Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Stellar Bancorp, Inc. Reports First Quarter 2024 Results By: Stellar Bancorp, Inc. via Business Wire April 26, 2024 at 07:00 AM EDT Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NYSE: STEL) today reported net income of $26.1 million, or diluted earnings per share of $0.49, for the first quarter of 2024 compared to net income of $27.3 million, or diluted earnings per share of $0.51, for the fourth quarter of 2023. “We are pleased to announce our first quarter 2024 results that reflect our continued focus on building capital, maintaining liquidity, and monitoring credit as uncertainty with the interest rate environment persists,” said Robert R. Franklin, Jr., Stellar’s Chief Executive Officer. “We are working with our customers as they adapt and understand how to operate in the higher interest rate environment,” continued Mr. Franklin. “We operate in one of the best markets in the country with continued population growth, increasing jobs and a friendly environment to build businesses. Our incredible team continues to deliver great service to the community and our customers. We are well positioned in our markets and are excited about what Stellar is building,” concluded Mr. Franklin. First Quarter 2024 Financial Highlights Solid Profitability: First quarter 2024 net income of $26.1 million, or diluted earnings per share of $0.49, translated into an annualized return on average assets of 0.98%, an annualized return on average equity of 6.88% and an annualized return on average tangible equity of 11.47%(1). Strong Net Interest Margin: Tax equivalent net interest margin was 4.26% for the first quarter of 2024 compared to 4.40% for the fourth quarter of 2023. The tax equivalent net interest margin, excluding purchase accounting accretion (“PAA”), was 3.91%(1) for the first quarter of 2024 compared to 3.91%(1) for the fourth quarter of 2023. Meaningful Regulatory Capital Build: Total risk-based capital ratio increased to 14.62% at March 31, 2024 from 14.02% at December 31, 2023 and Tier 1 leverage ratio increased to 10.41% at March 31, 2024 from 10.18% at December 31, 2023. Favorable Cost of Funds: Cost of funds was 2.06% for the first quarter of 2024 compared to 2.03% for the fourth quarter of 2023. First Quarter 2024 Results Net interest income in the first quarter of 2024 decreased $3.8 million, or 3.6%, to $102.1 million from $105.9 million for the fourth quarter of 2023. The net interest margin on a tax equivalent basis decreased 14 basis points to 4.26% for the first quarter of 2024 from 4.40% for the fourth quarter of 2023. The decrease in the net interest margin from the prior quarter was primarily due to the decreased yield on interest earning assets from decreased purchase accounting adjustments during the first quarter. Net interest income for the first quarter of 2024 benefited from $8.6 million of income from purchase accounting adjustments compared to $11.7 million in the fourth quarter of 2023. Excluding purchase accounting adjustments, net interest income (tax equivalent) for the first quarter 2024 would have been $93.7 million(1) and the tax equivalent net interest margin would have been 3.91%(1). Noninterest income for the fourth quarter of 2023 was $6.3 million, a decrease of $590 thousand, or 8.6%, compared to $6.9 million for the fourth quarter of 2023. Noninterest income decreased in the first quarter of 2024 compared to the fourth quarter of 2023 primarily due to Small Business Investment Company income recognized in the fourth quarter of 2023, partially offset by an increase in gains on sales of assets in the first quarter of 2024 compared to the fourth quarter of 2023. _____________________ (1) Refer to page 9 of this earnings release for the calculation of this non-GAAP financial measure. Noninterest expense for the first quarter of 2024 decreased $6.5 million, or 8.4%, to $71.4 million compared to $77.9 million for the fourth quarter of 2023. The decrease in noninterest expense in the first quarter of 2024 compared to the fourth quarter of 2023 was primarily due to higher nonrecurring items in the fourth quarter of 2023, including higher professional fees associated with various projects some of which related to the Company’s total assets crossing the $10 billion asset threshold, $3.1 million of acquisition and merger-related expenses, a $2.4 million accrual for future payments to the FDIC pursuant to the special insurance assessment and $1.9 million of severance expense. The efficiency ratio was 66.18% for the first quarter of 2024 compared to 69.21% for the fourth quarter of 2023. First quarter 2024 annualized returns on average assets, average equity and average tangible equity were 0.98%, 6.88% and 11.47%(1), respectively, compared to 1.02%, 7.33% and 12.61%(1), respectively, for the fourth quarter of 2023. Financial Condition Total loans at March 31, 2024 decreased $17.0 million to $7.91 billion compared to $7.93 billion at December 31, 2023. At March 31, 2024, the remaining balance of the purchase accounting adjustments on loans was $98.3 million. Total deposits at March 31, 2024 decreased $78.8 million to $8.79 billion compared to $8.87 billion at December 31, 2023, due to decreases in noninterest-bearing deposits and interest-bearing demand deposits, partially offset by increases in money market and certificates and other time deposits. Shifts in the deposit mix were primarily driven by the current interest rate environment and an intensely competitive market for deposits. Estimated uninsured deposits totaled $4.80 billion and estimated uninsured deposits net of collateralized deposits of $1.03 billion were $3.77 billion, or 42.8%, of total deposits at March 31, 2024. Total assets at March 31, 2024 were $10.73 billion, an increase of $82.1 million, compared to $10.65 billion at December 31, 2023. Asset Quality Nonperforming assets totaled $57.1 million, or 0.53% of total assets, at March 31, 2024, compared to $39.2 million, or 0.37%, of total assets, at December 31, 2023. The allowance for credit losses on loans as a percentage of total loans was 1.22% at March 31, 2024 and 1.16% at December 31, 2023. The provision for credit losses for the first quarter of 2024 was $4.1 million compared to $1.0 million for the fourth quarter of 2023. First quarter 2024 net charge-offs were $714 thousand, or 0.04% (annualized) of average loans, compared to net charge-offs of $2.6 million, or 0.13% (annualized) of average loans, for the fourth quarter 2023. GAAP Reconciliation of Non-GAAP Financial Measures Stellar’s management uses certain non-GAAP financial measures to evaluate its performance. Please refer to the GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures on page 9 of this earnings release for a reconciliation of these non-GAAP financial measures. Conference Call Stellar’s management team will host a conference call and webcast on Friday, April 26, 2024 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss its first quarter 2024 results. Participants may register for the conference call at https://registrations.events/direct/Q4I635866971 to receive the dial-in numbers and unique PIN to access the call. If you need assistance in obtaining a dial-in number, please contact IR@stellar.bank. A simultaneous audio-only webcast may be accessed at https://events.q4inc.com/attendee/952298333. If you are unable to participate during the live webcast, the webcast will be accessible via the Investor Relations section of the Company’s website at ir.stellar.bank. About Stellar Bancorp, Inc. Stellar Bancorp, Inc. is a bank holding company headquartered in Houston, Texas. Stellar’s principal banking subsidiary, Stellar Bank, provides a diversified range of commercial banking services primarily to small- to medium-sized businesses and individual customers across the Houston, Dallas, Beaumont and surrounding communities in Texas. Forward-Looking Statements Certain statements in this press release which are not historical in nature are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements about the benefits of the Company’s merger with Allegiance Bancshares, Inc. (the “Merger”), including future financial performance and operating results, the Company’s plans, business and growth strategies, objectives, expectations and intentions, and other statements that are not historical facts, including projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Forward-looking statements may be identified by terminology such as “may,” “will,” “should,” “could,” “scheduled,” “plans,” “intends,” “projects,” “anticipates,” “expects,” “believes,” “estimates,” “potential,” “would,” or “continue” or negatives of such terms or other comparable terminology. All forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of Stellar to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, among others: the risk that the cost savings and any revenue synergies from the Merger may not be fully realized or may take longer than anticipated to be realized; disruption to our business as a result of the Merger; the risk that the integration of operations will be materially delayed or will be more costly or difficult than we expected or that we are otherwise unable to successfully integrate our legacy businesses; the amount of the costs, fees, expenses and charges related to the Merger; reputational risk and the reaction of our customers, suppliers, employees or other business partners to the Merger; changes in the interest rate environment, the value of Stellar’s assets and obligations and the availability of capital and liquidity; general competitive, economic, political and market conditions; and other factors that may affect future results of Stellar including changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; disruptions to the economy and the U.S. banking system caused by recent bank failures, risks associated with uninsured deposits and responsive measures by federal or state governments