Stellar Bancorp, Inc. (STEL) Company Overview

What did Stellar Bancorp do, and what is its status now?

Stellar Bancorp, Inc. was a Houston-headquartered bank holding company whose operating subsidiary, Stellar Bank, served small- and medium-sized businesses, professionals, municipalities and individual customers across major Texas markets. The company reported as a single banking segment because substantially all revenue and income came from commercial banking. Its former ticker was STEL on the New York Stock Exchange.

The central fact for any current analysis is that Stellar is no longer a standalone public company. Prosperity Bancshares completed its acquisition of Stellar on June 30, 2026; STEL trading was suspended before the July 1, 2026 market open and the shares were withdrawn from NYSE listing. The completion filing states that former Stellar holders ceased to hold rights in STEL other than the right to receive merger consideration. Therefore, Stellar’s historical financials remain useful as a case study in regional-bank economics and merger valuation, but there is no longer an independent STEL equity to value. The surviving public security is Prosperity Bancshares, ticker PB. The transaction status is confirmed in the company’s merger-completion Form 8-K.

How did Stellar Bancorp make money?

Stellar’s model was balance-sheet driven. Deposits supplied most funding; the bank deployed that funding into loans and securities; the spread between asset yields and funding costs produced net interest income. In FY2025, net interest income was $401.6 million, while noninterest income was only $21.8 million. That mix shows why deposit pricing, loan yields and interest-rate sensitivity mattered far more than fee growth.

Which revenue streams mattered most?

The 2025 Form 10-K describes a relationship-banking strategy that paired local decision-making and seasoned bankers with centralized credit, technology, treasury management and operating support. The intended advantage was to provide community-bank responsiveness while carrying enough scale to compete with larger regional institutions.

Which loan categories drove Stellar’s balance sheet?

Commercial real estate was the largest exposure, and real estate-related lending dominated the portfolio. At March 31, 2026, commercial real estate loans were $3.84 billion, or 50.7% of total loans; commercial real estate construction and land development added $821.7 million, or 10.8%. Together, those categories represented 61.5% of loans. Commercial and industrial loans were $1.56 billion, or 20.6%, while one-to-four-family residential loans were $1.17 billion, or 15.4%.

Why was commercial real estate the defining strategic tension?

The concentration supported relationship economics because commercial borrowers often bring operating deposits, treasury services and repeat credit demand. It also increased sensitivity to local property values, refinancing conditions, vacancy, cap rates and borrower cash flow. Stellar’s average funded loan size was about $533,000 at December 31, 2025, which diffused exposure across many relationships, but the portfolio still remained geographically concentrated in the Houston and Beaumont metropolitan areas.

What did deposit composition contribute?

At March 31, 2026, noninterest-bearing deposits were $3.21 billion, equal to 35.7% of total deposits. Public funds were $1.30 billion, or 14.5% of deposits, and were collateralized. Brokered deposits were only $4,000 at quarter-end, versus $12.5 million at December 31, 2025. This funding profile reduced reliance on rate-sensitive brokered money, although the decline in noninterest-bearing deposits from 37.8% of deposits at year-end showed continued competitive pressure.

What did Stellar Bancorp’s latest quarter show?

The quarter ended March 31, 2026 was Stellar’s final full reported quarter as an independent company. Net income rose to $27.0 million from $24.7 million in the year-earlier quarter, while diluted EPS improved to $0.53 from $0.46. Net interest income increased 6.7% to $105.9 million because lower funding costs more than offset softer asset yields. The tax-equivalent net interest margin rose four basis points year over year to 4.24%.

What changed on the balance sheet?

Loans grew 3.9% from year-end to $7.59 billion, while deposits declined 0.4% to $8.98 billion. The loan-to-deposit ratio therefore increased to 84.5% from 80.9%. Total immediate contingent funding sources were $3.48 billion, equal to 39% of deposits, and estimated uninsured deposits net of collateralized deposits were 45.0% of deposits. These figures indicate adequate liquidity capacity, but also explain why funding discipline remained central.

The company’s Q1 2026 Form 10-Q is the most complete source for the final independent quarter.

What strategic turning points shaped Stellar Bancorp?

