Prosperity Bancshares (NYSE:PB) executives highlighted higher earnings, an expanding net interest margin, and a busy merger pipeline during the company’s fourth-quarter 2025 earnings call, while also addressing a rise in nonperforming assets and outlining near-term expense expectations tied to recent and pending bank deals.
Full-year and quarterly results
Senior Chairman and CEO David Zalman said Prosperity posted net income of $543 million for the year ended Dec. 31, 2025, up from $480 million in 2024. Diluted earnings per share were $5.72 for 2025 versus $5.05 the prior year.
Margin expansion, income and expense outlook
Chief Financial Officer Asylbek Osmonov reported net interest income before provision for credit losses of $275 million in the fourth quarter, up from $267.8 million a year earlier and slightly above $273.4 million in the third quarter.
Prosperity’s tax-equivalent net interest margin (NIM) was 3.30% in the fourth quarter, up from 3.05% in the fourth quarter of 2024 and 3.24% in the third quarter of 2025. Excluding purchase accounting adjustments, NIM was 3.26% versus 3.00% a year earlier.
Osmonov said fair value loan income was $3.1 million in the fourth quarter and is expected to be in the $3 million to $4 million range in the first quarter of 2026. Non-interest income totaled $42.8 million in the fourth quarter, compared to $41.2 million in the third quarter and $39.8 million in the year-ago period.
Non-interest expense was $138.7 million in the fourth quarter, roughly flat with the third quarter and down from $141.5 million a year earlier. Looking ahead, Osmonov guided first-quarter 2026 non-interest expense to $172 million to $176 million, reflecting three months of American Bank expenses and two months of Texas Partners Bank expenses. In addition, management expects $30 million to $33 million of one-time merger-related charges tied to those two acquisitions, with most of the previously announced cost savings expected after system conversions scheduled later in 2026.
On balance sheet positioning, Osmonov said the bond portfolio had a modified duration of 3.7 at Dec. 31, 2025, with projected annual cash flows of approximately $1.9 billion.
Balance sheet trends and credit quality
Zalman said loans excluding warehouse purchase program loans were $20.5 billion at year-end, down $249 million from Sept. 30, 2025. He said the company continues to see good loan demand but has been unwilling to match certain terms being offered by out-of-state competitors on some larger deals, and also noted efforts to move out of “less desired” loans acquired in prior transactions.
Deposits totaled $28.4 billion at Dec. 31, 2025, up $700 million from Sept. 30, 2025. Zalman said the seasonal increase exceeded management’s expectations.
Asset quality metrics moved higher during the quarter. Zalman said nonperforming assets were $150 million, or 46 basis points of quarterly average interest-earning assets, at Dec. 31, 2025, compared with $119 million, or 36 basis points, at Sept. 30, 2025. He attributed the increase primarily to two loans from the middle market lending group and one well-collateralized real estate loan acquired in a recent acquisition.
Tim Timanus Jr., chairman, provided additional detail, reporting nonperforming assets of $150.8 million, or 69 basis points of loans and other real estate, up from $119.6 million (or 54 basis points) at the prior quarter-end. He said $6.6 million of nonperforming assets had been removed or placed under contract for sale since year-end. The Dec. 31 total included $137.5 million in loans, $12,000 in repossessed assets, and $13.3 million in other real estate.
Net charge-offs were $5.9 million for the fourth quarter. Timanus said there was no addition to the allowance for credit losses during the quarter and no releases into income during the period.
In Q&A, management discussed a $35 million Shared National Credit that had been downgraded to nonperforming/non-accrual in the fourth quarter after being classified as substandard in the third quarter. Executives said they had reserves against the credit but did not see the need at this stage to record a provision due to that loan or another credit previously discussed in the “buy here, pay here” space.
M&A activity: completed and pending deals, plus the Stellar Bancorp announcement
Zalman said Prosperity completed its merger with American Bank effective Jan. 1, 2026, and has received regulatory and shareholder approvals for the merger with Southwest Bancshares (parent of Texas Partners Bank), which the company expects to become effective Feb. 1, 2026.
During the call, management also discussed Prosperity’s announcement that it is acquiring Stellar Bancorp. Zalman described Stellar as a “well-run bank” with “similar credit discipline” and an “envious non-interest-bearing deposit mix,” and said the deal would move the combined company’s Houston deposit rank from No. 9 to No. 5, making Prosperity “the largest Texas-based bank in the market” and “second-largest bank by deposits in the state,” according to his remarks.
Stellar CFO Paul Egge said the company’s back-half 2025 momentum included growth in earning assets while maintaining and growing core NIM. He said that if fourth-quarter earnings were annualized with a more normalized provision, it would imply about a $0.55 per share quarterly run rate, or $2.20 annualized, and added that Stellar entered 2026 with about $100 million more in interest-earning assets than its fourth-quarter average.
Prosperity executives also addressed integration planning, saying designated teams handle integrations to avoid distracting frontline staff from core operations. On cost saves related to Stellar, management said it felt “very comfortable” with a 35% cost-save estimate and noted that branch consolidation would be part of the process given overlapping footprints.
Capital actions and shareholder returns
Zalman said Prosperity repurchased approximately $157 million of common stock in 2025, or 2.34 million shares, at an average weighted price of $67.04. In Q&A, management said it does not have a 10b5-1 plan and reiterated that buybacks have historically been done opportunistically, though executives also noted blackout periods around earnings and merger-related processes.
Management also discussed its longer-term earnings and capital outlook in the context of the pending deals, including commentary on expected excess cash flow and the ability to rebuild capital over time, while emphasizing that near-term focus will be on integrating the three transactions.
About Prosperity Bancshares (NYSE:PB)
Prosperity Bancshares, Inc is a holding company for Prosperity Bank, offering a broad range of commercial and consumer banking services across Texas, Oklahoma, Arkansas and Louisiana. Through its network of branches and digital platforms, the company provides deposit products, business and real estate lending, treasury management, mortgage origination and servicing, as well as wealth management and trust services.
Originally chartered in 1911 as First National Bank in McKinney, Texas, the organization rebranded to Prosperity Bank in 2009 following a series of strategic acquisitions aimed at deepening its regional presence.