or banking regulators, including increases in the cost of our deposit insurance assessments and other actions of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and Texas Department of Banking and legislative and regulatory actions and reforms. Additional factors which could affect the Company’s future results can be found in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, in each case filed with the SEC and available on the SEC’s website at https://www.sec.gov. We disclaim any obligation and do not intend to update or revise any forward-looking statements contained in this communication, which speak only as of the date hereof, whether as a result of new information, future events or otherwise, except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements. Stellar Bancorp, Inc. Financial Highlights (Unaudited) 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars in thousands) ASSETS Cash and due from banks $ 74,663 $ 121,004 $ 94,970 $ 105,913 $ 99,231 Interest-bearing deposits at other financial institutions 325,079 278,233 207,302 198,176 164,102 Total cash and cash equivalents 399,742 399,237 302,272 304,089 263,333 Available for sale securities, at fair value 1,523,100 1,395,680 1,414,952 1,478,222 1,519,175 Loans held for investment 7,908,111 7,925,133 8,004,528 8,068,718 7,886,044 Less: allowance for credit losses on loans (96,285 ) (91,684 ) (93,575 ) (100,195 ) (96,188 ) Loans, net 7,811,826 7,833,449 7,910,953 7,968,523 7,789,856 Accrued interest receivable 45,466 44,244 43,536 42,051 42,405 Premises and equipment, net 115,698 118,683 119,332 119,142 124,723 Federal Home Loan Bank stock 16,050 25,051 29,022 24,478 19,676 Bank-owned life insurance 105,671 105,084 104,699 104,148 103,616 Goodwill 497,318 497,318 497,318 497,260 497,260 Core deposit intangibles, net 110,513 116,712 122,944 129,805 136,665 Other assets 103,838 111,681 120,432 110,633 108,009 Total assets $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 $ 10,604,718 LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES: Deposits: Noninterest-bearing $ 3,323,149 $ 3,546,815 $ 3,656,288 $ 3,713,536 $ 3,877,859 Interest-bearing Demand 1,576,261 1,659,999 1,397,492 1,437,509 1,394,244 Money market and savings 2,203,767 2,136,777 2,128,950 2,174,073 2,401,840 Certificates and other time 1,691,539 1,529,876 1,503,891 1,441,251 1,064,932 Total interest-bearing deposits 5,471,567 5,326,652 5,030,333 5,052,833 4,861,016 Total deposits 8,794,716 8,873,467 8,686,621 8,766,369 8,738,875 Accrued interest payable 12,227 11,288 7,612 4,555 3,875 Borrowed funds 215,000 50,000 323,981 369,963 238,944 Subordinated debt 109,864 109,765 109,665 109,566 109,420 Other liabilities 66,717 81,601 76,735 69,218 67,388 Total liabilities 9,198,524 9,126,121 9,204,614 9,319,671 9,158,502 SHAREHOLDERS’ EQUITY: Common stock 536 533 533 533 533 Capital surplus 1,235,221 1,232,627 1,231,686 1,228,532 1,225,596 Retained earnings 425,130 405,945 385,600 361,619 333,368 Accumulated other comprehensive loss (130,189 ) (118,087 ) (156,973 ) (132,004 ) (113,281 ) Total shareholders’ equity 1,530,698 1,521,018 1,460,846 1,458,680 1,446,216 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 $ 10,604,718 Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars in thousands, except per share data) INTEREST INCOME: Loans, including fees $ 134,685 $ 139,114 $ 138,948 $ 133,931 $ 125,729 Securities: Taxable 9,293 9,622 9,493 9,726 9,653 Tax-exempt 818 418 437 436 1,262 Deposits in other financial institutions 3,627 3,021 2,391 2,865 3,771 Total interest income 148,423 152,175 151,269 146,958 140,415 INTEREST EXPENSE: Demand, money market and savings deposits 27,530 25,033 23,557 20,708 18,037 Certificates and other time deposits 15,084 15,075 13,282 9,622 3,307 Borrowed funds 1,774 4,154 5,801 6,535 1,317 Subordinated debt 1,917 1,983 1,908 1,812 1,927 Total interest expense 46,305 46,245 44,548 38,677 24,588 NET INTEREST INCOME 102,118 105,930 106,721 108,281 115,827 Provision for credit losses 4,098 1,047 2,315 1,915 3,666 Net interest income after provision for credit losses 98,020 104,883 104,406 106,366 112,161 NONINTEREST INCOME: Service charges on deposit accounts 1,598 1,520 1,620 1,575 1,349 Gain (loss) on sale of assets 513 198 — (6 ) 198 Bank-owned life insurance 587 573 551 532 522 Debit card and ATM income 527 542 935 1,821 1,698 Other 3,071 4,053 1,589 1,561 3,731 Total noninterest income 6,296 6,886 4,695 5,483 7,498 NONINTEREST EXPENSE: Salaries and employee benefits 41,376 40,464 39,495 37,300 39,775 Net occupancy and equipment 4,390 4,572 4,455 3,817 4,088 Depreciation 1,964 1,955 1,952 1,841 1,836 Data processing and software amortization 4,894 5,000 4,798 4,674 5,054 Professional fees 2,662 3,867 997 1,564 1,527 Regulatory assessments and FDIC insurance 1,854 5,169 1,814 2,755 1,294 Amortization of intangibles 6,212 6,247 6,876 6,881 6,879 Communications 937 743 663 689 701 Advertising 765 1,004 877 907 839 Acquisition and merger-related expenses — 3,072 3,421 2,897 6,165 Other 6,356 5,848 5,400 5,882 4,440 Total noninterest expense 71,410 77,941 70,748 69,207 72,598 INCOME BEFORE INCOME TAXES 32,906 33,828 38,353 42,642 47,061 Provision for income taxes 6,759 6,562 7,445 7,467 9,913 NET INCOME $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 37,148 EARNINGS PER SHARE Basic $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 0.70 Diluted $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 0.70 Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars and share amounts in thousands, except per share data) Net income $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 37,148 Earnings per share, basic $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 0.70 Earnings per share, diluted $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 0.70 Dividends per share $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.13 Return on average assets(A) 0.98 % 1.02 % 1.14 % 1.31 % 1.38 % Return on average equity(A) 6.88 % 7.33 % 8.34 % 9.67 % 10.62 % Return on average tangible equity(A)(B) 11.47 % 12.61 % 14.47 % 17.05 % 19.32 % Net interest margin (tax equivalent)(A)(C) 4.26 % 4.40 % 4.37 % 4.49 % 4.80 % Net interest margin (tax equivalent) excluding PAA(A)(B)(C) 3.91 % 3.91 % 3.87 % 3.97 % 4.38 % Efficiency ratio(D) 66.18 % 69.21 % 63.50 % 60.83 % 58.96 % Capital Ratios Stellar Bancorp, Inc. (Consolidated) Equity to assets 14.27 % 14.29 % 13.70 % 13.53 % 13.64 % Tangible equity to tangible assets(B) 9.12 % 9.04 % 8.37 % 8.19 % 8.15 % Estimated Total capital ratio (to risk-weighted assets) 14.62 % 14.02 % 13.61 % 13.21 % 12.72 % Estimated Common equity Tier 1 capital (to risk weighted assets) 12.29 % 11.77 % 11.30 % 10.83 % 10.39 % Estimated Tier 1 capital (to risk-weighted assets) 12.41 % 11.89 % 11.41 % 10.94 % 10.50 % Estimated Tier 1 leverage (to average tangible assets) 10.41 % 10.18 % 9.82 % 9.51 % 9.01 % Stellar Bank Estimated Total capital ratio (to risk-weighted assets) 14.13 % 13.65 % 13.32 % 12.98 % 12.42 % Estimated Common equity Tier 1 capital (to risk-weighted assets) 12.61 % 12.20 % 11.80 % 11.38 % 10.87 % Estimated Tier 1 capital (to risk-weighted assets) 12.61 % 12.20 % 11.80 % 11.38 % 10.87 % Estimated Tier 1 leverage (to average tangible assets) 10.59 % 10.44 % 10.15 % 9.89 % 9.35 % Other Data Weighted average shares: Basic 53,343 53,282 53,313 53,297 53,021 Diluted 53,406 53,350 53,380 53,375 53,138 Period end shares outstanding 53,551 53,291 53,322 53,303 53,296 Book value per share $ 28.58 $ 28.54 $ 27.40 $ 27.37 $ 27.14 Tangible book value per share(B) $ 17.23 $ 17.02 $ 15.76 $ 15.60 $ 15.24 Employees - full-time equivalents 1,007 998 1,008 1,004 1,055 (A) Interim periods annualized. (B) Refer to the calculation of these non-GAAP financial measures and a reconciliation to their most directly comparable GAAP financial measures on page 9 of this Earnings Release. (C) Net interest margin represents net interest income divided by average interest-earning assets. (D) Represents total noninterest expense divided by the sum of net interest income plus noninterest income, excluding net gains and losses on the sale of loans, securities and assets. Additionally, taxes and provision for credit losses are not part of this calculation. Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended March 31, 2024 December 31, 2023 March 31, 2023 Average Balance Interest Earned/ Interest Paid Average Yield/Rate Average Balance Interest Earned/ Interest Paid Average Yield/Rate Average Balance Interest Earned/ Interest Paid Average Yield/Rate (Dollars in thousands) Assets Interest-Earning Assets: Loans $ 7,938,824 $ 134,685 6.82 % $ 7,973,780 $ 139,114 6.92 % $ 7,847,011 $ 125,729 6.50 % Securities 1,441,814 10,111 2.82 % 1,386,079 10,040 2.87 % 1,604,011 10,915 2.76 % Deposits in other financial institutions 264,906 3,627 5.51 % 217,068 3,021 5.52 % 364,781 3,771 4.19 % Total interest-earning assets 9,645,544 $ 148,423 6.19 % 9,576,927 $ 152,175 6.30 % 9,815,803 $ 140,415 5.80 % Allowance for credit losses on loans (91,612 ) (92,992 ) (93,331 ) Noninterest-earning assets 1,132,857 1,142,438 1,160,061 Total assets $ 10,686,789 $ 10,626,373 $ 10,882,533 Liabilities and Interest-Bearing Liabilities: Interest-bearing demand deposits $ 1,697,211 $ 12,278 2.91 % $ 1,420,892 $ 10,548 2.95 % $ 1,650,273 $ 8,382 2.06 % Money market and savings deposits 2,150,805 15,252 2.85 % 2,163,348 14,485 2.66 % 2,490,889 9,655 1.57 % Certificates and other time deposits 1,444,048 15,084 4.20 % 1,461,227 15,075 4.09 % 861,595 3,307 1.56 % Borrowed funds 134,400 1,774 5.31 % 275,694 4,154 5.98 % 105,191 1,317 5.08 % Subordinated debt 109,808 1,917 7.02 % 109,713 1,983 7.17 % 109,415 1,927 7.14 % Total interest-bearing liabilities 5,536,272 $ 46,305 3.36 % 5,430,874 $ 46,245 3.38 % 5,217,363 $ 24,588 1.91 % Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits 3,525,758 3,624,417 4,166,265 Other liabilities 96,461 95,705 80,823 Total liabilities 9,158,491 9,150,996 9,464,451 