- Key takeaway: Prosperity Bancshares executives say they’ve lost loans in recent weeks to competitors that are willing to price or structure deals more aggressively.
- Supporting data: During the second quarter, the company’s loan portfolio shrank by 1% on a linked-quarter basis.
- Expert quote: “Some things out there are getting to the point of being ridiculous.” — Prosperity President and Chief Operating Officer Kevin Hanigan
Though Prosperity Bancshares CEO David Zalman still refers to Texas as “the best market out there,” competition in the Lone Star State is making it tougher to book profitable loans, he said Wednesday.
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Houston-based Prosperity expects to hold its own in loan growth during the second half of 2026, but fierce competition is making meaningful loan growth hard to come by, Zalman and other senior managers said on a conference call with analysts.
“We do forecast stability going forward,” said Prosperity Chairman Tim Timanus. “We have a decent pipeline of loans. We see decent loan activity out there in the marketplace. Really the only thing we see as a hindrance is some of the very, very aggressive structure and pricing that the competition is putting forth. So we have to be cognizant of that and careful with it.”
Prosperity recently passed on a $20 million loan to a “grade-A” borrower because a competitor had offered a 25-year deal with the first seven years fixed at 5.5%, according to Zalman, who is also Prosperity’s senior chairman.
“There’s not many, if any, deposits with that,” he added. “You have to consider, `Okay, do I want to make a loan at 5.5% with a pretty high duration, or do I want to buy a mortgage-backed security with a 4.8-year duration and get 5%?”
Kevin Hanigan, Prosperity’s president and chief operating officer, said the $43.9 billion-asset company passed on two additional recent deals after competitors offered sub-5% introductory rates.
“Some things out there are getting to the point of being ridiculous,” Hanigan said on the conference call.
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Prosperity’s loan-growth pains come as regional and super-regional banks in other parts of the country have been enjoying more robust expansion.
The $725.9 billion-asset, Minneapolis-based U.S. Bancorp, for example,
By contrast, Prosperity, which is heavily focused on Texas, is struggling to put loans on its books. Total loans of $25 billion were down 1% from the March 31 level. (The year-over-year comparison was skewed by the closing of a recent acquisition.)
Zalman attributed the more competitive climate to the influence of out-of-state banks, particularly regional players, “trying to make a mark” in Texas.
Though Zalman did not name specific banks, the $284 billion-asset Huntington Bancshares in Columbus, Ohio, and $300 billion-asset, Cincinnati-based Fifth Third Bancorp are among the out-of-state regional banks that have been seeking to bulk up in the Lone Star State.
“There’s a couple of banks that have come in, they’re trying to buy their way into the market,” the CEO added. “I’m not saying they’re wrong. When we go into a market, we do special deals, too. … I think that’s a way they can say they’re making a splash.”
Not ready for the sidelines
Prosperity has never relied solely on organic growth to expand. It’s been an acquisitive bank throughout its 43-year history, and has completed more than 30 deals since 2000. Its most recent acquisition —
Zalman said Wednesday that deals will remain an integral part of Prosperity’s business model.
“We continue to have conversations with other bankers regarding potential acquisition opportunities,” Zalman said. “We intend to continue to grow the company organically and through mergers and acquisitions.”
For the second quarter, Prosperity reported net income totaling $168.6 million, up 25% from the same three months in 2025, before the Stellar acquisition closed.
Jon Arfstrom, who covers Prosperity for RBC Capital Markets, characterized the results as “a consistent strong quarter.” Operating expenses were “well-controlled,” while fee income was “ahead of expectations,” Arfstrom wrote Wednesday in a research note.
