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 Second Quarter 2024 Results By: Stellar Bancorp, Inc. via Business Wire July 26, 2024 at 07:00 AM EDT Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NYSE: STEL) today reported net income of $29.8 million, or diluted earnings per share of $0.56, for the second quarter of 2024 compared to net income of $26.1 million, or diluted earnings per share of $0.49, for the first quarter of 2024. “We are pleased to announce our second quarter 2024 results,” said Robert R. Franklin, Jr., Stellar’s Chief Executive Officer. “Our disciplined focus on capital, credit and liquidity gives us strength and optionality as we move into the back half of the year. Although many anticipate lower interest rates in September, we are prepared if that does not come to pass,” said Mr. Franklin. “Stellar Bank is well-positioned for either outcome.” “In addition to building capital, we have reduced our commercial real estate exposure and are pursuing a more balanced approach to our lending through new additions to our team to help us build our commercial and industrial portfolio. Our credit quality remains steady as the economy in our markets remains solid. We operate in some of, if not the best, markets in the country and they have shown resilience throughout this tightening cycle,” Mr. Franklin continued. “Our focus on capital, credit and liquidity will not change. We will continue to monitor effects of higher interest rates and the contentious presidential election on our markets. We believe that building and maintaining a strong balance sheet, positions us to take advantage of opportunities that arise from this economic cycle. Our focus remains on building long-term shareholder value as we embark on the second half of 2024 and the future is bright,” concluded Mr. Franklin. Second Quarter 2024 Financial Highlights Solid Profitability: Second quarter 2024 net income of $29.8 million, or diluted earnings per share of $0.56, translated into an annualized return on average assets of 1.13%, an annualized return on average equity of 7.78% and an annualized return on average tangible equity of 12.82%(1). Meaningful Regulatory Capital Build: Total risk-based capital ratio increased to 15.34% at June 30, 2024 from 14.62% at March 31, 2024 and Tier 1 leverage ratio increased to 10.93% at June 30, 2024 from 10.55% at March 31, 2024. Strong Net Interest Margin: Tax equivalent net interest margin was 4.24% for the second quarter of 2024 compared to 4.26% for the first quarter of 2024. The tax equivalent net interest margin, excluding purchase accounting accretion (“PAA”), was 3.82%(1) for the second quarter of 2024 compared to 3.91%(1) for the first quarter of 2024. Stable Credit Performance: Net charge-offs of $715 thousand, or 0.02%, for the year-to-date 2024. ________________________ (1) Refer to page 10 of this earnings release for the calculation of this non-GAAP financial measure. Second Quarter 2024 Results Net interest income in the second quarter of 2024 decreased $708 thousand, or 0.7%, to $101.4 million from $102.1 million for the first quarter of 2024. The net interest margin on a tax equivalent basis decreased 2 basis points to 4.24% for the second quarter of 2024 from 4.26% for the first quarter of 2024. The decrease in the net interest margin from the prior quarter was primarily due to the impact of increased interest rates on our cost of funding only partially offset by increased income on interest earning assets. Net interest income for the second quarter of 2024 benefited from $10.1 million of income from purchase accounting adjustments compared to $8.6 million in the first quarter of 2024. Excluding purchase accounting adjustments, net interest income (tax equivalent) for the second quarter 2024 would have been $91.4 million(1) and the tax equivalent net interest margin would have been 3.82%(1). Noninterest income for the second quarter of 2024 was $5.4 million, a decrease of $880 thousand, or 14.0%, compared to $6.3 million for the first quarter of 2024. Noninterest income decreased in the second quarter of 2024 compared to the first quarter of 2024 primarily due to a decrease in gains on sales of assets in the second quarter of 2024 compared to the first quarter of 2024. Noninterest expense for the second quarter of 2024 decreased $194 thousand, or 0.3%, to $71.2 million compared to $71.4 million for the first quarter of 2024. The decrease in noninterest expense in the second quarter of 2024 compared to the first quarter of 2024 was primarily due to a $2.3 million decrease in salaries and employee benefits and a $1.0 million decrease in professional fees partially offset by other expenses. The efficiency ratio was 66.63% for the second quarter of 2024 compared to 66.18% for the first quarter of 2024. Annualized returns on average assets, average equity and average tangible equity were 1.13%, 7.78% and 12.82%(1) for the second quarter of 2024, respectively, compared to 0.98%, 6.88% and 11.47%(1), respectively, for the first quarter of 2024. Financial Condition Total loans at June 30, 2024 decreased $194.2 million to $7.71 billion compared to $7.91 billion at March 31, 2024. At June 30, 2024, the remaining balance of the purchase accounting adjustments on loans was $87.4 million. Total deposits at June 30, 2024 decreased $69.4 million to $8.73 billion compared to $8.79 billion at March 31, 2024, due to decreases in certificates and other time deposits, noninterest-bearing deposits and interest-bearing demand deposits, partially offset by increases in money market and savings 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 $4.79 billion and estimated uninsured deposits net of collateralized deposits of $1.01 billion were $3.78 billion, or 43.3%, of total deposits at June 30, 2024. Total assets at June 30, 2024 were $10.72 billion, a decrease of $5.6 million, compared to $10.73 billion at March 31, 2024. Asset Quality Nonperforming assets totaled $53.4 million, or 0.50% of total assets, at June 30, 2024, compared to $57.1 million, or 0.53% of total assets, at March 31, 2024. The allowance for credit losses on loans as a percentage of total loans was 1.23% at June 30, 2024 and 1.22% at March 31, 2024. The second quarter of 2024 included a reversal of provision for credit losses expenses of $1.9 million compared to a $4.1 million provision for credit losses recorded during the first quarter of 2024. Net charge-offs for the second quarter of 2024 were $1 thousand, or 0.00% (annualized) of average loans, compared to net charge-offs of $714 thousand, or 0.04% (annualized) of average loans, for the first quarter of 2024. 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 10 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, July 26, 2024 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss its results for the second quarter of 2024. Participants may register for the conference call at https://registrations.events/direct/Q4I635860 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/232230638. 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 June 30 March 31 December 31 September 30 June 30 (Dollars in thousands) ASSETS Cash and due from banks $ 110,341 $ 74,663 $ 121,004 $ 94,970 $ 105,913 Interest-bearing deposits at other financial institutions 379,909 325,079 278,233 207,302 198,176 Total cash and cash equivalents 490,250 399,742 399,237 302,272 304,089 Available for sale securities, at fair value 1,630,971 1,523,100 1,395,680 1,414,952 1,478,222 Loans held for investment 7,713,897 7,908,111 7,925,133 8,004,528 8,068,718 Less: allowance for credit losses on loans (94,772 ) (96,285 ) (91,684 ) (93,575 ) (100,195 ) Loans, net 7,619,125 7,811,826 7,833,449 7,910,953 7,968,523 Accrued interest receivable 43,348 45,466 44,244 43,536 42,051 Premises and equipment, net 113,984 115,698 118,683 119,332 119,142 Federal Home Loan Bank stock 15,089 16,050 25,051 29,022 24,478 Bank-owned life insurance 106,262 105,671 105,084 104,699 104,148 Goodwill 497,318 497,318 497,318 497,318 497,260 Core deposit intangibles, net 104,315 110,513 116,712 122,944 129,805 Other assets 103,001 103,838 111,681 120,432 110,633 Total assets $ 10,723,663 $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES: Deposits: Noninterest-bearing $ 3,308,441 $ 3,323,149 $ 3,546,815 $ 3,656,288 $ 3,713,536 Interest-bearing Demand 1,564,405 1,576,261 1,659,999 1,397,492 1,437,509 Money market and savings 2,213,031 2,203,767 2,136,777 2,128,950 2,174,073 Certificates and other time 1,639,426 1,691,539 1,529,876 1,503,891 1,441,251 Total interest-bearing deposits 5,416,862 5,471,567 5,326,652 5,030,333 5,052,833 Total deposits 8,725,303 8,794,716 8,873,467 8,686,621 8,766,369 Accrued interest payable 12,327 12,227 11,288 7,612 4,555 Borrowed funds 240,000 215,000 50,000 323,981 369,963 Subordinated debt 109,964 109,864 109,765 109,665 109,566 Other liabilities 70,274 66,717 81,601 76,735 