EX-99.1 2 stel2024q2earningsreleasee.htm EX-99.1 Document


Exhibit 99.1
image.jpg
PRESS RELEASE                                        

STELLAR BANCORP, INC. REPORTS
SECOND QUARTER 2024 RESULTS

HOUSTON, July 26, 2024 - 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.

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).


_____________________
(1) Refer to page 10 of this earnings release for the calculation of this non-GAAP financial measure.


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.

Investor Relations
IR@stellar.bank


2


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.


3

Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
20242023
 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 institutions379,909 325,079 278,233 207,302 198,176 
Total cash and cash equivalents490,250 399,742 399,237 302,272 304,089 
Available for sale securities, at fair value1,630,971 1,523,100 1,395,680 1,414,952 1,478,222 
Loans held for investment7,713,897 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, net7,619,125 7,811,826 7,833,449 7,910,953 7,968,523 
Accrued interest receivable43,348 45,466 44,244 43,536 42,051 
Premises and equipment, net113,984 115,698 118,683 119,332 119,142 
Federal Home Loan Bank stock15,089 16,050 25,051 29,022 24,478 
Bank-owned life insurance106,262 105,671 105,084 104,699 104,148 
Goodwill497,318 497,318 497,318 497,318 497,260 
Core deposit intangibles, net104,315 110,513 116,712 122,944 129,805 
Other assets103,001 103,838 111,681 120,432 110,633 
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
Demand1,564,405 1,576,261 1,659,999 1,397,492 1,437,509 
Money market and savings2,213,031 2,203,767 2,136,777 2,128,950 2,174,073 
Certificates and other time1,639,426 1,691,539 1,529,876 1,503,891 1,441,251 
Total interest-bearing deposits5,416,862 5,471,567 5,326,652 5,030,333 5,052,833 
Total deposits8,725,303 8,794,716 8,873,467 8,686,621 8,766,369 
Accrued interest payable12,327 12,227 11,288 7,612 4,555 
Borrowed funds240,000 215,000 50,000 323,981 369,963 
Subordinated debt109,964 109,864 109,765 109,665 109,566 
Other liabilities70,274 66,717 81,601 76,735 69,218 
Total liabilities9,157,868 9,198,524 9,126,121 9,204,614 9,319,671 
SHAREHOLDERS’ EQUITY:
Common stock536 536 533 533 533 
Capital surplus1,238,477 1,235,221 1,232,627 1,231,686 1,228,532 
Retained earnings447,948 425,130 405,945 385,600 361,619 
Accumulated other comprehensive loss(121,166)(130,189)(118,087)(156,973)(132,004)
Total shareholders’ equity1,565,795 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 
4

Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
Three Months EndedSix Months Ended
2024202320242023
 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:
Taxable11,923 9,293 9,622 9,493 9,726 21,216 19,379 
Tax-exempt816 818 418 437 436 1,634 1,698 
Deposits in other financial institutions3,555 3,627 3,021 2,391 2,865 7,182 6,636 
Total interest income152,179 148,423 152,175 151,269 146,958 300,602 287,373 
INTEREST EXPENSE:
Demand, money market and savings deposits28,399 27,530 25,033 23,557 20,708 55,929 38,745 
Certificates and other time deposits18,758 15,084 15,075 13,282 9,622 33,842 12,929 
Borrowed funds1,700 1,774 4,154 5,801 6,535 3,474 7,852 
Subordinated debt1,912 1,917 1,983 1,908 1,812 3,829 3,739 
Total interest expense50,769 46,305 46,245 44,548 38,677 97,074 63,265 
NET INTEREST INCOME101,410 102,118 105,930 106,721 108,281 203,528 224,108 
(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 losses103,345 98,020 104,883 104,406 106,366 201,365 218,527 
NONINTEREST INCOME:
Service charges on deposit accounts1,648 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 insurance591 587 573 551 532 1,178 1,054 
Debit card and ATM income543 527 542 935 1,821 1,070 3,519 
Other2,698 3,071 4,053 1,589 1,561 5,769 5,292 
Total noninterest income5,416 6,296 6,886 4,695 5,483 11,712 12,981 
NONINTEREST EXPENSE:
Salaries and employee benefits39,061 41,376 40,464 39,495 37,300 80,437 77,075 
Net occupancy and equipment4,503 4,390 4,572 4,455 3,817 8,893 7,905 
Depreciation1,948 1,964 1,955 1,952 1,841 3,912 3,677 
Data processing and software amortization5,501 4,894 5,000 4,798 4,674 10,395 9,728 
Professional fees1,620 2,662 3,867 997 1,564 4,282 3,091 
Regulatory assessments and FDIC insurance2,299 1,854 5,169 1,814 2,755 4,153 4,049 
Amortization of intangibles6,215 6,212 6,247 6,876 6,881 12,427 13,760 
Communications847 937 743 663 689 1,784 1,390 
Advertising891 765 1,004 877 907 1,656 1,746 
Acquisition and merger-related expenses— — 3,072 3,421 2,897 — 9,062 
Other8,331 6,356 5,848 5,400 5,882 14,687 10,322 
Total noninterest expense71,216 71,410 77,941 70,748 69,207 142,626 141,805 
INCOME BEFORE INCOME TAXES37,545 32,906 33,828 38,353 42,642 70,451 89,703 
Provision for income taxes7,792 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 
5

Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
Three Months EndedSix Months Ended
2024202320242023
 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 assets14.60 %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:
Basic53,57253,34353,28253,31353,29753,45753,160
Diluted53,60853,40653,35053,38053,37553,50653,261
Period end shares outstanding53,56453,55153,29153,32253,30353,56453,303
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 equivalents1,0451,0079981,0081,0041,0451,004

(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.

