in 2025. This increase was mainly attributable to the recent acquisitions.

Noninterest expense, which includes salaries, benefits, and other operating costs, increased by 54.8% to $217.3 million in the first quarter of 2026 compared to the same period in 2025. This was primarily due to $42.5 million in merger-related expenses associated with the recent acquisitions.

Loan and Deposit Growth

Total loans grew by 16% to $25.29 billion at March 31, 2026, compared to $21.81 billion at December 31, 2025. This increase was driven by growth in the company’s commercial and industrial, real estate, and warehouse purchase program loan portfolios.

Total deposits increased by 14.6% to $32.63 billion at March 31, 2026, compared to $28.48 billion at December 31, 2025. This growth was seen in both interest-bearing and noninterest-bearing deposits.

Recent Acquisitions

Prosperity Bancshares completed two significant acquisitions during the first quarter of 2026:

1. Acquisition of American Bank Holding Corporation: Prosperity Bancshares issued 4.4 million shares of its common stock to acquire American Bank, which operated 18 banking offices and two loan production offices in South and Central Texas.

2. Acquisition of Southwest Bancshares, Inc.: Prosperity Bancshares issued 4.1 million shares of its common stock to acquire Texas Partners Bank, which operated 11 banking offices in Central Texas.

These acquisitions resulted in $185 million and $134 million in goodwill, respectively, and $31.1 million and $33.8 million in core deposit intangibles, respectively.

Prosperity Bancshares also announced a pending acquisition of Stellar Bancorp, Inc., which operates 52 banking offices in the greater Houston and Beaumont, Texas areas. This transaction is expected to be completed in July 2026, subject to regulatory and shareholder approvals.

Asset Quality and Allowance for Credit Losses

Nonperforming assets, which include nonaccrual loans and other real estate owned, decreased by 19% to $122.1 million at March 31, 2026, compared to $150.8 million at December 31, 2025. The ratio of nonperforming assets to total loans and other real estate was 0.48% at March 31, 2026, down from 0.69% at the end of 2025.

The allowance for credit losses on loans increased by 15% to $383.8 million at March 31, 2026, compared to $333.7 million at December 31, 2025. This allowance represented 1.52% of total loans at the end of the first quarter of 2026, compared to 1.53% at the end of 2025.

The increase in the allowance for credit losses was primarily due to the acquisitions of American Bank and Texas Partners Bank, which added $52.1 million and $43.9 million, respectively, in allowances for credit losses on purchased credit-deteriorated (PCD) and purchased seasoned (PSL) loans.

Capital and Liquidity

Total shareholders’ equity increased by 7.8% to $8.21 billion at March 31, 2026, compared to $7.62 billion at December 31, 2025. This growth was driven by the common stock issued in the American and Southwest acquisitions, as well as the company’s net income, partially offset by dividend payments and share repurchases.

Prosperity Bancshares’ capital ratios remained well above the regulatory minimums required to be considered “well capitalized.” As of March 31, 2026, the company’s Common Equity Tier 1 capital ratio was 15.45%, its Tier 1 capital ratio was 15.45%, and its total capital ratio was 16.63%.

The company’s liquidity position remained strong, with $1.55 billion in cash and cash equivalents at March 31, 2026. Prosperity Bancshares also had $7.56 billion in available borrowing capacity from the Federal Home Loan Bank and the Federal Reserve Discount Window, with only $2.2 billion in FHLB advances outstanding.

Outlook and Conclusion

Prosperity Bancshares’ financial performance in the first quarter of 2026 was solid, with growth in net interest income, noninterest income, and loans and deposits. The company’s recent acquisitions have expanded its footprint in Texas and Oklahoma and are expected to contribute to future growth.

However, the increase in noninterest expense due to merger-related costs is a concern, and the company will need to effectively integrate the acquired banks to realize the expected synergies and cost savings. Additionally, the company’s ability to maintain asset quality and manage interest rate risk will be crucial as the economic environment evolves.

Overall, Prosperity Bancshares remains a well-capitalized and liquid financial institution that is well-positioned to continue its growth strategy through organic expansion and strategic acquisitions. The company’s focus on efficient operations, internal growth, and disciplined risk management should help it navigate the challenges and opportunities ahead.