Shareholders’ equity 1,528,298 1,475,377 1,418,082 Total liabilities and shareholders’ equity $ 10,686,789 $ 10,626,373 $ 10,882,533 Net interest rate spread 2.83 % 2.92 % 3.89 % Net interest income and margin $ 102,118 4.26 % $ 105,930 4.39 % $ 115,827 4.79 % Net interest income and net interest margin (tax equivalent) $ 102,207 4.26 % $ 106,121 4.40 % $ 116,119 4.80 % Cost of funds 2.06 % 2.03 % 1.06 % Cost of deposits 1.94 % 1.84 % 0.94 % Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars in thousands) Period-end Loan Portfolio: Commercial and industrial $ 1,451,462 $ 1,409,002 $ 1,474,600 $ 1,512,476 $ 1,477,340 Paycheck Protection Program (PPP) 4,293 5,100 5,968 8,027 11,081 Real estate: Commercial real estate (including multi-family residential) 4,049,885 4,071,807 4,076,606 4,038,487 4,014,609 Commercial real estate construction and land development 1,039,443 1,060,406 1,078,265 1,136,124 1,034,538 1-4 family residential (including home equity) 1,049,316 1,047,174 1,024,945 1,009,439 1,008,362 Residential construction 252,573 267,357 289,553 311,208 292,143 Consumer and other 61,139 64,287 54,591 52,957 47,971 Total loans held for investment $ 7,908,111 $ 7,925,133 $ 8,004,528 $ 8,068,718 $ 7,886,044 Deposits: Noninterest-bearing $ 3,323,149 $ 3,546,815 $ 3,656,288 $ 3,713,536 $ 3,877,859 Interest-bearing Demand 1,576,261 1,659,999 1,397,492 1,437,509 1,394,244 Money market and savings 2,203,767 2,136,777 2,128,950 2,174,073 2,401,840 Certificates and other time 1,691,539 1,529,876 1,503,891 1,441,251 1,064,932 Total interest-bearing deposits 5,471,567 5,326,652 5,030,333 5,052,833 4,861,016 Total deposits $ 8,794,716 $ 8,873,467 $ 8,686,621 $ 8,766,369 $ 8,738,875 Asset Quality: Nonaccrual loans $ 57,129 $ 39,191 $ 38,291 $ 43,349 $ 43,413 Accruing loans 90 or more days past due — — — — — Total nonperforming loans 57,129 39,191 38,291 43,349 43,413 Other repossessed assets — — — — 124 Total nonperforming assets $ 57,129 $ 39,191 $ 38,291 $ 43,349 $ 43,537 Net charge-offs $ 714 $ 2,577 $ 8,116 $ 236 $ 192 Nonaccrual loans: Commercial and industrial $ 15,465 $ 5,048 $ 14,991 $ 22,968 $ 23,329 Real estate: Commercial real estate (including multi-family residential) 21,268 16,699 13,563 8,221 9,026 Commercial real estate construction and land development 8,406 5,043 170 388 27 1-4 family residential (including home equity) 10,368 8,874 8,442 10,880 10,586 Residential construction 1,410 3,288 635 665 195 Consumer and other 212 239 490 227 250 Total nonaccrual loans $ 57,129 $ 39,191 $ 38,291 $ 43,349 $ 43,413 Asset Quality Ratios: Nonperforming assets to total assets 0.53 % 0.37 % 0.36 % 0.40 % 0.41 % Nonperforming loans to total loans 0.72 % 0.49 % 0.48 % 0.54 % 0.55 % Allowance for credit losses on loans to nonperforming loans 168.54 % 233.94 % 244.38 % 231.14 % 221.56 % Allowance for credit losses on loans to total loans 1.22 % 1.16 % 1.17 % 1.24 % 1.22 % Net charge-offs to average loans (annualized) 0.04 % 0.13 % 0.40 % 0.01 % 0.01 % Stellar Bancorp, Inc. GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures (Unaudited) Stellar’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Stellar believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and that management and investors benefit from referring to these non-GAAP financial measures in assessing Stellar’s performance and when planning, forecasting, analyzing and comparing past, present and future periods. Specifically, Stellar reviews pre-tax, pre-provision income, pre-tax pre-provision ROAA, tangible book value per share, return on average tangible equity, tangible equity to tangible assets and net interest margin (tax equivalent) excluding PAA for internal planning and forecasting purposes. Stellar has included in this earnings release information relating to these non-GAAP financial measures for the applicable periods presented. These non-GAAP measures should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which Stellar calculates the non-GAAP financial measures may differ from that of other companies reporting measures with similar names. Three Months Ended 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars and share amounts in thousands, except per share data) Net income $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 37,148 Add: Provision for credit losses 4,098 1,047 2,315 1,915 3,666 Add: Provision for income taxes 6,759 6,562 7,445 7,467 9,913 Pre-tax, pre-provision income $ 37,004 $ 34,875 $ 40,668 $ 44,557 $ 50,727 Total average assets $ 10,686,789 $ 10,626,373 $ 10,741,295 $ 10,740,138 $ 10,882,533 Pre-tax, pre-provision return on average assets(B) 1.39 % 1.30 % 1.50 % 1.66 % 1.89 % Total shareholders’ equity $ 1,530,698 $ 1,521,018 $ 1,460,846 $ 1,458,680 $ 1,446,216 Less: Goodwill and core deposit intangibles, net 607,831 614,030 620,262 627,065 633,925 Tangible shareholders’ equity $ 922,867 $ 906,988 $ 840,584 $ 831,615 $ 812,291 Shares outstanding at end of period 53,551 53,291 53,322 53,303 53,296 Tangible book value per share $ 17.23 $ 17.02 $ 15.76 $ 15.60 $ 15.24 Average shareholders’ equity $ 1,528,298 $ 1,475,377 $ 1,471,009 $ 1,458,473 $ 1,418,082 Less: Average goodwill and core deposit intangibles, net 611,149 617,236 623,864 630,854 638,110 Average tangible shareholders’ equity $ 917,149 $ 858,141 $ 847,145 $ 827,619 $ 779,972 Return on average tangible equity(B) 11.47 % 12.61 % 14.47 % 17.05 % 19.32 % Total assets $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 $ 10,604,718 Less: Goodwill and core deposit intangibles, net 607,831 614,030 620,262 627,065 633,925 Tangible assets $ 10,121,391 $ 10,033,109 $ 10,045,198 $ 10,151,286 $ 9,970,793 Tangible equity to tangible assets 9.12 % 9.04 % 8.37 % 8.19 % 8.15 % Net interest income (tax equivalent) $ 102,207 $ 106,121 $ 106,919 $ 108,509 $ 116,119 Less: Purchase accounting accretion 8,551 11,726 12,400 12,572 10,104 Adjusted net interest income (tax equivalent) $ 93,656 $ 94,395 $ 94,519 $ 95,937 $ 106,015 Average earning assets $ 9,645,544 $ 9,576,927 $ 9,697,553 $ 9,693,527 $ 9,815,803 Net interest margin (tax equivalent) excluding PAA 3.91 % 3.91 % 3.87 % 3.97 % 4.38 % (A) Represents total noninterest expense, excluding acquisition and merger-related expenses, core deposit intangibles amortization and write-downs on assets moved to held for sale, divided by the sum of net interest income, excluding purchase accounting adjustments plus noninterest income, excluding gains and losses on the sale of assets. Additionally, taxes and provision for credit losses are not part of this calculation. (B) Interim periods annualized. View source version on businesswire.com: https://www.businesswire.com/news/home/20240426630776/en/Contacts Investor relations IR@stellar.bank Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Stellar Bancorp, Inc. Reports First Quarter 2024 Results By: Stellar Bancorp, Inc. via Business Wire April 26, 2024 at 07:00 AM EDT Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NYSE: STEL) today reported net income of $26.1 million, or diluted earnings per share of $0.49, for the first quarter of 2024 compared to net income of $27.3 million, or diluted earnings per share of $0.51, for the fourth quarter of 2023. “We are pleased to announce our first quarter 2024 results that reflect our continued focus on building capital, maintaining liquidity, and monitoring credit as uncertainty with the interest rate environment persists,” said Robert R. Franklin, Jr., Stellar’s Chief Executive Officer. “We are working with our customers as they adapt and understand how to operate in the higher interest rate environment,” continued Mr. Franklin. “We operate in one of the best markets in the country with continued population growth, increasing jobs and a friendly environment to build businesses. Our incredible team continues to deliver great service to the community and our customers. We are well positioned in our markets and are excited about what Stellar is building,” concluded Mr. Franklin. First Quarter 2024 Financial Highlights Solid Profitability: First quarter 2024 net income of $26.1 million, or diluted earnings per share of $0.49, translated into an annualized return on average assets of 0.98%, an annualized return on average equity of 6.88% and an annualized return on average tangible equity of 11.47%(1). Strong Net Interest Margin: Tax equivalent net interest margin was 4.26% for the first quarter of 2024 compared to 4.40% for the fourth quarter of 2023. The tax equivalent net interest margin, excluding purchase accounting accretion (“PAA”), was 3.91%(1) for the first quarter of 2024 compared to 3.91%(1) for the fourth quarter of 2023. Meaningful Regulatory Capital Build: Total risk-based capital ratio increased to 14.62% at March 31, 2024 from 14.02% at December 31, 2023 and Tier 1 leverage ratio increased to 10.41% at March 31, 2024 from 10.18% at December 31, 2023. Favorable Cost of Funds: Cost of funds was 2.06% for the first quarter of 2024 compared to 2.03% for the fourth quarter of 2023. First Quarter 2024 Results Net interest income in the first quarter of 2024 decreased $3.8 million, or 3.6%, to $102.1 million from $105.9 million for the fourth quarter of 2023. The net interest margin on a tax equivalent basis decreased 14 basis points to 4.26% for the first quarter of 2024 from 4.40% for the fourth quarter of 2023. The decrease in the net interest margin from the prior quarter was primarily due to the decreased yield on interest earning assets from decreased purchase accounting adjustments during the first quarter. Net interest income for the first quarter of 2024 benefited from $8.6 million of income from purchase accounting adjustments compared to $11.7 million in the fourth quarter of 2023. Excluding purchase accounting adjustments, net interest income (tax equivalent) for the first quarter 2024 would have been $93.7 million(1) and the tax equivalent net interest margin would have been 3.91%(1). Noninterest income for the fourth quarter of 2023 was $6.3 