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Core Viewpoint - Prosperity Bancshares, Inc. has successfully completed the merger with Southwest Bancshares, Inc. and its subsidiary Texas Partners Bank, effective February 1, 2026, enhancing its market presence in Texas [1][2]. Group 1: Merger Details - The merger agreement resulted in Prosperity issuing 4,095,397 shares of common stock to former shareholders and award holders of Southwest [2]. - Texas Partners operates 11 banking offices in Central Texas, including San Antonio, and will continue to use its name until operational integration, expected by November 2026 [4]. Group 2: Management Changes - Brent Given, the Interim Chairman and CEO of Texas Partners, will become the San Antonio Area Chairman at Prosperity Bank, while Tom Moreno will take a senior management role [3]. - Additional Texas Partners management will retain leadership positions within the combined organization, and Gene Dawson, Jr. has joined the Board of Directors of Prosperity Bank [3]. Group 3: Company Overview - As of December 31, 2025, Prosperity Bancshares is a regional financial holding company with assets of $38.463 billion, providing a range of banking services across Texas and Oklahoma [5]. - Prosperity operates 301 full-service banking locations across various regions, including Houston, Dallas/Fort Worth, and Central Texas [6].

Core Viewpoint - The proposed sale of Stellar Bancorp, Inc. to Prosperity Bancshares, Inc. is under investigation to assess whether the transaction adequately values Stellar and the process leading to this valuation is appropriate [1]. Group 1: Transaction Details - Shareholders of Stellar Bancorp will receive 0.3803 shares of Prosperity common stock and $11.36 in cash for each share of Stellar they own as part of the proposed transaction [1]. Group 2: Legal Investigation - Kahn Swick & Foti, LLC is investigating the proposed sale to determine if the consideration offered undervalues Stellar Bancorp [1]. - The firm is inviting shareholders who believe the transaction undervalues the company to discuss their legal rights regarding the proposed sale [2].

Core Insights - Prosperity Bancshares, Inc. (PB) reported fourth-quarter 2025 earnings of $1.49, exceeding the Zacks Consensus Estimate of $1.45, with an 8.8% year-over-year growth [1] - The company announced a $2 billion stock-and-cash acquisition of Stellar Bancorp, Inc. (STEL), which led to a 7.9% decline in PB's shares following the announcement [1][9] Financial Performance - Net income available to common shareholders was $139.9 million, reflecting a 7.6% increase from the previous year, surpassing the estimate of $134.9 million [2] - For 2025, earnings per share reached $5.72, beating the Zacks Consensus Estimate of $5.68, and net income was $542.8 million, up 13.2% year over year [3] - Quarterly total revenues were $317.7 million, up from $307.6 million a year earlier, slightly above the Zacks Consensus Estimate of $317.3 million [4] Income and Expenses - Net interest income (NII) rose 4.5% year over year to $275 million, with a net interest margin (NIM) of 3.30%, an increase of 25 basis points [5] - Non-interest income totaled $42.8 million, up 7.4%, driven by increases in fee-based revenues [6] - Non-interest expenses decreased by 2% year over year to $138.7 million, attributed to lower salaries, regulatory assessments, and other costs [7] Balance Sheet and Capital Position - As of December 31, 2025, total assets were $38.46 billion, total loans were $21.81 billion (down 1%), and deposits increased by 2.5% to $28.48 billion [8] - The common equity tier 1 ratio improved to 17.55% from 16.42% year over year [8] - The total risk-based capital ratio rose to 18.80% from 17.67%, and the equity-to-assets ratio strengthened to 19.8% from 18.8% [10] Credit Quality - Non-performing assets increased to $150.8 million from $81.5 million a year ago, while net charge-offs rose to $5.9 million from $2.6 million [11] - The company reported no provision for credit losses during the quarter, consistent with the previous year [11] Acquisition Details - Prosperity Bancshares agreed to acquire Stellar Bancorp for $2 billion, with the deal expected to close in Q2 2026, subject to regulatory and shareholder approvals [13] - The acquisition will involve issuing 0.3803 shares of PB's common stock and $11.36 in cash for each share of Stellar common stock [14] - Upon completion, the merged entity will be the second-largest bank based on deposits in Texas, with approximately $54 billion in assets [15] Strategic Outlook - The acquisition is projected to generate significant financial benefits, including cost savings of 35% of STEL's non-interest expenses, with an expected 9.2% accretion to 2027 earnings [16] - Prosperity Bancshares continues to demonstrate strong capital management and strategic expansion initiatives, although challenges remain with lower loan balances and asset quality [17]

