Stellar Bancorp (STEL) Q2 2025 earnings summary

Executive summary

• Net income for Q2 2025 was $26.4 million ($0.51 per share), up from $24.7 million in Q1 2025, but down from $29.8 million year-over-year, with annualized ROAA of 1.01% and ROAE of 6.62%.

• Tangible book value per share increased 10.8% year-over-year to $19.94.

• Loan originations nearly doubled sequentially, supporting a return to organic growth, with management expecting continued loan and deposit growth.

• Repurchased 791,000 shares at an average price of $26.08 per share during Q2 2025.

• Efficiency ratio for Q2 2025 was 61.87%, slightly higher year-over-year, reflecting increased resource utilization.

Financial highlights

• Net interest income for Q2 2025 was $98.3 million, down 0.9% sequentially and 3.0% year-over-year; net interest margin (tax equivalent) was 4.18%.

• Noninterest income rose to $5.8 million, mainly due to Federal Reserve Bank dividends.

• Noninterest expense remained flat at approximately $70 million, with a slight year-over-year decline.

• Provision for credit losses was $1.1 million, up from a $1.9 million reversal in Q2 2024, mainly due to increased allowance for unfunded commitments.

• Book value per share increased to $31.20 at June 30, 2025.

Outlook and guidance

• Management expects continued loan and deposit growth, supported by a healthy pipeline, new hires, and economic tailwinds in the Houston area.

• Funding costs are expected to remain stable or improve, with a focus on core deposits and reduced reliance on wholesale funds.

• Expense management will remain disciplined, allowing for opportunistic investments in talent and growth.

• Positioned for strong internal capital generation and financial flexibility, with a focus on credit performance and risk management.

• Margin improvement is anticipated if funding composition remains consistent and as rate cuts normalize the yield curve.