Stellar News Today: Stellar's Strategic Shifts Offset Rising Costs as EPS Beat, Revenue Miss

Stellar Bancorp, Inc. (NYSE: STEL) reported robust third-quarter 2025 results, according to the company's press release, with net income of $25.7 million and diluted earnings per share (EPS) of $0.50, outperforming consensus estimates for EPS but falling short on revenue, as shown in the earnings transcript. The Houston-based bank highlighted a 2.3% increase in net interest income to $100.6 million and a net interest margin of 4.20%, driven by deposit growth and a strategic shift in its loan portfolio.

CEO Robert R. Franklin emphasized the company's focus on balancing its loan mix, reducing exposure to non-relationship real estate commitments, and capitalizing on market disruptions in Texas. "We believe this strategic portfolio shift will help moderate payoff activity over the longer term," he stated during the earnings call. The bank also repurchased nearly $5 million of shares and paid down $30 million of subordinated debt, bolstering its capital position.

Despite these positives, Stellar faced headwinds. Non-interest income dropped 13.9% to $5 million due to losses on asset sales and write-downs, while non-interest expenses rose 4.5% to $73.1 million, primarily from higher salaries and professional fees. The efficiency ratio climbed to 63.69%, up from 61.87% in the prior quarter.

Analysts had forecasted revenue of $105.92 million and EPS of $0.49 for Q3 2025, according to a GuruFocus preview, making Stellar's EPS a slight beat but revenue a miss. The bank's stock, trading at $29.93, faces mixed analyst sentiment, with a $31.60 average price target implying 5.58% upside, as noted in a separate GuruFocus report.

Stellar's Q3 results reflect its ongoing efforts to reposition its loan portfolio toward commercial and industrial (C&I) and real estate loans. Total deposits grew to $8.82 billion, with 51% of new deposits from new customers, signaling successful market share gains. The bank's tangible book value per share increased 9.3% year-over-year to $21.08, and its total risk-based capital ratio reached 16.33%.

However, the company acknowledged challenges, including $3.3 million in net charge-offs and elevated loan payoffs of $330 million in Q3. Franklin noted that while Texas remains a competitive market, the bank is leveraging its local expertise and reputation to deepen customer relationships.

The earnings report comes as Stellar navigates a volatile banking sector. While its EPS beat estimates, the revenue shortfall and rising expenses have raised concerns about sustainability. Analysts remain cautiously optimistic, with some noting the bank's strong capital ratios and strategic flexibility. "Stellar's ability to maintain profitability amid industry headwinds underscores its operational resilience," said Jordan Bender of Citizens.

Looking ahead, Stellar plans to continue its focus on deposit growth, cost management, and capital returns. The company reaffirmed its 2025 guidance but did not provide updated EBITDA forecasts, citing uncertainty around the timing of new product launches.

---