Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________________________________ FORM 10-Q _______________________________________________ S QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025 OR £ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: 001-38280 ____________________ ...

Financial Data and Key Metrics Changes - The company reported a net income of $26.4 million or $54.51 per diluted share for Q2 2025, an increase from $24.7 million or $46 per share in Q1 2025, representing an annualized ROAA of 1.01% and an annualized ROATCE of 12.16% [9][10] - Net interest income for Q2 was $98.3 million, slightly down from $99.3 million in Q1, with a net interest margin of 4.18% compared to 4.2% in the previous quarter [11][12] - Noninterest income increased to $5.8 million in Q2 from $5.5 million in Q1, benefiting from Federal Reserve Bank dividends [13] - Noninterest expenses remained flat at approximately $70 million, reflecting effective expense management [14] Business Line Data and Key Metrics Changes - New loan originations nearly doubled in Q2 compared to Q1, marking the highest level since 2022, indicating a return to organic growth [6][7] - The company experienced slight growth in loans, attributed to a healthy pipeline and business development efforts [6][10] Market Data and Key Metrics Changes - The Texas marketplace remains resilient, providing opportunities for growth, particularly in the context of increased M&A activity [7] - The competitive landscape for loans is described as extremely competitive, with the company gaining market share in the Dallas and Houston Beaumont regions [22] Company Strategy and Development Direction - The company aims to build itself into the bank of choice for small business leaders, focusing on relationship banking to drive long-term shareholder value [8] - The strategy includes expanding existing relationships and acquiring new customers, with a disciplined approach to managing expenses while remaining opportunistic [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to defend and improve net interest margins, despite competitive pressures on funding costs [31][45] - The company is open to acquiring new talent to support growth, while maintaining a strong balance sheet and capital position [26][14] Other Important Information - The total risk-based capital ratio was 15.98% at the end of Q2, slightly up from 15.97% at the end of Q1 [14] - The company repurchased 791,000 shares at a weighted average price of $26.08 during the quarter [14] Q&A Session Summary Question: Growth outlook and competitive landscape for loans - Management noted that loan originations nearly doubled in Q2 compared to Q1, with a healthy pipeline supporting continued growth [20][21] Question: Funding side and core deposits strategy - The company has seen competitive pressures on money market deposits but is well-positioned to drive core deposits, with a focus on new customer acquisition [23][24] Question: Expense management and future investments - Management characterized expense management as holding the line to remain opportunistic for future investments, while being open to acquiring new talent [25][26] Question: Margin trends and implications for the second half of the year - Management feels confident in defending margins and expects improvements as the funding composition stabilizes [30][31] Question: M&A discussions and opportunities - The pace of M&A discussions has increased, with management emphasizing the importance of disciplined pricing [50] Question: Other income line trends - Management indicated that the other income line may trend back towards first quarter levels, with some volatility expected [53]

Stellar Bancorp (STEL) came out with quarterly earnings of $0.51 per share, beating the Zacks Consensus Estimate of $0.45 per share. This compares to earnings of $0.56 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of +13.33%. A quarter ago, it was expected that this bank holding company would post earnings of $0.44 per share when it actually produced earnings of $0.46, delivering a surprise of +4.55%.Over the last four quarters ...

Financial Performance - Net income for Q2 2025 was $264 million, resulting in diluted earnings per share of $051[22] - The tax equivalent net interest margin was 418% for Q2 2025, compared to 420% in Q1 2025[22] - Excluding purchase accounting adjustments (PAA), the net interest margin was 395% in Q2 2025, down from 397% in Q1 2025[22] - The total capital ratio increased to 1598% as of June 30, 2025[22] - Tangible book value per share increased to $1994 at June 30, 2025, from $1969 at March 31, 2025[22] Balance Sheet - Total assets reached $1049 billion as of June 30, 2025[9] - Total loans amounted to $7287 billion as of June 30, 2025[9] - Total deposits were $8674 billion as of June 30, 2025[9] - Noninterest-bearing deposits constituted 3671% of total deposits as of June 30, 2025[9, 13] Loan Portfolio - Total loans reached $7287347 thousand in Q2 2025, slightly up from $7283133 thousand in Q1 2025[32] - Commercial Real Estate (CRE) loans, including multifamily, comprised $3840981 thousand of the total loan portfolio in Q2 2025[32]

Exhibit 99.1 PRESS RELEASE STELLAR BANCORP, INC. REPORTS SECOND QUARTER 2025 RESULTS HOUSTON, July 25, 2025 - Stellar Bancorp, Inc. (the "Company" or "Stellar") (NYSE: STEL) today reported net income of $26.4 million, or diluted earnings per share of $0.51, for the second quarter of 2025, compared to net income of $24.7 million, or diluted earnings per share of $0.46, for the first quarter of 2025. "We are pleased to report our second quarter results that reflect the efforts of our team beginning to add gro ...

