Stellar Bancorp, Inc.STEL
Stellar Bancorp, Inc. Stock Compensation Disclosure
STOCK-BASED COMPENSATION
During 2025, the Company increased the maximum shares authorized to be issued under the 2022 Omnibus Incentive Plan (the “2022 Plan”) to 3,100,000 shares of common stock from 2,000,000 shares. All restricted stock and performance share units outstanding at December 31, 2025 were issued under the 2022 Plan. At December 31, 2025, there were 1,686,152 shares reserved and available for issuance under the 2022 Plan.
The Company accounts for stock-based employee compensation plans using the fair value-based method of accounting. The Company recognized total stock-based compensation expense of $9.2 million, $10.8 million and $9.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Stock Options
Stock options outstanding at December 31, 2025 were issued under equity compensation plans that are no longer active. No additional shares may be issued under these compensation plans. There were no stock options granted during 2025 and 2024. The fair value of stock options granted is estimated at the date of grant using the Black-Scholes model. Options are exercisable up to 10 years from the date of the grant and, dependent on the terms of the applicable award agreement, generally vest 3 to 4 years after the date of grant.
Stock option activity for the years ended December 31, 2025 and 2024 was as follows:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||
| (In thousands) | (In years) | (In thousands) | |||||||||||||||||||||
| Options outstanding, January 1, 2024 | 258 | $ | 18.56 | 2.09 | $ | 2,398 | |||||||||||||||||
| Options granted | — | — | |||||||||||||||||||||
| Options exercised | (133) | 16.34 | |||||||||||||||||||||
| Options forfeited | (6) | 19.89 | |||||||||||||||||||||
| Options outstanding, December 31, 2024 | 119 | $ | 20.98 | 2.05 | $ | 876 | |||||||||||||||||
| Options granted | — | — | |||||||||||||||||||||
| Options exercised | (44) | 19.15 | |||||||||||||||||||||
| Options forfeited | (3) | 21.33 | |||||||||||||||||||||
| Options outstanding, December 31, 2025 | 72 | $ | 22.10 | 1.55 | $ | 634 | |||||||||||||||||
| Options vested and exercisable, December 31, 2025 | 72 | $ | 22.10 | 1.55 | $ | 634 | |||||||||||||||||
Information related to the stock options exercises for the years indicated below is as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Intrinsic value of options exercised | $ | 396 | $ | 1,118 | $ | 776 | |||||||||||
| Cash received from option exercises | 851 | 2,173 | 986 | ||||||||||||||
Restricted Stock Awards
The fair value of the Company’s restricted stock awards is estimated based on the market value of the Company’s common stock at the date of grant, which is the closing price of the Company’s common stock on the day before the grant date. The shares of restricted stock granted generally vest over a period of or three years from the date of grant and the Company accounts for shares of restricted stock by recording the fair value of the grant on the award date as compensation expense over the vesting period. Restricted stock awards are non-transferable and subject to forfeiture until the restricted stock awards vest and any dividends with respect to the restricted stock awards are subject to the same restrictions, including the risk of forfeiture.
Nonvested shares of restricted stock activity for the years ended December 31, 2025 and 2024 was as follows:
| Number of Shares | Weighted Average Grant Date Fair Value | ||||||||||
| (In thousands) | |||||||||||
| Nonvested share awards outstanding, January 1, 2024 | 458 | $ | 29.38 | ||||||||
| Share awards granted | 314 | 23.20 | |||||||||
| Share awards vested | (279) | 30.29 | |||||||||
| Unvested share awards forfeited or cancelled | (64) | 25.71 | |||||||||
| Nonvested share awards outstanding, December 31, 2024 | 429 | $ | 24.81 | ||||||||
| Share awards granted | 271 | 28.76 | |||||||||
| Share awards vested | (205) | 25.56 | |||||||||
| Unvested share awards forfeited or cancelled | (35) | 27.21 | |||||||||
| Nonvested share awards outstanding, December 31, 2025 | 460 | $ | 26.63 | ||||||||
At December 31, 2025, there was $7.7 million of unrecognized compensation expense related to the restricted stock awards, which is expected to be recognized over a weighted-average period of 1.77 years. The total fair value of restricted stock awards that fully vested during the years ended December 31, 2025, 2024 and 2023 was approximately $5.7 million, $6.8 million and $5.0 million, respectively.
Performance Share Units and Performance Share Awards
The Company’s PSUs and PSAs are earned subject to certain performance goals being met after a specified performance period and are settled in shares of Company common stock. The Company awarded 88,941 and 77,624 PSUs during the years ended December 31, 2025 and 2024, respectively, under the 2022 Plan. PSUs issued in 2025 and 2024 are not considered outstanding at the date of issuance as the grantee does not become the record owner of the restricted stock and does not have voting, dividend and other shareholder rights.
The grant date fair value of the PSUs and PSAs is based on the probable outcome of the applicable performance conditions and is calculated at target based on a combination of the closing market price of our common stock on the grant date and a Monte Carlo simulated fair value in accordance with ASC 718. At December 31, 2025, there was $2.5 million of unrecognized compensation expense related to PSUs, which is expected to be recognized over a weighted-average period of 2.11 years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 15, 2023 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.