HOUSTON--(BUSINESS WIRE)--Stellar Bancorp, Inc. (the "Company†) (NYSE: STEL) will hold a conference call to discuss its fourth quarter 2025 results on Friday, January 30, 2026, at 8:00 a.m. Central Time (9:00 a.m. Eastern Time). The related earnings release will be issued prior to market opening on January 30, 2026, and will also be available on the Investor Relations section of the Company's website at https://ir.stellar.bank/news/default.aspx. About Stellar Bancorp, Inc. Stellar Bancorp, Inc. is a bank ...

Core Points - Stellar Bancorp, Inc. announced an increase in its quarterly cash dividend to $0.15 per share, up from $0.14 per share, payable on December 31, 2025, to shareholders of record as of December 15, 2025 [1] Company Overview - Stellar Bancorp, Inc. is a bank holding company based in Houston, Texas, with its principal banking subsidiary, Stellar Bank, providing a range of commercial banking services primarily to small- to medium-sized businesses and individual customers in Texas [2]

Core Viewpoint - Stellar Bancorp, Inc. is positioned as a significant entity in the financial services sector, focusing on competitive banking products and services to differentiate itself in a crowded market [1] Group 1: Company Performance - Stellar Bancorp's Q3 2025 earnings call featured CEO Robert Franklin and CFO Paul Egge, highlighting the company's performance and attracting analysts from notable firms [3] - The stock price of STEL fluctuated between $29.12 and $30.01 during the earnings call, indicating volatility and investor interest [3] Group 2: Market Sentiment and Analyst Ratings - Raymond James revised its outlook on STEL to "Outperform" while maintaining a "hold" action, with a price target adjustment from $34 to $32 [2][5] - Following the rating change, STEL's stock experienced a slight increase of $0.35, or 1.19%, closing at $29.81, reflecting cautiously optimistic market sentiment [2][5] Group 3: Market Capitalization and Trading Activity - Stellar Bancorp has a market capitalization of approximately $1.53 billion, indicating strong investor engagement [4][5] - The daily trading volume stands at 202,028 shares, further demonstrating the company's market presence [4]

Financial Performance - Net income for the three months ended September 30, 2025, was $25.7 million, or $0.50 per diluted share, compared to $33.9 million, or $0.63 per diluted share, for the same period in 2024, reflecting a decrease primarily due to a $6.3 million increase in the provision for credit losses [126]. - Net income for the nine months ended September 30, 2025, was $76.7 million, or $1.47 per diluted share, a decrease from $89.8 million, or $1.68 per diluted share for the same period in 2024 [129]. - Noninterest income for the three months ended September 30, 2025 totaled $5.0 million, down $1.3 million or 20.9% from $6.3 million in 2024 [150]. - Noninterest income for the nine months ended September 30, 2025 was $16.3 million, down $1.7 million or 9.6% from $18.0 million in 2024 [151]. - The efficiency ratio for the nine months ended September 30, 2025, was 62.50%, compared to 60.54% for the same period in 2024 [130]. - The efficiency ratio for the three months ended September 30, 2025, was 63.69%, compared to 60.40% for the same period in 2024 [161]. Credit Losses and Provisions - The provision for credit losses increased by $6.3 million, contributing to the decline in net income [126]. - Provision for credit losses recorded was $305 thousand for the three months ended September 30, 2025, compared to a reversal of $6.0 million in 2024 [148]. - The allowance for credit losses decreased from $94.2 million in 2024 to $82.6 million in 2025 [1]. - The allowance for credit losses on loans was $78.9 million as of September 30, 2025, compared to $81.1 million as of December 31, 2024 [183]. - Total charge-offs for all loan types were $4.27 million for the nine months ended September 30, 2025, compared to $5.86 million for the same period in 2024 [184]. - The net charge-offs to average loans ratio was 0.07% for the nine months ended September 30, 2025, compared to 0.08% for the same period in 2024 [184]. Interest Income and Expenses - Net interest income before the provision for credit losses for the nine months ended September 30, 2025, was $298.2 million, a decrease of $6.8 million, or 2.2%, compared to $305.0 million for the same period in 2024 [138]. - Interest income for the nine months ended September 30, 2025, was $430.4 million, down $21.9 million, or 4.9%, from $452.4 million for the same period in 2024 [139]. - Interest expense for the nine months ended September 30, 2025, was $132.2 million, a decrease of $15.1 million, or 10.3%, compared to $147.3 million for the same period in 2024 [140]. - The tax equivalent net interest margin for the nine months ended September 30, 2025, was 4.19%, a decrease of 4 basis points from 4.23% for the same period in 2024 [141]. - The net interest margin for the nine months ended September 30, 2025 was 4.19%, consistent with