Prosperity Bancshares Set to Acquire Stellar Bancorp in $2 Billion Deal
Prosperity Bancshares, a bank holding company based in Houston, Texas, has agreed to pay $2 billion to acquire its crosstown rival, Stellar Bancorp. Upon completion, the transaction will establish the second-biggest Texas-headquartered bank. The acquisition is expected to close in the second quarter of 2026.
Prosperity Bancshares and Stellar Bancorp are set to combine under the Prosperity name and brand. The merged company will hold $54 billion in assets and secure the fifth position in deposit share in Houston. In Beaumont, which houses one of the nation’s largest oil refineries and a bustling port, the new entity is projected to rank first by deposits.
Details of the Acquisition
During a conference call discussing the acquisition, Prosperity’s Senior Chairman and CEO, David Zalman, referred to the merger as a “marriage made in heaven.” He noted that he and Stellar Chairman and CEO, Robert Franklin, have known each other for over 20 years and have often contemplated a merger. “We did our due diligence, and we feel really good. This is something we’ve thought about and talked about with each other for years and years,” Zalman added.
With both CEOs sharing similar banking philosophies and the banks’ proximity, Zalman believes the risks associated with the transaction are reduced. Franklin has agreed to join the merged company as vice chairman, while Stellar President Ramon Vitulli will serve as the Houston-area chairman. Additionally, Franklin and another Stellar director will join Prosperity’s board.
Prosperity’s Acquisition History
Since its establishment as a one-branch bank in Edna, Texas, in 1983, Prosperity has used acquisitions as a core strategy for expansion. The company has completed 31 deals since 2000, with the acquisition of Stellar marking the third deal announced since mid-July. The planned purchase follows Prosperity’s $322 million acquisition of the $2.5 billion-asset American Bank on January 1 and its $269 million deal for the $2.52 billion-asset Southwest Bancshares in San Antonio, expected to close on February 1.
Stellar’s Background
Stellar emerged from the merger of equals between Allegiance Bancshares and CBTX in November 2021. Both companies were based in Houston. The transaction received regulatory approval in September 2022, albeit with a requirement for the merged company to extend more loans to African American homebuyers.
In a recent press release, Franklin expressed his excitement about the deal with Prosperity. “By joining forces, we are creating one of the strongest Texas banking franchises, supported by an exceptional deposit base and a shared commitment to relationship-driven community banking,” he stated.
Implications of the Acquisition
Following the completion of this deal and the expected closing of Dallas-based Comerica’s sale to Fifth Third Bancorp on February 1, Prosperity will rank second by deposits among Texas-based banks, behind the $52.5 billion-asset Cullen/Frost Bankers. The merged Prosperity is projecting $42 billion of deposits at closing.
The acquisition cost, which works out to $39.08 per share, represents 181% of Stellar’s tangible book value. It will be paid approximately 70% in stock and 30% in cash. Despite the high acquisition cost and the initial negative reaction from investors, Zalman believes that the enhanced franchise value of the combined company far outweighs the cost.
Both Prosperity and Stellar reported fourth-quarter earnings alongside the deal announcement. Prosperity’s earnings stood at $140 million for the three months ending December 31, an 8.8% increase from the same period in 2024. Stellar reported a slightly higher net income of $26.1 million, up from $25.2 million for the same three months in 2024.
With this development, the companies are creating a strong banking franchise with an exceptional deposit base and a shared commitment to relationship-driven community banking. The newly merged entity is set to become a formidable player in the banking industry in Texas, a testament to the strategic vision and leadership of both Prosperity Bancshares and Stellar Bancorp.
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