Prosperity Bancshares Acquires Stellar Bancorp in $2B Deal
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1d ago
0mins
Source: seekingalpha
- Transaction Size: Prosperity Bancshares (PB) has agreed to acquire Stellar Bancorp (STEL) in a cash-and-stock deal valued at approximately $2 billion, positioning it as the second-largest bank in Texas by deposits and significantly enhancing its market presence.
- Shareholder Returns: Under the agreement, Prosperity will issue 0.3803 shares of its common stock and $11.36 in cash for each outstanding share of Stellar, valuing Stellar's shares at about $39.08, which represents a 20% premium over Stellar's closing price of $32.63 on Tuesday.
- Market Reaction: Following the announcement, Stellar Bancorp's stock rose by 12%, while Prosperity Bancshares' stock dropped by 6.1% in premarket trading, indicating differing market perceptions regarding the transaction's value.
- Management Changes: Stellar's CEO Robert R. Franklin will join Prosperity as vice chairman, while Stellar's president Ramon Vitulli will become the Houston area chairman, facilitating a smoother integration of the two banks' management teams.
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Analyst Views on PB
Wall Street analysts forecast PB stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for PB is 80.50 USD with a low forecast of 75.00 USD and a high forecast of 85.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
10 Analyst Rating
5 Buy
5 Hold
0 Sell
Moderate Buy
Current: 67.110
Low
75.00
Averages
80.50
High
85.00
Current: 67.110
Low
75.00
Averages
80.50
High
85.00
About PB
Prosperity Bancshares, Inc. is a regional financial holding company providing personal banking services and investments to consumers and businesses throughout Texas and Oklahoma. It offers certificates of deposit, interest checking accounts, money market accounts and savings accounts. It also offers agricultural loans, home equity loans, debit and credit cards, digital banking solutions, trust and wealth management, retail brokerage services, mortgage services, and treasury management. It operates around 283 full-service banking locations: 65 in the Houston area, including The Woodlands; 30 in the South Texas area including Corpus Christi and Victoria; 62 in the Dallas/Fort Worth area; 22 in the East Texas area; 31 in the Central Texas area including Austin and San Antonio; 44 in the West Texas area including Lubbock, Midland-Odessa, Abilene; Amarillo and Wichita Falls; 15 in the Bryan/College Station area, six in the Central Oklahoma area, and eight in the Tulsa, Oklahoma area.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Prosperity Bancshares Set to Release Q4 Earnings
- Earnings Announcement: Prosperity Bancshares (PB) is set to announce its Q4 2024 earnings on January 28 before market open, with a consensus EPS estimate of $1.45, reflecting a 5.8% year-over-year growth, indicating stable profitability.
- Revenue Expectations: The anticipated revenue for Q4 is $317.72 million, representing a 3.3% year-over-year increase, suggesting growth potential despite economic challenges and reflecting the company's competitive position in the market.
- Historical Performance: Over the past year, PB has exceeded EPS estimates 100% of the time and revenue estimates 75% of the time, demonstrating reliability in earnings forecasts and bolstering market confidence.
- Revision Dynamics: In the last three months, EPS estimates have seen 2 upward revisions and 12 downward revisions, while revenue estimates experienced no upward revisions and 10 downward revisions, indicating a cautious market outlook on the company's future performance.
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Prosperity Bancshares Reports Strong 2025 Earnings and M&A Activity
- Net Income Growth: Prosperity Bancshares reported a net income of $543 million for 2025, a 13.1% increase from $480 million in 2024, with diluted EPS rising to $5.72, indicating significant improvement in profitability.
- Margin Expansion: The bank's net interest margin reached 3.30% in Q4, up from 3.05% in the same quarter of 2024, reflecting ongoing improvements in interest income that are expected to enhance future profitability.
- M&A Activity: Prosperity has completed its merger with American Bank and anticipates finalizing the merger with Southwest Bancshares on February 1, 2026, while the acquisition of Stellar Bancorp will elevate its Houston deposit rank from 9th to 5th, strengthening its competitive position.
- Asset Quality Concerns: Although nonperforming assets rose to $150 million from $119 million in the previous quarter, net charge-offs remained low at $5.9 million, demonstrating the company's effectiveness in managing credit risk.
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