the margin in 2024 [1]. Loans and Deposits - Total loans as of September 30, 2025, were $7.17 billion, a decrease of $272.0 million, or 3.7%, compared to December 31, 2024 [164]. - Total deposits as of September 30, 2025, were $8.82 billion, a decrease of $310.9 million, or 3.4%, from $9.13 billion at December 31, 2024 [197]. - Noninterest-bearing deposits decreased by $365.3 million, or 10.2%, to $3.21 billion at September 30, 2025, compared to $3.58 billion at December 31, 2024 [197]. - Interest-bearing deposits increased by $54.3 million, or 1.0%, to $5.61 billion at September 30, 2025, from $5.55 billion at December 31, 2024 [197]. - Average loans to average interest-earning assets decreased to 76.5% for the nine months ended September 30, 2025, compared to 80.9% for the same period in 2024 [139]. Economic and Regulatory Environment - The company’s financial performance may be significantly affected by economic conditions, including inflation, interest rates, and the overall health of the banking sector [107]. - The company has identified risks related to uninsured deposits and potential regulatory changes that could impact its operations and financial results [107]. - Estimated uninsured deposits net of collateralized deposits were 46.0% of total deposits as of September 30, 2025, up from 43.4% at December 31, 2024 [213]. Asset Management - The carrying amount of investment securities increased by $169.3 million, or 10.1%, to $1.84 billion as of September 30, 2025, from $1.67 billion as of December 31, 2024 [188]. - The weighted-average life of the securities portfolio was 6.8 years as of September 30, 2025 [212]. - The yield on the securities portfolio increased to 3.77% for the nine months ended September 30, 2025, from 3.22% for the same period in 2024 [139]. Capital and Borrowing - As of September 30, 2025, the company maintained a total capital ratio of 16.33%, significantly above the minimum required ratio of 8.00% [223]. - The Company had a total borrowing capacity of $3.16 billion as of September 30, 2025, with $2.09 billion available under the Federal Home Loan Bank agreement [199]. - The Company redeemed $30.0 million of its $60.0 million aggregate principal amount of Fixed-to-Floating Rate Subordinated Notes on October 1, 2025 [205].

Financial Data and Key Metrics Changes - The company reported a net income of $25.7 million or $0.50 per diluted share for Q3 2025, a slight decrease from $26.4 million or $0.51 per diluted share in Q2 2025 [7] - Annualized return on assets (ROA) was 0.97% and return on average tangible common equity (ROATCE) was 11.45% [7] - Net interest income increased to $100.6 million from $98.3 million in the previous quarter, with a net interest margin of 4.2% compared to 4.18% in Q2 2025 [7][8] - Year-over-year tangible book value per share increased by 9.3% from $19.28 to $21.08 [11] Business Line Data and Key Metrics Changes - Non-interest income decreased to $5 million in Q3 2025 from $5.8 million in Q2 2025, primarily due to write-downs on foreclosed assets [9] - Non-interest expenses rose to $73.1 million from $70 million in the previous quarter, driven by increased salaries and benefits [10] Market Data and Key Metrics Changes - The company experienced a $50 million increase in payoffs compared to the previous quarter, with 44% of payoffs related to the sale of collateral and 25% due to refinancing elsewhere [19] - Loan originations were up 62% year-to-date compared to the same period last year, with a total of $500 million originated in the last quarter [21] Company Strategy and Development Direction - The company aims to grow by focusing on quality assets, protecting margins, and enhancing full client relationships [6] - The management expressed confidence in their ability to defend and potentially improve their net interest margin by adhering to their core relationship banking model [8][12] Management's Comments on Operating Environment and Future Outlook - Management noted that credit quality remains stable despite some charge-offs, with a comfortable reserve level based on their portfolio [4] - The company is positioned to take advantage of market disruptions and is focused on maintaining a strong balance sheet to support growth [12] Other Important Information - The company repurchased shares and paid down $30 million of subordinated debt after the quarter ended [5] - Total risk-based capital was reported at 16.33%, up from 15.98% in the previous quarter [11] Q&A Session Summary Question: What is driving the payoffs and paydowns? - Management indicated that payoffs were $50 million higher than the previous quarter, with a significant portion related to collateral sales and refinancing elsewhere [19] Question: What are the current credit concerns? - Management stated that they conduct stress testing and monitor portfolios closely, emphasizing a careful approach to credit management [24][25] Question: What are the drivers behind deposit growth? - 51% of new deposits were from new customers, reflecting