Core Viewpoint - Prosperity Bancshares is set to acquire Stellar Bancorp and its subsidiary Stellar Bank in a deal valued at approximately $2 billion, which will enhance Prosperity's presence in Texas and create the second largest Texas-based bank by assets [1][2][3]. Group 1: Deal Overview - The acquisition involves Prosperity offering 0.3803 shares of its common stock and $11.36 in cash for each share of Stellar [1]. - Stellar reported consolidated assets of $10.81 billion, loans of $7.3 billion, and deposits of $9.02 billion as of December 31, 2025 [2]. - The merger will result in combined assets of around $54 billion, making it the second largest bank in Texas [2]. Group 2: Strategic Implications - The merger is expected to significantly enhance Prosperity's presence in the Houston area, a market characterized by a diverse economy and growing population [4]. - The combined entity will have over 330 banking centers, positioning it to better serve customers and invest in future opportunities [3][6]. - Leadership changes will occur, with Stellar's CEO and other executives joining Prosperity's management team [4][5]. Group 3: Leadership and Management - Stellar CEO Robert R. Franklin, Jr. will become vice chairman of Prosperity Bank, while Stellar president Ramon Vitulli will serve as Houston area chairman [4]. - Other members of Stellar's management will retain leadership roles post-merger, and additional members will join Prosperity's Board of Directors [5].

Core Viewpoint - Prosperity Bancshares has announced an agreement to acquire Stellar Bancorp, creating a $54 billion-asset bank with a strong presence in the Houston market [1] Group 1: Acquisition Details - Prosperity Bancshares will pay approximately $2 billion for Stellar in a part-cash, part-stock transaction, with 70% of the value in stock, resulting in an implied value of $39.08 per Stellar share [1] - The pro forma bank will have the number one deposit market share in Beaumont County and the number five deposit market share in Houston [2] Group 2: Financial Implications - The acquisition is projected to be over 9% accretive to Prosperity's earnings by 2027, with the ability to cut 35% of Stellar's non-interest expense base [3] - Management projects the combined entity to generate a return on average assets of 1.58% and a return on average tangible common equity of 17.1% by 2027, with an efficiency ratio of 44% [4] Group 3: Valuation and Market Reaction - The deal values Stellar at slightly over 180% of its tangible book value, which is a strong multiple in the current high bank stock valuation market [5] - The acquisition is projected to dilute Prosperity's tangible book value by nearly 8%, with an estimated 4.5 years to earn that back, leading to an approximate 8% decline in Prosperity's stock [6]

Our annualized return on average assets and average tangible common equity for the three months ending 12/31/2025 was 1.49% on assets and 13.61% on tangible equity. Prosperity's efficiency ratio, excluding the net gains and losses on the sale, write-down, or write-up of assets and securities, was 43.6% for the three months ending 12/31/2025. As mentioned, since 2024, we expect that our net interest margin to increase, and it has. Net interest margin on a tax-equivalent basis was 3.3% for the three months en ...