million, a decrease of $590 thousand, or 8.6%, compared to $6.9 million for the fourth quarter of 2023. Noninterest income decreased in the first quarter of 2024 compared to the fourth quarter of 2023 primarily due to Small Business Investment Company income recognized in the fourth quarter of 2023, partially offset by an increase in gains on sales of assets in the first quarter of 2024 compared to the fourth quarter of 2023. _____________________ (1) Refer to page 9 of this earnings release for the calculation of this non-GAAP financial measure. Noninterest expense for the first quarter of 2024 decreased $6.5 million, or 8.4%, to $71.4 million compared to $77.9 million for the fourth quarter of 2023. The decrease in noninterest expense in the first quarter of 2024 compared to the fourth quarter of 2023 was primarily due to higher nonrecurring items in the fourth quarter of 2023, including higher professional fees associated with various projects some of which related to the Company’s total assets crossing the $10 billion asset threshold, $3.1 million of acquisition and merger-related expenses, a $2.4 million accrual for future payments to the FDIC pursuant to the special insurance assessment and $1.9 million of severance expense. The efficiency ratio was 66.18% for the first quarter of 2024 compared to 69.21% for the fourth quarter of 2023. First quarter 2024 annualized returns on average assets, average equity and average tangible equity were 0.98%, 6.88% and 11.47%(1), respectively, compared to 1.02%, 7.33% and 12.61%(1), respectively, for the fourth quarter of 2023. Financial Condition Total loans at March 31, 2024 decreased $17.0 million to $7.91 billion compared to $7.93 billion at December 31, 2023. At March 31, 2024, the remaining balance of the purchase accounting adjustments on loans was $98.3 million. Total deposits at March 31, 2024 decreased $78.8 million to $8.79 billion compared to $8.87 billion at December 31, 2023, due to decreases in noninterest-bearing deposits and interest-bearing demand deposits, partially offset by increases in money market and certificates and other time deposits. Shifts in the deposit mix were primarily driven by the current interest rate environment and an intensely competitive market for deposits. Estimated uninsured deposits totaled $4.80 billion and estimated uninsured deposits net of collateralized deposits of $1.03 billion were $3.77 billion, or 42.8%, of total deposits at March 31, 2024. Total assets at March 31, 2024 were $10.73 billion, an increase of $82.1 million, compared to $10.65 billion at December 31, 2023. Asset Quality Nonperforming assets totaled $57.1 million, or 0.53% of total assets, at March 31, 2024, compared to $39.2 million, or 0.37%, of total assets, at December 31, 2023. The allowance for credit losses on loans as a percentage of total loans was 1.22% at March 31, 2024 and 1.16% at December 31, 2023. The provision for credit losses for the first quarter of 2024 was $4.1 million compared to $1.0 million for the fourth quarter of 2023. First quarter 2024 net charge-offs were $714 thousand, or 0.04% (annualized) of average loans, compared to net charge-offs of $2.6 million, or 0.13% (annualized) of average loans, for the fourth quarter 2023. GAAP Reconciliation of Non-GAAP Financial Measures Stellar’s management uses certain non-GAAP financial measures to evaluate its performance. Please refer to the GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures on page 9 of this earnings release for a reconciliation of these non-GAAP financial measures. Conference Call Stellar’s management team will host a conference call and webcast on Friday, April 26, 2024 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss its first quarter 2024 results. Participants may register for the conference call at https://registrations.events/direct/Q4I635866971 to receive the dial-in numbers and unique PIN to access the call. If you need assistance in obtaining a dial-in number, please contact IR@stellar.bank. A simultaneous audio-only webcast may be accessed at https://events.q4inc.com/attendee/952298333. If you are unable to participate during the live webcast, the webcast will be accessible via the Investor Relations section of the Company’s website at ir.stellar.bank. About Stellar Bancorp, Inc. Stellar Bancorp, Inc. is a bank holding company headquartered in Houston, Texas. Stellar’s principal banking subsidiary, Stellar Bank, provides a diversified range of commercial banking services primarily to small- to medium-sized businesses and individual customers across the Houston, Dallas, Beaumont and surrounding communities in Texas. Forward-Looking Statements Certain statements in this press release which are not historical in nature are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements about the benefits of the Company’s merger with Allegiance Bancshares, Inc. (the “Merger”), including future financial performance and operating results, the Company’s plans, business and growth strategies, objectives, expectations and intentions, and other statements that are not historical facts, including projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Forward-looking statements may be identified by terminology such as “may,” “will,” “should,” “could,” “scheduled,” “plans,” “intends,” “projects,” “anticipates,” “expects,” “believes,” “estimates,” “potential,” “would,” or “continue” or negatives of such terms or other comparable terminology. All forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of Stellar to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, among others: the risk that the cost savings and any revenue synergies from the Merger may not be fully realized or may take longer than anticipated to be realized; disruption to our business as a result of the Merger; the risk that the integration of operations will be materially delayed or will be more costly or difficult than we expected or that we are otherwise unable to successfully integrate our legacy businesses; the amount of the costs, fees, expenses and charges related to the Merger; reputational risk and the reaction of our customers, suppliers, employees or other business partners to the Merger; changes in the interest rate environment, the value of Stellar’s assets and obligations and the availability of capital and liquidity; general competitive, economic, political and market conditions; and other factors that may affect future results of Stellar including changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; disruptions to the economy and the U.S. banking system caused by recent bank failures, risks associated with uninsured deposits and responsive measures by federal or state governments or banking regulators, including increases in the cost of our deposit insurance assessments and other actions of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and Texas Department of Banking and legislative and regulatory actions and reforms. Additional factors which could affect the Company’s future results can be found in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, in each case filed with the SEC and available on the SEC’s website at https://www.sec.gov. We disclaim any obligation and do not intend to update or revise any forward-looking statements contained in this communication, which speak only as of the date hereof, whether as a result of new information, future events or otherwise, except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements. Stellar Bancorp, Inc. Financial Highlights (Unaudited) 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars in thousands) ASSETS Cash and due from banks $ 74,663 $ 121,004 $ 94,970 $ 105,913 $ 99,231 Interest-bearing deposits at other financial institutions 325,079 278,233 207,302 198,176 164,102 Total cash and cash equivalents 399,742 399,237 302,272 304,089 263,333 Available for sale securities, at fair value 1,523,100 1,395,680 1,414,952 1,478,222 1,519,175 Loans held for investment 7,908,111 7,925,133 8,004,528 8,068,718 7,886,044 Less: allowance for credit losses on loans (96,285 ) (91,684 ) (93,575 ) (100,195 ) (96,188 ) Loans, net 7,811,826 7,833,449 7,910,953 7,968,523 7,789,856 Accrued interest receivable 45,466 44,244 43,536 42,051 42,405 Premises and equipment, net 115,698 118,683 119,332 119,142 124,723 Federal Home Loan Bank stock 16,050 25,051 29,022 24,478 19,676 Bank-owned life insurance 105,671 105,084 104,699 104,148 103,616 Goodwill 497,318 497,318 497,318 497,260 497,260 Core deposit intangibles, net 110,513 116,712 122,944 129,805 136,665 Other assets 103,838 111,681 120,432 110,633 108,009 Total assets $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 $ 10,604,718 LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES: Deposits: Noninterest-bearing $ 3,323,149 $ 3,546,815 $ 3,656,288 $ 3,713,536 $ 3,877,859 Interest-bearing Demand 1,576,261 1,659,999 1,397,492 1,437,509 1,394,244 Money market and savings 2,203,767 2,136,777 2,128,950 2,174,073 2,401,840 Certificates and other time 1,691,539 1,529,876 1,503,891 1,441,251 1,064,932 Total interest-bearing deposits 5,471,567 5,326,652 5,030,333 5,052,833 4,861,016 Total deposits 8,794,716 8,873,467 8,686,621 8,766,369 8,738,875 Accrued interest payable 12,227 11,288 7,612 4,555 3,875 Borrowed funds 215,000 50,000 323,981 369,963 238,944 Subordinated debt 109,864 109,765 109,665 109,566 109,420 Other liabilities 66,717 81,601 76,735 69,218 67,388 Total liabilities 9,198,524 9,126,121 9,204,614 9,319,671 9,158,502 SHAREHOLDERS’ EQUITY: Common stock 536 533 533 533 533 Capital surplus 1,235,221 1,232,627 1,231,686 1,228,532 1,225,596 Retained earnings 425,130 405,945 385,600 361,619 333,368 Accumulated other comprehensive loss (130,189 ) (118,087 ) (156,973 ) (132,004 ) (113,281 ) Total shareholders’ equity 1,530,698 1,521,018 1,460,846 1,458,680 1,446,216 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 $ 10,604,718 Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars in thousands, except per share data) INTEREST INCOME: Loans, including fees $ 134,685 $ 139,114 $ 138,948 $ 133,931 $ 125,729 Securities: Taxable 9,293 9,622 9,493 9,726 9,653 Tax-exempt 818 418 437 436 1,262 Deposits in other financial institutions 3,627 3,021 2,391 2,865 3,771 Total interest income 148,423 152,175 151,269 146,958 140,415 INTEREST EXPENSE: Demand, money market and savings deposits 27,530 25,033 23,557 20,708 18,037 Certificates and other time deposits 15,084 15,075 13,282 9,622 3,307 Borrowed funds 1,774 4,154 5,801 6,535 1,317 Subordinated debt 1,917 1,983 1,908 1,812 1,927 Total interest expense 46,305 46,245 44,548 38,677 24,588 NET INTEREST INCOME 102,118 105,930 106,721 108,281 115,827 Provision for credit losses 4,098 1,047 2,315 1,915 3,666 Net interest income after provision for credit losses 98,020 104,883 104,406 106,366 112,161 NONINTEREST INCOME: Service charges on deposit accounts 1,598 1,520 1,620 1,575 1,349 Gain (loss) on sale of assets 513 198 — (6 ) 198 Bank-owned life insurance 587 573 551 532 522 Debit card and ATM income 527 542 935 1,821 1,698 Other 3,071 4,053 1,589 1,561 3,731 Total noninterest income 6,296 6,886 4,695 5,483 7,498 NONINTEREST EXPENSE: Salaries and employee benefits 41,376 40,464 39,495 37,300 39,775 Net occupancy and equipment 4,390 4,572 4,455 3,817 4,088 Depreciation 1,964 1,955 1,952 1,841 1,836 Data processing and software amortization 4,894 5,000 4,798 4,674 5,054 Professional fees 2,662 3,867 997 1,564 1,527 Regulatory assessments and FDIC insurance 1,854 5,169 1,814 2,755 1,294 Amortization of intangibles 6,212 6,247 6,876 6,881 6,879 Communications 937 743 663 689 701 Advertising 765 1,004 877 907 839 Acquisition and merger-related expenses — 3,072 3,421 2,897 6,165 Other 6,356 5,848 5,400 5,882 4,440 Total noninterest expense 71,410 77,941 70,748 69,207 72,598 INCOME BEFORE INCOME TAXES 32,906 33,828 38,353 42,642 47,061 Provision for income taxes 6,759 6,562 7,445 7,467 9,913 NET INCOME $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 37,148 EARNINGS PER SHARE Basic $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 0.70 Diluted $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 0.70 Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars and share amounts in thousands, except per share data) Net income $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 37,148 Earnings per share, basic $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 0.70 Earnings per share, diluted $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 0.70 Dividends per share $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.13 Return on average assets(A) 0.98 % 1.02 % 1.14 % 1.31 % 1.38 % Return on average equity(A) 6.88 % 7.33 % 8.34 % 9.67 % 10.62 % Return on average tangible equity(A)(B) 11.47 % 12.61 % 14.47 % 17.05 % 19.32 % Net interest margin (tax equivalent)(A)(C) 4.26 % 4.40 % 4.37 % 4.49 % 4.80 % Net interest margin (tax equivalent) excluding PAA(A)(B)(C) 3.91 % 3.91 % 3.87 % 3.97 % 4.38 % Efficiency ratio(D) 66.18 % 69.21 % 63.50 % 60.83 % 58.96 % Capital Ratios Stellar Bancorp, Inc. (Consolidated) Equity to assets 14.27 % 14.29 % 13.70 % 13.53 % 13.64 % Tangible equity to tangible assets(B) 9.12 % 9.04 % 8.37 % 8.19 % 8.15 % Estimated Total capital ratio (to risk-weighted assets) 14.62 % 14.02 % 13.61 % 13.21 % 12.72 % Estimated Common equity Tier 1 capital (to risk weighted assets) 12.29 % 11.77 % 11.30 % 10.83 % 10.39 % Estimated Tier 1 capital (to risk-weighted assets) 12.41 % 11.89 % 11.41 % 10.94 % 10.50 % Estimated Tier 1 leverage (to average tangible assets) 10.41 % 10.18 % 9.82 % 9.51 % 9.01 % Stellar Bank Estimated Total capital ratio (to risk-weighted assets) 14.13 % 13.65 % 13.32 % 12.98 % 12.42 % Estimated Common equity Tier 1 capital (to risk-weighted assets) 12.61 % 12.20 % 11.80 % 11.38 % 10.87 % Estimated Tier 1 capital (to risk-weighted assets) 12.61 % 12.20 % 11.80 % 11.38 % 10.87 % Estimated Tier 1 leverage (to average tangible assets) 10.59 % 10.44 % 10.15 % 9.89 % 9.35 % Other Data Weighted average shares: Basic 53,343 53,282 53,313 53,297 53,021 Diluted 53,406 53,350 53,380 53,375 53,138 Period end shares outstanding 53,551 53,291 53,322 53,303 53,296 Book value per share $ 28.58 $ 28.54 $ 27.40 $ 27.37 $ 27.14 Tangible book value per share(B) $ 17.23 $ 17.02 $ 15.76 $ 15.60 $ 15.24 Employees - full-time equivalents 1,007 998 1,008 1,004 1,055 (A) Interim periods annualized. (B) Refer to the calculation of these non-GAAP financial measures and a reconciliation to their most directly comparable GAAP financial measures on page 9 of this Earnings Release. (C) Net interest margin represents net interest income divided by average interest-earning assets. (D) Represents total noninterest expense divided by the sum of net interest income plus noninterest income, excluding net gains and losses on the sale of loans, securities and assets. Additionally, taxes and provision for credit losses are not part of this calculation. Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended March 31, 2024 December 31, 2023 March 31, 2023 Average Balance Interest Earned/ Interest Paid Average Yield/Rate Average Balance Interest Earned/ Interest Paid Average Yield/Rate Average Balance Interest Earned/ Interest Paid Average Yield/Rate (Dollars in thousands) Assets Interest-Earning Assets: Loans $ 7,938,824 $ 134,685 6.82 % $ 7,973,780 $ 139,114 6.92 % $ 7,847,011 $ 125,729 6.50 % Securities 1,441,814 10,111 2.82 % 1,386,079 10,040 2.87 % 1,604,011 10,915 2.76 % Deposits in other financial institutions 264,906 3,627 5.51 % 217,068 3,021 5.52 % 364,781 3,771 4.19 % Total interest-earning assets 9,645,544 $ 148,423 6.19 % 9,576,927 $ 152,175 6.30 % 9,815,803 $ 140,415 5.80 % Allowance for credit losses on loans (91,612 ) (92,992 ) (93,331 ) Noninterest-earning assets 1,132,857 1,142,438 1,160,061 Total assets $ 10,686,789 $ 10,626,373 $ 10,882,533 Liabilities and Interest-Bearing Liabilities: Interest-bearing demand deposits $ 1,697,211 $ 12,278 2.91 % $ 1,420,892 $ 10,548 2.95 % $ 1,650,273 $ 8,382 2.06 % Money market and savings deposits 2,150,805 15,252 2.85 % 2,163,348 14,485 2.66 % 2,490,889 9,655 1.57 % Certificates and other time deposits 1,444,048 15,084 4.20 % 1,461,227 15,075 4.09 % 861,595 3,307 1.56 % Borrowed funds 134,400 1,774 5.31 % 275,694 4,154 5.98 % 105,191 1,317 5.08 % Subordinated debt 109,808 1,917 7.02 % 109,713 1,983 7.17 % 109,415 1,927 7.14 % Total interest-bearing liabilities 5,536,272 $ 46,305 3.36 % 5,430,874 $ 46,245 3.38 % 5,217,363 $ 24,588 1.91 % Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits 3,525,758 3,624,417 4,166,265 Other liabilities 96,461 95,705 80,823 Total liabilities 9,158,491 9,150,996 9,464,451 Shareholders’ equity 1,528,298 1,475,377 1,418,082 Total liabilities and shareholders’ equity $ 10,686,789 $ 10,626,373 $ 10,882,533 Net interest rate spread 2.83 % 2.92 % 3.89 % Net interest income and margin $ 102,118 4.26 % $ 105,930 4.39 % $ 115,827 4.79 % Net interest income and net interest margin (tax equivalent) $ 102,207 4.26 % $ 106,121 4.40 % $ 116,119 4.80 % Cost of funds 2.06 % 2.03 % 1.06 % Cost of deposits 1.94 % 1.84 % 0.94 % Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars in thousands) Period-end Loan Portfolio: Commercial and industrial $ 1,451,462 $ 1,409,002 $ 1,474,600 $ 1,512,476 $ 1,477,340 Paycheck Protection Program (PPP) 4,293 5,100 5,968 8,027 11,081 Real estate: Commercial real estate (including multi-family residential) 4,049,885 4,071,807 4,076,606 4,038,487 4,014,609 Commercial real estate construction and land development 1,039,443 1,060,406 1,078,265 1,136,124 1,034,538 1-4 family residential (including home equity) 1,049,316 1,047,174 1,024,945 1,009,439 1,008,362 Residential construction 252,573 267,357 289,553 311,208 292,143 Consumer and other 61,139 64,287 54,591 52,957 47,971 Total loans held for investment $ 7,908,111 $ 7,925,133 $ 8,004,528 $ 8,068,718 $ 7,886,044 Deposits: Noninterest-bearing $ 3,323,149 $ 3,546,815 $ 3,656,288 $ 3,713,536 $ 3,877,859 Interest-bearing Demand 1,576,261 1,659,999 1,397,492 1,437,509 1,394,244 Money market and savings 2,203,767 2,136,777 2,128,950 2,174,073 2,401,840 Certificates and other time 1,691,539 1,529,876 1,503,891 1,441,251 1,064,932 Total interest-bearing deposits 5,471,567 5,326,652 5,030,333 5,052,833 4,861,016 Total deposits $ 8,794,716 $ 8,873,467 $ 8,686,621 $ 8,766,369 $ 8,738,875 Asset Quality: Nonaccrual loans $ 57,129 $ 39,191 $ 38,291 $ 43,349 $ 43,413 Accruing loans 90 or more days past due — — — — — Total nonperforming loans 57,129 39,191 38,291 43,349 43,413 Other repossessed assets — — — — 124 Total nonperforming assets $ 57,129 $ 39,191 $ 38,291 $ 43,349 $ 43,537 Net charge-offs $ 714 $ 2,577 $ 8,116 $ 236 $ 192 Nonaccrual loans: Commercial and industrial $ 15,465 $ 5,048 $ 14,991 $ 22,968 $ 23,329 Real estate: Commercial real estate (including multi-family residential) 21,268 16,699 13,563 8,221 9,026 Commercial real estate construction and land development 8,406 5,043 170 388 27 1-4 family residential (including home equity) 10,368 8,874 8,442 10,880 10,586 Residential construction 1,410 3,288 635 665 195 Consumer and other 212 239 490 227 250 Total nonaccrual loans $ 57,129 $ 39,191 $ 38,291 $ 43,349 $ 43,413 Asset Quality Ratios: Nonperforming assets to total assets 0.53 % 0.37 % 0.36 % 0.40 % 0.41 % Nonperforming loans to total loans 0.72 % 0.49 % 0.48 % 0.54 % 0.55 % Allowance for credit losses on loans to nonperforming loans 168.54 % 233.94 % 244.38 % 231.14 % 221.56 % Allowance for credit losses on loans to total loans 1.22 % 1.16 % 1.17 % 1.24 % 1.22 % Net charge-offs to average loans (annualized) 0.04 % 0.13 % 0.40 % 0.01 % 0.01 % Stellar Bancorp, Inc. GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures (Unaudited) Stellar’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Stellar believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and that management and investors benefit from referring to