Financial Performance - Net income for Q1 2025 was $24.7 million, resulting in diluted earnings per share of $0.46[22] - The tax equivalent net interest margin for Q1 2025 was 4.20%[13, 22] - Excluding purchase accounting adjustments (PAA), the net interest margin was 3.97% for Q1 2025[13, 22] - The total capital ratio (to risk-weighted assets) was 15.94% as of March 31, 2025[9, 13, 22] - Tangible book value per share increased to $19.69 as of March 31, 2025[19, 22] Balance Sheet - Total assets were $10.43 billion as of March 31, 2025[9] - Total loans amounted to $7.28 billion as of March 31, 2025[9, 30] - Total deposits reached $8.56 billion as of March 31, 2025[9, 26] - Noninterest-bearing deposits constituted 37.4% of total deposits as of March 31, 2025[9, 13, 24] Loan Portfolio - Commercial and Industrial (C&I) loans totaled $1.36 billion in Q1 2025[30] - Total Commercial Real Estate loans were $3.85 billion in Q1 2025[30] - 1-4 Family Residential loans amounted to $1.13 billion in Q1 2025[30] Houston Market - Stellar has $8.6 billion in deposits in the Houston region[15, 50] - Stellar ranked 6th in deposit market share for the Houston region[13]

Financial Performance - Net income for the three months ended March 31, 2025, was $24.7 million, or $0.46 per diluted share, compared to $26.1 million, or $0.49 per diluted share for the same period in 2024, reflecting a decrease in net income [124]. - The decrease in net income was primarily due to a $2.9 million decrease in net interest income and a $791 thousand decrease in noninterest income [124]. - Noninterest expense decreased by $1.2 million and the provision for income taxes decreased by $496 thousand, partially offsetting the declines in income [124]. - Annualized returns on average assets, average equity, and efficiency ratios were 0.94%, 6.21%, and 61.93% for the three months ended March 31, 2025, compared to 0.98%, 6.88%, and 60.42% for the same period in 2024 [125]. - Net interest income before provision for credit losses decreased by $2.9 million, or 2.8%, to $99.3 million for the three months ended March 31, 2025, from $102.1 million in 2024 [126]. - Interest income was $142.3 million for the three months ended March 31, 2025, a decrease of $6.1 million, or 4.1%, compared to $148.4 million for the same period in 2024 [127]. - Interest expense decreased by $3.2 million, or 7.0%, to $43.1 million for the three months ended March 31, 2025, from $46.3 million in 2024 [128]. - Tax equivalent net interest margin was 4.20% for the three months ended March 31, 2025, a decrease of 6 basis points from 4.26% in 2024 [129]. - Noninterest income totaled $5.5 million for the three months ended March 31, 2025, a decrease of $791 thousand, or 12.6%, from $6.3 million in 2024 [138]. - Noninterest expense was $70.2 million for the three months ended March 31, 2025, a decrease of $1.2 million, or 1.7%, compared to $71.4 million in 2024 [140]. Credit Quality - The allowance for credit losses is based on estimates of expected losses in performing loans, with a 5% increase in historical loss rates potentially increasing funded reserves by $1.6 million [118]. - A 5% increase in qualitative risk factors across all segments could increase funded reserves by $2.8 million, while an overall increase in estimated loss rates by 5% would have a $3.5 million impact [118]. - Provision for credit losses was $3.6 million for the three months ended March 31, 2025, down from $4.1 million in 2024 [136]. - The provision for credit losses on loans for the first quarter of 2025 was $2.9 million, compared to $5.3 million for the same period in 2024, indicating a decrease of 46.5% [165]. - Nonperforming assets totaled $59.7 million, or 0.57% of total assets, at March 31, 2025, compared to $38.9 million, or 0.36%, at December 31, 2024 [160]. - As of March 31, 2025, total nonaccrual loans increased to $54.5 million from $37.2 million as of December 31, 2024, representing a 46.5% increase [161]. - The allowance for credit losses on loans was $83.7 million, or 1.15% of total loans, up from $81.1 million, or 1.09% of total loans, as of December 31, 2024 [164]. - Nonperforming loans to total loans ratio increased to 0.75% from 0.50% [161]. - The allowance for