Oct 28, 2026 earnings call — Integration of three recent bank mergers
Net interest income rose to $443 million and net income (ex-onetime) was $200 million this quarter.
Revenue $0.5B (est $0.5B) · EPS $1.67 (est $1.35)
Key quotes
"We completed the operational integration of American Bank in September. All American Bank locations are now branded Prosperity Bank, and we welcome the American Bank customers and associates to our family."
"The net interest margin on a tax-equivalent basis was 3.73% for the 3 months ended September 30, 2026, an increase of 49 basis points compared to 3.24% for the same period in 2025."
"The third quarter of 26 included $69.7 million of merger related expenses. Excluding these merger related expenses, noninterest expense was $238.9 million."
Analyst Q&A 8
Margin and accretion outlook
Q (Dave Rochester · Cantor): Analyst asked if accretion from loans, securities, and CDs could make Q4 accretion larger and how that affects margin.
A: Management said loan and bond repricing will continue and assets take time to reprice, so reported margin should be flat to slightly up in Q4. They noted deposit rate increases at quarter end will show up in Q4, and they remain comfortable with their fourth quarter exit margin guidance. They confirmed loan accretion of $7 million to $10 million and CD accretion declining from $2.25 million to about $1.3 million in Q4.
"But 1 thing I want to note that you know, we did increase our deposit rates at the end of the third quarter due to the, you know, Fed rate increase." — Asylbek Osmonov (CFO)
Deposit cost and rates
Q (Brett Rabatin · Stonex Group): Analyst asked how much deposit rates were increased, what cost of funds should be expected, and how margin reacts if rates rise further.
A: Management said they increased rates in different deposit buckets and estimate fourth quarter average deposit cost will rise about 6 or 7 basis points from Q3. Total cost of funds was said to rise about 8 basis points to around 1.57% or 1.58%. They emphasized focus on money market accounts and large balances, noting specific promotional CD and money market rate increases.
"it is going to go up by like 6 or 7 basis points from Q3." — Asylbek Osmonov (CFO)
2027 NIM guidance explanation
Q (Janet Lee · TD Cowen): Analyst asked why 2027 NIM guidance (3.80–3.85%) could not be higher given rising rates.
A: Management said their balance sheet is roughly neutral to asset-sensitive and higher rates help, but they used a flat-rate assumption in their model and chose to be conservative and stick to guidance. They also said models look strong for later years and reiterated expectations for double-digit earnings growth in coming years.
"So, I mean, there might be a you know, possibility to do better, but, you know, us being conservative, we just gonna stick to our guidance that we provided." — Asylbek Osmonov (CFO)
Mortgage warehouse outlook
Q (Michael Rose · Raymond James): Analyst asked for an update on mortgage warehouse balances and the near-term outlook into Q4 and next year.
A: Management said quarter average was about $1.229 billion and since quarter end balances trended down to about $1.110 and around $1.1 billion recently. They expect further declines due to higher rates and typical seasonal Q4 decline, forecasting a Q4 average roughly between $850 million and $900 million.
"So, Michael, I am thinking you know, on the low side, $850 million to maybe on the high side, $900 million average for the quarter." — Kevin J. Hanigan (COO)
Sources of fee growth
Q (David Chiaverini · Jefferies): Analyst asked where fee growth will come from and whether treasury management for Stellar commercial clients is the main lever.
A: Management said the trust and brokerage businesses are key focuses and have grown well; they expect referrals from Stellar lenders to help expand those businesses. They also said treasury management will play an increasing role, but they need to target the right customers for those products rather than smaller businesses that may not need full treasury services.
"And now with the addition of Stellar and having you know, partners at Stellar with the lenders referring the business, so that is a focus for ours." — Asylbek Osmonov (CFO)
Grow loans by M&A or organically
Q (Stephen Kendall Scouten · Piper Sandler): Analyst asked whether the firm prefers growing loans via M&A given past success, or pushing harder on organic loan growth.
A: Management said they like both but favor a balanced approach; they will not chase double-digit loan growth above GDP and will use acquisitions to grow when needed. They emphasized disciplined underwriting on acquired loan books, ample reserves, and that the model aims for steady, sustainable growth rather than aggressive outsized growth.
"But on the loan growth side, we are we are not gonna be somebody that is gonna grow at double the rate of GDP." — Kevin J. Hanigan (COO)
Nonperforming assets and energy lending
Q (Jon Arfstrom · RBC): Analyst asked plans to reduce NPAs and whether energy lending appetite is increasing in West Texas.
A: Management said they do not expect NPAs to go below $100 million and realistically expect nonperforming balances to settle around $125 million to $150 million over the next year or two. On energy lending, they said they have strong, conservative existing oil and gas clients who rarely need to borrow and do not expect that category to grow materially; they will consider only highly attractive new opportunities.
"we will probably realistically settle when it is all said and done." — David E. Zalman (CEO·CHAIR)
Houston market and branch footprint
Q (Ramon Vitulli): Analyst asked how integration and market performance are going in Houston and whether anything will be done differently with higher branch density.
A: Management said integration is going well and they are focusing on leveraging merger synergies, such as wealth referrals and a broader combined offering. They highlighted expanded footprint in Houston and East Texas, increased balance sheet and opportunity areas, and said the larger presence provides significant runway for growth over the next several years.