Stellar Bancorp(US:STEL)2025-10-24 20:46Financial 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].