credit losses on loans to nonperforming loans ratio was 153.61% as of March 31, 2025, down from 168.54% [165]. - Total nonperforming assets rose to $59.7 million, up from $38.9 million, marking a 53.4% increase [161]. Loans and Deposits - Average loans decreased to $7.34 billion for the three months ended March 31, 2025, from $7.94 billion in 2024 [131]. - Total loans decreased by $156.7 million, or 2.1%, to $7.28 billion as of March 31, 2025, compared to $7.44 billion as of December 31, 2024 [147]. - Commercial real estate loans comprised 52.9% of the loan portfolio as of March 31, 2025, with a total amount of $3.85 billion, a decrease of $13.6 million, or 0.4%, from December 31, 2024 [149]. - Commercial real estate construction and land development loans decreased by $124 million, or 14.7%, to $721.5 million as of March 31, 2025, compared to $845.5 million as of December 31, 2024 [153]. - The consumer and other loan portfolio decreased by $12.8 million, or 14.1%, to $77.7 million as of March 31, 2025, from $90.4 million as of December 31, 2024 [157]. - Total deposits as of March 31, 2025, were $8.56 billion, a decrease of $565.7 million, or 6.2%, from $9.13 billion at December 31, 2024 [177]. - Noninterest-bearing deposits decreased by $370.6 million, or 10.4%, to $3.21 billion as of March 31, 2025 [177]. - Interest-bearing deposits decreased by $195.1 million, or 3.5%, to $5.36 billion as of March 31, 2025 [177]. - Average total deposits decreased by $28.6 million, or 0.3%, and average loans decreased by $594.5 million, or 7.5%, for the three months ended March 31, 2025 compared to the same period in 2024 [190]. Asset Management - The carrying amount of investment securities increased to $1.72 billion, a rise of $46.4 million, or 2.8%, from $1.67 billion as of December 31, 2024 [168]. - The yield on the securities portfolio increased to 3.78% for the three months ended March 31, 2025, from 2.82% in 2024 [127]. - The average yield of the securities portfolio increased to 3.78% for the three months ended March 31, 2025, compared to 2.82% for the same period in 2024 [173]. - The securities portfolio had a weighted average life of 7.3 years as of March 31, 2025 [190]. Compliance and Risk Management - The company is subject to various risks including economic disruptions, changes in interest rates, and asset quality deterioration, which could materially affect future results [105]. - Goodwill is subject to impairment testing at least annually, with potential impairment losses recognized if fair value is less than carrying value [121]. - The company has evaluated recent accounting pronouncements that may require enhanced disclosures in future financial statements [123]. - The Company maintained compliance with all debt covenants under the Loan Agreement as of March 31, 2025 [187]. - Interest rate risk simulation indicated a potential decrease in net interest income of 8.7% under a +300 basis points scenario as of March 31, 2025 [207]. - The Asset Liability Committee (ALCO) regularly reviews the sensitivity of assets and liabilities to interest rate changes [204]. Capital and Borrowing - Total shareholders' equity was $1.61 billion as of March 31, 2025, with a net income of $24.7 million during the three months ended March 31, 2025 [199]. - The total capital ratio to risk-weighted assets was 15.94%, significantly above the minimum required ratio of 8.0% as of March 31, 2025 [200]. - The Company had a total borrowing capacity of $3.04 billion, with $1.72 billion available under the Federal Home Loan Bank agreement as of March 31, 2025 [179]. - The Company had $120.0 million of FHLB short-term advances outstanding at a weighted-average rate of 4.75% as of March 31, 2025 [179]. - The Company issued $60.0 million of Fixed-to-Floating Rate Subordinated Notes due October 1, 2029, bearing interest at a floating rate equal to 3-Month SOFR plus 3.13% [184]. - The Company had outstanding commitments to extend credit of $1.81 billion as of March 31, 2025 [193]. - Total immediate contingent funding sources were $4.80 billion, or 56.0% of total deposits, as of March 31, 2025 [191]. - Estimated uninsured deposits net of collateralized deposits were 45.5% of total deposits at March 31, 2025 [191].

