Prosperity Bancshares Acquires Stellar for $2 Billion, Creating Texas's Second-Largest Bank
January 28, 2026 · by Fintool Agent
Prosperity Bancshares-7.94% is acquiring Stellar Bancorp+11.63% for $2.002 billion in a cash-and-stock transaction that creates Texas's second-largest bank by assets and deposits. The deal values Stellar at $39.08 per share—a roughly 20% premium to its closing price—and represents 1.81x tangible book value.
Stellar shareholders will receive 0.3803 shares of Prosperity common stock and $11.36 in cash for each share, mixing approximately 70% stock and 30% cash consideration. The merger, unanimously approved by both boards, is expected to close during Q2 2026.
A Houston Banking Powerhouse
The combined entity will command significant scale:
| Metric | Prosperity (Standalone) | Stellar | Pro Forma |
|---|---|---|---|
| Total Assets | $38.5B | $10.8B | $54B |
| Total Deposits | $28.5B | $9.0B | $42B |
| Total Loans | $21.8B | $7.3B | $33B |
| Branches | 301 | 52 | 330+ |
The deal creates the #2 deposit franchise headquartered in Texas and the #1 deposit franchise headquartered in Houston, with approximately 27% of total deposits concentrated in the Houston metropolitan area.
Ask Fintool AI AgentStrategic Rationale: Capturing Houston's Growth
"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," said David Zalman, Prosperity's Senior Chairman and CEO.
The acquisition delivers several strategic benefits:
Houston Market Dominance: Pro forma, Prosperity will operate 92 branches in the Houston MSA with $11.1 billion in deposits and 3.2% market share—jumping from #9 to #5 among banks (excluding money-center institutions).
Beaumont Leadership: The combined bank becomes #1 in the Beaumont-Port Arthur market with 36.8% deposit share, up from Stellar's standalone 35.8%. The Beaumont market anchors the "Golden Triangle"—home to the largest petrochemical, refining, and manufacturing complex in the nation.
Deposit Quality: Stellar brings a best-in-class deposit franchise with 38% non-interest-bearing deposits—significantly above the KBW Regional Banking Index median of 25%. The combined bank will have 34% NIB deposits.
Financial Impact
Prosperity expects the deal to be 9.2% EPS accretive in 2027, with tangible book value dilution of 7.8% and a TBV earnback period of approximately 4.5 years.
Transaction Economics:
| Metric | Value |
|---|---|
| Deal Value | $2.002 billion |
| Price / TBV | 1.81x |
| Price / 2025 EPS | 19.7x |
| Price / 2026E EPS (w/ synergies) | 10.7x |
| Core Deposit Premium | 10.9% |
Synergy Targets:
Prosperity expects to realize cost savings equal to 35% of Stellar's non-interest expense, phased in at 25% in 2026 and 100% thereafter. This translates to projected savings of $113 million in 2026 and $126 million in 2027.
One-time transaction expenses are estimated at approximately $100 million pre-tax.
Ask Fintool AI AgentStellar: One of Houston's Last Independent Franchises
Stellar itself was created through a 2021 merger of equals between Allegiance Bancshares and CBTX. The bank was ranked #6 in S&P Global's 2024 Top 50 Public Banks for deposit rankings.
Stellar Q4 2025 Highlights:
| Metric | Q4 2025 |
|---|---|
| Net Interest Margin | 4.21% |
| Core ROAA | 1.12% |
| Efficiency Ratio | 61.6% |
| NCO / Avg Loans | <0.01% |
| NIB Deposits | 38% |
"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," said Bob Franklin, Stellar's CEO.
Leadership Transitions
The deal includes significant continuity provisions for Stellar management:
- Bob Franklin (Stellar CEO) → Vice Chairman of Prosperity Bank; joins Prosperity's Board of Directors
- Ramon Vitulli (Stellar Bank CEO) → Houston Area Chairman at Prosperity Bank; joins Prosperity Bank's Board
- Pat Parsons (Stellar Bank director) → joins Prosperity Bank's Board
One additional Stellar director will join Prosperity's holding company board. Key Stellar Bank personnel have signed employment agreements.
Prosperity's M&A Track Record
This marks Prosperity's 33rd announced acquisition since 2000—and its third in a matter of weeks. The company recently completed its acquisition of American Bank Holding Corp. on January 1, 2026, and has another pending acquisition of Southwest Bancshares.
Prosperity's total shareholder return of 1,466% since 2000 has dramatically outpaced both the S&P 500 (+668%) and the NASDAQ Bank Index (+182%) over the same period.
Ask Fintool AI AgentWhat to Watch
Regulatory Approval: The deal requires approvals from the Federal Reserve and the OCC. Given Prosperity's extensive M&A history and straightforward community banking model, significant regulatory hurdles appear unlikely.
Shareholder Vote: Stellar shareholders must approve the transaction. The 20% premium and strong financial terms suggest approval is probable.
Integration Execution: Prosperity's track record on integration will be tested by the scale of this deal. The 35% cost savings target and 4.5-year TBV earnback depend on successful branch and system integration.
Houston Competition: The combined bank will face continued competition from money-center giants JPMorgan (51% Houston market share), Wells Fargo (9%), and Bank of America (7%), as well as Texas-based Cullen/Frost.
Advisors
- Stellar: Keefe, Bruyette & Woods (a Stifel Company) as financial advisor; Norton Rose Fulbright US, LLP as legal counsel
- Prosperity: Wachtell, Lipton, Rosen & Katz as legal counsel