Stellar Bancorp, Inc. reported net income of $27.0 million, or diluted earnings per share of $0.53, for the first quarter of 2026, an increase from $26.1 million, or diluted earnings per share of $0.51, in the fourth quarter of 2025. Excluding acquisition and merger-related expenses, adjusted net income was $29.6 million, or diluted earnings per share of $0.58. The company experienced significant loan growth, with loans held for investment increasing by $287.4 million, representing a 3.94% linked-quarter growth or 16.0% annualized. Net interest income also rose to $105.9 million in Q1 2026 from $103.4 million in Q4 2025, and the tax equivalent net interest margin improved to 4.24% from 4.21%.
Despite the positive earnings, nonperforming assets increased to $70.1 million, or 0.64% of total assets, at March 31, 2026, up from $60.0 million, or 0.56%, at December 31, 2025. The provision for credit losses decreased to $2.5 million from $5.1 million in the previous quarter, but net charge-offs saw a notable increase to $1.4 million in Q1 2026 compared to $71 thousand in Q4 2025. GuruFocus data indicates that Stellar Bancorp's shares might be overvalued by approximately 42.4%, with a GF Value of $26.39 compared to a current price of $37.59.
A significant event influencing Stellar Bancorp is its merger with Prosperity Bancshares, Inc. The merger, announced on January 27, 2026, received all necessary regulatory approvals by April 22, 2026. This transaction was completed on July 1, 2026, with Stellar merging into Prosperity and Stellar Bank merging into Prosperity Bank. Under the terms, each Stellar common stock share was converted into 0.3803 shares of Prosperity common stock and $11.36 in cash. Stellar's CEO, Robert R. Franklin, Jr., and other management joined Prosperity's leadership team.
