Stellar Bancorp surges 12% on $2B sale to Prosperity Bancshares
All-stock and cash deal creates Texas's second-largest bank by deposits with 20% premium for shareholders
Stellar Bancorp shares surged 12% on Wednesday after the Houston-based regional bank agreed to be acquired by Prosperity Bancshares in a $2 billion cash-and-stock transaction that will create the second-largest bank by deposits headquartered in Texas.
The deal, which received unanimous approval from both companies' boards, represents a 20% premium to Stellar's closing price of $32.63 on Tuesday. Under the agreement, Stellar shareholders will receive 0.3803 shares of Prosperity common stock and $11.36 in cash for each share they own. Based on Prosperity's closing price of $72.90 on January 27, the transaction values each Stellar share at approximately $39.08.
Stellar stock rose 11.8% to $36.49 in afternoon trading, while Prosperity shares fell 8.3% to $66.85, reflecting typical market reaction where acquirer shares decline on deal announcement concerns about financing and integration risks.
The merger will combine two Houston-based banks with complementary footprints across Texas. As of December 31, 2025, Stellar operated 52 branches across Houston, Beaumont, Dallas, and surrounding markets with $10.8 billion in assets, $7.3 billion in loans, and $9.0 billion in deposits. Prosperity, with 301 locations across Texas and Oklahoma, brings $38.5 billion in assets, $21.8 billion in loans, and $28.5 billion in deposits to the combined entity.
"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 chief executive, in a statement announcing the deal. "Our banks have a complementary footprint, and we are familiar with and remain committed to the communities that Stellar Bank serves."
The transaction is structured as 70% stock and 30% cash, with Prosperity shareholders expected to own approximately 84% of the combined company and Stellar shareholders holding about 16%. The combined entity will operate more than 330 banking centers, positioning it as a formidable competitor in the Texas banking market.
Management integration has been outlined to preserve local expertise. Robert R. Franklin, Jr., Stellar's chief executive officer and executive chairman of Stellar Bank, will join Prosperity Bank as vice chairman. Ramon Vitulli, Stellar's president and chief executive officer of Stellar Bank, will become Houston area chairman. Additionally, Franklin and one other Stellar director will join Prosperity's board of directors, while Vitulli and Stellar director Pat Parsons will join Prosperity Bank's board.
The merger is anticipated to close during the second quarter of 2026, subject to regulatory approvals, Stellar shareholder approval, and satisfaction of customary closing conditions. Keefe, Bruyette & Woods served as financial advisor to Stellar, with Norton Rose Fulbright providing legal counsel. Wachtell, Lipton, Rosen & Katz acted as legal advisor to Prosperity.
The deal comes amid ongoing consolidation in the regional banking sector, where larger institutions have been acquiring smaller players to achieve scale and expand geographic reach. The combined company will have the scale to compete more effectively for commercial and middle-market business in one of the nation's fastest-growing states.
Texas has attracted significant banking M&A activity in recent years as lenders seek exposure to the state's robust population growth and expanding economy. Houston, in particular, remains a key market due to its diverse industrial base spanning energy, healthcare, and technology sectors.
Stellar Bancorp had previously faced challenges, with quarterly earnings declining 20.6% year-over-year and revenue falling 7.4% according to recent data. The merger provides shareholders with an immediate premium and the opportunity to participate in the combined entity's growth prospects.