Stellar Bancorp (STEL) Q1 2025 earnings summary

Executive summary

• Q1 2025 net income was $24.7 million, or $0.46 per diluted share, with annualized ROAA of 0.94% and ROATCE of 11.48%.

• Net income declined from $26.1 million in Q1 2024 and $25.2 million in Q4 2024, mainly due to lower net interest and noninterest income, partially offset by reduced expenses and taxes.

• Share repurchases were prioritized, with 1.4 million shares repurchased in Q1 and 679,000 post-quarter, and a new $65 million buyback program authorized through May 2026.

• Management expects most growth to occur in the second half of 2025 due to economic uncertainty and market conditions.

• Operates as the largest regionally focused bank in Houston, ranking 1st among Texas-based banks in the region by deposit market share.

Financial highlights

• Net interest income was $99.3 million, down from $103 million in Q4 2024 and a 2.8% decrease year-over-year.

• Net interest margin (tax equivalent) was 4.20% in Q1 2025, down from 4.25% in Q4 2024; excluding purchase accounting accretion, margin was 3.97%.

• Noninterest income was $5.5 million, with sequential growth due to asset sale gains but a 12.6% year-over-year decline.

• Noninterest expense decreased to $70.2 million from $75.3 million in Q4 2024, with notable declines in salaries, professional fees, and advertising.

• Book value per share increased to $30.89 and tangible book value per share to $19.69 at March 31, 2025.

Outlook and guidance

• Growth is expected to resume in the third and fourth quarters of 2025, with incremental improvement in operating leverage and earnings.

• Management aims to maintain a strong balance sheet, deliver positive operating leverage, and benefit from a scalable platform.

• Core net interest margin is targeted to reach or exceed 4%, with every basis point of improvement considered a win.

• No material changes in risk factors or forward-looking guidance were disclosed for the remainder of 2025.

• Focus remains on credit performance and risk management as key success factors.