Stellar’s modern identity was built through consolidation rather than a long period under one brand. The relevant history is not corporate trivia; each step changed scale, funding, credit exposure or governance.

1. 2015
   The CBTX predecessor acquired F&M Bancshares, bringing trust-preferred obligations that remained on the balance sheet and illustrated the acquisition-led growth model.
2. 2017–2019
   The bank and holding company issued subordinated notes, adding regulatory capital and debt-service obligations that later became targets for redemption.
3. October 2022
   Allegiance Bancshares and CBTX combined; CBTX survived, adopted the Stellar Bancorp name and changed its ticker to STEL. This created the scale behind the modern franchise.
4. February 2023
   The operating bank changed its name from Allegiance Bank to Stellar Bank after systems and brand conversion, unifying the combined organization.
5. 2025
   The bank became a Federal Reserve member, continued branch rationalization, repurchased shares and redeemed $30.0 million of company subordinated notes.
6. January 2026
   Stellar agreed to be acquired by Prosperity Bancshares for $11.36 in cash plus 0.3803 PB shares per STEL share.
7. June 30, 2026
   The merger closed. Stellar and Stellar Bank were absorbed into Prosperity and Prosperity Bank, ending the standalone company and transferring the franchise to a larger Texas banking platform.

What did the 2022 combination accomplish?

The Allegiance-CBTX transaction joined two relationship-oriented Texas banks and made Stellar one of the largest banks based in Houston. It delivered branch density, commercial relationships, a broader deposit base and centralized infrastructure. It also created $497.3 million of goodwill on the balance sheet at March 31, 2026, making successful integration and sustained franchise value important to book-value analysis.

Why did the Prosperity transaction become the decisive event?

Stellar’s sale converted a regional-bank thesis into a merger-consideration thesis. The definitive merger proxy and prospectus estimated that former Stellar holders would own about 16.1% of the combined company, with existing Prosperity holders owning about 83.9%. The transaction transferred future earnings power, credit risk and capital-allocation decisions to Prosperity.

What gave Stellar a competitive advantage in Texas banking?

Stellar’s moat was modest but real: local banker relationships, established commercial deposits, knowledge of Houston and Beaumont borrowers, and a branch network dense enough to support business customers. Unlike a digital-only bank, it could combine face-to-face service, local credit judgment and treasury management. Unlike a very small community bank, it had more than $10 billion of assets, centralized credit infrastructure and product breadth.

Who were the main competitors?

Stellar competed with money-center banks, large Texas and regional banks, local community banks, credit unions, finance companies and fintech-enabled providers. In practical terms, JPMorgan Chase, Bank of America, Wells Fargo, Frost Bank, Amegy Bank, Cadence Bank, Prosperity Bank and numerous privately held Texas banks all competed for some combination of commercial loans, deposits and treasury services. Official filings did not provide a verified market-share ranking, so the defensible conclusion is qualitative: Stellar occupied the middle ground between very large standardized institutions and smaller banks with less scale.

How financially strong was Stellar before the acquisition?

Stellar entered the transaction with solid regulatory capital, meaningful liquidity and positive earnings, but with rising credit stress and an efficiency ratio above 60%. The balance sheet was not distressed; rather, it displayed the normal trade-offs of a commercial regional bank exposed to deposit competition and real estate credit.

Capital, liquidity and asset quality

Nonperforming assets increased to $70.1 million, or 0.64% of assets, at March 31, 2026 from $60.0 million, or 0.56%, at December 31, 2025. Nonperforming loans rose to 0.80% of loans from 0.72%. The allowance for credit losses on loans was $85.4 million, equal to about 1.13% of loans. Those figures were manageable but directionally weaker.

Annual earnings quality and capital allocation

FY2025 net income declined 10.5% to $102.9 million, with diluted EPS of $1.99. Net interest margin was 4.20%, the efficiency ratio was 62.28%, and dividends were $0.57 per share. The company also repurchased 299,347 shares in Q4 2025 at a weighted-average price of $30.44 and redeemed $30.0 million of subordinated notes in October 2025; the remaining $30.0 million was redeemed on April 1, 2026. These actions reduced share count and debt ahead of closing but also illustrate how a regulated bank must balance capital returns against lending growth, liquidity and merger needs.

Who owned Stellar stock, and how did governance affect the merger?

