Stellar Bancorp's second quarter was shaped by stable loan volumes, disciplined expense management, and a continued focus on core funding in a competitive Texas banking landscape. While the company’s revenue fell short of Wall Street’s expectations, management pointed to a near doubling of loan originations and careful control of non-interest expenses as key contributors to improved non-GAAP profitability. CEO Bob Franklin acknowledged that heightened competition for both loans and deposits created headwinds, but emphasized the bank’s “healthy pipeline” and the resilience of the Texas market as bright spots during the quarter.
Is now the time to buy STEL? Find out in our full research report (it’s free).
Stellar Bancorp (STEL) Q2 CY2025 Highlights:
- Revenue: $104.1 million vs analyst estimates of $104.9 million (2.5% year-on-year decline, 0.8% miss)
- Adjusted EPS: $0.51 vs analyst estimates of $0.45 (14.3% beat)
- Adjusted Operating Income: $33.15 million vs analyst estimates of $32.41 million (31.8% margin, 2.3% beat)
- Market Capitalization: $1.50 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Stellar Bancorp’s Q2 Earnings Call
- David Pipkin Feaster (Raymond James) asked about competitive dynamics in loan originations and payoffs. President Ray Vitulli detailed that the origination pipeline is strong, with increased activity from new hires and market share wins in Dallas and Houston-Beaumont.
- David Pipkin Feaster (Raymond James) followed up on funding competition and deposit strategy. Vitulli explained that while the money market segment remains highly competitive, measured exception pricing and a focus on core client expansion have positioned the bank well.
- David Pipkin Feaster (Raymond James) inquired about expense flexibility and talent investments. CFO Paul Egge emphasized that expense discipline creates the ability to invest opportunistically, while CEO Bob Franklin noted the back office build is largely complete, enabling focus on growth-related hiring.
- William Bradford Jones (KBW) questioned implications of deposit competition on net interest margin. Egge responded that a stable funding mix and reduced wholesale funding usage should help defend and possibly incrementally improve margins.
- Matthew Covington Olney (Stephens) asked about the mix and trajectory of loan originations, particularly in commercial and industrial lending. Vitulli confirmed a good mix of C&I loans and continued backfilling in commercial real estate, with overall origination levels at multi-year highs.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be monitoring (1) whether loan origination and advances continue at elevated levels to drive organic growth, (2) management’s ability to defend or improve net interest margin despite ongoing deposit competition and changing rate dynamics, and (3) the effectiveness of expense discipline as the bank invests in new talent or pursues M&A opportunities. Updates on the competitive landscape in core Texas markets will also be key.
Stellar Bancorp currently trades at $29.29, down from $31.59 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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