69,218 Total liabilities 9,157,868 9,198,524 9,126,121 9,204,614 9,319,671 SHAREHOLDERS’ EQUITY: Common stock 536 536 533 533 533 Capital surplus 1,238,477 1,235,221 1,232,627 1,231,686 1,228,532 Retained earnings 447,948 425,130 405,945 385,600 361,619 Accumulated other comprehensive loss (121,166 ) (130,189 ) (118,087 ) (156,973 ) (132,004 ) Total shareholders’ equity 1,565,795 1,530,698 1,521,018 1,460,846 1,458,680 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 10,723,663 $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended Six Months Ended 2024 2023 2024 2023 June 30 March 31 December 31 September 30 June 30 June 30 June 30 (Dollars in thousands, except per share data) INTEREST INCOME: Loans, including fees $ 135,885 $ 134,685 $ 139,114 $ 138,948 $ 133,931 $ 270,570 $ 259,660 Securities: Taxable 11,923 9,293 9,622 9,493 9,726 21,216 19,379 Tax-exempt 816 818 418 437 436 1,634 1,698 Deposits in other financial institutions 3,555 3,627 3,021 2,391 2,865 7,182 6,636 Total interest income 152,179 148,423 152,175 151,269 146,958 300,602 287,373 INTEREST EXPENSE: Demand, money market and savings deposits 28,399 27,530 25,033 23,557 20,708 55,929 38,745 Certificates and other time deposits 18,758 15,084 15,075 13,282 9,622 33,842 12,929 Borrowed funds 1,700 1,774 4,154 5,801 6,535 3,474 7,852 Subordinated debt 1,912 1,917 1,983 1,908 1,812 3,829 3,739 Total interest expense 50,769 46,305 46,245 44,548 38,677 97,074 63,265 NET INTEREST INCOME 101,410 102,118 105,930 106,721 108,281 203,528 224,108 (Reversal of) provision for credit losses (1,935 ) 4,098 1,047 2,315 1,915 2,163 5,581 Net interest income after provision for credit losses 103,345 98,020 104,883 104,406 106,366 201,365 218,527 NONINTEREST INCOME: Service charges on deposit accounts 1,648 1,598 1,520 1,620 1,575 3,246 2,924 (Loss) gain on sale of assets (64 ) 513 198 — (6 ) 449 192 Bank-owned life insurance 591 587 573 551 532 1,178 1,054 Debit card and ATM income 543 527 542 935 1,821 1,070 3,519 Other 2,698 3,071 4,053 1,589 1,561 5,769 5,292 Total noninterest income 5,416 6,296 6,886 4,695 5,483 11,712 12,981 NONINTEREST EXPENSE: Salaries and employee benefits 39,061 41,376 40,464 39,495 37,300 80,437 77,075 Net occupancy and equipment 4,503 4,390 4,572 4,455 3,817 8,893 7,905 Depreciation 1,948 1,964 1,955 1,952 1,841 3,912 3,677 Data processing and software amortization 5,501 4,894 5,000 4,798 4,674 10,395 9,728 Professional fees 1,620 2,662 3,867 997 1,564 4,282 3,091 Regulatory assessments and FDIC insurance 2,299 1,854 5,169 1,814 2,755 4,153 4,049 Amortization of intangibles 6,215 6,212 6,247 6,876 6,881 12,427 13,760 Communications 847 937 743 663 689 1,784 1,390 Advertising 891 765 1,004 877 907 1,656 1,746 Acquisition and merger-related expenses — — 3,072 3,421 2,897 — 9,062 Other 8,331 6,356 5,848 5,400 5,882 14,687 10,322 Total noninterest expense 71,216 71,410 77,941 70,748 69,207 142,626 141,805 INCOME BEFORE INCOME TAXES 37,545 32,906 33,828 38,353 42,642 70,451 89,703 Provision for income taxes 7,792 6,759 6,562 7,445 7,467 14,551 17,380 NET INCOME $ 29,753 $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 55,900 $ 72,323 EARNINGS PER SHARE Basic $ 0.56 $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 1.05 $ 1.36 Diluted $ 0.56 $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 1.04 $ 1.36 Three Months Ended Six Months Ended 2024 2023 2024 2023 June 30 March 31 December 31 September 30 June 30 June 30 June 30 (Dollars and share amounts in thousands, except per share data) Net income $ 29,753 $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 55,900 $ 72,323 Earnings per share, basic $ 0.56 $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 1.05 $ 1.36 Earnings per share, diluted $ 0.56 $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 1.04 $ 1.36 Dividends per share $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.26 $ 0.26 Return on average assets(A) 1.13 % 0.98 % 1.02 % 1.14 % 1.31 % 1.06 % 1.35 % Return on average equity(A) 7.78 % 6.88 % 7.33 % 8.34 % 9.67 % 7.33 % 10.14 % Return on average tangible equity(A)(B) 12.82 % 11.47 % 12.61 % 14.47 % 17.05 % 12.15 % 18.14 % Net interest margin (tax equivalent)(A)(C) 4.24 % 4.26 % 4.40 % 4.37 % 4.49 % 4.25 % 4.64 % Net interest margin (tax equivalent) excluding PAA(A)(B)(C) 3.82 % 3.91 % 3.91 % 3.87 % 3.97 % 3.86 % 4.18 % Efficiency ratio(D) 66.63 % 66.18 % 69.21 % 63.50 % 60.83 % 66.40 % 59.86 % Capital Ratios Stellar Bancorp, Inc. (Consolidated) Equity to assets 14.60 % 14.27 % 14.29 % 13.70 % 13.53 % 14.60 % 13.53 % Tangible equity to tangible assets(B) 9.53 % 9.12 % 9.04 % 8.37 % 8.19 % 9.53 % 8.19 % Estimated Total capital ratio (to risk-weighted assets) 15.34 % 14.62 % 14.02 % 13.61 % 13.21 % 15.34 % 13.21 % Estimated Common equity Tier 1 capital (to risk weighted assets) 12.98 % 12.29 % 11.77 % 11.30 % 10.83 % 12.98 % 10.83 % Estimated Tier 1 capital (to risk-weighted assets) 13.10 % 12.41 % 11.89 % 11.41 % 10.94 % 13.10 % 10.94 % Estimated Tier 1 leverage (to average tangible assets) 10.93 % 10.55 % 10.18 % 9.82 % 9.51 % 10.93 % 9.51 % Stellar Bank Estimated Total capital ratio (to risk-weighted assets) 14.65 % 14.13 % 13.65 % 13.32 % 12.98 % 14.65 % 12.98 % Estimated Common equity Tier 1 capital (to risk-weighted assets) 13.12 % 12.61 % 12.20 % 11.80 % 11.38 % 13.12 % 11.38 % Estimated Tier 1 capital (to risk-weighted assets) 13.12 % 12.61 % 12.20 % 11.80 % 11.38 % 13.12 % 11.38 % Estimated Tier 1 leverage (to average tangible assets) 10.94 % 10.72 % 10.44 % 10.15 % 9.89 % 10.94 % 9.89 % Other Data Weighted average shares: Basic 53,572 53,343 53,282 53,313 53,297 53,457 53,160 Diluted 53,608 53,406 53,350 53,380 53,375 53,506 53,261 Period end shares outstanding 53,564 53,551 53,291 53,322 53,303 53,564 53,303 Book value per share $ 29.23 $ 28.58 $ 28.54 $ 27.40 $ 27.37 $ 29.23 $ 27.37 Tangible book value per share(B) $ 18.00 $ 17.23 $ 17.02 $ 15.76 $ 15.60 $ 18.00 $ 15.60 Employees - full-time equivalents 1,045 1,007 998 1,008 1,004 1,045 1,004 (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 10 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 June 30, 2024 March 31, 2024 June 30, 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 $ 7,808,320 $ 135,885 7.00 % $ 7,938,824 $ 134,685 6.82 % $ 7,980,856 $ 133,931 6.73 % Securities 1,549,638 12,739 3.31 % 1,441,814 10,111 2.82 % 1,502,949 10,162 2.71 % Deposits in other financial institutions 258,916 3,555 5.52 % 264,906 3,627 5.51 % 209,722 2,865 5.48 % Total interest-earning assets 9,616,874 $ 152,179 6.36 % 9,645,544 $ 148,423 6.19 % 9,693,527 $ 146,958 6.08 % Allowance for credit losses on loans (96,306 ) (91,612 ) (96,414 ) Noninterest-earning assets 1,103,297 1,132,857 1,143,025 Total assets $ 10,623,865 $ 10,686,789 $ 10,740,138 Liabilities and Shareholders' Equity Interest-Bearing Liabilities: Interest-bearing demand deposits $ 1,545,096 $ 12,213 3.18 % $ 1,697,211 $ 12,278 2.91 % $ 1,387,604 $ 9,343 2.70 % Money market and savings deposits 2,227,393 16,186 2.92 % 2,150,805 15,252 2.85 % 2,220,827 11,365 2.05 % Certificates and other time deposits 1,694,536 18,758 4.45 % 1,444,048 15,084 4.20 % 1,225,834 9,622 3.15 % Borrowed funds 112,187 1,700 6.09 % 134,400 1,774 5.31 % 479,896 6,535 5.46 % Subordinated debt 109,910 1,912 7.00 % 109,808 1,917 7.02 % 109,499 1,812 6.64 % Total interest-bearing liabilities 5,689,122 $ 50,769 3.59 % 5,536,272 $ 46,305 3.36 % 5,423,660 $ 38,677 2.86 % Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits 3,308,633 3,525,758 3,779,594 Other liabilities 87,986 96,461 78,411 Total liabilities 9,085,741 9,158,491 9,281,665 Shareholders’ equity 1,538,124 1,528,298 1,458,473 Total liabilities and shareholders’ equity $ 10,623,865 $ 10,686,789 $ 10,740,138 Net interest rate spread 2.77 % 2.83 % 3.22 % Net interest income and margin $ 101,410 4.24 % $ 102,118 4.26 % $ 108,281 4.48 % Net interest income and net interest margin (tax equivalent) $ 101,482 4.24 % $ 102,207 4.26 % $ 108,509 4.49 % Cost of funds 2.27 % 2.06 % 1.69 % Cost of deposits 2.16 % 1.94 % 1.41 % Stellar Bancorp, Inc. Financial Highlights (Unaudited) Six Months Ended June 30, 2024 2023 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 $ 7,873,572 $ 270,570 6.91 % $ 7,914,303 $ 259,660 6.62 % Securities 1,495,726 22,850 3.07 % 1,553,200 21,077 2.74 % Deposits in other financial institutions 261,911 7,182 5.52 % 286,823 6,636 4.67 % Total interest-earning assets 9,631,209 $ 300,602 6.28 % 9,754,326 $ 287,373 5.94 % Allowance for credit losses on loans (93,959 ) (94,881 ) Noninterest-earning assets 1,118,077 1,151,497 Total assets $ 10,655,327 $ 10,810,942 Liabilities and Shareholders' Equity Interest-Bearing Liabilities: Interest-bearing demand deposits $ 1,621,154 $ 24,491 3.04 % $ 1,518,213 $ 17,725 2.35 % Money market and savings deposits 2,189,099 31,438 2.89 % 2,355,112 21,020 1.80 % Certificates and other time deposits 1,569,292 33,842 4.34 % 1,044,721 12,929 