Stellar Bancorp’s third quarter delivered results that were generally in line with Wall Street expectations, with management attributing stable performance to strong deposit growth and disciplined margin management. CEO Bob Franklin highlighted the bank’s emphasis on building full client relationships, which drove balance sheet expansion and contributed to improved net interest income. The quarter also saw a modest uptick in charge-offs, but management emphasized that these were anticipated and well-reserved. CFO Paul Egge described the expense increase as a temporary outlier, citing severance costs linked to upcoming branch closures as a primary factor.

Is now the time to buy STEL? Find out in our full research report (it’s free for active Edge members).

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 Q3 Earnings Call

• David Feaster (Raymond James) asked about the drivers of loan payoffs and the outlook for loan growth. President Ray Vitulli explained that payoffs were split between collateral sales, competitive refinancing, and normal portfolio activity, noting that a healthy origination pipeline should support future growth as paydowns moderate.
• David Feaster (Raymond James) inquired about credit quality concerns and risk management practices. CFO Paul Egge described a focus on front-end credit controls, ongoing stress testing, and a deliberate shift toward more stable C&I loans, emphasizing that most charge-offs were already reserved.
• David Feaster (Raymond James) questioned the composition of deposit growth and plans for excess liquidity. Vitulli stated that 51% of new deposits were from new clients, with the balance from deeper existing relationships; Franklin added that deploying liquidity into loans and securities will remain a focus.
• Stephen Scouten (Piper Sandler) asked whether typical fourth-quarter seasonal deposit inflows were expected. Egge and Franklin noted that government-related deposits could provide a late-quarter lift, but the timing is unpredictable and not reflected in Q3 results.
• William Jones (KBW) probed margin sustainability amid Fed rate cuts and the bank’s approach to deposit repricing. Egge outlined plans to proactively lower costs on exception and index-priced deposits, leveraging a nuanced strategy to defend margin as rates decline.

Catalysts in Upcoming Quarters

In the coming quarters, our analyst team will be watching (1) whether the origination pipeline translates into net loan growth as paydowns ease, (2) how effectively management contains expenses following the Q3 spike, and (3) the pace and quality of deposit growth as competitive dynamics shift in Texas. Execution on these fronts, as well as selective deployment of excess liquidity, will be important in determining the bank’s ability to drive sustainable profitability.

Stellar Bancorp currently trades at $29.50, in line with $29.46 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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