STEL

STEL is no longer a fundamentals story — it is a near-closed merger. Per the 10-K, on January 27, 2026 Stellar signed a definitive Agreement and Plan of Merger to be acquired by Prosperity Bancshares (PB), with each share converting into 0.3803 PB shares plus $11.36 cash, closing 'expected to occur in the second quarter of 2026, subject to customary conditions, including approval of the Company's shareholders and regulatory approvals.' Today is June 30, 2026 — the very end of that window — so the $39.31 price is a merger-arbitrage spread on a fixed-ratio cash-and-stock deal, not a bet on the underlying bank. The reward is capped at the deal value and the residual spread to close; the only real swing factor is whether the deal clears on schedule.

The standalone numbers explain why management sold rather than soldiered on. Net income fell to $103M (-10.5%) and diluted EPS to $1.99 (-7.4%), the second straight year of decline from the FY2023 peak ($130M), and ROE is a soft 6.2% — below most banks' cost of capital. The MD&A frames the business squarely as a spread lender ('Net interest income is our largest source of revenue') exposed to Texas rate and credit cycles, and the 54% drop in cash & equivalents to $419M points to tightening liquidity. The balance sheet itself is sound (equity $1.67B, +3.8%; liabilities/equity 5.48x is normal-to-conservative for a bank; retained earnings +14.9%), and the $73.4M of buybacks plus $29.3M dividends show capital return — but a mid-single-digit ROE bank earning less each year is exactly the kind of franchise that creates more value inside a larger acquirer than alone.