Financial Data and Key Metrics Changes - Stellar Bancorp reported a net income of $24.7 million or $0.46 per diluted share for Q1 2025, with an annualized return on average assets of 94 basis points and an annualized return on average tangible common equity of 11.48% [8][10] - The net interest income for the quarter was $99.3 million, down from $103 million in the previous quarter, resulting in a net interest margin of 4.2% compared to 4.25% in Q4 2024 [12][10] - Noninterest expenses decreased to $70.2 million from $75.3 million in the previous quarter, reflecting effective cost management [15][10] - The total risk-based capital ratio was 15.94% at the end of Q1 2025, slightly down from 16% at the end of Q4 2024 [16] Business Line Data and Key Metrics Changes - The company experienced a reduction in loans during the quarter, with payoffs estimated between $275 million to $300 million [31][70] - Core net interest margin excluding purchase accounting accretion improved to 3.97% from 3.94% in the prior quarter [12][10] - Noninterest income increased to $5.5 million from $5 million in the previous quarter, benefiting from small gains on asset sales [14] Market Data and Key Metrics Changes - The company noted a competitive market for deposits, with a focus on acquiring new accounts, achieving a significant number of new accounts onboarded in Q1 2025 [38][39] - Approximately 40% of new accounts were from customers who were not previously with the bank, indicating successful market penetration [38] Company Strategy and Development Direction - The management emphasized a cautious approach to growth due to economic uncertainty, with expectations for growth to materialize in the latter half of 2025 [7][11] - The company plans to utilize its strong capital position for share repurchases while remaining open to growth opportunities through M&A in the future [19][50] - The focus remains on building a strong foundation and optimizing capital management to benefit shareholders [6][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertainty introduced by new tariff policies but remains optimistic about customer acquisition and pipeline growth [4][5][7] - The management expressed confidence in returning to a reasonable level of growth later in the year, despite current challenges [11][20] Other Important Information - The company repurchased 1.4 million shares at an average price of $27.99 per share during the first quarter, with a new share repurchase program authorized for up to $65 million [18][19] - Tangible book value per share increased by 14.3% year-over-year, from $17.23 to $19.69 [17] Q&A Session Summary Question: What is the current sentiment from clients regarding loan growth? - Management indicated cautious optimism about potential growth, noting that the pipeline is trending positively despite economic uncertainty [24][25][30] Question: Can you elaborate on the competitive landscape for deposits? - Management highlighted intense competition in the market but noted success in onboarding new accounts, particularly from new customers [35][38] Question: What are the expectations for loan paydowns and growth in the coming quarters? - Management expects payoffs to remain around $275 to $300 million per quarter, with growth anticipated in the second half of the year as the pipeline builds [70][69] Question: How is the company managing expenses moving forward? - Management expressed a commitment to managing expenses while also investing in growth, indicating that the first quarter's performance was better than planned [78][79]

Core Insights - Stellar Bancorp reported a revenue of $104.76 million for the quarter ended March 2025, reflecting a decrease of 3.4% year-over-year [1] - The earnings per share (EPS) for the quarter was $0.46, down from $0.49 in the same quarter last year, with a surprise of +4.55% compared to the consensus estimate of $0.44 [1] Financial Performance - The reported revenue was slightly below the Zacks Consensus Estimate of $105.47 million, resulting in a surprise of -0.67% [1] - The net interest margin (tax equivalent) stood at 4.2%, matching the average estimate from analysts [4] - The efficiency ratio was reported at 61.9%, significantly better than the average estimate of 68.9% [4] - Total nonperforming loans amounted to $54.52 million, exceeding the average estimate of $37.63 