Stellar had one class of common stock with one vote per share, so there was no founder-controlled dual-class structure. Ownership was institutionally influenced but directors and executives also held a meaningful block. According to the April 17, 2026 Form 10-K/A, directors, nominees and executive officers as a group beneficially owned 4.81 million shares, or 9.44%, as of April 10, 2026.

The 2026 ownership and governance amendment also reported a 13-member classified board before closing. Robert R. Franklin, Jr. served as CEO, while Steven F. Retzloff served as executive chairman. Stock-ownership guidelines required the CEO to hold shares worth five times base salary, nonemployee directors five times cash retainer and other executive officers two times base salary.

What changed for former shareholders?

Each eligible STEL share converted into $11.36 in cash plus 0.3803 PB shares. Based on April 15, 2026 share counts, Prosperity expected to issue about 19.36 million PB shares and pay about $578.3 million in cash. Former Stellar holders therefore became a minority block in the larger company, with less direct influence than they had in Stellar. Two former Stellar directors, Robert Franklin and Joseph Swinbank, joined Prosperity’s board at closing, preserving some franchise continuity.

What risks and opportunities defined the final standalone story?

By closing, the most important opportunity was integration into a larger bank with broader funding, technology and operating scale. The most important risks shifted from STEL-specific trading questions to execution inside Prosperity: retaining customers and bankers, managing credit marks, realizing cost savings and preserving deposit relationships.

Which filing risks were most material?

The 2025 annual report emphasized regional-bank confidence, deposit competition, interest-rate changes, commercial real estate concentration, cybersecurity, compliance costs and the possibility that credit-loss allowances could prove insufficient. The bank also crossed the $10 billion asset threshold, making debit-interchange regulation and increased compliance complexity more relevant. Regulation was not merely a legal issue: it affected fee income, capital deployment, dividend capacity, systems investment and acquisition timing.

Where could the combined company create value?

Prosperity can spread technology, compliance and corporate overhead across a larger asset base; use a broader funding network; cross-sell treasury and deposit products; and consolidate duplicate locations or systems. The acquired Stellar franchise contributed dense Houston and Beaumont relationships, $7.59 billion of loans and $8.98 billion of deposits at March 31, 2026. The opportunity is to retain those economics while reducing standalone cost. The risk is that aggressive consolidation weakens the local responsiveness that created the franchise value in the first place.

Which KPIs matter most for analyzing Stellar’s legacy franchise?

Because STEL no longer trades, these KPIs should now be used to assess the acquired portfolio inside Prosperity rather than to forecast a standalone issuer. They still provide a disciplined framework for banking research and transaction review.

How should these metrics be connected?

No single ratio captures bank quality. A higher margin can be produced by better funding, riskier lending or both. A low efficiency ratio is attractive only if customer service and controls remain strong. Rapid loan growth improves revenue potential but can raise future losses and liquidity demands. The most useful analysis connects margin, funding mix, credit performance and capital: strong low-cost deposits support margin; disciplined underwriting protects capital; capital and liquidity allow the bank to absorb volatility and continue lending.

What is the key takeaway from Stellar Bancorp analysis?

Why does the legacy franchise still matter for valuation?

A conventional standalone DCF is no longer the correct framework because the company ceased to exist as an independent public issuer. The economically relevant valuation question is whether the cash and PB shares paid for Stellar will earn an acceptable return for Prosperity shareholders after credit marks, restructuring costs, lost revenue, capital needs and integration savings.

What would a transaction model need?

A rigorous model would start with Stellar’s $10.89 billion of assets, $7.59 billion of loans and $8.98 billion of deposits at March 31, 2026. It would estimate purchase-accounting marks on loans and securities, core deposit intangible amortization, merger charges, cost saves, lost fee and spread income, credit losses and the capital required to support the combined balance sheet. The consideration structure—$11.36 cash plus 0.3803 PB shares per STEL share—means value also depends on Prosperity’s post-merger earnings and share performance.

For comparable-company work, the useful ratios are price to tangible book value, price to forward earnings, return on tangible common equity, net interest margin, efficiency ratio, deposit mix, credit quality and capital. The SEC’s merger announcement filing provides the exchange ratio and cash component, while the closing filing confirms that the transaction is complete.