2.50 % Borrowed funds 123,293 3,474 5.67 % 293,578 7,852 5.39 % Subordinated debt 109,859 3,829 7.01 % 109,458 3,739 6.89 % Total interest-bearing liabilities 5,612,697 $ 97,074 3.48 % 5,321,082 $ 63,265 2.40 % Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits 3,417,196 3,971,862 Other liabilities 92,223 79,609 Total liabilities 9,122,116 9,372,553 Shareholders’ equity 1,533,211 1,438,389 Total liabilities and shareholders' equity $ 10,655,327 $ 10,810,942 Net interest rate spread 2.80 % 3.54 % Net interest income and margin $ 203,528 4.25 % $ 224,108 4.63 % Net interest income and net interest margin (tax equivalent) $ 203,688 4.25 % $ 224,628 4.64 % Cost of funds 2.16 % 1.37 % Cost of deposits 2.05 % 1.17 % Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended 2024 2023 June 30 March 31 December 31 September 30 June 30 (Dollars in thousands) Period-end Loan Portfolio: Commercial and industrial $ 1,392,435 $ 1,451,462 $ 1,409,002 $ 1,474,600 $ 1,512,476 Paycheck Protection Program (PPP) 3,629 4,293 5,100 5,968 8,027 Real estate: Commercial real estate (including multi-family residential) 4,029,671 4,049,885 4,071,807 4,076,606 4,038,487 Commercial real estate construction and land development 922,805 1,039,443 1,060,406 1,078,265 1,136,124 1-4 family residential (including home equity) 1,098,681 1,049,316 1,047,174 1,024,945 1,009,439 Residential construction 200,134 252,573 267,357 289,553 311,208 Consumer and other 66,542 61,139 64,287 54,591 52,957 Total loans held for investment $ 7,713,897 $ 7,908,111 $ 7,925,133 $ 8,004,528 $ 8,068,718 Deposits: Noninterest-bearing $ 3,308,441 $ 3,323,149 $ 3,546,815 $ 3,656,288 $ 3,713,536 Interest-bearing Demand 1,564,405 1,576,261 1,659,999 1,397,492 1,437,509 Money market and savings 2,213,031 2,203,767 2,136,777 2,128,950 2,174,073 Certificates and other time 1,639,426 1,691,539 1,529,876 1,503,891 1,441,251 Total interest-bearing deposits 5,416,862 5,471,567 5,326,652 5,030,333 5,052,833 Total deposits $ 8,725,303 $ 8,794,716 $ 8,873,467 $ 8,686,621 $ 8,766,369 Asset Quality: Nonaccrual loans $ 50,906 $ 57,129 $ 39,191 $ 38,291 $ 43,349 Accruing loans 90 or more days past due — — — — — Total nonperforming loans 50,906 57,129 39,191 38,291 43,349 Other real estate 2,548 — — — — Total nonperforming assets $ 53,454 $ 57,129 $ 39,191 $ 38,291 $ 43,349 Net (recoveries) charge-offs $ (1 ) $ 714 $ 2,577 $ 8,116 $ 236 Nonaccrual loans: Commercial and industrial $ 18,451 $ 15,465 $ 5,048 $ 14,991 $ 22,968 Real estate: Commercial real estate (including multi-family residential) 18,094 21,268 16,699 13,563 8,221 Commercial real estate construction and land development 1,641 8,406 5,043 170 388 1-4 family residential (including home equity) 12,454 10,368 8,874 8,442 10,880 Residential construction 155 1,410 3,288 635 665 Consumer and other 111 212 239 490 227 Total nonaccrual loans $ 50,906 $ 57,129 $ 39,191 $ 38,291 $ 43,349 Asset Quality Ratios: Nonperforming assets to total assets 0.50 % 0.53 % 0.37 % 0.36 % 0.40 % Nonperforming loans to total loans 0.66 % 0.72 % 0.49 % 0.48 % 0.54 % Allowance for credit losses on loans to nonperforming loans 186.17 % 168.54 % 233.94 % 244.38 % 231.14 % Allowance for credit losses on loans to total loans 1.23 % 1.22 % 1.16 % 1.17 % 1.24 % Net charge-offs to average loans (annualized) 0.00 % 0.04 % 0.13 % 0.40 % 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 Six Months Ended 2024 2023 2024 2023 June 30 March 31 December 31 September 30 June 30 June 30 June 30 (Dollars and share amounts in thousands, except per share data) Net income $ 29,753 $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 55,900 $ 72,323 Add: Provision for credit losses (1,935 ) 4,098 1,047 2,315 1,915 2,163 5,581 Add: Provision for income taxes 7,792 6,759 6,562 7,445 7,467 14,551 17,380 Pre-tax, pre-provision income $ 35,610 $ 37,004 $ 34,875 $ 40,668 $ 44,557 $ 72,614 $ 95,284 Total average assets $ 10,623,865 $ 10,686,789 $ 10,626,373 $ 10,741,295 $ 10,740,138 $ 10,655,327 $ 10,810,942 Pre-tax, pre-provision return on average assets(B) 1.35 % 1.39 % 1.30 % 1.50 % 1.66 % 1.37 % 1.78 % Total shareholders’ equity $ 1,565,795 $ 1,530,698 $ 1,521,018 $ 1,460,846 $ 1,458,680 $ 1,565,795 $ 1,458,680 Less: Goodwill and core deposit intangibles, net 601,633 607,831 614,030 620,262 627,065 601,633 627,065 Tangible shareholders’ equity $ 964,162 $ 922,867 $ 906,988 $ 840,584 $ 831,615 $ 964,162 $ 831,615 Shares outstanding at end of period 53,564 53,551 53,291 53,322 53,303 53,564 53,303 Tangible book value per share $ 18.00 $ 17.23 $ 17.02 $ 15.76 $ 15.60 $ 18.00 $ 15.60 Average shareholders’ equity $ 1,538,124 $ 1,528,298 $ 1,475,377 $ 1,471,009 $ 1,458,473 $ 1,533,211 $ 1,438,389 Less: Average goodwill and core deposit intangibles, net 604,722 611,149 617,236 623,864 630,854 607,935 634,462 Average tangible shareholders’ equity $ 933,402 $ 917,149 $ 858,141 $ 847,145 $ 827,619 $ 925,276 $ 803,927 Return on average tangible equity(B) 12.82 % 11.47 % 12.61 % 14.47 % 17.05 % 12.15 % 18.14 % Total assets $ 10,723,663 $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 $ 10,723,663 $ 10,778,351 Less: Goodwill and core deposit intangibles, net 601,633 607,831 614,030 620,262 627,065 601,633 627,065 Tangible assets $ 10,122,030 $ 10,121,391 $ 10,033,109 $ 10,045,198 $ 10,151,286 $ 10,122,030 $ 10,151,286 Tangible equity to tangible assets 9.53 % 9.12 % 9.04 % 8.37 % 8.19 % 9.53 % 8.19 % Net interest income (tax equivalent) $ 101,482 $ 102,207 $ 106,121 $ 106,919 $ 108,509 $ 203,688 $ 224,628 Less: Purchase accounting accretion 10,098 8,551 11,726 12,400 12,572 18,649 22,676 Adjusted net interest income (tax equivalent) $ 91,384 $ 93,656 $ 94,395 $ 94,519 $ 95,937 $ 185,039 $ 201,952 Average earning assets $ 9,616,874 $ 9,645,544 $ 9,576,927 $ 9,697,553 $ 9,693,527 $ 9,631,209 $ 9,754,326 Net interest margin (tax equivalent) excluding PAA 3.82 % 3.91 % 3.91 % 3.87 % 3.97 % 3.86 % 4.18 % (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/20240726333029/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 Second Quarter 2024 Results By: Stellar Bancorp, Inc. via Business Wire July 26, 2024 at 07:00 AM EDT Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NYSE: STEL) today reported net income of $29.8 million, or diluted earnings per share of $0.56, for the second quarter of 2024 compared to net income of $26.1 million, or diluted earnings per share of $0.49, for the first quarter of 2024. “We are pleased to announce our second quarter 2024 results,” said Robert R. Franklin, Jr., Stellar’s Chief Executive Officer. “Our disciplined focus on capital, credit and liquidity gives us strength and optionality as we move into the back half of the year. Although many anticipate lower interest rates in September, we are prepared if that does not come to pass,” said Mr. Franklin. “Stellar Bank is well-positioned for either outcome.” “In addition to building capital, we have reduced our commercial real estate exposure and are pursuing a more balanced approach to our lending through new additions to our team to help us build our commercial and industrial portfolio. Our credit quality remains steady as the economy in our markets remains solid. We operate in some of, if not the best, markets in the country and they have shown resilience throughout this tightening cycle,” Mr. Franklin continued. “Our focus on capital, credit and liquidity will not change. We will continue to monitor effects of higher interest rates and the contentious presidential election on our markets. We believe that building and maintaining a strong balance sheet, positions us to take advantage of opportunities that arise from this economic cycle. Our focus remains on building long-term shareholder value as we embark on the second half of 2024 and the future is bright,” concluded Mr. Franklin. Second Quarter 2024 Financial Highlights Solid Profitability: Second quarter 2024 net income of $29.8 million, or diluted earnings per share of $0.56, translated into an annualized return on average assets of 1.13%, an annualized return on average equity of 7.78% and an annualized return on average tangible equity of 12.82%(1). Meaningful Regulatory Capital Build: Total risk-based capital ratio increased to 15.34% at June 30, 2024 from 14.62% at March 31, 2024 and Tier 1 leverage ratio increased to 10.93% at June 30, 2024 from 10.55% at March 31, 2024. Strong Net Interest Margin: Tax equivalent net interest margin was 4.24% for the second quarter of 2024 compared to 4.26% for the first quarter of 2024. The tax equivalent net interest margin, excluding purchase accounting accretion (“PAA”), was 3.82%(1) for the second quarter of 2024 compared to 3.91%(1) for the first quarter of 2024. Stable Credit Performance: Net charge-offs of $715 thousand, or 0.02%, for the year-to-date 2024. ________________________ (1) Refer to page 10 of this earnings release for the calculation of this non-GAAP financial