these non-GAAP financial measures in assessing Stellar’s performance and when planning, forecasting, analyzing and comparing past, present and future periods. Specifically, Stellar reviews pre-tax, pre-provision income, pre-tax pre-provision ROAA, tangible book value per share, return on average tangible equity, tangible equity to tangible assets and net interest margin (tax equivalent) excluding PAA for internal planning and forecasting purposes. Stellar has included in this earnings release information relating to these non-GAAP financial measures for the applicable periods presented. These non-GAAP measures should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which Stellar calculates the non-GAAP financial measures may differ from that of other companies reporting measures with similar names. Three Months Ended 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars and share amounts in thousands, except per share data) Net income $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 37,148 Add: Provision for credit losses 4,098 1,047 2,315 1,915 3,666 Add: Provision for income taxes 6,759 6,562 7,445 7,467 9,913 Pre-tax, pre-provision income $ 37,004 $ 34,875 $ 40,668 $ 44,557 $ 50,727 Total average assets $ 10,686,789 $ 10,626,373 $ 10,741,295 $ 10,740,138 $ 10,882,533 Pre-tax, pre-provision return on average assets(B) 1.39 % 1.30 % 1.50 % 1.66 % 1.89 % Total shareholders’ equity $ 1,530,698 $ 1,521,018 $ 1,460,846 $ 1,458,680 $ 1,446,216 Less: Goodwill and core deposit intangibles, net 607,831 614,030 620,262 627,065 633,925 Tangible shareholders’ equity $ 922,867 $ 906,988 $ 840,584 $ 831,615 $ 812,291 Shares outstanding at end of period 53,551 53,291 53,322 53,303 53,296 Tangible book value per share $ 17.23 $ 17.02 $ 15.76 $ 15.60 $ 15.24 Average shareholders’ equity $ 1,528,298 $ 1,475,377 $ 1,471,009 $ 1,458,473 $ 1,418,082 Less: Average goodwill and core deposit intangibles, net 611,149 617,236 623,864 630,854 638,110 Average tangible shareholders’ equity $ 917,149 $ 858,141 $ 847,145 $ 827,619 $ 779,972 Return on average tangible equity(B) 11.47 % 12.61 % 14.47 % 17.05 % 19.32 % Total assets $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 $ 10,604,718 Less: Goodwill and core deposit intangibles, net 607,831 614,030 620,262 627,065 633,925 Tangible assets $ 10,121,391 $ 10,033,109 $ 10,045,198 $ 10,151,286 $ 9,970,793 Tangible equity to tangible assets 9.12 % 9.04 % 8.37 % 8.19 % 8.15 % Net interest income (tax equivalent) $ 102,207 $ 106,121 $ 106,919 $ 108,509 $ 116,119 Less: Purchase accounting accretion 8,551 11,726 12,400 12,572 10,104 Adjusted net interest income (tax equivalent) $ 93,656 $ 94,395 $ 94,519 $ 95,937 $ 106,015 Average earning assets $ 9,645,544 $ 9,576,927 $ 9,697,553 $ 9,693,527 $ 9,815,803 Net interest margin (tax equivalent) excluding PAA 3.91 % 3.91 % 3.87 % 3.97 % 4.38 % (A) Represents total noninterest expense, excluding acquisition and merger-related expenses, core deposit intangibles amortization and write-downs on assets moved to held for sale, divided by the sum of net interest income, excluding purchase accounting adjustments plus noninterest income, excluding gains and losses on the sale of assets. Additionally, taxes and provision for credit losses are not part of this calculation. (B) Interim periods annualized. View source version on businesswire.com: https://www.businesswire.com/news/home/20240426630776/en/Contacts Investor relations IR@stellar.bank
Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NYSE: STEL) today reported net income of $26.1 million, or diluted earnings per share of $0.49, for the first quarter of 2024 compared to net income of $27.3 million, or diluted earnings per share of $0.51, for the fourth quarter of 2023. “We are pleased to announce our first quarter 2024 results that reflect our continued focus on building capital, maintaining liquidity, and monitoring credit as uncertainty with the interest rate environment persists,” said Robert R. Franklin, Jr., Stellar’s Chief Executive Officer. “We are working with our customers as they adapt and understand how to operate in the higher interest rate environment,” continued Mr. Franklin. “We operate in one of the best markets in the country with continued population growth, increasing jobs and a friendly environment to build businesses. Our incredible team continues to deliver great service to the community and our customers. We are well positioned in our markets and are excited about what Stellar is building,” concluded Mr. Franklin. First Quarter 2024 Financial Highlights Solid Profitability: First quarter 2024 net income of $26.1 million, or diluted earnings per share of $0.49, translated into an annualized return on average assets of 0.98%, an annualized return on average equity of 6.88% and an annualized return on average tangible equity of 11.47%(1). Strong Net Interest Margin: Tax equivalent net interest margin was 4.26% for the first quarter of 2024 compared to 4.40% for the fourth quarter of 2023. The tax equivalent net interest margin, excluding purchase accounting accretion (“PAA”), was 3.91%(1) for the first quarter of 2024 compared to 3.91%(1) for the fourth quarter of 2023. Meaningful Regulatory Capital Build: Total risk-based capital ratio increased to 14.62% at March 31, 2024 from 14.02% at December 31, 2023 and Tier 1 leverage ratio increased to 10.41% at March 31, 2024 from 10.18% at December 31, 2023. Favorable Cost of Funds: Cost of funds was 2.06% for the first quarter of 2024 compared to 2.03% for the fourth quarter of 2023. First Quarter 2024 Results Net interest income in the first quarter of 2024 decreased $3.8 million, or 3.6%, to $102.1 million from $105.9 million for the fourth quarter of 2023. The net interest margin on a tax equivalent basis decreased 14 basis points to 4.26% for the first quarter of 2024 from 4.40% for the fourth quarter of 2023. The decrease in the net interest margin from the prior quarter was primarily due to the decreased yield on interest earning assets from decreased purchase accounting adjustments during the first quarter. Net interest income for the first quarter of 2024 benefited from $8.6 million of income from purchase accounting adjustments compared to $11.7 million in the fourth quarter of 2023. Excluding purchase accounting adjustments, net interest income (tax equivalent) for the first quarter 2024 would have been $93.7 million(1) and the tax equivalent net interest margin would have been 3.91%(1). Noninterest income for the fourth quarter of 2023 was $6.3 million, a decrease of $590 thousand, or 8.6%, compared to $6.9 million for the fourth quarter of 2023. Noninterest income decreased in the first quarter of 2024 compared to the fourth quarter of 2023 primarily due to Small Business Investment Company income recognized in the fourth quarter of 2023, partially offset by an increase in gains on sales of assets in the first quarter of 2024 compared to the fourth quarter of 2023. _____________________ (1) Refer to page 9 of this earnings release for the calculation of this non-GAAP financial measure. Noninterest expense for the first quarter of 2024 decreased $6.5 million, or 8.4%, to $71.4 million compared to $77.9 million for the fourth quarter of 2023. The decrease in noninterest expense in the first quarter of 2024 compared to the fourth quarter of 2023 was primarily due to higher nonrecurring items in the fourth quarter of 2023, including higher professional fees associated with various projects some of which related to the Company’s total assets crossing the $10 billion asset threshold, $3.1 million of acquisition and merger-related expenses, a $2.4 million accrual for future payments to the FDIC pursuant to the special insurance assessment and $1.9 million of severance expense. The efficiency ratio was 66.18% for the first quarter of 2024 compared to 69.21% for the fourth quarter of 2023. First quarter 2024 annualized returns on average assets, average equity and average tangible equity were 0.98%, 6.88% and 11.47%(1), respectively, compared to 1.02%, 7.33% and 12.61%(1), respectively, for the fourth quarter of 2023. Financial Condition Total loans at March 31, 2024 decreased $17.0 million to $7.91 billion compared to $7.93 billion at December 31, 2023. At March 31, 2024, the remaining balance of the purchase accounting adjustments on loans was $98.3 million. Total deposits at March 31, 2024 decreased $78.8 million to $8.79 billion compared to $8.87 billion at December 31, 2023, due to decreases in noninterest-bearing deposits and interest-bearing demand deposits, partially offset by increases in money market and certificates and other time deposits. Shifts in the deposit mix were primarily driven by the current interest rate environment and an intensely competitive market for deposits. Estimated uninsured deposits totaled $4.80 billion and estimated uninsured deposits net of collateralized deposits of $1.03 billion were $3.77 billion, or 42.8%, of total deposits at March 31, 2024. Total assets at March 31, 2024 were $10.73 billion, an increase of $82.1 million, compared to $10.65 billion at December 31, 2023. Asset Quality Nonperforming assets totaled $57.1 million, or 0.53% of total assets, at March 31, 2024, compared to $39.2 million, or 0.37%, of total assets, at December 31, 2023. The allowance for credit losses on loans as a percentage of total loans was 1.22% at March 31, 2024 and 1.16% at December 31, 2023. The provision for credit losses for the first quarter of 2024 was $4.1 million compared to $1.0 million for the fourth quarter of 2023. First quarter 2024 net charge-offs were $714 thousand, or 0.04% (annualized) of average loans, compared to net charge-offs of $2.6 million, or 0.13% (annualized) of average loans, for the fourth quarter 2023. GAAP Reconciliation of Non-GAAP Financial Measures Stellar’s management uses certain non-GAAP financial measures to evaluate its performance. Please refer to the GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures on page 9 of this earnings release for a reconciliation of these non-GAAP financial measures. Conference Call Stellar’s management team will host a conference call and webcast on Friday, April 26, 2024 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss its first quarter 2024 results. Participants may register for the conference call at https://registrations.events/direct/Q4I635866971 to receive the dial-in numbers and unique PIN to access the call. If you need assistance in obtaining a dial-in number, please contact IR@stellar.bank. A simultaneous audio-only webcast may be accessed at https://events.q4inc.com/attendee/952298333. If you are unable to participate during the live webcast, the webcast will be accessible via the Investor Relations section of the Company’s website at ir.stellar.bank. About Stellar Bancorp, Inc. Stellar Bancorp, Inc. is a bank holding company headquartered in Houston, Texas. Stellar’s principal banking subsidiary, Stellar Bank, provides a diversified range of commercial banking services primarily to small- to medium-sized businesses and individual customers across the Houston, Dallas, Beaumont and surrounding communities in Texas. Forward-Looking Statements Certain statements in this press release which are not historical in nature are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements about the benefits of the Company’s merger with Allegiance Bancshares, Inc. (the “Merger”), including future financial performance and operating results, the Company’s plans, business and growth strategies, objectives, expectations and intentions, and other statements that are not historical facts, including projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Forward-looking statements may be identified by terminology such as “may,” “will,” “should,” “could,” “scheduled,” “plans,” “intends,” “projects,” “anticipates,” “expects,” “believes,” “estimates,” “potential,” “would,” or “continue” or negatives of such terms or other comparable terminology. All forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of Stellar to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, among others: the risk that the cost savings and any revenue synergies from the Merger may not be fully realized or may take longer than anticipated to be realized; disruption to our business as a result of the Merger; the risk that the integration of operations will be materially delayed or will be more costly or difficult than we expected or that we are otherwise unable to successfully integrate our legacy businesses; the amount of the costs, fees, expenses and charges related to the Merger; reputational risk and the reaction of our customers, suppliers, employees or other business partners to the Merger; changes in the interest rate environment, the value of Stellar’s assets and obligations and the availability of capital and liquidity; general competitive, economic, political and market conditions; and other factors that may affect future results of Stellar including changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; disruptions to the economy and the U.S. banking system caused by recent bank failures, risks associated with uninsured deposits and responsive measures by federal or state governments or banking regulators, including increases in the cost of our deposit insurance assessments and other actions of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and Texas Department of Banking and legislative and regulatory actions and reforms. Additional factors which could affect the Company’s future results can be found in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, in each case filed with the SEC and available on the SEC’s website at https://www.sec.gov. We disclaim any obligation and do not intend to update or revise any forward-looking statements contained in this communication, which speak only as of the date hereof, whether as a result of new information, future events or otherwise, except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements. Stellar Bancorp, Inc. Financial Highlights (Unaudited) 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars in thousands) ASSETS Cash and due from banks $ 74,663 $ 121,004 $ 94,970 $ 105,913 $ 99,231 Interest-bearing deposits at other financial institutions 325,079 278,233 207,302 198,176 164,102 Total cash and cash equivalents 399,742 399,237 302,272 304,089 263,333 Available for sale securities, at fair value 1,523,100 1,395,680 1,414,952 1,478,222 1,519,175 Loans held for investment 7,908,111 7,925,133 8,004,528 8,068,718 7,886,044 Less: allowance for credit losses on loans (96,285 ) (91,684 ) (93,575 ) (100,195 ) (96,188 ) Loans, net 7,811,826 7,833,449 7,910,953 7,968,523 7,789,856 Accrued interest receivable 45,466 44,244 43,536 42,051 42,405 Premises and equipment, net 115,698 118,683 119,332 119,142 124,723 Federal Home Loan Bank stock 16,050 25,051 29,022 24,478 19,676 Bank-owned life insurance 105,671 105,084 104,699 104,148 103,616 Goodwill 497,318 497,318 497,318 497,260 497,260 Core deposit intangibles, net 110,513 116,712 122,944 129,805 136,665 Other assets 103,838 111,681 120,432 110,633 108,009 Total assets $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 $ 10,604,718 LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES: Deposits: Noninterest-bearing $ 3,323,149 $ 3,546,815 $ 3,656,288 $ 3,713,536 $ 3,877,859 Interest-bearing Demand 1,576,261 1,659,999 1,397,492 1,437,509 1,394,244 Money market and savings 2,203,767 2,136,777 2,128,950 2,174,073 2,401,840 Certificates and other time 1,691,539 1,529,876 1,503,891 1,441,251 1,064,932 Total interest-bearing deposits 5,471,567 5,326,652 5,030,333 5,052,833 4,861,016 Total deposits 8,794,716 8,873,467 8,686,621 8,766,369 8,738,875 Accrued interest payable 12,227 11,288 7,612 4,555 3,875 Borrowed funds 215,000 50,000 323,981 369,963 238,944 Subordinated debt 109,864 109,765 109,665 109,566 109,420 Other liabilities 66,717 81,601 76,735 69,218 67,388 Total liabilities 9,198,524 9,126,121 9,204,614 9,319,671 9,158,502 SHAREHOLDERS’ EQUITY: Common stock 536 533 533 533 533 Capital surplus 1,235,221 1,232,627 1,231,686 1,228,532 1,225,596 Retained earnings 425,130 405,945 385,600 361,619 333,368 Accumulated other comprehensive loss (130,189 ) (118,087 ) (156,973 ) (132,004 ) (113,281 ) Total shareholders’ equity 1,530,698 1,521,018 1,460,846 1,458,680 1,446,216 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 $ 10,604,718 Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars in thousands, except per share data) INTEREST INCOME: Loans, including fees $ 134,685 $ 139,114 $ 138,948 $ 133,931 $ 125,729 Securities: Taxable 9,293 9,622 9,493 9,726 9,653 Tax-exempt 818 418 437 436 1,262 Deposits in other financial institutions 3,627 3,021 2,391 2,865 3,771 Total interest income 148,423 152,175 151,269 146,958 140,415 INTEREST EXPENSE: Demand, money market and savings deposits 27,530 25,033 23,557 20,708 18,037 Certificates and other time deposits 15,084 15,075 13,282 9,622 3,307 Borrowed funds 1,774 4,154 5,801 6,535 1,317 Subordinated debt 1,917 1,983 1,908 1,812 1,927 Total interest expense 46,305 46,245 44,548 38,677 24,588 NET INTEREST INCOME 102,118 105,930 106,721 108,281 115,827 Provision for credit losses 4,098 1,047 2,315 1,915 3,666 Net interest income after provision for credit losses 98,020 104,883 104,406 106,366 112,161 NONINTEREST INCOME: Service charges on deposit accounts 1,598 1,520 1,620 1,575 1,349 Gain (loss) on sale of assets 513 198 — (6 ) 198 Bank-owned life insurance 587 573 551 532 522 Debit card and ATM income 527 542 935 1,821 1,698 Other 3,071 4,053 1,589 1,561 3,731 Total noninterest income 6,296 6,886 4,695 5,483 7,498 NONINTEREST EXPENSE: Salaries and employee benefits 41,376 40,464 39,495 37,300 39,775 Net occupancy and equipment 4,390 4,572 4,455 3,817 4,088 Depreciation 1,964 1,955 1,952 1,841 1,836 Data processing and software amortization 4,894 5,000 4,798 4,674 5,054 Professional fees 2,662 3,867 997 1,564 1,527 Regulatory assessments and FDIC insurance 1,854 5,169 1,814 2,755 1,294 Amortization of intangibles 6,212 6,247 6,876 6,881 6,879 Communications 937 743 663 689 701 Advertising 765 1,004 877 907 839 Acquisition and merger-related expenses — 3,072 3,421 2,897 6,165 Other 6,356 5,848 5,400 5,882 4,440 Total noninterest expense 71,410 77,941 70,748 69,207 72,598 INCOME BEFORE INCOME TAXES 32,906 33,828 38,353 42,642 47,061 Provision for income taxes 6,759 6,562 7,445 7,467 9,913 NET INCOME $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 37,148 EARNINGS PER SHARE Basic $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 0.70 Diluted $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 0.70 Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars and share amounts in thousands, except per share data) Net income $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 37,148 Earnings per share, basic $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 0.70 Earnings per share, diluted $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 0.70 Dividends per share $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.13 Return on average assets(A) 0.98 % 1.02 % 1.14 % 1.31 % 1.38 % Return on average equity(A) 6.88 % 7.33 % 8.34 % 9.67 % 10.62 % Return on average tangible equity(A)(B) 11.47 % 12.61 % 14.47 % 17.05 % 19.32 % Net interest margin (tax equivalent)(A)(C) 4.26 % 4.40 % 4.37 % 4.49 % 4.80 % Net interest margin (tax equivalent) excluding PAA(A)(B)(C) 3.91 % 3.91 % 3.87 % 3.97 % 4.38 % Efficiency ratio(D) 66.18 % 69.21 % 63.50 % 60.83 % 58.96 % Capital Ratios Stellar Bancorp, Inc. (Consolidated) Equity to assets 14.27 % 14.29 % 13.70 % 13.53 % 13.64 % Tangible equity to tangible assets(B) 9.12 % 9.04 % 8.37 % 8.19 % 8.15 % Estimated Total capital ratio (to risk-weighted assets) 14.62 % 14.02 % 13.61 % 13.21 % 12.72 % Estimated Common equity Tier 1 capital (to risk weighted assets) 12.29 % 11.77 % 11.30 % 10.83 % 10.39 % Estimated Tier 1 capital (to risk-weighted assets) 12.41 % 11.89 % 11.41 % 10.94 % 10.50 % Estimated Tier 1 leverage (to average tangible assets) 10.41 % 10.18 % 9.82 % 9.51 % 9.01 % Stellar Bank Estimated Total capital ratio (to risk-weighted assets) 14.13 % 13.65 % 13.32 % 12.98 % 12.42 % Estimated Common equity Tier 1 capital (to risk-weighted assets) 12.61 % 12.20 % 11.80 % 11.38 % 10.87 % Estimated Tier 1 capital (to risk-weighted assets) 12.61 % 12.20 % 11.80 % 11.38 % 10.87 % Estimated Tier 1 leverage (to average tangible assets) 10.59 % 10.44 % 10.15 % 9.89 % 9.35 % Other Data Weighted average shares: Basic 53,343 53,282 53,313 53,297 53,021 Diluted 53,406 53,350 53,380 53,375 53,138 Period end shares outstanding 53,551 53,291 53,322 53,303 53,296 Book value per share $ 28.58 $ 28.54 $ 27.40 $ 27.37 $ 27.14 Tangible book value per share(B) $ 17.23 $ 17.02 $ 15.76 $ 15.60 $ 15.24 Employees - full-time equivalents 1,007 998 1,008 1,004 1,055 (A) Interim periods annualized. (B) Refer to the calculation of these non-GAAP financial measures and a reconciliation to their most directly comparable GAAP financial measures on page 9 of this Earnings Release. (C) Net interest margin represents net interest income divided by average interest-earning assets. (D) Represents total noninterest expense divided by the sum of net interest income plus noninterest income, excluding net gains and losses on the sale of loans, securities and assets. Additionally, taxes and provision for credit losses are not part of this calculation. Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended March 31, 2024 December 31, 2023 March 31, 2023 Average Balance Interest Earned/ Interest Paid Average Yield/Rate Average Balance Interest Earned/ Interest Paid Average Yield/Rate Average Balance Interest Earned/ Interest Paid Average Yield/Rate (Dollars in thousands) Assets Interest-Earning Assets: Loans $ 7,938,824 $ 134,685 6.82 % $ 7,973,780 $ 139,114 6.92 % $ 7,847,011 $ 125,729 6.50 % Securities 1,441,814 10,111 2.82 % 1,386,079 10,040 2.87 % 1,604,011 10,915 2.76 % Deposits in other financial institutions 264,906 3,627 5.51 % 217,068 3,021 5.52 % 364,781 3,771 4.19 % Total interest-earning assets 9,645,544 $ 148,423 6.19 % 9,576,927 $ 152,175 6.30 % 9,815,803 $ 140,415 5.80 % Allowance for credit losses on loans (91,612 ) (92,992 ) (93,331 ) Noninterest-earning assets 1,132,857 1,142,438 1,160,061 Total assets $ 10,686,789 $ 10,626,373 $ 10,882,533 Liabilities and Interest-Bearing Liabilities: Interest-bearing demand deposits $ 1,697,211 $ 12,278 2.91 % $ 1,420,892 $ 10,548 2.95 % $ 1,650,273 $ 8,382 2.06 % Money market and savings deposits 2,150,805 15,252 2.85 % 2,163,348 14,485 2.66 % 2,490,889 9,655 1.57 % Certificates and other time deposits 1,444,048 15,084 4.20 % 1,461,227 15,075 4.09 % 861,595 3,307 1.56 % Borrowed funds 134,400 1,774 5.31 % 275,694 4,154 5.98 % 105,191 1,317 5.08 % Subordinated debt 109,808 1,917 7.02 % 109,713 1,983 7.17 % 109,415 1,927 7.14 % Total interest-bearing liabilities 5,536,272 $ 46,305 3.36 % 5,430,874 $ 46,245 3.38 % 5,217,363 $ 24,588 1.91 % Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits 3,525,758 3,624,417 4,166,265 Other liabilities 96,461 95,705 80,823 Total liabilities 9,158,491 9,150,996 9,464,451 Shareholders’ equity 1,528,298 1,475,377 1,418,082 Total liabilities and shareholders’ equity $ 10,686,789 $ 10,626,373 $ 10,882,533 Net interest rate spread 2.83 % 2.92 % 3.89 % Net interest income and margin $ 102,118 4.26 % $ 105,930 4.39 % $ 115,827 4.79 % Net interest income and net interest margin (tax equivalent) $ 102,207 4.26 % $ 106,121 4.40 % $ 116,119 4.80 % Cost of funds 2.06 % 2.03 % 1.06 % Cost of deposits 1.94 % 1.84 % 0.94 % Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars in thousands) Period-end Loan Portfolio: Commercial and industrial $ 1,451,462 $ 1,409,002 $ 1,474,600 $ 1,512,476 $ 1,477,340 Paycheck Protection Program (PPP) 4,293 5,100 5,968 8,027 11,081 Real estate: Commercial real estate (including multi-family residential) 4,049,885 4,071,807 4,076,606 4,038,487 4,014,609 Commercial real estate construction and land development 1,039,443 1,060,406 1,078,265 1,136,124 1,034,538 1-4 family residential (including home equity) 1,049,316 1,047,174 1,024,945 1,009,439 1,008,362 Residential construction 252,573 267,357 289,553 311,208 292,143 Consumer and other 61,139 64,287 54,591 52,957 47,971 Total loans held for investment $ 7,908,111 $ 7,925,133 $ 8,004,528 $ 8,068,718 $ 7,886,044 Deposits: Noninterest-bearing $ 3,323,149 $ 3,546,815 $ 3,656,288 $ 3,713,536 $ 3,877,859 Interest-bearing Demand 1,576,261 1,659,999 1,397,492 1,437,509 1,394,244 Money market and savings 2,203,767 2,136,777 2,128,950 2,174,073 2,401,840 Certificates and other time 1,691,539 1,529,876 1,503,891 1,441,251 1,064,932 Total interest-bearing deposits 5,471,567 5,326,652 5,030,333 5,052,833 4,861,016 Total deposits $ 8,794,716 $ 8,873,467 $ 8,686,621 $ 8,766,369 $ 8,738,875 Asset Quality: Nonaccrual loans $ 57,129 $ 39,191 $ 38,291 $ 43,349 $ 43,413 Accruing loans 90 or more days past due — — — — — Total nonperforming loans 57,129 39,191 38,291 43,349 43,413 Other repossessed assets — — — — 124 Total nonperforming assets $ 57,129 $ 39,191 $ 38,291 $ 43,349 $ 43,537 Net charge-offs $ 714 $ 2,577 $ 8,116 $ 236 $ 192 Nonaccrual loans: Commercial and industrial $ 15,465 $ 5,048 $ 14,991 $ 22,968 $ 23,329 Real estate: Commercial real estate (including multi-family residential) 21,268 16,699 13,563 8,221 9,026 Commercial real estate construction and land development 8,406 5,043 170 388 27 1-4 family residential (including home equity) 10,368 8,874 8,442 10,880 10,586 Residential construction 1,410 3,288 635 665 195 Consumer and other 212 239 490 227 250 Total nonaccrual loans $ 57,129 $ 39,191 $ 38,291 $ 43,349 $ 43,413 Asset Quality Ratios: Nonperforming assets to total assets 0.53 % 0.37 % 0.36 % 0.40 % 0.41 % Nonperforming loans to total loans 0.72 % 0.49 % 0.48 % 0.54 % 0.55 % Allowance for credit losses on loans to nonperforming loans 168.54 % 233.94 % 244.38 % 231.14 % 221.56 % Allowance for credit losses on loans to total loans 1.22 % 1.16 % 1.17 % 1.24 % 1.22 % Net charge-offs to average loans (annualized) 0.04 % 0.13 % 0.40 % 0.01 % 0.01 % Stellar Bancorp, Inc. GAAP Reconciliation and Management’s Explanation of Non-GAAP Financial Measures (Unaudited) Stellar’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Stellar believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and that management and investors benefit from referring to these non-GAAP financial measures in assessing Stellar’s performance and when planning, forecasting, analyzing and comparing past, present and future periods. Specifically, Stellar reviews pre-tax, pre-provision income, pre-tax pre-provision ROAA, tangible book value per share, return on average tangible equity, tangible equity to tangible assets and net interest margin (tax equivalent) excluding PAA for internal planning and forecasting purposes. Stellar has included in this earnings release information relating to these non-GAAP financial measures for the applicable periods presented. These non-GAAP measures should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which Stellar calculates the non-GAAP financial measures may differ from that of other companies reporting measures with similar names. Three Months Ended 2024 2023 March 31 December 31 September 30 June 30 March 31 (Dollars and share amounts in thousands, except per share data) Net income $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 37,148 Add: Provision for credit losses 4,098 1,047 2,315 1,915 3,666 Add: Provision for income taxes 6,759 6,562 7,445 7,467 9,913 Pre-tax, pre-provision income $ 37,004 $ 34,875 $ 40,668 $ 44,557 $ 50,727 Total average assets $ 10,686,789 $ 10,626,373 $ 10,741,295 $ 10,740,138 $ 10,882,533 Pre-tax, pre-provision return on average assets(B) 1.39 % 1.30 % 1.50 % 1.66 % 1.89 % Total shareholders’ equity $ 1,530,698 $ 1,521,018 $ 1,460,846 $ 1,458,680 $ 1,446,216 Less: Goodwill and core deposit intangibles, net 607,831 614,030 620,262 627,065 633,925 Tangible shareholders’ equity $ 922,867 $ 906,988 $ 840,584 $ 831,615 $ 812,291 Shares outstanding at end of period 53,551 53,291 53,322 53,303 53,296 Tangible book value per share $ 17.23 $ 17.02 $ 15.76 $ 15.60 $ 15.24 Average shareholders’ equity $ 1,528,298 $ 1,475,377 $ 1,471,009 $ 1,458,473 $ 1,418,082 Less: Average goodwill and core deposit intangibles, net 611,149 617,236 623,864 630,854 638,110 Average tangible shareholders’ equity $ 917,149 $ 858,141 $ 847,145 $ 827,619 $ 779,972 Return on average tangible equity(B) 11.47 % 12.61 % 14.47 % 17.05 % 19.32 % Total assets $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 $ 10,604,718 Less: Goodwill and core deposit intangibles, net 607,831 614,030 620,262 627,065 633,925 Tangible assets $ 10,121,391 $ 10,033,109 $ 10,045,198 $ 10,151,286 $ 9,970,793 Tangible equity to tangible assets 9.12 % 9.04 % 8.37 % 8.19 % 8.15 % Net interest income (tax equivalent) $ 102,207 $ 106,121 $ 106,919 $ 108,509 $ 116,119 Less: Purchase accounting accretion 8,551 11,726 12,400 12,572 10,104 Adjusted net interest income (tax equivalent) $ 93,656 $ 94,395 $ 94,519 $ 95,937 $ 106,015 Average earning assets $ 9,645,544 $ 9,576,927 $ 9,697,553 $ 9,693,527 $ 9,815,803 Net interest margin (tax equivalent) excluding PAA 3.91 % 3.91 % 3.87 % 3.97 % 4.38 % (A) Represents total noninterest expense, excluding acquisition and merger-related expenses, core deposit intangibles amortization and write-downs on assets moved to held for sale, divided by the sum of net interest income, excluding purchase accounting adjustments plus noninterest income, excluding gains and losses on the sale of assets. Additionally, taxes and provision for credit losses are not part of this calculation. (B) Interim periods annualized. View source version on businesswire.com: https://www.businesswire.com/news/home/20240426630776/en/