increased brand awareness and market share gains [28] Question: What are the expectations for seasonal deposit strength in Q4? - Management acknowledged historical seasonal strength but noted it is difficult to predict exact amounts [36][38] Question: What makes the current expense level an outlier? - The increase in expenses was attributed to severance payments and elevated medical insurance costs, with expectations for a return to previous levels in Q4 [40][42] Question: How does the company plan to manage net interest margin? - Management plans to focus on lowering deposit costs and is optimistic about defending the current margin level [46][48] Question: What are the expectations for loan growth and M&A activity? - Management expressed confidence in loan growth in the coming quarters and indicated ongoing discussions regarding potential M&A opportunities while being cautious about balance sheet protection [60][61]

Financial Data and Key Metrics Changes - The company reported a net income of $25.7 million or $0.50 per diluted share for Q3 2025, a slight decrease from $26.4 million or $0.51 per diluted share in Q2 2025, reflecting an annualized ROA of 0.97% and an annualized ROATCE of 11.45% [7] - Net interest income increased to $100.6 million in Q3 2025 from $98.3 million in Q2 2025, with a net interest margin of 4.2% compared to 4.18% in the previous quarter [7][8] - The allowance for credit losses on loans decreased to $78.9 million or 1.1% of loans, down from $83.2 million or 1.14% at the end of Q2 2025 [9] Business Line Data and Key Metrics Changes - Non-interest income decreased to $5 million in Q3 2025 from $5.8 million in Q2 2025, primarily due to write-downs on foreclosed assets [10] - Non-interest expenses increased to $73.1 million from $70 million in the previous quarter, driven by higher salaries and benefits, including severance expenses related to branch closures [10] Market Data and Key Metrics Changes - The company experienced a significant increase in loan originations, up 62% year-to-date compared to the same period last year, with a focus on commercial and industrial (C&I) loans [21] - Deposit growth was strong, with 51% of new deposits coming from new customers, indicating successful market share gains [28] Company Strategy and Development Direction - The company aims to maintain a disciplined approach to building quality assets and protecting margins while focusing on full balance relationships to drive long-term shareholder value [6][12] - The management highlighted the importance of low-cost deposits and plans to continue acquiring customers while being cautious about competitive pressures in the market [30][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of credit trends and the overall market, despite some charge-offs, indicating a favorable outlook for the company's credit quality [4][25] - The company is positioned to take advantage of opportunities arising from M&A disruptions in Texas, emphasizing its unique franchise strength in a competitive landscape [12] Other Important Information - The company repurchased shares totaling just under $5 million in Q3 2025, with a year-to-date total of approximately $64 million in share repurchases [11] - The total risk-based capital ratio improved to 16.33% at the end of Q3 2025, up from 15.98% at the end of Q2 2025 [11] Q&A Session Summary Question: What is driving the payoffs and paydowns, and what is the growth outlook? - Management noted that payoffs were about $50 million more than the previous quarter, with 44% related to collateral sales and 25% due to refinancing elsewhere, indicating a competitive market [19][20] Question: What are the current credit concerns and management's approach? - Management emphasized the importance of stress testing and careful monitoring of credit quality, with a focus on maintaining a healthy loan-to-deposit ratio [24][25] Question: What are the drivers behind the strong deposit growth? - The company reported that 51% of new deposits were from new customers, reflecting successful brand awareness and market share gains [28] Question: What are the expectations for seasonal deposit strength in Q4? - Management acknowledged historical seasonal strength in government banking deposits but noted the unpredictability of timing [36][38] Question: What makes the current expense level an outlier? - Management indicated that the increase in expenses was due to severance payments and elevated medical insurance costs, expecting expenses to return closer to previous levels in Q4 [40][42] Question: How does the company plan to manage deposit costs moving forward? - The company plans to focus on lowering deposit costs where possible, particularly for price-sensitive customers, while defending its net interest margin [46][49] Question: What are the company's thoughts on M&A opportunities? - Management continues to explore M&A opportunities but remains cautious about protecting the balance sheet and deposit base [60][61]