measure. Second Quarter 2024 Results Net interest income in the second quarter of 2024 decreased $708 thousand, or 0.7%, to $101.4 million from $102.1 million for the first quarter of 2024. The net interest margin on a tax equivalent basis decreased 2 basis points to 4.24% for the second quarter of 2024 from 4.26% for the first quarter of 2024. The decrease in the net interest margin from the prior quarter was primarily due to the impact of increased interest rates on our cost of funding only partially offset by increased income on interest earning assets. Net interest income for the second quarter of 2024 benefited from $10.1 million of income from purchase accounting adjustments compared to $8.6 million in the first quarter of 2024. Excluding purchase accounting adjustments, net interest income (tax equivalent) for the second quarter 2024 would have been $91.4 million(1) and the tax equivalent net interest margin would have been 3.82%(1). Noninterest income for the second quarter of 2024 was $5.4 million, a decrease of $880 thousand, or 14.0%, compared to $6.3 million for the first quarter of 2024. Noninterest income decreased in the second quarter of 2024 compared to the first quarter of 2024 primarily due to a decrease in gains on sales of assets in the second quarter of 2024 compared to the first quarter of 2024. Noninterest expense for the second quarter of 2024 decreased $194 thousand, or 0.3%, to $71.2 million compared to $71.4 million for the first quarter of 2024. The decrease in noninterest expense in the second quarter of 2024 compared to the first quarter of 2024 was primarily due to a $2.3 million decrease in salaries and employee benefits and a $1.0 million decrease in professional fees partially offset by other expenses. The efficiency ratio was 66.63% for the second quarter of 2024 compared to 66.18% for the first quarter of 2024. Annualized returns on average assets, average equity and average tangible equity were 1.13%, 7.78% and 12.82%(1) for the second quarter of 2024, respectively, compared to 0.98%, 6.88% and 11.47%(1), respectively, for the first quarter of 2024. Financial Condition Total loans at June 30, 2024 decreased $194.2 million to $7.71 billion compared to $7.91 billion at March 31, 2024. At June 30, 2024, the remaining balance of the purchase accounting adjustments on loans was $87.4 million. Total deposits at June 30, 2024 decreased $69.4 million to $8.73 billion compared to $8.79 billion at March 31, 2024, due to decreases in certificates and other time deposits, noninterest-bearing deposits and interest-bearing demand deposits, partially offset by increases in money market and savings 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 $4.79 billion and estimated uninsured deposits net of collateralized deposits of $1.01 billion were $3.78 billion, or 43.3%, of total deposits at June 30, 2024. Total assets at June 30, 2024 were $10.72 billion, a decrease of $5.6 million, compared to $10.73 billion at March 31, 2024. Asset Quality Nonperforming assets totaled $53.4 million, or 0.50% of total assets, at June 30, 2024, compared to $57.1 million, or 0.53% of total assets, at March 31, 2024. The allowance for credit losses on loans as a percentage of total loans was 1.23% at June 30, 2024 and 1.22% at March 31, 2024. The second quarter of 2024 included a reversal of provision for credit losses expenses of $1.9 million compared to a $4.1 million provision for credit losses recorded during the first quarter of 2024. Net charge-offs for the second quarter of 2024 were $1 thousand, or 0.00% (annualized) of average loans, compared to net charge-offs of $714 thousand, or 0.04% (annualized) of average loans, for the first quarter of 2024. 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 10 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, July 26, 2024 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss its results for the second quarter of 2024. Participants may register for the conference call at https://registrations.events/direct/Q4I635860 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/232230638. 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 June 30 March 31 December 31 September 30 June 30 (Dollars in thousands) ASSETS Cash and due from banks $ 110,341 $ 74,663 $ 121,004 $ 94,970 $ 105,913 Interest-bearing deposits at other financial institutions 379,909 325,079 278,233 207,302 198,176 Total cash and cash equivalents 490,250 399,742 399,237 302,272 304,089 Available for sale securities, at fair value 1,630,971 1,523,100 1,395,680 1,414,952 1,478,222 Loans held for investment 7,713,897 7,908,111 7,925,133 8,004,528 8,068,718 Less: allowance for credit losses on loans (94,772 ) (96,285 ) (91,684 ) (93,575 ) (100,195 ) Loans, net 7,619,125 7,811,826 7,833,449 7,910,953 7,968,523 Accrued interest receivable 43,348 45,466 44,244 43,536 42,051 Premises and equipment, net 113,984 115,698 118,683 119,332 119,142 Federal Home Loan Bank stock 15,089 16,050 25,051 29,022 24,478 Bank-owned life insurance 106,262 105,671 105,084 104,699 104,148 Goodwill 497,318 497,318 497,318 497,318 497,260 Core deposit intangibles, net 104,315 110,513 116,712 122,944 129,805 Other assets 103,001 103,838 111,681 120,432 110,633 Total assets $ 10,723,663 $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES: Deposits: Noninterest-bearing $ 3,308,441 $ 3,323,149 $ 3,546,815 $ 3,656,288 $ 3,713,536 Interest-bearing Demand 1,564,405 1,576,261 1,659,999 1,397,492 1,437,509 Money market and savings 2,213,031 2,203,767 2,136,777 2,128,950 2,174,073 Certificates and other time 1,639,426 1,691,539 1,529,876 1,503,891 1,441,251 Total interest-bearing deposits 5,416,862 5,471,567 5,326,652 5,030,333 5,052,833 Total deposits 8,725,303 8,794,716 8,873,467 8,686,621 8,766,369 Accrued interest payable 12,327 12,227 11,288 7,612 4,555 Borrowed funds 240,000 215,000 50,000 323,981 369,963 Subordinated debt 109,964 109,864 109,765 109,665 109,566 Other liabilities 70,274 66,717 81,601 76,735 69,218 Total liabilities 9,157,868 9,198,524 9,126,121 9,204,614 9,319,671 SHAREHOLDERS’ EQUITY: Common stock 536 536 533 533 533 Capital surplus 1,238,477 1,235,221 1,232,627 1,231,686 1,228,532 Retained earnings 447,948 425,130 405,945 385,600 361,619 Accumulated other comprehensive loss (121,166 ) (130,189 ) (118,087 ) (156,973 ) (132,004 ) Total shareholders’ equity 1,565,795 1,530,698 1,521,018 1,460,846 1,458,680 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 10,723,663 $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended Six Months Ended 2024 2023 2024 2023 June 30 March 31 December 31 September 30 June 30 June 30 June 30 (Dollars in thousands, except per share data) INTEREST INCOME: Loans, including fees $ 135,885 $ 134,685 $ 139,114 $ 138,948 $ 133,931 $ 270,570 $ 259,660 Securities: Taxable 11,923 9,293 9,622 9,493 9,726 21,216 19,379 Tax-exempt 816 818 418 437 436 1,634 1,698 Deposits in other financial institutions 3,555 3,627 3,021 2,391 2,865 7,182 6,636 Total interest income 152,179 148,423 152,175 151,269 146,958 300,602 287,373 INTEREST EXPENSE: Demand, money market and savings deposits 28,399 27,530 25,033 23,557 20,708 55,929 38,745 Certificates and other time deposits 18,758 15,084 15,075 13,282 9,622 33,842 12,929 Borrowed funds 1,700 1,774 4,154 5,801 6,535 3,474 7,852 Subordinated debt 1,912 1,917 1,983 1,908 1,812 3,829 3,739 Total interest expense 50,769 46,305 46,245 44,548 38,677 97,074 63,265 NET INTEREST INCOME 101,410 102,118 105,930 106,721 108,281 203,528 224,108 (Reversal of) provision for credit losses (1,935 ) 4,098 1,047 2,315 1,915 2,163 5,581 Net interest income after provision for credit losses 103,345 98,020 104,883 104,406 106,366 201,365 218,527 NONINTEREST INCOME: Service charges on deposit accounts 1,648 1,598 1,520 1,620 1,575 3,246 2,924 (Loss) gain on sale of assets (64 ) 513 198 — (6 ) 449 192 Bank-owned life insurance 591 587 573 551 532 1,178 1,054 Debit card and ATM income 543 527 542 935 1,821 1,070 3,519 Other 2,698 3,071 4,053 1,589 1,561 5,769 5,292 Total noninterest income 5,416 6,296 6,886 4,695 5,483 11,712 12,981 NONINTEREST EXPENSE: Salaries and employee benefits 39,061 41,376 40,464 39,495 37,300 80,437 77,075 Net occupancy and equipment 4,503 4,390 4,572 4,455 3,817 8,893 7,905 Depreciation 1,948 1,964 1,955 1,952 1,841 3,912 3,677 Data processing and software amortization 5,501 4,894 5,000 4,798 4,674 10,395 9,728 Professional fees 1,620 2,662 3,867 997 1,564 4,282 3,091 Regulatory assessments and FDIC insurance 2,299 1,854 5,169 1,814 2,755 4,153 4,049 Amortization of intangibles 6,215 6,212 6,247 6,876 6,881 12,427 13,760 Communications 847 937 743 663 689 1,784 1,390 Advertising 891 765 1,004 877 907 1,656 1,746 Acquisition and merger-related expenses — — 3,072 3,421 2,897 — 9,062 Other 8,331 6,356 5,848 5,400 5,882 14,687 10,322 Total noninterest expense 71,216 71,410 77,941 70,748 69,207 142,626 141,805 INCOME BEFORE