Stellar Bancorp, Inc. reported fourth‑quarter 2025 results that fell short of consensus expectations, with net income of $26.1 million and earnings per share of $0.51—$0.02 below the $0.53 forecasted by analysts. Total revenue reached $108.9 million, beating the $107.8 million consensus by $1.1 million, a 1.0% lift driven by stronger fee income and modest interest‑earning asset growth.
The quarter’s net interest income was $103.4 million, up from $100.6 million in the third quarter, reflecting a 2.3% sequential gain. Net interest margin on a tax‑equivalent basis rose to 4.21% from 4.20% in Q3, a modest improvement attributed to a tighter cost of deposits and a slight shift toward higher‑yielding loan products. The full‑year net interest income of $401.6 million represents a 1.6% decline from $408.0 million in 2024, driven by a 1.6% drop in earnings assets.
Non‑interest income for the quarter was $5.5 million, an increase of $0.5 million from $5.0 million in Q3, largely due to gains on the sale of a portfolio of consumer loans. However, the company recorded a $1.3 million loss on sales and write‑downs of foreclosed assets, which offset the fee gains and contributed to the lower overall non‑interest income. The allowance for credit losses stood at $78.9 million, or 1.15% of total loans, while non‑performing assets totaled $60.0 million, representing 0.56% of total assets at year‑end.
Deposits grew to $9.02 billion, up $204 million from $8.82 billion at the end of September, driven by a $120 million increase in money‑market and savings balances. The credit profile remained stable, with non‑performing assets at 0.56% of total assets and the allowance for credit losses at 1.15% of loans, indicating a modest deterioration in asset quality relative to the prior quarter.
On the same day, Stellar Bancorp announced a definitive merger agreement with Prosperity Bancshares, Inc., valuing the transaction at approximately $2.002 billion based on Prosperity’s closing price on January 27, 2026. The deal will combine Stellar’s $9 billion deposit base with Prosperity’s $5 billion in assets, creating a regional bank with expanded geographic reach and a broader product mix. The merger is expected to generate synergies of $50 million annually and will likely lead to a consolidation of overlapping branches and a streamlined loan portfolio.
CEO Robert R. Franklin emphasized that the merger “strengthens our competitive position in the Midwest and positions us for long‑term growth.” He also noted that the company’s focus on disciplined cost management and strategic asset allocation has positioned it well to integrate Prosperity’s operations. The merger announcement prompted the cancellation of Stellar’s scheduled earnings conference call for January 30, 2026.
The earnings miss on EPS can be traced to higher operating expenses and the impact of the foreclosed asset write‑downs, which offset the gains from fee income. The revenue beat, however, reflects a 1.0% increase driven by a 1.5% rise in interest income and a 0.8% lift in fee revenue, offsetting the decline in non‑interest income. Analysts had expected a $0.53 EPS and $107.8 million in revenue; the company fell short on earnings but exceeded revenue expectations, indicating that while profitability was pressured, top‑line growth remained resilient.
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