PB Q4 Earnings Top Estimates on Higher NII, Stock Dips on Stellar Deal

Prosperity Bancshares, Inc.’s PB fourth-quarter 2025 earnings of $1.49 surpassed the Zacks Consensus Estimate of $1.45. The bottom line grew 8.8% year over year.

Concurrently, PB announced a stock-and-cash deal to acquire Stellar Bancorp, Inc. STEL for $2 billion. Following this announcement, the company’s shares tanked 7.9% in yesterday’s trading session.

Results benefited from an increase in net interest income (NII), non-interest income, alongside nil provisions and lower expenses. Further, a higher deposit balance was a positive. However, a decline in loan balance was a concern.
 
Net income available to common shareholders was $139.9 million, up 7.6% from the year-ago quarter. Our estimate for the metric was $134.9 million.

For 2025, earnings per share of $5.72 beat the Zacks Consensus Estimate of $5.68. The figure represented a rise of 13.3% from the previous year. Net income was $542.8 million, up 13.2% year over year. Our estimate for net income available to common shareholders was $537.9 million.

PB’s Revenues Rise, Expenses Fall

Quarterly total revenues came in at $317.7 million, up from $307.6 million a year earlier. The top line was marginally above the Zacks Consensus Estimate of $317.3 million.

For 2025, total revenues were $1.25 billion, up 4.8% year over year. The top line matched the Zacks Consensus Estimate. 

NII rose 4.5% year over year to $275 million. Also, net interest margin (NIM), on a tax-equivalent basis, expanded 25 basis points to 3.30%. Both were supported by lower funding costs, balance sheet repricing benefits and lower average deposit balances. Our estimates for NII and NIM were pegged at $279.5 million and 3.43%, respectively.

Non-interest income totaled $42.8 million, up 7.4%. This was driven by an increase in all fee-based revenues except nonsufficient funds (NSF) fees and net gains on asset sales. Our estimate for the metric was pegged at $41.2 million.

Non-interest expenses were $138.7 million, down 2% year over year. This was mainly attributable to lower salaries and benefits, regulatory assessments and FDIC insurance, core deposit intangibles amortization and other real estate expenses.  Our estimate for non-interest expenses was $141 million.

Efficiency ratio improved to 43.66% from 46.10% in the prior-year quarter.

PB’s Balance Sheet & Capital Position Strong

As of Dec. 31, 2025, total assets were $38.46 billion, up marginally from the previous quarter.

Total loans were $21.81 billion, down 1%. Deposits increased 2.5% to $28.48 billion. Our estimates for total loans and total deposits were $22.04 billion and $28.02 billion, respectively.

As of Dec. 31, 2025, the common equity tier 1 ratio improved to 17.55% from 16.42% in the year-ago quarter. 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%.

At the end of the fourth quarter, return on average assets was 1.49% and return on average common equity was 7.30%, both higher year over year.

PB’s Credit Quality: A Mixed Bag

As of Dec. 31, 2025, non-performing assets were $150.8 million, up from $81.5 million a year ago. Net charge-offs were $5.9 million, up from $2.6 million in the same quarter of 2024.

The company reported no provision for credit losses during the quarter, consistent with the year-ago period. The ratio of allowance for credit losses on loans was $1.53% of total loans, down from 1.59% a year earlier.

Prosperity Bancshares’s Share Repurchase Plans

In the reported quarter, Prosperity repurchased 2.04 million shares at an average price of $67.10 under its ongoing 2025 stock buyback program.

PB and Stellar Bancorp Acquisition Details

Prosperity Bancshares signed an agreement to acquire Stellar Bancorp and its banking subsidiary for $2 billion. This stock-and-cash deal, expected to be closed in the second quarter of 2026, is subject to regulatory and shareholder approvals and customary closing conditions.

Per agreement, Prosperity Bancshares will issue 0.3803 shares of its common stock and $11.36 in cash for each outstanding share of Stellar common stock based on PB’s closing price of $72.90 on Jan. 27, 2026.

The transaction unites two well-established Texas banking franchises. STEL has a total of 52 offices across Houston, Beaumont and Dallas areas with assets of $10.8 billion, total loans of $7.3 billion and total deposits of 9.02 billion. 

Upon completion of the deal, the merged company will be the second-largest bank based on deposits, with over 330 banking locations. This will provide Prosperity with a broader reach in the Texas markets. Also, on a pro forma basis at closing, the combined entity will have approximately $54 billion in assets, $33 billion in loans and $42 billion in deposits.
 
The acquisition is projected to generate significant financial benefits, with cost savings of 35.0% of STEL's non-interest expense (25.0% will be recognized in 2026 and 100% thereafter). The deal is expected to be 9.2% accretive to 2027 earnings. Prosperity also anticipates a one-time, pre-tax transaction charges of about $100 million related to this merger.

Our Take on Prosperity Bancshares

Prosperity Bancshares delivered another solid quarter with expanding margins and prudent expense management. Its strong capital base and consistent shareholder return underscore stability, while its strategic inorganic expansion initiatives are expected to enhance scale and market reach across Texas and Oklahoma. However, a lower loan balance and subdued asset quality remain near-term headwinds.
 

Prosperity Bancshares, Inc. Price, Consensus and EPS Surprise

Prosperity Bancshares, Inc. price-consensus-eps-surprise-chart | Prosperity Bancshares, Inc. Quote

Currently, Prosperity Bancshares carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of PB’s Peer Banks

BOK Financial Corporation's BOKF fourth-quarter 2025 adjusted net income per share of $2.48 surpassed the Zacks Consensus Estimate of $2.13. The bottom line increased 16.9% from the prior-year quarter.

BOKF’s results benefited from higher NII and total fees and commissions. An increase in loans and deposit balances was another positive. However, the increase in operating expenses was a major undermining factor.

Associated Banc-Corp’s ASB fourth-quarter 2025 earnings of 80 cents per share handily surpassed the Zacks Consensus Estimate of 69 cents. This compared favorably with adjusted earnings of 57 cents in the prior-year quarter. 

ASB’s results reflected higher NII and a robust improvement in non-interest income. A rise in loans and deposit balances, and lower provisions and expenses acted as tailwinds. 


 

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This article originally published on Zacks Investment Research (zacks.com).

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