INCOME TAXES 37,545 32,906 33,828 38,353 42,642 70,451 89,703 Provision for income taxes 7,792 6,759 6,562 7,445 7,467 14,551 17,380 NET INCOME $ 29,753 $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 55,900 $ 72,323 EARNINGS PER SHARE Basic $ 0.56 $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 1.05 $ 1.36 Diluted $ 0.56 $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 1.04 $ 1.36 Three Months Ended Six Months Ended 2024 2023 2024 2023 June 30 March 31 December 31 September 30 June 30 June 30 June 30 (Dollars and share amounts in thousands, except per share data) Net income $ 29,753 $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 55,900 $ 72,323 Earnings per share, basic $ 0.56 $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 1.05 $ 1.36 Earnings per share, diluted $ 0.56 $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 1.04 $ 1.36 Dividends per share $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.26 $ 0.26 Return on average assets(A) 1.13 % 0.98 % 1.02 % 1.14 % 1.31 % 1.06 % 1.35 % Return on average equity(A) 7.78 % 6.88 % 7.33 % 8.34 % 9.67 % 7.33 % 10.14 % Return on average tangible equity(A)(B) 12.82 % 11.47 % 12.61 % 14.47 % 17.05 % 12.15 % 18.14 % Net interest margin (tax equivalent)(A)(C) 4.24 % 4.26 % 4.40 % 4.37 % 4.49 % 4.25 % 4.64 % Net interest margin (tax equivalent) excluding PAA(A)(B)(C) 3.82 % 3.91 % 3.91 % 3.87 % 3.97 % 3.86 % 4.18 % Efficiency ratio(D) 66.63 % 66.18 % 69.21 % 63.50 % 60.83 % 66.40 % 59.86 % Capital Ratios Stellar Bancorp, Inc. (Consolidated) Equity to assets 14.60 % 14.27 % 14.29 % 13.70 % 13.53 % 14.60 % 13.53 % Tangible equity to tangible assets(B) 9.53 % 9.12 % 9.04 % 8.37 % 8.19 % 9.53 % 8.19 % Estimated Total capital ratio (to risk-weighted assets) 15.34 % 14.62 % 14.02 % 13.61 % 13.21 % 15.34 % 13.21 % Estimated Common equity Tier 1 capital (to risk weighted assets) 12.98 % 12.29 % 11.77 % 11.30 % 10.83 % 12.98 % 10.83 % Estimated Tier 1 capital (to risk-weighted assets) 13.10 % 12.41 % 11.89 % 11.41 % 10.94 % 13.10 % 10.94 % Estimated Tier 1 leverage (to average tangible assets) 10.93 % 10.55 % 10.18 % 9.82 % 9.51 % 10.93 % 9.51 % Stellar Bank Estimated Total capital ratio (to risk-weighted assets) 14.65 % 14.13 % 13.65 % 13.32 % 12.98 % 14.65 % 12.98 % Estimated Common equity Tier 1 capital (to risk-weighted assets) 13.12 % 12.61 % 12.20 % 11.80 % 11.38 % 13.12 % 11.38 % Estimated Tier 1 capital (to risk-weighted assets) 13.12 % 12.61 % 12.20 % 11.80 % 11.38 % 13.12 % 11.38 % Estimated Tier 1 leverage (to average tangible assets) 10.94 % 10.72 % 10.44 % 10.15 % 9.89 % 10.94 % 9.89 % Other Data Weighted average shares: Basic 53,572 53,343 53,282 53,313 53,297 53,457 53,160 Diluted 53,608 53,406 53,350 53,380 53,375 53,506 53,261 Period end shares outstanding 53,564 53,551 53,291 53,322 53,303 53,564 53,303 Book value per share $ 29.23 $ 28.58 $ 28.54 $ 27.40 $ 27.37 $ 29.23 $ 27.37 Tangible book value per share(B) $ 18.00 $ 17.23 $ 17.02 $ 15.76 $ 15.60 $ 18.00 $ 15.60 Employees - full-time equivalents 1,045 1,007 998 1,008 1,004 1,045 1,004 (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 10 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 June 30, 2024 March 31, 2024 June 30, 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 $ 7,808,320 $ 135,885 7.00 % $ 7,938,824 $ 134,685 6.82 % $ 7,980,856 $ 133,931 6.73 % Securities 1,549,638 12,739 3.31 % 1,441,814 10,111 2.82 % 1,502,949 10,162 2.71 % Deposits in other financial institutions 258,916 3,555 5.52 % 264,906 3,627 5.51 % 209,722 2,865 5.48 % Total interest-earning assets 9,616,874 $ 152,179 6.36 % 9,645,544 $ 148,423 6.19 % 9,693,527 $ 146,958 6.08 % Allowance for credit losses on loans (96,306 ) (91,612 ) (96,414 ) Noninterest-earning assets 1,103,297 1,132,857 1,143,025 Total assets $ 10,623,865 $ 10,686,789 $ 10,740,138 Liabilities and Shareholders' Equity Interest-Bearing Liabilities: Interest-bearing demand deposits $ 1,545,096 $ 12,213 3.18 % $ 1,697,211 $ 12,278 2.91 % $ 1,387,604 $ 9,343 2.70 % Money market and savings deposits 2,227,393 16,186 2.92 % 2,150,805 15,252 2.85 % 2,220,827 11,365 2.05 % Certificates and other time deposits 1,694,536 18,758 4.45 % 1,444,048 15,084 4.20 % 1,225,834 9,622 3.15 % Borrowed funds 112,187 1,700 6.09 % 134,400 1,774 5.31 % 479,896 6,535 5.46 % Subordinated debt 109,910 1,912 7.00 % 109,808 1,917 7.02 % 109,499 1,812 6.64 % Total interest-bearing liabilities 5,689,122 $ 50,769 3.59 % 5,536,272 $ 46,305 3.36 % 5,423,660 $ 38,677 2.86 % Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits 3,308,633 3,525,758 3,779,594 Other liabilities 87,986 96,461 78,411 Total liabilities 9,085,741 9,158,491 9,281,665 Shareholders’ equity 1,538,124 1,528,298 1,458,473 Total liabilities and shareholders’ equity $ 10,623,865 $ 10,686,789 $ 10,740,138 Net interest rate spread 2.77 % 2.83 % 3.22 % Net interest income and margin $ 101,410 4.24 % $ 102,118 4.26 % $ 108,281 4.48 % Net interest income and net interest margin (tax equivalent) $ 101,482 4.24 % $ 102,207 4.26 % $ 108,509 4.49 % Cost of funds 2.27 % 2.06 % 1.69 % Cost of deposits 2.16 % 1.94 % 1.41 % Stellar Bancorp, Inc. Financial Highlights (Unaudited) Six Months Ended June 30, 2024 2023 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 $ 7,873,572 $ 270,570 6.91 % $ 7,914,303 $ 259,660 6.62 % Securities 1,495,726 22,850 3.07 % 1,553,200 21,077 2.74 % Deposits in other financial institutions 261,911 7,182 5.52 % 286,823 6,636 4.67 % Total interest-earning assets 9,631,209 $ 300,602 6.28 % 9,754,326 $ 287,373 5.94 % Allowance for credit losses on loans (93,959 ) (94,881 ) Noninterest-earning assets 1,118,077 1,151,497 Total assets $ 10,655,327 $ 10,810,942 Liabilities and Shareholders' Equity Interest-Bearing Liabilities: Interest-bearing demand deposits $ 1,621,154 $ 24,491 3.04 % $ 1,518,213 $ 17,725 2.35 % Money market and savings deposits 2,189,099 31,438 2.89 % 2,355,112 21,020 1.80 % Certificates and other time deposits 1,569,292 33,842 4.34 % 1,044,721 12,929 2.50 % Borrowed funds 123,293 3,474 5.67 % 293,578 7,852 5.39 % Subordinated debt 109,859 3,829 7.01 % 109,458 3,739 6.89 % Total interest-bearing liabilities 5,612,697 $ 97,074 3.48 % 5,321,082 $ 63,265 2.40 % Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits 3,417,196 3,971,862 Other liabilities 92,223 79,609 Total liabilities 9,122,116 9,372,553 Shareholders’ equity 1,533,211 1,438,389 Total liabilities and shareholders' equity $ 10,655,327 $ 10,810,942 Net interest rate spread 2.80 % 3.54 % Net interest income and margin $ 203,528 4.25 % $ 224,108 4.63 % Net interest income and net interest margin (tax equivalent) $ 203,688 4.25 % $ 224,628 4.64 % Cost of funds 2.16 % 1.37 % Cost of deposits 2.05 % 1.17 % Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended 2024 2023 June 30 March 31 December 31 September 30 June 30 (Dollars in thousands) Period-end Loan Portfolio: Commercial and industrial $ 1,392,435 $ 1,451,462 $ 1,409,002 $ 1,474,600 $ 1,512,476 Paycheck Protection Program (PPP) 3,629 4,293 5,100 5,968 8,027 Real estate: Commercial real estate (including multi-family residential) 4,029,671 4,049,885 4,071,807 4,076,606 4,038,487 Commercial real estate construction and land development 922,805 1,039,443 1,060,406 1,078,265 1,136,124 1-4 family residential (including home equity) 1,098,681 1,049,316 1,047,174 1,024,945 1,009,439 Residential construction 200,134 252,573 267,357 289,553 311,208 Consumer and other 66,542 61,139 64,287 54,591 52,957 Total loans held for investment $ 7,713,897 $ 7,908,111 $ 7,925,133 $ 8,004,528 $ 8,068,718 Deposits: Noninterest-bearing $ 3,308,441 $ 3,323,149 $ 3,546,815 $ 3,656,288 $ 3,713,536 Interest-bearing Demand 1,564,405 1,576,261 1,659,999 1,397,492 1,437,509 Money market and savings 2,213,031 2,203,767 2,136,777 2,128,950 2,174,073 Certificates and other time 1,639,426 1,691,539 1,529,876 1,503,891 1,441,251 Total interest-bearing deposits 5,416,862 5,471,567 5,326,652 5,030,333 5,052,833 Total deposits $ 8,725,303 $ 8,794,716 $ 8,873,467 $ 8,686,621 $ 8,766,369 Asset Quality: Nonaccrual loans $ 50,906 $ 57,129 $ 39,191 $ 38,291 $ 43,349 Accruing loans 90 or more days past due — — — — — Total nonperforming loans 50,906 57,129 39,191 38,291 43,349 Other real estate 2,548 — — — — Total nonperforming assets $ 53,454 $ 57,129 $ 39,191 $ 38,291 $ 43,349 Net (recoveries) charge-offs $ (1 ) $ 714 $ 2,577 $ 8,116 $ 236 Nonaccrual loans: Commercial and industrial $ 18,451 $ 15,465 $ 5,048 $ 14,991 $ 22,968 Real estate: Commercial real estate (including multi-family residential) 18,094 21,268 16,699 13,563 8,221 Commercial real estate construction and land development 1,641 8,406 5,043 170 388 1-4 family residential (including home equity) 12,454 10,368 8,874 8,442 10,880 Residential construction 155 1,410 3,288 635 665 Consumer and other 111 212 239 490 227 Total nonaccrual loans $ 50,906 $ 57,129 $ 39,191 $ 38,291 $ 43,349 Asset Quality Ratios: Nonperforming assets to total assets 0.50 % 0.53 % 0.37 % 0.36 % 0.40 % Nonperforming loans to total loans 0.66 % 0.72 % 0.49 % 0.48 % 0.54 % Allowance for credit losses on loans to nonperforming loans 186.17 % 168.54 % 233.94 % 244.38 % 231.14 % Allowance for credit losses on loans to total loans 1.23 % 1.22 % 1.16 % 1.17 % 1.24 % Net charge-offs to average loans (annualized) 0.00 % 0.04 % 0.13 % 0.40 % 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 Six Months Ended 2024 2023 2024 2023 June 30 March 31 December 31 September 30 June 30 June 30 June 30 (Dollars and share amounts in thousands, except per share data) Net income $ 29,753 $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 55,900 $ 72,323 Add: Provision for credit losses (1,935 ) 4,098 1,047 2,315 1,915 2,163 5,581 Add: Provision for income taxes 7,792 6,759 6,562 7,445 7,467 14,551 17,380 Pre-tax, pre-provision income $ 35,610 $ 37,004 $ 34,875 $ 40,668 $ 44,557 $ 72,614 $ 95,284 Total average assets $ 10,623,865 $ 10,686,789 $ 10,626,373 $ 10,741,295 $ 10,740,138 $ 10,655,327 $ 10,810,942 Pre-tax, pre-provision return on average assets(B) 1.35 % 1.39 % 1.30 % 1.50 % 1.66 % 1.37 % 1.78 % Total shareholders’ equity $ 1,565,795 $ 1,530,698 $ 1,521,018 $ 1,460,846 $ 1,458,680 $ 1,565,795 $ 1,458,680 Less: Goodwill and core deposit intangibles, net 601,633 607,831 614,030 620,262 627,065 601,633 627,065 Tangible shareholders’ equity $ 964,162 $ 922,867 $ 906,988 $ 840,584 $ 831,615 $ 964,162 $ 831,615 Shares outstanding at end of period 53,564 53,551 53,291 53,322 53,303 53,564 53,303 Tangible book value per share $ 18.00 $ 17.23 $ 17.02 $ 15.76 $ 15.60 $ 18.00 $ 15.60 Average shareholders’ equity $ 1,538,124 $ 1,528,298 $ 1,475,377 $ 1,471,009 $ 1,458,473 $ 1,533,211 $ 1,438,389 Less: Average goodwill and core deposit intangibles, net 604,722 611,149 617,236 623,864 630,854 607,935 634,462 Average tangible shareholders’ equity $ 933,402 $ 917,149 $ 858,141 $ 847,145 $ 827,619 $ 925,276 $ 803,927 Return on average tangible equity(B) 12.82 % 11.47 % 12.61 % 14.47 % 17.05 % 12.15 % 18.14 % Total assets $ 10,723,663 $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 $ 10,723,663 $ 10,778,351 Less: Goodwill and core deposit intangibles, net 601,633 607,831 614,030 620,262 627,065 601,633 627,065 Tangible assets $ 10,122,030 $ 10,121,391 $ 10,033,109 $ 10,045,198 $ 10,151,286 $ 10,122,030 $ 10,151,286 Tangible equity to tangible assets 9.53 % 9.12 % 9.04 % 8.37 % 8.19 % 9.53 % 8.19 % Net interest income (tax equivalent) $ 101,482 $ 102,207 $ 106,121 $ 106,919 $ 108,509 $ 203,688 $ 224,628 Less: Purchase accounting accretion 10,098 8,551 11,726 12,400 12,572 18,649 22,676 Adjusted net interest income (tax equivalent) $ 91,384 $ 93,656 $ 94,395 $ 94,519 $ 95,937 $ 185,039 $ 201,952 Average earning assets $ 9,616,874 $ 9,645,544 $ 9,576,927 $ 9,697,553 $ 9,693,527 $ 9,631,209 $ 9,754,326 Net interest margin (tax equivalent) excluding PAA 3.82 % 3.91 % 3.91 % 3.87 % 3.97 % 3.86 % 4.18 % (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/20240726333029/en/Contacts Investor Relations IR@stellar.bank
Stellar Bancorp, Inc. (the “Company” or “Stellar”) (NYSE: STEL) today reported net income of $29.8 million, or diluted earnings per share of $0.56, for the second quarter of 2024 compared to net income of $26.1 million, or diluted earnings per share of $0.49, for the first quarter of 2024. “We are pleased to announce our second quarter 2024 results,” said Robert R. Franklin, Jr., Stellar’s Chief Executive Officer. “Our disciplined focus on capital, credit and liquidity gives us strength and optionality as we move into the back half of the year. Although many anticipate lower interest rates in September, we are prepared if that does not come to pass,” said Mr. Franklin. “Stellar Bank is well-positioned for either outcome.” “In addition to building capital, we have reduced our commercial real estate exposure and are pursuing a more balanced approach to our lending through new additions to our team to help us build our commercial and industrial portfolio. Our credit quality remains steady as the economy in our markets remains solid. We operate in some of, if not the best, markets in the country and they have shown resilience throughout this tightening cycle,” Mr. Franklin continued. “Our focus on capital, credit and liquidity will not change. We will continue to monitor effects of higher interest rates and the contentious presidential election on our markets. We believe that building and maintaining a strong balance sheet, positions us to take advantage of opportunities that arise from this economic cycle. Our focus remains on building long-term shareholder value as we embark on the second half of 2024 and the future is bright,” concluded Mr. Franklin. Second Quarter 2024 Financial Highlights Solid Profitability: Second quarter 2024 net income of $29.8 million, or diluted earnings per share of $0.56, translated into an annualized return on average assets of 1.13%, an annualized return on average equity of 7.78% and an annualized return on average tangible equity of 12.82%(1). Meaningful Regulatory Capital Build: Total risk-based capital ratio increased to 15.34% at June 30, 2024 from 14.62% at March 31, 2024 and Tier 1 leverage ratio increased to 10.93% at June 30, 2024 from 10.55% at March 31, 2024. Strong Net Interest Margin: Tax equivalent net interest margin was 4.24% for the second quarter of 2024 compared to 4.26% for the first quarter of 2024. The tax equivalent net interest margin, excluding purchase accounting accretion (“PAA”), was 3.82%(1) for the second quarter of 2024 compared to 3.91%(1) for the first quarter of 2024. Stable Credit Performance: Net charge-offs of $715 thousand, or 0.02%, for the year-to-date 2024. ________________________ (1) Refer to page 10 of this earnings release for the calculation of this non-GAAP financial measure. Second Quarter 2024 Results Net interest income in the second quarter of 2024 decreased $708 thousand, or 0.7%, to $101.4 million from $102.1 million for the first quarter of 2024. The net interest margin on a tax equivalent basis decreased 2 basis points to 4.24% for the second quarter of 2024 from 4.26% for the first quarter of 2024. The decrease in the net interest margin from the prior quarter was primarily due to the impact of increased interest rates on our cost of funding only partially offset by increased income on interest earning assets. Net interest income for the second quarter of 2024 benefited from $10.1 million of income from purchase accounting adjustments compared to $8.6 million in the first quarter of 2024. Excluding purchase accounting adjustments, net interest income (tax equivalent) for the second quarter 2024 would have been $91.4 million(1) and the tax equivalent net interest margin would have been 3.82%(1). Noninterest income for the second quarter of 2024 was $5.4 million, a decrease of $880 thousand, or 14.0%, compared to $6.3 million for the first quarter of 2024. Noninterest income decreased in the second quarter of 2024 compared to the first quarter of 2024 primarily due to a decrease in gains on sales of assets in the second quarter of 2024 compared to the first quarter of 2024. Noninterest expense for the second quarter of 2024 decreased $194 thousand, or 0.3%, to $71.2 million compared to $71.4 million for the first quarter of 2024. The decrease in noninterest expense in the second quarter of 2024 compared to the first quarter of 2024 was primarily due to a $2.3 million decrease in salaries and employee benefits and a $1.0 million decrease in professional fees partially offset by other expenses. The efficiency ratio was 66.63% for the second quarter of 2024 compared to 66.18% for the first quarter of 2024. Annualized returns on average assets, average equity and average tangible equity were 1.13%, 7.78% and 12.82%(1) for the second quarter of 2024, respectively, compared to 0.98%, 6.88% and 11.47%(1), respectively, for the first quarter of 2024. Financial Condition Total loans at June 30, 2024 decreased $194.2 million to $7.71 billion compared to $7.91 billion at March 31, 2024. At June 30, 2024, the remaining balance of the purchase accounting adjustments on loans was $87.4 million. Total deposits at June 30, 2024 decreased $69.4 million to $8.73 billion compared to $8.79 billion at March 31, 2024, due to decreases in certificates and other time deposits, noninterest-bearing deposits and interest-bearing demand deposits, partially offset by increases in money market and savings 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 $4.79 billion and estimated uninsured deposits net of collateralized deposits of $1.01 billion were $3.78 billion, or 43.3%, of total deposits at June 30, 2024. Total assets at June 30, 2024 were $10.72 billion, a decrease of $5.6 million, compared to $10.73 billion at March 31, 2024. Asset Quality Nonperforming assets totaled $53.4 million, or 0.50% of total assets, at June 30, 2024, compared to $57.1 million, or 0.53% of total assets, at March 31, 2024. The allowance for credit losses on loans as a percentage of total loans was 1.23% at June 30, 2024 and 1.22% at March 31, 2024. The second quarter of 2024 included a reversal of provision for credit losses expenses of $1.9 million compared to a $4.1 million provision for credit losses recorded during the first quarter of 2024. Net charge-offs for the second quarter of 2024 were $1 thousand, or 0.00% (annualized) of average loans, compared to net charge-offs of $714 thousand, or 0.04% (annualized) of average loans, for the first quarter of 2024. 