Financial Data and Key Metrics Changes - The company reported a net income of $25.7 million or $0.50 per diluted share for Q3 2025, a slight decrease from $26.4 million or $0.51 per diluted share in Q2 2025, reflecting an annualized ROA of 0.97% and an annualized ROATCE of 11.45% [6][11] - Net interest income increased to $100.6 million in Q3 2025 from $98.3 million in Q2 2025, driven by higher earning assets and a net interest margin of 4.2%, up from 4.18% in the previous quarter [6][7] - The allowance for credit losses on loans decreased to $78.9 million or 1.1% of loans, down from $83.2 million or 1.14% at the end of Q2 2025 [9] Business Line Data and Key Metrics Changes - Non-interest income decreased to $5 million in Q3 2025 from $5.8 million in Q2 2025, primarily due to write-downs on foreclosed assets [10] - Non-interest expenses increased to $73.1 million from $70 million in the previous quarter, attributed to higher salaries and benefits, including severance expenses related to branch closures [10] Market Data and Key Metrics Changes - The company experienced strong deposit growth, with 51% of new deposits coming from new customers, indicating a successful strategy in expanding market share [24] - The total risk-based capital ratio improved to 16.33% at the end of Q3 2025, compared to 15.98% at the end of Q2 2025 [11] Company Strategy and Development Direction - The company aims to enhance shareholder value through disciplined asset building, protecting margins, and focusing on full client relationships [5] - The management emphasized the importance of maintaining a strong balance sheet to support quality growth and to be opportunistic in the current competitive landscape [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in credit quality, noting that charge-offs were primarily from small credits that were already identified and reserved for [4] - The company anticipates continued loan origination growth, with a healthy pipeline and a year-to-date increase of 62% in loan originations compared to the previous year [18] Other Important Information - The company repurchased shares and paid down $30 million of subordinated debt after the quarter ended, reinforcing its capital position [5] - The tangible book value per share increased by 9.3% year-over-year, from $19.28 to $21.08 [11] Q&A Session Summary Question: What is driving the payoffs and paydowns? - Payoffs were about $50 million more than the previous quarter, with 44% related to collateral sales and 25% to refinancing elsewhere [16][17] Question: What are the current credit concerns? - Management stated that stress testing and portfolio monitoring are in place, and they are cautious about the mix of C&I credits while maintaining a focus on real estate loans [19][20] Question: What are the drivers behind deposit growth? - The growth was driven by new accounts, with 51% of new deposits from new customers, reflecting brand awareness and customer satisfaction improvements [24] Question: What are the expectations for loan growth and payoffs? - Management expects a lift from advances exceeding paydowns, with a healthy pipeline and loan originations anticipated to continue growing [44][46] Question: What is the company's approach to M&A? - The company is cautious about M&A, focusing on finding partners that align with their funding structure and protecting their balance sheet [48]

Financial Data and Key Metrics Changes - The company reported a net income of $25.7 million or $0.50 per diluted share for Q3 2025, compared to $26.4 million or $0.51 per share in Q2 2025, reflecting an annualized ROAA of 0.97% and an annualized ROATCE of 11.45% [9] - Net interest income increased to $100.6 million from $98.3 million in the previous quarter, with a net interest margin of 4.2% compared to 4.18% in Q2 2025 [10] - The total risk-based capital ratio improved to 16.33% at the end of Q3 2025 from 15.98% at the end of Q2 2025, and tangible book value per share increased by 9.3% year-over-year [13] Business Line Data and Key Metrics Changes - The provision for loan losses was $305,000 in Q3 2025, with net charge-offs totaling $3.3 million, primarily from previously identified credits [11] - Non-interest income decreased to $5 million from $5.8 million in the previous quarter, mainly due to write-downs on foreclosed assets [12] - Non-interest expenses rose to $73.1 million from $70 million in Q2 2025, driven by increased salaries and benefits, including severance expenses related to branch closures [12] Market Data and Key Metrics Changes - The company experienced strong deposit growth, with 51% of new deposits coming from new customers, reflecting improved brand awareness and customer satisfaction [32] - The company reported a significant increase in loan originations, up 62% year-to-date compared to the same period last year, although Q3 originations were lower than Q2 [22] Company Strategy and Development Direction - The company aims to enhance shareholder value through disciplined capital deployment, focusing on building