- Key insight: The merged bank will hold the number-one deposit share in Beaumont, home to a bustling port and some of the nation's largest oil refineries.
- Expert quote: "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." — Stellar Bancorp Chairman and CEO Robert Franklin
- Supporting data: Prosperity has completed 31 M&A deals since 2000.
UPDATE: This story includes additional information about financial aspects of the deal, as well as analysts' reaction.
Prosperity Bancshares in Houston has agreed to pay $2 billion for crosstown rival Stellar Bancorp in a deal that would create the second-biggest Texas-headquartered bank.
The combined company will carry the Prosperity name and brand. It would hold $54 billion of assets and a number-five deposit share in Houston. In Beaumont, home to a massive Exxon-Mobil refinery, as well as one of the country's busiest ports, the combined company would rank number-one by deposits.
The cash-and-stock deal is expected to close during the second quarter of 2026.
"This is a rare opportunity to significantly enhance our presence in the Houston area, a market with a diverse economy that is continually attracting investment and has a growing population," David Zalman, Prosperity's senior chairman and CEO, said Wednesday in a press release.
Stellar Chairman and CEO Robert Franklin has agreed to join the merged company as vice chairman. Stellar President Ramon Vitulli will serve as Houston-area Chairman. Franklin and one other Stellar director will join Prosperity's board.
The planned acquisition of Stellar is the third deal Prosperity has announced since mid-July. Prosperity closed its
Prosperity, which began in 1983 as a one-branch bank in Edna, Texas, has made bank acquisitions a central component of its expansion strategy throughout its history. The company has completed 31 deals since 2000.
Stellar emerged from the
In Wednesday's press release, Franklin said that Stellar was "thrilled" to announce 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," Franklin said.
The deal price works out to $39.08 per share and represents 181% of Stellar's tangible book value. It will be paid roughly 70% in stock and 30% in cash. Prosperity believes it can cut about 35% of Stellar's noninterest expenses, which totaled $285.5 million in 2025.
Prosperity is projecting 9.2% earnings-per-share accretion in 2027. On the flip side, the deal is expected to result in 7.8% tangible-book-value dilution, to be earned back over four-and-a-half years.
Analysts' initial impressions focused on the $2 billion cost and the relatively high premium Prosperity paid. Piper Sandler's Stephen Scouten noted that the $39.08 per share price tag amounted to a 20% premium over Stellar's Tuesday closing price of $32.63. "The price paid is a higher premium than we would have expected," Scouten wrote Wednesday in a research note.
RBC Capital Markets Analyst Jon Arfstrom wrote that the deal price is "likely to be scrutinized,' but he added that deposits in the lucrative, growing and highly competitive Houston market are more expensive than those in other markets.
"This is an expensive acquisition for Prosperity, but the deal enhances franchise value and density in the sought-after and faster-growing Texas markets," Arfstrom wrote.
Both Prosperity and Stellar reported fourth-quarter earnings simultaneous with the deal announcement. Prosperity earned $140 million for the three months ending Dec. 31, up 8.8% from the same period in 2024. Stellar reported fourth-quarter net income of $26.1 million, up from $25.2 million for the same three months in 2024.
