Stellar Bancorp Reports $26.97 Million Net Income in Q1 2026, Prepares for Merger with Prosperity Bancshares

Stellar Bancorp, Inc. reported a net income of $26.97 million, or $0.53 per diluted share, for the first quarter of 2026, reflecting a 9.1% increase from the $24.70 million, or $0.46 per diluted share, recorded in the same period of 2025. The growth in profitability was primarily driven by a $6.7 million increase in net interest income, which rose to $105.93 million, alongside a reduction in the provision for credit losses, which decreased to $2.50 million from $3.63 million year-over-year. However, noninterest expenses also increased by $5.0 million, totaling $75.16 million, largely due to acquisition-related costs associated with the pending merger with Prosperity Bancshares, Inc.

Total assets for Stellar Bancorp increased to $10.89 billion as of March 31, 2026, up from $10.81 billion at the end of 2025. The company's loan portfolio grew by 3.9% to $7.59 billion, with notable increases in commercial real estate and commercial construction loans. The allowance for credit losses on loans rose to $85.43 million, representing 1.13% of total loans, compared to 1.15% at the end of the previous year. The company’s nonperforming assets also increased to $70.08 million, or 0.64% of total assets, up from $60.04 million, indicating a slight deterioration in asset quality.

In terms of strategic developments, Stellar Bancorp is in the process of merging with Prosperity Bancshares, a transaction that has received all necessary regulatory approvals. The merger is expected to be completed around July 1, 2026, pending shareholder approval. This strategic move aims to enhance the company's market presence and operational scale, particularly in the Texas banking sector. The merger agreement stipulates that each share of Stellar common stock will be converted into a combination of Prosperity stock and cash.

Operationally, Stellar Bancorp has maintained a strong deposit base, with total deposits at $8.98 billion as of March 31, 2026, a slight decrease from $9.02 billion at the end of 2025. The company reported a decrease in noninterest-bearing deposits, which fell by 5.8%, while interest-bearing deposits increased by 2.8%. The company’s efficiency ratio, a measure of operating efficiency, was reported at 63.27%, up from 61.93% in the prior year, indicating a need for continued focus on cost management as the company navigates its growth and merger integration.

Looking ahead, Stellar Bancorp anticipates that the merger with Prosperity will provide significant growth opportunities and enhance its competitive position in the market. The company remains committed to managing its credit risk and maintaining strong asset quality, while also focusing on optimizing its operational efficiency in the face of evolving market conditions.