Financial Data and Key Metrics Changes - For the year ended December 31, 2025, net income was $543 million, an increase of $63 million or 13.2% compared to $480 million for the same period in 2024 [6] - Net income per diluted common share was $5.72 for the year ending December 31, 2025, compared to $5.05 for the same period in 2024, an increase of 13.3% [6] - For the three months ending December 31, 2025, net income was $139.9 million, an increase of $9.8 million or 7.6% compared to $130 million for the same period in 2024 [7] - The annualized return on average assets was 1.49% and on average tangible common equity was 13.61% for the three months ending December 31, 2025 [7] - The efficiency ratio was 43.6% for the three months ending December 31, 2025 [7] Business Line Data and Key Metrics Changes - Net interest income before provision for credit losses for the three months ended December 31, 2025, was $275 million, an increase of $7.2 million compared to $267.8 million for the same period in 2024 [15] - The net interest margin on a tax-equivalent basis was 3.30% for the three months ended December 31, 2025, an increase of 25 basis points compared to 3.05% for the same period in 2024 [16] - Non-interest income was $42.8 million for the three months ended December 31, 2025, compared to $39.8 million for the same period in 2024 [17] - Non-interest expense was $138.7 million for the three months ended December 31, 2025, compared to $141.5 million for the same period in 2024 [18] Market Data and Key Metrics Changes - Deposits were $28.4 billion at December 31, 2025, an increase of $700 million from $27.7 billion at September 30, 2025 [9] - Nonperforming assets totaled $150 million, or 46 basis points of quarterly average interest-earning assets at December 31, 2025, compared to $119 million, or 36 basis points at September 30, 2025 [10] Company Strategy and Development Direction - The company is focused on delivering shareholder value through low-cost core deposits, operational efficiency, sound credit quality, and growth via opportunistic M&A [14] - The acquisition of Stellar Bancorp is seen as a significant milestone, enhancing the company's Texas footprint and making it the largest Texas-based bank in the market [14] - The company plans to prioritize the integration of the three banks it is acquiring, focusing on customer and associate care [36][37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth momentum heading into 2026, with expectations for improved net interest margins and overall performance [32][34] - The company anticipates realizing cost savings related to the acquisitions after system conversions scheduled for later in the year [19] - Management highlighted strong tailwinds for growth in 2026 and beyond, with expectations for a minimum net interest margin of 3.5% [86] Other Important Information - The company completed a merger with American Bank on January 1, 2026, and expects to finalize the merger with Southwest Bancshares on February 1, 2026 [11][12] - The allowance for credit losses on loans was $333 million, with a strong coverage ratio of 2.21 times non-performing assets [10] Q&A Session Summary Question: Can you explain the difference in earnings estimates for Stellar compared to consensus? - Management indicated that Stellar's fourth quarter earnings influenced the estimates, and they are confident in the earnings level coming from Stellar [28][29] Question: Why is this acquisition different from past ones? - Management emphasized the long-standing relationship with Stellar and the similarities in operational discipline, which reduce risks associated with the acquisition [36][37] Question: Can you discuss the price of the acquisition and the expected synergies? - Management acknowledged the premium price for a quality bank and highlighted the expected earnings growth and synergies from the merger [40][45] Question: What are the capital deployment plans moving forward? - Management indicated a focus on integration but also mentioned the potential for opportunistic buybacks and dividend increases [48][50] Question: How will the company manage multiple bank integrations simultaneously? - Management stated that designated teams will handle integrations, allowing core operations to continue without distraction [53][56] Question: Can you provide details on the increase in nonperforming assets? - Management confirmed that a specific $35 million Shared National Credit was part of the increase and noted ongoing resolution discussions [108][109]

Financial Data and Key Metrics Changes - For the year ended December 31, 2025, net income was $543 million, an increase of $63 million or 13.2% compared to $480 million for the same period in 2024 [6] - Net income per diluted common share was $5.72 for the year ending December 31, 2025, compared to $5.05 for the same period in 2024, an increase of 13.3% [6] - The net income for the three months ending December 31, 2025, was $139.9 million, compared to $130 million for the same period in 2024, an increase of $9.8 million or 7.6% [7] - The annualized return on average assets was 1.49% and on average tangible common equity was 13.61% for the three months ending December 31, 2025 [7] - The efficiency ratio was 43.6% for the three months ending December 31, 2025 [7] Business Line Data and Key Metrics Changes - Net interest income before provision for credit losses for the three months ended December 31, 2025, was $275 million, an increase of $7.2 million compared to $267.8 million for the same period in 2024 [15] - The net interest margin on a tax-equivalent basis was 3.30% for the three months ended December 31, 2025, an increase of 25 basis points compared to 3.05% for the same period in 2024 [16] - Non-interest income was $42.8 million for the three months ended December 31, 2025, compared to $39.8 million for the same period in 2024 [17] - Non-interest expense was $138.7 million for the three months ended December 31, 2025, compared to $141.5 million for the same period in 2024 [18] Market Data and Key Metrics Changes - Deposits were $28.4 billion at December 31, 2025, an increase of $700 million from $27.7 billion at September 30, 2025 [9] - Nonperforming assets totaled $150 million, or 46 basis points of quarterly average interest-earning assets at December 31, 2025, compared to $119 million, or 36 basis points at September 30, 2025 [10] Company Strategy and Development Direction - The company completed a merger with American Bank on January 1, 2026, and expects to finalize the merger with Southwest Bancshares on February 1, 2026 [11][12] - The acquisition of Stellar Bancorp is seen as a significant milestone, enhancing the company's Texas footprint and deposit rank [14] - The company aims to deliver shareholder value through low-cost core deposits, operational efficiency, sound credit quality, and growth via opportunistic M&A [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth momentum from the second half of 2025 into 2026, with expectations for improved net interest margins and earnings [32][34] - The company anticipates a minimum net interest margin of 3.5% for 2026, with potential upside from the acquisition of Stellar Bank [79][80] - Management highlighted a strong capital position and plans for capital deployment, including potential stock buybacks and dividend increases [48][49] Other Important Information - The company repurchased approximately $157 million, or 2.34 million shares of its common stock at an average weighted price of $67.04 under its 2025 stock repurchase program [8] - The allowance for credit losses on loans was $333 million, with a strong coverage ratio of 2.21 times non-performing assets [10] Q&A Session Summary Question: Can you discuss the Stellar acquisition and the difference in earnings estimates? - Management noted that the earnings estimates are influenced by Stellar's recent performance and expressed confidence in the projected earnings from the acquisition [28][32] Question: Why is this acquisition different from past ones? - Management emphasized the familiarity and alignment between the two banks, which reduces risk and enhances growth potential [35][37] Question: Can you elaborate on the capital deployment strategy post-acquisition? - Management indicated a focus on integration of the three banks and potential for opportunistic buybacks, with a strong capital position allowing for flexibility [48][50] Question: How will you manage multiple bank integrations simultaneously? - Management assured that designated teams are in place for integration, allowing core operations to continue without distraction [53][56] Question: What is the outlook for nonperforming assets and credit quality? - Management acknowledged an increase in nonperforming assets but expressed confidence in the overall credit quality of the portfolio [108][109]