quality assets and maintaining strong credit quality [8] - The management emphasized the importance of maintaining a competitive edge in a dynamic market, particularly in Texas, where M&A activity is increasing [13][67] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of credit trends and the overall market, despite some concerns in the industry [7][29] - The company plans to continue optimizing expenses and managing its balance sheet effectively to support growth and maintain financial flexibility [45] Other Important Information - The company repurchased shares and paid down $30 million of subordinated debt after the quarter-end, reinforcing its capital position [8] - The management noted that Q3 expenses were considered an outlier and expected a return to a more typical expense level in Q4 2025 [12][44] Q&A Session Summary Question: What is driving the payoffs and paydowns, and what is the growth outlook? - Payoffs in the last quarter were about $50 million more than the previous quarter, with 44% related to collateral sales and 25% due to refinancing elsewhere. The company remains optimistic about future growth due to a healthy pipeline [20][22] Question: What are the current credit concerns and management's approach? - Management stated that they conduct stress testing and monitor portfolios closely, emphasizing a shift towards more stable C&I credits while maintaining a strong real estate loan portfolio [26][28] Question: What are the drivers behind the strong deposit growth? - The company reported that 51% of new deposits were from new customers, reflecting successful market share gains and improved customer satisfaction [31][32] Question: What are the expectations for seasonal deposit strength in Q4? - The company noted historical seasonal strength in government banking deposits, but it is difficult to predict exact amounts for the upcoming quarter [39][41] Question: What is the outlook for loan growth and M&A activity? - Management indicated that loan growth is expected to manifest in the second half of the year, with ongoing conversations about potential M&A opportunities while being cautious about maintaining a strong balance sheet [65][67]

Group 1: Earnings Performance - Stellar Bancorp reported quarterly earnings of $0.5 per share, matching the Zacks Consensus Estimate, but down from $0.63 per share a year ago [1] - The company had a surprise of +13.33% in the previous quarter, posting earnings of $0.51 per share against an expected $0.45 [1] - Over the last four quarters, Stellar Bancorp has exceeded consensus EPS estimates three times [1] Group 2: Revenue Analysis - The company posted revenues of $105.63 million for the quarter ended September 2025, missing the Zacks Consensus Estimate by 0.32% and down from $107.81 million year-over-year [2] - Stellar Bancorp has topped consensus revenue estimates only once in the last four quarters [2] Group 3: Stock Performance and Outlook - Stellar Bancorp shares have increased by approximately 3.9% since the beginning of the year, compared to a 14.6% gain in the S&P 500 [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the earnings outlook [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.49 on revenues of $107.07 million, and for the current fiscal year, it is $1.96 on revenues of $421.93 million [7] Group 4: Industry Context - The Zacks Industry Rank for Banks - Southeast places it in the top 24% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Total assets increased to $10,628.113 million as of September 30, 2025, from $10,493.010 million as of June 30, 2025[8] - Total deposits increased to $8,817.463 million as of September 30, 2025, from $8,673.614 million as of June 30, 2025[8] - Net interest margin (tax equivalent) was 4.20% for the third quarter of 2025, compared to 4.18% for the second quarter of 2025[8, 12, 20] - Net income for the third quarter of 2025 was $25.7 million, translating to an annualized return on average assets of 0.97%, an annualized return on average equity of 6.30%, and an annualized return on average tangible equity of 11.45%[20] - The total capital ratio (to risk-weighted assets) increased to 16.33% at September 30, 2025, from 15.98% at June 30, 2025[8, 12, 20] Balance Sheet Composition - Noninterest-bearing deposits constituted 36.4% of total deposits as of September 30, 2025[8, 12, 22, 24] - Total loans decreased to $7,167.857 million as of September 30, 2025, from $7,287.347 million as of June 30, 2025[8] - Loans to total deposits ratio was 81.29% as of September 30, 2025, compared to 84.02% as of June 30, 2025[8, 24] Market Position - Stellar Bancorp is ranked 6th in deposit market share for the Houston region[12] - Stellar has over $8.4 billion in deposits in the Houston region[14, 49] Asset Quality - Nonperforming loans to total loans were 0.65% at September 30, 2025, compared to 0.69% as of June 30, 2025[40] - Allowance for credit losses on loans to nonperforming loans was 170.65% at September 30, 2025, compared to 164.67% as of June 30, 2025[40]