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 10 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, July 26, 2024 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss its results for the second quarter of 2024. Participants may register for the conference call at https://registrations.events/direct/Q4I635860 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/232230638. 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 June 30 March 31 December 31 September 30 June 30 (Dollars in thousands) ASSETS Cash and due from banks $ 110,341 $ 74,663 $ 121,004 $ 94,970 $ 105,913 Interest-bearing deposits at other financial institutions 379,909 325,079 278,233 207,302 198,176 Total cash and cash equivalents 490,250 399,742 399,237 302,272 304,089 Available for sale securities, at fair value 1,630,971 1,523,100 1,395,680 1,414,952 1,478,222 Loans held for investment 7,713,897 7,908,111 7,925,133 8,004,528 8,068,718 Less: allowance for credit losses on loans (94,772 ) (96,285 ) (91,684 ) (93,575 ) (100,195 ) Loans, net 7,619,125 7,811,826 7,833,449 7,910,953 7,968,523 Accrued interest receivable 43,348 45,466 44,244 43,536 42,051 Premises and equipment, net 113,984 115,698 118,683 119,332 119,142 Federal Home Loan Bank stock 15,089 16,050 25,051 29,022 24,478 Bank-owned life insurance 106,262 105,671 105,084 104,699 104,148 Goodwill 497,318 497,318 497,318 497,318 497,260 Core deposit intangibles, net 104,315 110,513 116,712 122,944 129,805 Other assets 103,001 103,838 111,681 120,432 110,633 Total assets $ 10,723,663 $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES: Deposits: Noninterest-bearing $ 3,308,441 $ 3,323,149 $ 3,546,815 $ 3,656,288 $ 3,713,536 Interest-bearing Demand 1,564,405 1,576,261 1,659,999 1,397,492 1,437,509 Money market and savings 2,213,031 2,203,767 2,136,777 2,128,950 2,174,073 Certificates and other time 1,639,426 1,691,539 1,529,876 1,503,891 1,441,251 Total interest-bearing deposits 5,416,862 5,471,567 5,326,652 5,030,333 5,052,833 Total deposits 8,725,303 8,794,716 8,873,467 8,686,621 8,766,369 Accrued interest payable 12,327 12,227 11,288 7,612 4,555 Borrowed funds 240,000 215,000 50,000 323,981 369,963 Subordinated debt 109,964 109,864 109,765 109,665 109,566 Other liabilities 70,274 66,717 81,601 76,735 69,218 Total liabilities 9,157,868 9,198,524 9,126,121 9,204,614 9,319,671 SHAREHOLDERS’ EQUITY: Common stock 536 536 533 533 533 Capital surplus 1,238,477 1,235,221 1,232,627 1,231,686 1,228,532 Retained earnings 447,948 425,130 405,945 385,600 361,619 Accumulated other comprehensive loss (121,166 ) (130,189 ) (118,087 ) (156,973 ) (132,004 ) Total shareholders’ equity 1,565,795 1,530,698 1,521,018 1,460,846 1,458,680 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 10,723,663 $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended Six Months Ended 2024 2023 2024 2023 June 30 March 31 December 31 September 30 June 30 June 30 June 30 (Dollars in thousands, except per share data) INTEREST INCOME: Loans, including fees $ 135,885 $ 134,685 $ 139,114 $ 138,948 $ 133,931 $ 270,570 $ 259,660 Securities: Taxable 11,923 9,293 9,622 9,493 9,726 21,216 19,379 Tax-exempt 816 818 418 437 436 1,634 1,698 Deposits in other financial institutions 3,555 3,627 3,021 2,391 2,865 7,182 6,636 Total interest income 152,179 148,423 152,175 151,269 146,958 300,602 287,373 INTEREST EXPENSE: Demand, money market and savings deposits 28,399 27,530 25,033 23,557 20,708 55,929 38,745 Certificates and other time deposits 18,758 15,084 15,075 13,282 9,622 33,842 12,929 Borrowed funds 1,700 1,774 4,154 5,801 6,535 3,474 7,852 Subordinated debt 1,912 1,917 1,983 1,908 1,812 3,829 3,739 Total interest expense 50,769 46,305 46,245 44,548 38,677 97,074 63,265 NET INTEREST INCOME 101,410 102,118 105,930 106,721 108,281 203,528 224,108 (Reversal of) provision for credit losses (1,935 ) 4,098 1,047 2,315 1,915 2,163 5,581 Net interest income after provision for credit losses 103,345 98,020 104,883 104,406 106,366 201,365 218,527 NONINTEREST INCOME: Service charges on deposit accounts 1,648 1,598 1,520 1,620 1,575 3,246 2,924 (Loss) gain on sale of assets (64 ) 513 198 — (6 ) 449 192 Bank-owned life insurance 591 587 573 551 532 1,178 1,054 Debit card and ATM income 543 527 542 935 1,821 1,070 3,519 Other 2,698 3,071 4,053 1,589 1,561 5,769 5,292 Total noninterest income 5,416 6,296 6,886 4,695 5,483 11,712 12,981 NONINTEREST EXPENSE: Salaries and employee benefits 39,061 41,376 40,464 39,495 37,300 80,437 77,075 Net occupancy and equipment 4,503 4,390 4,572 4,455 3,817 8,893 7,905 Depreciation 1,948 1,964 1,955 1,952 1,841 3,912 3,677 Data processing and software amortization 5,501 4,894 5,000 4,798 4,674 10,395 9,728 Professional fees 1,620 2,662 3,867 997 1,564 4,282 3,091 Regulatory assessments and FDIC insurance 2,299 1,854 5,169 1,814 2,755 4,153 4,049 Amortization of intangibles 6,215 6,212 6,247 6,876 6,881 12,427 13,760 Communications 847 937 743 663 689 1,784 1,390 Advertising 891 765 1,004 877 907 1,656 1,746 Acquisition and merger-related expenses — — 3,072 3,421 2,897 — 9,062 Other 8,331 6,356 5,848 5,400 5,882 14,687 10,322 Total noninterest expense 71,216 71,410 77,941 70,748 69,207 142,626 141,805 INCOME BEFORE INCOME TAXES 37,545 32,906 33,828 38,353 42,642 70,451 89,703 Provision for income taxes 7,792 6,759 6,562 7,445 7,467 14,551 17,380 NET INCOME $ 29,753 $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 55,900 $ 72,323 EARNINGS PER SHARE Basic $ 0.56 $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 1.05 $ 1.36 Diluted $ 0.56 $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 1.04 $ 1.36 Three Months Ended Six Months Ended 2024 2023 2024 2023 June 30 March 31 December 31 September 30 June 30 June 30 June 30 (Dollars and share amounts in thousands, except per share data) Net income $ 29,753 $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 55,900 $ 72,323 Earnings per share, basic $ 0.56 $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 1.05 $ 1.36 Earnings per share, diluted $ 0.56 $ 0.49 $ 0.51 $ 0.58 $ 0.66 $ 1.04 $ 1.36 Dividends per share $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.26 $ 0.26 Return on average assets(A) 1.13 % 0.98 % 1.02 % 1.14 % 1.31 % 1.06 % 1.35 % Return on average equity(A) 7.78 % 6.88 % 7.33 % 8.34 % 9.67 % 7.33 % 10.14 % Return on average tangible equity(A)(B) 12.82 % 11.47 % 12.61 % 14.47 % 17.05 % 12.15 % 18.14 % Net interest margin (tax equivalent)(A)(C) 4.24 % 4.26 % 4.40 % 4.37 % 4.49 % 4.25 % 4.64 % Net interest margin (tax equivalent) excluding PAA(A)(B)(C) 3.82 % 3.91 % 3.91 % 3.87 % 3.97 % 3.86 % 4.18 % Efficiency ratio(D) 66.63 % 66.18 % 69.21 % 63.50 % 60.83 % 66.40 % 59.86 % Capital Ratios Stellar Bancorp, Inc. (Consolidated) Equity to assets 14.60 % 14.27 % 14.29 % 13.70 % 13.53 % 14.60 % 13.53 % Tangible equity to tangible assets(B) 9.53 % 9.12 % 9.04 % 8.37 % 8.19 % 9.53 % 8.19 % Estimated Total capital ratio (to risk-weighted assets) 15.34 % 14.62 % 14.02 % 13.61 % 13.21 % 15.34 % 13.21 % Estimated Common equity Tier 1 capital (to risk weighted assets) 12.98 % 12.29 % 11.77 % 11.30 % 10.83 % 12.98 % 10.83 % Estimated Tier 1 capital (to risk-weighted assets) 13.10 % 12.41 % 11.89 % 11.41 % 10.94 % 13.10 % 10.94 % Estimated Tier 1 leverage (to average tangible assets) 10.93 % 10.55 % 10.18 % 9.82 % 9.51 % 10.93 % 9.51 % Stellar Bank Estimated Total capital ratio (to risk-weighted assets) 14.65 % 14.13 % 13.65 % 13.32 % 12.98 % 14.65 % 12.98 % Estimated Common equity Tier 1 capital (to risk-weighted assets) 13.12 % 12.61 % 12.20 % 11.80 % 11.38 % 13.12 % 11.38 % Estimated Tier 1 capital (to risk-weighted assets) 13.12 % 12.61 % 12.20 % 11.80 % 11.38 % 13.12 % 11.38 % Estimated Tier 1 leverage (to average tangible assets) 10.94 % 10.72 % 10.44 % 10.15 % 9.89 % 10.94 % 9.89 % Other Data Weighted average shares: Basic 53,572 53,343 53,282 53,313 53,297 53,457 53,160 Diluted 53,608 53,406 53,350 53,380 53,375 53,506 53,261 Period end shares outstanding 53,564 53,551 53,291 53,322 53,303 53,564 53,303 Book value per share $ 29.23 $ 28.58 $ 28.54 $ 27.40 $ 27.37 $ 29.23 $ 27.37 Tangible book value per share(B) $ 18.00 $ 17.23 $ 17.02 $ 15.76 $ 15.60 $ 18.00 $ 15.60 Employees - full-time equivalents 1,045 1,007 998 1,008 1,004 1,045 1,004 (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 10 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 June 30, 2024 March 31, 2024 June 30, 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 $ 7,808,320 $ 135,885 7.00 % $ 7,938,824 $ 134,685 6.82 % $ 7,980,856 $ 133,931 6.73 % Securities 1,549,638 12,739 3.31 % 1,441,814 10,111 2.82 % 1,502,949 10,162 2.71 % Deposits in other financial institutions 258,916 3,555 5.52 % 264,906 3,627 5.51 % 209,722 2,865 5.48 % Total interest-earning assets 9,616,874 $ 152,179 6.36 % 9,645,544 $ 148,423 6.19 % 9,693,527 $ 146,958 6.08 % Allowance for credit losses on loans (96,306 ) (91,612 ) (96,414 ) Noninterest-earning assets 1,103,297 1,132,857 1,143,025 Total assets $ 10,623,865 $ 10,686,789 $ 10,740,138 Liabilities and Shareholders' Equity Interest-Bearing Liabilities: Interest-bearing demand deposits $ 1,545,096 $ 12,213 3.18 % $ 1,697,211 $ 12,278 2.91 % $ 1,387,604 $ 9,343 2.70 % Money market and savings deposits 2,227,393 16,186 2.92 % 2,150,805 15,252 2.85 % 2,220,827 11,365 2.05 % Certificates and other time deposits 1,694,536 18,758 4.45 % 1,444,048 15,084 4.20 % 1,225,834 9,622 3.15 % Borrowed funds 112,187 1,700 6.09 % 134,400 1,774 5.31 % 479,896 6,535 5.46 % Subordinated debt 109,910 1,912 7.00 % 109,808 1,917 7.02 % 109,499 1,812 6.64 % Total interest-bearing liabilities 5,689,122 $ 50,769 3.59 % 5,536,272 $ 46,305 3.36 % 5,423,660 $ 38,677 2.86 % Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits 3,308,633 3,525,758 3,779,594 Other liabilities 87,986 96,461 78,411 Total liabilities 9,085,741 9,158,491 9,281,665 Shareholders’ equity 1,538,124 1,528,298 1,458,473 Total liabilities and shareholders’ equity $ 10,623,865 $ 10,686,789 $ 10,740,138 Net interest rate spread 2.77 % 2.83 % 3.22 % Net interest income and margin $ 101,410 4.24 % $ 102,118 4.26 % $ 108,281 4.48 % Net interest income and net interest margin (tax equivalent) $ 101,482 4.24 % $ 102,207 4.26 % $ 108,509 4.49 % Cost of funds 2.27 % 2.06 % 1.69 % Cost of deposits 2.16 % 1.94 % 1.41 % Stellar Bancorp, Inc. Financial Highlights (Unaudited) Six Months Ended June 30, 2024 2023 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 $ 7,873,572 $ 270,570 6.91 % $ 7,914,303 $ 259,660 6.62 % Securities 1,495,726 22,850 3.07 % 1,553,200 21,077 2.74 % Deposits in other financial institutions 261,911 7,182 5.52 % 286,823 6,636 4.67 % Total interest-earning assets 9,631,209 $ 300,602 6.28 % 9,754,326 $ 287,373 5.94 % Allowance for credit losses on loans (93,959 ) (94,881 ) Noninterest-earning assets 1,118,077 1,151,497 Total assets $ 10,655,327 $ 10,810,942 Liabilities and Shareholders' Equity Interest-Bearing Liabilities: Interest-bearing demand deposits $ 1,621,154 $ 24,491 3.04 % $ 1,518,213 $ 17,725 2.35 % Money market and savings deposits 2,189,099 31,438 2.89 % 2,355,112 21,020 1.80 % Certificates and other time deposits 1,569,292 33,842 4.34 % 1,044,721 12,929 2.50 % Borrowed funds 123,293 3,474 5.67 % 293,578 7,852 5.39 % Subordinated debt 109,859 3,829 7.01 % 109,458 3,739 6.89 % Total interest-bearing liabilities 5,612,697 $ 97,074 3.48 % 5,321,082 $ 63,265 2.40 % Noninterest-Bearing Liabilities: Noninterest-bearing demand deposits 3,417,196 3,971,862 Other liabilities 92,223 79,609 Total liabilities 9,122,116 9,372,553 Shareholders’ equity 1,533,211 1,438,389 Total liabilities and shareholders' equity $ 10,655,327 $ 10,810,942 Net interest rate spread 2.80 % 3.54 % Net interest income and margin $ 203,528 4.25 % $ 224,108 4.63 % Net interest income and net interest margin (tax equivalent) $ 203,688 4.25 % $ 224,628 4.64 % Cost of funds 2.16 % 1.37 % Cost of deposits 2.05 % 1.17 % Stellar Bancorp, Inc. Financial Highlights (Unaudited) Three Months Ended 2024 2023 June 30 March 31 December 31 September 30 June 30 (Dollars in thousands) Period-end Loan Portfolio: Commercial and industrial $ 1,392,435 $ 1,451,462 $ 1,409,002 $ 1,474,600 $ 1,512,476 Paycheck Protection Program (PPP) 3,629 4,293 5,100 5,968 8,027 Real estate: Commercial real estate (including multi-family residential) 4,029,671 4,049,885 4,071,807 4,076,606 4,038,487 Commercial real estate construction and land development 922,805 1,039,443 1,060,406 1,078,265 1,136,124 1-4 family residential (including home equity) 1,098,681 1,049,316 1,047,174 1,024,945 1,009,439 Residential construction 200,134 252,573 267,357 289,553 311,208 Consumer and other 66,542 61,139 64,287 54,591 52,957 Total loans held for investment $ 7,713,897 $ 7,908,111 $ 7,925,133 $ 8,004,528 $ 8,068,718 Deposits: Noninterest-bearing $ 3,308,441 $ 3,323,149 $ 3,546,815 $ 3,656,288 $ 3,713,536 Interest-bearing Demand 1,564,405 1,576,261 1,659,999 1,397,492 1,437,509 Money market and savings 2,213,031 2,203,767 2,136,777 2,128,950 2,174,073 Certificates and other time 1,639,426 1,691,539 1,529,876 1,503,891 1,441,251 Total interest-bearing deposits 5,416,862 5,471,567 5,326,652 5,030,333 5,052,833 Total deposits $ 8,725,303 $ 8,794,716 $ 8,873,467 $ 8,686,621 $ 8,766,369 Asset Quality: Nonaccrual loans $ 50,906 $ 57,129 $ 39,191 $ 38,291 $ 43,349 Accruing loans 90 or more days past due — — — — — Total nonperforming loans 50,906 57,129 39,191 38,291 43,349 Other real estate 2,548 — — — — Total nonperforming assets $ 53,454 $ 57,129 $ 39,191 $ 38,291 $ 43,349 Net (recoveries) charge-offs $ (1 ) $ 714 $ 2,577 $ 8,116 $ 236 Nonaccrual loans: Commercial and industrial $ 18,451 $ 15,465 $ 5,048 $ 14,991 $ 22,968 Real estate: Commercial real estate (including multi-family residential) 18,094 21,268 16,699 13,563 8,221 Commercial real estate construction and land development 1,641 8,406 5,043 170 388 1-4 family residential (including home equity) 12,454 10,368 8,874 8,442 10,880 Residential construction 155 1,410 3,288 635 665 Consumer and other 111 212 239 490 227 Total nonaccrual loans $ 50,906 $ 57,129 $ 39,191 $ 38,291 $ 43,349 Asset Quality Ratios: Nonperforming assets to total assets 0.50 % 0.53 % 0.37 % 0.36 % 0.40 % Nonperforming loans to total loans 0.66 % 0.72 % 0.49 % 0.48 % 0.54 % Allowance for credit losses on loans to nonperforming loans 186.17 % 168.54 % 233.94 % 244.38 % 231.14 % Allowance for credit losses on loans to total loans 1.23 % 1.22 % 1.16 % 1.17 % 1.24 % Net charge-offs to average loans (annualized) 0.00 % 0.04 % 0.13 % 0.40 % 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 Six Months Ended 2024 2023 2024 2023 June 30 March 31 December 31 September 30 June 30 June 30 June 30 (Dollars and share amounts in thousands, except per share data) Net income $ 29,753 $ 26,147 $ 27,266 $ 30,908 $ 35,175 $ 55,900 $ 72,323 Add: Provision for credit losses (1,935 ) 4,098 1,047 2,315 1,915 2,163 5,581 Add: Provision for income taxes 7,792 6,759 6,562 7,445 7,467 14,551 17,380 Pre-tax, pre-provision income $ 35,610 $ 37,004 $ 34,875 $ 40,668 $ 44,557 $ 72,614 $ 95,284 Total average assets $ 10,623,865 $ 10,686,789 $ 10,626,373 $ 10,741,295 $ 10,740,138 $ 10,655,327 $ 10,810,942 Pre-tax, pre-provision return on average assets(B) 1.35 % 1.39 % 1.30 % 1.50 % 1.66 % 1.37 % 1.78 % Total shareholders’ equity $ 1,565,795 $ 1,530,698 $ 1,521,018 $ 1,460,846 $ 1,458,680 $ 1,565,795 $ 1,458,680 Less: Goodwill and core deposit intangibles, net 601,633 607,831 614,030 620,262 627,065 601,633 627,065 Tangible shareholders’ equity $ 964,162 $ 922,867 $ 906,988 $ 840,584 $ 831,615 $ 964,162 $ 831,615 Shares outstanding at end of period 53,564 53,551 53,291 53,322 53,303 53,564 53,303 Tangible book value per share $ 18.00 $ 17.23 $ 17.02 $ 15.76 $ 15.60 $ 18.00 $ 15.60 Average shareholders’ equity $ 1,538,124 $ 1,528,298 $ 1,475,377 $ 1,471,009 $ 1,458,473 $ 1,533,211 $ 1,438,389 Less: Average goodwill and core deposit intangibles, net 604,722 611,149 617,236 623,864 630,854 607,935 634,462 Average tangible shareholders’ equity $ 933,402 $ 917,149 $ 858,141 $ 847,145 $ 827,619 $ 925,276 $ 803,927 Return on average tangible equity(B) 12.82 % 11.47 % 12.61 % 14.47 % 17.05 % 12.15 % 18.14 % Total assets $ 10,723,663 $ 10,729,222 $ 10,647,139 $ 10,665,460 $ 10,778,351 $ 10,723,663 $ 10,778,351 Less: Goodwill and core deposit intangibles, net 601,633 607,831 614,030 620,262 627,065 601,633 627,065 Tangible assets $ 10,122,030 $ 10,121,391 $ 10,033,109 $ 10,045,198 $ 10,151,286 $ 10,122,030 $ 10,151,286 Tangible equity to tangible assets 9.53 % 9.12 % 9.04 % 8.37 % 8.19 % 9.53 % 8.19 % Net interest income (tax equivalent) $ 101,482 $ 102,207 $ 106,121 $ 106,919 $ 108,509 $ 203,688 $ 224,628 Less: Purchase accounting accretion 10,098 8,551 11,726 12,400 12,572 18,649 22,676 Adjusted net interest income (tax equivalent) $ 91,384 $ 93,656 $ 94,395 $ 94,519 $ 95,937 $ 185,039 $ 201,952 Average earning assets $ 9,616,874 $ 9,645,544 $ 9,576,927 $ 9,697,553 $ 9,693,527 $ 9,631,209 $ 9,754,326 Net interest margin (tax equivalent) excluding PAA 3.82 % 3.91 % 3.91 % 3.87 % 3.97 % 3.86 % 4.18 % (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/20240726333029/en/