    
6

Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
Three Months Ended
June 30, 2024March 31, 2024June 30, 2023
Average BalanceInterest Earned/
Interest Paid		Average Yield/RateAverage BalanceInterest Earned/
Interest Paid		Average Yield/RateAverage BalanceInterest 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 %
Securities1,549,638 12,739 3.31 %1,441,814 10,111 2.82 %1,502,949 10,162 2.71 %
Deposits in other financial institutions258,916 3,555 5.52 %264,906 3,627 5.51 %209,722 2,865 5.48 %
Total interest-earning assets9,616,874 $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 assets1,103,297 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 deposits2,227,393 16,186 2.92 %2,150,805 15,252 2.85 %2,220,827 11,365 2.05 %
Certificates and other time deposits1,694,536 18,758 4.45 %1,444,048 15,084 4.20 %1,225,834 9,622 3.15 %
Borrowed funds112,187 1,700 6.09 %134,400 1,774 5.31 %479,896 6,535 5.46 %
Subordinated debt109,910 1,912 7.00 %109,808 1,917 7.02 %109,499 1,812 6.64 %
Total interest-bearing liabilities5,689,122 $50,769 3.59 %5,536,272 $46,305 3.36 %5,423,660 $38,677 2.86 %
Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits3,308,633 3,525,758 3,779,594 
Other liabilities87,986 96,461 78,411 
Total liabilities9,085,741 9,158,491 9,281,665 
Shareholders’ equity1,538,124 1,528,298 1,458,473 
Total liabilities and shareholders’ equity$10,623,865 $10,686,789 $10,740,138 
Net interest rate spread2.77 %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 funds2.27 %2.06 %1.69 %
Cost of deposits2.16 %1.94 %1.41 %
7

Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
Six Months Ended June 30,
20242023
Average BalanceInterest Earned/
Interest Paid		Average Yield/RateAverage BalanceInterest 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 %
Securities1,495,726 22,850 3.07 %1,553,200 21,077 2.74 %
Deposits in other financial institutions261,911 7,182 5.52 %286,823 6,636 4.67 %
Total interest-earning assets9,631,209 $300,602 6.28 %9,754,326 $287,373 5.94 %
Allowance for credit losses on loans(93,959)(94,881)
Noninterest-earning assets1,118,077 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 deposits2,189,099 31,438 2.89 %2,355,112 21,020 1.80 %
Certificates and other time deposits1,569,292 33,842 4.34 %1,044,721 12,929 2.50 %
Borrowed funds123,293 3,474 5.67 %293,578 7,852 5.39 %
Subordinated debt109,859 3,829 7.01 %109,458 3,739 6.89 %
Total interest-bearing liabilities5,612,697 $97,074 3.48 %5,321,082 $63,265 2.40 %
Noninterest-Bearing Liabilities:
Noninterest-bearing demand deposits3,417,196 3,971,862 
Other liabilities92,223 79,609 
Total liabilities9,122,116 9,372,553 
Shareholders’ equity1,533,211 1,438,389 
Total liabilities and shareholders' equity$10,655,327 $10,810,942 
Net interest rate spread2.80 %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 funds2.16 %1.37 %
Cost of deposits2.05 %1.17 %
8

Stellar Bancorp, Inc.
Financial Highlights
(Unaudited)
Three Months Ended
20242023
 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)3,6294,2935,1005,9688,027
Real estate:
Commercial real estate (including multi-family residential)4,029,6714,049,8854,071,8074,076,6064,038,487
Commercial real estate construction and land development922,8051,039,4431,060,4061,078,2651,136,124
1-4 family residential (including home equity)1,098,6811,049,3161,047,1741,024,9451,009,439
Residential construction200,134252,573267,357289,553311,208
Consumer and other66,54261,13964,28754,59152,957
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
Demand1,564,4051,576,2611,659,9991,397,4921,437,509
Money market and savings2,213,0312,203,7672,136,7772,128,9502,174,073
Certificates and other time1,639,4261,691,5391,529,8761,503,8911,441,251
Total interest-bearing deposits5,416,8625,471,5675,326,6525,030,3335,052,833
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 loans50,90657,12939,19138,29143,349
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)18,09421,26816,69913,5638,221
Commercial real estate construction and land development1,6418,4065,043170388
1-4 family residential (including home equity)12,45410,3688,8748,44210,880
Residential construction1551,4103,288635665
Consumer and other111212239490227
Total nonaccrual loans$50,906$57,129$39,191$38,291$43,349
Asset Quality Ratios:
Nonperforming assets to total assets0.50 %0.53 %0.37 %0.36 %0.40 %
Nonperforming loans to total loans0.66 %0.72 %0.49 %0.48 %0.54 %
Allowance for credit losses on loans to nonperforming loans186.17 %168.54 %233.94 %244.38 %231.14 %
Allowance for credit losses on loans to total loans1.23 %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 %

9
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 EndedSix Months Ended
2024202320242023
 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)4,0981,0472,3151,9152,1635,581
Add: Provision for income taxes7,7926,7596,5627,4457,46714,55117,380
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, net601,633607,831614,030620,262627,065601,633627,065
Tangible shareholders’ equity$964,162$922,867$906,988$840,584$831,615$964,162$831,615
Shares outstanding at end of period53,56453,55153,29153,32253,30353,56453,303
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, net604,722611,149617,236623,864630,854607,935634,462
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, net601,633607,831614,030620,262627,065601,633627,065
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 assets9.53 %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 accretion10,0988,55111,72612,40012,57218,64922,676
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 PAA3.82 %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.
10