million [4] - Average balance of total interest-earning assets was $9.59 billion, slightly above the average estimate of $9.58 billion [4] - Net charge-offs to average loans (annualized) were reported at 0%, better than the average estimate of 0.2% [4] - Total nonperforming assets reached $59.67 million, higher than the average estimate of $38.46 million [4] - Net interest income was reported at $99.26 million, slightly below the average estimate of $100.17 million [4] - Total non-interest income was $5.51 million, surpassing the average estimate of $5.31 million [4] Stock Performance - Stellar Bancorp's shares have returned -3.4% over the past month, compared to a -4.8% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Financial Data and Key Metrics Changes - The company reported a net income of $24.7 million or $0.46 per diluted share for Q1 2025, with an annualized return on average assets of 94 basis points and an annualized return on average tangible common equity of 11.48% [10] - Net interest income decreased to $99.3 million from $103 million in the previous quarter, resulting in a net interest margin of 4.2%, down from 4.25% [11][12] - Non-interest expenses decreased to $70.2 million from $75.3 million in the previous quarter, reflecting a reduction of $5.1 million [13] Business Line Data and Key Metrics Changes - The company experienced a provision for loan losses of $3.6 million, with minimal net charge-offs of $163,000, increasing the allowance for credit losses on loans to $83.7 million, or 1.15% of loans [13] - Non-interest income increased to $5.5 million from $5 million in the previous quarter, benefiting from small gains on asset sales [13] Market Data and Key Metrics Changes - The company noted a competitive market for deposits, with a focus on new account origination, onboarding more accounts in both number and dollar amount compared to the previous quarter [31][32] - The company maintained a strong proportion of non-interest bearing deposits, representing over 37% of the deposit base, and achieved a 14 basis point improvement in the cost of funds [12] Company Strategy and Development Direction - The company aims to build a strong foundation for growth, focusing on customer acquisition and managing capital to benefit shareholders through share repurchases [7][8] - The management expressed a cautious approach to growth due to economic uncertainty, anticipating growth to be pushed to the latter half of the year [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged economic uncertainty introduced by the administration but remains optimistic about opportunities for new customer acquisition and growth in the second half of the year [7][9] - The management emphasized a disciplined approach to credit monitoring in light of new tariff policies affecting customers [7] Other Important Information - The company repurchased 1.4 million shares at a weighted average price of $27.99 per share during the first quarter, with a new share repurchase program authorized for up to $65 million through May 2026 [15] - Year-over-year tangible book value per share increased by 14.3% from $17.23 to $19.69, after accounting for dividends and share repurchases [14] Q&A Session Summary Question: Client sentiment and loan pipeline trends - Management noted a cautious optimism regarding loan growth, with a focus on reconfiguring the loan book to reduce reliance on smaller real estate loans [22][23] - The loan originations in Q1 were solid, supporting a positive outlook for the pipeline and deal flow [26] Question: Competitive deposit market - Management highlighted the intense competition in the deposit market, with successful onboarding of new accounts and a low level of closed accounts [30][31] Question: Credit migration and concerns - Management reported migration in non-accruals primarily in owner-occupied commercial real estate, but did not attribute it to tariffs, indicating a cautious approach to new credits [35][36] Question: Capital management and buyback strategy - Management discussed the ongoing evaluation of capital use, including potential debt redemption and the flexibility to pursue M&A opportunities [44][46] Question: Expense trends and outlook - Management cautioned against annualizing the first quarter's expenses, indicating a focus on managing costs while investing in growth [68]