$PB earnings report

Prosperity reported third-quarter GAAP net income of $141.5 million, compared with $137.6 million in the same period of 2025, while diluted earnings per share was $1.18 versus $1.45. On a linked-quarter basis, net income declined from $168.6 million and diluted earnings per share declined from $1.67. The principal reported pressure was $69.7 million of merger related expenses, alongside higher noninterest expenses related to the Mergers and a $5.0 million out of state tax settlement that contributed to a 24.4% effective tax rate. Excluding specified merger, tax settlement and securities items, adjusted net income was $200.8 million and adjusted diluted earnings per share was $1.67.

Core spread income expanded sharply. Net interest income before provision for credit losses was $443.0 million, up $169.5 million or 62.0% year over year and up $112.4 million or 34.0% sequentially. Tax-equivalent net interest margin reached 3.73%, compared with 3.24% a year earlier and 3.47% in the prior quarter. Management attributed these improvements to the Mergers, asset repricing, and lower average balances and rates on other borrowings. Noninterest income increased to $52.7 million from $41.2 million a year ago, although it declined from $60.7 million sequentially due to lower securities gains and a higher net loss on sale or write-down of assets.

The balance sheet expanded materially after the July 1 Stellar Merger. Total assets were $54.101 billion, total loans were $32.060 billion, and total deposits were $41.231 billion at September 30, 2026. Loans increased $7.032 billion and deposits increased $8.631 billion from June 30, 2026. Noninterest-bearing deposits totaled $13.8 billion and represented 33.6% of total deposits. The company also completed the operational integration of American Bank during the quarter and remains focused on integrating Texas Partners Bank and Stellar Bank.

Credit loss provision was zero for both the third quarter and first nine months of 2026, but reported asset-quality measures increased following the Mergers. Nonperforming assets were $193.9 million, or 0.41% of quarterly average interest-earning assets, compared with $130.6 million, or 0.34%, at June 30, 2026. The allowance for credit losses on loans and off-balance sheet credit exposures was $629.6 million, and the allowance for credit losses on loans to total loans excluding Warehouse Purchase Program loans was 1.91%. Nine-month net charge-offs were $47.9 million, including a $37.7 million increase in commercial and industrial loan net charge-offs.

Capital allocation remained active. The board increased the fourth-quarter 2026 cash dividend to $0.64 per share, payable January 4, 2027, and Prosperity repurchased approximately 457 thousand shares for $31.8 million during the third quarter. The reported efficiency ratio was 62.05%, while the efficiency ratio excluding merger related expenses and specified gains and losses was 48.03%. The filing did not provide quantitative forward earnings, margin, expense, credit or balance-sheet guidance.

Prosperity reported stronger second-quarter earnings, with GAAP net income of $168.6 million, compared with $135.2 million in the same period in 2025, and diluted EPS of $1.67, compared with $1.42. Excluding the reported Visa Class B-2 stock exchange and investment-securities gain and merger related expenses, net income was $162.7 million and diluted EPS was $1.62. The release stated that these adjusted measures increased 20.4% and 14.1%, respectively, compared with the same period last year.

Core spread income was the principal operating driver. Net interest income before provision for credit losses rose 23.5% to $330.6 million from $267.7 million, while tax-equivalent net interest margin rose to 3.47% from 3.18% a year earlier. Management attributed the improvement to asset repricing, lower average balances and rates on other borrowings, and the American and Southwest mergers. On a linked-quarter basis, net interest income before provision for credit losses rose 2.9%, but margin declined from 3.51% because the first quarter included one-time loan interest income from a nonaccrual loan.

Noninterest income increased 41.2% to $60.7 million, driven by the American and Southwest mergers and the $8.2 million gain on Visa Class B-2 stock exchange net of investment securities sales. Expenses also increased as the company absorbed acquired operations: noninterest expense was $176.2 million, compared with $138.6 million a year earlier. Linked-quarter expense declined from $217.3 million, primarily because merger related expenses were lower.

Reported profitability and asset quality metrics remained favorable in the release. Annualized return on average assets was 1.55%, return on average common equity was 8.14%, and return on average tangible common equity was 15.48%. Nonperforming assets were 0.34% of second quarter average interest-earning assets. Noninterest-bearing deposits were $10.7 billion, representing 32.9% of total deposits, and the company reported an allowance for credit losses on loans and off-balance sheet credit exposure of $420.5 million.

Capital allocation included repurchases of 200 thousand shares during the second quarter and 1.0 million shares during 2026. The company completed the Stellar merger on July 1, 2026, subsequent to quarter end. Management stated that, giving effect to the merger, assets are over $53 billion compared with $38 billion as of June 30, 2025. The filing did not provide forward guidance, so the next reported period will be important for the operational and expense effects of the Stellar combination.