Download PDF

1. Company Snapshot

1.a. Company Description

Stellar Bancorp, Inc.operates as the bank holding company that provides a range of commercial banking services primarily to small and medium-sized businesses, professionals, and individual customers.It accepts deposit products, including checking accounts, commercial accounts, money market accounts, savings accounts, and other time deposits; and certificates of deposit.


The company's loan portfolio comprises commercial and industrial loans; commercial real estate loans, including multi-family residential loans; commercial real estate construction and land development loans; residential real estate loans, such as 1-4 family residential mortgage loans; residential construction loans; and consumer and other loans.In addition, it offers automated teller machine services, drive-through services, and depository facilities; mobile banking services; and telephone, mail, and Internet banking services.Further, the company provides safe deposit boxes, debit cards, cash management and wire transfer services, night depository services, direct deposits, cashier's checks, and letters of credit.


It has locations in the Southeast region, including Houston, The Woodlands, Sugar Land, Beaumont, and Port Arthur, as well as Dallas.The company was founded in 2007 and is headquartered in Houston, Texas.

Show Full description

1.b. Last Insights on STEL

The recent 3-month performance of Stellar Bancorp, Inc. was negatively impacted by a lack of significant news or developments. The company's Q4 2024 earnings release, while beating estimates, did not provide any substantial insights into its future growth prospects. The absence of any major acquisitions, new product launches, or significant changes in its business conditions has contributed to the lack of momentum in its stock price. Furthermore, the company's recent announcement of its first quarter 2025 earnings release and conference call date, while routine, has not generated any significant excitement among investors.

1.c. Company Highlights

2. Stellar Bank's Q3 Earnings: A Closer Look

Stellar Bank reported a net income of $25.7 million or $0.50 per diluted share for the third quarter of 2025, slightly lower than the $26.4 million or $0.51 per share in the second quarter. Net interest income increased to $100.6 million, up from $98.3 million in the previous quarter, resulting in a net interest margin of 4.2%, compared to 4.18% in the second quarter. The earnings per share (EPS) of $0.50 met analysts' estimates. Revenue growth is expected to be 2.9% next year, according to analyst estimates.

Publication Date: Nov -12

📋 Highlights
  • Net Income Decline:: Q3 2025 net income fell to $25.7M ($0.50/share) from $26.4M ($0.51/share) in Q2, reflecting stable performance amid higher expenses.
  • Net Interest Income Growth:: Increased to $100.6M from $98.3M, driven by balance sheet expansion and a 4.2% net interest margin (up from 4.18% in Q2).
  • Deposit Growth:: 51% of new deposits came from new customers, with low-cost deposit focus and $50M higher payoffs in Q3 compared to Q2.
  • Credit Quality:: $3.3M in charge-offs across small credits, with $305K provision for loan losses covering unfunded commitments and growth.
  • Capital Management:: $30M subordinated debt paydown, share repurchases, and $73M Q3 expenses (including $7M one-time severance), with Q4 guidance at $70M quarterly run rate.

Balance Sheet Growth and Credit Quality

The bank's balance sheet expansion was driven by strong deposit growth, reflecting the bankers' emphasis on securing full client relationships. Credit quality has shown improvement, with some charge-offs in the quarter, but they were spread over several small credits, most of which were already identified and reserved. The provision for loan losses was $305,000, driven primarily by an increase in the allowance for unfunded commitments.

Expense Management and Capital Position

The company's expense ratio was an outlier in the quarter due to a severance payment in salaries. The CFO expects the fourth quarter earnings to be closer to the first quarter run rate, potentially around $70 million per quarter. Stellar Bank is in optimization mode, focusing on holding the line on expenses and managing human capital attrition. The bank has repurchased shares and paid down $30 million of its subordinated debt, showcasing its well-capitalized position.

Valuation and Outlook

With a Price-to-Tangible Book Value (P/TBV) ratio of less than 1, at 0.94 P/B Ratio, Stellar Bank appears to be reasonably valued. The Net Interest Margin (NIM) of 4.2% is a positive highlight. The Dividend Yield is 1.84%, providing a relatively stable return for investors. As the bank continues to focus on deposit growth, manage expenses, and optimize its balance sheet, it is well-positioned for future growth.