Financial Data and Key Metrics Changes - For the year ended December 31, 2025, net income was $543 million, an increase of $63 million or 13.2% compared to $480 million for the same period in 2024 [5] - Net income per diluted common share was $5.72 for the year ending December 31, 2025, compared to $5.05 for the same period in 2024, an increase of 13.3% [5] - The net income for the three months ending December 31, 2025, was $139.9 million, an increase of $9.8 million or 7.6% compared to $130 million for the same period in 2024 [6] - The annualized return on average assets was 1.49% and on average tangible common equity was 13.61% for the three months ending December 31, 2025 [6] - The efficiency ratio was 43.6% for the three months ending December 31, 2025 [6] Business Line Data and Key Metrics Changes - Net interest income before provision for credit losses for the three months ended December 31, 2025, was $275 million, an increase of $7.2 million compared to $267.8 million for the same period in 2024 [13] - Non-interest income was $42.8 million for the three months ended December 31, 2025, compared to $39.8 million for the same period in 2024 [16] - Non-interest expense was $138.7 million for the three months ended December 31, 2025, compared to $141.5 million for the same period in 2024 [17] Market Data and Key Metrics Changes - Deposits were $28.4 billion at December 31, 2025, an increase of $700 million from $27.7 billion at September 30, 2025 [8] - Nonperforming assets totaled $150 million, or 46 basis points of quarterly average interest-earning assets at December 31, 2025, compared to $119 million, or 36 basis points at September 30, 2025 [9] Company Strategy and Development Direction - The company completed a merger with American Bank on January 1, 2026, and expects to finalize the merger with Southwest Bancshares on February 1, 2026 [10][11] - The acquisition of Stellar Bancorp is seen as a significant milestone, enhancing the company's Texas footprint and making it the largest Texas-based bank in the market [12] - The company aims to deliver shareholder value through low-cost core deposits, operational efficiency, sound credit quality, and growth via opportunistic M&A [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to maintain and grow earnings, citing strong demand for loans and a disciplined approach to credit quality [8][12] - The company anticipates improvements in net interest margin due to the integration of acquired banks and favorable market conditions [78][86] - Management highlighted the importance of focusing on customer care and successful integration of the three banks acquired [35] Other Important Information - The company repurchased approximately $157 million, or 2.34 million shares of its common stock at an average weighted price of $67.04 under its 2025 stock repurchase program [7] - The allowance for credit losses on loans was $333 million, with a strong coverage ratio of 2.21 times non-performing assets [9] Q&A Session Summary Question: What is driving the difference in earnings estimates for Stellar compared to consensus? - Management indicated that Stellar's fourth quarter earnings would influence the estimates, and a representative from Stellar provided insights on their growth momentum and earnings potential [27][31] Question: Why is this acquisition different from past ones? - Management emphasized the familiarity and alignment between the two banks, suggesting that the integration would be smoother and more efficient than previous acquisitions [33][35] Question: Can you elaborate on the price of the acquisition and the expected synergies? - Management acknowledged the premium paid for Stellar but justified it by highlighting the expected earnings growth and enhanced franchise value from the merger [39][42] Question: What are the capital deployment plans moving forward? - Management indicated a focus on integration for the coming months, with potential for opportunistic buybacks and dividend increases based on strong cash flow projections [45][48] Question: How will the company manage multiple bank integrations simultaneously? - Management assured that designated teams are in place for integration, allowing core operations to continue without distraction [51][53] Question: Can you discuss the increase in nonperforming assets? - Management provided details on specific loans contributing to the increase and expressed confidence in the overall credit quality of the portfolio [108][110]