3. NewsRoom

Card image cap

Stellar Bancorp, Inc. Announces Increase in Quarterly Dividend

Nov -20

Source: businesswire.com

Card image cap

What Makes Stellar Bancorp (STEL) a New Buy Stock

Oct -27

Source: zacks.com

Card image cap

Stellar Bancorp, Inc. (STEL) Q3 2025 Earnings Call Transcript

Oct -24

Source: seekingalpha.com

Card image cap

Stellar Bancorp (STEL) Q3 Earnings: How Key Metrics Compare to Wall Street Estimates

Oct -24

Source: zacks.com

Card image cap

Stellar Bancorp (STEL) Matches Q3 Earnings Estimates

Oct -24

Source: zacks.com

Card image cap

Stellar Bancorp, Inc. Reports Third Quarter 2025 Results

Oct -24

Source: businesswire.com

Card image cap

Stellar Bancorp, Inc. Announces Third Quarter 2025 Earnings Release and Conference Call Date

Oct -02

Source: businesswire.com

Card image cap

Stellar Bancorp, Inc. Announces Quarterly Dividend

Aug -28

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.00%)

6. Segments

Commercial and Retail Loans and Commercial Banking Services

Expected Growth: 1.0%

Stellar Bancorp, Inc.'s 1.0% growth in Commercial and Retail Loans and Commercial Banking Services is driven by a strong economy, increasing demand for credit, and strategic expansion into new markets. Additionally, the company's focus on customer relationships, competitive pricing, and efficient operations have contributed to the growth.

7. Detailed Products

Commercial Banking

Provides financial solutions to businesses, including cash management, lending, and treasury management services.

Consumer Banking

Offers personal banking services, including checking and savings accounts, credit cards, and personal loans.

Wealth Management

Provides investment and wealth management services, including financial planning, investment management, and trust services.

Mortgage Banking

Offers mortgage lending services, including residential and commercial mortgage loans.

Treasury Management

Provides cash management and treasury services, including account management, payment processing, and risk management.

8. Stellar Bancorp, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Stellar Bancorp, Inc. is medium due to the presence of alternative financial institutions and digital payment platforms.

Bargaining Power Of Customers

The bargaining power of customers is low for Stellar Bancorp, Inc. as customers have limited negotiating power due to the bank's strong brand and limited alternatives.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium for Stellar Bancorp, Inc. as the bank relies on a few large suppliers for technology and services, giving them some negotiating power.

Threat Of New Entrants

The threat of new entrants is high for Stellar Bancorp, Inc. due to the low barriers to entry in the fintech industry and the increasing trend of digital banking.

Intensity Of Rivalry

The intensity of rivalry is high for Stellar Bancorp, Inc. due to the highly competitive nature of the banking industry, with many established players and new entrants vying for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 9.51%
Debt Cost 8.34%
Equity Weight 90.49%
Equity Cost 8.34%
WACC 8.34%
Leverage 10.50%

11. Quality Control: Stellar Bancorp, Inc. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
First Bancorp

A-Score: 6.6/10

Value: 7.0

Growth: 4.9

Quality: 5.9

Yield: 9.0

Momentum: 5.0

Volatility: 8.0

1-Year Total Return ->

View Full Report
Stock-Card
Farmers National Banc

A-Score: 6.2/10

Value: 7.0

Growth: 5.6

Quality: 5.4

Yield: 8.0

Momentum: 4.0

Volatility: 7.3

1-Year Total Return ->

View Full Report
Stock-Card
Stellar Bancorp

A-Score: 6.2/10

Value: 6.0

Growth: 4.9

Quality: 7.5

Yield: 4.0

Momentum: 7.0

Volatility: 7.7

1-Year Total Return ->

View Full Report
Stock-Card
Western New England Bancorp

A-Score: 6.0/10

Value: 5.4

Growth: 4.4

Quality: 6.2

Yield: 5.0

Momentum: 8.5

Volatility: 6.7

1-Year Total Return ->

View Full Report
Stock-Card
WesBanco

A-Score: 5.8/10

Value: 5.1

Growth: 4.0

Quality: 4.2

Yield: 8.0

Momentum: 6.0

Volatility: 7.3

1-Year Total Return ->

View Full Report
Stock-Card
California Bank

A-Score: 4.8/10

Value: 5.8

Growth: 8.4

Quality: 6.3

Yield: 0.0

Momentum: 5.0

Volatility: 3.3

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

31.66$

Current Price

31.66$

Potential

-0.00%

Expected Cash-Flows